H.B. Fuller Company 1200 Willow Lake Boulevard St. Paul, Minnesota 55110-5101 Phone 651-236-5900 | Correspondence to: P.O. Box 64683 St. Paul, MN 55164-0683 |
June 12, 2012
VIA EDGAR
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, DC 20549
| Attention: | Mr. Terence O’Brien |
Accounting Branch Chief
| Re: | H.B. Fuller Company |
Form 10-K for Fiscal Year Ended December 3, 2011
Filed January 27, 2012
Form 10-Q for Fiscal Quarter Ended March 3, 2012
Filed March 30, 2012
Response dated May 11, 2012
File No. 1-9225
Dear Mr. O’Brien:
This letter contains the response of H.B. Fuller Company (the “Company” or “we”) to comment 4 regarding the reports referenced above contained in your letter to the Company dated May 17, 2012 in addition to comments from previous correspondence related to the same topic. We have addressed your most recent comment letter by reproducing this comment below and providing our response immediately thereafter.
| 4. | We note the modifications you made to your discussion and analysis of your first quarter offiscal year 2012 results in response to comment 6 in our letter dated April 13, 2012. Pleasefurther enhance these modifications to address the following: |
| • | For your analysis of consolidated gross profit margin, it is unclear how the factors, asdisclosed, fully explain the increase recognized. In this regard, it appears that pricing increases offset by raw material increases positively impacted gross profit by $10.9 million with sales volume and flat manufacturing costs positively impacting gross profit by $1.8 million, which leaves $4.5 million of the increase in gross profit unexplained. |
| • | Please quantify the amount by which raw material costs increased for each segment. |
| • | Please quantify the amount by which employee related manufacturing costs declined for the North America Adhesives segment. |
| • | Please quantify the amount by which the change in sales volumes impacted segmentoperating income for each segment. |
| • | Please quantify the extent to which the production interruptions in Egypt negatively impacted the EIMEA segment’s operating income. |
United States Securities and Exchange Commission
June 12, 2012
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| • | Please quantify the extent to which cost management activities positively impacted theEIMEA segment’s operating income. |
| • | Please quantify the extent to which other manufacturing expenses increased, negativelyimpacting Latin America Adhesives’ segment operating income. |
| • | Please quantify the extent to which the change in SG&A expenses impacted segmentoperating income for each segment. |
| • | Please explain why the change in weeks included in the pre-holiday sales negativelyimpacted the Latin America Paints’ segment sales but not the Latin America Adhesives’segment sales. |
| • | Please quantify the extent to which the change in product mix negatively impacted theLatin America Paints’ segment operating income. |
Please provide us with your enhanced draft disclosures you intend to provide infuturefilings.
We respectfully submit the following based on the comment noted above and the related comments regarding our MD&A in your previous letters dated February 28, 2012 and April, 13, 2012 in addition to our teleconference with Tracey Smith of your staff on June 8, 2012.
We understand that our MD&A discussion should more consistently quantify the material factors which influence the consolidated and operating segment net revenue and segment operating profit of our business. To this end, we will provide the following enhanced MD&A discussion in our report on Form 10-Q for Fiscal Quarter Ended June 2, 2012 and in our subsequent filings.
We currently explain the changes in our consolidated and segment net revenue by providing a breakdown of net revenue variances attributable to pricing changes, volume changes, foreign currency translation and business acquisitions. Our enhanced disclosures will more consistently provide management’s best judgment and analysis regarding the reasons for material variances in the various components of net revenue.
With respect to cost of sales, in future filings we will disclose the Company’s raw material costs at the consolidated level, in absolute dollars and as a percent of revenue, for the current and comparable prior periods. We will also discuss the underlying cause of material changes in our raw material costs in absolute dollars and as a percentage of net revenue, as appropriate based on the circumstances.
At the operating segment level, we will quantify the change in our raw material costs as a percentage of net revenue when this variance is material to understanding the change in the segment’s operating profit or operating profit margin percentage for the period. When the change in raw material cost as a percentage of net revenue is not a significant factor for the period, we will disclose that this ratio did not change materially.
With respect to other manufacturing costs (i.e., those costs in cost of sales that are not raw material costs) and for Selling, General and Administrative (SG&A) expenses, we will provide a general discussion concerning the expected long-term trend for these costs for the current fiscal year or other specified period as appropriate. For example, we currently would note that our SG&A expenses in the 2012 fiscal year are expected to increase at a rate below the rate of growth in net revenue for the fiscal year. When the actual other manufacturing and SG&A costs in a period are materially different than the expected trend,
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June 12, 2012
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we will quantify the impact of this variance on our segment operating income and provide a qualitative discussion of the reasons these costs were different than our expectations. When considering whether these costs had a material impact on the results of the period or reflect a change in the trend of our business, we will consider the trend of these costs in prior periods and our expectations for future periods in relationship to the general guidance provided.
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If you have any questions or require any additional information, please call me at (651) 236-5710 or Tim Keenan, Vice President and General Counsel, at (651) 236-5867.
Very truly yours,
James R. Giertz
Senior Vice President and Chief Financial Officer
| cc: | Tracey Smith & Al Pavot, Securities and Exchange Commission |
Mr. Thomas Lydon, KPMG LLP
Mr. James J. Owens, President and Chief Executive Officer
Mr. Timothy J. Keenan, Vice Pres., General Counsel and Corp. Secretary
Mr. James C. McCreary, Jr., Vice Pres., Corp. Controller
Mr. Jay Swanson, Dorsey & Whitney