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8-K/A - FORM 8-K AMENDMENT NO. 1 - FULLER H B COd355386d8ka.htm
EX-99.1 - AUDITED COMBINED FINANCIAL STATEMENTS OF THE BUSINESS - FULLER H B COd355386dex991.htm
EX-99.2 - UNAUDITED COMBINED FINANCIAL STATEMENTS OF THE BUSINESS - FULLER H B COd355386dex992.htm
EX-15.1 - AWARENESS LETTER FROM PRICEWATERHOUSECOOPERS AG - FULLER H B COd355386dex151.htm
EX-23.1 - CONSENT OF PRICEWATERHOUSECOOPERS AG - FULLER H B COd355386dex231.htm

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The unaudited pro forma condensed combined financial data set forth below gives effect to the acquisition (the “acquisition”) of the industrial adhesives and synthetic polymers business (the “Business”) of Forbo Holding AG (“Forbo”) by H.B. Fuller Company (“H.B. Fuller”), the issuance of $250 million of 4.12 percent Senior Notes and the draw down of the $150 million term loan with an initial interest rate of 1.75 percent which represented the prevailing LIBOR plus a spread of 150 basis points, by the application of the pro forma adjustments to the historical condensed consolidated financial statements of H.B. Fuller. The unaudited pro forma condensed combined financial data should be read in conjunction with the audited consolidated financial statements and notes of H.B. Fuller on Form 10-K for the fiscal year ended December 3, 2011, the unaudited condensed consolidated financial statements and notes of H.B. Fuller on Form 10-Q for the quarterly period ended March 3, 2012, the attached combined financial information of the Business in Exhibit 99.1 and Exhibit 99.2, and the accompanying notes to the unaudited pro forma condensed combined financial data.

The unaudited pro forma condensed combined balance sheet as of March 3, 2012 gives effect to the acquisition and the issuance of the notes and draw down of the term loan as if they had occurred on such date. The unaudited pro forma condensed combined statements of income give effect to the acquisition and the issuance of the notes and the draw down of the term loan as if they occurred as of November 28, 2010, the beginning of H.B. Fuller’s 2011 fiscal year. The unaudited pro forma condensed combined financial data do not purport to represent what H.B. Fuller’s results or financial position would have been if the acquisition had occurred as of the dates indicated or what such results will be for any future periods. The actual results in the periods following the acquisition may differ significantly from that reflected in the unaudited pro forma condensed combined financial data for a number of reasons including, but not limited to, differences between the assumptions used to prepare the unaudited pro forma condensed combined financial data and actual amounts and, completion of a final valuation of the acquisition and other reviews, including a valuation of the Business’ fixed assets and intangible assets, evaluation of contingent liabilities and changes in exchange rates. In addition, no adjustments have been made for non-recurring costs related to the acquisition, including costs associated with the completion of the acquisition, costs associated with the restructuring of the workforce and the manufacturing footprint and non-cash costs related to accelerated depreciation of long-lived assets for periods subsequent to the acquisition. Also, no adjustments have been made for potential cost savings from information technology integration, accounting migration and other activities necessary to handle financial, tax and regulatory compliance and operational changes of manufacturing sites.

The unaudited pro forma condensed combined financial data have been prepared giving effect to the acquisition, which is accounted for as a purchase business combination in accordance with FASB Accounting Standards Codification 805, “Business Combinations”. The total purchase price for the Business was allocated to the net assets based upon preliminary estimates of fair value. The purchase price allocations for the acquisition are preliminary and further refinements are likely to be made based on the results of final valuations and consideration of fair values.

The unaudited pro forma adjustments are based upon available information and certain assumptions that H.B. Fuller believes are reasonable, which assumptions are described in the accompanying notes. The unaudited pro forma condensed combined statements of income exclude certain non-recurring charges that will be incurred in connection with the acquisition, including additional transaction and subsequent integration costs. The inventory fair value step up, expected to increase cost of sales by $3.3 million in 2012, has also been excluded.

The financial information of the Business has been extracted from the historical financial information of Forbo for the entities and assets acquired. The financial information was prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the International Accounting Standards Board (IASB) which is a method of accounting different from United States Generally Accepted Accounting Principles (U.S. GAAP) and prepared in Swiss francs. Unaudited pro forma adjustments have been made to convert the Business IFRS financial statements to U.S. GAAP. After application of U.S. GAAP adjustments, the Swiss francs amounts have been translated to U.S. dollars using historic exchange rates.


Unaudited Pro Forma Condensed Combined Balance Sheet

(amounts in thousands, except exchange rates)

As of March 3, 2012

 

     H.B. Fuller
Company
($)
     Business
Acquired
(IFRS)
(CHF)
     Business
Acquired
US GAAP
Adjustments
(CHF)
    Business
Acquired
(US GAAP)
(CHF)
     Exchange
Rate

($/CHF)
     Business
Acquired
(US GAAP)
($)
     Acquisition
and
Purchase
Price
Allocation8
($)
    Pro Forma
Combined
($)
 

Assets

                     

Current assets

                     

Cash and cash equivalents

     149,877        —             —           1.0939        —           (4,725 )       145,152  

Trade receivables, net

     244,641        80,730          80,730        1.0939        88,307        (893 )       332,055  

Inventories

     163,466        68,527          68,527        1.0939        74,958        668         239,092  

Other current assets

     69,240        27,264        264        27,528        1.0939        30,112        (637     98,715  
  

 

 

    

 

 

    

 

 

   

 

 

       

 

 

    

 

 

   

 

 

 

Total current assets

     627,224        176,521        264         176,785           193,377        (5,587 )       815,014  

Property, plant and equipment, net

     252,893        81,680        (15,312 ) 1       66,368        1.0939        72,597        19,759         345,249  

Goodwill

     114,819        85,804           85,804         1.0939        93,861         43,835        252,515  

Other intangibles, net

     124,563        21,725           21,725         1.0939        23,765         95,595        243,923   

Other assets and deferred taxes

     136,158        1,263         27        1,290         1.0939        1,411         (1,283     136,286   
  

 

 

    

 

 

    

 

 

   

 

 

       

 

 

    

 

 

   

 

 

 

Total assets

     1,255,657        366,993         (15,021     351,972            385,011         152,319        1,792,987  
  

 

 

    

 

 

    

 

 

   

 

 

       

 

 

    

 

 

   

 

 

 

Liabilities, redeemable non-controlling interest and total equity

                     

Current liabilities

                     

Notes payable

     28,397             —           1.0939        —             28,397  

Current maturities of long-term debt

     26,250             —           1.0939        —           7,500         33,750  

Trade payables

     136,137        56,454          56,454        1.0939        61,752        128         198,017  

Accrued compensation

     33,377        6,589          6,589        1.0939        7,207        646         41,230  

Income taxes payable

     13,391        365          365        1.0939        399        177         13,967  

Other accrued expenses

     32,280        28,652          28,652        1.0939        31,341        (411 )       63,210  
  

 

 

    

 

 

    

 

 

   

 

 

       

 

 

    

 

 

   

 

 

 

Total current liabilities

     269,832        92,060        —          92,060           100,699        8,040        378,571  

Long-term debt, excluding current maturities

     172,956             —           1.0939        —           392,500         565,456  

Accrued pension liabilities

     39,156        13,818          13,818        1.0939        15,115        (489 )       53,782  

Other liabilities and deferred taxes

     41,875        7,554        (3,908 )1, 2      3,646        1.0939        3,988        17,477        63,340  
  

 

 

    

 

 

    

 

 

   

 

 

       

 

 

    

 

 

   

 

 

 

Total liabilities

     523,819        113,432        (3,908     109,524           119,802        417,528         1,061,149  

Commitments and contingencies

     —                —           1.0939        —             —     

Redeemable non-controlling interest

     3,861             —           1.0939        —             3,861  

Equity

                     

Stockholders’ equity

     727,602        253,561         (11,113 ) 1       242,448         1.0939        265,209         (265,209     727,602  

Non-controlling interests

     375             —           1.0939        —             375  
  

 

 

    

 

 

    

 

 

   

 

 

       

 

 

    

 

 

   

 

 

 

Total equity

     727,977        253,561         (11,113     242,448            265,209         (265,209     727,977  
  

 

 

    

 

 

    

 

 

   

 

 

       

 

 

    

 

 

   

 

 

 

Total liabilities, redeemable non-controlling interest and total equity

     1,255,657        366,993         (15,021     351,972            385,011         152,319        1,792,987  
  

 

 

    

 

 

    

 

 

   

 

 

       

 

 

    

 

 

   

 

 

 

See accompanying notes to unaudited pro forma condensed combined financial data


Unaudited Pro Forma Condensed Combined Statement of Income

(amounts in thousands, except per share amounts and exchange rates)

Fiscal Year ended December 3, 2011

 

 

     H.B. Fuller
Company
    Business
Acquired
(IFRS)
    Business
Acquired
US GAAP
Adjustments
    Business
Acquired
(US GAAP)
    Exchange
Rate
     Business
Acquired
(US GAAP)
    Acquisition
and Purchase
Price
Allocation
    Pro Forma
Combined
 
     ($)     (CHF)     (CHF)     (CHF)     ($/CHF)      ($)     ($)     ($)  

Net revenue

     1,557,552       507,052         507,052       1.1378        576,911         2,134,463  

Cost of sales

     (1,110,462     (423,685     500  1      (423,185     1.1378        (481,489     (1,235 ) 5      (1,593,186
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

 

Gross profit

     447,090       83,367       500        83,867          95,422        (1,235     541,277  

Selling, general and administrative expenses

     (318,046     (56,730       (56,730     1.1378        (64,546     (11,084 ) 5       (393,676

Special charges, net

     (7,499         —          1.1378        —          6,003  4      (1,496

Asset impairment charges

     (332         —          1.1378        —            (332

Other income (expense), net

     4,590       (14,869       (14,869     1.1378        (16,918     16,918        4,590  

Interest expense

     (10,811     (7,629       (7,629     1.1378        (8,680     (4,425 3, 6      (23,916
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

 

Income before income taxes and income from equity method investments

     114,992       4,139       500        4,639          5,278        6,177        126,447   

Income taxes

     (34,951     458       (192 ) 1      266        1.1378        303        (1,379 7      (36,027

Income from equity method investments

     9,006           —          1.1378        —            9,006  
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

 

Net income including non-controlling interests

     89,047       4,597       308        4,905          5,581       4,798        99,426   

Net (income) loss attributable to non-controlling interests

     58           —          1.1378        —          —          58  
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

 

Net income

     89,105       4,597       308        4,905          5,581       4,798        99,484   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

 

Earnings per share attributable to H.B. Fuller common stockholders

                 

Basic

     1.82                    2.03   

Diluted

     1.79                    2.00   

Weighted-average common shares outstanding

                 

Basic

     48,991                    48,991  

Diluted

     49,866                    49,866  

See accompanying notes to unaudited pro forma condensed combined financial data


Unaudited Pro Forma Condensed Combined Statement of Income

(amounts in thousands, except per share amounts and exchange rates)

Thirteen Weeks Ended March 3, 2012

 

     H.B. Fuller
Company
    Business
Acquired
(IFRS)
    Business
Acquired
US GAAP
Adjustments
    Business
Acquired
(US GAAP)
    Exchange
Rate
     Business
Acquired
(US GAAP)
    Acquisition
and Purchase
Price
Allocation
    Pro Forma
Combined
 
     ($)     (CHF)     (CHF)     (CHF)     ($/CHF)      ($)     ($)     ($)  

Net revenue

     375,262       123,826         123,826       1.0730        132,864         508,126  

Cost of sales

     (261,156     (102,884     125  1      (102,759     1.0730        (110,260     (392 5      (371,808
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

 

Gross profit

     114,106       20,942       125        21,067          22,604       (392     136,318  

Selling, general and administrative expenses

     (83,331     (13,978       (13,978     1.0730        (14,998     (2,777 5      (101,106

Special charges, net

     (6,482         —          1.0730        —            (6,482

Asset impairment charges

     —              —          1.0730        —            —     

Other income (expense), net

     143       (1,999       (1,999     1.0730        (2,145     2,145  3       143  

Interest expense

     (2,618     (2,254       (2,254     1.0730        (2,419     (784 3, 6      (5,821
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

 

Income before income taxes and income from equity method investments

     21,818       2,711       125        2,836          3,042       (1,808     23,052  

Income taxes

     (8,683     (540     (48 ) 1      (588     1.0730        (631     682  7      (8,632

Income from equity method investments

     2,195           —          1.0730        —            2,195  
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

 

Net income including non-controlling interests

     15,330       2,171       77        2,248          2,411       (1,126     16,615  

Net (income) loss attributable to non-controlling interests

     (25         —          1.0730        —          —          (25
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

 

Net income

     15,305       2,171       77        2,248          2,411       (1,126     16,590  
  

 

 

   

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

 

Earnings per share attributable to H.B. Fuller common stockholders

                 

Basic

     0.31                    0.34  

Diluted

     0.30                    0.33  

Weighted-average common shares outstanding

                 

Basic

     49,365                    49,365  

Diluted

     50,253                    50,253  

See accompanying notes to unaudited pro forma condensed combined financial data


Notes to Unaudited Pro Forma Condensed Combined Financial Statements

(amounts in thousands, except per share amounts and exchange rates)

The unaudited pro forma condensed combined financial statements have been derived from the financial information of H.B. Fuller Company (“H.B. Fuller”) and the industrial adhesives and synthetic polymers business (“the Business”) of Forbo Holding AG (“Forbo”). The financial information of the Business was prepared in accordance with IFRS and in Swiss francs. Adjustments have been made to the Business information to present it in conformity with U.S. GAAP and in U.S. dollars. The acquisition has been treated as an acquisition with H.B. Fuller as the acquirer and the Business as the acquiree, assuming that the acquisition had been completed on March 3, 2012, for the unaudited pro forma condensed combined balance sheet and November 28, 2010 for the unaudited pro forma condensed combined statements of income.

Translation from Swiss francs to U.S. dollars

The financial information of the Business has been translated from Swiss francs to U.S. dollars:

 

   

In the unaudited pro forma condensed combined balance sheet using an exchange rate of $1.0939/CHF, the exchange rate at which H.B. Fuller completed the acquisition.

 

   

In the unaudited pro forma condensed combined statement of income for the fiscal year ended December 3, 2011, using an exchange rate of $1.1378/CHF, the average exchange rate during the period presented.

 

   

In the unaudited pro forma condensed combined statement of income for the 13 weeks ended March 3, 2012, using an exchange rate of $1.0730/CHF, the average exchange rate during the period presented.

U.S. GAAP adjustments

The following reclassification adjustments have been made to align the IFRS financial information of the Business with H.B. Fuller’s accounting policies under U.S. GAAP:

Note 1—Adjustments to property, plant and equipment, net. Land and buildings revaluations in the amount of CHF 15,312 were removed from property, plant and equipment, net and stockholders’ equity to conform with H.B. Fuller’s accounting policies under U.S. GAAP. The adjustment to stockholders’ equity was net of related deferred taxes of CHF 4,199. The related depreciation expense of CHF 500 for the year ended December 3, 2011 and CHF 125 for the 13 weeks ended March 3, 2012, were removed from cost of sales to conform with H.B. Fuller’s accounting policies under U.S. GAAP. The related income tax expense was estimated at the statutory rate in the local jurisdiction where the depreciation expense was incurred.

Note 2—Adjustments to deferred income taxes. U.S. GAAP requires deferred income taxes to be classified as current and non-current based on the nature of the associated asset or liability. IFRS requires all deferred tax to be classified as non-current. This resulted in an increase in other current assets of CHF 264, an increase in other non-current assets of CHF 27 and an increase in other non-current liabilities of CHF 291.

Other pro forma adjustments

The following entries reflect the pro forma adjustments related to the acquisition.

Note 3—Adjustment to the acquired Business historical income statement. The adjustments reflect the elimination of royalty fees and technology fees paid to Forbo by the Business prior to the acquisition. As part of the purchase agreement all licenses and related royalty assets were acquired by H.B. Fuller and therefore these fees will not continue in the future. See note 5 for explanation of the increase in amortization expense related to the fair value of the related assets as part of the acquisition in selling, general and administrative expenses.

The adjustments reflect the elimination of interest expense paid to Forbo by the Business prior to the acquisition as these intercompany liabilities were settled as part of the purchase agreement. The additional interest expense related to the H.B. Fuller aggregate borrowing of $400,000 has been added to the pro forma periods.

 

     Year ended
December 3, 2011
     13 Weeks ended
March 3, 2012
 

Other income (expense), net

   $ 16,918      $ 2,145  

Interest expense

     8,680        2,419  

Note 4—Adjustment to the H.B. Fuller historical income statement. Adjustments have been made to Special charges, net in the amount of $6,003 for the fiscal year ended December 3, 2011 to remove the acquisition expenses directly related to the acquired Business which were incurred in the period. Acquisition related expenses included costs related to investment advisory, financial advisory, legal and valuation services and the expense to purchase a foreign currency option to hedge a portion of the acquisition purchase price. No adjustments have been made to Special charges, net for the thirteen weeks ended March 3, 2012 because the acquisition expenses directly related to organization consulting, investment advisory, financial advisory, legal and valuation services necessary to acquire the Business and financing expense to make a bridge loan available if needed were offset by a gain on the purchase of forward currency contracts to hedge the purchase price of the acquisition after the price was established.

Note 5—Adjustments to Depreciation and Amortization Expense. The adjustments reflect additional depreciation and amortization expenses associated with the fair market value adjustments to property, plant and equipment (included in cost of goods sold) and amortizable intangible assets (included in selling, general and administrative expenses):


     Year ended
December 3, 2011
     13 Weeks ended
March 3, 2012
 

Property, plant and equipment

   $ 1,235      $ 392   

Amortizable intangible assets

     11,084        2,777  

Amortizable intangible assets, acquired and related useful lives:

 

     Net Identifiable
Intangibles
     Weighted
average useful
lives (in years)
 

Customer relationships

   $ 55,980        12  

Developed technology

     42,190        11  

Trademarks/trade names

     20,710        8  

Other

     480         3  
  

 

 

    
   $ 119,360      
  

 

 

    

Note 6—Adjustments to Interest Expense. Adjustments have been made to interest expense as follows:

 

     Year ended
December 3, 2011
     13 Weeks ended
March 3, 2012
 

Interest on the $250,000 of 4.12% Senior Notes

   $ 10,498      $ 2,575  

Interest on the $150,000 term loan at the initial rate of 1.75%

     2,580        621  

Amortization of additional deferred financing costs

     27        7  
  

 

 

    

 

 

 
   $ 13,105      $ 3,203  
  

 

 

    

 

 

 

The $250,000 of 4.12 percent Senior Notes were issued on March 5, 2012 to fund a portion of the acquisition of the Business. The draw down of $150,000 term loan with an initial interest rate of 1.75 percent interest rate occurred on March 5, 2012 to fund a portion of the acquisition of the Business. Actual interest rates can vary from the interest rates assumed in the pro forma adjustment to interest expense. A one-eighth percentage point variance in the assumed interest rate would affect interest expense $185 for the year ended December 3, 2011 and $44 for the 13 weeks ended March 3, 2012.

Note 7—Adjustments to Income Tax Expense. Adjustments have been made to income tax expense to record the tax effects associated with the IFRS to U.S. GAAP depreciation expense adjustment, the Business historical income statement adjustments, the additional depreciation and amortization expense adjustments and the interest expense adjustments in the condensed combined statements of income. The tax effect of the IFRS to U.S. GAAP depreciation expense adjustment, the Business historical income statement adjustments, and the depreciation and amortization expense adjustments were estimated at the statutory rate in the local jurisdiction where expenses were incurred. The weighted average tax rate for these adjustments was 33.6 percent. The tax effect for the H.B. Fuller historical income statement adjustments was $1,634 for the fiscal year ended December 3, 2011. The tax effect of the interest expense adjustment was estimated at 38.4 percent, which is H.B. Fuller’s estimated marginal U.S. tax rate.

Note 8—Adjustment Based Upon Purchase Price Allocation. The unaudited pro forma condensed combined financial data includes adjustments based upon the preliminary purchase price allocation, and further adjustments may be made based on the completion of the final valuation of the acquisition and other reviews. The acquisition price of $404,725 was determined using an exchange rate of $1.0939 / CHF, the exchange rate at time H.B. Fuller completed the acquisition, and consists of 370,000 CHF for the Business. The following table summarizes the net assets acquired from Forbo and the pro forma purchase price allocation based on the March 5, 2012 unaudited combined financial statement of the Business:

 

Acquisition price

   $  404,725  

Less net book value of the Business acquired

     (265,209
  

 

 

 
   $ 139,516   
  

 

 

 

Allocation of acquisition price less net book value of the Business  acquired:

  

Trade receivables, net

   $ (893

Inventories

     668  

Other current assets

     (637 )

Property, plant and equipment

     19,759  

Goodwill

     43,835   

Other intangibles, net

     95,595   

Other assets and deferred taxes

     (1,283


Trade payables

     (128

Accrued compensation

     (646

Income taxes payable

     (177

Other accrued expenses

     411  

Accrued pension liabilities

     489  

Other liabilities and deferred taxes

     (17,477
  

 

 

 
   $ 139,516   
  

 

 

 

The adjustment to the pension liability relates to an adjustment of the present value of the Business’ pension benefit obligations to fair value, reflecting a change from U.S. GAAP liability to funding liability in accordance with purchase accounting requirements.

The deferred income taxes adjustment relates to the recognition of deferred income taxes on the differences between financial accounting and income tax bases related to the allocation of excess purchase price to various assets and liabilities.

The following table summarizes the debt incurred from the Notes and the draw down of H.B. Fuller’s term loan to finance the acquisition. The acquisition was funded as follows:

 

Senior notes issued March 5, 2012

   $ 250,000  

Draw down of term loan on March 5, 2012

     150,000  
  

 

 

 

Increase in debt

     400,000  

Less current maturities

     (7,500
  

 

 

 

Total increase in long-term debt

   $ 392,500