Acquisitions and Divestitures

3 Months Ended

Mar. 02, 2013

Acquisitions and Divestitures Abstract

Acquisitions and Divestitures Disclosure

Note 2: Acquisitions and Divestitures

Acquisitions

Engent, Inc.: On September 10, 2012 we acquired the outstanding shares of Engent, Inc., a provider of manufacturing, research and development services to the electronics industry. The purchase price of $7,881was funded through existing cash and was recorded in our North America Adhesives operating segment.

In addition to the initial consideration, the former owners of the Engent, Inc. business are entitled to receive a series of annual cash payments based on certain financial performance criteria during the period September 10, 2012 through November 28, 2015 up to a maximum additional consideration of $2,000. We used a probability-weighted present value technique based on expected future cash flows to estimate the fair value of the contingent consideration. The resulting fair value of the contingent consideration was $1,200 which was recorded in other liabilities and increased goodwill. Each reporting period we determine the fair value of the contingent consideration liability and any changes in value are reflected in the Condensed Consolidated Statements of Income.

Forbo Industrial Adhesives. On March 5, 2012 we completed the acquisition of the global industrial adhesives and synthetic polymers business of Forbo Holding AG. The purchase price was 368,514 Swiss francs or $403,100 which we financed with the proceeds from our March 5, 2012 note purchase agreement and a term loan.

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

	Preliminary Valuation December 1, 2012		Final Purchase Price Adjustment		Final Valuation March 2, 2013
Current assets	$	172,345	$	-	$	172,345
Property, plant and equipment		92,443		-		92,443
Goodwill		136,658		(1,625)		135,033
Other intangibles
Developed technology		42,190		-		42,190
Customer relationships		58,910		-		58,910
Trademarks/trade names		21,880		-		21,880
Other		479		-		479
Other assets		4,605		-		4,605
Current liabilities		(84,251)		-		(84,251)
Other liabilities		(40,534)		-		(40,534)
Total purchase price	$	404,725	$	(1,625)	$	403,100

Our expected lives of the acquired intangible assets are as follows: developed technologybetween 7and 12 years,customer relationships between 12and 13 years,trademarks/trade names8 years and other 3 years.

Based on fair value measurement of the assets acquired and liabilities assumed, we allocated $135,033 to goodwill for the expected synergies from combining the acquired business with our existing business. The goodwill was assigned to our existing operating segments as presented below:

North America Adhesives	$	29,938
EIMEA		97,466
Latin America Adhesives		1,584
Asia Pacific		6,045
Total acquired goodwill	$	135,033

The amount of goodwill deductible for tax purposes over a five year period is $9,419 and over a fifteen year period is $26,173. The goodwill non-deductible for tax purposes is $99,441.

The following unaudited pro forma information gives effect to the acquisition of the Forbo industrial adhesives 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 ended March 3, 2012, assuming that the acquisition occurred at the beginning of fiscal 2011, is presented below:

	13 Weeks Ended
	March 3, 2012
Net revenue	$	478,318
Net income from continuing operations		14,892
Net income attributable to H.B. Fuller		16,590
Diluted earnings per share from continuing operations	$	0.30
Diluted earnings per share		0.33

Divestitures

Central America Paints.On August 6, 2012 we completed the sale of our Central America Paints businessto Compania Global de Pinturas S.A., a company of Inversiones Mundial S.A for cash proceeds of $118,566.In accordance with ASC 205-20 “Discontinued Operations”, we have classified the results of this business as discontinued operations. The operational results of this business are presented in the “Income from discontinued operations, net of tax” line item on the Condensed Consolidated Statements of Income. Also in accordance with ASC 205-20, we have not allocated general corporate charges to this business. The assets and liabilities of this business are presented on the Condensed Consolidated Balance Sheets as assets and liabilities of discontinued operations.

Revenue and income from discontinued operations for the period ended March 3, 2012 were as follows:

	13 Weeks Ended
	March 3, 2012
Net revenue	$	29,808
Income from operations		2,843
Income taxes		(1,120)
Net income from discontinued operations	$	1,723

The major classes of assets and liabilities of discontinued operations as of March 2, 2013 and December 1, 2012 were as follows:

	March 2, 2013		December 1, 2012
Other current assets		1,865		-
Current assets of discontinued operations		1,865		-
Other assets		-		1,865
Long-term assets of discontinued operations		-		1,865
Trade payables		-		74
Other accrued expenses		5,000		-
Current liabilities of discontinued operations		5,000		74
Other liabilities		-		5,000
Long-term liabilities of discontinued operations		-		5,000