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November 2000
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SOURCES AND USES
($ in millions)
SOURCES
Senior Notes $ 375
Term D Loan 375
Food Gums Net Proceeds 318
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TOTAL $1,068
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USES
Repay RHINOS $ 200
Repay Trust VI 170
Preferred
Repay Revolver 256
Repay Term Loan A 101
Repay Term Loan C 318
Fees & Expenses 23
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TOTAL $1,068
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THE COMPANY
HERCULES
Market Capitalization: $ 1.9bn
LTM 6/30 Sales: $ 3.1bn
LTM 6/30 EBITDA: $ 638mm
PULP & PAPER BETZDEARBORN AQUALON BUSINESSES FOR SALE
- - Performance and - Water & process - Water-based - Resins
process chemicals treatment chemicals systems for oilfield
for pulp & paper for industrial, services, personal
industry commercial, care, construction - FiberVisions
petroleum and
chemical markets
Sales: $882mm Sales: $843mm Sales: $628mm Sales: $715mm
EBITDA: $199m EBITDA: $187mm EBITDA: $183mm EBITDA: $104mm
Note: LTM figures pro forma for sale of Food Gums
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COMMITMENT TO DELEVERAGING
ASSET SALES COMPLETION EXPECTED EBITDA
IN 2000-01 DATE PROCEEDS MULTIPLE
FOOD GUMS September 2000 $395 million >9x
RESINS Announced / Q1-2001 $500-$550 million 8x - 9x
FIBERVISIONS Q1/2-2001 $250-$300 million 7x - 9x
- - Focus on returning to investment grade rating
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... WITH DIVERSIFIED CUSTOMER BASE
- - DIVERSE CUSTOMER BASE
- No customer accounts for more than 1% of 1999 total sales
- Over 10,000 end-customers in hundreds of industries
- - STRONG CUSTOMER ORIENTATION
- Selling the "process" not the chemical
- - BROAD PRODUCT OFFERING
- "River-to-reel" in paper industry
- Water and process treatment chemicals in BetzDearborn
SALES BY END-MARKET
[PIE CHART]
Pulp & Paper 38%
Architectural Paints 5%
Construction 5%
Refining 6%
Chemicals 9%
Personal Care 3%
Oil Field Services 3%
Other 31%
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SIGNIFICANT STABLE FREE CASH FLOW
- - Capital expenditures of approximately $120 million
- - Adjusted for 1999 USD/EUR exchange rate levels, LTM EBITDA is higher by
approximately $26 million
[BAR CHART]
($ in millions)
1997 1998 1999 LTM LTM ADJUSTED
Pulp & Paper $212 $187 $206 $199 $203
BetzDearborn $175 $214 $199 $187 $191
Aqualon $218 $200 $186 $183 $200
FiberVisions $43 $55 $54 $43 $43
Resins $73 $66 $59 $62 $62
Note: Pro forma to exclude Food Gums and nitrocellulose -- before corporate
expenses.
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[HERCULES LOGO]
BETZDEARBORN
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POSITIVE TRENDS
- - Business is becoming more contract-based, increasing revenue visibility
- 40% of U.S. sales by contract
- BetzDearborn win/loss ratio in bids has increased 100% since 1999 to
4:1
- - Pricing pressure caused by competitive bid situations has softened over
last two quarters
- 5% price increase in July
- Competitors followed suit
- - Restructuring of supply chain nearly complete
- - Significant market and share growth in Asia
- Hercules sales growing by 15-20% annually in
China/India/Asia-Pacific
2000 EBITDA
[BAR CHART]
Q1 $42
Q2 $45
Q3 $53
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[HERCULES LOGO]
AQUALON
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THE BUSINESS
- - Products modify the physical properties of water-based and solvent-soluble
systems
- Examples include oilfield drilling fluids, paint thickening, pharma
tablet binders
- - Products primarily produced from natural resources such as cellulose
- - Business has leading positions globally in Hydroxyethylcellulose (HEC),
Carboxymethylcellulose (CMC), Methylcellulose (MC)
- - Business is global with 40% of sales in Europe
- - Annual volume growth of 2-4%
- - Operating margins of 25-26% in 1999
2000 SALES BY END-MARKET
[PIE CHART]
Construction Materials 23%
Architectural Paints 20%
Food 6%
Other 16%
Oilfield services 8%
Paper Manufacturers 15%
Personal Care 12%
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COMPETITIVE LANDSCAPE
($ in millions)
GLOBAL
SALES PRODUCT POSITION PRIMARY COMPETITORS
- --------------------------------------------------------------------------------
$200 HEC #1 Union Carbide, Akzo, Clariant
110 CMC #2 Noviant, Bayer, Lamberti
110 MC #2-3 Dow, Bayer, Clariant
30 Guar #1 Rhodia
35 HPC #1 Nippon Soda (Japan Only)
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[HERCULES LOGO]
FINANCIAL OVERVIEW
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HISTORICAL PERFORMANCE - REVENUES
[BAR CHART]
9 MONTHS ENDING
-----------------------
1997PF 1998PF 1999 9/30/99 9/30/00
- ---------------------------------------------------------------------------------------
($ in millions)
Pulp & Paper $ 906.0 $ 883.0 $ 884.0 $ 658.0 $ 660.0
BetzDearborn $ 881.0 $ 852.0 $ 846.0 $ 627.0 $ 633.0
Aqualon $ 625.0 $ 589.0 $ 527.0 $ 480.0 $ 454.0
-------- -------- -------- -------- --------
TOTAL $2,412.0 $2,324.0 $2,257.0 $1,765.0 $1,747.0
======== ======== ======== ======== ========
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HISTORICAL PERFORMANCE - EBITDA
[BAR CHART]
9 MONTHS ENDING
--------------------
1997 1998 1999 9/30/99 9/30/00
- -----------------------------------------------------------------------------------
($ in millions)
Pulp & Paper $212.0 $187.0 $208.0 $158.0 $143.0
BetzDearborn $175.0 $214.0 $199.0 $150.0 $140.0
Aqualon $218.0 $200.0 $186.0 $142.0 $133.0
------ ------ ------ ------ ------
TOTAL $605.0 $601.0 $593.0 $450.0 $416.0
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Note: Excludes unallocated corporate overhead
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FINANCIAL REVIEW
- - Based on Reported Q3 results
($ in millions)
- ------------------------------------------------------------------------------------------------------
9 MONTHS ENDED LTM
----------------------- --------
1999 9/30/99 9/30/00 9/30/00
- ------------------------------------------------------------------------------------------------------
REVENUES-- AS REPORTED $ 3,309 $ 2,467 $ 2,435 $ 3,277
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EBITDA-- AS REPORTED 703 560 578 721
UNUSUAL ITEMS 57 18 (90) (51)
ONE-TIME ITEMS 8 -- -- 8
- ------------------------------------------------------------------------------------------------------
ADJUSTED EBITDA 768 578 488 678
LTM FOOD GUMS ADJUSTMENT (1) (75)
CORPORATE ALLOCATION REDUCTION 15
- ------------------------------------------------------------------------------------------------------
PRO FORMA EBITDA $ 618
- ------------------------------------------------------------------------------------------------------
Note: Based on 8-K pro forma adjustments as of June 30, 2000.
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CAPITAL STRUCTURE
($ in millions)
- -------------------------------------------------------------------------------------------
ACTUAL(1) PRO FORMA
9/30/00 9/30/00 MATURITY
- -------------------------------------------------------------------------------------------
Cash $ 366 $ 48 --
- -------------------------------------------------------------------------------------------
DEBT
Revolver 652 396 2003
Term A 1,001 900 2003
Term C 318 -- --
Term D -- 375 2005
Other Secured Debt -- 328 2002 through 2027
Senior Unsecured Notes -- 375 2007
Other Debt 502 174 2002 through 2027
- -------------------------------------------------------------------------------------------
TOTAL LONG-TERM DEBT 2,473 2,548
- -------------------------------------------------------------------------------------------
TRUST PREFERRED
RHINOS 200 -- --
Trust Preferred VI 170 -- --
Crests 260 260 2028
Floating Rate Preferred 362 362 2028
- -------------------------------------------------------------------------------------------
TOTAL PREFERRED 992 622
- -------------------------------------------------------------------------------------------
TOTAL DEBT & PREFERRED 3,147 3,170
- -------------------------------------------------------------------------------------------
Shareholders' Equity 863 863
- -------------------------------------------------------------------------------------------
TOTAL CAPITALIZATION $4,010 $4,033
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(1) After sale of Food Gums
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PRO FORMA CREDIT STATISTICS
As of 9/30/00
- --------------------------------------------------------------------
PRO FORMA
EX - FOOD GUMS
& POST OFFERING
- --------------------------------------------------------------------
Net Senior Secured Debt / LTM EBITDA 3.2x
Net Debt / LTM EBITDA 4.0x
Net Debt & Preferred / LTM EBITDA 5.1x
Net Debt / Total Capitalization 62%
LTM EBITDA / Cash Interest 2.7x
LTM EBITDA Less CapEx / Cash Interest 2.2x
LTM EBITDA / Cash Interest & Pfd Dividends 2.0x
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