H.B. Fuller Company (FUL) 2002 Q2 法說會逐字稿

Good morning. My name is Cassandra and I will be your conference facilitator today. At this time, I would like to welcome everyone to the H. B. Fuller 2002 second quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press the star, then the number 2 on your telephone keypad. Thank you.

Mr. Dvorak, you may begin your conference

Good morning, everyone. This morning's conference call is being recorded and will be available for replay two hours after we are finished with questions.

Present for this conference call are Al Stroucken, chief executive officer, Ray Tucker, chief financial officer, and other key H. B. Fuller management personnel.

Before beginning, I would like to remind all listeners that certain matters discussed during this call will include forward-looking statements as this term is defined under the Private Securities Litigation Reform Act of 1995. Since such statements reflect our current expectations, actual results may differ.

Please refer to our press release for a full discussion of factors which could cause such differences.

Now, to Ray Tucker.

Thank you, Scott. Good morning, everyone, and thank you for joining us. As indicated by our news release, this quarter's results were in line with our expectations we communicated at the beginning of the year, and reiterated at the end of the previous quarter.

The global economic situation continues to depress our top-line results, but our streamlined cost structure and lower raw material costs have managed to significantly counter this impact.

As usual, I want to remind everyone that current-year results discussed will be prior to any special charges incurred due to the restructuring initiatives for 2002.

Net earnings increased from $11.9 million in the prior year to $12.0 million. Earnings per share were equal to last year's second quarter of 42 cents.

I would like to remind everyone that the current-quarter's earnings per share include a lower pension and post-retirement benefit income of 7 cents partially offset by the elimination of goodwill amortization of 2 cents per share.

Sales for the quarter were $319.4 million, a 2.8% decrease from 2001's sales of $328.5 million.

Looking at the components of the sales change for the quarter, we see the following. Pricing was down 1.1%. Volume decreased 1.1%. Currency effects, primarily due to the Euro, accounted for a six-tenths of a percent decrease.

Gross margins of 28.6% was 1.7 percentage points better than last year's gross margin of 26.9%.

Compared to the previous quarter, law materials provided a percent to sales benefit of 70 basis points, despite several raw material price increase announcements in a variety of chemistries.

Operating expenses were $68.7 million or $4.1 million higher than last year.

Over 75% of the increase is attributable to the reduced income received from the pension and other post-retirement benefit plans.

As a percentage of sales, operating expenses were 21.5% compared to 19.7% a year ago, and 23% in the first quarter of 2002.

Interest expense of $4.4 million was $1.1 million, or nearly 20%, below the second quarter of 2001. Other income and expense was income of $.2 million compared to an expense of $.2 million last year.

Included in last year's expense was a gain on asset sales of $1.6 million and goodwill amortization of $1 million. Currency effects were $.4 million of income this year, compared to $.3 million of expense last year.

Pretax earnings of $18.4 million were 2.5% better than the previous year's second quarter of $17.9 million. In the second quarter of last year, we adjusted our effective tax rate for the six months to 35%, resulting in an effective rate of 34.1% for the second quarter of 2001. The 35% continues to be our effective tax rate for 2002.

Moving on to the balance sheet, the company's capitalization ratio was 32%, compared to 40% in the second quarter of 2001 and 35% at the end of the previous year.

Total debt decreased 24.7% from the second quarter of 2001, to $211 million. Capital expending for the car totaled $5.6 million compared to last year's second quarter spending of $7.6 million.

Free cash flow for the quarter equaled $10.4 million compared to $10.9 million in the second quarter of last year. Through six months, our free cash flow is $10 million versus $1.4 million last year.

Depreciation and amortization were 14.6 million for the quarter and 28.9 million year-to-date.

Operating working capital amounted to $220 million compared to $242 million last year, a decrease of $22 million.

As a percentage of sales, operating working capital was 17.2% versus 18.4% last year.

Before I turn this over to Al - I'm sorry. Before I turn it over to Al Stroucken, let me give you an update on the restructuring initiative.

The program is progressing according to plan. In the second quarter, we incurred pretax charges of $6.6 million. This consists primarily of $2.8 million for severance, $2.8 million of accelerated depreciation, and $.4 million of contract and lease cancellations. We still expect the total charges related to the plan to be in the range of 30 to $35 million, and the remaining charges to be incurred in 2002.

Now, here's Al Stroucken to provide some additional comments.

Thank you, Ray, and good morning to all of you.

Our second quarter earnings, as described by Ray, were basically on target to slightly above the expectations we had earlier this year.

With the U.S. dollar weakening against some key currencies throughout the latter part of the quarter, we (inaudible) overall demand remaining as the most significant factor affecting our top line. Revenues were down 2.8% for the second quarter, an improvement of about 9% from sales we posted in the first quarter, which is a bit stronger than the quarter-over-quarter gain of last year. But the year-over-year gain remains elusive.

Throughout the quarter, we saw no clear economic indications or signs of a broad strengthening in the near future. To be certain, some of our markets continue to show improvement year over year. On a global level, (inaudible) remains resilient with an approximate increase of 6% over the next year. In north, the automotive markets continue to show strength, mainly due to increased production levels compared to last year when the industry was reducing inventories.

This increased production level at our automotive division improved its revenues by nearly 7%.

Continued weakness in graphic arts, converting and assembly, more than offset these positive trends. In our full-value specialty business, sales were flat compared to last year, with positive sales developments in tack and Atlas, our former linear product group, but in our paint-related units, sales were weaker.

As I have mentioned, last quarter, I believe any economic turn around for the United States will be gradual, akin to a dimmer switch effect. Economic reality has continued to defy predictive economic theory, and many indicators all around us are not only on the economic front demonstrate on a daily basis that this is a period of great uncertainty. In this environment, it is only logical that many people have adopted a "show me" attitude. We believe, as well, that we, too, have to demonstrate the earning power we have created in the past couple of years by growing our sales consistently and at a clear pace before we can consider ourselves successful.

I will talk about this again a little bit later.

In the U.S., the visibility for the next (inaudible) quarters remains murky. With the demand in the majority of our end markets continuing to be depressed, I have not seen the willingness of the customers we serve in our industrial adhesives and powdered coatings markets to begin spending at levels that would build inventories for expectations of a growing economy. In light of the many predictions of a turnaround that we have seen come and go in the past six months, we still believe that our performance this year is going to be similar to that of last year, which I believe is no small accomplishment considering the economic environment.

Also in Europe, headlines continue to point out the economic malaise of that region. Most of the industries expect to be below last year's outputs, which, for example, the graphic arts industry reported to be facing the toughest time in 40 years.

But also, automotive output, furniture sales, and footwear production are down significantly.

Overall, GDP growth for the European countries is less than one-half of a percent, and even that little bit of growth is being fueled by the service industry and not by manufacturing.

In any case, the economic recovery in Europe will likely trail the U.S. by at least six months, as I have mentioned in earlier conference calls.

Our expectations for Latin America have not changed. Central America will continue to depend on a clear pickup of U.S. economic activity. The Argentinean political and economic situation persists as the most significant issue affecting our business in the region. In Argentina, inflation rates are approaching 80%, expected GDP development of a negative 10%, and a continuing currency devaluation.

So far, the problems of Argentina have had only limited effect on the surrounding nations, perhaps with the exception of Uruguay. Brazil is also recently experiencing some heightened risk of economic instability with their presidential elections being held later this year. Chile is showing a modest 3% GDP growth and has demonstrated a remarkably (inaudible) performance.

In contrast to the other regions, Asia-Pacific is a different story, and we would expect the situation to remain positive for the remainder of the year. Our growth in the region is mainly driven by China, but also Japan, despite its continuing economic woes as contributing growth for our business this year.

Though still incurring a negative currency effect to our top line for the reporting period, the weakening U.S. dollar had a reduced impact on our sales in the latter part of the quarter.

The effect of the Euro provided the most significant negative impact earlier in the quarter, accounting for more than half of the currency effect.

Contrary to the previous quarter, the non-operating impact of currency fluctuations was favorable for the second quarter. As I had mentioned in the previous quarter's conference call, once the Argentinian government lifted their transfer restrictions of foreign currency, we began on working on reversing the effect this had on our financial strategy. In addition, we benefitted from the devaluation of the Brazilian real.

The raw material costs for the quarter continued slightly downward from that of the previous quarter. Though actual costs of some of our raw materials did begin to rise during the quarter in North America and Europe.

As noted during the last quarter's conference call, I believe raw material cost reductions have now bottomed out, ending at levels that are still higher than those of 1998 before the last run-up in raw material costs begin.

It is likely that the remainder of the year will present itself with a flat to upward tendency in raw material costs as crude oil and natural gas prices are forecasted to remain higher than fundamentals would support due to the concerns regarding the volatility in the Middle East.

How long political uncertainty and speculation will outrun the basic forces of supply and demand is anybody's guess.

We will continue to work with our suppliers to minimize this impact and to be ready for price increases of our own, should our cost structure be negatively impacted by raw materials.

Our pricing this quarter was seeing some pressure due to a competitive environment reacting to the initial softening of raw materials late last year and earlier this year.

The weakened demand is driving some competing companies to lower prices and making longer-term commitments to gain share. We are appropriately reacting to these activities.

We still believe that continuing on our path to demonstrate lower cost of ownership for our customers is the real long-term advantage that will give lasting higher value to the companies we work with.

That is nowhere more clearly evident than in our positive sales development of our new products. This quarter, again, we saw a growth rate of more than 40% in this category, composed of Advantra, Optonel, Hydronel, Clarity, Direct Glazing, indoor air quality and several of our window products, amongst others.

Our restructuring initiatives continue to be on track with projections that we had presented at the beginning of the year. And Ray gave you an overview of the activities earlier.

I'm very proud of the hard work and excellent performance of our employees that are actively engaged in this process. Their commitment and dedication are making this potentially disruptive undertaking a very smooth and rewarding experience.

The combination of product line consolidation, transfers of manufacturing from one facility to another, sometimes in a different country, and the disconnecting and reconnecting of the logistics pipeline, all without any material impact to serving our customers and our top line, is a major feat. Let me at this time also briefly touch on the announcement made earlier this year regarding the company's adoption of SEC Rule 10(b)(5)-1. Relating to the prearranged for the sale of a specified amount of company stock over a set period of time.

You will recall that some two years ago, we guaranteed some loans for our key executives that would allow them to purchase company stock to achieve the expected ownership guidelines we have for our executives.

The loans are the personal obligation of these employees, and they have to ensure that they are able to repay the loans when they become due or earlier.

As all of the loans become due around the same quarter three years hence, we felt that we had to provide some capability for these executives to manage their obligations without having to wait until the last moment and create possibly a situation where everybody sells at the same time.

Prearranged trading plans are a common practice among public companies and are designed to facilitate financial planning and diversification for employees and their families. As discussed in the news release, adoption of this plan facilitates company employees in repaying loans outstanding which were incurred to meet share ownership requirements established by the company.

The ownership requirements specify that qualified employees maintain a stock value ownership level at certain multiples of their salary. With the stock price appreciation, since the inception of the loan program, ownership requirements can still be maintained and the loans repaid.

Previous and future stock trading transactions by management under this rule should be viewed only as what it is: Personal assessment of financial needs and/or risk tolerance relating to investments, diversification, and the retirement of outstanding personal loans.

Before concluding my remarks, let me come back to the issue of sales growth that I touched on earlier.

Over the past couple of years, we have worked diligently to create a company that is more attuned to the needs of the marketplace and to develop capabilities that allow us as a company to undertake challenging assignments like the restructuring I mentioned earlier or the implementation - excuse me - of a three-party setup in Europe last year, and to be successful at it.

It shouldn't surprise you, then, that after having become a much stronger organization, we have now embarked on how we can convey that strength to our existing and potential customers. Our sales force worldwide is the face to the customer. Very often when customers think of H. B. Fuller, the image they have of us as a company is created by our front-line contacts. We, therefore, have to ensure that our company's representatives are able to convey these new capabilities and strategies in a convincing and compelling fashion. And above all, they have to be driven by a desire to win and sell profitably.

As we have established solid processes to serve our customers reliably and on time with hassle-free service, our sales force no longer needs to be the transactional facilitator. We are presently going through a fairly extensive process of evaluating the capabilities of our sales force along an array of desired behaviors, skill sets, and experiences that we believe to be essential in profitably growing the top line of our company at a higher rate than our competitors.

After this evaluation, we will determine what type and intensity of training and changes in staffing are required. We are convinced that we have become an attractive supplier with a performance profile and capabilities that will benefit our customers today and tomorrow. We are ready for growth and we will get it.

I will now be happy to answer any questions you may have.

At this time, I would like to remind everyone in order to ask a question, please press star, then the number 1 on your telephone keypad now.

At this time, I'm showing there are no questions. You now have a question from Merrill Lynch from Ross Calargee.

I wondered, given the economic environment, I had a couple of questions. The first one was on currency. I guess if we simply assume the dollar stays where it is today, do you think we would have a net earnings benefit from currency translation in the second half of the year?

Well, I believe that the currency translation effect is really going to be a positive effect only on the earnings that we generate in the foreign regions where the currency has strengthened. You know that in most regions, we manufacture locally, we also source locally, and only the part of our raw materials that we would source in U.S. dollars from the outside of those regions we would possibly see an additional operational cost.

Okay. And then on raw material costs, I was just wondering if you could talk a little bit about - a little bit more about what's happening with van prices. You know, month to month, what have been the trends? You know, are the price increases from your suppliers, you know, sticking in the marketplace?

And then - I wonder if you could answer those first. I just had a follow-up to that.

Well, it depends a little bit on the formula under which we are transacting with our suppliers. In some cases, we have a formula-based relationship. In other cases, it's a negotiation-based relationship. Where it's formula-based, ethylene is a key driver of the price levels in those products that we buy, and we have seen a considerable run-up of ethylene prices over the last quarter, and that is really also what we're going to most probably see as an effect on several of our raw materials in the coming quarter.

We are discussing with our suppliers, of course, whether this really is a longer-term development or whether this is just a blip and are seeing whether it would make sense to, at least for a period of time until we have better clarity in the marketplace, to (inaudible) raw materials at a stable level, rather than trying to create now an environment where we, in turn, would have to go out for significant price increases and then possibly find a situation at the end of the year where a dollar in natural gas - where oil and natural gas would come down again.

Okay. So you haven't actually begun to raise prices just yet?

We have not yet in the marketplace, but we are preparing the logistics that are required to do so, in case we really find that the raw material increases that have been announced are going to stick.

Could you just elaborate on what you meant when you said you're reacting appropriately to the pricing pressures and the pricing pressure that you're seeing in the market?

Well, as we see, for instance, one of our competitors going into an existing account of H. B. Fuller and trying to take the account away with lower pricing or even lower pricing and longer-term commitments, we will not tolerate that. I think that the present market conditions are bad for everyone in the marketplace, and trying to shift market share in that environment certainly is not a very wise strategy.

Thank you.

You're welcome.

Your next question comes from (inaudible).

Do you feel that you're capable of growing your volumes in your fiscal third quarter, or is the environment too difficult for that?

Well, as I have tried to indicate in my prepared comments, the overall environment is very volatile, very uncertain. We have - in some cases, we have a month that looks to be solid and then the next month it's weak again. So there is really not a pattern of development that I would be able to hang my hat on. I think that the real question that we're going to see over the next quarter is how Europe is going to develop, because as you know, the third quarter generally is the quarter where they take a lot of vacation and vacation shut-downs, and it might very well be that because of the overall economic situation, they may even extend some of those shut-downs a little bit longer.

So I would be very reluctant at this point in time to say we have turned a corner and we're going to see an improvement.

On the other hand, as I also said, our growth in the second quarter over the first quarter was stronger than our growth that we saw last year over the first quarter, and also our total sales in the second quarter were, in comparison to last year, we were narrowing the gap as far as shortfall is concerned. So that shows some underlying strength or stability.

Okay. Thank you very much.

Your next question comes from Rosemary Marbellini.

Good morning, all.

Hi, Rosemary.

Al, you experienced that you (inaudible) percent increase in the automotive side given the increase in production.

Yes.

Two questions. What is - I mean, related to that, what happened to your income? Did you actually generate more profit, and do you feel that the automotives are actually selling their cars or are they rebuilding inventories?

Well, the - we still see automotive inventories to be between 58 and 59 days, I believe. It has picked up a few days in the last month or so, but I (inaudible) think that the difference in volume that we're seeing is a pure difference in manufacturing activity. Whereas they were actively reducing last year, they're just holding stable this year, and are holding pace with overall sales.

But the increased volume has, of course, helped us with our cost structures in that organization and we're seeing improved results in our automotive business from last year and the first half of this year.

Did you make any money?

Yes, of course.

What do you mean, "Of course"?

And what is the automotive situation in Europe?

Well, in Europe -

Is that deteriorating fast or . . .

Well, Europe is right now going through a phase of also very contradicting statements. On the one hand, I saw a headline the other day that car sales are going to be down 6% in Germany this year. On the other hand, VW is still expecting to hold onto their targets for this year.

So I believe that there is a - an underlying weakness in the automotive industry in Europe. I mean, that's evident and I think it's going to continue. They are most probably going to go through the same phase the U.S. industry went through last year.

So that should translate in the equity portion of your income statement coming down versus last year in the next two quarters, do you think?

But that's going to be muted somewhat, by a fairly strong development in China and in Asia-Pacific where basically (inaudible) other leg is, and that generally in the past quarters has been able to make up for a lot of the uncertainty and the weakness that we've seen in Europe.

Oh, okay. So that's good.

On the restructuring side and your taking out 20% of your existing capacity, where are we now, and then linked to that, how does that translate in terms of savings or have we not - is it too early to see anything?

Well, I believe that we have been starting to see some savings towards the end of the quarter, and even in a partial month of the last month of the quarter. So it's very difficult to really project that number for an entire year or to project that number for a longer period of time, and I hope that by the end of the third quarter, we'll be able to start reporting on actual savings, because then we've already seen some solid quarter benefits from the facilities that we have closed so far.

Okay. And in terms of growing the top line in this environment, are you looking at - obviously you are looking at the new products, and I am guessing taking market share in one way or another, without giving away your products.

Where does acquisition come into play? Is there something in the works over the next six months, or is it more a question of 12 to 18 months before we see anything? And what are you looking at? Not specifically, obviously.

Well, we have, of course, continued to remain active in the acquisition area, and looking and negotiating and discussing opportunities that we felt were worthwhile for our organization.

We're dealing with a somewhat difficult situation, in that on the one hand, valuations of companies have come down and therefore it becomes more attractive to go out and acquire. On the other hand, the companies that are selling are now much more reluctant to sell at this point in time. They'd rather wait a little bit longer until the overall economic activity picks up, and hopefully get a bit higher value for their businesses.

So it really requires a strong drive by the selling entity to want to sell to make the deal happen.

We always have a variety of projects in the pipeline that may or may not work out in a period between three and six months, but I would at this point in time certainly not make any predictions because as the past year has shown, it's very uncertain when a deal is going to be successful.

Okay. Thanks.

Your next question comes from Tracy Marstakes.

Good morning, guys. And in a tough environment, pretty solid. So congratulations.

Thank you.

A couple questions.

On the sales force and organization training and evaluation, you know, I think you've at least made some attempts in the past on value selling and training the sales force. If you sort of look at what you did and the result you got out, what are the gaps and what are you trying to close the gaps on with the new evaluation?

Well, I believe what's happening is that at many of our customers, the purchasing function is more and more handled in a central fashion, so that's the old contacts that we used to have at the individual plant sites are no longer the sole decision-making. And so relationships for selling may not carry the weight that it carried before.

On top of that, I have mentioned in some conference calls the need for us to sell on a much broader basis into companies, and to demonstrate the value of our products beyond the just adhesive properties of the products, and talk about product reduced maintenance cost, talk about the possibility of possibly using capital equipment that's not as expensive to get the same result, and so on and so on. And so be able to convey that effectively, we need a sales organization that has the capability to connect on a broader basis into the companies that we're trying to sell, and also be able to convey from an overall economic aspect the benefits of buying from us before. And that's really what we are driving at, the value-based selling, was the first step in that direction, and business continuation of this path.

Okay. Very good. You've had remarkable growth in sort of - in some of your new products. One, is there commonality among, you know, what has worked for you either by regions or you get into a company and demonstrate, you know, the total product cost and then the company on a broader basis is more willing to listen? Is there any sort of common feature where you're really having success, and if you could point out maybe a few of the strongest product - new products among the list you sort of ran off?

All right. I'd say generally, the sales process is slower, to be successful, because you'd have to do in-depth selling and that means you have to hit more cylinders at the same time to get things moving.

And therefore, it also does require a somewhat longer evaluation time on the part of the companies that are buying the product because they want to know what am I getting for my additional dollars that I'm going to have to pay for this product.

But if I would look at the products that I (inaudible) I see one common theme along all of them, and that is that they are really robust products that very often cover a multitude of applications, that very often or in most cases certainly can be used in different regions equally well, and certainly across a broad base of customers who operate in the same industry, and you may recall that's really what one of the focus areas for us was, to drive product development in the future, was to find industry solutions rather than to find individual customer solutions. And I believe that really allows us, then, to use the experiences that we've seen at other customers to be transferred also to customers that are now trying the product, and that is a very compelling sales argument.

The most successful, as far as size is concerned, and volume, is of course our product that has been available now the longest, for about three years, which is our Advantra product. But also, the others like Optimeld and Clarity are now moving into the market on a much broader basis.

Generally, the products that we have in our full-value specialty chain tend to have a smaller available market to them because in many cases we are not global in our full-value specialty, but we believe that by bringing this experience and creating this experience for ourselves, we may create an opportunity for us in the future to take those product solutions and bring them also to other regions of the world.

Okay. One final question on sort of the current operating environment.

Several articles out over the recent weeks about, you know, every order is just in time and a lot of them are emergencies. What is, you know, the impact on visibility of your business?

The other is, you know, as you're taking down capacity and reorganizing and then trying to schedule orders like that, has that had any operating impact on you and created inefficiencies, or has that not really been an impact that you've been seeing

We have really been helped in this regard by our strong push to go to e-commerce because that has really driven us to have standardized processes and digitized processes in the organization, and we have certainly seen a dramatic pickup in our on-time delivery and I believe I mentioned it at the last quarter's report, we're up to 97% of - or so on on-time delivery whereas that used to be around the low 70s, just two, three years ago. So perhaps we did a lot of things by streamlining our operations and by taking the multitude of products out of our product range to create an opportunity for us to become more reactive and to deliver on a faster base, and that's helping us, perhaps, at this point in time.

Okay. Thank you very much.

You're welcome.

Your next question comes from John Roberts. Mr. Roberts, your line is open.

Thank you. When Roman Haas preannounced last week, they indicated a continuing adhesive and sealant business for them would be flat to modestly up this past quarter. Are there any share shifts going on between chemistries out there, or do you think it's just application differences and regional differences that might account for a little bit better performance there?

We don't compete directly in many areas with Roman Haas. Roman Haas does have a fairly strong position in the flexible packaging area, and that has continued to show a remarkable resiliency in both Europe and in North America over the past two years, and that's where the (inaudible) difference is coming from.

Great. Thank you.

Your next question comes from Rosemary March belly.pgh pgh /?TXU.

Could you - do you have the operating income for the two segments at this time?

Yes, I do, and the area of global adhesives, the operating income this year was 14.6 million compared to 15.3 million last year. And in the full-value specialty segment, it was 8.1 million this year, compared to $8.3 million last year.

And based on all of the work you have done, I mean those are margins which are - I have not calculated them but most likely lower than last year, and do you expect them to become - to switch and be above last year's in the third quarter, given all of the work you have done in terms of cost cutting?

Well, I would certainly hope that efforts that we have put in place will eventually come to the fore and demonstrate very clearly in a improved performance.

The total marginal difference, as far as percent of sales is concerned, and operating result, is, I think, one-tenth of a percent, so it's fairly small.

Okay. Even if the economy does not improve and we continue chugging along one month after one month, shouldn't the margin improve regardless of starting next quarter.

We already announced (inaudible) Rosemary, this quarter over last quarter, at least on the gross margin side of (inaudible) point 7 percent. Now, we have to keep in mind the comments that I made earlier about where raw materials are going to go. That's the big concern here at this point in time.

Could the fact that raw material costs are going up translate into a lower gross margin sequentially or do you think that your selling prices will come soon enough to offset it and keep it at this level?

I don't see at this point in time a negative impact on our margins overall from the raw materials side yet because we still are doing some other things in areas that are taking some of these costs out.

Okay.

Like sourcing in other regions and so on.

Uh-huh. And what was - could you give us a feel for what was the impact of the restructuring charge on minority interests?

On minority interests -

Yes.

- I think it must have been around 20,000 - sorry, 210 or 220,000 or 200,000. In that range. I don't have the exact number.

But what - what caused it? We have the number in the press release, but I was wondering what you do there.

Well, I think because we had restructuring, we closed one facility in automotive and that restructuring has to be borne and shared by our partner with his percentage of ownership in the joint venture.

Okay. Sure. I should have known that.

Currency in the third quarter, could that be positive, given what the Euro is doing, or what the dollar is doing, rather?

Well, I believe that certainly as the dollar continues to move downward, that we would see some top-line effect from the currency, and of course also a corresponding bottom-line effect with regard to the remaining profitable that gets converted into U.S. dollars.

And you think that the change is such that we will see it in the third quarter?

Yes.

Okay. And congratulations on a good quarter (inaudible) by the way.

Thank you very much.

Thanks.

At this time, there are no further questions.

Since there are no more questions, we will now conclude this conference call. We'd like to thank all of those who took the time to listen and participate in this today's conference call.

Thank you for participating in today's H. B. Fuller 2002 second-quarter conference call. This call is available for replay beginning at 1:30 p.m. eastern standard time through Wednesday, July 10th, 2002. The conference ID number for the replay is 4480378. Again, the conference ID number for the replay is 4480378. The number to dial in for the replay is 1-800-642-1687 or 1-706-645-9291.