Business Description and Accounting Policies [Text Block] | Note 1: Nature of Business H.B. Fuller Company and our subsidiaries formulate, manufacture and market specialty adhesives, sealants, coatings, polymers, tapes, encapsulants, additives and other specialty chemical products globally, with sales operations in 37 Our business is reported in five 2018, 36 24 9 15 16 Our Americas Adhesives, EIMEA and Asia Pacific operating segments produce and supply industrial adhesives products for applications in various markets, including durable assembly (appliances, filters and insulating glass), packaging (food and beverage containers, flexible packaging, consumer goods, package integrity and re-enforcement, and durable and non-durable goods), converting (corrugation, folding carton, tape and label, paper converting, envelopes, books, multi-wall bags, sacks, and tissue and towel), nonwoven and hygiene (disposable diapers, feminine care and medical garments), performance wood (windows, doors and wood flooring), insulating glass (windows) and textile (footwear and sportswear). The Americas Adhesives, EIMEA and Asia Pacific operating segments include a full range of specialty adhesives such as thermoplastic, thermoset, reactive, water-based and solvent-based products. The Construction Adhesives operating segment includes products used for tile setting (adhesives, grouts, mortars, sealers and levelers), the commercial roofing industry (pressure-sensitive adhesives, tapes and sealants) and heating, ventilation and air conditioning and insulation applications (duct sealants, weather barriers and fungicidal coatings and block fillers). This operating segment also includes caulks and sealants for the consumer market and professional trade, sold through retailers, primarily in Australia. The Engineering Adhesives operating segment produces and supplies high performance industrial adhesives to the transportation, electronics, medical, clean energy, aerospace and defense, appliance and heavy machinery markets. Principles of Consolidation The Consolidated Financial Statements include the accounts of H.B. Fuller Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated. Investments in affiliated companies in which we exercise significant influence, but which we do not not 20 Our 50 not 2018 2016, not X 1934. December 1, 2018 December 3, 2016 not In fiscal year 2017, X 1934. December 2, 2017 As of December 2, 2017 Current assets $ 102,454 Non-current assets 27,732 Current liabilities 40,173 Non-current liabilities 1,583 For the year ended December 2, 2017 Net revenue $ 171,302 Gross profit 50,607 Net income 17,735 Our fiscal year ends on the Saturday closest to November 30. December 1, 2018, December 2, 2017 December 3, 2016 2018, 2017 2016, five six 53 rd 2016 53 Use of Estimates Preparation of the Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Revenue Recognition For shipments made to customers, title generally passes to the customer when all requirements of the sales arrangement have been completed, which is generally at the time of delivery. Revenue from product sales is recorded when title to the product transfers, no Provisions for sales returns are estimated based on historical experience, and are adjusted for known returns, if material. Customer incentive programs (primarily volume purchase rebates) and arrangements such as cooperative advertising, slotting fees and buy-downs are recorded as a reduction of net revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 605 50, Customer Payments and Incentives $21,265, $18,158 $16,465 2018, 2017 2016, For certain products, consigned inventory is maintained at customer locations. For this inventory, revenue is recognized in the period that the inventory is consumed. Sales to distributors require a distribution agreement or purchase order. As a normal practice, distributors do not Cost of Sales Cost of sales includes raw materials, container costs, direct labor, manufacturing overhead, freight costs, and other less significant indirect costs related to the production of our products. Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses include sales and marketing, research and development, technical and customer service, finance, legal, human resources, general management and similar expenses. SG&A expenses also include the mark to market adjustment related to the contingent consideration liability. Income Taxes The income tax provision is computed based on income before income from equity method investments included in the Consolidated Statement of Income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Enacted statutory tax rates applicable to future years are applied to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances reduce deferred tax assets when it is not not 11 Acquisition Accounting As we enter into business combinations, we perform acquisition accounting requirements including the following: ● Identifying the acquirer, ● Determining the acquisition date, ● Recognizing and measuring the identifiable assets acquired and the liabilities assumed, and ● Recognizing and measuring goodwill or a gain from a bargain purchase We complete valuation procedures and record the resulting fair value of the acquired assets and assumed liabilities based upon the valuation of the business enterprise and the tangible and intangible assets acquired. Enterprise value allocation methodology requires management to make assumptions and apply judgment to estimate the fair value of assets acquired and liabilities assumed. If estimates or assumptions used to complete the enterprise valuation and estimates of the fair value of the acquired assets and assumed liabilities significantly differed from assumptions made, the resulting difference could materially affect the fair value of net assets. The calculation of the fair value of the tangible assets, including property, plant and equipment, utilizes the cost approach, which computes the cost to replace the asset, less accrued depreciation resulting from physical deterioration, functional obsolescence and external obsolescence. The calculation of the fair value of the identified intangible assets are determined using cash flow models following the income approach or a discounted market-based methodology approach. Significant inputs include estimated revenue growth rates, gross margins, operating expenses and estimated attrition, royalty and discount rates. Goodwill is recorded as the difference in the fair value of the acquired assets and assumed liabilities and the purchase price. Cash Equivalents Cash equivalents are highly liquid instruments with an original maturity of three Restrictions on Cash There were no December 1, 2018. no Trade Receivable and Allowances Trade receivables are recorded at the invoiced amount and do not not 4 Inventories Prior to the fourth 2018, not first 25.7 fourth 2018, Investments Investments with a value of $5,048 $5,062 December 1, 2018 December 2, 2017, Cost Method Investments Investments in an entity where we own less than 20% not may not December 1, 2018, December 2, 2017 December 3, 2016. $1,669 December 1, 2018 December 2, 2017. Property, Plant and Equipment Property, plant and equipment are carried at cost and depreciated over the useful lives of the assets using the straight-line method. Estimated useful lives range from 20 40 3 20 $285, $306 $752 2018, 2017 2016, Goodwill We evaluate our goodwill for impairment annually as of the end of our third not 2018 no 5 Intangible Assets Intangible assets include patents, customer lists, technology, trademarks and other intangible assets acquired from independent parties and are amortized on a straight-line basis with estimated useful lives ranging from 3 20 Impairment of Long-Lived Assets Our long-lived assets are tested for impairment whenever events or circumstances indicate that a carrying amount of an asset (asset group) may not Foreign Currency Translation Assets and liabilities of non-U.S. functional currency entities are translated to U.S. dollars at period-end exchange rates, and the resulting gains and losses arising from the translation of those net assets are recorded as a cumulative translation adjustment, a component of accumulated other comprehensive income (loss) in stockholders' equity. Revenues and expenses are translated using average exchange rates during the year. Foreign currency transaction gains and losses are included in other income (expense), net in the Consolidated Statements of Income. We consider a subsidiary’s sales price drivers, currency denomination of sales transactions and inventory purchases to be the primary indicators in determining a foreign subsidiary’s functional currency. Our subsidiaries in certain European countries have a functional currency different than their local currency. All other foreign subsidiaries, which are located in North America, Europe and Asia, have the same local and functional currency. On December 4, 2016, December 4, 2016 December 3, 2016 not $11,317 December 2, 2017. Pension and Other Postretirement Benefits We sponsor defined-benefit pension plans in both the U.S. and non-U.S. entities. Also in the U.S., we sponsor other postretirement plans for health care and life insurance benefits. Expenses and liabilities for the pension plans and other postretirement plans are actuarially calculated. These calculations are based on our assumptions related to the discount rate, expected return on assets, projected salary increases, health care cost trend rates and mortality rates. The discount rate assumption is determined using an actuarial yield curve approach, which results in a discount rate that reflects the characteristics of the plan. The approach identifies a broad population of corporate bonds that meet the quality and size criteria for the particular plan. We use this approach rather than a specific index that has a certain set of bonds that may may not 60 40 10 Asset Retirement Obligations We recognize asset retirement obligations (AROs) in the period in which we have an existing legal obligation associated with the retirement of a tangible long-lived asset, and the amount can be reasonably estimated. The ARO is recognized at fair value when the liability is incurred. Upon initial recognition of a liability, that cost is capitalized as part of the related long-lived asset and depreciated on a straight-line basis over the remaining estimated useful life of the related asset. We have recognized a liability related to special handling of asbestos related materials in certain facilities for which we have plans or expectation of plans to undertake a major renovation or demolition project that would require the removal of asbestos or have plans or expectation of plans to exit a facility. In addition, we have determined that we have facilities with some level of asbestos that will require abatement action in the future. Once the probability and timeframe of an action are determined, we apply certain assumptions to determine the related liability and asset. These assumptions include the use of inflation rates, the use of credit adjusted risk-free discount rates and the estimation of costs to handle asbestos related materials. The recorded liability is required to be adjusted for changes resulting from the passage of time and/or revisions to the timing or the amount of the original estimate. The asset retirement obligation liability was $3,646 $2,129 December 1, 2018 December 2, 2017, Environmental Costs Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not no Contingent Consideration Liability Concurrent with a business acquisition, we entered into an agreement that requires us to pay the sellers a certain amount based upon a formula related to the entity’s gross profit in 2018. Share-based Compensation We have various share-based compensation programs which provide for equity awards, including non-qualified stock options, incentive stock options, restricted stock shares, restricted stock units, performance awards and deferred compensation. We use the straight-line attribution method to recognize compensation expense associated with share-based awards based on the fair value on the date of grant, net of the estimated forfeiture rate. Expense is recognized over the requisite service period related to each award, which is the period between the grant date and the earlier of the award’s stated vesting term or the date the employee is eligible for early retirement based on the terms of the plan. The fair value of stock options is estimated using the Black-Scholes option pricing model. All of our stock compensation expense is recorded in SG&A expenses in the Consolidated Statements of Income. 9 Earnings per Share Basic earnings per share is calculated by dividing net income attributable to H.B. Fuller by the weighted-average number of common shares outstanding during the applicable period. Diluted earnings per share is based upon the weighted-average number of common and common equivalent shares outstanding during the applicable period. The difference between basic and diluted earnings per share is attributable to share-based compensation awards. We use the treasury stock method to calculate the effect of outstanding awards, which computes total employee proceeds as the sum of (a) the amount the employee must pay upon exercise of the award and (b) the amount of unearned share-based compensation costs attributed to future services. Share-based compensation awards for which total employee proceeds exceed the average market price over the applicable period have an antidilutive effect on earnings per share, and accordingly, are excluded from the calculation of diluted earnings per share. The computations for basic and diluted earnings per share are as follows: (in thousands, except per share data) 2018 2017 2016 Net income attributable to H.B. Fuller $ 171,208 $ 59,418 $ 121,663 Weighted-average common shares – basic 50,591 50,370 50,136 Equivalent shares from share-based compensation plans 1,384 1,249 1,134 Weighted-average common and common equivalent shares – diluted 51,975 51,619 51,270 Basic earnings per share $ 3.38 $ 1.18 $ 2.43 Diluted earnings per share $ 3.29 $ 1.15 $ 2.37 Share-based compensation awards for 1,905,411, 163,140 657,439 2018, 2017 2016, Financial Instruments and Derivatives As a part of our ongoing operations, we are exposed to market risks such as changes in foreign currency exchange rates and interest rates. To manage these risks, we may Our objective is to balance, where possible, non-functional currency denominated assets to non-functional currency denominated liabilities to have a natural hedge and minimize foreign exchange impacts. We minimize risks from foreign currency exchange rate fluctuations through normal operating and financing activities and, when deemed appropriate, through the use of derivative instruments. Derivatives consisted primarily of forward currency contracts used to manage foreign currency denominated assets and liabilities. For derivative instruments outstanding that were not may The company manages interest expense using a mix of fixed and floating rate debt. To manage exposure to interest rate movements and to reduce borrowing costs, the company may Changes in the fair values of derivatives are recorded in net earnings or other comprehensive income, based on the type of derivative, and whether the instrument is designated and effective as a hedge transaction. Gains or losses on derivative instruments reported in accumulated other comprehensive income (loss) are reclassified to earnings in the period the hedged item affects earnings. Any ineffectiveness is recognized in earnings in the current period. We maintain master netting arrangements that allow us to net settle contracts with the same counterparties; we do not not not 12 Purchase of Company Common Stock Under the Minnesota Business Corporation Act, repurchased stock is included in authorized shares, but is not 71,181, 56,230 67,807 2018, 2017 2016, Change in Accounting Principle As described above, in the fourth 2018, December 2, 2017 December 3, 2016 For the fiscal years ended: December 2, 2017 December 3, 2016 As reported Impact of change to weighted- average cost As adjusted As reported Impact of change to weighted- average cost As adjusted Cost of sales $ (1,702,873 ) $ 1,900 $ (1,700,973 ) $ (1,484,802 ) $ (3,981 ) $ (1,488,783 ) Gross profit 603,170 1,900 605,070 609,803 (3,981 ) 605,822 Income taxes (9,086 ) (724 ) (9,810 ) (50,436 ) 1,516 (48,920 ) Net income including non-controlling interests 58,290 1,176 59,466 124,382 (2,465 ) 121,917 Net income attributable to H. B. Fuller 58,242 1,176 59,418 124,128 (2,465 ) 121,663 Earnings per share attributable to H.B. Fuller common stockholders: Basic $ 1.16 $ 0.02 $ 1.18 $ 2.48 $ (0.05 ) $ 2.43 Diluted 1.13 0.02 1.15 2.42 (0.05 ) 2.37 The Consolidated Statements of Comprehensive Income (Loss) for the years ended December 2, 2017 December 3, 2016 For the fiscal years ended: December 2, 2017 December 3, 2016 As reported Impact of change to weighted- average cost As adjusted As reported Impact of change to weighted- average cost As adjusted Net income including non-controlling interests $ 58,290 $ 1,176 $ 59,466 $ 124,382 $ (2,465 ) $ 121,917 Comprehensive income 120,355 1,176 121,531 88,909 (2,465 ) 86,444 Comprehensive income attributable to H.B. Fuller 120,316 1,176 121,492 88,683 (2,465 ) 86,218 The Consolidated Balance Sheet as of December 2, 2017 As reported Impact of change to weighted- average cost As adjusted Inventories $ 359,505 $ 12,597 $ 372,102 Other liabilities 341,581 4,800 346,381 Retained earnings 1,119,231 7,797 1,127,028 The Consolidated Statements of Cash Flows for the years ended December 2, 2017 December 3, 2016 For the fiscal years ended: December 2, 2017 December 3, 2016 As reported Impact of change to weighted- average cost As adjusted As reported Impact of change to weighted- average cost As adjusted Net income including non-controlling interests $ 58,290 $ 1,176 $ 59,466 $ 124,382 $ (2,465 ) $ 121,917 Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities: Deferred income taxes (20,936 ) (724 ) (21,660 ) 5,344 1,516 6,860 Change in assets and liabilities, net of effects of acquisitions: Inventories (10,560 ) 1,900 (8,660 ) (3,495 ) (3,981 ) (7,476 ) New Accounting Pronouncements In August 2018, No. 2018 15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350 40 may November 29, 2020 first 2019 In August 2018, No. 2018 14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Topic 715 20 one November 28, 2021 fourth 2018. In August 2018, No. 2018 13, Fair Value Measurement (Topic 820 1 2 3 3 3 November 29, 2020 not In July 2018, No. 2018 11, Leases (Topic 842 not 842 840. not No. 2016 02 No. 2016 02. In July 2018, No. 2018 10, Codification Improvements to Topic 842, No. 2016 02. No. 2016 02 In February 2018, No. 2018 02, Income Statement – Reporting Comprehensive Income (Topic 220 740, December 1, 2018. No. 2018 02 December 1, 2019, first 2018 $18,341 In May 2017, No. 2017 09, Compensation—Stock Compensation (Topic 718 December 2, 2018 In March 2017, No. 2017 07, Compensation—Retirement Benefits (Topic 715 December 2, 2018 10. In February 2017, No. 2017 05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610 20 December 2, 2018. not In January 2017, No. 2017 04, Intangibles—Goodwill and Other (Topic 350 2 not November 29, 2020 2018. In November 2016, No. 2016 18, Statement of Cash Flows (Topic 230 December 2, 2018. not In October 2016, No. 2016 16, Income Taxes (Topic 740 third December 2, 2018. not In August 2016, No. 2016 15, Statement of Cash Flows (Topic 230 not December 2, 2018. In June 2016, No. 2016 13 , Financial Instruments - Credit Losses (Topic 326 November 2018, No. 2018 19, Codification Improvements to Topic 326, 842, Leases No. 2016 13 No. 2016 13. November 29, 2020. In March 2016, No. 2016 09, Compensation - Stock Compensation (Topic 718 first 2018. $1,047 December 1, 2018. no In March 2016, No. 2016 08, Revenue from Contracts with Customers (Topic 606 No. 2014 09 No. 2014 09 In February 2016, No. 2016 02, Leases (Subtopic 842 December 2018, No. 2018 20, Leases (Topic 842 2016 02. December 1, 2019 In January 2016, No. 2016 01, Financial Instruments - Overall (Subtopic 825 10 may not December 2, 2018. not In May 2014, No. 2014 09, Revenue from Contracts with Customers (Topic 606 December 15, 2017 ( No. 2015 14 August 2015) December 2, 2018. no not |