Maximillian Marcy - Senior Manager, Treasury and Investor Relations Jim Owens - President and Chief Executive Officer Jim Giertz - Executive Vice President and Chief Financial Officer.

Jermaine Brown - Deutsche Bank Rosemarie Morbelli - Gabelli & Company Mike Ritzenthaler - Piper Jaffray Jeff Zekauskas - J.P. Morgan Mike Sison - KeyBanc Dmitry Silversteyn - Longbow Research Steven Schwartz - First Analysis Christopher Butler - Sidoti & Company.

Good morning and welcome to the H.B. Fuller Fourth Quarter 2014 Investor Conference Call. This event has been scheduled for one hour. Following today's presentation, there will be a formal question-and-answer session and instructions will be given at that time, should you wish to ask a question. 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. Please go ahead sir..

Thank you Catherine and welcome everyone. Today's conference call is being webcast live and will also be archived on our Web site 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. 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 the 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.

The non-GAAP information discussed today may not be consistent with the methodologies used by other companies. A reconciliation of these non-GAAP measures to the nearest GAAP measure is provided in the earnings release our company issued last night.

For more information, please refer to our recent press release, quarterly reports on Form 10-Q dated September 26, June 27 and March 28, 2014 and Annual Report for the year ended November 30, 2013 on Form 10-K filed with the Securities and Exchange Commission.

These documents are available on our Web site at www.hbfuller.com under the Investor Relations section. I will now turn the call over to our President and CEO, Jim Owens..

Thanks Max and thank you everyone for joining us today. During the middle of 2014 our business faced some significant challenges, but the team at H.B. Fuller stepped up to these challenges and put us back on the path toward our strategic plan.

In the fourth quarter we delivered the improvements that we committed to within our two major projects and delivered financial results in line with our guidance. The quarter marked a turning point for us, transitioning from project management to a continuous improvement and growth. We are excited about the year ahead and the momentum we’re building.

We’re on track to have a strong 2015 and achieve our growth and EBITDA margin targets for 2016. I’ll start today’s call with a comprehensive discussion of our expectations for the 2015 fiscal year and I’ll also provide a brief update on project 1 and the European business integration project.

I’ll turn it over to James Giertz for a summary of our fourth quarter results and then we’ll have time for your questions.

We’ve taken a slightly different approach to financial guidance for the 2015 fiscal year rather than a range we’re providing a point estimate or target for our 2015 EPS along with an expanded discussion of the main drivers of the operating plans for the year.

This will enable you to make an important judgment about the risk and the opportunities that we see as we began this New Year. As you know, our business had many moving parts in the last half of 2014, most of which had a generally negative impact on our short-term financial results.

2015 will also be an eventful transition here but in a positive way as we continue to drive operating improvements in North America and Europe and at the same time capture some new and exciting growth opportunities across multiple segments of our business.

The pace at which we drive improvements on our operating performance and the pace at which we capture revenue growth opportunities will largely determine the speed at which our overall financial performance in 2015 is realized. We remain highly confident that the business transformation we began in 2011 will make H.B.

Fuller successful long into the future. The plan for 2015 represents the next phase in creating a stronger, more capable and more sustainable platform for earnings growth. Our plans for 2015 get us back on track to realizing our strategic EBITDA margin and sustainable organic growth goals.

This transition year should provide the bridge we need to realize the 15% EBITDA margin goal by the 2016 fiscal year. With that as background, our target for adjusted diluted EPS for the 2015 fiscal year is $2.60. We expect to generate approximately $280 million of EBITDA.

Organic growth will be about 6% and will be driven primarily by volume gains around the world. We expect an unfavorable foreign exchange translation will offset organic growth by about 300 basis points. Our core tax rate which excludes the impact of discrete items should drop back to 30% from slightly over 32% in 2014.

Special charges are expected to be about $5 million, a dramatic decrease versus last year. And finally capital expenditures are expected to be about $70 million for the full year. With that overview I’ll now walk through our operating plan in each operating segment.

In our Americas segment the SAP implementation is complete and 2015 is the time to focus on the business of serving customers and capitalizing on growth opportunities. 2014 was a difficult year for us in the Americas as we work through go-live event of SAP under Project One.

The supply chain difficulties related to Project One implementation in 2014 are largely behind us. Metrics such as available to promise which renewed 50% in Q2 and 80% at the end of Q3 are above 95% today.

We were running near pre go-live productivity levels as we entered the first quarter and we expect to see improving productivity from that point forward as we leverage the benefits of this system. The economy in North America is solid and will support further organic growth.

Some macro challenges exist in certain Latin American countries but our plans call for additional growth especially in countries like Brazil. No significant projects are planned in the Americas in 2015. So the desks are clear for a strong year for our largest and most profitable operating segment.

Our construction product segment had an active 2014 fiscal year generating growth of nearly 20%. Early in the 2014 year we captured all of the tile setting business at the Menards retail channel and work throughout the year to improve the operational efficiency of serving this important customer.

Near the end of the year we completed the acquisition of ProSpec which has enhanced our distribution network in the South and West regions of the U.S and added manufacturing locations that help us serve all regions across the U.S more effectively. We expect another eventful year in 2015 with revenue growth expectations of about 30%.

There are three significant drivers of our plan growth and margin expansion for 2015. First we will complete the integration in the ProSpec acquisition and capture the benefits of the combination with our base business.

Second, we have landed significant new market share with Lowe’s deepening the relationship with this customer over the past five years. The new business will ramp up during the second quarter of this year. Key element of the newly won business with Lowe’s is the introduction of a significant new product innovation.

We’re excited to see this new platform launch in selected Lowe’s stores later this year at which time we’ll see our more specifics. Finally we’re upgrading our manufacturing network to increase capacity and drive margin expansion and improve product quality.

One important element of this project is the start up of the new state of the art manufacturing module at our existing Aurora, Illinois facility, and the closure of our Palatine Illinois facility, significantly enhancing our capabilities to serve customers in the upper Midwest region including Menards.

As you can imagine these initiatives provide a significant positive impact on earnings.

However the timing of benefit have a high degree of uncertainty, the pace of the acquisition integration, the timing of the launch of new business with Lowe’s, the customer acceptance of our new product platform and our ability to ramp up the additional product volume in a cost effective manner all while shifting production between facilities in Illinois will impact our construction products results for 2015.

In major initiatives plan for construction products in 2015 will build a solid foundation for the future. We are strengthening our marketing position and delivering value for our key retain distribution partners Lowe’s and Menards along with our traditional wholesale distribution partners.

We are upgrading and streamlining our manufacturing network to create a cost effective supply chain to serve the entire United States. And our product innovations continue to set us apart from our competitors.

As a result of all this work we expect to see EBITA margins approaching 14% in 2015 excluding restructuring and non-recurring launch costs associated with our Lowe’s business. Our Asia Pacific segment performed well in 2014 growing volume over 11%. In 2015 we will continue to build on that success and expect organic growth of about 15%.

The revenue growth opportunities will primarily be focused on the hygiene market across the regions which has consistently been an area of success for us. In addition we have significant opportunity in our durable assembly market, especially in the electronics market which has been a very fast growing business for us over the past few years.

We completed our major business integration project work in 2014, specifically the consolidation of production facilities in China and much like the Americas operating segment we have no plans for significant projects in 2015 fiscal year. Our teams there will be free to focus on serving customers while continuing improving operating performance.

All of our planned actions together should drive EBITA margins higher by about 100 basis points versus 2014. And lastly our European business has began its transition into continues improvement mode. In the fourth quarter of 2014 the investment phase of the transformation project was essentially completed.

The first quarter of 2015 is a period of transition for the business moving from project mode to stable mode. As we exit the first quarter we expect to see the benefits of improving customer service levels and higher productivity across our manufacturing network.

Our based operating plan for 2015 calls for organic revenue growth rate to turn positive in Q2 and increase throughout the year, as our production facilities return to normal service levels and identify the market opportunities to realize.

In addition manufacturing costs are expected to decline quarter-by-quarter as we leverage the productivity improvements made possible by our capital investment. Since EIMEA is our second largest operating segment, its performance has a significant impact on our consolidated results.

The biggest variables in the 2015 results will be how swiftly we transition from negative revenue progression to positive organic growth and how quickly we move pass the operational inefficiency experienced in the second half of the 2014 fiscal year and generate margin improvement.

So that's a quick summary the plans we have for each operating segment in 2015. Now I want to switch gears a bit and discuss several factors that will broadly influence the results of the company across all sectors. Let's start with the discussion of the outlook for raw material costs and availability.

This is a topic of great interest given the dramatic decline in crude oil prices over the past several months. We have been clear over the years that the price we pay for our basket of raw materials is more heavily influenced by the specific supply and demand dynamics of the materials we purchase rather than the price of crude oil and natural gas.

That said over the long-term lower oil prices should result in lower costs for us and for our industry overall. Generally speaking because of the raw materials we use for adhesives are far downstream of the basic refining process the impact on our raw material costs due to changes in oil prices is dampened and delayed.

Given the current price of crude oil we believe there is a fair assumption that our raw material cost will broadly decline as we move through the 2015 fiscal year, offsetting the potentially favorable downward trend in raw material costs is ongoing tightness in supply and corresponding higher prices of certain resins that are critical for adhesive formulations.

As raw material costs decline some of the impact would be passed on to customers which will dampen the beneficial impact to margins. Based on these various uncertainties we decided to build to our base plan for 2015 assuming no significant impact on margins.

As always we monitor and manage the dynamics of our raw material cost environment continuously throughout the year and we will be prepared to maximum advantage of whatever market conditions we experience. Now moving on to another topic that has gathered quite a bit of attention recently foreign currency exchange rates.

The short message on this topic is that we expect a meaningful drag on our operating performance in 2015 relative to 2014 due to the translation of foreign entity results in U.S dollars. The most significant currency relationship we contend with is the euro versus the U.S dollar.

Our actual average translation rate in 2014 was $1.36 per euro and our plan for 2015 is based on an average translation rate of $1.24. This represents a decline in euro value of nearly 10% and a decline in the value of our euro denominated financial results.

In rough numbers a 10% change in the euro versus U.S dollar exchange rate generates a 3% change in our consolidated financial results both at the revenue and pretax operating level. We also have exposure to a variety of other foreign currency dynamics, but the potential impacts are smaller.

For example local currency weaknesses in places like Brazil, Russia, Venezuela and Australia could dampen local demand, but the impact to our consolidated results will not be as significant as the euro. Two major external factors, raw material costs and foreign exchange rates will have a significant impact on the results in 2015.

Now let me turn to a couple of internal factors that are also important when evaluating our 2015 operating plan. First a few comments about the quality of our earnings or perhaps better stated the cash flow characteristics associated with our earnings guidance.

As you know we had invested a significant amount in special charges over the past three years to complete the business integration and European business transformation.

These costs were varied and represented unusual or non-returning costs associated with the multi-year business integration project which began after the completion of the Forbo acquisition in 2012. Although we have removed the impact of special charges from adjusted earnings, special charges has a very real impact from a cash flow perspective.

In the 2014 fiscal year we expensed $45 million of cash costs through special charges. During the 2015 fiscal year we anticipate that number to drop substantially to approximately $5 million primarily related to the cost of maintaining ideal facilities in anticipation of their sale.

The significant reduction in special charges, the sharp reduction in capital spending associated with the business integration along with the elimination of other non-recurring costs related to Project One will significantly improve our free cash flow in 2015. One final note on the financial performance guidance.

Based on all of these factors we have discussed thus far, we expect the phasing of our earnings to be more heavily weighted to the second half of the 2015 fiscal year versus our normal earnings pattern. Traditionally we deliver 45% of earnings in the first half of a fiscal year with the remaining 55% in the second half.

In fiscal 2015 we expect that split to look more like 40% in the first half and 60% in the second half. There are four factors driving this phasing; first, operational efficiency in North America will improve through the year as the SAP platform allows for enhanced productivity.

Second, we expect improved operating results in Europe in the second half of the year as we move through our continuous improvement phase.

Third, new business with Lowe’s in the construction product segment plans up during the second quarter and finally our Asia-Pacific operating segment is seasonally strong in the final quarter of the year and has become a more meaningful contributor to overall results with its solid growth over the past few years.

Our first quarter of year is always our weakest quarter and this year will be no different especially consider the factors I just discussed. We estimated our first quarter adjusted diluted EPS to be about $0.35. Please note that we’ve not included in our guidance any financial impact attributed to the pending acquisition of Tonsan Adhesives in China.

The Tonsan acquisition, which was announced in June of 2014, is expected to close next month. We intend to update our guidance following the completion of the Tonsan deal. I hope this broad discussion of our 2015 plan and guidance has provided you with a clear picture of the opportunities and the challenges that we will face this year.

As I mentioned before we’re excited and energized as we enter this New Year, I know everyone on the team is especially looking forward to a year in which we focus primarily on customers and winning in the market rather than managing these large business integration projects. And speaking of major projects let me provide a brief status report.

Let’s begin with Project One, as I mentioned last quarter, the effort required to adopt the new system and return to normal productivity levels has taken longer and be more costly than we initially anticipated.

We are committed to making future launches happen smoothly and as a result I’ve elected to suspend any additional implementations of the SAP platform until after 2015. We expect three significant benefits from taking this action.

First, we will allow our operating segments to focus on operational excellence and winning with customers without the distraction of an upcoming systems implementation. Second, we’ll enable our North America team to become experts in the system before launching it in another segment.

And third, we’ll save the expense and corresponding cash flow that is just associated with these implementations.

What we will do in 2015 within Project One, is continue to refine our capabilities by optimizing the performance of the SAP platform in North America to improve the performance of our business in this region and to create the more robust template of implementation in other regions of the world.

We’ll also be working to create a new plan for the rollout of the SAP platform to another region. This plan will incorporate our learnings from the initial implementation and we’ll have a lower risk profile than the original global implementation plan.

And in 2015, we’ll also be building our internal technical capability with the SAP platform so that we can more effectively and efficiently manage future implementations and provide ongoing support of the system. Our second major project is the business integration.

The investment phase of the European transformation is essentially complete, during the first quarter we’re finalizing a few minor capital projects and any remaining work streams to be put in place at the end of the third quarter. The remainder of 2015 we’ll focus on continuous improvement, which we’ve referenced a few times today.

Specifically we’ll improve customer service levels to support organic growth targets. This includes shorter lead times and overall enhanced customer experience. We’ll continue to focus on driving manufacturing productivity across all facilities.

Some expected tangible benefits include less overtime, fewer temporary employees, lower freight costs, higher yields and more efficient equipment utilization. Both of these projects represent huge complex undertakings, both were designed to fundamentally change and enhance our business platform for the future.

We were disappointed with the degree of execution challenges that we had in the middle of year on both projects. That said we’ve made course corrections to quickly complete the ongoing project work and to reduce the risk associated with future implementations within Project One.

We will be successful in completing these projects and delivering the benefits just as we envision them when we embarked on these investments. With that I’ll now turn the call over to Jim Giertz, to provide more details on the quarter just completed and our financial guidance for 2015..

Thanks Jim. The fourth quarter results came in very much in line with the guidance that we provided at the end of the third quarter and reflected a significant improvement in performance relative to the prior quarter.

We’re still not performing at the desired productivity level but we feel that at minimum, we’ve turned the corner towards continuous improvement as we enter the new fiscal year. We posted relatively strong organic revenue growth in the fourth quarter in each operating segment other than EIMEA.

The Americas is a segment increased volume by over 2% in the fourth quarter and over 3% for the full year and we feel this is a pretty solid result considering the significant operational issues that impacted our customer service levels as we went live in Project One in North America.

With these project related issues mostly behind us and an improving end market environment in the U.S we have good momentum as we entered 2015. Our construction products volume was up 24% in the quarter and over 20% for the full year. The full year results were positively impacted by the newly acquired business with Menards.

The incremental volume increased in the fourth quarter came from the acquired ProSpec business which we account for as organic revenue growth. The Asia-Pacific segment extended its volume growth in the fourth quarter up nearly 13% from the prior year.

The growth was broad-based across the business including good gains in our developing electronics market segment. Finally the EIMEA segment posted a small year-over-year volume increase in the fourth quarter. As mentioned earlier we expect this segment to transition to consistent organic revenue growth as we move through the 2015 fiscal year.

And as expected the gross margin was down in the fourth quarter and full year versus a comparable period last year. The vast majority of the negative impacts are attributable to the European business integration and the disruption in North America following the go-live of Project One.

Reported SG&A spending was negatively impacted by incremental costs related to our Project One implementation and a non-recurring restructuring charge associated with reduction in force executed in the fourth quarter.

Adjusted SG&A was only $86.5 million in the fourth quarter down over $6 million from the prior year reflecting very tight control of discretionary expenses and the benefit of lower incentive compensation approval. I’d like to provide a bit more information on the non-recurring items that we adjusted from our EPS results in the fourth quarter.

The schedules we provide on our press release give financial performance metrics for our operating segments on an as reported basis and are not adjusted. We think the adjusted results for the fourth quarter provide a better indication of our run rate of operating margins as we entered 2015.

So with that in mind I’ll just run through the four segments and provide the pre-tax adjustments amounts for you. For Americas Adhesives, the Q4 adjustment totaled $4.2 million increasing EBITA margin from 12.7% to 14.5%. Our EIMEA adjustments totaled $3.3 million increasing EBITA margin from 8.5% to 10.4%.

Our Asia Pacific adjustments totaled $1.3 million increasing EBITA margin from 8.5% to 10.2%. And finally for our construction product adjustments totaled $1.7 million increasing EBITA margin from 8.0% to 11.3%. For H.B Fuller overall adjustments totaled $10.5 million increasing EBITA margin from 10.3% to 12.2%.

Nearly all of the items that were adjusted out of the fourth quarter results are either clearly one-time items, such as the severance cost associated with the reduction in force or have been eliminated as major projects stabilize, such as the Project One core team cost or have been absorbed into our operating plan for 2015.

Therefore we believe the adjusted margins in the fourth quarter provide a relatively accurate picture of our operating performance level as we entered the New Year. And as mentioned earlier the reduction in non-recurring items and special charges will improve cash flow significantly in 2015.

One additional item was adjusted from our fourth quarter earnings. During our year-end process as we determine that an accounting error was made in 2007 as we increased our ownership stake in our Japan joint venture from 40% to 50%.

In short in 2007 we deemed all of the excess purchase price associated with the transaction to be goodwill when a portion of the excess should have been assigned to other assets including certain intangible assets that amortized.

Therefore since 2007 we have slightly overstated our equity earnings in the joint venture by the cumulative amount of the intangible amortization that should have been recorded in each period.

We corrected this in the fourth quarter with an after tax charge of $1.7 million and this is why the income from our Japan JV was essentially zero in the fourth quarter. We excluded this amount from our adjusted EPS and going forward the income from the JV will return to normal level.

Our core tax rate and adjusted earnings for the fourth quarter came in just slightly above 32% generally in line with our guidance provided after the third quarter. Our reported tax rate in the fourth quarter was over 50% reflecting the very low tax rate on the special charges taken in the quarter primarily in the European region.

We reset our core tax rate on adjusted earnings for 2015 based in our forecast of the geographic mix of earnings in 2015. And primarily driven by expected profit improvements in Europe our 2015 core tax rate is expected to be 30%.

Pulling in all together adjusted diluted earnings per share in the fourth quarter of 2014 was $0.64 in line with our guidance, the slightly higher tax rate in the quarter and unfavorable foreign currency translation relative to the assumptions in our third quarter guidance dropped $0.02 from our fourth quarter results.

Cash flow from operations was positive $42 million in fourth quarter. Capital expenditures came in at $24 million in the fourth quarter and a $140 million for the full year generally in line with the most recent guidance we provided at the end of the third quarter.

And as we noted earlier we expect to reduce our capital expenditure substantially in 2015 to about $70 million or just slightly more than 3% of net revenue. And with all that I’ll turn the call back to Jim Owens to wrap us up..

Thanks, Jim. 2014 was a year disrupted with two large unexpected challenges. Our team responded to the challenges and put our business back on track towards our strategic goals. I am proud of what was accomplished this quarter.

The team righted the ship and at the same time we drove solid organic growth overall and drove outstanding growth in certain segments. We developed a plan for 2015 that provides double-digit growth in EBITDA and EPS and margins expanding throughout the year.

On top of the plan we have the exciting Tonson acquisition and the potential for raw material related margin expansion later in the year. When I say I am excited about 2015, I really mean it. We have an outstanding leadership team that was tested hard in 2014 and came through stronger.

We have organic growth momentum exiting the year and we had a series of initiatives ahead this year which will sustain that momentum. We have action plans and investments that were designed to drive sizable gross margin improvements which will be realized this year and we had the first year of a significant shift in cash flow generation.

We will exit 2015 with a financial position to deliver our targeted plans in 2016 and beyond. I thank our employees and our investors who have supported us through these investments with their time and their money. The return on these investments will be realized as we progress through 2015.

This is the end of our prepared remarks, so now I would like to open up the call for your questions..

Thank you. The company would like to provide everyone an opportunity to ask a question. You may re-queue as often as you would like time permitting. (Operator Instructions). Our first question will come from David Begleiter with Deutsche Bank..

This is actually Jermaine Brown filling in for David Begleiter.

A few questions, can you specify which raw material supply chains are seeing some supply demand tightness?.

Yes certain classify resins are the ones that I say are showing the highest degree of tightness, but we buy a wide pool of resins but currently that would be the area where we see a bit of tightness..

And then of the 5% shift from the first half to the back half you mentioned the four components of that, can you quantify the impact of each?.

Yes, probably difficult to spell those out but I think we need to dig into the details of each you can see them. I mean you have to pull through the math, Jim we don't have a specific element on that one, but I can't….

But I wouldn't try to quantify it now..

I guess finally how are the volumes currently trending in Q1?.

We generally don't comment on numbers through the quarter, but I think as we stated we expect the second half of our volume here to be stronger than the first half because of some of these shifts.

So I wouldn't say we see -- we're concerned at all about any kind of volume trends if you’re asking about a macro issue based on a very early look at the quarter..

Thank you. Our next question comes from Rosemarie Morbelli with Gabelli & Company..

Jim when you look at your anticipated 6% growth rate in revenues, do you have the negative 3% from FX in that or is it a net 3% growth?.

It's 6% organic and then our current projection which is based on a $1.24 is 300 basis points down, so net growth of 3%..

And then when you look at your 2016 targets and I am assuming that translates into about 6% or so 6% to 7% top-line growth including everything and EBITDA margin of 15%.

Do you need a lot of help from the outside world, or do you think that you can reach that based on your internal actions? And is that a number for the full year or just a number that you think you will reach towards year-end?.

Well couple of comments I’ll make.

First-off we’re laying out a plan here for 2015 and as I said clearly based on that plan we think we’re positioned well to deliver the plan in 2016, and so I think the general philosophy we’ve taken from macro assumptions is that the world will be a lot like it is now, so I don’t think there is a sense that it’s going to get a lot better but there is also not a plan that it’s going to get a lot worse would be the way I’d consider that..

And if I may we ask one last question regarding Tonsan's contribution, if we look at it on an annualized basis, when you announced the acquisition, it was, I think it generated about $100 million in revenues and close to $19 million also of EBITDA.

Is this what we should be expecting for 2015, or as you're getting closer to closing the deal, you are seeing a big deviation from those numbers?.

No, I’d say the business that we’re close to the business and the things that are going on. The business ran well in 2014, so we don’t see major deviations from where we were.

Exactly how it’s going to mile flow through to our business is something that we’ll learn a lot more is the purchase accounting is sorted and we look at exactly what investments we need to put in.

So, is there anything you want to add to that Jim?.

No, I think that’s right.

We have to close the transactions, so first of all it will happen two months at best it will happen two months into the year, we only have 10 months of the business maximum and then as Jim said we’ll have to go through the calculations and we’ll refresh our guidance for you probably when we get together for the first quarter conference call..

But to the core question, the business is running well, we’re very excited about what we see. This is a company that brings us into new market segments that we haven’t been in.

The ability to win versus Dow Corning and Loctite and local Chinese customers is very clear and apparent and we think the things that we’re going to bring as we partner are very positive. So, this is a really good positive acquisition for us particularly for the long-term bringing us into the new spaces that attracted..

Thank you. And we’ll now hear from Mike Ritzenthaler with Piper Jaffray..

Couple questions, Jim on Fuller's ability to pursue pricing initiatives in 201, sort of timing of how that flows through the P&L, and your current expectations for more or less flat pricing in 2015.

I guess the spirit of the question is around the supply chain piece, as it comes into Fuller, and then your ability to pass that through or drag your feet, so to speak?.

Yes, well it’s an interesting dynamic right and again it’s part of how we gave out the guidance because there is a few dynamics working.

So some of our raw materials are moving up and we’re talking with customers about increases there, there are some price increases we entered into late in 2014 that were related to some materials that took some time to get through the system, those are going to impact us in 2015 and on the flip side as raw materials come down some of that will go back to customer.

So, there is going to be a couple of different pricing dynamics that will flow through the year that again, in our base assumption we’ve come out with a net flat for the year, I think it’s a fair assumption I think our ability and the market’s ability to generate a more raw material reductions in the long run will be favorable to margins.

So, I’d say historically and we’ve got to deliver on this when raw materials go down we give some of that back to the market but margins improve. So that would be my long-term expectation or medium-term expectation if oil stayed low and raw materials came down.

Does that help?.

Yes, that makes sense. Just one other follow-up on the 2015 outlook. I heard the 14% EBITDA margins in construction, expansion of 100 basis points in Asia-Pacific, to get to kind of 13% EBITDA margins for the full year. I guess in that framework, expansion in the Americas and EIMEA would be pretty modest in that scenario.

I'm just wondering if there is any specific target for those segments, maybe as they exit the year, or some other sort of milestone to gauge performance in those two segments..

They’re very specific targets, right. So, we don’t drive each one, but I’d say the math and you can see as you dig through your own models but it ties with our plan, the margin expansion is nice in the second half of the year in both of those businesses and we’ve a lot of optimism that that’s going to happen.

Jim, is there is something more specific there?.

Well just on the Americas, Mike maybe I’ll reference you back to 2013 when EBITDA margin in Americas was about 16%. So that’s kind of a target level, so we’re pretty close to that as we exit the year. So I think that’s probably a range that you could think of for the Americas.

And then Europe I guess you can solve for the Europe one, you can figure out, kind of make up their own mind where they think that’s going to plan..

Thank you. And we’ll continue on to Jeff Zekauskas with J.P. Morgan..

I think the gross profit margin fell about 250 basis points in the quarter on an adjusted basis.

Can you analyze that?.

You’re talking about year-over-year Jeff?.

Yes year-over-year..

Well as we said in the script I mean it’s basically again, I can’t quantify every detail of it. But it’s related to -- almost entirely related to the excess cost of running this system for the European integration and the residual impacts of the Project One complications in North America.

And if you’re just looking at the reported as oppose to, you’re talking about reported gross margin not adjusted correct?.

I am talking about adjusted..

Adjusted, yes. So that’s still the answer..

And obviously while we had a lot of the improvements in the quarter Jeff, both of those projects they were operating in good performance.

So when I look at things that happened inside those businesses, we invested the money to get the businesses both running well but we had extra freight cost, extra labor cost, extra overtime costs, we had yield losses. All of those things that are part of the productivity improvements we’re going to drive into this year.

So we can define item by item what’s the different than we have and those are things that are going to drive the improvements we’re talking about delivering in 2015..

So 2014 was a tough year, both on a GAAP basis and on an adjusted basis. And part of what you have been doing over the last several years is you've bought Forbo, and you're integrating and changing H.B. Fuller.

Can you say something about what kind of cost reduction was actually achieved in 2014, or the kind of cost reduction you expect to achieve in ‘15 from all of the investments that you have made?.

Well Jeff I mean the main driver of the improvement that we’ll see, that we’re planning to see in 2015 is there a significant improvement in gross margin. And it relates to all the issues that you’re asking about.

So we have to methodically drive out these excess costs that have been introduced into our system in North America and in Europe, particularly in Europe and realize it. So we’re talking about both the 200 basis points of gross margin improvement that we need in 2015 to make this plan together.

So that’s the ultimate payout that’s been delayed from all the investments that needs to be realized in 2015..

In summary when you think from an action standpoint Jeff. We invested in new facilities; we invested in both capabilities for raw materials; we invested in new automated packaging equipment. All those things are running but it’s a whole new process with a complex product line in a different network.

And all the work that you do to drive OEE and freight efficiencies and yield efficiencies need to happen with that new system. So the potential item by item is very clearly there and that’s what we are going tackle this year..

Just a couple more. My impression is that customers want price reductions quickly, in the light of so many chemical prices falling in the spot markets.

And my guess is that your inventories right now are relatively high, and you've got higher cost raw materials embedded, and you'll work your way -- I take it, you'll work your way through those in the first half, and then your margins should widen out in the second half.

But do you expect your average prices in the first half actually to be down year-over-year, in the light of the pressure from customers, or do you think that you can actually hold your pricing flat or even up in the first half?.

So I mean the customers are lot more sophisticated than they once were Jeff they recognize, we’re downstream here. So I was with customers that impact and had exactly this discussion. So the short answer is yes, I think that we’ll hold off any kind of price decreases until we start seeing those decreases in our raw materials.

The first step is getting the decreases in our raw materials, right. So those things don’t happen automatically when the fee streams come, we need to create the leverage around certain supply demand dynamics to get those and we have to work those through our system and then we have to then negotiate with customers on those.

But I would say that early in the year we’re actually probably receiving more benefits from increases from late in last year. And then any kind of decreases will happen later in the year..

And then lastly, what we hear from talking to companies is that Europe has slowed down, and different people assess it differently, as to the magnitude of the slowness, and there are some pockets that are doing well, and some pockets that are doing less well.

Can you make an assessment of your prospects in Europe, in terms of volume growth? You spoke of the first half being weak. How weak? And you talked of a second half rebound.

How strong? And what’s the basis for that?.

So I think for us Jeff, we’re less exposed to Eastern Europe and Russia. I think people that have less European number it hurts the more, but we benefit from that from a relative European standpoint. We also benefit from the fact that we have sort of some pent-up demand, right.

So we've held off on some opportunities that we haven’t really been in a great position to deliver because of some of the operational efficiencies, we have that. In our EIMEA segment we have Africa and India which we have made some investments there that have generated good growth for us.

So that's sort of the dynamics that help us relative to maybe somebody else in terms of Europe. This quarter we had positive organic growth, what we said in the script is we expect Q2 to be sustainably positive.

I would like just positive in Q1, right but I think we're hovering around that flat range maybe a little down moving to a little positive in Q2 and then net positive as the year goes on. And I think when we net out our numbers that's a good solid view of our business and what's going to happen this year..

Thank you. Our next question will come from Mike Sison with KeyBanc..

When you think about the 3 to 3.15 you had hoped to hit in ‘14, and the 2.60 you have now. Is the delta from that still kind of the ongoing cost from Europe, and it sounds like SAP is going well.

And will that sort of I think about that $0.50 is the slam dunk heading into ‘16?.

So let me have Jim take you through some of those numbers so that you get a sense of it. There are two factors..

So I am going to generally agree with your first statement.

So I don't know, if our original 2014 look was $3 a share and then you want to bridge that 2.60 that we're talking about for this year where is the difference? Well about $0.05 of that is just non-op, I mean its interest expense, it's the JV equity earnings and a few technical things like that.

But you’re right, I mean the bulk of the difference between our 2015 plan and our 2014 plan is that our expectations for Europe are quite a bit lower, and that's really driving the difference.

And there is a parts of that, if the business is a little bit smaller than we thought it would be, because we had some attrition this year, we had attrition based on the complications of the project, so that's part of it.

Foreign exchange is another piece of it, it's going to be small on a dollar basis because the currency issues that we talked about. But the biggest piece of it is that the gross margin percentage is lower.

We're on a slower trend up in gross margin that we had originally anticipated and that's the most significant delta between our original plan for Europe and where we're today..

When we look forward Mike, the world changes, right, Europe changes but our business specially heading into 2016 and construction products is bigger and stronger than we expected and our business in Asia will be bigger and stronger than we expected.

So that's the net impact on the overall company while we still remain very positive about the 2016 target..

So when you think about ‘16, you have talked about hitting your 15% EBITDA margin goal.

I should add to whatever you earnings in ‘15 then grow the business into ‘16 and the earnings growth should be pretty potent, right? That's kind of how the math works?.

Absolutely. .

Absolutely..

So that's all based on just the fact that as we've mentioned the second half of this 2015 year should be substantially better. So you will be working off second half base as we go into '16 that's the idea..

And when you work through the issues, right, we try to go through a lot of details today on lots of items you can see the momentum SAP, Europe, organic growth, raw materials, the things we're doing in the construction products business and the investments we're making there, the momentum in Asia, all of those things are heading in the right direction.

So those are the action that flows through in the numbers..

And for the 2.60 in ‘15 I just wanted to make sure I understood.

Do you have a benefit from pricing over raw materials or in that 2.60 are you assuming no benefit?.

No benefit..

But there could be benefit if you do a better job in pricing.

Is that sort of maybe the potential cushion that you have as you head into the year?.

I think there is -- I had listed five things just a second ago that could all go better than we expected. We are laying out the plan we have it, I think you could argue on any one of them they could go better and worst when we laid out raw materials is an obvious one that we all know but yes, it could be better..

Just on a qualitative basis Jim, you touched on this a little bit. But can you walk us through? Nienburg is running, right? The one plant is down, Nienburg is up and running.

Where you add in terms of operating rates? Where does it need to get to, to sort of get on this 2016 plan?.

So we closed this quarter the Bordeaux site. I think we mentioned that in the press release and our three sites that have sizable investments, Luneburg, Nienburg and Blois now have all the products that they need to make there.

They’re not operating as efficiently as they need to but we’re getting the output that we need to serve customers and delivering the benefits. And the automated production lines that I talked about last quarter that weren’t doing some of the packaging work for the most part those are now running and operating as they need to be.

So the four parts to what we need to do going forward in Europe and first and foremost is around production efficiency.

So tackling the OEE making certain that we’ve got the right loading, schedule is right, the operations don’t have downtime and they’re performing at the rates material flow design, get into material flow design in these sites the right way, improving freight efficiencies both in terms of rates as well as minimizing any kind of expedited freight which is still part of our process, and then driving yields.

Now you start out whole new plant, you put all these products in there but laying out all the benefits related to bulk, getting all the campaigns right, optimizing exactly how we use those plants.

So, there are four big elements that are nothing experienced by our customer but they’re being experienced from a cost standpoint that we’ve lined out, we’ve very specific plans on what we’re tackling and how we’re going to tackle it.

But in terms of the sites themselves, all the sites are meeting customer needs now as they need to just at a higher cost than maybe a less yields and higher freight cost than they need to be..

Our next question comes from Dmitry Silversteyn with Longbow Research..

A lot of my questions have been answered, but I'd like to follow up on a couple of things that I'm looking for some clarification.

In construction products, the growth you delivered in the fourth quarter, did I hear you right, that includes the acquisition that you made, and you're counting it as organic growth?.

Yes, you’re correct..

So if I exclude that acquisition which I'm assuming did about $7 million in sales in the quarter, or more or less, then your organic growth comes out to be about 8%.

Is that the right way to think about it price plus volume 9% or so?.

I don’t have that math in front of me Dmitry but that’s basically yes..

So the 30% growth in construction that you expect for next year, that includes probably about 12% or 13% from this acquisition, correct?.

Correct..

So net growth next year is still going to be a very impressive 22%, I guess is what I'm trying to get to..

Yes, that’s a combination of the new business landed with Lowe’s that comes in sometime in the second quarter and just organic growth on the base business..

In terms of EIMEA segment, you talked about expecting sort of volume declines still to happen in the first quarter, but then to see volumes improve in the following three quarters and faster, so in the second half of the year.

I sort of understand the decline in year-over-year basis in the first quarter given that we're going against very difficult comps in Europe, just in general, in the economy on year-over-year basis first half of last year was pretty positive environment certainly compared to this year.

Besides the economy getting better sort of what’s going to reverse the trend that you’ve had a little less than year or year and half of losses in the business in terms of volume.

Is it sort of stabilizing at the levels that you’re and gating new business or do you expect some help from some sectors of the economy that you’ve particularly good exposure to that maybe doing better than the overall economy in the region?.

As I said just a second ago Dmitry, I think we had positive momentum here in Q4, we’re not expecting that necessary to build but to stabilize. We have good exposure and a growing exposure in India which is part of our EIMEA region and growth in Africa, which helps our business.

But most importantly we’re by now stabilizing our business being able to meet the needs of customers, we’re in a position to go after opportunities that we have. So, we’ve a bit of pent-up demand list of opportunity.

So, I wouldn’t say that it’s driven by a certain macro segment and I think when you compare us to others we’re little less exposed out in Eastern Europe that’s helping us, but it’s not really macro driven as much as the factor of business is stabilized and able to meet some of these needs that we haven’t been able to meet..

And a last question on the Asia-Pacific, you’ve delivered very strong organic growth the last couple of years, mid-single digits including some negative pricing in 2013, and looks like double-digits this year. And you provided a very strong 15% growth expectations for 2015.

What has sort of changed over the last couple of years that's allowing you to gain the business in hygiene and durable assembly that you talked about, versus your bigger international competitors, as well as the local players in the market?.

Yes I would say all of our organic growth; it’s pronounced when you see it in Asia. But all of our organic growth initiatives are driven by designing our business around market segments with market experts.

So by having which we didn’t have in the past series of market experts in these targeted markets like hygiene, like electronics they can understand and tackle the opportunities that are there combined with innovation agenda. So by developing new products, solving customer problems we’re meeting those needs, and that’s what we’ve done in Asia..

And then one final question on construction materials. Two years in a row you’ve grown the business very nicely, but it came at the expense of margin.

Should we be expecting margin to start moving in the upward direction, driven by the volumes that you’re getting here, once you get out of the second quarter, where what I understand you're going to have some lower margin business because of the channel sale at Lowe’s?.

Yes I think I was clear in the script as we expect margins to tick up approaching 14% this year. So a sizable uptick and getting some benefits out of this growth that we’ve been delivering. So when you take out, there is some cost you have to take out to get their but we’ll see some good margin improvement in that business this year..

And is that a function of sort of the business that you're getting being higher margins than the business that you’ve gotten in the past that drove your volumes or is it the business that you’ve gotten in the past at a low margin now getting sort of the right margin?.

It’s a combination of many things, but it’s driving the efficiencies. When you take on new business then you have to do the things to be able to run our facilities and run our business efficient, and that’s happening in all of our wins..

Thank you. Our next question comes from Steven Schwartz with First Analysis..

Just to review some of the things. Back to Jeff's question about the initial savings expectation, so you had the $90 million figure around that, maybe going back two years.

It sounds like maybe now you still have $90 million to gain, or is it more, or is it less? Should we just throw the $90 million figure out the door at this point?.

I guess what we could do is come back to you and spell out all the numbers there and where they will stand today. But a lot of that money was realized the North American business drove the margins up quickly and got to where they needed to be.

Our Asia business has a lot of benefits that are there and part of the benefits in Europe that we were driving were around shared services, around some SG&A reductions. So a lot of money is right there and the piece that we’re talking about being delayed is this piece related to gross margins in Europe.

So we could pull out that number and talk to you about it, I don’t have that right in front of me to go back to exact details there. But most of that benefit is right there in the P&L as you look forward here in 2015..

Thank you. And our final question will come from Christopher Butler with Sidoti & Company..

Just a question, with the lower CapEx and expenditures on restructuring, you had mentioned that your cash flow is better.

Could you talk to us about the acquisitions that you are looking at beyond Tonsan disclosure here and any changes or other uses of cash that you're looking at?.

So our attention is to cover this sometime around mid-year because will be towards the end of this year generating lot more cash. But fundamentally we don’t see us doing major acquisitions certainly not for the first few quarters of 2015.

So would be a 2016 initiative brining Tonsan and delivering these benefits delivering the results that we’re looking forward is the goals for 2015. And then beyond you’re right there is a sizable cash generation that we’re going to address in terms of how we return that to shareholders and how much we invest in future valuable acquisitions.

Jim do you want add anything to that..

No..

Thanks everyone for their time, sorry for going over here. We did want to bring you a lot of details and especially thanks for your support here at H.B Fuller..

Thank you. Ladies and gentlemen this does conclude today’s HB Fuller fourth quarter 2014 investor conference call. You may now disconnect..