-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DJF0TmDlpI13Jz62SoH7ur4g+kwiFnjwfDnihcyU7tvhP2g2MoPjsEtSb46HoXou wvcitJm6lSFewPv7PBrFiA== 0000893220-99-000804.txt : 19990713 0000893220-99-000804.hdr.sgml : 19990713 ACCESSION NUMBER: 0000893220-99-000804 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HERCULES INC CENTRAL INDEX KEY: 0000046989 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [2890] IRS NUMBER: 510023450 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-00496 FILM NUMBER: 99662824 BUSINESS ADDRESS: STREET 1: 1313 N MARKET ST STREET 2: HERCULES PLZ CITY: WILMINGTON STATE: DE ZIP: 19894 BUSINESS PHONE: 3025945000 MAIL ADDRESS: STREET 1: HERCULES PLAZA STREET 2: RM 8151 NW CITY: WILMINGTON STATE: DE ZIP: 19894-0001 FORMER COMPANY: FORMER CONFORMED NAME: HERCULES POWDER CO DATE OF NAME CHANGE: 19680321 11-K 1 FORM 11-K HERCULES INC. BETZDEARBORN INC. 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: BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN Issuer of the securities held pursuant to the Plan: HERCULES INCORPORATED Hercules Plaza 1313 North Market Street Wilmington, Delaware 19894 2 BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES 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 years ended December 31, 1998 and 1997 NOTES TO FINANCIAL STATEMENTS SUPPLEMENTAL SCHEDULES: Item 27a - Assets Held for Investment Purposes at December 31, 1998 Item 27d - Schedule of Reportable Transactions for the Year Ended December 31, 1998 REPORT OF INDEPENDENT ACCOUNTANTS EXHIBIT INDEX 2 3 BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401 (k) PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION DECEMBER 31, 1998
NONPARTICIPANT DIRECTED PARTICIPANT DIRECTED -------------- ---------------------------------------------------------------------------------- PUTNAM FUND PUTNAM NEW PUTNAM PUTNAM FOR GROWTH PUTNAM MONEY OPPORTUNITIES S&P 500 ESOP FUND STOCK FUND VOYAGER FUND AND INCOME MARKET FUND FUND INDEX FUND ------------- ----------- ------------ ----------- ------------ ------------- ----------- ASSETS Investments at fair value $159,565,985 $11,670,615 $51,969,856 $40,022,931 $37,019,453 $18,097,287 $10,390,961 Contribution receivable 302,524 -- -- -- -- -- -- Cash 69,551 51,407 -- -- -- -- -- ------------ ----------- ----------- ----------- ----------- ----------- ----------- Total Assets 159,938,060 11,722,022 51,969,856 40,022,931 37,019,453 18,097,287 10,390,961 ------------ ----------- ----------- ----------- ----------- ----------- ----------- LIABILITIES Accrued interest payable 302,524 -- -- -- -- -- -- Loan payable 93,500,000 -- -- -- -- -- -- ------------ ----------- ----------- ----------- ----------- ----------- ----------- Net Assets Available for Benefits $ 66,135,536 $11,722,022 $51,969,856 $40,022,931 $37,019,453 $18,097,287 $10,390,961 ============ =========== =========== =========== =========== =========== ===========
PARTICIPANT DIRECTED ------------------------------------------------------------------------------------------------- PUTNAM ASSET PUTNAM ASSET PUTNAM ASSET PUTNAM U.S. PUTNAM INT'L ALLOCATION ALLOCATION ALLOCATION GOVERNMENT GROWTH PUTNAM LOAN PUTNAM OTC & BALANCED GROWTH CONSERVATIVE INCOME TRUST FUND FUND EMERGING FUND FUND FUND FUND ------------ ------------ ----------- ------------- ------------ ------------ ------------ ASSETS Investments at fair value $9,209,912 $5,034,757 $3,622,167 $2,556,389 $1,643,412 $1,058,525 $891,617 Contribution receivable -- -- -- -- -- -- -- Cash -- -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- -------- Total Assets 9,209,912 5,034,757 3,622,167 2,556,389 1,643,412 1,058,525 891,617 ---------- ---------- ---------- ---------- ---------- ---------- -------- LIABILITIES Accrued interest payable -- -- -- -- -- -- -- Loan payable -- -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- -------- Net Assets Available for Benefits $9,209,912 $5,034,757 $3,622,167 $2,556,389 $1,643,412 $1,058,525 $891,617 ========== ========== ========== ========== ========== ========== ========
TOTAL ------------ ASSETS Investments at fair value $352,753,867 Contribution receivable 302,524 Cash 120,958 ------------ Total Assets 353,177,349 ------------ LIABILITIES Accrued interest payable 302,524 Loan payable 93,500,000 ------------ Net Assets Available for Benefits $259,374,825 ============
The accompanying notes are an integral part of these financial statements. 3 4 BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401 (k) PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION DECEMBER 31, 1997
NONPARTICIPANT DIRECTED PARTICIPANT DIRECTED -------------- ---------------------------------------------------------------------------------- PUTNAM FUND PUTNAM NEW PUTNAM U.S. PUTNAM FOR GROWTH OPPORTUNITIES PUTNAM MONEY GOVERNMENT ESOP FUND STOCK FUND VOYAGER FUND AND INCOME FUND MARKET FUND INCOME TRUST ------------ ----------- ------------ ----------- ------------- ------------ ------------ ASSETS Investments at fair value $159,596,410 $31,315,271 $47,151,542 $41,532,541 $14,092,470 $9,532,006 $6,585,642 Contribution receivable 285,285 -- -- -- -- -- -- Cash 63,148 37,820 -- -- -- -- -- ------------ ----------- ----------- ----------- ----------- ---------- ---------- Total Assets 159,944,843 31,353,091 47,151,542 41,532,541 14,092,470 9,532,006 6,585,642 ------------ ----------- ----------- ----------- ----------- ---------- ---------- LIABILITIES Accrued interest payable 285,285 -- -- -- -- -- -- Loan payable 94,500,000 -- -- -- -- -- -- ------------ ----------- ----------- ----------- ----------- ---------- ---------- Net Assets Available for Benefits $ 65,159,558 $31,353,091 $47,151,542 $41,532,541 $14,092,470 $9,532,006 $6,585,642 ============ =========== =========== =========== =========== ========== ==========
PARTICIPANT DIRECTED ---------------------------------------------------------------------------------------------- PUTNAM ASSET PUTNAM ASSET PUTNAM ALLOCATION ALLOCATION PUTNAM ASSET PUTNAM INT'L PUTNAM LOAN S&P 500 PUTNAM OTC & BALANCED CONSERVATIVE ALLOCATION GROWTH FUND FUND INDEX FUND EMERGING FUND FUND GROWTH FUND FUND ------------ ----------- ---------- ------------- ------------ ------------ ------------ ASSETS Investments at fair value $3,738,088 $3,718,866 $2,992,187 $1,593,400 $1,230,428 $707,287 $623,647 Contribution receivable -- -- -- -- -- -- -- Cash -- -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- -------- -------- Total Assets 3,738,088 3,718,866 2,992,187 1,593,400 1,230,428 707,287 623,647 ---------- ---------- ---------- ---------- ---------- -------- -------- LIABILITIES Accrued interest payable -- -- -- -- -- -- -- Loan payable -- -- -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- -------- -------- Net Assets Available for Benefits $3,738,088 $3,718,866 $2,992,187 $1,593,400 $1,230,428 $707,287 $623,647 ========== ========== ========== ========== ========== ======== ========
TOTAL ------------ ASSETS Investments at fair value $324,409,785 Contribution receivable 285,285 Cash 100,968 ------------ Total Assets 324,796,038 ------------ LIABILITIES Accrued interest payable 285,285 Loan payable 94,500,000 ------------ Net Assets Available for Benefits $230,010,753 ============
The accompanying notes are an integral part of these financial statements. 4 5 BETZDEARB0RN INC. EMPLOYEE STOCK OWNERSHIP AND 401 (k) PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION YEAR ENDED DECEMBER 31, 1998
NONPARTICIPANT PARTICIPANT DIRECTED DIRECTED ------------- ------------ ESOP FUND STOCK FUND ------------ ------------ NET ASSETS AT DECEMBER 31, 1997 $ 65,159,558 $ 31,353,091 Add: Contributions from employer 1,720,846 Contributions from employees 1,286,732 Loan repayments from employees 258,127 Investment income 7,260,929 736,917 Deduct: Loans issued (305,413) Benefit payments (4,177,403) (1,999,324) Interest expense (7,975,372) Administrative expenses (1,359) Change in market value 4,146,978 7,052,218 Interfund transfers 0 (26,658,967) ------------ ------------ NET ASSETS AT DECEMBER 31, 1998 $ 66,135,536 $ 11,722,022 ============ ============
PARTICIPANT DIRECTED ---------------------------------------------------------------------------------------- PUTNAM FUND PUTNAM NEW PUTNAM U.S. PUTNAM VOYAGER FOR GROWTH PUTNAM MONEY OPPORTUNITIES PUTNAM S&P 500 GOVERNMENT FUND AND INCOME MARKET FUND FUND INDEX FUND INCOME TRUST -------------- ------------ ------------ ------------ -------------- ------------ NET ASSETS AT DECEMBER 31, 1997 $ 47,151,542 $ 41,532,541 $ 9,532,006 $ 14,092,470 $ 2,992,187 $ 6,585,642 Add: Contributions from employer Contributions from employees 3,445,865 2,824,770 1,048,148 2,133,761 944,489 490,641 Loan repayments from employees 572,428 421,251 291,025 329,065 88,254 76,379 Investment income 3,516,897 3,629,668 861,134 549,114 442,314 Deduct: Loans issued (612,748) (437,091) (232,816) (303,917) (53,095) (75,163) Benefit payments (3,434,858) (3,755,049) (4,372,438) (1,515,577) (391,453) (646,524) Interest expense Administrative expenses (2,465) (1,767) (999) (1,035) (246) (308) Change in market value 6,854,906 1,914,643 3,045,853 1,533,987 320 Interfund transfers (5,521,711) (6,106,035) 29,893,393 (232,447) 5,276,838 2,336,611 ------------ ------------ ------------ ------------ ------------ ----------- NET ASSETS AT DECEMBER 31, 1998 $ 51,969,856 $ 40,022,931 $ 37,019,453 $ 18,097,287 $ 10,390,961 $ 9,209,912 ============ ============ ============ ============ ============ ===========
PARTICIPANT DIRECTED ------------------------------------------------------------------------------------ PUTNAM ASSET PUTNAM ASSET PUTNAM ASSET ALLOCATION ALLOCATION ALLOCATION PUTNAM INT'L PUTNAM LOAN PUTNAM OTC & BALANCED GROWTH CONSERVATIVE GROWTH FUND FUND EMERGING FUND FUND FUND FUND ----------- ----------- ------------- ------------ ------------ ------------ NET ASSETS AT DECEMBER 31, 1997 $ 3,738,088 $ 3,718,866 $ 1,593,400 $ 1,230,428 $ 623,647 $ 707,287 Add: Contributions from employer Contributions from employees 554,160 460,228 180,605 492,890 57,574 Loan repayments from employees 68,343 (2,250,712) 53,385 26,708 50,902 14,845 Investment income 144,917 370,047 79,802 52,816 27,454 47,139 Deduct: Loans issued (32,108) 2,120,878 (42,805) (6,454) (14,850) (4,418) Benefit payments (357,487) (336,912) (63,991) (117,138) (42,526) (360,481) Interest expense Administrative expenses (104) (144) (44) (84) (38) Change in market value 555,329 218,257 111,311 91,874 33,665 Interfund transfers 363,619 258,257 165,180 (170,782) 396,044 ----------- ----------- ----------- ----------- ----------- ------------ NET ASSETS AT DECEMBER 31, 1998 $ 5,034,757 $ 3,622,167 $ 2,556,389 $ 1,643,412 $ 1,058,525 $ 891,617 =========== =========== =========== =========== =========== ============
TOTAL ------------- NET ASSETS AT DECEMBER 31, 1997 $ 230,010,753 Add: Contributions from employer 1,720,846 Contributions from employees 13,919,863 Loan repayments from employees -- Investment income 17,719,148 Deduct: Loans issued -- Benefit payments (21,571,161) Interest expense (7,975,372) Administrative expenses (8,593) Change in market value 25,559,341 Interfund transfers -- ------------- NET ASSETS AT DECEMBER 31, 1998 $ 259,374,825 =============
The accompanying notes are an integral part of these financial statements. 5 6 BETZDEARB0RN INC. EMPLOYEE STOCK OWNERSHIP AND 401 (k) PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION YEAR ENDED DECEMBER 31, 1997
NONPARTICIPANT PARTICIPANT DIRECTED DIRECTED -------------- ------------ ESOP FUND STOCK FUND ------------ ------------ NET ASSETS AT DECEMBER 31, 1996 $ 66,941,910 $ 31,913,196 Add: Contributions from employer 1,491,159 Contributions from employees 2,156,742 Loan repayments from employees 295,157 Investment income 7,664,996 801,842 Deduct: Loans issued (626,441) Benefit payments (2,150,392) (1,583,746) Interest expense (8,136,392) Administrative expenses (3,711) Change in market value (651,723) 1,546,956 Interfund transfers 0 (3,146,904) ------------ ------------ NET ASSETS AT DECEMBER 31, 1997 $ 65,159,558 $ 31,353,091 ============ ============
PARTICIPANT DIRECTED ---------------------------------------------------------------------------------------- PUTNAM FUND FOR PUTNAM NEW PUTNAM U.S. PUTNAM VOYAGER GROWTH AND OPPORTUNITIES PUTNAM MONEY GOVERNMENT PUTNAM INT'L FUND INCOME FUND MARKET FUND INCOME TRUST GROWTH FUND -------------- ------------ ------------- ----------- ------------ ------------ NET ASSETS AT DECEMBER 31, 1996 $ 38,799,167 $ 30,892,121 $ 10,462,397 $ 8,775,990 $ 5,673,604 $-- Add: Contributions from employer Contributions from employees 4,124,564 3,298,257 2,432,482 785,031 660,589 279,792 Loan repayments from employees 519,749 366,279 269,244 135,966 65,583 26,724 Investment income 2,815,139 5,291,160 311,138 478,026 383,362 230,250 Deduct: Loans issued (723,142) (518,221) (203,781) (181,697) (87,156) (23,929) Benefit payments (2,201,597) (2,084,107) (507,977) (1,228,465) (453,293) (18,769) Interest expense Administrative expenses (6,569) (5,128) (2,311) (1,748) (910) (229) Change in market value 6,902,946 2,600,563 2,067,671 8 123,614 (129,709) Interfund transfers (3,078,715) 1,691,617 (736,393) 768,895 220,249 3,373,958 ------------ ------------ ------------ ----------- ----------- ----------- NET ASSETS AT DECEMBER 31, 1997 $ 47,151,542 $ 41,532,541 $ 14,092,470 $ 9,532,006 $ 6,585,642 $ 3,738,088 ============ ============ ============ =========== =========== ===========
PARTICIPANT DIRECTED --------------------------------------------------------------------------------------- PUTNAM ASSET PUTNAM ASSET ALLOCATION PUTNAM ASSET PUTNAM LOAN PUTNAM S&P 500 PUTNAM OTC & ALLOCATION CONSERVATIVE ALLOCATION FUND INDEX FUND EMERGING FUND BALANCED FUND FUND GROWTH FUND ----------- -------------- ------------- ------------- ------------ ------------ NET ASSETS AT DECEMBER 31, 1996 $ 2,880,805 $ -- $ -- $ -- $ -- $ -- Add: Contributions from employer Contributions from employees -- 390,774 271,557 69,177 17,707 167,916 Loan repayments from employees (1,814,470) 27,723 44,025 9,876 3,004 13,331 Investment income 316,733 99,000 28,704 45,938 Deduct: Loans issued 2,483,603 (16,953) (13,770) (11,567) (24,293) (4,820) Benefit payments (147,805) (247,296) (4,345) (6,841) (6,325) (24,969) Interest expense Administrative expenses (181) (135) (80) (32) (96) Change in market value 280,577 115,498 (33,437) (15,547) (15,210) Interfund transfers 0 2,557,543 1,180,570 1,104,300 704,069 441,557 ----------- ----------- ----------- ----------- --------- ------------ NET ASSETS AT DECEMBER 31, 1997 $ 3,718,866 $ 2,992,187 $ 1,593,400 $ 1,230,428 $ 707,287 $ 623,647 =========== =========== =========== =========== ========= ============
--------------- PUTNAM GLOBAL GROWTH FUND TOTAL ------------- ------------- NET ASSETS AT DECEMBER 31, 1996 $ 4,171,205 $ 200,510,395 Add: Contributions from employer 1,491,159 Contributions from employees 492,721 15,147,309 Loan repayments from employees 37,809 -- Investment income 18,466,288 Deduct: Loans issued (47,833) -- Benefit payments (208,779) (10,874,706) Interest expense (8,136,392) Administrative expenses (322) (21,452) Change in market value 635,945 13,428,152 Interfund transfers (5,080,746) -- ------------ ------------- NET ASSETS AT DECEMBER 31, 1997 $ -- $ 230,010,753 ============ =============
The accompanying notes are an integral part of these financial statements. 6 7 NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF PLAN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The BetzDearborn Inc. Employee Stock Ownership and 401(k) Plan ("Plan") is a defined contribution plan, which covers substantially all domestic employees of the former BetzDearborn Inc. who have attained age 21. (See Note 2.) The BetzDearborn 401(k) program was previously integrated with the Employee Stock Ownership Plan ("ESOP"). Under the 401(k) provisions of the Plan, employees could contribute on a pretax basis 2% to 15% of salary, the first 4% being matched 25% by BetzDearborn through the date of acquisition. This was continued by Hercules through year-end 1998. Beginning January 1, 1999, the Company match was increased to 50% of the first 6% of the participants' contribution. The company's match is made in the form of Hercules Common Stock since the acquisition date. Previously, the match was in BetzDearborn Inc. Series A ESOP Convertible Preferred shares. As of October 15, 1998, all preferred shares were exchanged for Hercules common shares. After satisfying the 401(k) matching contributions and dividends, the remaining allocable common shares are allocated to individual participants' accounts as of December 31st of each plan year based on the participants' eligible compensation as a percentage of total eligible compensation. The number of shares released for allocation in a plan year is equal to the number of previously unreleased shares multiplied by a fraction. The numerator of the fraction is the amount of principal and interest paid on the loan for the Plan year, and the denominator of the fraction is the sum of the numerator plus the principal and interest to be paid on the loan for all future plan years during the term of the loan. 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 participants' 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 held by Putnam Fiduciary Trust Company (Trustee). The Trustee also performs recordkeeping for the Plan. The Plan includes an employee loan provision authorizing participants to borrow up to 50% of withholdings and earnings, up to $50,000. The loans are executed by promissory notes and have a minimum term of 12 months and a maximum term of 60 months. The loans bear interest at a rate of 2% over prime, set on the first day of each quarter. The loans are repaid over the term in bi-weekly installments of principal and interest by payroll deduction. A participant also has the right to repay the loan in full at any time without penalty. 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. Marketable securities and investments in various mutual funds are stated at aggregate fair value as determined from quoted market prices. Series A ESOP Convertible Preferred Stock of the former BetzDearborn Inc. was stated at aggregate current value as determined by an independent securities appraisal company. 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. 7 8 The Plan presents the net appreciation (depreciation) in fair value of its investments and realized gains and losses on sales of investments in the statement of changes in net assets available for benefits under "Change in Market Value." Although it has not expressed any intent to do so, Hercules 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% vested in their accounts. 2. ACQUISITION On October 15, 1998, Hercules Incorporated acquired all of the outstanding common stock of BetzDearborn Inc. for $72 per share and exchanged $186 million in Hercules Common Stock for the Series A Convertible Preferred shares held by the BetzDearborn ESOP Trust. Hercules became the sponsor of the BetzDearborn ESOP and related trust as a long-term benefit for substantially all of BetzDearborn's U.S. employees. 3. INVESTMENTS The following investment media are available under the BetzDearborn Inc. Employee Stock Ownership and 401(k) Plan: 1. The Stock Fund invests in Hercules Incorporated Common Stock as of October 15, 1998. Previously, the Stock Fund invested in BetzDearborn Inc. Common Stock. 2. Putnam Voyager Fund invests in a combination of stocks of small companies expected to grow over time as well as stocks of larger, more established corporations. 3. The Putnam Fund for Growth and Income invests mainly in attractively priced stocks of companies that offer long-term growth potential while also providing income. 4. Putnam Money Market Fund invests in short-term, high-quality money market securities in an attempt to provide current income and safety of principal. 5. Putnam New Opportunities Fund invests in a portfolio of stocks in certain emerging industry groups that Putnam believes offer above-average long-term growth potential. 6. Putnam S&P 500 Index Fund seeks a return, before the assessment of fees, that closely approximates the return of the S&P 500 Index, which is an indicator of U.S. stock market performance. 7. Putnam U.S. Government Income Trust seeks current income consistent with capital preservation by investing mostly in securities backed by the full faith and credit of the U.S. government. 8. Putnam International Growth Fund seeks capital appreciation by investing in a diversified portfolio of stocks of companies located mainly outside the United States. 9. Putnam OTC & Emerging Growth Fund invests mainly in stocks of small to midsize emerging growth companies. 10. Putnam Asset Allocation Balanced Portfolio is designed for the investor who is willing to accept a moderate level of risk in a portfolio balanced between stocks and bonds. 11. Putnam Asset Allocation Growth Portfolio is designed for the investor who is willing to accept a higher level of risk and/or whose investment horizon is long term. 12. Putnam Asset Allocation Conservative Portfolio is designed for the investor who is concerned with preserving not only principal but also the purchasing power of assets. 8 9 There were 4,366 participants at December 31, 1998 who participated in one or more of the investment media. At December 31, 1998 the number of participants in each of the investment media was as follows: ESOP ................................................... 3,739 Putnam Voyager Fund..................................... 2,509 The Putnam Fund for Growth and Income................... 2,421 Putnam Money Market Fund................................ 2,224 Putnam New Opportunities Fund........................... 1,672 Stock Fund ............................................. 1,252 Putnam U.S. Government Income Trust..................... 1,087 Putnam S&P 500 Index Fund............................... 873 Putnam International Growth Fund........................ 621 Putnam OTC & Emerging Growth Fund....................... 502 Putnam Asset Allocation Growth Portfolio................ 240 Putnam Asset Allocation Balanced Portfolio.............. 188 Putnam Asset Allocation Conservative Portfolio.......... 121 4. ESOP LOAN, COMPANY LOAN GUARANTEE, AND EMPLOYER CONTRIBUTIONS The ESOP loan is secured by the unallocated shares of Hercules Incorporated Common Stock and is guaranteed by the Company. At December 31, 1998, the Plan held 4,052,556 unallocated shares of the Common Stock with a fair value of $110,938,723. The Company is required to make contributions to the Plan which, together with dividends received on stock held by the Plan, are sufficient to enable the Plan to service its indebtedness. Interest was incurred on the loan at 8.56% from January 1, 1997 to December 2, 1997; 8.36% from December 3, 1997 to October 15, 1998; and 8.96% from October 16, 1998 to December 31, 1998. Debt service contributions paid to the ESOP during 1998 and 1997 totaled $8,958,133 and $9,123,600, respectively, including dividends of $7,246,126 and $7,653,633, respectively. An additional contribution of $302,524 has been accrued by the Plan and is included in the contribution receivable recorded at December 31, 1998. The ESOP loan matures on June 19, 2009 and requires principal payments of $1,000,000 in 1999, $1,500,000 in 2000, $2,500,000 in 2001, $4,000,000 in 2002, $5,000,000 in 2003, and $79,500,000 thereafter. The Company is obligated to maintain certain financial ratios and meet certain net worth and indebtedness tests. 5. TRANSACTIONS WITH PARTIES-IN-INTEREST In accordance with the Plan document, the Company will pay substantially all administrative expenses reasonably incurred in connection with the Plan. It is impractical to allocate common expenses of the Company and the Plan. However, certain employees of the Company are involved in the operation of the Plan. Trustee's and other expenses directly applicable to the Plan and paid by the Company amounted to approximately $221,000 and $130,000 in 1998 and 1997, respectively. 6. TAX STATUS The United States Treasury Department advised on April 2, 1999, that the Plan as amended through April 9, 1998 is a qualified plan under Section 401(a) of the Internal Revenue Code and whose trust 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. 9 10 SUPPLEMENTAL SCHEDULES 10 11 BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN SUPPLEMENTAL SCHEDULE ITEM 27a ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1998
DESCRIPTION OF INVESTMENT INCLUDING MATURITY IDENTITY OF ISSUE, BORROWER, DATE, RATE OF INTEREST, OR SIMILAR PARTY PAR, OR MATURITY VALUE COST MARKET - ---------------------------------------------------------------------------------------------------------- COMMON STOCK: *Hercules Incorporated - ESOP 5,828,894 shares $184,338,786 $159,565,985 *Hercules Incorporated 426,323 shares 5,803,883 11,670,615 MUTUAL FUNDS: * Putnam Voyager Fund 2,370,887 units 36,276,502 51,969,856 * Putnam Fund for Growth & Income 1,953,290 units 33,703,511 40,022,931 * Putnam Money Market Fund 37,019,453 units 37,019,453 37,019,453 * Putnam New Opportunities Fund 309,725 units 14,198,712 18,097,287 * Putnam S&P 500 Index Fund 359,175 units 8,826,234 10,390,961 * Putnam U.S. Government Income Trust 7,019,744 units 9,200,767 9,209,912 * Putnam International Growth Fund 261,817 units 4,704,679 5,034,757 * Putnam OTC & Emerging Fund 148,196 units 2,280,021 2,556,389 * Putnam Asset Allocation Balanced Fund 136,836 units 1,568,407 1,643,412 * Putnam Asset Allocation Growth Fund 77,661 units 991,683 1,058,525 * Putnam Asset Allocation Conservative Fund 85,897 units 883,252 891,617 LOAN FUND: * Putnam Loan Fund Participant loans; between 8% to 10.5% interest 0 3,622,167 --------------------------- Total assets held for investment purposes $339,795,890 $352,753,867 ===========================
*Indicates party-in-interest to the Plan. 11 12 BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN SUPPLEMENTAL SCHEDULE 27d SCHEDULE OF REPORTABLE TRANSACTIONS YEAR ENDED DECEMBER 31, 1998
PURCHASE IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PRICE - -------------------------- -------------------- ----- CATEGORY (i): INDIVIDUAL TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS *Putnam Fiduciary Trust Putnam Money Market Fund: Purchased 45,509,097 units $ 45,509,097 *Putnam Fiduciary Trust BetzDearborn Inc. Common Stock: Sold 867,799 shares $ -- *Putnam Fiduciary Trust BetzDearborn Inc. Series A ESOP Convertible Preferred Stock: Sold 468,747 shares $ -- *Putnam Fiduciary Trust Hercules, Inc. Common Stock: Purchased 5,890,872 shares $186,298,848 CATEGORY (iii): SERIES OF SECURITIES TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS *Putnam Fiduciary Trust Putnam Money Market Fund: Purchased 61,629,861 units in 443 transactions; Sold 34,142,666 units in 321 transactions $ 61,629,861 *Putnam Fiduciary Trust Putnam Fund for Growth and Income Sold 820,068 units in 368 transactions $ -- *Putnam Fiduciary Trust BetzDearborn Inc. Common Stock: Purchased 483,085 shares in 222 transactions; Sold 995,025 shares in 289 transactions $ 28,603,844 *Putnam Fiduciary Trust BetzDearborn Inc. Series A ESOP Convertible Preferred Stock: Sold 475,371 shares in 37 transactions $ -- SELLING COST OF GAIN IDENTITY OF PARTY INVOLVED PRICE ASSET (LOSS) - -------------------------- ----- ----- ------ CATEGORY (i): INDIVIDUAL TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS *Putnam Fiduciary Trust $ -- $ -- $ -- *Putnam Fiduciary Trust $ 62,481,589 $42,383,851 $20,097,738 *Putnam Fiduciary Trust $186,298,848 $93,749,420 $92,549,428 *Putnam Fiduciary Trust $ -- $ -- $ -- CATEGORY (iii): SERIES OF SECURITIES TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS *Putnam Fiduciary Trust $ 34,142,666 $34,142,666 $ -- *Putnam Fiduciary Trust $16,699,026 $14,286,849 $ 2,412,177 *Putnam Fiduciary Trust $ 69,960,684 $48,507,529 $21,453,155 *Putnam Fiduciary Trust $188,562,520 $95,074,262 $93,488,258
There were no category (ii) or (iv) reportable transactions during 1998. *Indicates party-in-interest to the Plan. 12 13 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. BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN /S/ H. EUGENE McBRAYER _____________________________________________ H. Eugene McBrayer, Chairman Finance Committee, Hercules Incorporated, Plan Administrator Date: June 29, 1999 14 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors, Hercules Incorporated, Wilmington, Delaware In our opinion, the accompanying statement 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 BetzDearborn Inc. Employee Stock Ownership and 401(k) Plan (the "Plan") at December 31, 1998, and the changes in net assets available for benefits for the year then ended 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 audit. We conducted our audit of the 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 audit provides a reasonable basis for the opinion expressed above. The financial statements of the Plan as of December 31, 1997 and for the year then ended were audited by other independent accountants whose report dated June 15, 1998 expressed an unqualified opinion on those statements. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of Assets Held for Investment Purposes and Reportable Transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The fund information in the statement 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 benefits and changes in net assets available for benefits of each fund. The supplemental schedules and fund information are the responsibility of the Plan's management. The supplemental schedules and fund information have been subjected to the auditing procedures applied in the audit 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 15 REPORT OF INDEPENDENT AUDITORS To the Board of Directors, Hercules Incorporated, Wilmington, Delaware We have audited the accompanying statement of net assets available for benefits of the BetzDearborn Inc. Employee Stock Ownership and 401(k) Plan as of December 31,1997 and the related statement of changes in net assets available for benefits for the year then ended. 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 audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31,1997 and the changes in its net assets available for benefits for the year then ended, in conformity with generally accepted accounting principles. Our audit of the 1997 financial statements was conducted for the purpose of forming an opinion on the basic 1997 financial statements taken as a whole. The fund information in the statement of net assets available for benefits at December 31,1997 and in the statement of changes in net assets available for benefits for the year ended December 31, 1997 is presented for purposes of additional analysis rather than to present the net assets available for benefits and the changes in net assets available for benefits of each fund. The fund information is the responsibility of the Plan's management. The 1997 fund information has been subjected to the auditing procedures applied in our audit of the basic 1997 financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic 1997 financial statements taken as a whole. /s/ Ernst & Young LLP Philadelphia, Pennsylvania June 15, 1998 16 EXHIBIT INDEX NUMBER DESCRIPTION 23.1 Consent of PricewaterhouseCoopers LLP 23.2 Consent of Ernst & Young LLP EX-23.1 2 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-68863) 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 July 9, 1999 EX-23.2 3 CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-68863) of Hercules Incorporated pertaining to the BetzDearborn Inc. Employee Stock Ownership and 401(k) Plan of our report dated June 15, 1998, with respect to the financial statements of the BetzDearborn Inc. Employee Stock Ownership and 401(k) Plan as of December 31, 1997 and for the year then ended, included in this Annual Report (Form 11-K) for the year ended December 31, 1998. /s/ Ernst & Young LLP Philadelphia, Pennsylvania July 9, 1999 -----END PRIVACY-ENHANCED MESSAGE-----