Acquisitions

6 Months Ended

Jun. 02, 2012

Acquisitions Abstract

Acquisitions Disclosure

Note 2: Acquisitions

Forbo Industrial Adhesives. On March 5, 2012 we completed the acquisition of the global industrial adhesives and synthetic polymers business of Forbo Holding AG. We acquired the Forbo Group subsidiaries that operate the industrial adhesives business and directly purchased certain assets used in the industrial adhesives business that were not owned by the former Forbo Group subsidiaries on a cash-free and debt-free basis. The purchase price was 370,000 Swiss francs or $404,725 at the rate of 1.09385 USD/CHF when the acquisition closed. We financed the acquisition with the proceeds from our March 5, 2012 note purchase agreement under which we agreed to issue $250,000 in 4.12 percent Senior Notes and a $150,000 term loan at an initial interest rate of 1.75 percent.

The Forbo industrial adhesives business acquired is known for the breadth of its product line in all of our core markets, particularly packaging and durable assembly. The acquisition gives us added product technology, people and skills that will make our business even more competitive. The global industrial adhesives business acquired operated17 manufacturing facilities in 10 countries and employed more than 1,100 people globally. The acquired business will be integrated into our existing North America Adhesives, EIMEA, Latin America Adhesives and Asia Pacific operating segments. The integration will involve a significant amount of restructuring and capital investment to optimize the new combined operating segments. In addition, in July of 2011 we announced our intentions to take a series of actions in our existing EIMEA operating segment to improve the profitability and future growth prospects of this operating segment. We have combined these two initiatives into a single project which we refer to as the “Business Integration Project”.

The acquisition fair value measurement was preliminary as of June 2, 2012, subject to the completion of the valuation of the industrial adhesives business acquired and further management reviews and assessment of the preliminary fair values of the assets acquired and liabilities assumed. We expect the fair value measurement process to be completed in the third quarter of 2012.

The following table summarizes the preliminary fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:

Current assets	$	195,058
Property, plant and equipment		95,580
Goodwill		124,540
Other intangibles, net		120,687
Other assets		168
Current liabilities		(97,508)
Other liabilities		(33,800)
Total purchase price	$	404,725

Based on the results of an independent valuation, we allocated $120,687 of the purchase price to acquired intangible assetsas follows: $42,190 was assigned to developed technology with expected lives between 7or 12 years, $56,140 was assigned to customer relationships with an expected life of 12 years, $21,880 was assigned to trademarks/trade names with an expected life of 8 years and $477 was assigned to other intangibles with an expected life of 3 years.

Based on our preliminary fair value measurement of the assets acquired and liabilities assumed, we allocated $124,540 to goodwill for the expected synergies from combing the acquired business with our existing business. Upon completion of the fair value measurement, the goodwill will be assigned to our existing North America Adhesives, EIMEA, Latin America Adhesives and Asia Pacific operating segments. The estimated amount of goodwill deductible for tax purposes over a five year period is $3,060 and over a fifteen year period is $25,112. The goodwill non-deductible for tax purposes is $96,368.

Our condensed consolidated statements of income for the 13 weeks ended June 2, 2012 included $144,435 of net revenue and $1,391 of segment operating income from the acquisition. Segment operating income is defined as gross profit less selling, general and administrative (SG&A) expenses and excludes special charges, net and asset impairment charges.

The following unaudited pro forma information gives effect to the acquisition of the Forbo industrial business acquired as if the acquisition occurred on November 28, 2010. The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the acquisition, supportable and expected to have a continuing impact on combined results. The unaudited pro forma results do not include any anticipated cost savings from operating efficiencies or synergies that could result from the acquisition. Accordingly, the unaudited pro forma results are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the periods presented. The unaudited pro forma information for the 13 weeks and 26 weeks ended June 2, 2012 and May 28, 2011, assuming that the acquisition occurred at the beginning of fiscal 2011, is presented below:

		13 Weeks Ended				26 Weeks Ended
		June 2,		May 28,		June 2,		May 28,
($ in millions except earnings per share)		2012		2011		2012		2011
Net revenue	$	526,995	$	520,885	$	1,005,313	$	967,212
Net income from continuing operations	$	7,466	$	25,743	$	22,358	$	36,123
Net income attributable to H.B. Fuller	$	4,342	$	26,640	$	20,932	$	39,740
Diluted earnings per share from continuing operations	$	0.15	$	0.52	$	0.44	$	0.72
Diluted earnings per share	$	0.09	$	0.53	$	0.41	$	0.80

The pro forma results above for the 13 weeks and 26 weeks ended May 28, 2011 include non-recurring expenses related to acquired inventory fair value adjustment of $2,406, net of tax. During the 13 weeks and 26 weeks ended June 2, 2012, we recorded special charges, net of $24,187 and $31,040, respectively, for the after tax non-recurring costs related to the acquisition and integration of the acquired business.

Liquamelt Corp. On April 15, 2011 we acquired the principal assets and certain liabilities of Liquamelt Corp., a manufacturer and marketer of unique adhesives and dispensing systems. Liquamelt Corp. was based in Lorain, Ohio. This innovative adhesive system delivers room temperature liquid adhesive to the point of application where it is heat activated and dispensed.The acquisition was recorded in our North America Adhesives operating segment.

The purchase price of $6,000was funded through existing cash. We incurred acquisition related costs of approximately $118, which were recorded as selling, general and administrative expenses in the Condensed Consolidated Statements of Income.