UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K405 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended November 28, 1998 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 offices) (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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K405 or any amendment to this Form 10-K405. [X] The aggregate market value of the Common Stock, par value $1.00 per share, held by non-affiliates of the Registrant as of January 29, 1999 was approximately $560,199,000 (based on the closing price of such stock as quoted on the Nasdaq National Market ($43.00) on such date). The number of shares outstanding of the Registrant's Common Stock, par value $1.00 per share, was 13,982,649 as of January 29, 1999. DOCUMENTS INCORPORATED BY REFERENCE Parts I, II and IV incorporate information by reference to portions of the H.B. Fuller Company 1998 Annual Report to Shareholders. Part III incorporates information by reference to portions of the Registrant's Proxy Statement dated March 5, 1999. -1-
H.B. FULLER COMPANY 1998 Form 10-K405 Annual Report Table of Contents PART I ------ Page ---- Item 1. Business 3 Item 2. Properties 6 Item 3. Legal Proceedings 7 Item 4. Submission of Matters to a Vote of Security Holders 7 Executive Officers of the Registrant 8 PART II ------- Item 5. Market for Registrant's Common Stock and Related Stockholder Matters 9 Item 6. Selected Financial Data 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 9 Item 8. Financial Statements and Supplementary Data 9 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 9 PART III -------- Item 10. Directors and Executive Officers of the Registrant 10 Item 11. Executive Compensation 10 Item 12. Security Ownership of Certain Beneficial Owners and Management 10 Item 13. Certain Relationships and Related Transactions 10 PART IV ------- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 11 Signatures 15 Schedule II - Valuation and Qualifying Accounts 17 -2-
PART I Item 1. Business Founded in 1887 and incorporated as a Minnesota corporation in 1915, H.B. Fuller Company (the "Company") today is a worldwide manufacturer and marketer of adhesives, sealants, coatings, paints and other specialty chemical products. The Company currently employs approximately 6,000 people and has sales operations in 42 countries in North America, Europe, Latin America and the Asia/Pacific region. The Company's largest worldwide business category is adhesives, sealants and coatings, which generated more than 90 percent of 1998 sales. These products, in thousands of formulations, are sold to customers in a wide range of industries, including packaging, woodworking, automotive, aerospace, graphic arts (books/magazines), appliances, filtration, windows, sporting goods, nonwovens, shoes and ceramic tile. The Company also is a quality producer and supplier of powder coatings to metal finishing industries; commercial and industrial paints in Latin American markets; as well as mastics and coatings for thermal insulation, indoor air quality and asbestos abatement applications in the United States. Segment Information For financial information relating to major geographic areas of the Company, see Note 15, "Business Segment Information", on pages 47 and 48 of the Company's 1998 Annual Report to Shareholders, incorporated herein by reference. Line of Business and Classes of Similar Products The Company is engaged in one line of business, the manufacturing of specialty chemical products which includes formulating, compounding and marketing adhesives, sealants and coatings, paints, specialty waxes and related chemicals. The following tabulation sets forth information concerning the approximate contribution to consolidated sales of the Company's classes of products: Class of Product Sales ---------------------------------- 1998 1997 1996 ---- ---- ---- Adhesives, sealants and coatings 91% 90% 88% Paints 8 7 7 Other 1 3 5 --- --- --- 100% 100% 100% === === === Non-U.S. Operations Wherever feasible, the Company's practice has been to establish manufacturing units outside of the United States to service the local markets. The principal markets, products and methods of distribution in the non-U.S. business vary with the country or business practices of the country. The products sold include not only those developed by the local manufacturing plants but also those developed within the United States and elsewhere in the world. The Company's operations overseas face varying degrees of economic and political risk. At the end of fiscal year 1998, the Company had plants in 29 countries outside the United States and satellite sales offices in another 13 countries. The Company also uses license agreements to maintain a worldwide manufacturing network. In the opinion of management of the Company, there are several countries where the Company has operating facilities which have political risks higher than in the United States. Where possible, the Company insures its physical assets against damage from civil unrest. -3-
Competition The Company encounters a high degree of competition in the marketing of its products. Because of the large number and variety of its products, the Company does not compete directly with any one competitor in all of its markets. The Company competes with several large firms as well as many smaller local, independent firms. In North America there are a large number of competitors. Since adhesives of all types are widely used, it is not possible to identify a few competitors who would represent the major competition. In Latin America, the Company experiences substantial competition in marketing its printing inks and industrial adhesives. In Central America, it is a major factor in the industrial adhesives market and, along with several other large paint manufacturing firms, in the residential paint market. In Europe, the Company is a large manufacturer of adhesives and competes in certain areas of this market with several large companies. The principal competitive factors in the sale of adhesives, paints, coatings and sealants are product performance, customer and technical service, quality and price. Customers Of the Company's $1,347,241,000 total sales to unaffiliated customers in 1998, $779,499,000 was sold through North American operations. The Company's largest customer accounts for less than 5% of consolidated sales. Backlog Orders for the Company's products are generally processed within one week. Therefore, the Company had no significant backlog of unfilled orders at November 28, 1998, November 29, 1997 or November 30, 1996. Raw Materials The Company purchases from large chemical suppliers raw materials including solvents, plasticizers, waxes, resins, polymers and vinyl acetate monomer which the Company uses to manufacture its principal products. Natural raw materials are also purchased from outside suppliers and include starch, dextrines, natural latex and resins. The Company attempts to find multiple sources for all of its raw materials and alternate sources of supply are generally available. An adequate supply of the raw materials used by the Company is presently available in the open market. The Company's Latin American and Asia/Pacific operations import many of their raw materials. Extended delivery schedules of these materials are common, thereby requiring maintenance of higher inventory levels than those maintained in North America and Europe. A significant portion of the Company's raw materials are derived from petroleum-based products and this is common to all adhesive manufacturers. The Company is not a large consumer of energy and, therefore, has not experienced any difficulties in obtaining energy for its manufacturing operations. The Company anticipates it will be able to obtain needed energy supplies in the future. Patents, Trademarks and Licenses Much of the technology used in the manufacturing of adhesives, coatings and other specialty chemicals is in the public domain. To the extent that it is not, the Company relies on trade secrets and patents to protect its know-how. The Company has agreements with many of its employees for the purpose of protecting the Company's rights to technology and intellectual property. The Company also routinely obtains confidentiality commitments from customers, suppliers and others to safeguard its proprietary information. Company trademarks such as HB Fuller(R), Kativo(R), Protecto(R) and Rakoll(R) are of continuing importance in marketing its products. -4-
Research and Development The Company conducts research and development activities in an effort to improve existing products and to design new products and processes. The Company's research and development expenses during 1998, 1997 and 1996 aggregated $22,255,000, $24,830,000 and $25,823,000, respectively. Environmental Protection The Company regularly reviews and upgrades its environmental policies, practices and procedures and seeks improved production methods that reduce waste, particularly toxic waste, coming out of its facilities, based upon evolving societal standards and increased environmental understanding. The Company's high standards of environmental consciousness are supported by an organizational program supervised by environmental professionals and the Worldwide Environment, Health and Safety Committee, a committee with management membership from around the world which proactively monitors practices at all facilities. Company practices are often more stringent than local government standards. The Company integrates environmental programs into operating objectives, thereby translating philosophy into every day practice. The Company believes that as a general matter its current policies, practices and procedures in the areas of environmental regulations and the handling of hazardous waste are designed to substantially reduce risks of environmental and other damage that would result in litigation and financial liability. Some risk of environmental and other damage is, however, inherent in particular operations and products of the Company, as it is with other companies engaged in similar businesses. The Company is and has been engaged in the handling, manufacture, use, sale and/or disposal of substances, some of which are considered by federal or state environmental agencies to be hazardous. The Company believes that its manufacture, handling, use, sale and disposal of such substances are generally in accord with current applicable environmental regulations. Increasingly strict environmental laws, standards and enforcement policies may increase the risk of liability and compliance costs associated with such substances. Environmental expenditures, reasonably known to management, to comply with environmental regulations over the Company's next two fiscal years are estimated to be approximately $8.0 million. See additional disclosure under Item 3, Legal Proceedings. Employees The Company and its consolidated subsidiaries employed approximately 6,000 persons on November 28, 1998, of which approximately 2,300 persons were employed in the United States. -5-
Item 2. Properties The principal manufacturing plants and other properties are located in 30 countries: U.S. Locations -------------- California Michigan Chatsworth Grand Rapids Los Angeles (1 owned, 1 leased) Madison Heights* Roseville Taylor Florida Warren Gainesville Minnesota Pompano Beach Minneapolis and St. Paul Georgia (7 owned, 1 leased) Covington (2 owned) New Jersey - Edison Forest Park (1 owned, 1 leased) Tucker North Carolina - Greensboro Illinois Ohio Palatine Cincinnati Tinley Park Dayton Indiana - Elkhart Tennessee - Memphis* Kentucky Texas Paducah Dallas Houston Washington - Vancouver Other Locations --------------- Argentina - Buenos Aires Honduras Australia - Melbourne San Pedro Sula (2 owned) Austria - Wels Italy - Borgolavezzaro Brazil - Sao Paulo Japan - Hamamatsu Canada Mexico - Mexico City* St. Andre est Netherlands - Amerongen Montreal New Zealand - Auckland Toronto Nicaragua - Managua Chile - Santiago People's Republic of Colombia - Itagui* China - Guangzhou* Costa Rica - San Jose (5 owned) Peru - Lima Dominican Republic - Santo Domingo Philippines - Manila* Ecuador - Guayaquil (2 owned) Puerto Rico - Bayamon El Salvador - San Salvador Republic of Panama - Panama City Federal Republic of Germany Spain - Alicante Luneburg United Kingdom Nienburg* Birmingham* France - Le Trait Chesham Guatemala - Guatemala City Dukinfield Leabrooks* Venezuela - Caracas *Leased properties -6-
The Company's principal executive offices and central research facilities are Company owned and located in the St. Paul, Minnesota metropolitan area. The Company has facilities for the manufacture of various products with total floor space of approximately 1,656,000 square feet, including 325,000 square feet of leased space. In addition, the Company has approximately 1,992,000 square feet of warehouse space, including 504,000 square feet of leased space. Offices and other facilities total 1,842,000 square feet, including 453,000 square feet of leased space. The Company believes that the properties owned or leased are suitable and adequate for its business. Item 3. Legal Proceedings Environmental Remediation The Company is subject to the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state laws that impose liability for costs relating to the clean-up of contamination resulting from past spills, disposal or other release of hazardous substances. The Company is currently involved in administrative proceedings or lawsuits under CERCLA or such state laws relating to clean-up of 15 sites. The future costs in connection with all of these matters have not been determined due to such factors as the unknown timing and extent of the remedial actions which may be required, the full extent of clean-up costs and the amount of the Company's liability in consideration of the liability and financial resources of the other potentially responsible parties. However, based on currently available information, the Company does not believe that any liabilities allocated to it in these administrative proceedings or lawsuits, individually or in the aggregate, will have a material adverse affect on the Company's business or financial condition. The Company has received requests for information from federal, state or local government entities regarding 8 other contaminated sites. The Company has not been named a party to any administrative proceedings or lawsuits relating to the clean-up of these sites. From time to time the Company becomes aware of compliance matters relating to, or receives notices from federal, state or local entities regarding possible or alleged violations of environmental, health or safety laws and regulations. In some instances, these matters may become the subject of administrative proceedings or lawsuits and may involve monetary sanctions of $100,000 or more (exclusive of interest and costs). Based on currently available information, the Company does not believe that such compliance matters or alleged violations of laws and regulations, individually or in the aggregate, will have a material adverse affect on the Company's business or financial condition. Other Legal Proceedings The Company is subject to legal proceedings incidental to its business. Based on currently available information, the Company does not believe that an adverse outcome in any pending legal proceedings individually or in the aggregate would have a material adverse affect on the Company's business or financial condition. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. -7-
Executive Officers of the Registrant The following sets forth the name, age and business experience for at least the past five years of each of the executive officers of the Company as of January 1, 1999. Unless otherwise noted, the positions described are positions with the Company or its subsidiaries. <TABLE> <CAPTION> Name Age Position Period Served - ---- --- -------- ------------- <S> <C> <C> Albert P.L. Stroucken 51 President and Chief Executive Officer April, 1998-Present General Manager, Inorganics Division, Bayer AG 1997-1998 Executive Vice President, 1992-1997 President of Industrial Chemicals Division, Bayer Corporation Jorge Walter Bolanos 55 Senior Vice President 1995-Present Chief Financial Officer and Treasurer 1992-Present Lars T. Carlson 60 Senior Vice President-Administration 1996-Present Vice President 1986-1996 Alan R. Longstreet 52 Senior Vice President, Global Strategic Business Units 1998-Present Vice President-Asia/Pacific Group Manager 1996-1998 Vice President-ASC Structural 1992-1996 John T. Ray, Jr. 61 General Manager, North American ASC 1998-Present Senior Vice President 1984-Present Richard C. Baker 46 Corporate Secretary 1995-Present Vice President 1993-Present General Counsel 1990-Present Matthew Critchley 49 Group President, Group Manager, Asia/Pacific ASC October, 1998-Present Managing Director, Australia/New Zealand 1994-1998 Peter Koxholt 54 Group President, General Manager, Europe ASC January, 1999-Present Head of Business Unit Textile Chemicals & Specialties, Bayer AG 1995-1998 Vice President, Enamels and Ceramics Business, 1991-1995 Bayer Corporation Antonio Lobo 56 General Manager, Latin America ASC 1996-Present Vice President 1989-Present Asia Pacific Group Manager 1989-1996 David J. Maki 57 Vice President 1990-Present Controller 1987-Present Walter Nussbaumer 41 Chief Technology Officer January, 1999-Present Director of Research & Development 1997-1998 Corporate Research & Development, Group Leader 1992-1997 Linda J. Welty 43 Group President, General Manager, Specialty September, 1998-Present Vice President, General Manager, Clariant International 1997-1998 Global Business Director, 1994-1996 Superabsorbent Materials, Clariant International </TABLE> The executive officers of the Company are elected annually by the Board of Directors with the exception of the Group Presidents, Group Managers and the Chief Technology Officer, who hold appointed offices. -8-
PART II Information for Items 5 through 8 of this report appear in the 1998 H.B. Fuller Company Annual Report to Shareholders as indicated in the following table and is incorporated herein by reference to the applicable portions of such Annual Report: Annual Report to Shareholders Page ---------------- Item 5. Market for Registrant's Common Stock and Related Stockholder Matters Trading Market 52 High and Low Market Value 52 Dividend Payments 52 Dividend Restrictions (Note 14) 45 Holders of Common Stock 52 Item 6. Selected Financial Data 1988 - 1998 in Review and Selected Financial Data 50-51 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Analysis of Results of Operations and Financial Condition 23-30 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Financial Instruments 36-37 Item 8. Financial Statements and Supplementary Data Consolidated Financial Statements 31-48 Quarterly Data (Unaudited)(Note 16) 48 Report of the Independent Accountants 49 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None -9-
PART III Item 10. Directors and Executive Officers of the Registrant The information under the heading "Election of Directors" (but not including the sections entitled "Directors' Compensation" and "Board Meetings and Committees") and the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" contained in the Company's Proxy Statement dated March 5, 1999 (the "1999 Proxy Statement") are incorporated herein by reference. The information contained at the end of Part I hereof under the heading "Executive Officers of the Registrant" is incorporated herein by reference. Item 11. Executive Compensation The section under the heading "Election of Directors" entitled "Directors' Compensation" and the sections under the heading "Executive Compensation" entitled "Summary Compensation Table," "Aggregated Option Exercises in Fiscal Year 1998 and Fiscal Year End Option Values," "Retirement Plans," "Employment and Consulting Agreements", "Separation Agreements" and "Change in Control Arrangements" contained in the 1999 Proxy Statement are incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The information under the heading "Security Ownership of Certain Beneficial Owners and Management" contained in the 1999 Proxy Statement is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The section entitled "Exchange Agreement" contained in the 1999 Proxy Statement is incorporated herein by reference. -10-
PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K <TABLE> <CAPTION> Reference ----------------------------------- Form 10-K405 Annual Report Annual Report to Shareholders Page Page ------------- --------------- <S> <C> <C> (a)(1.) Index to Consolidated Financial Statements Incorporated by Reference to the applicable portions of the 1998 Annual Report to Shareholders of H.B. Fuller Company: Consolidated Statements of Earnings for the Three Years Ended November 28, 1998, November 29, 1997 and November 30, 1996 31 Consolidated Balance Sheets as of November 28, 1998 and November 29, 1997 32 Consolidated Statements of Stockholders' Equity for the Three Years Ended November 28, 1998, November 29, 1997 and November 30, 1996 33 Consolidated Statements of Cash Flows for the Three Years Ended November 28, 1998, November 29, 1997 and November 30, 1996 34 Notes to Consolidated Financial Statements 35-48 Report of Independent Accountants 49 (a)(2.) Index to Consolidated Financial Statement Schedules for the Three Years Ended November 28, 1998, November 29, 1997 and November 30, 1996: Report of Independent Accountants on Financial Statement Schedules 16 Schedule II Valuation and Qualifying Accounts 17 </TABLE> All other financial statement schedules are omitted as the required information is inapplicable or the information is given in the financial statements or related notes. -11-
(a)(3.) Exhibits Exhibit Number 3(a) Restated Articles of Incorporation of H.B. Fuller Company, October 30, 1998. 3(b) By-Laws of H.B. Fuller Company as amended and restated as of October 15, 1998. 4(a) Rights Agreement, dated as of July 18, 1996, between H.B. Fuller Company and Norwest Bank Minnesota, National Association, as Rights Agent, which includes as an exhibit the form of Right Certificate - incorporated by reference to Exhibit 4 to the Registrant's Form 8-K, dated July 24, 1996. 4(b) Specimen Stock Certificate. 4(c) Stock Exchange Agreement, dated July 18, 1996, between H.B. Fuller Company and Elmer L. Andersen, including Designations for Series B Preferred Stock - incorporated by reference to Exhibit 10 to the Registrant's Form 8-K, dated July 24, 1996. 4(d) Agreement dated as of June 2, 1998 between H.B. Fuller Company and a group of investors, primarily insurance companies, including the form of Notes - incorporated by reference to Exhibit 4(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 29, 1998. *10(a) H.B. Fuller Company 1992 Stock Incentive Plan - incorporated by reference to Exhibit 10(a) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1992. *10(b) H.B. Fuller Company Restricted Stock Plan - incorporated by reference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1993. *10(c) H.B. Fuller Company Restricted Stock Unit Plan - incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1993. *10(d) Directors' Stock Plan as Amended and Restated July 16, 1998 - incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 29, 1998. *10(e) H.B. Fuller Company 1987 Stock Incentive Plan - incorporated by reference to Exhibit 4(a) to the Registrant's Registration Statement on Form S-8 (Commission File No. 33-16082). *10(f) H.B. Fuller Company Executive Benefit Trust, dated October 25, 1993 between H.B. Fuller Company and First Trust National Association, as Trustee, relating to the H.B. Fuller Company Supplemental Executive Retirement Plan - incorporated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended November 29, 1997. *10(g) Form of Employment Agreement signed by executive officers - incorporated by reference to Exhibit 10(e) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1990 (Commission File No. 0-3488). *10(h) Pension Plan Agreement with Dr. Hermann Lagally signed February 5, 1980 (English translation) incorporated by reference to Exhibit 10(h) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1996. *10(i) Managing Director Agreement with Dr. Hermann Lagally signed December 1, 1995 - incorporated by reference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1996. *10(j) H.B. Fuller Company Supplemental Executive Retirement Plan - 1998 Revision. -12-
(a)(3.) Exhibits (continued) *10(k) Amendments to H.B. Fuller Company Executive Benefit Trust, dated October 1, 1997 and March 2, 1998, between H.B. Fuller Company and First Trust National Association, as Trustee, relating to the H.B. Fuller Company Supplemental Executive Retirement Plan. *10(l) Deferred Compensation Agreement dated December 22, 1994, between H.B. Fuller Company and Walter Kissling - incorporated by reference to Exhibit 10(m) to the Registrant's Annual Report on Form 10-K405 for the year ended November 30, 1994. *10(m) First Amendment to Deferred Compensation Agreement dated December 22, 1994, between H.B. Fuller Company and Walter Kissling - incorporated by reference to Exhibit 10(m) to the Registrant's Annual Report on Form 10-K for the year ended November 29, 1997. *10(n) Deferred Compensation Agreement dated May 5, 1997, between H.B. Fuller Company and Walter Kissling - incorporated by reference to Exhibit 10(n) to the Registrant's Annual Report on Form 10-K for the year ended November 29, 1997. *10(o) Split-Dollar Insurance Agreement, dated May 5, 1997, between H.B. Fuller Company and Jorge Walter Bolanos, as Trustee of the Walter Kissling Irrevocable Trust Agreement dated May 5, 1997 - incorporated by reference to Exhibit 10(o) to the Registrant's Annual Report on Form 10-K for the year ended November 29, 1997. *10(p) Retirement Plan for Directors of H.B. Fuller Company - incorporated by reference to Exhibit 10(n) to the Registrant's Annual Report on Form 10-K405 for the year ended November 30, 1994. *10(q) 1996 Performance Unit Plan - incorporated by reference to Exhibit 10(n) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1996. *10(r) Employment Agreement, dated as of April 16, 1998, between H.B. Fuller Company and Albert Stroucken - incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 30, 1998. *10(s) Consulting Agreement and First Amendment to International Service Agreement and Non-Competition Agreement, effective as of April 30, 1998, between H.B. Fuller Company and Walter Kissling - incorporated by reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 30, 1998. *10(t) H.B. Fuller Company 1998 Directors' Stock Incentive Plan- incorporated by reference to Exhibit 10(c) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 30, 1998. *10(u) Restricted Stock Award Agreement, dated as of April 23, 1998, between H.B. Fuller Company and Lee R. Mitau - incorporated by reference to Exhibit 10(d) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 30, 1998. *10(v) Separation Agreement dated August 28, 1998 between H.B. Fuller Company and Jerald L. Scott - incorporated by reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 29, 1998. *10(w) Separation Agreement dated August 28, 1998 between H.B. Fuller Company and Rolf Schubert - incorporated by reference to Exhibit 10(c) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 29, 1998. *10(x) First Amendment to H.B. Fuller Company Supplemental Executive Retirement Plan dated November 4, 1998. -13-
(a)(3.) Exhibits (continued) *10(y) Form of Change in Control Agreement dated as of April 8, 1998 between H.B. Fuller Company and each of its executive officers, other than Albert Stroucken. *10(z) English translation of Separation Agreement dated December 14, 1998 between H.B. Fuller Company and Dr. Hermann Lagally. *Asterisked items are management contracts or compensatory plans or arrangements required to be filed as an exhibit to this Form 10-K405 pursuant to Item 14(c) of this Form 10-K405. 11 Statement re: Computation of Net Earnings Per Common Share 13 Pages 23-52 of the 1998 Annual Report to Shareholders 21 Subsidiaries of the Registrant 23 Consent of PricewaterhouseCoopers LLP 24 Powers of Attorney 27(a) Financial Data Schedule 27(b) Restated Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the fourth quarter of the fiscal year ended November 28, 1998. (c) See Exhibit Index and Exhibits attached to this Form 10-K405. (d) See Financial Statement Schedule included at the end of this Form 10-K405. -14-
S I G N A T U R E S Pursuant to the requirements of Section 13 or 15(d) 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: February 25, 1999 By /s/ Albert P.L. Stroucken --------------------------------- ALBERT P.L. STROUCKEN President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title --------- ----- /s/ Albert P.L. Stroucken President and - --------------------------------- Chief Executive Officer and Director ALBERT P.L. STROUCKEN (Principal Executive Officer) /s/ Jorge Walter Bolanos Senior Vice President, - --------------------------------- Chief Financial Officer and Treasurer JORGE WALTER BOLANOS (Principal Financial Officer) /s/ David J. Maki Vice President and Controller - --------------------------------- (Principal Accounting Officer) DAVID J. MAKI *Anthony L. Andersen *Norbert R. Berg - --------------------------------- --------------------------------- ANTHONY L. ANDERSEN NORBERT R. BERG, Director Chair, Board of Directors and Director *Edward L. Bronstien, Jr. *Freeman Ford - --------------------------------- --------------------------------- EDWARD L. BRONSTIEN, JR., Director FREEMAN FORD, Director - --------------------------------- --------------------------------- GAIL D. FOSLER, Director REATHA CLARK KING, Director *John J. Mauriel, Jr. - --------------------------------- --------------------------------- WALTER KISSLING, Director JOHN J. MAURIEL, JR., Director *Lee R. Mitau *Rolf Schubert - --------------------------------- --------------------------------- LEE R. MITAU, Director ROLF SCHUBERT, Vice President and Director *Lorne C. Webster - --------------------------------- LORNE C. WEBSTER, Director *By: /s/ Richard C. Baker Dated: February 25, 1999 ---------------------------- RICHARD C. BAKER Attorney in Fact -15-
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of H.B. Fuller Company Our audits of the consolidated financial statements referred to in our report dated January 8, 1999 appearing in the 1998 Annual Report to Stockholders of H.B. Fuller Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K405) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K405. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PricewaterhouseCoopers LLP Minneapolis, Minnesota January 8, 1999 -16-
Schedule II H.B. Fuller Company and Consolidated Subsidiaries Valuation and Qualifying Accounts (Dollars in thousands) Allowance for doubtful receivables -------------------------------------------- November 28, November 29, November 30, Years Ended 1998 1997 1996 - ----------- ------------ ------------ ------------ Balance at beginning of period $5,879 $7,043 $6,256 Additions(deductions): Charged to costs and expenses 2,232 1,183 2,745 Accounts charged off during year (2,836) (1,991) (1,897) Accounts of business sold (154) (88) - Effect of currency exchange rate changes on beginning of year balance (48) (268) (61) ------ ------ ------ Balance at end of period $5,073 $5,879 $7,043 ====== ====== ====== -17-
EXHIBIT INDEX Exhibit Number *3(a) Restated Articles of Incorporation of H.B. Fuller Company, October 30, 1998. *3(b) By-Laws of H.B. Fuller Company as amended and restated as of October 15, 1998. 4(a) Rights Agreement, dated as of July 18, 1996, between H.B. Fuller Company and Norwest Bank Minnesota, National Association, as Rights Agent, which includes as an exhibit the form of Right Certificate - incorporated by reference to Exhibit 4 to the Registrant's Form 8-K, dated July 24, 1996. *4(b) Specimen Stock Certificate. 4(c) Stock Exchange Agreement, dated July 18, 1996, between H.B. Fuller Company and Elmer L. Andersen, including Designations for Series B Preferred Stock - incorporated by reference to Exhibit 10 to the Registrant's Form 8-K, dated July 24, 1996. 4(d) Agreement dated as of June 2, 1998 between H.B. Fuller Company and a group of investors, primarily insurance companies, including the form of Notes - incorporated by reference to Exhibit 4(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 29, 1998. 10(a) H.B. Fuller Company 1992 Stock Incentive Plan - incorporated by reference to Exhibit 10(a) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1992. 10(b) H.B. Fuller Company Restricted Stock Plan - incorporated by reference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1993. 10(c) H.B. Fuller Company Restricted Stock Unit Plan - incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1993. 10(d) Directors' Stock Plan as Amended and Restated July 16, 1998 - incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 29, 1998. 10(e) H.B. Fuller Company 1987 Stock Incentive Plan - incorporated by reference to Exhibit 4(a) to the Registrant's Registration Statement on Form S-8 (Commission File No. 33-16082). 10(f) H.B. Fuller Company Executive Benefit Trust, dated October 25, 1993 between H.B. Fuller Company and First Trust National Association, as Trustee, relating to the H.B. Fuller Company Supplemental Executive Retirement Plan - incorporated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended November 29, 1997. 10(g) Form of Employment Agreement signed by executive officers - incorporated by reference to Exhibit 10(e) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1990 (Commission File No. 0-3488). 10(h) Pension Plan Agreement with Dr. Hermann Lagally signed February 5, 1980 (English translation) - incorporated by reference to Exhibit 10(h) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1996. 10(i) Managing Director Agreement with Dr. Hermann Lagally signed December 1, 1995 - incorporated by reference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1996. *10(j) H.B. Fuller Company Supplemental Executive Retirement Plan - 1998 Revision.
*10(k) Amendments to H.B. Fuller Company Executive Benefit Trust, dated October 1, 1997 and March 2, 1998, between H.B. Fuller Company and First Trust National Association, as Trustee, relating to the H.B. Fuller Company Supplemental Executive Retirement Plan. 10(l) Deferred Compensation Agreement dated December 22, 1994, between H.B. Fuller Company and Walter Kissling - incorporated by reference to Exhibit 10(m) to the Registrant's Annual Report on Form 10-K405 for the year ended November 30, 1994. 10(m) First Amendment to Deferred Compensation Agreement dated December 22, 1994, between H.B. Fuller Company and Walter Kissling - incorporated by reference to Exhibit 10(m) to the Registrant's Annual Report on Form 10-K for the year ended November 29, 1997. 10(n) Deferred Compensation Agreement dated May 5, 1997, between H.B. Fuller Company and Walter Kissling - incorporated by reference to Exhibit 10(n) to the Registrant's Annual Report on Form 10-K for the year ended November 29, 1997. 10(o) Split-Dollar Insurance Agreement, dated May 5, 1997, between H.B. Fuller Company and Jorge Walter Bolanos, as Trustee of the Walter Kissling Irrevocable Trust Agreement dated May 5, 1997 - incorporated by reference to Exhibit 10(o) to the Registrant's Annual Report on Form 10-K for the year ended November 29, 1997. 10(p) Retirement Plan for Directors of H.B. Fuller Company - incorporated by reference to Exhibit 10(n) to the Registrant's Annual Report on Form 10-K405 for the year ended November 30, 1994. 10(q) 1996 Performance Unit Plan - incorporated by reference to Exhibit 10(n) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1996. 10(r) Employment Agreement, dated as of April 16, 1998, between H.B. Fuller Company and Albert Stroucken - incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 30, 1998. 10(s) Consulting Agreement and First Amendment to International Service Agreement and Non-Competition Agreement, effective as of April 30, 1998, between H.B. Fuller Company and Walter Kissling - incorporated by reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 30, 1998. 10(t) H.B. Fuller Company 1998 Directors' Stock Incentive Plan- incorporated by reference to Exhibit 10(c) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 30, 1998. 10(u) Restricted Stock Award Agreement, dated as of April 23, 1998, between H.B. Fuller Company and Lee R. Mitau - incorporated by reference to Exhibit 10(d) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 30, 1998. 10(v) Separation Agreement dated August 28, 1998 between H.B. Fuller Company and Jerald L. Scott - incorporated by reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 29, 1998. 10(w) Separation Agreement dated August 28, 1998 between H.B. Fuller Company and Rolf Schubert - incorporated by reference to Exhibit 10(c) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 29, 1998. *10(x) First Amendment to H.B. Fuller Company Supplemental Executive Retirement Plan dated November 4, 1998. *10(y) Form of Change in Control Agreement dated as of April 8, 1998 between H.B. Fuller Company and each of its executive officers, other than Albert Stroucken.
*10(z) English translation of Separation Agreement dated December 14, 1998 between H.B. Fuller Company and Dr. Hermann Lagally. *11 Statement re: Computation of Net Earnings Per Common Share *13 Pages 23-52 of the 1998 Annual Report to Shareholders *21 Subsidiaries of the Registrant *23 Consent of PricewaterhouseCoopers LLP *24 Powers of Attorney *27(a) Financial Data Schedule *27(b) Restated Financial Data Schedule * Asterisked exhibits are filed with this 10-K.