<PAGE> 1
COMMISSION FILE NO. 1-496
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1998
Title of the Plan:
HERCULES INCORPORATED EMPLOYEE SAVINGS PLAN
Issuer of the securities held pursuant to the Plan:
HERCULES INCORPORATED
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894
<PAGE> 2
HERCULES INCORPORATED EMPLOYEE SAVINGS PLAN
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS AVAILABLE
FOR BENEFITS WITH FUND INFORMATION
at December 31, 1998 and 1997
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS WITH FUND INFORMATION
for the year ended December 31, 1998
Supplemental schedules required by Section 2520, 103-10 of the Department of
Labor Rules and Regulations for Reporting and Disclosure under ERISA have been
omitted because they are not applicable. Plans with all of their assets in a
Master Trust are exempt from the requirement to include investment supplemental
schedules as part of their Financial Statements.
1
<PAGE> 3
HERCULES INCORPORATED EMPLOYEE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
--------------------------------------------------------------------------------------
BLENDED
HERCULES INTEREST FRANK
INCORPORATED RATE FIDELITY RUSSELL
COMMON SAVINGS MAGELLAN LOAN EQUITY
STOCK FUND EQUITY FUND FUND FUND FUND INDEX FUND
---------- ----------- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Allocated Share of Master Savings
Trust Investments $ 334,747(a) $1,371,182(b) $5,065,949 $1,902,709(c) $ 102 $ 193,502(d)
Allocated Share of Master Savings
Trust Cash 7,303 -- 324,431 627 -- 54
---------- ---------- ---------- ---------- ---------- ----------
Total Assets 342,050 1,371,182 5,390,380 1,903,336 102 193,556
---------- ---------- ---------- ---------- ---------- ----------
LIABILITIES
Accounts Payable -- 38 1,596 -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net Assets Available for Benefits $ 342,050 $1,371,144 $5,388,784 $1,903,336 $ 102 $ 193,556
========== ========== ========== ========== ========== ==========
<CAPTION>
PARTICIPANT DIRECTED
------------------------------------------------------------------------
SEI
SEI SMALL DIVERSIFIED SEI SEI CORE
SEI INT'L CAP. MODERATE DIVERSIFIED FIXED
EQUITY GROWTH GROWTH CONSERVATIVE INCOME
FUND FUND FUND FUND FUND TOTAL
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Allocated Share of Master Savings
Trust Investments $ 16,514(e) $ 65,767(f) $ 7,150(g) $ --(h) $ 2,380(i) $8,960,002
Allocated Share of Master Savings
Trust Cash -- 332 1 -- 27 332,775
---------- ---------- ---------- ------ ---------- ----------
Total Assets 16,514 66,099 7,151 -- 2,407 9,292,777
---------- ---------- ---------- ------ ---------- ----------
LIABILITIES
Accounts Payable -- -- 3 -- 6 1,643
---------- ---------- ---------- ------ ---------- ----------
Net Assets Available for Benefits $ 16,514 $ 66,099 $ 7,148 $ -- $ 2,401 $9,291,134
========== ========== ========== ====== ========== ==========
</TABLE>
- ----------
(a) At fair value. Cost: $ 295,892 Shares: 12,284
(b) At fair value. Cost: $ 726,846
(c) At fair value. Cost: $ 1,333,209
(d) At fair value. Cost: $ 162,481
(e) At fair value. Cost: $ 16,326
(f) At fair value. Cost: $ 64,461
(g) At fair value. Cost: $ 6,750
(h) At fair value. Cost: $ 0
(i) At fair value. Cost: $ 2,382
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
HERCULES INCORPORATED EMPLOYEE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
--------------------------------------------------------------------------------------
BLENDED
HERCULES INTEREST
INCORPORATED RATE FIDELITY
COMMON EQUITY SAVINGS MAGELLAN LOAN
STOCK FUND FUND FUND FUND FUND
---------- ---- ---- ---- ----
ASSETS
<S> <C> <C> <C> <C> <C>
Allocated Share of Master Savings
Trust Investments $ 654,845(a) $ 886,024(b) $5,297,044 $1,362,345(c) $ 963
Allocated Share of Master Savings
Trust Cash 9,052 -- 44,715 -- --
---------- ---------- ---------- ---------- ----------
Total Assets 663,897 886,024 5,341,759 1,362,345 963
---------- ---------- ---------- ---------- ----------
LIABILITIES
Accounts Payable -- 620 -- -- --
---------- ---------- ---------- ---------- ----------
Net Assets Available for Benefits $ 663,897 $ 885,404 $5,341,759 $1,362,345 $ 963
========== ========== ========== ========== ==========
<CAPTION>
PARTICIPANT DIRECTED
-----------------------------------------------------------------------
FRANK SEI
RUSSELL SEI SEI SMALL DIVERSIFIED
EQUITY INT'L CAP. MODERATE
INDEX EQUITY GROWTH GROWTH
FUND FUND FUND FUND TOTAL
---- ---- ---- ---- -----
ASSETS
<S> <C> <C> <C> <C> <C>
Allocated Share of Master Savings
Trust Investments $ 79,576(d) $ 32(e) $ 34,817(f) $ 295(g) $8,315,941
Allocated Share of Master Savings
Trust Cash -- -- -- -- 53,767
---------- ---------- ---------- ---------- ----------
Total Assets 79,576 32 34,817 295 8,369,708
---------- ---------- ---------- ---------- ----------
LIABILITIES
Accounts Payable -- -- 30 3 653
---------- ---------- ---------- ---------- ----------
Net Assets Available for Benefits $ 79,576 $ 32 $ 34,787 $ 292 $8,369,055
========== ========== ========== ========== ==========
</TABLE>
- ----------
(a) At fair value. Cost: $ 360,085 Shares: 13,081
(b) At fair value. Cost: $ 363,399
(c) At fair value. Cost: $ 1,059,224
(d) At fair value. Cost: $ 69,912
(e) At fair value. Cost: $ 36
(f) At fair value. Cost: $ 37,815
(g) At fair value. Cost: $ 293
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
HERCULES INCORPORATED EMPLOYEE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
----------------------------------------------------------------------------------------
BLENDED
HERCULES INTEREST FRANK
INCORPORATED RATE FIDELITY RUSSELL
COMMON EQUITY SAVINGS MAGELLAN LOAN EQUITY
STOCK FUND FUND FUNDS FUND FUND INDEX FUND
---------- ---- ----- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
CONTRIBUTIONS:
Participating employees $ -- $ 112,807 $ 363,404 $ 134,385 $ -- $ 26,855
Company contributions -- 28,202 87,688 33,533 -- 401
----------- ----------- ----------- ----------- -------- -----------
Subtotal Contributions -- 141,009 451,092 167,918 -- 27,256
Interplan transfers 163,503 -- -- -- -- --
ALLOCATED SHARE OF MASTER
SAVINGS TRUST INVESTMENT
ACTIVITIES:
Cash dividends 14,971 -- -- 89,054 -- 4
Interest 448 1 331,299 -- -- 2
Change in market value (237,720) 285,611 -- 377,765 -- 31,541
----------- ----------- ----------- ----------- -------- -----------
Total (58,798) 426,621 782,391 634,737 -- 58,803
Withdrawals (260,370) (67,069) (475,362) (130,011) -- (8,015)
Interfund transfers (2,679) 126,188 (260,004) 36,265 (861) 63,192
----------- ----------- ----------- ----------- -------- -----------
Change in Net Assets Available
for Benefits (321,847) 485,740 47,025 540,991 (861) 113,980
Net Assets Available for
Benefits, December 31, 1997 663,897 885,404 5,341,759 1,362,345 963 79,576
----------- ----------- ----------- ----------- -------- -----------
Net Assets Available for
Benefits, December 31, 1998 $ 342,050 $ 1,371,144 $ 5,388,784 $ 1,903,336 $ 102 $ 193,556
=========== =========== =========== =========== ======== ===========
<CAPTION>
PARTICIPANT DIRECTED
-----------------------------------------------------------------------
SEI SEI
SMALL DIVERSIFIED SEI SEI CORE
SEI CAP MODERATE DIVERSIFIED FIXED
INTERNATIONAL GROWTH GROWTH CONSERVATIVE INCOME
EQUITY FUND FUND FUND FUND FUND TOTAL
----------- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
CONTRIBUTIONS:
Participating employees $ 1,807 $ 4,170 $ 3,518 $ -- $ 1,890 $ 648,836
Company contributions 452 1,042 880 -- 473 152,671
----------- ----------- ----------- --------- ----------- -----------
Subtotal Contributions 2,259 5,212 4,398 -- 2,363 801,507
Interplan transfers -- -- -- -- -- 163,503
ALLOCATED SHARE OF MASTER
SAVINGS TRUST INVESTMENT
ACTIVITIES:
Cash dividends 576 314 421 126 108 105,574
Interest -- -- -- -- -- 331,750
Change in market value (328) 3,422 (29) 1,339 (70) 461,531
----------- ----------- ----------- ----------- ----------- -----------
Total 2,507 8,948 4790 1,465 2,401 1,863,865
Withdrawals -- (959) -- -- -- (941,786)
Interfund transfers 13,975 23,323 2,066 (1,465) -- --
----------- ----------- ----------- ----------- ----------- -----------
Change in Net Assets Available
for Benefits 16,482 31,312 6,856 -- 2,401 922,079
Net Assets Available for
Benefits, December 31, 1997 32 34,787 292 -- -- 8,369,055
----------- ----------- ----------- ----------- ----------- -----------
Net Assets Available for
Benefits, December 31, 1998 $ 16,514 $ 66,099 $ 7,148 $ -- $ 2,401 $ 9,291,134
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Hercules Incorporated Employee Savings Plan (the Plan) is a
defined-contribution plan subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
Upon hire, certain represented employees are immediately eligible to
participate in the Plan and obtain immediate, nonforfeitable (vested) rights to
the full market value of their account. At time of enrollment in the Plan, a
participant, by giving written notice to the Trustee, shall direct the
investment of his monthly savings in any of the Plan's investment media, or a
combination thereof, providing his monthly savings in any one medium selected is
not less than 20% of the total amount saved and is stated in 5% increments.
The Plan provides for various investment options in any combination of
stocks, bonds, fixed income securities, mutual funds, and other investment
securities. Investment securities are exposed to various risks, such as interest
rate, market, and credit. Due to the level of risk associated with certain
investment securities and the level of uncertainty related to changes in the
value of investment securities, it is at least reasonably possible that changes
in risks in the near term would materially affect participant's account balances
and the amounts reported in the statement of net assets available for benefits
and the statement of changes in net assets available for benefits.
The assets of the Plan are commingled for investment purposes in the
Hercules Incorporated Master Savings Trust (the Trust) with the assets of the
Hercules Incorporated Savings and Investment Plan. Bankers Trust Company
(Trustee) holds the assets of the Trust. The Plan's investment in the Trust is
based upon the fair value of net assets in the Trust and the Plan's relative
interest in the Trust. The investments in the accompanying statements of net
assets available for benefits represent the Plan's share of the investments in
the Trust, which was 2.82% and 2.53% at December 31, 1998 and 1997,
respectively. Recordkeeping for the Plan is performed by MetLife's Defined
Contribution Group.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make significant estimates
and assumptions that affect the reported amounts of assets, liabilities and
changes therein, and disclosures of contingent assets and liabilities at the
date of the financial statements. Actual results could differ from those
estimates.
The financial statements of the Plan are prepared under the accrual
method of accounting. Investments in the Plan are carried at fair value. The
fair value of the common stock of Hercules Incorporated is based upon the price
at which the stock closed on the New York Stock Exchange on the last business
day of the year. The Blended Interest Rate Savings Fund is carried at cost plus
accrued interest, which is equivalent to contract value, which approximates fair
value. The market value of the Equity Fund, the Fidelity Magellan Fund, the
Frank Russell Equity Index Fund, and the SEI group of funds is based on the fair
value of the underlying securities held by the fund. Purchases and sales of
securities are recorded on a trade-date basis. Interest income is recorded on
the accrual basis and dividends are recorded on the ex-dividend date.
Withdrawals are recorded upon distribution.
The Plan provides that participants who retire from the Company may
elect, upon retirement, an Optional Valuation Date (OVD) for determining their
final withdrawal. The OVD is the last business day of any month following
retirement up to age 70 in which the distribution is requested.
The Plan presents in the statement of changes in net assets available
for benefits its allocated share of the Trust's investment activities that
include the net appreciation (depreciation) in fair value of its investments
(under the caption Change in Market Value), which consists of the realized gains
or losses and the change in unrealized appreciation (depreciation) on those
investments.
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of Plan
termination, participants will become 100 percent vested in their accounts.
5
<PAGE> 7
2. INVESTMENT PROGRAM
The following investment media are available under the Employee Savings
Plan:
1. Hercules Incorporated Common Stock.
2. Equity Fund. This Fund is made up of substantially all the stocks that
make up the Standard and Poor's 500 Index in such a mix as to track as
closely as possible the movement of the Index.
3. A Blended Interest Rate Savings Fund, wherein savings so directed are
deposited with various major insurance companies, who guarantee the
payment of principal. For 1998 and 1997, the blended yield of these
contracts was approximately 6.8% and 6.4%, respectively.
4. Fidelity Magellan Fund is a long-term capital appreciation fund, which
invests in common stocks, and securities convertible to common stock,
issued by companies operating in the U.S. and abroad as well as foreign
companies.
5. Frank Russell Equity Index Fund sells high long-term returns by
investing in common stocks of the largest companies in the U.S. stock
market.
6. SEI International Equity Fund seeks to provide aggressive long-term
growth from investments in foreign stocks and diversification in
domestic stock portfolios.
7. SEI Small Cap. Growth Fund invests in stocks of smaller companies that
are in an early stage or transition point in their development.
8. SEI Diversified Moderate Growth Fund invests in U.S. and international
stocks and provides a limited level of current income by investing in
bonds.
9. SEI Diversified Conservative Fund seeks to provide current income with
opportunity for capital growth by investing in domestic and
international stocks and bonds.
10. SEI Core Fixed Income Fund invests in a diversified portfolio of
high-quality fixed-income bonds.
The Company contribution, as defined in the Plan, is equal to 25% of
that portion of the participants' contribution which does not exceed 6% of
earnings or base pay.
During 1998, the Plan had purchases and sales of Hercules Common Stock
of $174,933 and $44,492, respectively, which are considered related party
transactions.
There were 340 participants at December 31, 1998 who participated in
one or more of the ten investment media. At December 31, 1998 the number of
participants selecting each of the investment media for their contributions was
as follows:
<TABLE>
<S> <C>
Hercules Incorporated Common Stock ....................... 298
Equity Fund............................................... 70
Blended Interest Rate Savings Fund ....................... 198
Fidelity Magellan Fund.................................... 90
Frank Russell Equity Index Fund........................... 25
SEI International Equity Fund............................. 5
SEI Small Cap. Growth Fund................................ 10
SEI Diversified Moderate Growth Fund...................... 3
SEI Diversified Conservative Fund......................... 0
SEI Core Fixed Income Fund................................ 2
</TABLE>
3. INTEREST IN HERCULES INCORPORATED MASTER SAVINGS TRUST
The Plan's allocated share of the Trust's net assets is based upon the
total of each individual Plan's interest in investments of the Trust. The
allocated interest of the net assets of each fund in the Trust at December 31
was as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Hercules Incorporated Common Stock Fund........................ 0.7% 0.9%
Equity Fund.................................................... 1.8% 1.4%
Blended Interest Rate Savings Fund............................. 4.8% 4.4%
Fidelity Magellan Fund......................................... 4.6% 4.2%
Loan Fund...................................................... 0% 0%
Frank Russell Equity Index Fund................................ 1.5% 1.1%
SEI International Equity Fund.................................. 0.6% 0%
SEI Small Cap. Growth Fund..................................... 1.2% 0.8%
SEI Diversified Moderate Growth Fund........................... 0.1% 0%
SEI Diversified Conservative Fund.............................. 0% 0%
SEI Core Fixed Income Fund..................................... 0% 0%
</TABLE>
6
<PAGE> 8
4. INTERPLAN TRANSFERS
Interplan transfers represent the vesting of a 1996 supplemental
stock award.
5. TAX STATUS
The United States Treasury Department advised on October 29, 1997 that
the Plan as amended through February 1, 1996 is a qualified trust under Section
401(a) of the Internal Revenue Code and is therefore exempt from Federal income
taxes under provisions of Section 501(a) of the code. The Plan has been amended
since receiving the determination letter. However, the Plan administrator
believes that the Plan is designed and currently being operated in compliance
with the applicable provisions of the Internal Revenue Code.
6. INVESTMENTS
The Plan's allocated interest in investments in the Trust that
represent five percent or more of net assets available for benefits at December
31, 1998 or 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Hercules Incorporated Common Stock ........... $ 334,747 $ 654,845
Equity Fund .................................. $1,371,182 $ 886,024
Fidelity Magellan Fund ....................... $1,902,709 $1,362,345
Group Annuity Contract with Peoples
Life Insurance Company (#BDA 00002TR) ... $1,823,993 $1,056,404
Group Annuity Contract with Transamerica Life
Insurance & Annuity Company (#76768) .... $ 793,541 --
GIC Prudential (#GA 8083) .................... $ -- $1,185,706
Hartford Life Contract (#GA 10226) ........... $ 360,382 $ 494,418
Group Annuity Contract with Transamerica Life
Insurance & Annuity Company (#76589) .... $ 979,004 $ 844,109
</TABLE>
7. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1998 1997
----------- -----------
<S> <C> <C>
Net Assets Available for Benefits
per the financial statements ........... $ 9,291,134 $ 8,369,055
Amounts Allocated to Withdrawing Participants (7,969) (8,978)
----------- -----------
Net Assets Available for Benefits
per the Form 5500 ...................... $ 9,283,165 $ 8,360,077
=========== ===========
</TABLE>
The following is a reconciliation of withdrawals per the financial
statements to the Form 5500:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
Benefits paid to participants per the financial statements ... $ 941,786
Add: Amounts Allocated to Withdrawing Participants at
December 31, 1998 ...................................... 7,969
Less: Amounts Allocated to Withdrawing Participants at
December 31, 1997 ...................................... (8,978)
---------
Benefits paid to participants per the Form 5500 .............. $ 940,777
=========
</TABLE>
Amounts allocated to withdrawing participants are recorded on the Form
5500 for benefit claims that have been processed and approved for payment prior
to December 31 but not yet paid as of that date.
7
<PAGE> 9
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors,
Hercules Incorporated,
Wilmington, Delaware
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of Hercules Incorporated Employee Savings Plan (the "Plan") at December 31, 1998
and December 31, 1997, and the changes in net assets available for benefits for
the year ended December 31, 1998 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Plan's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statements of
net assets available for benefits and the statement of changes in net assets
available for benefits is presented for purposes of additional analysis rather
than to present the net assets available for plan benefits and changes in net
assets available for benefits of each fund. The fund information is the
responsibility of the Plan's management. The fund information has been subjected
to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania 19103
June 22, 1999
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed by the undersigned hereunto duly authorized.
HERCULES INCORPORATED EMPLOYEE SAVINGS PLAN
/s/ H. Eugene McBrayer
----------------------
H. Eugene McBrayer, Chairman
Finance Committee, Hercules Incorporated,
Plan Administrator
Date: June 29, 1999
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
23 Consent of Independent Accountants.
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-21667) of Hercules Incorporated of our report
dated June 22, 1999 relating to the financial statements, which appears in this
Form 11-K.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
June 29, 1999
