Good morning and welcome to the H.B. Fuller Fourth Quarter 2013 Investor Conference Call. This event has been scheduled for one hour. (Operator Instructions) Management in attendance on today's call includes Mr. Jim Owens, President and Chief Executive Officer; Mr. Jim Giertz, Executive Vice President and Chief Financial Officer; and Mr. Maximillian Marcy, Senior Manager, Treasury and Investor Relations. At this time, I would like to turn the meeting over to Mr. Maximillian Marcy. Sir, you may begin.

Thank you, Lisa, and welcome, everyone. Today's conference call is being webcast live and will also be archived on our website for future listening. Before beginning, I would like to inform everyone that certain matters discussed during this call will 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 differ. In addition, during today's conference call, we will be discussing certain non-GAAP financial measures specifically: adjusted earnings per diluted share; segment operating income; and earnings before interest expense, taxes, depreciation expense and amortization expense or EBITDA. Adjusted diluted earnings per share are defined in the quarter reported, typically excluding the impact of special charges related to ongoing business integration project. Segment operating income is defined as gross profit less SG&A expense. And EBITDA is defined as gross profit less SG&A expense plus depreciation and amortization expense. All of the non-GAAP measures discussed today should not be construed as an alternative to reported results determined in accordance with GAAP. We believe that the discussion of these measures is useful to investors, because it assists in understanding our operating performance and our operating segments, as well as the comparability of results. All of the non-GAAP information discussed today may not be consistent with methodologies used by other companies. All non-GAAP information is reconciled with reported GAAP results on the last pages of our presentation. For more information, please refer to our recent press release, quarterly report from Form 10-Q dated September 27, June 28 and March 29, 2013, and annual report for the year ended December 1, 2012, on Form 10-K, filed with the Securities and Exchange Commission. All of these documents are available on our website at www.hbfuller.com in the Investor Relations section. Now, I will turn the call over to our President and CEO, Jim Owens.

Thanks, Max, and thank you, everyone, for joining us today. In 2013, we delivered on our profit commitments and positioned ourselves for further success in 2014 and 2015. 2014 will represent the fourth year of our current transformational five-year plan. We’ve made great progress over the first three years of the plan and we expect to take further significant steps toward our 2015 goal in 2014. Our key long-term financial objectives remain unchanged, namely achieve organic revenue growth of between 5% and 8% per year, increase our EBITDA margins to 15% by 2015, grow EPS by 15% per annum, and increase return on invested capital to 15% by 2015. 2014, we expect revenue growth at the low end of our long-term growth targets of 5% to 8%. Our Constructions Products segment posted solid volume growth in 2013, and this is expected to continue into 2014. Our Asia Pacific region picked up the growth pace throughout the last year, especially in China, and this momentum will carry forward into 2014 as well. We anticipate more modest revenue increases in the Americas and the EIMEA operating segments. For the EIMEA, the revenue performance is expected to improve in the second-half of 2014 following the completion of the business integration project at the end of the second quarter. Our gross profit margin is expected to increase in 2014, primarily driven by the cost benefits that will be realized upon the completion of the business integration project in Europe. And once again, our SG&A expenses should increase at a rate below the increase in net revenue. Overall, we expect our EBITDA margin to be about 14% for the full year, about 150 basis points higher than the level achieved in the fiscal 2013 year. Our core tax rate should remain steady at about 30%,…

Okay. Thanks, Jim. I’ll start by providing a bit more color on the fourth quarter results. Starting at the top, organic revenue increased by 3.6%. Volume growth was over 4%. And the pricing was slightly negative, reflecting the ongoing trend of gradually falling raw material costs. The general weakness in our volume delivery in the EIMEA region reflects several significant factors that we have been dealing with for the past several quarters. I think everyone recognizes that economic conditions in the broader European region remained stagnant and many indicators show end-market conditions flat to down in many countries. And as we have mentioned in previous conference calls, we have several specific factors that are hindering our growth as we execute our business integration project in the region. Some of the volume decline is planned attrition that supports our strategic goal of reducing complexity in our business. Some of the volume weakness is due to the distraction within our commercial teams as we manage product substitutions and product transfers. Although volume was down versus the prior year, the trend has improved in both of the last two quarters. In Americas Adhesives, we delivered volume growth of nearly 6%, which was a solid improvement from the prior two quarters. The volume improvement was the result of incremental improvements in both North America and Latin America. Market conditions did not materially improve in the region, but the results we delivered reflect improved focus on closing new business and regaining some business lost during the business integration activities. Our Construction Products business delivered over 12% volume growth in the fourth quarter. The growth in this segment was supported by generally more favorable end-market conditions and market share gains. We gained new business with a large customer in the fourth quarter that will drive further…

Thanks, Jim. It was another great year for our company. We delivered record levels of revenue, operating income and adjusted earnings per share. We produced organic growth for the fourth year in a row and again improved EBITDA margins towards our 2015 goal of 15%, and we’re on track to deliver our 2015 commitments. We are quick to react when conditions, both internal and external, change. We have proved this by delivering full year EPS in line with our initial guidance, even while revenue was softer than we anticipated and transform delays nearly to be managed. The performance we delivered in the second half of the year helped us to gain momentum in organic growth across the world as we deal with slower growth in Europe. We did all this while executing important investments for our future. Capital investments in Europe driving our profitability improvements; investments in electronics, Asia and Latin America, which will drive our sales growth; and investments in our core operating systems, which will drive our overall productivity. 2013 was a remarkable year and it is a springboard into 2014. We’ve laid out another aggressive plan for 2014 and we’re confident that we will deliver. This plan represents a further significant step towards our long-term goals. We have demonstrated over the last few years that this management at H. B. Fuller sets aggressive targets and delivers the results and are able to do it under varying external conditions, while tackling numerous challenges. Thank you for your interest in H. B. Fuller and for joining us on the call today. And I’d like to open the call up for your questions.

We will go first to Mike Sison of KeyBanc.

In terms of these manufacturing costs that came up in the fourth quarter, is that going to be about a similar size in the first quarter?

No, Mike. We don’t expect that those costs are all going to continue into the first quarter. There’s a variety of different things. We can talk about more if anyone is interested. But not all of those costs are going to continue into Q1. So we try to say that some of those residual costs will remain in Q1. That’s why we’re being a little bit cautious about our Q1 performance. But clearly, there was some of the costs in Q4 that we know that we’ve clamped off and shouldn’t recur in Q1. That being said, I mean obviously there is a lot of activity going on. So being precise about forecasting right now is a little bit difficult for us.

We’ll continue, Mike. I think the main point is as we saw these delays, we really took all our efforts to protect our customers and we’re doing what it takes to make certain we provide good service to customers during the transformation.

Right. And then is Project ONE impacting the first half more pointedly than the second half? Can you maybe help us on the costs there?

Yeah. Mike, I don’t think there is a big difference between the expenses that are going to hit the P&L. I don’t think there will be a big difference in their phasing across the year. I think we called out that the direct project expenses are estimated about $4 million for 2014, which are about similar to what we had in 2013. This should be pretty evenly spread. If I had to guess, it’d be a little front-loaded into the first half of the year.

Okay. And then real quickly on the organic sales growth outlook, you sort of noted to be at the lower end of your goals of 5% to 8%. You’re sort of in that range for the first quarter. Is that why the first quarter has been a bit weak? Is it maybe trending a little bit less? I was hoping it would improve as the year unfolds.

Yeah. I’d say, Mike, we certainly see progress throughout the year. And we have good momentum on organic growth exiting the year and we see it strengthening throughout the year. So net again, out in that 5% range. So we do see momentum. Especially in Europe, in the second half of the year, the ability to grow will significantly change once we hit mid-year. So I hope that gives you a sense.

And [ph] Flexit model is included in that organic sales outlook for ‘14?

Yes. Well, for the first half of the year, as you know, [ph] Flexit came on board about mid-year this year.

We’ll go next to Steve Schwartz from First Analysis.

It’s actually Mike Harrison sitting in for Steve. I was wondering if maybe we could just dig in a little bit more on the non-recurring manufacturing costs. First of all, you mentioned that those were partially in Europe, partially in North America. Was it roughly 50-50 or a little bit more one than the other?

Yeah, this is Jim G. And I don’t want to get too specific about it, but it was primarily in Europe was where we had our challenges and to a lesser extent in North America.

All right. And just help me understand why that didn’t meet the threshold to be a special item, even though you’re kind of calling it out as being non-recurring in nature.

Yeah, so, well, we have a line item on our P&L that we’ve had since the business integration began which we call special charges net. And we have a very specific set of guidelines and parameters that we use to determine whether any cost that we have our expense would fit into that definition. And so these costs didn’t fit into that definition. In terms of adjusting things out of our earnings, I guess we’d probably take a more conservative view to this and not the others. But we disclosed them to you. We decided not to adjust them out of our earnings. I think maybe we could have, but we didn’t. But we disclosed them to you as non-recurring, because we don’t think they really are relevant to the kind of ongoing earning power of the businesses, but they were temporary and unusual in nature.

So let me give you a sense of what we’re talking about here, Mike, in terms of costs. So as things got delayed, we had to implement contracts (inaudible) to make some products for us. We had to produce some products that at sites that we hadn’t originally planned. In Europe, we are making products at Finland and shipping it into Mainland Europe, so things in the U.K. shipping into Mainland Europe. We’re making products on the assets that we hadn’t originally planned. And our philosophy here was make certain that we did the things to support our customers. So when this delay went in place, if there was extra freight charges, if we had to locate a product in Finland and ship it into Europe or run it on a less efficient asset. In some cases, we substituted a higher cost product in for a customer, but it was all centered around making certain that we did a good job of supporting our customers. So I hope that gives you a color on the type of costs we’re talking about here.

No, that’s very helpful.

Mike, this is Jim G. Not to go beyond answering more or your question that you asked. But now based on Jim’s explanation of what these costs are, they don’t really qualify as special charges for us, because they relate to making products and selling products to customers today. Okay? So they’re just extra costs that we incurred to make the products and sell products today. Those don’t classify as special charges for us. The special charges only relate to costs that are directly around the execution of the project. Okay?

But I think your point is right. That probably could have been a case made to call them now. We decided not to.

I understand now why you treated them that way. So maybe just one more on Project ONE. You mentioned the capital budget is $60 million. You mentioned it’s expected to return well over internal hurdle rates. So once that kind of hits stride, I’m sure you’re not going to see a full savings rate in 2016. But is the annual savings rate something in the $12 million to $18 million range or it going to be something north of that?

Yeah. I think you’re right. We won’t see these benefits until ‘16 and ‘17 as we finish up the project. And what we’ve decided Mike is to be clear that it’s going to hit our current hurdle rate. As we get later into the year and we start laying out our new five-year plan, we’ll be more precise and specific about what we see as the returns. But they’re sizeable returns and it is a good financial investment.

Maybe just a housekeeping question for Jim G. Any guidance on interest expense and D&A and any other non-operating expense for next year?

Sure. So depreciation will increase next year. Our current forecast is $43 million. I can just give you the precise estimate that we have. It’s $43 million of depreciation, which is up somewhat from last year. Amortization is $23 million, which is what it was last year. The total is $66 million. But that’s what’s in our current internal plan. Interest expense, I can give you that number as well. Our internal forecast is $20.5 million of interest expense in 2014.

We’ll go next to Christopher Butler of Sidoti & Company. Christopher Butler - Sidoti & Company: Continuing on Project ONE, you had mentioned that there was about $4 million of expenses this year from that. Could you just kind of break that out by quarter, so that we have a sense of where there were some extra costs?

So the question was Project ONE cost in 2013? Yes, oh, boy, that’s a tough one. I don’t know it precisely. They were heavy in the first quarter. I’m just going to not answer the question, because I don’t know the answer, Chris.

I would have said, Chris, the spread-out of quarters, two, three and four, we didn’t have them in Q1, and they’re relatively even I think in the quarter. But it’s a relatively small number. Christopher Butler - Sidoti & Company: Just wanted to be sure they weren’t bunched somewhere.

No, they weren’t bunched in the fourth quarter. They were spread out over the last three quarters of the year. Christopher Butler - Sidoti & Company: And if we’re looking at the decline in prices that we’ve seen in most of your regions, you had mentioned raw materials. Is that exclusively? What’s occurring there?

Well, pricing was actually up in Europe, and that’s part of our transformation project of repositioning. In Asia and in the Americas, it was definitely about raw materials, concessions related to that, our contractual commitments. In the Construction Products business, there were some of that. This year was a high-volume level. So some of our customers were able to reach volume thresholds that gave a higher level of rebates than we’ve had in past year. So that came through in some of those numbers, but mostly raw materials, Chris. Christopher Butler - Sidoti & Company: And just looking at that on the European side, you had mentioned that you had been raising prices as you fully bring Forbo into the fold. With 3% volume loss over 2013, how much of that do you think was the business that just kind of went away because you were raising prices and it was a little bit lower margin that you were interested in?

Yeah. Obviously, I wouldn’t directly point it at the price increase itself, but I would point it towards the transformation. So we had a lot of moving parts. Very small SKUs had to be eliminated. We had to change and reposition customers as we consolidated products. We had to move some customers to different channels. And also, we had to reposition pricing. So I wouldn’t say it was about pricing. I think we’re very careful in being fair about our pricing and making certain that we weren’t losing business related to that. But the combination of all of those things together definitely had an impact in our results in 2013, most of which we anticipated. Some of it was, especially early in the year, was a little more than we anticipated. Christopher Butler - Sidoti & Company: And why wouldn’t we get to a point where we start to lap some of that, or was that a continual effort through the year, so it’s still going to be ongoing?

It was a continual effort throughout the year. I think as I said, it’s just being able to be in the aggressive offence Q3 this year. I think we’ve got a lot of work here to do to make certain we finish that. But as we said, big chunks of the transformation, the SKU reduction, the product container elimination, big chunks of that work happened this year and won’t continuing, but we still have the distraction factor. So look for mid-year for this to start seeing the trends to change.

We’ll go next to David Begleiter of Deutsche Bank.

Jim and Jim, how should we think about working capital in 2014? Is there going to be a use of cash again in 2014?

It’s Jim G. I think that our basic working capital structure is not going to change in 2014. So it will be a working capital use to the extent that we grow our business. One of the things that’s showing up in our working capital numbers right now is that there are a lot of capital expenditures going on. And so for example, you see our payables went up this quarter. That really is not so much a reflection of a change in the core operations of our business, but it’s a temporary phenomenon related to the acquisition of our capital and the payment for capital. But if you’re just asking about our core operations, our net working capital ratios would remain similar in ‘14 as they were ‘13. And I think they’ll only change fundamentally once we have SAP up and running and start taking advantage of some of the opportunities that we have to improve our inventory management there.

Understood. And just on business integration, Jim, what’s the delta from a savings impact in ‘14 versus ‘13?

From the business integration project itself? That’s another one I can’t answer. That’s a probably good question, but I don’t know that number.

But I think it nets out in this EBITDA improvement. A big chunk of that is related to the business integration. So particularly on the gross margin improvement that we expect to see in 2014.

Right. And just lastly, looking at the Americas Adhesives volume growth, 5.7%, were their market share gains embedded in that number?

Yeah, I would say we had some nice wins. The team did some good work. Particularly, our hygiene team and our global assembly teams had good solid progress that we expect to see momentum going forward. And I know you recall this, David. Middle of the year, we hit a soft patch on organic growth, and we’ve reallocated a lot of our effort toward: A, managing discretionary spending; but also, getting the sales pipeline moving in. We call that Project Win, dedicated a different level of resource and focus on key wins. And that was a successful project and it really helped us kick start some of the organic growth. Everywhere outside of Europe, we’re still managing the distraction. And so definitely some wins in the quarter.

We’ll go next to Dmitry Silversteyn of Longbow Research.

Just have a couple of questions, if you would. First of all, just to get this out of the way, on the G&A guidance, the depreciation increase year-over-year to $43 million, is that going to be mainly in EIMEA and Construction segments, or is it going to be equally split between the companies and sort of what’s driving that since you’re closing plants at least in Europe and China? Sort of what’s driving the higher depreciation year-over-year?

Yeah, Dmitry, it’s commissioning and putting into use the capital that we’re employing in Europe is the primary driver of that. Plus, we will begin the depreciation of our Project ONE investment as well.

Got it.

I think those are the two bigger drivers.

Okay. So that’s going to offset. So the expensing of new capital basically is going to offset the savings that you’ve gotten from plant closures, so you’re going to get them net up in Europe and then Project ONE will be more or less U.S.-centric at least in 2014 in terms of depreciation?

Obviously I don’t know how the depreciation is going to get allocated out by the segments. I’m not quite sure I know that right now. Well, we’ve had some depreciation already from Project ONE, but more of the depreciation will start in the second quarter of this year.

In terms of (inaudible) contribution to revenue, I think it was 1% of the divisional revenue in the third quarter. Is that the similar level in the fourth quarter that we need to deck out before looking at organic growth?

Yeah, 1%.

Okay. So that takes care of that. The strong growth in construction that you’ve seen, you talked about some business wins in general and then specific large business won in the fourth quarter. If you had to sort of look at the market growth versus your broader share gains versus this one customer win, how would you sort of apportion the very strong topline you saw in the fourth quarter? I think you said that the large customer win was in the fourth quarter. Should we see that momentum carry into 2014?

Yeah. So the large customer win that we talked about, Dmitry, actually didn’t show up in the fourth quarter results. It one that we’ll start hitting in 2014. So these results actually, without that, and it was part of the discussion about why we’re optimistic about that. And other wins are happening in the company that are driving organic growth. So yeah, we had a good quarter. The Construction Products business had a good year. And it’s tough for me to parse out what part of that is market and what part of that is wins. Now if you look back over the last couple of years, our team has outperformed the market throughout the downturn. If you look at our CP business versus what’s happened in the market, and that’s because that team focuses on driving innovative projects and then getting on the front-end of the channels that are winning. So those are the two things we’re doing. Now if I were to try and pick a number, I’d say it’s 50-50. Maybe it’s a little different than that. But there is definitely a good positive environment in that market and the team is definitely doing a nice job winning in the market. And as I said, this big win we got is going to help accelerate that in 2014. And we’re pretty excited about the growth we’re going to see in CP next year.

Excellent. On the pricing environment as you sort of look forward to 2014, it was not a significant contributor one way or the other to 2013 results. Do you see that changing in 2014 at all in terms of either being a slightly positive contributor or do you think if raw material prices continue to come down that you’re going to have to pass that through? Conversely, is the competitive environment such that if raw materials start to accelerate and there’re several companies that have been reporting earnings recently that they talk about their possibility, particularly in Europe, would you be able to pass through pricing at sort of the same pace you did in the past?

In terms of what we see, we see another benign year in terms of pricing, which I think allows us to focus on doing our business, of growing the business. If anything, we see late in the year some uptick, but that would probably only happen if the economy got strong or stayed strong throughout the year. So we see a relatively benign, maybe a little bit of slight decline throughout the year. But if things did pick up, we’ve built a machine that understands how to manage the complexities of our product line, raw material substitutions in pricing. And we’re very confident that process and system we set up. So we’d be able to react very quickly, Dmitry, if something happened that was a shock to the system. But at this point, we’re not expecting that, but we’re prepared to do that if those go up.

Very good. And then final question on corporate costs. I know you guys don’t break them out as many companies as a separate line item. So it’s part of your divisional result. But if you look at sort of 2014 deltas versus 2013, can you talk us through sort of what the impact would be, if anything, from pension funding obligations or reversals, any other items that could of size in corporate costs one way or the other American or anything else that sort of comes to mind when you look at that deltas in corporate expenses.

Dmitry, Jim G. Yeah, I can give you some broad answers to those questions. We will be seeing some benefit from our pension expense. Actually we have pension income. It’s actually an income item for us, I think, net. And it will be favorable in 2014 versus 2013 by single-digit millions of dollars. I can’t think of anything else that really would be material. We had no particular pension funding records. From a cash flow perspective, that won’t be an issue in 2014. I can’t think off the top of my head of anything else of a particular note that’s changing our cost structure and kind of corporate areas that you’re referring to.

(Operator Instructions) We’ll go next to Jeff Zekauskas from J.P. Morgan.

Even if you strip out the $4 million in cost of goods sold from manufacturing and efficiencies, your cost of goods sold was up 4%. Why is it up so much in a easing raw material environment?

Okay, Jeff, this is Jim G. Can we just talk about gross margin percentage?

What I was interested in why your cost of goods sold went up. In that, if you do it on a gross margin percentage basis, I guess you’re roughly flat year-over-year or maybe flat-to-up notwithstanding the sales growth?

Yeah. So I think that was pretty much what the plan was for the year. I think our gross margin, when you adjust out these unusual expenses in fourth quarter, would have come in closer to 28%, which has been pretty much what our gross margin percentages have been through the entire year. And I think that was pretty much in line with our plan. We never really anticipated a lot of gross margin improvement until 2014 when the business integration is complete.

Maybe put another way, your sequential sales went up $18 million and your gross margin adjusted for the costs went down 30 basis points. So why did that happen?

I can’t give you a specific answer to that, Jeff. I mean I can’t do that online right now. I don’t know the answer to the question.

You expected because there’s more volume in the fourth quarter than the third quarter, there were some margin improvement, is that what you’re saying? Is it a sequential question or a year-over-year question?

You can do it either way. All I’m remarking on is that the gross profit margin sequentially declined a little bit, even though your sales went up $15 million if you adjust for the extra manufacturing costs. And so I was wondering why that was the case? You could do it year-over-year in terms of why did cost of goods sold go up 4% ex-manufacturing costs?

Well, Jeff, I am obviously working on from a different paradigm than you are, but I’m not able to answer the question very articulately. So I apologize for that. But I can come back from the other side and just tell you, if you’re asking is there any fundamental change like a contribution margin sequentially or year-over-year, no. In our manufacturing cost structure, year-over-year or sequentially, no. So any variance that you’re referring to would be just, I guess, normal swings and variations between quarters is what I would say.

Let me just try and rephrase the question here, Jeff. What you’re saying if you strip out the $4 million in costs, we would have moved from 28.3% gross margin to 28.1% or 28.0%? Is that what you’re saying?

So why wouldn’t the incremental margins be higher? Why wouldn’t your gross margin be higher?

I would just classify that as normal fluctuations from quarter-to-quarter. I just don’t think there’s any real significant explanation to it.

Yeah, and our fixed costs are spread over the volume over the year. So when we have a higher-volume quarter, it’s different than a lower-volume quarter. And if you look back at our history, you’ll see that as well. There’s no big jump. Even though our Q3 is lower than Q4, there’s not a big jump in the gross margin from Q3 to Q4, Jeff. So I would say 28.3% to 28.0% or 28.1% would be pretty normal and just normal variation.

Okay. How many employees work at your company now?

The number is just under 3,700.

Is your expectation for 2014 that average price mix falls in the United States and Asia and rises in Europe? Is that your general operating plan for next year?

The average price, I would say, if anything, slightly, but relatively benign in all three of those areas. And I think directionally, I would agree with your view. So slightly down in Americas, slightly down in Asia, slightly up in Europe.

Okay. And then lastly, can you characterize your sort of the raw material experience that you had this year? What happened by quarter and what’s your outlook for next year?

Yeah. So I would say that for us, Jeff, there is a combination of two things happening here. We’re generating savings relative to the integration, plus there’s some market dynamics that are happening. So there’s a mix of those two things in here. But if I look at the overall fundamental market, it was across our raw materials, flat to slightly down throughout the year. And I would expect that to continue for the first quarter or two. But for the most part, so what I use is flat throughout that period. And in terms of next year, I think the general view is later in the year is when we would expect to see any uptick.

Okay. Do you expect EIMEA volumes to grow in the first half of ‘14?

Yeah, I don’t think we’ve given specific numbers on that.

Just roughly, up or down?

Yeah, I would say roughly, we expect to move from negative to positive throughout the year in EIMEA and see very strong rates, Asia Construction Products and then solid rates in the Americas.

Okay, great. Thank you for your patience.

No, thanks for your questions, Jeff, and your time.

(Operator Instructions) Actually we just had a question in the queue. We’ll go next to Richard O'Reilly of Revere and Associates. We have no further questions in queue.

Okay, thank you, operator. And thanks, everyone, for your time on the call and for your support of our company and your support of our strategy.

Thank you, ladies and gentlemen. This does conclude today’s H. B. Fuller fourth quarter 2013 investor conference call. You may now disconnect.