8-K 1 w41234e8-k.txt FORM 8-K FOR HERCULES INCORPORATED 1 Securities and Exchange Commission Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): September 28, 2000 Hercules Incorporated ---------------------- (Exact name of registrant as specified in its charter) Delaware 001-00496 51-0023450 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) Hercules Plaza 1313 North Market Street Wilmington, Delaware 19894-0001 -------------------------------- (Address of principal executive offices) (Zip Code) (302) 594-5000 --------------- (Registrant's telephone number, including area code) Not Applicable --------------- (Former name or former address, if changed since last report) 2 Item 2. Acquisition or Disposition of Assets. On September 28, 2000, Hercules Incorporated sold the assets and capital stock of certain subsidiaries comprising the Registrant's Food Gums Business to CP Kelco ApS, a new venture owned by Hercules and an affiliate of Lehman Brothers Merchant Banking Partners II L.P. Hercules owns approximately 29% of the capital stock of CP Kelco ApS, and has the right to appoint two directors of CP Kelco ApS. Pursuant to the Share Purchase Agreement, dated as of August 10, 2000, among CP Kelco ApS (formerly known as Hercules Copenhagen ApS), Hercules Investment ApS, Hercules Incorporated, Lehman FG Newco, Inc., WSP, Inc. and Hercules Holding BV/BVBA, Hercules received net proceeds of approximately $395 million in cash and recorded certain expenses of approximately $77 million for its Food Gums Business. Item 7. Financial Statements and Exhibits. (b) Pro Forma Financial Information. Unaudited Pro Forma Consolidated Statement of Income for the year ended December 31, 1999. Unaudited Pro Forma Consolidated Statement of Income for the six months ended June 30, 2000. Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2000. (c) Exhibits. 2.1 Share Purchase Agreement, dated as of August 10, 2000, among CP Kelco ApS (formerly known as Hercules Copenhagen ApS), Hercules Investment ApS, Hercules Incorporated, Lehman FG Newco, Inc., WSP, Inc. and Hercules Holding BV/BVBA. 2 3 PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Basis of Presentation The following unaudited pro forma consolidated financial statements give effect to the divestiture of Hercules' Food Gums Business after giving effect to the pro forma adjustments described in the accompanying notes. These unaudited pro forma consolidated financial statements have been prepared from, and should be read in conjunction with, the historical financial statements and notes thereto of Hercules, which are included in Hercules' Annual Report on Form 10-K for the year ended December 31, 1999 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2000. The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred had the divestiture been consummated at the dates indicated, nor is it necessarily indicative of future operating results or financial position of Hercules. The unaudited pro forma consolidated statements of income give effect to the divestiture as if it had occurred at the beginning of the earliest period presented. The unaudited pro forma balance sheet gives effect to the divestiture as if it had occurred on June 30, 2000. PF-1 4 HERCULES INCORPORATED PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) FOR THE YEAR ENDED DECEMBER 31, 1999 (In millions except for per share amounts)
(1) FOOD GUMS EX- PRO FORMA HERCULES FOOD GUMS ADJUSTMENTS PRO FORMA -------- --------- ----------- --------- Net sales $ 3,309 $ 208 $ -- $ 3,101 Cost of sales 1,831 113 -- 1,718 Selling, general and administrative expenses 787 40 17 (2) 764 Research and development 85 8 -- 77 Goodwill and intangible asset amortization 79 -- (2)(3) 77 Other operating expenses (income), net 47 2 2 (3) 47 ------- ------- ------- ------- Profit from operations $ 480 $ 45 $ (17) $ 418 ------- ------- ------- ------- Equity in income (loss) of affiliated companies 1 -- -- (4) 1 Interest and debt expense 185 4 (17)(5) 164 Preferred security distributions of subsidiary trusts 51 -- -- 51 Other income (expense), net (2) (2) -- -- ------- ------- ------- ------- Income before income taxes $ 243 $ 39 $ -- $ 204 Provision for income taxes 75 14 -- (6) 61 ------- ------- ------- ------- Net income $ 168 $ 25 $ -- $ 143 ======= ======= ======= ======= Earnings per share: Per share - basic $ 1.63 $ 1.39 Weighted average shares outstanding - basic 103.2 103.2 Per share - assuming dilution $ 1.62 $ 1.38 Weighted average shares outstanding - assuming dilution 103.9 103.9
The accompanying notes are an integral part of the Pro Forma Financial Statements. PF-2 5 HERCULES INCORPORATED PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2000 (In millions except for per share amounts)
(1) EX- FOOD GUMS HERCULES FOOD GUMS PRO FORMA PRO FORMA -------- --------- --------- --------- Net sales $ 1,620 $ 105 $ -- 1,515 Cost of sales 912 58 -- 854 Selling, general and administrative expenses 403 21 9 (2) 391 Research and development 41 3 -- 38 Goodwill and intangible asset amortization 40 -- (1)(3) 39 Other operating expenses (income), net 22 1 1 (3) 22 ------- ------- ------- ------ Profit from operations $ 202 $ 22 $ (9) 171 ------- ------- ------- ------ Equity in income (loss) of affiliated companies -- -- (2)(4) (2) Interest and debt expense 74 3 (9)(7) 62 Preferred security distributions of subsidiary trusts 46 -- -- 46 Other income (expense), net (1) -- -- (1) ------- ------- ------- ------- Income before income taxes $ 81 $ 19 $ (2) $ 60 Provision for taxes on income 29 6 -- (6) 23 ------- ------- ------- ------- Net income $ 52 $ 13 $ (2) $ 37 ======= ======= ======= ======= Earnings per share: Per share - basic $ 0.49 $ 0.35 Weighted average shares outstanding - basic 106.9 106.9 Per share - assuming dilution $ 0.49 $ 0.35 Weighted average shares outstanding - assuming dilution 107.1 107.1
The accompanying notes are an integral part of the Pro Forma Financial Statements. PF-3 6 HERCULES INCORPORATED PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED) JUNE 30, 2000 (Dollars in millions)
(8) FOOD GUMS EX- NET HERCULES FOOD GUMS ADJUSTMENTS PRO FORMA -------- --------- ----------- --------- ASSETS Current assets Cash and cash equivalents $ 65 $ -- $ -- $ 65 Accounts and notes receivable, net 630 44 -- 586 Other current assets 90 -- -- 90 Inventories 372 58 -- 314 Deferred income taxes 144 -- -- 144 ------- ------- ------- ------- Total current assets 1,301 102 -- 1,199 Net property, plant and equipment 1,303 127 -- 1,176 Goodwill and other tangible assets 2,484 41 -- 2,443 Other assets 685 14 39 (9) 710 ------- ------- ------- ------- Total assets $ 5,773 $ 284 $ 39 $ 5,528 ======= ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $ 730 $ 36 $ 26 (10) $ 720 Short-term debt 686 1 -- 685 ------- ------- ------- ------- Total current liabilities 1,416 37 26 1,405 Long-term debt 1,882 -- (318)(11) 1,564 Deferred income taxes 284 14 -- 270 Postretirement benefits and other liabilities 390 10 -- 380 Company-obligated preferred securities of subsidiary trusts 992 -- -- 992 Stockholders' equity Common stock 83 -- -- 83 Additional paid-in capital 739 -- -- 739 Unearned compensation (119) -- -- (119) Other comprehensive losses (109) -- 7 (12) (102) Retained earnings 2,120 223 324 (13) 2,221 Reacquired stock, at cost (1,905) -- -- (1,905) ------- ------- ------- ------- Total stockholders' equity 809 223 331 917 ------- ------- ------- ------- Total liabilities and stockholders' equity $ 5,773 $ 284 $ 39 $ 5,528 ======= ======= ======= =======
The accompanying notes are an integral part of the Pro Forma Financial Statements. PF-4 7 HERCULES INCORPORATED NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) Eliminates the results of operations of our Food Gums Business as if the divestiture had been completed as of the beginning of the period presented. (2) Reflects the adjustment for Corporate allocations that had been included in the Food Gums Business. (3) Reclassifies this item to the appropriate category. (4) Gives effect to equity in the pro forma income (loss) of CP Kelco ApS at 28.57%. (5) Reflects a reduction in interest expense of approximately $21 million from the application of the proceeds from the divestiture of the Foods Gums Business to the reduction in long-term debt, offset by an adjustment of approximately $4 million for Corporate allocated interest expense included in the Food Gums Business. (6) Reflects income tax effect of pro forma adjustments (excluding equity in income (loss) of affiliated companies which is not tax deductible) at a statutory rate of 37%, including state income taxes. (7) Reflects a reduction in interest expense of approximately $12 million from the application of the proceeds from the divestiture of the Foods Gums Business to the reduction in long-term debt, offset by an adjustment of approximately $3 million for Corporate allocated interest expense included in the Food Gums Business. (8) Eliminates the net assets of our Food Gums Business as if the divestiture had been completed as of the balance sheet date. (9) Reflects Hercules' net investment in CP Kelco ApS at 28.57%. (10) Reflects recognition of liabilities associated with the sale of the Food Gums Business for transition costs, pension funding obligations and other expenses. (11) Reflects application of the estimated net proceeds from the sale of the Food Gums Business and the corresponding reduction to long-term debt. (12) Reflects elimination of currency translation adjustments that were associated with the Food Gums Business. (13) Reflects the add back of the retained earnings of the Food Gums Business and the estimated net gain from the sale of the business, net of taxes. PF-5 8 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HERCULES INCORPORATED October 13, 2000 By: /s/ Israel J. Floyd --------------------------------- Israel J. Floyd, Executive Vice President, Secretary and General Counsel 3 9 EXHIBIT INDEX
Number Exhibit ------ ------- 2.1 Share Purchase Agreement, dated as of August 10, 2000, among CP Kelco ApS (formerly known as Hercules Copenhagen ApS), Hercules Investment ApS, Hercules Incorporated, Lehman FG Newco, Inc., WSP, Inc. and Hercules Holding BV/BVBA.