-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UZGKv7RX/ywefOFXdmuXX/Ry1a431WbuxMDEtVM/qPAHabULfkvE4ws2g0345jWy R/TxM1INiXC0e9Wq0XU63w== 0001045969-99-000747.txt : 19991018 0001045969-99-000747.hdr.sgml : 19991018 ACCESSION NUMBER: 0001045969-99-000747 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990828 FILED AS OF DATE: 19991012 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FULLER H B CO CENTRAL INDEX KEY: 0000039368 STANDARD INDUSTRIAL CLASSIFICATION: ADHESIVES & SEALANTS [2891] IRS NUMBER: 410268370 STATE OF INCORPORATION: MN FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09225 FILM NUMBER: 99726671 BUSINESS ADDRESS: STREET 1: 1200 WILLOW LAKE BLVD CITY: ST PAUL STATE: MN ZIP: 55110-5132 BUSINESS PHONE: 6126453401 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended August 28, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from.............to............. Commission File No. 0-3488 H.B. FULLER COMPANY (Exact name of registrant as specified in its charter) Minnesota 41-0268370 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1200 Willow Lake Boulevard, St. Paul, Minnesota 55110-5101 (Address of principal executive officers) (Zip Code) (651) 236-5900 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $1.00 per share Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of the Registrant's Common Stock, par value $1.00 per share, was 14,036,986 as of September 30, 1999. -1- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidated Condensed Statements of Earnings (Unaudited) (In thousands except per share amounts)
Thirteen Weeks Ended Thirty-Nine Weeks Ended ----------------------- ------------------------- August 28, August 29, August 28, August 29, 1999 1998 1999 1998 ---------- ---------- ----------- ---------- Net sales $ 331,916 $ 333,518 $1,007,325 $ 986,144 Cost of sales (223,205) (230,424) (681,550) (676,722) --------- --------- ---------- --------- Gross profit 108,711 103,094 325,775 309,422 Selling, administrative and other expenses (78,437) (81,211) (242,193) (247,381) Nonrecurring items (2,995) (24,003) (11,165) (24,003) --------- --------- ---------- --------- Operating earnings 27,279 (2,120) 72,417 38,038 Interest expense (6,541) (7,766) (19,995) (19,548) Other income (expense), net (158) (739) (2,388) (1,529) --------- --------- ---------- --------- Earnings before income taxes and minority interests 20,580 (10,625) 50,034 16,961 Income taxes (8,773) (145) (21,594) (11,399) Net earnings (losses) of consolidated subsidiaries applicable to minority interests (51) 119 (396) 133 Earnings from equity investments 312 387 1,649 1,257 --------- --------- ---------- --------- Net earnings 12,068 (10,264) 29,693 6,952 Dividends on preferred stock (4) (4) (12) (12) --------- --------- ---------- --------- Net earnings applicable to common stock $ 12,064 ($10,268) $ 29,681 $ 6,940 ========= ========= ========== ========= Weighted average common shares outstanding: Basic 13,822 13,749 13,797 13,710 ========= ========= ========== ========= Diluted 14,015 13,749 13,945 13,848 ========= ========= ========== ========= Net earnings (loss) per common share: Basic $ 0.87 ($0.75) $ 2.15 $ 0.51 ========= ========= ========== ========= Diluted $ 0.86 ($0.75) $ 2.13 $ 0.50 ========= ========= ========== ========= Cash dividend per common share $ 0.205 $ 0.200 $ 0.610 $ 0.585 ========= ========= ========== =========
-2- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidated Condensed Balance Sheets (In thousands) (Unaudited) August 28, November 28, 1999 1998 ---------- ------------ ASSETS Current assets: Cash and cash equivalents $ 5,560 $ 4,605 Trade receivables 235,618 247,952 Allowance for doubtful accounts (4,781) (5,073) Inventories 152,518 158,606 Other current assets 52,662 51,810 ----------- ----------- Total current assets 441,577 457,900 Property, plant and equipment, net of accumulated depreciation of $353,213 in 1999 and $343,514 in 1998 415,395 414,467 Deposits and miscellaneous assets 77,286 70,673 Other intangibles 31,623 34,717 Excess cost 66,157 68,412 ----------- ----------- Total assets $ 1,032,038 $ 1,046,169 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 54,234 $ 59,282 Current installments of long-term debt 8,218 4,428 Accounts payable 118,185 129,694 Accrued expenses 74,006 71,725 Accrued nonrecurring charges 5,673 13,215 Income taxes payable 5,554 6,816 ----------- ----------- Total current liabilities 265,870 285,160 Long-term debt, excluding current installments 281,485 300,074 Accrued pension cost 81,143 83,500 Deferred income taxes and other liabilities 21,621 19,833 Minority interest 16,884 16,198 Stockholders' equity: Preferred stock 306 306 Common stock 14,037 13,983 Additional paid-in capital 33,136 31,140 Retained earnings 330,243 309,275 Accumulated other comprehensive income (6,170) (5,306) Unearned compensation (6,517) (7,994) ----------- ----------- Total stockholders' equity 365,035 341,404 =========== =========== Total liabilities and stockholders' equity $ 1,032,038 $ 1,046,169 =========== =========== See accompanying Notes to Consolidated Condensed Financial Statements. -3- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidated Condensed Statement of Cash Flows (Unaudited) (In thousands)
Thirty-Nine Weeks Ended -------------------------- August 28, August 29, 1999 1998 ---------- ---------- Cash flows from operating activities: Net earnings $ 29,693 $ 6,952 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 37,769 35,246 Pension costs 5,015 4,434 Deferred income tax (331) 3,714 Nonrecurring expenses (1,054) 17,833 Gain on sale of businesses in the restructuring plan (2,449) -- Other items (6,362) (658) Change in current assets and liabilities: Accounts receivable 2,078 (360) Inventory 5,246 (9,775) Prepaid assets (1,490) (4,684) Accounts payable (7,742) (19,659) Accrued expense 11,039 (7,406) Accrued nonrecurring charges (7,542) 7,179 Income taxes payable 8,895 (2,550) -------- --------- Net cash provided by operating activities 72,765 30,266 Cash flows from investing activities: Purchased property, plant and equipment (43,157) (41,633) Purchased business, net of cash acquired (4,483) (87,701) Proceeds from sale of assets -- 9,019 -------- --------- Net cash used in investing activities (47,640) (120,315) Cash flows from financing activities: Increase in long-term debt 51,651 208,309 Current installments and payments of long-term debt (60,703) (108,704) Notes payable (9,251) 4,038 Dividends paid (8,559) (8,146) Other 2,669 (3,453) -------- --------- Net cash (used)provided by financing activities (24,193) 92,044 Effect of exchange rate changes on cash 23 (411) -------- --------- Net change in cash and cash equivalents 955 1,584 Cash and cash equivalents at beginning of year 4,605 2,710 -------- --------- Cash and cash equivalents at end of period $ 5,560 $ 4,294 ======== ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest expense (net of amount capitalized) $ 25,353 $ 21,007 Income taxes $ 7,623 $ 11,458
For purposes of this statement, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. -4- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Condensed Financial Statements (Amounts in Thousands) (Unaudited) 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information necessary for a fair presentation of results of operations, financial position, and cash flows in conformity with generally accepted accounting principles. In the opinion of management, the consolidated financial statements reflect all adjustments considered necessary for a fair presentation of the Company's results for the periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from these estimates. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended November 28, 1998. 2. The composition of inventories is presented below: August 28, 1999 November 28, 1998 --------------- ----------------- Raw materials $ 64,584 $ 73,126 Finished goods 97,902 95,862 LIFO reserve (9,968) (10,382) -------- -------- $152,518 $158,606 ======== ======== 3. The difference between basic and diluted earnings per share data is due to the dilutive impact of stock options and restricted stock grants whose exercise price or grant price was below the average common stock price for the respective period presented. -5- 4. As required, the company adopted Financial Accounting Standard No. 130 "Reporting Comprehensive Income" during the first quarter. Other comprehensive income: Quarter YTD --------- -------- Beginning balance $(11,195) $(5,306) Foreign currency translation adjustment 4,913 (976) Translation loss taken through earnings 112 112 -------- ------- Ending balance $ (6,170) $(6,170) ======== ======= 5. During the first nine months of 1999, the company recorded the following amounts in the income statement in connection with the restructuring plan implemented in 1998 and discussed in the 1998 Form 10-K. The total amount of the charge is now estimated to be from $39,000 to $43,000 (before tax) with approximately $12,000 to $16,000 to be incurred in 1999. North Latin Asia/ America Europe America Pacific Total ------- ------ ------- ------- ----- Severance (net of pension curtailment) $1,741 $5,791 $ 426 $ 166 $ 8,124 Impairment of property, plant and equipment -- 780 13 7 800 Contracts/leases -- 143 205 84 432 Consulting 183 381 199 3 766 Other 1,358 1,143 901 90 3,492 ------ ------ ------ -------- ------- Subtotal 3,282 8,238 1,744 350 13,614 Less: Gain on the sale of property and plant -- -- -- (2,449) (2,449) ------ ------ ------ -------- ------- Total $3,282 $8,238 $1,744 ($ 2,099) $11,165 ====== ====== ====== ======== ======= Included in the $13,614 restructuring charge for the first nine months are $14,668 of cash costs, $800 non-cash related costs and a $1,854 pension curtailment benefit. North America charges related to a manufacturing plant closing in the first quarter, manufacturing and sales offices to be closed in the fourth quarter and reduced layers of management. Latin America charges relate to two manufacturing plants closed in the first quarter, two manufacturing plants closed in the second quarter and one plant to be closed in the balance of 1999. The European charges related to plant closures in three countries (in the second quarter of 1999), severance cost associated with the reduction in layers in management and relocation of the area office. In Asia/Pacific, the costs related to a manufacturing plant closure, sales offices and warehouses closings, the area office relocation and reduced layers of management. The costs in Asia/Pacific were more than offset by a gain on the sale of the closed manufacturing plant. There was a reduction in census of 535 employees in the first nine months of 1999 as a result of the restructuring plan. An additional 46 employees have been notified of severance over the balance of 1999 with severance costs accrued. The following table is a detailed reconciliation of the restructuring reserve balance from November 28, 1998 to August 28, 1999. The reconciliation reflects the accruals recorded and payments applied during the first nine months. -6- Nonrecurring charge reserve:
North Latin Asia/ America Europe America Pacific Total ------- ------ ------- ------- ----- Balance: November 28, 1998 $ 1,992 $ 7,994 $ 3,141 $ 88 $ 13,215 Accruals in first nine months, 1999: Severance 2,790 6,596 426 166 9,978 Contracts/leases -- 143 205 84 432 Consulting 183 381 199 -- 763 Other 1,358 851 914 100 3,223 Payments in first nine months, 1999: Severance (2,970) (11,067) (3,168) (240) (17,445) Contracts/leases -- (211) (39) (84) (334) Consulting (183) (381) (151) -- (715) Other (1,049) (880) (1,415) (100) (3,444) ------- -------- ------- ----- -------- Balance: August 28, 1999 $ 2,121 $ 3,426 $ 112 $ 14 $ 5,673 ======= ======== ======= ===== ========
Item 2. Management's Discussion and Analysis Of --------------------------------------- Financial Condition and Results of Operations --------------------------------------------- (Dollars in Thousands) The following discussion includes comments and data relating to the company's financial condition and results of operations during the periods included in the accompanying Consolidated Condensed Financial Statements. Results of Operations --------------------- Net sales for the third quarter of 1999 decreased $1,602 or 0.5 percent from the third quarter of 1998. The 0.5 percent decrease contained the following components: 1.2 percent increase in volume, 1.1 percent decrease in pricing and changes in product mix, 0.4 percent net decrease from acquisitions/divestitures and 0.2 percent decrease from the stronger U.S. dollar. Through nine months of 1999, net sales increased $21,181 or 2.1 percent over the same period of 1998. Volume accounted for an increase of 1.9 percent, pricing and mix combined were a negative 0.7 percent, acquisitions/divestitures had a positive 0.8 percent impact and fluctuations in foreign currency against the U.S. dollar accounted for a positive 0.1%. Following is a comparison of sales variances by operating area: 13 Weeks Ended 39 Weeks Ended Operating Area 8/28/99 vs 8/29/98 8/28/99 vs 8/29/98 -------------- ------------------ ------------------ North America $ 3,481 1.8% $10,409 1.8% Latin America (3,855) (8.2%) (5,270) (3.6%) Europe (4,757) (6.6%) 6,760 3.3% Asia/Pacific 3,529 18.1% 9,282 15.0% ------ ------- Total ($1,602) (0.5%) $21,181 2.1% ======= ======= Net earnings in the third quarter were $12,068. This compares to a third quarter, 1998 net loss of $10,264. The 1999 earnings include nonrecurring charges of $2,995 ($2,339 after tax). The 1998 earnings include nonrecurring charges of $24,003 ($18,689 after tax). -7- Net earnings through nine months of 1999 were $29,693 compared to $6,952 for the first nine months of 1998. The year-to-date impact of the nonrecurring charges was $11,165 ($8,279 after tax) in 1999 and $24,003 ($18,689 after tax) in 1998. During the first nine months of 1999, the company recorded the following amounts in the income statement in connection with the restructuring plan implemented in 1998 and discussed in the 1998 Form 10-K. The total amount of the charge is now estimated to be from $39,000 to $43,000 (before tax) with approximately $12,000 to $16,000 to be incurred in 1999. North Latin Asia/ America Europe America Pacific Total ------- ------ ------- ------- ----- Severance (net of pension curtailment) $1,741 $5,791 $ 426 $ 166 $ 8,124 Impairment of property, plant and equipment -- 780 13 7 800 Contracts/leases -- 143 205 84 432 Consulting 183 381 199 3 766 Other 1,358 1,143 901 90 3,492 ------ ------ ------ ------- ------- Subtotal 3,282 8,238 1,744 350 13,614 Less: Gain on the sale of property and plant -- -- -- (2,449) (2,449) ------ ------ ------ ------- ------- Total $3,282 $8,238 $1,744 ($2,099) $11,165 ====== ====== ====== ======= ======= Included in the $13,614 restructuring charge for the first nine months are $14,668 of cash costs, $800 non-cash related costs and a $1,854 pension curtailment benefit. North America charges related to a manufacturing plant closing in the first quarter, manufacturing and sales offices to be closed in the fourth quarter and reduced layers of management. Latin America charges relate to two manufacturing plants closed in the first quarter, two manufacturing plants closed in the second quarter and one plant to be closed in the balance of 1999. The European charges related to plant closures in three countries (in the second quarter of 1999), severance cost associated with the reduction in layers in management and relocation of the area office. In Asia/Pacific, the costs related to a manufacturing plant closure, sales offices and warehouses closings, the area office relocation and reduced layers of management. The costs in Asia/Pacific were more than offset by a gain on the sale of the closed manufacturing plant. There was a reduction in census of 535 employees in the first nine months of 1999 as a result of the restructuring plan. An additional 46 employees have been notified of severance over the balance of 1999 with severance costs accrued. The following table is a detailed reconciliation of the restructuring reserve balance from November 28, 1998 to August 28, 1999. The reconciliation reflects the accruals recorded and payments applied during the first nine months. -8- Nonrecurring charge reserve:
North Latin Asia/ America Europe America Pacific Total ------- ------ ------- ------- ----- Balance: November 28, 1998 $ 1,992 $ 7,994 $ 3,141 $ 88 $ 13,215 Accruals in first nine months, 1999: Severance 2,790 6,596 426 166 9,978 Contracts/leases -- 143 205 84 432 Consulting 183 381 199 -- 763 Other 1,358 851 914 100 3,223 Payments in first nine months, 1999: Severance (2,970) (11,067) (3,168) (240) (17,445) Contracts/leases -- (211) (39) (84) (334) Consulting (183) (381) (151) -- (715) Other (1,049) (880) (1,415) (100) (3,444) ------- -------- ------- ----- -------- Balance: August 28, 1999 $ 2,121 $ 3,426 $ 112 $ 14 $ 5,673 ======= ======== ======= ===== ========
The North American net sales increase of 1.8 percent consisted of an increase in volume of 3.8 percent, a decrease in pricing and mix of 1.7 percent and a 0.3 percent decrease due to the divestiture of the hot melt stick and gun business in the fourth quarter of 1998. The Adhesives, Sealants and Coatings Group had a sales decrease of 1.9 percent in the third quarter. Volume increased 1.1 percent while pricing and changes in product mix decreased 2.6 percent. The sale of the gun and stick business had a negative 0.4 percent impact. In the Specialty Group, third quarter sales increased 6.1 percent over last year. Strong growth from TEC Specialty Products, Inc. was the primary driver. Foster Products Corporation and Linear Products, Inc. both experienced moderate growth while the Global Coatings Division experienced a slight decline in sales from the third quarter, 1998. The Automotive Group experienced a sales increase of 14.1 percent in the third quarter. Last year's sales were depressed due to strikes in the Auto industry. Through nine months, the North American increase in net sales was 1.8 percent. Volume was up 2.8 percent, while pricing and mix were down 0.5 percent. The sale of the stick and gun business had a 0.3 percent negative impact on the nine month sales and currency fluctuations (primarily the Canadian dollar), had a negative 0.2 percent impact. Sales in the Adhesives, Sealants and Coatings Group approximated last year's sales as volume increases of 1.4 percent were offset by decreases in pricing and mix, currency and the business divestiture. The Specialty Group sales through nine months increased 4.8 percent over last year, driven primarily by the growth in TEC Specialty Products, Inc. The Automotive Group experienced a sales increase of 4.2 percent for the first nine months. Third quarter, 1999 operating earnings, before nonrecurring charges, in North America were $20,334. This represents an increase of 50.3 percent over third quarter, 1998. Favorable raw material costs, tight operating expense control and savings from the restructuring plan all contributed to the strong third quarter earnings. Through nine months, North American operating earnings prior to nonrecurring charges, were $50,677. This compared to $43,004 for the same period in 1998. Third quarter net sales in Europe decreased 6.6 percent from the third quarter, 1998 to $68,773. The stronger U.S. dollar, especially against the deutsch mark, had a negative 3.6 percent impact on third quarter sales. Sale of the Wax business in the fourth quarter, 1998 resulted in a 3.0 percent decrease in sales for the quarter. The decrease in volume of 2.5 percent was offset by a 2.5 percent gain in pricing and changes in product mix. Operating earnings, prior to nonrecurring charges, increased 32.2 percent from third quarter, 1998 to $7,654. Savings from the restructuring plan was the primary driver of the improved earnings. -9- Through nine months, European net sales of $209,765 were 3.3 percent above the same period of 1998. Two acquisitions in the United Kingdom in the first half of 1998, net of the Wax business divestiture, resulted in a 3.6 percent sales increase. The year-to-date impact of foreign currency fluctuations had a negative 0.3 percent impact. Similar to the results of the third quarter, volume decreases through the first nine months of 2.1 percent were offset by increases in pricing and product mix. The operating earnings, prior to the nonrecurring charge, increased 81.4 percent over the first nine months of 1998, to $19,026. In Latin America, third quarter sales declined 8.2 percent from last year to $42,970. Volume was down 5.5 percent while pricing and mix contributed a negative 2.7 percent. Weak economies in Argentina and Brazil were key factors in the sales decrease. Operating earnings, prior to nonrecurring charges, declined 13.3 percent to $2,235 as savings from the restructuring plan were not enough to offset the decrease in sales. Net sales through nine months in Latin America of $139,761 were 3.6 percent below the same period of 1998. Pricing and product mix accounted for 2.4 percent while volume was down 1.2 percent. The operating earnings of $10,919 were above last year's level by 11.3 percent. The Asia/Pacific region showed a net sales increase over the third quarter, 1998 of 18.1 percent to $23,016. The strengthening of foreign currencies, primarily the Japanese yen, against the U.S. dollar caused a 10.0 percent increase in the third quarter sales. Two acquisitions, one in the fourth quarter of 1998 and one in the first quarter of 1999, accounted for a 7.5 percent increase. Volume increased 5.9 percent in the quarter while pricing and product mix resulted in a 5.3 percent decrease. Operating earnings of $51 for the quarter was $62 higher than the 1998 operating loss of $9. Through nine months of 1999, Asia/Pacific net sales of $71,128 were 15 percent above the first nine months of 1998. Increased volume added 13.3 percent to the nine month sales. The acquisitions mentioned above, net of a divestiture in the second quarter of 1998 accounted for a 4.0 percent increase. The foreign currency changes against the U.S. dollar had a 3.5 percent positive impact while pricing and changes in product mix decreased 5.8 percent. Operating earnings of $2,960 compares to an operating loss of $1,131 for the first nine months of 1998. The third quarter cost of sales for the consolidated company, decreased 3.1 percent. This resulted in a gross margin of 32.8 percent as compared to the third quarter, 1998 gross margin of 30.9 percent. Lower raw material costs and manufacturing savings resulting from the restructuring plan were the major reasons for the margin improvement. Through nine months of 1999, the gross margin was 32.3 percent, which compared to 31.4 percent for the same period in 1998. The European operations have shown particularly strong margins as a result of the restructuring efforts. Selling, administrative and other expenses in the third quarter of $78,437 were 3.4 percent below last year. As a percentage of sales, the third quarter, 1999 expenses were 23.6 percent, which compared to 24.3 percent for the same period of 1998. Through nine months, these expenses were 2.1 percent below last year. The percentage of sales improved from 25.1 percent in 1998 to 24.0 percent in 1999. Savings from the restructuring effort and tight spending control were the primary reasons for both the quarter and year-to-date improvement. Interest expense of $6,541 in the third quarter was 15.8 percent lower than the $7,766 posted in the third quarter, 1998. Improved cash flow from operations resulted in lower debt levels which, in turn, has resulted in lower interest expense. Through nine months of 1999 interest expense of $19,995 was 2.3 percent higher than the same period of 1998. Income tax expense of $8,773 in the third quarter, 1999 compared to expense of $145 for the same period of 1998. The large variance was due to the earnings before taxes and minority interest in 1999 were $20,580, and in 1998 were a loss of $10,625. The loss in 1998 was due to the nonrecurring charges. Excluding the nonrecurring charge, the tax rate for 1999 is expected to be 40.0 percent, compared to 40.8 percent in 1998. -10- Liquidity and Capital Resources ------------------------------- The cash flows as presented in this section have been calculated by comparison of the Consolidated Condensed Balance Sheets at August 28, 1999 to November 28, 1998 and at August 29, 1998 to November 29, 1997. Cash flow provided by operations for the first nine months of 1999 was $72,765. This compares to $30,266 for the same period in 1998. Improved net earnings and lower cash requirements to fund working capital were the key reasons for the cash flow improvement. Working capital was $175,707 at August 28,1999. This compares to $172,740 at November 28, 1998 and $202,411 at August 29, 1998. The current ratio of 1.7 at the end of the third quarter, 1999 compared to 1.9 at the same time in 1998. The number of days sales in trade accounts receivable, net of reserves for doubtful accounts, was 63 at August 28, 1999. At August 29, 1998 the number of days was 57. The average days sales in inventory was 62 at August 28, 1999 compared to 63 at August 29, 1998. The total debt to total capitalization ratio was 48.5 percent at August 28, 1999. This compares to 51.6 percent at November 28, 1998. Capital expenditures for property, plant and equipment, through the first nine months of 1999, were $43,157. The expenditures were primarily for construction of manufacturing capacity in Europe to support the restructuring efforts, the investment in Information Technology and general improvements in manufacturing productivity and operating efficiency. Environmental capital expenditures were not a material portion of overall company expenditures. Impact of the Year 2000 Issue The company's Year 2000 Project Office (consisting of information technology ("IT") personnel) has established a three-phase program to address the Year 2000 Issue. The three phases consist of (a) an assessment phase, (b) an analysis and resolution strategy phase and (c) a remediation and testing phase. The readiness program focuses on the company's IT as well as non-IT systems (which systems contain embedded technology in manufacturing or process control equipment containing microprocessors or similar circuitry.) The assessment phase, during which the Year 2000 Project Office attempted to identify all hardware and software that affect the company's operation, has been completed with respect to most of the company's operations. Based on the results of the assessment phase, the company has determined that its primary hardware and operating system software used in North American operations is Year 2000 ready. In addition, the company's internal laboratory, regulatory, financial and enterprise resource planning systems for North America are Year 2000 ready. Outside the United States, the company is addressing readiness issues on a region-by-region basis. The company is in the analysis and resolution strategy phase in certain locations and in the remediation and testing phase in other locations. The company currently anticipates these projects will be completed by fiscal year-end. The company has also begun assessing Year 2000 readiness issues relating to companies with which it has third-party outsourcing relationships on a global basis, such as a financial institution administering employee benefit plans, telecommunications providers and health care providers. The company has requested assurance from its significant suppliers that they will be functioning properly in the Year 2000. The company will continue to assess supplier readiness issues. In addition, the company is communicating with its major customers regarding the company's Year 2000 readiness efforts. However, it is impossible to fully assess the potential consequences in the event service -11- interruptions from suppliers occur or in the event that there are disruptions in such infrastructure areas as utilities, communication, transportation, banking and government. In October of 1998, the company formed a Year 2000 Task Force (consisting of representatives from its financial, IT, legal and risk management departments and from its key business units) to address the internal and external Year 2000 Issues. The company incurred Year 2000 readiness costs of approximately $2,000 over the two-year period ending November 28, 1998. The current total estimated costs to complete Year 2000 readiness efforts in 1999 is $1,200 to $1,500. In recent years, the company has replaced certain of its financial and operating systems. These systems have not required modification to address the Year 2000 Issue, and, as a result, the company's Year 2000 costs have been relatively low. Estimates of Year 2000 costs are based on numerous assumptions, and there can be no assurance that the estimates are correct or that the actual costs will not be greater than anticipated. The company's most reasonably likely worst case Year 2000 Issue scenario is a potential inability to obtain raw materials from suppliers in a timely manner, due either to a supplier's inability to manufacture the product or ship it. In such event, the company may experience a delay in its ability to manufacture and deliver products when ordered by customers. The company is currently evaluating its alternatives to mitigate the effect of such a scenario, if it occurs. The company is developing contingency plans to address other potential failures or delays due to the Year 2000 Issue. The company is in the process of developing a plan for the "Y2K transition". This will be a comprehensive plan for managing the actual transition over that last week of December, 1999 and the first week of January, 2000. Based on its assessments and current knowledge, the company believes it will not, as a result of the Year 2000 Issue, experience any material disruptions in internal manufacturing processes, information processing or interfacing with major customers, or with processing orders and billing. However, if certain third-party providers, such as providers of electricity, water or telephone service, experience difficulties resulting in disruption of service to the company, a shutdown of the company's operations at individual facilities could occur for the duration of the disruption. Assuming no major disruption in service from utility companies or other critical third-party providers, the company believes that it will be able to manage its total Year 2000 transition without any material effects on the company's results of operations or financial condition. Safe Harbor Statement under the Private Securities Litigation Act of 1995 ------------------------------------------------------------------------- Certain statements in this document are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, including but not limited to the following: political and economic conditions; product demand and industry capacity; competitive products and pricing; manufacturing efficiencies; new product development; product mix; availability and price of raw materials and critical manufacturing equipment; new plant startups; accounts receivable collection; the company's relationships with its major customers and suppliers; change in tax laws and tariffs; patent rights that could provide significant advantage to a competitor; devaluations and other foreign exchange rate fluctuations (particularly with respect to the German mark, the Japanese yen, the Brazilian real and the Ecuadorian sucre); the regulatory and trade environment; the Year 2000 computer issue; and other risks as indicated from time to time in the company's filings with the Securities and Exchange Commission. All forward-looking information represents management's best judgment as of this date based on information currently available that in the future may prove to have been inaccurate. -12- PART II. OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K (a) Exhibits to Part I 27 Financial Data Schedule. Exhibits to Part II 3(b) Bylaws of H.B. Fuller Company, as amended through July 14, 1999. 10(a) Employment Agreement dated May 6, 1999, between H.B. Fuller Company and Raymond A. Tucker. (b) Reports on Form 8-K. No reports on Form 8-K were filed for the thirteen weeks ended August 28, 1999. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. H.B. Fuller Company Dated: October 11, 1999 /s/ Raymond A. Tucker ------------------------------------ Raymond A. Tucker Chief Financial Officer and Treasurer -13- EXHIBIT INDEX Exhibit Number 3(b) Bylaws of H.B. Fuller Company, as amended through July 14, 1999. 10(a) Employment Agreement dated May 6, 1999, between H.B. Fuller Company and Raymond A. Tucker. 27 Financial Data Schedule. EX-3.(B) 2 BYLAWS OF H.B. FULLER COMPANY Exhibit 3(b) BYLAWS OF H.B. FULLER COMPANY (As amended through July 14, 1999) ARTICLE I - SHARES SECTION 1. CERTIFICATES. The forms of certificates for shares shall conform to Section 302A.417 of the Minnesota Business Corporation Act, as amended from time to time (the "MBCA"), and shall be approved by the Board of Directors. Each certificate shall be manually signed by the Chief Executive Officer, the President or an Executive Vice President, a Senior Vice President or a Vice President and by the Secretary or an Assistant Secretary (except that where any such certificate is manually signed by a transfer agent or a registrar (or by both), the signatures of any such officers may be facsimile, engraved or printed). All certificates of each class and each series shall be consecutively numbered. No certificate shall be issued for any share until such share is fully paid. SECTION 2. TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint one or more transfer agents and registrars to countersign and register certificates for shares. SECTION 3. TRANSFERS OF STOCK. Subject to Section 302A.429 of the MBCA, upon surrender to the Corporation or the transfer agent of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 4. LOSS OF CERTIFICATES. Except as otherwise provided by Section 302A.419 of the MBCA, any shareholder claiming a certificate for shares to be lost, stolen, or destroyed shall make an affidavit of that fact in such form as the appropriate officers of the Corporation shall require and shall give the Corporation a bond of indemnity in form, in an amount, and with one or more sureties satisfactory to the appropriate officers of the Corporation, to indemnify the Corporation against any claim which may be made against it on account of the reissue of such certificate, whereupon a new certificate may be issued in the same tenor and for the same number of shares as the one alleged to have been lost, stolen or destroyed. SECTION 5. RECORD DATE. (a) For the purpose of determining the shareholders entitled to notice of and to vote at any meeting of shareholders or to receive payment of any dividend, or for any other proper purpose, the Board of Directors shall fix a record date which shall not be more than sixty days preceding the date on which the particular action requiring such determination of shareholders is to be taken. (b) The record date fixed for the determination of the shareholders entitled to notice of and to vote at a shareholders' meeting shall continue to be the record date for all adjournments thereof. ARTICLE II - SHAREHOLDERS SECTION 1. PLACE OF MEETINGS. All meetings of the shareholders shall be held at the principal executive office of the Corporation or at any other place within or without the State of Minnesota designated by the Board of Directors. -1- SECTION 2. ANNUAL MEETINGS. An annual meeting of shareholders shall be held each year on such date and at such time of the day as the Board of Directors shall determine. At such meeting, directors shall be elected to succeed those whose terms are expiring and to fill any other vacancies, reports of the affairs of the Corporation shall be considered, and other business may be transacted. Only proposals to be brought before an annual meeting of shareholders by a shareholder in accordance with the following procedures shall be considered at such annual meeting. For a proposal to be properly brought by a shareholder at an annual meeting, the shareholder must give written notice to the Chief Executive Officer or Chief Financial Officer of the Company so as to be received at the principal executive offices of the Corporation not later than the date determined in accordance with the proxy rules promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, that proposals of shareholders intended to be presented at such annual meeting must be received in order to be included in the Corporation's proxy statement and proxy for such annual meeting. Each such notice shall set forth (a) the name and address of the shareholder who intends to make the proposal specified in such notice, (b) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at the annual meeting and intends to appear in person or by proxy at such annual meeting to make such proposal, (c) a brief description of such proposal and the reasons for making the proposal at the annual meeting, (d) a description of any material interest of the shareholder in the matter proposed and (e) such other information that would be required to be included in a Corporation proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission with respect to the proposal and the proponent thereof. SECTION 3. SPECIAL MEETINGS. A special meeting of the shareholders may be called for any purpose or purposes at any time in accordance with the provisions of Section 302A.433 of the MBCA. The business transacted at a special meeting shall be limited to the purposes stated in the notice of the meeting. For a special meeting to be properly called by a shareholder, the shareholder must give written notice of such shareholder's demand for a special meeting to the Chief Executive Officer or Chief Financial Officer of the Company. Each such notice shall set forth (a) the name and address of the shareholder demanding the special meeting, (b) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at the special meeting and intends to appear in person or by proxy at such special meeting to propose the business to be considered at the special meeting, (c) a brief description of the business to be considered at the special meeting and the reasons for conducting such business at the special meeting, (d) a description of any material interest of the shareholder in such business and (e) such other information that would be required to be included in a Corporation proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission with respect to the matters to be considered at the special meeting and the shareholder making the demand for such meeting. SECTION 4. NOTICE OF MEETINGS. Written notice given in the manner provided in Section 302A.011, Subd. 17, of the MBCA stating the place, date, and time of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the other officer calling the meeting, to each shareholder of record entitled to vote at such meeting. SECTION 5. QUORUM; ADJOURNED MEETINGS. The presence in person or by proxy of the holders of a majority of the voting power of the shares entitled to vote at any meeting shall constitute a quorum for the transaction of business. A meeting may be adjourned from time to time, whether or not a quorum is present. If any meeting is adjourned, no further notice as to such adjourned meeting need be given other than by announcement at the time of adjournment of the date, time and place of the adjourned meeting. At adjourned meetings at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally noticed. If a quorum is present when a meeting is convened, the shareholders present may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders originally present to leave less than a quorum. -2- SECTION 6. VOTING. Every shareholder entitled to vote at a meeting of shareholders shall be entitled at such meeting to one vote for each share of capital stock of the Corporation which is entitled to be voted unless the terms of the shares provide for no votes or a different number of votes per share. SECTION 7. PROXIES. Every shareholder entitled to vote at a meeting of shareholders shall be entitled to be represented at such meeting and to vote thereat by proxy or proxies appointed by a writing signed by such shareholder or appointed by telephonic transmission or any other form of electronic transmission as permitted by Section 302A.449 of the MBCA or any successor provision thereof. The appointment of a proxy shall be valid for eleven months after it is made, unless a longer period is expressly provided in the appointment. To be valid, all proxies must meet the requirements of, and shall be governed by, Section 302A.449 of the MBCA or any successor provision thereof. SECTION 8. INSPECTORS OF ELECTION. In advance of any meeting of shareholders the Board of Directors may appoint inspectors of election to act at such meeting or any adjournment thereof. If inspectors of election are not so appointed, the chair of any such meeting may, and on the request of any shareholder or shareholder's proxy shall, make such appointment at the meeting. SECTION 9. CONDUCT OF MEETINGS. The chair for each meeting of shareholders shall be the first of the following persons who is able to attend and chair the meeting: (i) the Chair of the Board, (ii) the Vice Chair of the Board, (iii) the Chief Executive Officer, (iv) the President or (v) any director or elected officer of the Corporation selected by the Chair. ARTICLE III - DIRECTORS SECTION 1. NUMBER. In addition to any director who may be elected by the holders of any one or more series of Preferred Stock voting separately as such (the "Series Directors"), the Board of Directors shall consist of a number of directors, which number shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by the affirmative vote of a majority of the entire Board of Directors, but the number of directors shall in no event be more than fifteen (excluding any Series Directors). SECTION 2. TERM OF OFFICE VACANCIES AND REMOVAL. (a) The directors to be elected by the holders of the shares of Common Stock and of any other shares of capital stock entitled to vote as a single class with the shares of Common Stock shall be divided into three classes designated Class I, Class II and Class III. The term of one class of directors shall expire each year. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors fixed pursuant to Section 1 of this Article III. At each Annual Meeting of Shareholders, the directors elected to succeed those directors whose terms expire shall be elected for a term expiring three years after the date of their election and until their successors are duly elected and qualified. (b) If the number of directors is changed, any increase or decrease shall be apportioned among the three classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class but in no case shall a decrease in the number of directors shorten the term of any incumbent director. Subject to the rights of the holders of any class or series of the then outstanding capital stock of the Corporation entitled to vote generally in the election of directors (other than Series Directors), newly created directorships resulting from any increase in the authorized number of directors or any vacancies in any class resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the directors (other than Series Directors) then in office, although less than a quorum. Directors so elected shall hold office for a term expiring at the time at which the term of office of the class to which they have been elected expires and until their successors are duly elected and qualified. -3- (c) Any directors, or the entire Board of Directors, may be removed from office at any time for good cause by the affirmative vote of the holders of at least two-thirds of the combined voting power of the shares of the classes or series of capital stock of the Corporation present and voting as a single class. A director named by the Board of Directors to fill a vacancy may be removed from office at any time, with or without cause, by the affirmative vote of a majority of the remaining directors if the shareholders have not elected directors in the interim between the time of the appointment to fill such vacancy and the time of removal. In the event that any one or more directors or the entire Board is removed at a shareholder's meeting, a new director or new directors shall be elected at the same meeting. (d) Notwithstanding the provisions of Article VI of these Bylaws, any amendment, alteration, change or repeal of Sections 1 and/or 2 of Article III of these Bylaws shall require the affirmative vote of the holders of two-thirds of the shares present and voting as a single class. SECTION 3. NOMINATION OF DIRECTORS. Only persons nominated in accordance with the following procedures shall be eligible for election by shareholders as directors. Nominations of persons for election as directors at a meeting of shareholders called for the purpose of electing directors may be made (a) by or at the direction of the Board of Directors or (b) by any shareholder in the manner herein provided. For a nomination to be properly made by a shareholder, the shareholder must give written notice to the Corporate Governance Committee of the Board of Directors so as to be received at the principal executive offices of the Corporation not later than (i) with respect to an annual meeting of shareholders, not later than the date determined in accordance with the proxy rules promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, that proposals of shareholders intended to be presented at such meeting must be received in order to be included in the Corporation's proxy statement and proxy for such meeting and (ii) with respect to a special meeting of shareholders for the election of directors, the close of business on the seventh day following the date on which the notice of such meeting is first given to shareholders. Each such notice shall set forth (A) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated, (B) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (C) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder, (D) such other information regarding each nominee proposed to such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated, by the Board, and (E) the consent of each nominee to serve as a director of the Corporation if so elected. SECTION 4. MEETINGS. The Board of Directors may provide by resolution the date, time and place, either within or without the State of Minnesota, for the holding of meetings of the Board of Directors without other notice than such resolution. Other meetings of the Board of Directors may be called by the Chair of the Board, the Vice Chair of the Board, the Chief Executive Officer (if a director) or any two other directors. The person or persons authorized to call meetings of the Board of Directors may fix any place, either within or without the State of Minnesota, as the place for holding any meeting of the Board of Directors called by them. In the absence of such designation, all called meetings of the Board of Directors shall be held at the principal executive office of the Corporation. The Board of Directors shall choose from among the directors a Chair of the Board and may from time to time choose a Vice Chair of the Board. The chair for each meeting of the Board of Directors shall be the first of the following persons who is able to attend and chair such meeting: (i) the Chair of the Board, (ii) the Vice Chair of the Board, if any, (iii) the Chief Executive Officer (if a director), (iv) the President (if a director), or (v) any director selected by the Chair. -4- Notice of any called meeting of the Board of Directors shall be given by the person or persons calling the meeting (or by the Secretary or an Assistant Secretary at the request of such person or persons) either by mail to each director at the director's business address at least two days prior to such meeting or by telegram, telecopy, facsimile, telephone, or in person at least 24 hours prior to such meeting to the business address of each director, or in the event such notice is given on a Saturday, Sunday or holiday to the residence address of each director. If the day or date, time and place of a meeting of the Board of Directors has been announced at a previous meeting of the Board of Directors, no notice is required. Notice of an adjourned meeting of the Board of Directors need not be given other than by announcement at the meeting at which adjournment is taken. Neither the business to be transacted at, nor the purpose of, any regular or called meeting of the Board of Directors needs to be specified in the notice of such meeting. Notice of any meeting of the Board of Directors may be waived by any director either before, at, or after such meeting orally or in a writing signed by such director. A director, by his or her attendance at any meeting of the Board of Directors, shall be deemed to have waived notice of such meeting, except where the director objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate thereafter in the meeting. The members of the Board of Directors, the Executive Committee or any other committee created by the Board of Directors may participate in a meeting of the Board of Directors or such Committee by any means of communication through which the directors may simultaneously hear each other during the meeting and such participation in a meeting shall constitute presence in person at such meeting. Any action which may be taken at a meeting of the Board of Directors, the Executive Committee or any other committee of the Board of Directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors or committee members then holding office. SECTION 5. QUORUM; REQUIRED VOTE. A majority of the directors then holding office shall constitute a quorum for the transaction of business by the Board of Directors. The Board of Directors shall take action by the affirmative vote of the greater of (a) majority of the directors present at a duly held meeting at the time the action is taken, or (b) a majority of the minimum number of directors that would constitute a quorum for the transaction of business at the meeting. A majority of the members of any committee appointed by the Board of Directors and then holding office shall constitute an quorum for the transaction of business by such committee. Any committee shall take action by the affirmative vote of the greater of (a) majority of the members present at a duly held meeting at the time the action is taken, (b) a majority of the minimum number of members that would constitute a quorum for the transaction of business at the meeting, or (c) such higher requirement as may be established by the Board of Directors. Notwithstanding the foregoing, where other sections of these Bylaws or the Articles of Incorporation of the Corporation require a larger proportion or number than is set forth in this Section 5 of Article III, the affirmative vote of such larger proportion or number shall be required for the Board of Directors or a committee of the Board of Directors to take action. SECTION 6. EXECUTIVE COMMITTEE. By the affirmative action of at least three fourths of the directors then holding office, the Board of Directors by resolution may create an Executive Committee of three or more directors and may delegate to such committee such of its powers and authority in the management of the business and affairs of the Corporation as it may by resolution provide, except the power to declare dividends and to adopt, amend or repeal the Bylaws. SECTION 7. OTHER COMMITTEES. The Board of Directors by resolution may create, in addition to an Executive Committee, ad hoc and standing committees, and may delegate to such Committees such of its powers as it may choose, including without limitation the power to perform such inquiries, investigations or analyses as may be required from time to time, and to report the results of any of their findings and their recommendations to the Board of Directors for such action as the Board of Directors deems to be appropriate. -5- SECTION 8. COMPENSATION. The directors, by resolution of the Board of Directors, may be paid fees and provided benefits and may be reimbursed for expenses incurred by them on behalf of the Corporation, which fees, benefits and expenses shall be paid at such times and upon such conditions as may be determined by the Board of Directors; provided, however, that the shareholders at any meeting called for the purpose may revoke or rescind any such action by the Board of Directors, but may not revoke or rescind any action of the Board of Directors (i) authorizing reimbursement to directors for expenses incurred by them on behalf of the Corporation or (ii) establishing vested or contractual compensation or benefit arrangements for directors. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor. SECTION 9. EMERITUS DIRECTORS. The Board of Directors may from time to time appoint a former director to the honorary position of "Director Emeritus" or, in the case of a former Chair of the Board (whether or not then also a director), "Chair Emeritus." A former director holding an honorary position may be invited to attend meetings or portions of meetings of the Board of Directors, but shall have no voting or other rights of a director and shall not be entitled to the compensation payable to directors. ARTICLE IV - OFFICERS SECTION 1. ELECTED OFFICERS. The officers of the Corporation to be elected by the Board of Directors shall be a Chief Executive Officer, a President, a Chief Financial Officer, one or more Executive or Senior Vice Presidents, one or more Vice Presidents, a Treasurer, a General Counsel, a Controller, a Secretary and one or more assistant officers. Any combination of such offices may be held by the same person. Elected officers shall hold office at the pleasure of the Board and shall perform the duties referred to in the Bylaws, those determined by the Board of Directors and those assigned by the Chief Executive Officer. The Chair of the Board and the Vice Chair of the Board are not and shall not be deemed to be officers of the Corporation solely by virtue of having such titles. SECTION 2. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have general planning, administrative and oversight responsibility for the Corporation and shall have general charge of and control over the Corporation, subject to the orders and directions of the Board of Directors. The Chief Executive Officer shall also perform such other duties as the Board of Directors may from time to time prescribe or as are required by Section 302A.305, Subd. 2, of the MBCA. SECTION 3. PRESIDENT. The President shall be the chief operating officer of the corporation and shall perform all responsibilities related to the ongoing management of the Corporation. SECTION 4. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be responsible for all financial operations of the Corporation, including without limitation raising funds, safeguarding assets, accounting and reporting, financial planning, financial organizational administration and maintenance of internal controls as are prudent and required by law. The Chief Financial Officer shall also perform such other duties as are required by Section 302A.305, Subd. 3, of the MBCA. SECTION 5. EXECUTIVE AND SENIOR VICE PRESIDENTS; VICE PRESIDENTS. Each Executive and Senior Vice President and each Vice President shall perform such duties as shall be determined by the Board of Directors or assigned by the Chief Executive Officer. SECTION 6. TREASURER. The Treasurer shall have the care and custody of the funds and valuable documents of the Corporation and shall have oversight and administrative responsibility for raising and borrowing funds and establishing banking and similar relationships. SECTION 7. GENERAL COUNSEL. The General Counsel shall be the chief legal officer of the Corporation and shall be responsible for the administration and general direction of all matters that may involve or require legal review or analysis, including threatened and actual legal proceedings. -6- SECTION 8. CONTROLLER. The Controller shall be responsible for keeping complete and accurate records of the business, assets, liabilities and transactions of the Corporation and for the preparation of such financial statements as may be required by law or are needed for internal management purposes. SECTION 9. SECRETARY. The Secretary shall keep a record of the proceedings of the meetings of the shareholders and the Board of Directors. The Secretary shall give notice as required of meetings of the shareholders and the Board of Directors; provided, however, notice given by another shall not be ineffective merely because it was not given by the Secretary. The Secretary shall also perform such duties as are determined by the Board of Directors or by the Chief Executive Officer. SECTION 10. ASSISTANT OFFICERS. Each Assistant Officer shall perform such duties as are determined by the Board of Directors and by the officer to whom the Assistant Officer reports. SECTION 11. APPOINTED OFFICERS. The Chief Executive Officer may from time to time appoint vice presidents and any other officers deemed appropriate. These officers shall hold office at the pleasure of the Chief Executive Officer and shall perform such duties as are determined by the Chief Executive Officer. SECTION 12. COMPENSATION. Compensation of all elected officers referred to in Section 1 and all appointed officers referred to in Section 11 shall be fixed by the Board of Directors or a Committee of the Board of Directors and may be changed from time to time (subject to contract rights) by the Board or such Committee. SECTION 13. EXECUTION OF CORPORATE CONTRACTS. Except as otherwise provided by the Board of Directors or the Executive Committee, all contracts of the Corporation shall be executed on its behalf by the Chief Executive Officer, the President, the Chief Financial Officer, the Controller, an Executive or Senior Vice President, a Vice President or such other person or persons as one of these officers may from time to time authorize so to do. Notes given and drafts accepted by the Corporation shall be valid only when signed by the Chief Executive Officer, the President, the Chief Financial Officer, the Controller, an Executive or Senior Vice President, a Vice President, the Treasurer or such other person as one of these officers may from time to time authorize so to do. Checks, drafts, and other evidences of indebtedness to the Corporation shall, for the purpose of deposit, discount and collection, be endorsed by these same officers or their delegees. Funds of the Corporation deposited in banks and other depositories to the credit of the Corporation shall be drawn from such bank and depositories by checks, drafts or orders for payment of money signed by any one or more of the Chief Executive Officer, the President, the Chief Financial Officer, the Controller, an Executive or Senior Vice President, a Vice President, the Treasurer or such other person or persons as any two of these officers may authorize. Whenever the Board of Directors or the Executive Committee shall provide that any contract be executed or any other act be done in any other manner and by any other officer than as specified in these Bylaws, such method of execution or action shall be as equally effective to bind the Corporation as if specified herein. ARTICLE V - INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES The Corporation shall indemnify such persons (and shall advance expenses of such persons), for such expenses and liabilities, in such manner, under such circumstances, and to such extent as required or permitted by the Minnesota Business Corporation Act, section 302A.521, as now enacted or hereafter amended. ARTICLE VI - AMENDMENTS These Bylaws may be amended or repealed as provided in Section 302A.181 of the MBCA; provided, however, that Sections 1 and 2 of Article III shall only be amended or repealed as provided in Section 2(d) of Article III. -7- EX-10.(A) 3 EMPLOYMENT AGREEMENT Exhibit 10(a) EMPLOYMENT AGREEMENT THIS AGREEMENT dated May 6, 1999 is between H.B. Fuller Company, a Minnesota corporation ("Fuller") and Raymond A Tucker ("Executive"). The parties hereto agree as follows: 1. Employment and Term Subject to the terms and conditions of this Agreement, Fuller agrees to employ Executive and Executive accepts employment of Fuller commencing on July 1, 1999 continuing thereafter until terminated by Fuller or Executive. 2. Duties Executive's title will be Chief Financial Officer and Treasurer and you will report directly to Fuller's CEO. At Executive's option, you may also hold additional positions as offered by Fuller's CEO. Your exact duties and responsibilities will be outlined to you by Fuller's CEO. 3. Compensation a. Base Compensation. For your initial year of employment, your base compensation will be $250,000.00, payable in substantially equal semi-monthly installments subject to payroll deductions. Your base compensation will be reviewed annually and may be adjusted annually by Fuller's Compensation Committee, a committee authorized by Fuller's Board of Directors. b. Annual Incentive Plan. You are immediately eligible to participate in the annual incentive plan with specific performance targets as agreed to with the CEO and Compensation Committee. These targets, tied to a combination of Fuller and individual performance, will provide you with an annual bonus potential equal to a maximum of 75% of base compensation for 1999. Fuller guarantees a first year Special Payment of 37.5% of base compensation, or $93,750 with payment being made as follows: (1) $46,875 added to the "Transition Allowance" (covered below) and (2) $46,875 to be paid in January, 2000 in conjunction with any payments under the 1999 Annual Incentive Plan. The 1999 Annual Incentive Plan payment, if any, will be reduced by this Special Payment. c. Long-Term Incentive Plan. You will be immediately eligible to participate in the long-term incentive plan in accordance with its current terms and conditions. Further, you will immediately receive a stock option of 10,000 shares and 1,500 performance units. You will be required to complete the necessary agreements that are part of these plans. You will also be eligible to receive additional awards under these plans as provided annually. d. Relocation Package and Transition Allowance. You will be immediately eligible to participate in Fuller's relocation policy with a guaranteed purchase of your current home at fair market value. Transition Allowance, under this plan, will be increased by $46,875 bringing the total amount payable under Transition Allowance to $71,875. e. Retirement Plans, Medical, Dental, Vision and Other Benefits. You will become a participant under these plans as provided under the applicable plan documents. Additionally, you will participate in the Fuller car allowance program, executive physical, and tax and financial planning benefits in accordance with current Fuller policy. f. Supplemental Executive Retirement Plan ("SERP"). You will be eligible to participate in the SERP with an immediate granting of all years of service with your prior employer for purposes of eligibility. Additionally, the effect of your annual benefit from your previous employer's pension plan is limited to $35,253, which represents 50% of the gross benefit payable to you at retirement. All other offsets provided under the plan will continue, including all of the applicable early retirement factors. g. Deferred Compensation. Fuller is currently investigating various options allowing certain deferrals by executives. Fuller will work with you to establish a reasonable plan for your use, if and when a plan is adopted. h. Change in Control. The current applicable provisions governing change in control features apply to you, as provided under the applicable plans. 4. Disclosure of Information In your capacity as Chief Financial Officer of Fuller, you will received confidential and proprietary information. You agree to hold this information in confidence and not disclose such information to others except as authorized by Fuller. 5. Other Agreement Executive warrants that, to the best of his knowledge, the execution and delivery of this Agreement or the performance of duties contemplated will not violate the terms of any other agreement to which he is party or by which he is bound. 6. Miscellaneous. This Agreement shall be binding upon and inure to the benefit of Fuller, its successors, and assigns and may not be assigned by Executive. This Agreement contains the entire agreement of the parties and supersedes all prior agreements relating to the subject matter hereof, and may only be changed by a writing signed by the parties. The Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. Executive agrees that any disputes arising out of or relating to this Agreement shall be brought, if at all, in and before a court located in the State of Minnesota to the exclusion of the courts of any other state. Executive H.B. Fuller Company /s/ Raymond A. Tucker By: /s/ James A. Metts - -------------------------- --------------------------- Raymond A. Tucker Its: VP-Human Resources --------------------------- EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE SHEET, INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS NOV-27-1999 NOV-29-1998 AUG-28-1999 5,560 0 235,618 4,781 152,518 441,577 768,608 353,213 1,032,038 265,870 281,485 0 306 14,037 350,692 1,032,038 1,007,325 1,007,325 681,550 253,358 2,388 1,643 19,995 50,034 21,594 29,693 0 0 0 29,693 2.15 2.13
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