H. B. Fuller Company · NYSE:FUL
H. B. Fuller — Fuller H B — Investor Day (October 2007)
56 slides from H. B. Fuller's investor day presentation, Oct 3, 2007
Slide 1: 2007 Institutional Investor Day: Leveraging A Solid Foundation
2007 Institutional Investor Day Leveraging A Solid Foundation St. Paul, Minnesota October 3, 2007 120 Years Exhibit 99.2
Slide 2: Board of Directors
Slide 2 Institutional Investor Day 2007 120 Years Board of Directors • Juliana Chugg Senior Vice President, General Mills, and President of its Pillsbury USA division Director since 2007 • Knut Kleedehn Former President and Senior Country Representative, Bayer AG Director since 2001 • J. Michael Los
Slide 3: Executive Committee
Slide 3 Institutional Investor Day 2007 120 Years Executive Committee Michele Volpi President & CEO Jim McCreary VP, Interim CFO Fabrizio Corradini VP, CSO Monica Moretti VP, CMO Ann Parriott VP, Human Resources Kevin Gilligan VP, Asia Pacific Jan Muller VP, Europe Jay Scripter VP, North America Ram
Slide 4: 2007 Investor Day: Leveraging A Solid Foundation
2007 Investor Day Leveraging A Solid Foundation St. Paul, Minnesota October 3, 2007 120 Years
Slide 5: Safe Harbor
Slide 5 Institutional Investor Day 2007 120 Years Safe Harbor • Certain matters discussed today may include 'forward looking statements' as that term is defined under the Private Securities Litigation Reform Act of 1995. Since such statements reflect our current expectations, actual results may diff
Slide 6: Regulation G
Slide 6 Institutional Investor Day 2007 120 Years Regulation G • During today’s meeting we will be discussing certain non-GAAP financial measures, specifically, operating income and EBITDA. Management believes that a discussion of these measures is useful to investors because it assists in understan
Slide 7: Objectives
Slide 7 Institutional Investor Day 2007 120 Years Objectives • Background: Where we came from • Situation Analysis: Where we are today • Vision: Where we are going, what we will accomplish • Detail our strategy to continue to generate shareholder value for the long term • Review our new long-term go
Slide 8: Agenda
Slide 8 Institutional Investor Day 2007 120 Years Agenda • Michele Volpi, President and Chief Executive Officer H.B. Fuller: Past, present, and future • Fabrizio Corradini, Chief Strategy Officer Platforms for organic growth Strategic approach to M&A • Monica Moretti, Chief Marketing Officer The rol
Slide 9: Past, Present, and Future
2007 Investor Day Past, Present, and Future Michele Volpi President and Chief Executive Officer 120 Years
Slide 10: Formerly A Manufacturing Model
Slide 10 Institutional Investor Day 2007 120 Years Formerly A Manufacturing Model Distributors Raw material providers Polymerization Compounder Converters End-product manufacturers OEMs H.B. Fuller’s core position H.B. Fuller’s end-customers Other industry players H.B. Fuller’s customers Provides ra
Slide 11: Preamble: Turnaround Required
Slide 11 Institutional Investor Day 2007 120 Years 3.0% 3.2% 3.6% 3.8% 3.7% 3.6% 3.2% 2.6% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 4.8% 4.8% 5.0% 5.2% 5.0% 5.2% 4.7% 4.4% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q
Slide 12: TSR Pre-Turnaround Below Market Returns
Slide 12 Institutional Investor Day 2007 120 Years (25%) (20%) (15%) (10%) (5%) 0% 5% 10% 15% 20% 25% 30% 35% 40% S&P 500 HB FULLER TSR Pre-Turnaround Below Market Returns
Slide 13: Turnaround, The First Chapter
Slide 13 Institutional Investor Day 2007 120 Years Turnaround, The First Chapter Chapter 1 Turnaround Improved pricing discipline Addressed cost structure Established Lean Six Sigma Started repositioning of product lines and business portfolio Started addressing capital structure Improved drive and
Slide 14: Results of Actions
Slide 14 Institutional Investor Day 2007 120 Years 2.9% 3.3% 4.0% 5.1% 5.9% 5.1% 5.7% 5.5% 6.3% 6.9% 7.2% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 4.3% 4.1% 4.8% 5.5% 6.4% 7.2% 7.8% 7.8% 8.3% 8.7% 9.1% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0
Slide 15: TSR Post Turnaround Above Market Returns
Slide 15 Institutional Investor Day 2007 120 Years TSR Post Turnaround Above Market Returns (20%) 0% 20% 40% 60% 80% 100% 120% 140% S&P 500 HB FULLER
Slide 16: Leveraging a Solid Foundation
Slide 16 Institutional Investor Day 2007 120 Years Leveraging a Solid Foundation Foundation Strengths Leverage Factors • Balance sheet Investment grade credit rating Underlevered • Scalable organization • Capacity utilization • Customer relationships • Distribution channels • Empowered and talented
Slide 17: Chapters 2 & 3: The Next Leg
Slide 17 Institutional Investor Day 2007 120 Years Chapters 2 & 3…The Next Leg Chapter 2 Grow the Core Invest to Grow Chapter 3 Expansion 2005 2006 2007 2008 2009 2010 2011 2012+ Transformational Journey Accelerates LSS focus on growth Customer intimacy Innovation Resource key programs Talent enhanc
Slide 18: Integrated Solutions Partner
Slide 18 Institutional Investor Day 2007 120 Years Integrated Solutions Partner Distributors Raw material providers Polymerization Compounder Converters End-product manufacturers OEMs H.B. Fuller’s position H.B. Fuller’s end-customers Other industry players H.B. Fuller’s partners Provides raw materi
Slide 19: Market & Technology Focus Around Specialty Products and Applications
Slide 19 Institutional Investor Day 2007 120 Years Market & Technology Focus Efforts Around Specialty Products and Applications Fast-Moving Consumer Goods Textiles Hygiene Packaging Construction Flooring Perf. Wood RHM HM HM Cement, WB, RHM RHM OEM and Strategic Account Focus OEMs and Distributors I
Slide 20: Geographic Expansion
Slide 20 Institutional Investor Day 2007 120 Years • Faster GDP growth areas • Leverage local strengths and capabilities • Capturing manufacturing migration • Emerging consumer class Faster Growth Areas... Key Component of Growth India Eastern Europe Rationale Middle East & Africa Go To Market Model
Slide 21: Previous Long-Term Metrics
Slide 21 Institutional Investor Day 2007 120 Years Previous Long-Term Metrics GOAL Revenue Growth [Including Acquisitions] • Acquisitions an unpredictable factor • Foreign exchange translation source of noise Gross Margin • Appropriate for driving turnaround and repositioning • Volume insensitive SG
Slide 22: Forward Path Summary
Slide 22 Institutional Investor Day 2007 120 Years • Turnaround, reshaping company foundation • Differentiated approach to value chain front end focus • Balanced market focus and portfolio • Investments in geographic expansion • Innovation and value selling • Strategic M&A to complement organic grow
Slide 23: Strategy Office: Charting and executing on profitable, sustainable growth
2007 Investor Day Strategy Office: Charting and executing on profitable, sustainable growth Fabrizio Corradini Vice President, Chief Strategy Officer 120 Years
Slide 24: Key Platforms for Growth
Slide 24 Institutional Investor Day 2007 120 Years Key Platforms for Growth Strategy Innovation Goals and objectives Key Commercial Processes Values & culture Enabling systems, processes and structure
Slide 25: Strategy
Slide 25 Institutional Investor Day 2007 120 Years Strategy • Taking a longer outlook – 5 year view – invest in the business • Areas of focus: Customer intimacy: value-added solutions Innovation Complete geographical footprint in key growth areas • Investment areas Innovation Human capital Systems P
Slide 26: Innovation – Three Areas of Focus
Slide 26 Institutional Investor Day 2007 120 Years Strategy Innovation Goals and objectives Key Commercial Processes Values & culture Enabling systems, processes and structure Innovation – Three Areas of Focus • Better use of what exists: Rationalizing/Leveraging product portfolio Exploiting/Complet
Slide 27: LSS Resources Shift To Growth
Slide 27 Institutional Investor Day 2007 120 Years LSS Resources Shift To Growth • Global process improvement program to launch in October 2007 • Thorough review of the company’s commercial processes • Strengthen LSS program: more robust global standards, decentralization of efficiency efforts • Glo
Slide 28: Performance Management
Slide 28 Institutional Investor Day 2007 120 Years Performance Management • Establishment of a set of “balanced” KPIs • Unify/align and lengthen horizon • Monitoring of execution and action taken on variance • Goals and objectives cascaded down to individual level and tied to compensation plan Strat
Slide 29: Building A Growth Culture
Slide 29 Institutional Investor Day 2007 120 Years Building A Growth Culture • Environment that rewards performance • Accountability • Planning and project discipline as “way-of-life” • Innovation • Focus on the customer Strategy Innovation Goals and objectives Key Commercial Processes Values & cult
Slide 30: Leaner, Better Performing Structure
Slide 30 Institutional Investor Day 2007 120 Years Leaner, Better Performing Structure • More fluid organization, rid of internal “silos” • Process > Function • Corporate functions driven by clear value-added accountabilities • Right local/global balance • Upgrading and aligning the role of IT Strat
Slide 31: M&A: Disciplined, Proactive Approach
Slide 31 Institutional Investor Day 2007 120 Years M&A: Disciplined, Proactive Approach • Learned from past high/low-lights • Strategy-driven, proactive sourcing • Process discipline: origination to integration • Financial discipline: pricing/ROI hurdles Targeting short-term accretion Timeline for a
Slide 32: Strategic Lenses For External Growth
Slide 32 Institutional Investor Day 2007 120 Years Strategic “Lenses” For External Growth Builds on our strengths • Surface technology • Assembly & dispensing • Innovation/performance • Differentiation • Customer intimacy • Global distribution • Local sales/tech support • Global manufacturing • Orga
Slide 33: Types of Transactions Envisioned
Slide 33 Institutional Investor Day 2007 120 Years Types of Transactions Envisioned Scale plays Geographical expansion “Bolt-on” acquisitions Source of Value • Limited options – be creative (club deals, carve-outs…) • Small targets – easier to integrate – after careful due diligence • Scale: Market
Slide 34: New Product Introduction
2007 Investor Day New Product Introduction Monica Moretti Vice President, Chief Marketing Officer 120 Years
Slide 35: Marketing & Technology
Slide 35 Institutional Investor Day 2007 120 Years Marketing & Technology R&D Marketing Global Accounts • Material science • Modeling and testing • Application science • Field market development • Industry management • Product portfolio management • Brand management • Customer intimacy • Long-term g
Slide 36: Focus On The Customer
Slide 36 Institutional Investor Day 2007 120 Years • The challenges of our customers are our own inspiration…beyond bonding Broaden the scope to total value delivered Strengthen collaboration through value chain Open innovation • It’s all about our customers Intense pre-work to get to know customers
Slide 37: New Products Evolution
Slide 37 Institutional Investor Day 2007 120 Years • Fast-moving consumer goods and construction focus • High level of intimacy with strategic accounts • Diligent stage-gate approach to drive development & market investigation • Disciplined use of Lean Six Sigma tools New Products Evolution 0% 5% 10
Slide 38: New Products Platforms
Slide 38 Institutional Investor Day 2007 120 Years Green • Consumer Health • Care for the environment Performance To Fit • Optimize/Enhanced adhesion • Lower application temperature Multi Functionality • Beyond adhesion Value-Added Technologies • Process and supply chain optimization Performance New
Slide 39: Innovation in Action: LiquiLoc
Slide 39 Institutional Investor Day 2007 120 Years Innovation in Action Platform(s): Performance to fit and Value-Added Technologies Challenge: Bottles used to package common products like detergent, cooking oil, etc. require costly flame pre-treatment for label application Product: LiquiLoc ® Solut
Slide 40: Innovation in Action: Rapidex
Slide 40 Institutional Investor Day 2007 120 Years Innovation in Action Platform(s): Value Added Technologies Challenge: Water-based and UF adhesives used in manufacturing involve lengthy and costly drying times Product: Rapidex ® product line for lean panel Solution: LEAN panel program enables cust
Slide 41: Innovation in Action: SmartGrip
Slide 41 Institutional Investor Day 2007 120 Years Innovation in Action Platform(s): Multi-Functionality Challenge: Packaging customers need to bind multiple units together during production, then unbundle them later in the supply chain Customers using tapes for years to pair soft drinks for easer i
Slide 42: Innovation in Action: TEC AccuColor Easy Grout
Slide 42 Institutional Investor Day 2007 120 Years Platform(s): Multi-functionality and Performance to Fit Challenge: Create a next-generation grout that eases tile ceramic tile installation – especially for the do-it-yourselfer Product: TEC ™ AccuColor Easy ™ Ready-to- Use Grout Solution: Delivers
Slide 43: Running a Different Race
Slide 43 Institutional Investor Day 2007 120 Years Running a Different Race • Focused now on market-driven products and solutions - “Outside in” • Empowering the regions to better “read” and address the market • Solid, focused new products process in place • Driving Lean Six Sigma discipline • Solid
Slide 44: Financial Strength Enabling Growth
2007 Investor Day Financial Strength Enabling Growth Jim McCreary Vice President, Interim Chief Financial Officer 120 Years
Slide 45: Strength & Flexibility
Slide 45 Institutional Investor Day 2007 120 Years • Strong financial position Strong free cash flow Commitment to investment grade credit rating Unlevered balance sheet • Capital allocation Growth Mergers and acquisitions Share repurchases Strength & Flexibility
Slide 46: Credit Metrics
Slide 46 Institutional Investor Day 2007 120 Years Credit Metrics* 39.9% 33.7% 47.3% 38.3% 55.1% 0% 10% 20% 30% 40% 50% 60% 2003 2004 2005 2006 TTM Q3 2007 FFO/DEBT 2.1x 2.4x 1.8x 1.8x 1.3x 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 2003 2004 2005 2006 TTM Q3 2007 DEBT/EBITDA 39.3% 39.0% 36.1% 33.9% 26.2% 0% 10%
Slide 47: ROGI: Key New Metric Introduced
Slide 47 Institutional Investor Day 2007 120 Years ROGI: Key New Metric Introduced [Gross Profit - SG&A Expense] * (1 – Tax Rate) + Depreciation Expense + Amortization Expense - Maintenance CAPEX Total Assets (Including Goodwill) + Accumulated Depreciation - Non-Debt Current Liabilities - Cash GROSS
Slide 48: ROGI Calculation (TTM Q3 2007)
Slide 48 Institutional Investor Day 2007 120 Years ROGI Calculation (TTM Q3 2007) Q4 2006 Q1 2007 Q2 2007 Q3 2007 TTM Q3 2007 Net Revenue 395.6 351.8 373.5 367.9 1,488.8 Less: Cost of Good Sold 283.2 249.5 265.4 259.3 1,057.3 Gross Profit 112.5 102.3 108.1 108.6 431.5 Less: SG&A Expense 81.9 73.6 70
Slide 49: Why Is ROGI Relevant?
Slide 49 Institutional Investor Day 2007 120 Years • Shareholders Highly correlated to TSR Measure of cash return on gross cash investment True measure of return on investment • Business Reasons for ROGI Better way to internally measure performance Less susceptible to gaming, focused on the long ter
Slide 50: ROGI History
Slide 50 Institutional Investor Day 2007 120 Years ROGI History 5.9% 5.9% 7.3% 7.5% 8.9% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 2003 2004 2005 2006 TTM Q3 2007
Slide 51: Financial Summary
Slide 51 Institutional Investor Day 2007 120 Years • Strong financial position • Able and willing to invest for growth • Prudent and balanced approach to capital allocation • Committed to investment grade credit rating • Focused on return on gross investment and driving long-term shareholder value c
Slide 52: New Long Term Goals
2007 Investor Day New Long Term Goals Michele Volpi President and Chief Executive Officer 120 Years
Slide 53: Growing At Higher Profitability Profile
Slide 53 Institutional Investor Day 2007 120 Years Growing At Higher Profitability Profile • Organic Growth Goal: 3 – 5% CAGR Eliminates noise from acquisitions and foreign currency translation • Diluted Earnings Per Share Growth Goal: 10 – 15% CAGR Commitment to consistent EPS growth Clear Timeline
Slide 54: Recap
Slide 54 Institutional Investor Day 2007 120 Years Recap • Proud of our past, energized and confident in the future and well positioned for growth • Ready, willing, and able to invest for growth • Alignment on all fronts Leadership team and organization structure Vision and strategy Processes and to
Slide 55: H.B. Fuller
Zz! Pe ww. H.B. Fuller
Slide 56: Regulation G Reconciliations
Slide 56 Institutional Investor Day 2007 120 Years Regulation G Reconciliations SLIDE 11 - PREAMBLE: TURNAROUND REQUIRED 1000's $ Q1 2002 Q2 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Net Revenue 276,422 300,743 296,139 304,418 277,770 305,822 304,292 326,59