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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hercules Inc | LSE:HRC | London | Ordinary Share | COM STK NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.00 | - |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:2909V
Hercules Inc
11 February 2004
Release Immediately
04-03-S
HERCULES REPORTS FOURTH QUARTER AND
FULL-YEAR 2003 RESULTS
WILMINGTON, DE, FEBRUARY 11, 2004 . . . Hercules Incorporated (NYSE: HPC) today
reported net income before the cumulative effect of a change in accounting
principle for the quarter ended December 31, 2003 of $13 million, or $0.12 per
diluted share, up from $11 million, or $0.10 per diluted share, forthe same
period of 2002(1).
Fourth quarter 2003 net income included a $6 million pre-tax charge, net of
insurance, to increase the reserve for future asbestos costs following the
conclusion of a study commissioned in early 2003. Based on the results of the
study, the Company estimates that its reasonably possible gross financial
exposure for asbestos-related matters will range from $220 million to $675
million. In accordance with Generally Accepted Accounting Principles (GAAP), the
Company recorded a gross charge of $55 million as of December 31, 2003, thereby
increasing its recorded liability for future asbestos costs, before anticipated
insurance recoveries, to $221 million, reflecting the low end of the range noted
above and $1 million for previously settled but unpaid asbestos cases. The
Company believes that it is probable that at least $169 million of that amount
will be paid or reimbursed by its insurance carriers. Accordingly, an increase
of $49 million to the associatedreceivable for anticipated insurance recoveries
was recorded as of December 31, 2003. This range of financial exposures does not
include estimates for future legal costs, which are expensed on an ongoing
basis. The Company, in conjunction with outside advisors, will continue to study
its asbestos-related exposures, insurance recovery expectations, and reserves on
an ongoing basis, and make adjustments as appropriate.
In addition, the Company recognized a charge of $0.04 per share in the fourth
quarter of 2003 for a cumulative effect of a change in accounting principle
associated with the adoption of FIN 46(R) "Consolidation of Variable Interest
Entities."(7)
Earnings from ongoing operations(2) for the fourth quarter of 2003 were $0.18
per diluted share. This compares to earnings on the same basis of $0.16 per
diluted share in the fourth quarter of 2002 (please refer to Table 2 for
reconciliation from net income (loss) to earnings from ongoing operations).
Net sales in the fourth quarter were $458 million, an increase of 8% from the
same period last year. Compared with the fourth quarter of 2002, the sales
increase was driven primarily by the Euro's strength compared with the dollar.
Fourth quarter 2003 net sales, as compared to the same period in 2002, increased
in all regions of the world: 2% in North America; 14% in Europe; 9% in Asia
Pacific; and 21% in Latin America.
Profit from operations in the fourth quarter of 2003 was $53 million compared
with $49 million for the same period in 2002. Profit from ongoing operations(2)
in the fourth quarter of 2003 was $60 million, a 7% improvement compared with
$56 million in the fourth quarter of 2002.
"Hercules demonstrated solid operating performance in what was another difficult
year for the chemical industry," said Craig Rogerson, President and Chief
Executive Officer. "We remain focused on our strategy of bringing value to our
customers, increasing our competitive advantage, and improving productivity to
deliver significant value to our investors."
Interest and debt expense, which includes preferred securities distributions,
was $32 million in the fourth quarter of 2003, flat compared with the fourth
quarter of 2002. Full-year 2003 interest and debt expense was $131 million, a
decrease of $26 million from 2002 due to lower outstanding debt balances.
Capital spending was $21 million in the fourth quarter and $48 million for the
full-year 2003. Cash outflows for restructuring were $3 million in the fourth
quarter and $21 million for the full-year 2003.
Total debt, including the preferred securities, was $1.348 billion at the end of
2003, a decrease of $159 million from year-end 2002. The Company repurchased
approximately $59 million of its indebtedness in the fourth quarter of 2003. The
repurchase included approximately $35 million of the Company's trust preferred
securities. In accordance with the provisions of FIN 46(R), the Company has
deferred recognition of the gain realized on its repurchases of the preferred
securities and continues to reflect the associated debt as outstanding.
Full Year 2003 Overview
Net sales in 2003 were $1.846 billion, an increase of 8% from 2002. Growth in
sales for 2003 compared with 2002 was driven by a 6% benefit from rate of
exchange and a 2% benefit from the consolidation of ES FiberVisions. Volume and
price in the aggregate were flat in 2003 compared with 2002.
Net income in 2003 was $45 million or $0.41 per diluted share. This compares to
a net loss of $611 million, or a $5.60 net loss per diluted share in 2002(1).
Earnings from ongoing operations(2) for 2003 were $0.79 per diluted share, an
18% improvement compared with $0.67 per diluted share for 2002.
As previously disclosed, the Company changed the accounting for its ESOP during
the fourth quarter of 2003 and adopted the provisions of SOP 93-6. The ESOP is
used to fund obligations related to the Company's 401(k) plan. As a result of
this accounting change, full year 2003 earnings increased by $0.04 per diluted
share and full year 2002 earnings increased by $0.05 per diluted share.
Segment Results
In the Performance Products segment (Aqualon, Pulp and Paper),net sales in the
fourth quarter grew 9%, while profit from operations improved 7% compared with
the same quarter in 2002.
In the Pulp and Paper Division, net sales in the fourth quarter grew 6% and
profit from operations decreased 8% comparedwith the fourth quarter of 2002.
Growth in sales compared with the fourth quarter of 2002 was driven by an 8%
benefit from rate of exchange, offset in part by both a 1% decline in price and
a 1% decline in volume/mix. Profit from operations was negatively impacted by
(lower volume/mix, lower prices, higher raw material, freight and energy costs
and higher non-cash pension expenses, offset by favorable rate of currency
exchange and lower general and administrative expenses.
For full-year 2003 in Pulp and Paper, net sales grew 4% compared to full-year
2002. The sales growth was driven by a 6% benefit from rate of exchange, offset
partially by a 1% decline in both price and mix. Physical volumes were flat.
Aqualon's net sales in the fourth quarter increased 14% and profit from
operations increased 20% compared with the fourth quarter of 2002. Growth in
sales compared with the fourth quarter of 2002 was driven by a 7% benefit from
rate of exchange and a 7% benefit from volume/mix. Profit from operations was
positively impacted by rate of exchange, higher volume/mix and lower general and
administrative expenses, offset in part by higher non-cash pension expenses and
higher energy and raw material costs.
For full-year 2003 in Aqualon, net sales grew 11% compared to full-year 2002.
The sales growth was driven by an 8% benefit from rate of exchange and 3% from
improved volume/mix.
As previously announced, Aqualon strengthened its geographic presence in the
Asia Pacific region with the acquisition on December 1, 2003 of Quantum, a
leading China-based producer of carboxymethylcellulose (CMC) for food,
toothpaste, ceramics and paper.
In the Engineered Materials and Additives segment (FiberVisions, Pinova), net
sales in the fourth quarter increased 6% compared with the fourth quarter of
2002. Profit from operations decreased $2 million compared with the fourth
quarter of 2002.
Fourth quarter 2003 net sales in FiberVisions increased 14% compared with the
same period in 2002. Profit from operations remained flat compared with the
fourth quarter of 2002. Growth in sales compared to the fourth quarter 2002 was
driven by a 14% benefit from the consolidation of ES FiberVisions, a 7% benefit
from rate of exchange, and a 3% benefit from higher prices, offset by a 10%
decline in volume/mix. Lower volumes for fibers used in diapers were partially
offset by higher volumes in the wipes market.
Full-year 2003 net sales in FiberVisions grew 26% compared to full-year 2002.
The sales growth was driven by a 13% benefit from the consolidation of ES
FiberVisions, an 8% benefit from rate of exchange, a 4% benefit from higher
prices and a 1% benefit from improved volume/mix.
Pinova's net sales in the fourth quarter declined 14% compared to the fourth
quarter 2002, resulting in a loss from operations and a decrease of $2 million
compared with the fourth quarter 2002. The net sales decline was driven by a 15%
negative impact of lower volume/mix, offset in part by a 1% benefit from higher
prices.
Full-year net sales in Pinova declined 14% as a result of lower volume/mix.
Outlook
"We anticipate further improvements in sales, earnings and cash flow in 2004 in
spite of a number of challenges," said Mr. Rogerson. "The challenges include
higher non-cash pension costs, a weak paper market, and volatile and
persistently high energy and raw material costs. We remain committed to our
target of double-digit earnings per share growth. In addition, we intend to
drive productivity improvements throughout our businesses and functional groups,
to continue to strengthen our balance sheet, and generate significantly improved
cash flow."
Capital expendituresare estimated to be between $65 and $70 million for 2004.
The Company will maintain its practice of not providing quarterly earnings
guidance.
Fourth Quarter Conference Call and Webcast
The Company will discuss preliminary fourth-quarter and full-year 2003 results
at 9:00 a.m. EST today.
Teleconference: (973) 409-9262
Please call 10 to 15 minutes prior to the call.
Webcast: Listen-only mode via Internet broadcast
from www.herc.com
under Shareholder Info.
# # #
Hercules manufactures and markets chemical specialties globally for making a
variety of products for home, office and industrial markets. For more
information, visit the Hercules website at www.herc.com.
This news release includes forward-looking statements, as defined in the Private
Securities Litigation Reform Act of 1995, reflecting management's current
analysis and expectations, based on what management believes to be reasonable
assumptions. Forward-looking statements may involve known and unknown risks,
uncertainties and other factors, which may cause the actual results to differ
materially from those projected, stated or implied, depending on such factors
as: ability to generate cash, ability to raise capital, ability to refinance,
the result of the pursuit of strategic alternatives, ability to execute work
process redesign and reduce costs, business climate, business performance,
economic and competitive uncertainties, higher manufacturing costs, reduced
level of customer orders, changes in strategies, risks in developing new
products and technologies, environmental andsafety regulations and clean-up
costs, foreign exchange rates, the impact of changes in the value of pension
fund assets and liabilities, changes in generally accepted accounting
principles, adverse legal and regulatory developments, including increases in
the number or financial exposures of claims, lawsuits, settlements or judgments,
or the inability to eliminate or reduce such financial exposures by collecting
indemnity payments from insurers, the impact of increased accruals and reserves
for such exposures, and adverse changes in economic and political climates
around the world, including terrorist activities and international hostilities.
Accordingly, there can be no assurance that the Company will meet future
results, performance orachievements expressed or implied by such
forward-looking statements. As appropriate, additional factors are contained in
other reports filed by the Company with the Securities and Exchange Commission.
This paragraph is included to provide safe harbor for forward-looking
statements, which are not generally required to be publicly revised as
circumstances change, and which the Company does not intend to update.
Media Contact: John S. Riley (302) 594-6025
Investor Contact: Allen A. Spizzo (302) 594-6491
HERCULES INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
(Dollars in millions, except per share data)
(Unaudited)
Table 1 THREE MONTHS TWELVE MONTHS
As Reported(3) ENDED DECEMBER 31 ENDED DECEMBER 31
2003 2002 2003 2002
Net sales $458 $423 $1,846 $1,705
Cost of sales 296 258 1,167 1,040
Selling, general 90 93 360 348
and administrative
expenses
Research and 10 10 39 42
development
Intangible asset 2 2 8 9
amortization(4)
Other operating 7 11 17 46
expense, net
Profit from 53 49 255 220
operations
Interest and debt 32 32 131 157
expense
Other income (12) 1 (29) (115)
(expense), net
Income (loss) 9 18 95 (52)
before income taxes
andequity income
Provision (benefit) (2) 8 21 (3)
for income taxes
Income (loss) 11 10 74 (49)
before equity
income
Equity in income of - 1 - 2
affiliated
companies
Net income (loss)
from continuing 11 1174 (47)
operations before
discontinued
operations and
cumulative effect
of changes in
accounting
principle
Net income (loss) 2 - 4 (124)
on operations of
discontinued
operations
Provisions for - - - (72)
income taxes
Total discontinued 2 - 4 (196)
operations
Net income (loss) 13 11 78 (243)
before cumulative
effect of changes
in accounting
principle
Cumulative effect (5) - (33) (349)
of changes in
accounting
principle, net of
tax
Cumulative effect - - - (19)
of change in
accounting
principle on equity
investment in
affiliated company,
net of tax
Total change in (5) - (33) (368)
accounting
principle
Net income (loss) $ 8 $ 11 $45 $(611)
Basic and diluted
earnings (loss) per
share:
Continuing $0.10 $0.10 $0.67 $(0.43)
operations
Discontinued $0.02 - $0.04 $(1.80)
operations
Cumulative effect ($0.04) - ($0.30) $(3.37)
of changes in
accounting
principle
Net income (loss) $0.08 $0.10 $0.41 $(5.60)
Weighted average 110.9 109.3 110.5109.1
# of basic shares
(millions)
Weighted average 111.1 109.5 110.6 109.1
# of diluted
shares (millions)
Income (loss) 9 18 95 (52)
before income taxes
and equity income
Interest, debt 32 32 131 157
expense and
preferred security
distributions
EBIT 41 50 226 105
Depreciation and 25 23 95 90
amortization(4)
EBITDA(2) 66 73 321 195
(Unaudited)
Segment Data Reported
(Dollars in
millions)
THREE MONTHS TWELVE MONTHS
ENDED DECEMBER 31 ENDED DECEMBER 31
2003 2002 2003 2002
Net Sales From
Continuing
Operations
By Industry
Segment
Performance $373 $343 $1,483 $1,385
Products
Engineered 85 80 363 320
Materials and
Additives
Total $458 $423 $1,846 $1,705
Profit From
Continuing
Operations
By Industry
Segment
Performance $ 60 $ 56 $ 262 $ 243
Products
Engineered 2 4 9 18
Materials and
Additives
Reconciling Items (9) (11) (16) (41)
Total $ 53 $ 49 $ 255 $ 220
EBITDA(2) 66 73 321 195
(Unaudited)
Table 2
Reconciliation to THREE MONTHS THREE MONTHS
Ongoing Operations ENDED DECEMBER 31, 2003 ENDED DECEMBER 31, 2002
December 31, 2003
(Dollars in Net Basic & Profit EBITDA Net Basic & Profit EBITDA
millions, Income Diluted From Income Diluted From
except per share) (Loss) EPS Operations (Loss)( EPS Operations
From Table 1 $ 8 $0.08 $53 $66 $11 $0.10 $49 $73
Discontinued (2) (0.02) - - - - - -
operations
Cumulative effect
of changes in 5 0.04 - - - - - -
accounting
principle, net of
tax
Income (loss)
before
discontinued 11 0.10 53 66 11 0.10 49 73
operations and
changes in
accounting
principle
Restructuring 1 0.01 2 2 4 0.04 6 6
costs(5)
Asset 1 0.01 - 2 1 0.01 1 1
Impairments(5)
Debt Prepayment - - - - 1 0.01 - 1
and Write-Off of
Debt Issuance
Costs(5)
Net gain on debt (1) (0.01) - (2) - - - -
repurchases
Executive 2 0.02 3 3 - - - -
Retirement
Benefits(5)(6)
Asbestos(5) 4 0.03 - 6 - - - -
Other gains and
losses, net, 2 0.02 - 4 - - - -
related to
divested
businesses(5)
Other(5) - - 2 1 (1) (0.01) - (2)
Subtotal $ 9 $0.08 $ 7 $16 $ 5 $0.05 $ 7 $ 6
Adjustment to - - - - 1 0.01 - -
statutory tax rate
Ongoing $20 $0.18 $60 $82 $17 $0.16 $56 $79
Operations(2)
(Unaudited)
Table 3
Reconciliation to TWELVE MONTHS TWELVE MONTHS
Ongoing Operations ENDED DECEMBER 31, 2003 ENDED DECEMBER 31, 2002
December 31, 2003
(Dollars in Net Basic & Profit EBITDA Net Basic & Profit EBITDA
millions, Income Diluted From Income Diluted From
except per share) (Loss) EPS Operations (Loss)( EPS Operations
From Table 1 $45 $0.41 $255 $321 $(611) $(5.60) $220 $195
Discontinued (4) (0.04) - - 196 1.80 - -
operations
Cumulative effect
of changes in 33 0.30 - - 368 3.37 - -
accounting
principle, net of
tax
Income (loss)
before discontinued
operations and 74 0.67 255 321 (47) (0.43) 220 195
changes in
accounting
principle
Restructuring 4 0.04 6 6 14 0.13 22 22
costs(5)
Asset 1 0.01 - 2 5 0.05 7 7
Impairments(5)
Proxy Costs(5) 2 0.02 3 3 - - - -
Debt Prepayment and - - - - 29 0.26 - 44
Write-Off of Debt
Issuance Costs(5)
Net gain on debt (1) (0.01) - (2) - - - -
repurchases
Executive 5 0.04 7 7 - - - -
Retirement
Benefits(5)(6)
Asbestos(5) 4 0.03 - 6 42 0.39 - 65
Other gains and
losses, net, 5 0.05 3 7 (1) (0.01) (1) (1)
related to divested
businesses(5)
Other(5) 1 0.01 (2) 2 3 0.03 6 4
Subtotal $21 $0.19 $ 17 $ 31 $ 92 $0.85 $ 34 $141
Items related to
discontinued
operations(2)(5)
Interest Expense - - - - 17 0.15 - -
Distribution - - - - (3) (0.03) (5) (5)
Agreement
Corporate Costs - - - - (3) (0.03) (4) (4)
Subtotal - - - - $ 11 $0.09 $ (9) $ (9)
Tax benefit
attributable to (8) (0.07) - - - - - -
donation of
intellectual
property
Adjustment to - - - - 17 0.16 - -
statutory tax rate
Ongoing $87 $0.79 $272 $352 $ 73 $0.67 $245 $327
Operations(2)
NOTES:
(1) Hercules changed its method of accounting for ESOP in the fourth quarter
2003. As required, prior periods have been restated resulting in an increase of
$1 million, or $0.01 per fully diluted share, in the reported net income for the
fourth quarter 2002, and $5 million, or $0.05 per fully diluted share, for the
year 2002.
(2) Ongoing operations and EBITDA are non-GAAP financial measures. The
ongoing operations include Pulp and Paper, Aqualon, FiberVisions and Pinova.
Unaudited profit from ongoing operations and EBITDA (see Note 3) exclude
restructuring and other costs and includes the effects of the distribution
agreement with General Electric Specialty Materials "GESM", which became
effective on April 29, 2002 in connection with the sale of the BetzDearborn
Water Treatment Business.
As a result of the BetzDearborn Water Treatment Business divestiture and
corresponding debt repayment, the Company will no longer incur costs related to
ESOP expense and certain corporate costs for personnel who supported the
BetzDearborn Water Treatment Business. Had these costs not existed in the twelve
months ended December 31, 2002 profit and EBITDA from ongoing operations would
have been higher by $4 million.
Calculated as income from continuing operations before taxes plus interest
expense, preferred security distributions, depreciation and amortization, net of
amortization of debt issuance costs.
Includes an adjustment to interest expense in the twelve months ended
December 31, 2002 to reflect paydown of debt with proceeds from the BetzDearborn
Water Treatment Business divestiture.
(3) 2003 results reflect adoption of FIN 46 in the third quarter of 2003 and
FIN 46(R) in the fourth quarter of 2003.
(4) Net of amortization of debt issuance costs.
(5) After tax, assuming a 31% tax rate for 2003 and a 35% tax rate for 2002.
(6) Representsa special pension benefit recognizing past service granted in
the quarter ended September 30, 2003 by the Company's Board of Directors to the
then Chief Executive Officer and the accelerated vesting of restricted stock
awards upon retirement of suchperson in the quarter ended December 31, 2003.
The special pension benefit has an estimated net present value of approximately
$4.7 million, of which approximately $0.3 million is attributable to services
rendered in the quarter ended December 31, 2003 and $4.4 million is attributable
to services rendered through September 30, 2003.
(7) This new accounting standard requires the de-consolidation of the
Company's two wholly-owned consolidated subsidiary trusts, which are the issuers
of thecompany-obligated preferred securities
This information is provided by RNS
The company news service from the London Stock Exchange
END
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