<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number 1-496
HERCULES INCORPORATED
A Delaware Corporation
I.R.S. Employer Identification No. 51-0023450
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894-0001
Telephone: 302-594-5000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
As of April 30, 1997, 100,435,847 shares of registrant's common stock
were outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
HERCULES INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
(Dollars in millions, except per share)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended March 31,
----------------------------
1997 1996
----- -----
<S> <C> <C>
Net sales $ 495 $ 503
Cost of sales 320 326
Selling, general, and administrative expenses 66 66
Research and development 14 14
Other operating expenses (income), net 163 (1)
----- -----
Profit (loss) from operations (68) 98
Equity in income of affiliated companies 17 14
Interest and debt expense 10 8
Other income, net 335 12
----- -----
Income before income taxes 274 116
Provision for income taxes 166 40
----- -----
Net income $ 108 $ 76
===== =====
Earnings per share $1.05 $0.70
===== =====
Dividends per share $0.25 $0.23
===== =====
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 3
HERCULES INCORPORATED
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
<TABLE>
<CAPTION>
(Unaudited)
March 31 December 31
-------- -----------
1997 1996
------ ------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 46 $ 30
Accounts and notes receivable, net 404 394
Inventories
Finished products 137 154
Materials, supplies, and work in process 133 125
Deferred income taxes 36 36
------ ------
Total current assets 756 739
Property, plant, and equipment 2,280 2,349
Accumulated depreciation and amortization 1,547 1,484
------ ------
Net property, plant, and equipment 733 865
Investments 746 364
Other assets 419 418
------ ------
Total assets $2,654 $2,386
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 115 $ 140
Accrued expenses 314 221
Short-term debt 352 313
Income taxes payable 57 20
------ ------
Total current liabilities 838 694
Long-term debt 255 345
Deferred income taxes 236 129
Postretirement benefits and other liabilities 403 331
Stockholders' equity
Common stock (issued 1997--152,280,694;
1996--152,269,076 shares) 79 79
Additional paid-in capital 485 493
Foreign currency translation adjustment 11 45
Retained earnings 2,025 1,942
------ ------
2,600 2,559
Reacquired stock, at cost (1997--50,881,229;
1996--50,866,562) 1,678 1,672
------ ------
Total stockholders' equity 922 887
------ ------
Total liabilities and stockholders' equity $2,654 $2,386
====== ======
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
HERCULES INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOW
(Dollars in millions)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended March 31,
----------------------------
1997 1996
----- -----
<S> <C> <C>
Net cash provided by (used in) operations $ 33 $ (6)
----- -----
Cash Flow from Investing Activities:
Capital expenditures (24) (21)
Proceeds of investment and fixed asset disposals 108 8
Other, net 1 11
----- -----
Net cash provided by (used in) investing activities 85 (2)
----- -----
Cash Flow from Financing Activities:
Long-term debt repayments (90) (7)
Change in short-term debt 39 124
Common stock reissued 3 5
Common stock reacquired (28) (113)
Dividends paid (25) (25)
----- -----
Net cash used in financing activities (101) (16)
----- -----
Effect of exchange rate changes on cash (1) --
----- -----
Net increase (decrease) in cash and cash equivalents 16 (24)
Cash and cash equivalents - beginning of period 30 73
----- -----
Cash and cash equivalents - end of period $ 46 $ 49
===== =====
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 6 $ 7
Income taxes 15 47
Noncash Investing and Financing Activities:
Accounts payable for common stock acquisitions 8 --
Incentive plan stock issuances 2 7
Investment in long-term note 500 --
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. These condensed financial statements are unaudited, but in the opinion of
management include all adjustments necessary to present fairly the Company's
financial position and results of operations for interim periods. It is
suggested that these condensed financial statements be read in conjunction with
the accounting policies and the financial statements and notes thereto included
in the Company's annual report for 1996.
2. Primary earnings per share are calculated on the basis of average number
of common and common equivalent shares of 102,783,847 at March 31, 1997 and
109,583,935 at March 31, 1996. Earnings have been adjusted to reflect the
elimination of interest expense, net of taxes, on the 6.5% convertible
debentures.
Fully diluted earnings per share, which additionally assume conversion of
the 8% convertible subordinated debentures, are not materially different from
primary earnings per share. In the fully diluted computation, the number of
shares is increased by 2,742,663 in 1997 and 2,745,711 in 1996. Earnings are
further adjusted in both 1997 and 1996 to reflect the elimination of interest
expense on the 8% debentures.
3. Cost and expenses include depreciation of $22 million and $31 million
for the quarters ended March 31, 1997 and 1996, respectively.
4. Other operating expenses for the quarter ended March 31, 1997 include
charges of $141 million associated with management organizational changes and
adoption of alternative competitive strategies relative to current businesses,
announced in late February and March of 1997. This charge includes $118 million
related to asset rationalizations and impairment and $23 million related to
severance benefits.
Included in the $118 million is an impairment loss of $91 million ($23
million in Food & Functional Products and $68 million in Chemical Specialties),
where the sum of estimated future cash flows (undiscounted) was less than the
carrying amount of the assets. The amount of the impairment loss is the excess
of the carrying amount of the impaired asset over the fair value of the asset.
The fair value represents expected future cash flows from the use of the assets,
discounted at the rate used by the Company to evaluate potential investments.
Additionally, the Company recognized approximately $27 million of
rationalization charges primarily associated with certain assets, which will no
longer be utilized, and lease abandonment costs.
Concurrently, management authorized and committed the Company to a plan
to reduce its work force and accrued $23 million of severance related benefits,
of which approximately $20 million is the remaining liability at March 31,
1997. Under the plan, approximately 260 employees will be terminated. The plan
includes reorganization of management, reductions in operating personnel at
certain domestic and foreign facilities, and the consolidation of certain
support functions.
Additionally, other operating expenses include $13 million of net
environmental cleanup costs, principally for nonoperating sites and $8 million
of executive retirement benefits.
Other operating expenses (income), for the quarter ended March 31, 1996
includes a $2 million reduction in the estimated losses on the divestiture of
the Composite Products Division.
5
<PAGE> 6
5. Interest and debt costs are summarized as follows:
<TABLE>
<CAPTION>
(Dollars in millions) Three Months Ended March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Costs incurred $11 $9
Amount capitalized 1 1
--- --
Interest expense $10 $8
=== ==
</TABLE>
6. Other income, net for the quarter ended March 31, 1997 primarily reflects a
gain of $357 million on completion of transactions to monetize the investment in
Tastemaker, a 50%-owned flavors joint venture. In addition, it includes net
foreign currency gains of $11 million and charges of $32 million related to
legal settlements and accruals. Other income, net for the quarter ended March
31, 1996 primarily reflects the gain on the sale of real estate of $7 million
and additional gains from post-closing adjustments to the fourth quarter 1995
sale of the Electronics & Printing Division of $4 million.
7. Dividends received from affiliated companies accounted for on the equity
method were $0 and $3 million during the quarters ended March 31, 1997 and 1996,
respectively.
8. A summary of short-term and long-term debt follows:
<TABLE>
<CAPTION>
(Dollars in millions) March 31, December 31,
--------- ------------
1997 1996
---- ----
<S> <C> <C>
SHORT-TERM:
Commercial paper $300 $265
Banks 52 48
Current maturities -- --
---- ----
$352 $313
==== ====
</TABLE>
At March 31, 1997, Hercules had $109 million of unused lines of credit that may
be drawn as needed. Lines of credit in use at March 31, 1997, were $52 million.
<TABLE>
<S> <C> <C>
(Dollars in millions)
LONG-TERM:
6.5% convertible subordinated debentures due 1999 $ 2 $ 2
7.85% notes due 2000 25 25
6.625% notes due 2003 125 125
8% convertible subordinated debentures due 2010 41 41
Commercial paper 50 50
Variable rate loans 5 93
Other 7 9
---- ----
255 345
Current maturities of long-term debt -- --
---- ----
Net long-term debt $255 $345
==== ====
</TABLE>
6
<PAGE> 7
9. Since 1991, the Board of Directors has authorized the repurchase of up to
74,650,000 shares of Company common stock, 6,150,000 shares of which is intended
to satisfy requirements of various employee benefit programs. Through March 31,
1997, a total of 55,050,768 shares of common stock (including 6,150,000 shares
for employee benefit programs) had been purchased in the open market at an
average price of $35.22 per share.
10. In March 1997, the Company completed transactions to monetize its
investment in Tastemaker for approximately $608 million, including $103 million
in cash and a $500-million, 6.2%, interest-bearing five-year note, expected to
be paid in three years, classified as "held to maturity." Equity in income of
affiliated companies includes Tastemaker earnings of $11 million and $8 million
for the quarters ended March 31, 1997 and 1996, respectively. Tastemaker
earnings included in equity income for the year 1996 were $32 million.
11. In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," and SFAS No. 129, "Disclosure of Information about Capital Structure,"
for fiscal years beginning after December 15, 1997. The provisions of SFAS No.
128 establishes standards for computing and presenting earnings per share (EPS).
It replaces the presentation of primary EPS with a presentation of basic EPS. It
also requires dual presentation of basic and diluted EPS on the face of the
income statement for entities with complex capital structures. Had the SFAS No.
128 provisions been required at March 31, 1997, the Company's earnings per share
would approximate the pro-forma amounts below:
<TABLE>
<CAPTION>
March 31,
-----------
1997 1996
-------- --------
<S> <C> <C>
Basic E.P.S $ 1.07 $ .71
Diluted E.P.S $ 1.03 $ .68
</TABLE>
The provisions of SFAS No. 129 established standards for disclosing
information about an entity's capital structure. Adoption of this standard will
have no effect on the companies current disclosure requirements.
12. (a) Environmental:
Hercules has been identified as a potentially responsible party (PRP) by
U.S. federal and state authorities for environmental cleanup at numerous sites.
The estimated range of the reasonably possible costs of remediation is between
$90 million and $257 million. The actual costs will depend upon numerous
factors, including the number of parties found liable at each environmental site
and their ability to pay, the actual method of remediation, outcome of
negotiations with regulatory authorities, outcome of litigation, changes in
environmental laws and regulations, technological developments, and the years of
remedial activity required, which could range up to 30 years. Hercules becomes
aware of sites in which it may be, but has not yet been named, a PRP principally
through its knowledge of investigation of sites by the U.S. Environmental
Protection Agency (EPA) or other government agency or through correspondence
with previously named PRPs requesting information on Hercules' activities at
sites under investigation. Hercules brought suit in 1992 against its insurance
carriers for past and future costs for remediation of certain environmental
sites. Hercules has not included any insurance recovery in the estimates above.
Hercules has established procedures for identifying environmental issues
at Hercules plant sites. Environmental coordinators, a designated position at
all operating facilities, are familiar with environmental laws and regulations
and are resources for identification of environmental issues.
7
<PAGE> 8
Hercules also has an environmental audit program, which is designed to identify
environmental issues at operating plant sites. Through these programs, Hercules
identifies potential environmental, regulatory, and remedial issues.
Litigation over liability at Jacksonville, Arkansas, the most significant
site, has been pending since 1980. As a result of a pretrial court ruling in
October 1993, Hercules has been held jointly and severally liable for costs
incurred, and for future remediation costs, at the Jacksonville site by the
District Court, Eastern District of Arkansas (the Court). Appeal of the Court's
ruling will be filed promptly after issuance of a final court order. In November
1993, an advisory jury found Uniroyal Chemical, Ltd., liable for the
Jacksonville site, but also found that Uniroyal had proven a reasonable basis
for allocation of responsibility. That same advisory jury found Standard
Chlorine of Delaware is not a liable party for the Jacksonville site. The Court
may take the jury's findings into consideration when reaching its decision
regarding these parties. The Court has not entered its ruling on the liability
of Uniroyal and Standard Chlorine. Appeals of the Court's expected rulings with
respect to Uniroyal and Standard Chlorine are probable.
Other defendants in this litigation have either settled with the
government or, in the case of the Department of Defense (DoD), have not been
held liable. Hercules appealed the Court's order finding the DoD not liable. On
January 31, 1995, the 8th Circuit Court of Appeals upheld the Court's order.
Hercules filed a petition to the U.S. Supreme Court requesting review and
reversal of the 8th Circuit Court ruling. This petition was denied on June 26,
1995, and the case was remanded to the District Court for further proceedings.
Hercules' potential costs for remediation of the Jacksonville site are
presently estimated between $34 million and $111 million. These costs are based
on Hercules' assessment of potential liability, the level of participation by
other PRPs, and current estimates of remediation costs.
At March 31, 1997, the accrued liability for environmental remediation
represents management's best estimate of the probable and reasonably estimable
costs related to environmental remediation. The extent of liability is evaluated
quarterly. The measurement of the liability is evaluated based on currently
available information, including the progress of remedial investigation at each
site and the current status of negotiations with regulatory authorities
regarding the method and extent of apportionment of costs among other PRPs.
During the quarter ended March 31, 1997, based upon completion of several site
investigations, clarification of and new remediation requirements, and reduced
level of participation by other PRPs, the Company recognized a net increase in
environmental expense of $13 million. The company does not anticipate that its
financial condition will be materially affected by environmental remediation
costs in excess of amounts accrued, although quarterly or annual operating
results could be materially affected.
(b) Litigation:
Hercules is a defendant in numerous lawsuits that arise out of, and are
incidental to, the conduct of its business. In these legal proceedings, no
director, officer, or affiliate is a party or a named defendant. These suits
concern issues such as product liability, contract disputes, labor-related
matters, patent infringement, environmental proceedings, property damage, and
personal injury matters. Hercules also is a defendant in two Qui Tam ("Whistle
Blower") lawsuits brought by former employees of the Aerospace segment sold to
Alliant Techsystems. One suit involves allegations relating to submission of
false claims and records, delivery of defective products, and a deficient
quality control program. The other suit involves allegations of mischarging of
work performed under government contracts, misuse of government equipment, other
acts of financial mismanagement, and wrongful termination claims. The
government, after investigation of the allegations, declined to intervene in
either lawsuit. The first of these lawsuits is presently scheduled
8
<PAGE> 9
for trial in 1997. While damages claimed in the first suit are material, the
company believes no damages were incurred by the government, no false claims
were made to the government, and alleged damages are speculative and
unsupportable. The damages in the second suit were not defined. The company
intends to vigorously defend these lawsuits.
Hercules is also a defendant in a class action (approximately 140 members)
of property owners adjacent to its Brunswick, Georgia, plant. The class members
seek property impairment related damages including damages for alleged decrease
in property values caused by the presence of toxaphene (a pesticide manufactured
at the plant from 1948 to 1980) on their properties. The class members claim
that the toxaphene resulted from manufacturing operations. In February 1997, a
settlement was reached, subject to the approval of the court. The court approved
the settlement on April 2, 1997. The amount is not material to the financial
condition of the company.
While it is not feasible to predict the outcome of all pending suits and
claims, management does not anticipate that the ultimate resolution of these
matters will have a material effect upon the consolidated financial position of
Hercules, although the resolution of any of the matters during a specific period
could have a material effect on the quarterly or annual operating results for
that period.
OTHER FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Operational Highlights
(Dollars in millions)
Three Months Ended March 31,
------------ ---------------
1997 1996
---- ----
<S> <C> <C>
Net Sales by Industry Segment
Chemical Specialties $ 272 $252
Food & Functional Products 223 228
Corporate and other -- 23
----- ----
Total $ 495 $503
===== ====
Profit (Loss) from Operations by Industry Segment
Chemical Specialties $( 46) $ 45
Food & Functional Products (3) 51
Corporate and other (19) 2
----- ----
Total $( 68) $ 98
===== ====
</TABLE>
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
In late February and March of 1997, Hercules announced several changes
in executive leadership and the adoption of alternative strategies intended to
strengthen its current businesses. This will result in the shutdown of certain
high-cost manufacturing facilities; consolidation of redundant manufacturing
locations; workforce reductions, primarily operating personnel at certain
domestic and foreign facilities; and a more realistic balance between selling
prices and volumes. These measures are designed to improve manufacturing
capacity utilization, create operating efficiencies, and eliminate redundant
functions (see Note 4). It is the Company's goal to complete these programs by
the first quarter of 1998. These actions are expected to have a favorable
effect on future before tax annual earnings in the range of $20 million to $25
million, beginning in 1998.*
The table below reflects results through profit from operations on an
adjusted basis. The 1997 results exclude the effects of asset rationalization
and impairment, severance, benefits, and other adjustments aggregating $161
million (see Notes 4 and 12). 1996 has been adjusted to exclude the results of
operations of the aroma chemicals business unit of the Food & Functional
Products segment, the ink resins business unit of the Chemical Specialties
segment, and the Composite Products Division of the Corporate and other
segment, which were divested in 1996. The table should make it easier to
compare quarter-over-quarter operating results. Accordingly, the discussion
that follows speaks to the comparisons in the table through profit from
operations.
<TABLE>
<CAPTION>
(Dollars in millions) Three Months Ended March 31,
----------------------------
1997 1996
----- -----
<S> <C> <C>
Net sales .......................................... $ 495 $ 465
Cost of sales ...................................... 320 295
Selling, general, and administrative expenses ...... 66 62
Research and development ........................... 14 14
Other operating expenses (income), net ............. 2 --
----- -----
Profit from operations ............................. $ 93 $ 94
===== =====
Net Sales by Industry Segment
Chemical Specialties .......................... $ 272 $ 247
Food & Functional Products .................... 223 218
Corporate and other ........................... -- --
----- -----
Total .................................... $ 495 $ 465
===== =====
Profit (Loss) From Operations by Industry Segment
Chemical Specialties .......................... $ 51 $ 46
Food & Functional Products .................... 45 50
Corporate and other ........................... (3) (2)
----- -----
Total .................................... $ 93 $ 94
===== =====
</TABLE>
- ---------------------
* This paragraph contains forward looking statements and is included here
to provide safe harbor under the Private Securities Litigation Reform
Act of 1995.
10
<PAGE> 11
RESULTS OF OPERATIONS
All comparisons within the following discussion are with the corresponding
periods in the previous year, unless otherwise stated.
Consolidated net sales increased 6%, or $30 million, while Chemical
Specialties sales increased 10%, or $25 million, and Food and Functional
Products sales increased 2%, or $5 million. These increases were driven
primarily by higher volumes in all business units (particularly in the Chemical
Specialties segment), as compared to a relatively weak first quarter of 1996,
partially offset by weaker foreign currencies relative to the dollar and lower
prices.
Consolidated profit from operations remained flat, while Chemical
Specialties profit from operations increased 11%, or $5 million, as the gross
profit improvement from increased revenue and manufacturing cost improvements
were offset by higher selling, general, and administrative expenses. However,
profit from operations in Food and Functional Products declined 10%, or $5
million, due to the additional impact of higher food gums raw material costs and
the after effects of a fire at a pectin production facility.
Equity in income of affiliated companies increased $3 million and
reflects higher earnings in Tastemaker (see Notes 6 and 10).
Interest and debt expense increased $2 million on higher average debt
outstanding over the comparable 1996 period.
Other income, net (see Note 6) increased $324 million and primarily
reflects the net gain on the monetization of Tastemaker, partially offset by
increased charges related to legal settlements and accruals.
The provision for income taxes for the quarter ended March 31, 1997
reflects an estimated annual effective tax rate of 35%. The first quarter rate
was negatively impacted by a relatively high rate on the Tastemaker transaction,
along with required increases to tax reserves primarily related to anticipated
tax assessments by federal, state, and foreign tax authorities. The 1996
full-year rate of 33% was favorably impacted by utilization of tax loss
carryforwards.
11
<PAGE> 12
FINANCIAL CONDITION
In March 1997 Hercules completed transactions to monetize its
investment in Tastemaker. According to the provisions of the transactions,
Hercules received approximately $103 million in cash, subject to post-closing
adjustments (see Notes 6 and 10). In addition, Hercules retained a $500
million, five-year note, expected to be paid in three years, classified as held
to maturity. Management intends to increase leverage so that the net cash value
of the transaction to Hercules approximates $550 million. Cash will be utilized
to repurchase shares until and unless a more attractive investment appears.
Cash provided by operations was $33 million for the first quarter of
1997, compared to a cash use in 1996 of $6 million. Lower tax payments and
improved working capital primarily account for the improvement. First quarter
1996 included tax payments of $36 million associated with the sale of a business
unit in late 1995.
Short-term liquidity has remained stable since year-end 1996. Both the
current and quick ratios are relatively flat at .9 and 0.5, respectively. At
March 31, 1997, $109 million is available under short-term lines of credit.
During the quarter, revolving credit agreements were increased from $380 million
to $700 million, of which $350 million was available at March 31, 1997. In
addition, $50 million is accessible, depending upon market conditions, under a
shelf registration.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In September 1993, Hercules and the U.S. Environmental Protection Agency
(EPA) Region 1 reached an agreement in principle in settlement of EPA's claims
that Hercules violated its wastewater permit with the City of Chicopee and the
Federal pretreatment standard for industrial users of publicly owned treatment
works at its Chicopee, Massachusetts, facility. Hercules signed a consent
Decree, which was entered by the court on December 15, 1994, based on this
agreement, requiring supplemental environmental projects (at a cost of
approximately $375,000), compliance with permit limits in the future, and
$250,000 in fines. Hercules has paid the $250,000 fine and is currently in the
process of performing the supplemental environmental projects, which are
expected to be completed in 1997.
Hercules received a letter from the New Jersey Department of Environmental
Protection (the "Department") dated March 9, 1995, which stated that the
Department was considering an enforcement action against Hercules for alleged
noncompliance with the terms of a 1993 Administrative Consent Order ("ACO") at
its Kenvil, New Jersey, facility and other alleged violations. The ACO covered
alleged violations of the Air Pollution Control Act. The other alleged
violations were under the Spill Compensation and Control Act, the New Jersey
Water Pollution Control Act, and the New Jersey Safe Drinking Water Act. On
March 4, 1997 Hercules received from the Department a formal demand for payment
of stipulated penalties under the ACO as well as for civil penalties for the
other alleged violations. Hercules is evaluating the demand and is discussing a
possible resolution with the Department at a value which will not have a
material impact on the company's financial condition.
Item 4. Submission of Matters to a Vote of Security Holders.
A SUMMARY OF THE FINAL RESULTS OF VOTING ON THE RESOLUTIONS
PROPOSED TO SHAREHOLDERS AT THE ANNUAL MEETING HELD APRIL 24, 1997,
IS AS FOLLOWS:
1. Election of Directors
Of the 88,330,881 shares voted, a total of 86,771,110 shares,
voted FOR Richard M. Fairbanks, III, as a director; 86,767,301 shares,
voted FOR Edith E. Holiday; 86,738,152 shares, voted FOR H. Eugene
McBrayer; and 86,775,869 shares, voted FOR Lee M. Thomas. A total of
1,559,771 shares, WITHHELD votes for Richard M. Fairbanks, III; 1,563,580
shares, WITHHELD votes for Edith E. Holiday; 1,592,729 shares, WITHHELD
votes for H. Eugene McBrayer; and 1,555,012 shares, WITHHELD votes for Lee
M. Thomas.
Directors continuing in office after the meeting are: R. Keith Elliott,
Gaynor N. Kelley, Robert G. Jahn, Ralph L. MacDonald, Jr., and Paula A.
Sneed.
2. Ratification of Coopers & Lybrand L. L. P. as Auditors
The proposal received the required favorable majority vote necessary FOR
approval. Of the shares voting on this proposal, 87,855,208 were
FOR; 305,891 were AGAINST; and 169,782 ABSTAINED.
13
<PAGE> 14
3. Approval of amendments to the Hercules Long-Term Incentive Compensation
Plan
The proposal received the required favorable majority vote necessary
FOR approval. Of the shares voting on this proposal, 70,317,533 were FOR;
9,300,415 were AGAINST; and 1,108,254 ABSTAINED.
Item 6. Exhibits and Reports on Form 8-K.
(a)Exhibit 27 - Financial Data Schedule
(b)Reports on Form 8-K.
Hercules filed an 8-K on April 15, 1997 in regards to completion of
transactions related to Tastemaker, a 50% owned flavors joint venture.
14
<PAGE> 15
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
HERCULES INCORPORATED
BY GEORGE MACKENZIE
----------------------------------
GEORGE MACKENZIE
SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER
AND DULY AUTHORIZED SIGNATORY)
MAY 15, 1997
BY VIKRAM JOG
----------------------------------
VIKRAM JOG
VICE PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
MAY 15, 1997
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
HERCULES INCORPORATED 1Q97 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 46,000
<SECURITIES> 0
<RECEIVABLES> 404,000
<ALLOWANCES> 0
<INVENTORY> 270,000
<CURRENT-ASSETS> 756,000
<PP&E> 2,280,000
<DEPRECIATION> 1,547,000
<TOTAL-ASSETS> 2,654,000
<CURRENT-LIABILITIES> 838,000
<BONDS> 0
0
0
<COMMON> 79,000
<OTHER-SE> 843,000
<TOTAL-LIABILITY-AND-EQUITY> 2,654,000
<SALES> 495,000
<TOTAL-REVENUES> 495,000
<CGS> 320,000
<TOTAL-COSTS> 563,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,000
<INCOME-PRETAX> 274,000
<INCOME-TAX> 166,000
<INCOME-CONTINUING> 108,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,000
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 0
</TABLE>
