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COMMISSION FILE NO. 1-496
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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, 2000
Title of the Plan:
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BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN
Issuer of the securities held pursuant to the Plan:
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HERCULES INCORPORATED
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894
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BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
STATEMENT OF NET ASSETS AVAILABLE
FOR BENEFITS
at December 31, 2000 and 1999
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
for the years ended December 31, 2000 and 1999
NOTES TO FINANCIAL STATEMENTS
SUPPLEMENTAL SCHEDULE:
Schedule H, Part IV, Item 4i - Assets Held for Investment Purposes at
December 31, 2000
REPORT OF INDEPENDENT ACCOUNTANTS
EXHIBIT INDEX
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BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31,
2000 1999
---- ----
ASSETS
Investments at fair value $299,133,049 $394,090,238
Contribution receivable 294,808 299,289
Cash 47,013 41,621
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Total Assets 299,474,870 394,431,148
LIABILITIES
Accrued interest payable 294,808 299,289
Loan payable 91,000,000 92,500,000
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Net Assets Available for
Benefits $208,180,062 $301,631,859
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The accompanying notes are an integral part of these financial statements.
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BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended
December 31, 2000
ADDITIONS:
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
INVESTMENT INCOME:
Net depreciation in fair value of
investments $(83,948,908)
Interest 1,448,172
Dividends 4,427,355
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(78,073,381)
CONTRIBUTIONS:
Participant 11,753,808
Employer 8,690,339
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20,444,147
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Total additions: (57,624,753)
DEDUCTIONS:
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants 27,188,884
Interest expense 8,631,507
Administrative expenses 6,653
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Total deductions: 35,827,044
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Net (decrease): (93,451,797)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 301,631,859
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End of year $208,180,062
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The accompanying notes are an integral part of these financial statements.
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NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following description of the BetzDearborn Inc. Employee Stock
Ownership and 401(k) Plan (the Plan) provides only general information.
Participants should refer to the Plan agreement for a more complete description
of the Plan's provisions.
The 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 Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
The BetzDearborn 401(k) program was previously integrated with the
Employee Stock Ownership Plan ("ESOP"). Under the 401(k) provisions of the Plan,
employees can contribute on a pretax basis 2% to 15% of salary, the first 6%
being matched 50% by Hercules Incorporated (the Company) in the form of Hercules
Incorporated common stock.
Participants are immediately vested in their contributions plus actual
earnings thereon. Vesting in the Company's matching contribution portion of
their accounts plus actual earnings thereon is based on years of continuous
service. A participant is 100% vested after 5 years of credited service.
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. If this allocation is not sufficient to satisfy the 401(k)
contributions and dividends the Company is required to fund the shortfall. For
the year ended December 31, 2000 the Company contributed 105,137 shares of
Hercules common stock having a fair market value of $2,004,178 to fund this
shortfall.
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 (the
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 monthly
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 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. 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.
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The Plan presents in the statement of changes in net assets available
for benefits under the net appreciation (depreciation) in fair value of its
investments, which consists of the realized gains or losses and the 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% vested in their accounts.
2. INVESTMENTS
The fair value of the Plan's investments that represent five percent or
more of net assets available for benefits at December 31, 2000 and 1999 are as
follows:
2000 1999
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Hercules Incorporated Common Stock $ 39,325,828 $ 31,915,715
Hercules Incorporated ESOP Stock 105,405,829 156,733,250
The Putnam Fund for Growth & Income 27,210,630 32,693,527
Putnam New Opportunities Fund 20,583,042 30,705,452
Putnam Voyager Fund 50,486,571 71,358,867
Putnam Money Market Fund 17,853,920 23,987,449
Putnam S&P 500 Index Fund 10,683,034 12,629,927
During 2000, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated in
value by ($83,948,908) as follows:
Common stock $(58,425,272)
Mutual funds (25,523,636)
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$(83,948,908)
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3. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed investments is as
follows:
December 31,
2000 1999
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Allocated Unallocated Allocated Unallocated
NET ASSETS:
Investments in Hercules Incorporated
Common stock $ 37,117,587 $ 68,288,242 $ 50,397,120 $ 106,336,130
Contributions receivable -- 294,808 -- 299,289
Accrued interest payable -- (294,808) -- (299,289)
Loan payable -- (91,000,000) -- (92,500,000)
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$ 37,117,587 $ (22,707,275) $ 50,397,120 $ 13,836,130
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Year Ended
December 31, 2000
Allocated Unallocated
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Changes in net assets:
Net (depreciation) in fair value
of investments: $(15,910,623) $(34,419,560)
Dividends -- 3,449,822
Employer contributions 2,004,174 6,686,165
Benefits paid to participants (2,962,016) --
Interest expense -- (8,631,507)
Allocation of shares under
ESOP provision 3,628,325 (3,628,325)
Transfers to other investment
options (39,393) --
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Net Decrease $(13,279,533) $(36,543,405)
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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,
2000, the Plan held 3,582,334 unallocated shares of Common Stock with a fair
value of $ 68,288,242. 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. The Company's common
stock dividends were suspended during the fourth quarter of 2000. Interest was
incurred on the loan at 8.96% from October 16, 1998 to October 03, 2000, 10.45%
from October 4, 2000 to November 13, 2000, and 11.95% from November 14, 2000 to
December 31, 2000. Debt service contributions paid to the ESOP during 2000 and
1999 totaled approximately $10,135,987 and $9,332,800, respectively, including
dividends of $3,449,822 and $6,154,985, respectively. An additional contribution
of $393,019 has been accrued by the Plan and is included in the contribution
receivable recorded at December 31, 2000.
In May of 2001, Hercules Incorporated sold a significant portion of
its Resins business. As part of the Company's existing bank agreement, a
portion of the proceeds from such sales were be used to directly pay down the
ESOP debt. On May 1, 2001, in conjunction with the sale of part of its Resins
business to Eastman Chemical Corporation, Hercules Incorporated pre-paid
$9,845,076 of the ESOP loan. On May 31, 2001, in conjunction with the sale of
another part of its Resins business to GEO Specialty Chemicals, Hercules
Incorporated pre-paid $ 3,582,280 of the ESOP loan. The pre-payments will be
applied on a pro-rata basis to reduce future principal payments on the ESOP
loan.
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.
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.
7. SUBSEQUENT EVENTS
During the 2nd quarter of 2001, Hercules Incorporated sold a
significant portion of its Resins business. As part of the Company's existing
bank agreement, a portion of the proceeds from any such sale must be used to
directly pay down debt. On May 1, 2001, in conjunction with the sale of part of
its Resins business to Eastman Chemical Corporation, Hercules Incorporated paid
$ 9,845,076 of the ESOP loan. On May 31, 2001, in conjunction with the sale of
another part of its Resins business to GEO Specialty Chemicals, Hercules
Incorporated paid $ 3,562,260 of the ESOP loan. The pre-payments will be applied
on a pro-rata basis to reduce future principal payments on the ESOP loan.
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SUPPLEMENTAL SCHEDULES
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BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN
SUPPLEMENTAL SCHEDULE H, ITEM 4i
ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 2000
DESCRIPTION OF
INVESTMENT
INCLUDING MATURITY
IDENTITY OF ISSUE, BORROWER, DATE, RATE OF INTEREST,
OR SIMILAR PARTY PAR, OR MATURITY VALUE COST MARKET
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COMMON STOCK:
*Hercules Incorporated - ESOP 5,529,486 shares $161,860,052 $105,405,829
*Hercules Incorporated Common Stock 2,062,747 shares 40,905,120 39,325,828
MUTUAL FUNDS:
*Putnam Voyager Fund 2,111,525 shares 50,829,402 50,486,571
*Putnam Fund for Growth & Income 1,391,136 shares 27,988,541 27,210,630
*Putnam Money Market Fund 17,853,920 shares 17,853,920 17,853,920
*Putnam New Opportunities Fund 343,853 shares 23,596,350 20,583,042
*Putnam S&P 500 Index Fund 337,217 shares 9,516,822 10,683,024
*Putnam U.S. Government Income Trust 458,357 shares 5,904,284 5,857,792
*Putnam International Growth Fund 324,750 shares 7,533,908 8,053,796
*Putnam OTC & Emerging Growth Fund 424,129 shares 10,782,683 6,009,918
*Putnam Asset Allocation Balanced Fund 169,338 shares 2,058,939 1,833,927
*Putnam Asset Allocation Growth Fund 132,508 shares 1,800,912 1,462,896
*Putnam Asset Allocation Conservative Fund 81,058 shares 836,714 751,413
LOAN FUND:
*Putnam Loan Fund Participant loans;
between
10.5% to 11.5% N/A 3,614,463
interest
Total assets held for investment purposes $361,514,660 $299,133,049
*Indicates party-in-interest to the Plan.
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BETZDEARBORN INC. EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN
SUPPLEMENTAL SCHEDULE H, ITEM 4j
SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 2000
PURCHASE SELLING COST OF GAIN
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE ASSET (LOSS)
CATEGORY (i):
*Putnam Fiduciary Trust OTC & emerging Growth $15,714,173 9,289,755 $25,576,436 (572,508)
*Putnam Fiduciary Trust International Growth 7,941,201 $ 7,173,712 $14,638,151 $ 476,762
Putnam Fiduciary Trust Growth & Income 4,432,911 10,733,653 16,328,844 (1,162,280)
*Putnam Fiduciary Trust New Opportunities $12,975,274 12,539,296 $23,376,999 2,137,571
*Putnam Fiduciary Trust Hercules Incorporated Common Stock 23,124,641 $ 7,612,772 $31,967,977 $(1,230,564)
Putnam Fiduciary Trust Voyager Fund 12,203,961 17,345,970 26,309,532 3,240,399
*Putnam Fiduciary Trust Money Market $14,773,546 20,907,076 $35,860,622 0
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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/ Gaynor Kelley
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Gaynor Kelley, Chairman
Finance Committee, Hercules Incorporated,
Plan Administrator
Date: June 29, 2001
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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 the BetzDearborn Inc. Employee Stock Ownership and 401(k) Plan (the "Plan")
at December 31, 2000 and December 31, 1999, and the changes in net assets
available for benefits for the year ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America. 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 audits of the statements in accordance with auditing
standards generally accepted in the United States of America, 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 our opinion.
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 is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is 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 supplemental schedule is the responsibility of the Plan's management.
The supplemental schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania 19103
June 29, 2001
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EXHIBIT INDEX
NUMBER DESCRIPTION
23.1 Consent of PricewaterhouseCoopers LLP