1
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:
HERCULES INCORPORATED SAVINGS AND INVESTMENT PLAN
Issuer of the securities held pursuant to the Plan:
HERCULES INCORPORATED
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894
2
HERCULES INCORPORATED SAVINGS AND INVESTMENT PLAN
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS AVAILABLE
FOR BENEFITS
at December 31, 2000 and 1999
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
for the year ended December 31, 2000
NOTES TO FINANCIAL STATEMENTS
SUPPLEMENTAL SCHEDULES
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.
REPORT OF INDEPENDENT ACCOUNTANTS
EXHIBIT INDEX
1
3
HERCULES INCORPORATED SAVINGS AND INVESTMENT PLAN STATEMENT OF
NET ASSETS AVAILABLE FOR BENEFITS
December 31,
2000 1999
INTEREST IN HERCULES INCORPORATED
MASTER SAVINGS TRUST: $ 298,358,404 $ 341,263,128
----------- ----------
NET ASSETS AVAILABLE FOR BENEFITS: $ 298,358,404 $ 341,263,128
=========== ==========
The accompanying notes are an integral part of these financial statements.
2
4
HERCULES INCORPORATED SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended
December 31, 2000
ADDITIONS:
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
INVESTMENT INCOME (LOSS):
Decrease in net interest in Hercules
Incorporated Master Savings Trust $ (21,396,702)
Contributions:
Participant 12,683,695
Employer 4,268,721
-------------
16,952,416
-------------
Total additions (4,444,286)
DEDUCTIONS:
Deductions from net assets attributed to:
Benefits paid to participants 34,105,704
Administrative expenses 494,718
Transfer to other plans 3,860,016
-------------
Total deductions 38,460,438
-------------
Net decrease (42,904,724)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 341,263,128
-------------
End of year $ 298,358,404
=============
The accompanying notes are an integral part of these financial statements.
3
5
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following description of the Hercules Incorporated Savings and
Investments Plan (the Plan) provides only general information. The Plan is a
defined contribution plan subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA). Participants should refer to the Plan
agreement for a more complete description of the Plan's provisions.
Upon hire, substantially all domestic Hercules Incorporated (the
Company) employees are eligible to participate in the Plan and obtain immediate,
non-forfeitable (vested) rights to the full market value of their account. At
time of enrollment in the Plan, participants may elect to contribute up to 15%
of their annual wages on either a pre- or post-tax basis, or a combination
thereof. The Company makes matching contributions in the form of Hercules
Incorporated common stock, equal to 50% of the first 6% of the annual wages that
an employee contributes to the Plan. Participants direct the investment of their
monthly savings in any of the Plan's investment options, or a combination
thereof.
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 Plan includes an employee loan provision authorizing participants to
borrow a minimum of $1,000 up to a maximum, equal to the lesser of $50,000 or
50% of their vested balances in the Plan. The loans are executed by promissory
notes and have a minimum term of 12 months and a maximum term of 60 months,
except for qualified residential loans, which have a maximum term of 120 months.
The loans bear an interest rate equal to the average rate charged by selected
major banks to prime customers for secured loans. 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. 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
investment earnings less withdrawals, which is equivalent to contract 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 valued at the net asset value
of the shares held by the Plan at year end, which 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.
The Plan presents in the statement of changes in net assets available
for benefits its allocated share of the Trust's investment activities, which
includes the net appreciation (depreciation) in fair value of its investments,
which consists of the realized gains or losses and the change in unrealized
appreciation (depreciation) on those investments.
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, in which the distribution is
requested.
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.
2. INVESTMENTS IN MASTER TRUST
The assets of the Plan are held in the Hercules Incorporated Master
Savings Trust (the Trust) with the assets of the Hercules Incorporated Employee
Savings Plan. The assets of the Trust are held by Bankers Trust Company
(Trustee). 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 fair
value of the Plan's interest in the Trust is based on the beginning of the year
value of the Plan's interest in the Trust plus contributions, and allocated
investment income less actual distributions. The Plan's share of the net assets
of the Trust was approximately 98% and 97% at both December 31, 2000, and 1999,
respectively Recordkeeping for the Plan is performed by MetLife's Defined
Contribution Group.
4
6
The following table presents the fair values of investments for the
Trust:
December 31,
2000 1999
Hercules Incorporated Common Stock.......... $ 58,451,380 $ 55,786,379
Mutual Funds................................ 145,542,269 178,488,853
Blended Interest Rate Fund.................. 94,599,576 109,620,622
Loan Fund 7,060,823 8,092,771
------------- ------------
Total.................................... $305,654,048 $351,988,625
============= ============
Investment income for the Trust for the year ended December 31, 2000 is
as follows:
Net (depreciation) in fair value of investments:
Hercules Incorporated Common Stock ............. $(14,573,231)
Mutual Funds..................................... (21,077,180)
------------
(35,650,411)
Interest ......................................... 6,520,700
Dividends......................................... 7,471,218
------------
Total............................. $(21,658,493)
============
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
Interest in the Hercules Incorporated
Master Savings Trust investment in
Hercules Incorporated common stock: $ 15,031,565 $ 15,641,111
Year Ended
December 31, 2000
Decrease in net interest in Hercules
Incorporated Master Savings Trust $ (3,774,165)
Employer contributions 4,231,226
Benefits paid to participants (886,334)
Interfund transfers (180,273)
--------------
Net decrease $ (609,546)
==============
4. 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.
5
7
5. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits
for the Plan, per the financial statements to the Form 5500:
December 31,
2000 1999
Net Assets Available for Benefits
per the financial statements $ 298,358,404 $ 341,263,128
Amounts Allocated to Withdrawing Participants (144,668) (132,738)
-------------- --------------
Net Assets Available for Benefits
per the Form 5500 $ 298,213,736 $ 341,130,390
============== ==============
The following is a reconciliation of withdrawals per the financial
statements to the Form 5500:
Year Ended
December 31, 2000
Benefits paid to participants per the financial statements $34,105,704
Add: Amounts Allocated to Withdrawing Participants at
December 31, 2000 144,668
Less: Amounts Allocated to Withdrawing Participants at
December 31, 1999 (132,738)
-------------
Benefits paid to participants per the Form 5500 $34,117,634
=============
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.
6. PLAN TRANSFERS
On September 29, 2000, Hercules Incorporated entered into an agreement
with Lehman Brothers to form CP Kelco, a joint venture combining Hercules' Food
Gums Division and the Kelco Biogums unit of Pharmacia Corporation. Pursuant to
the formation of the joint venture, approximately 32 former Hercules
Incorporated Savings and Investment Plan participants joined CP Kelco. Their
Hercules Incorporated Savings and Investment Plan account balances, having a
fair market value of $ 3,860,015.91, were transferred to CP Kelco's defined
contribution plan as a plan to plan transfer.
7. SUBSEQUENT EVENTS
After the close of business on January 31, 2001, the Hercules
Incorporated Employee Savings Plan merged into the Hercules Incorporated Savings
& Investment Plan. Pursuant to the merger, approximately 194 participants with
assets having a fair market value of $ 7,345,810 million at the time of the
merger, became part of the Hercules Incorporated Savings & Investment Plan.
Under the Hercules Incorporated Savings & Investment Plan, former
Hercules Incorporated Employee Savings Plan participants underwent changes to
their benefits. Under the former plan, participants could make contributions on
a post-tax basis only. The employer match was 2.5% of the first 10% of employee
contributions, and was a participant-directed investment. The former Hercules
Incorporated Employee Savings Plan participants are now subject to the
provisions of this plan.
6
8
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 Hercules Incorporated Savings and Investment 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 audits. We
conducted our audits of these 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 audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania 19103
June 29, 2001
9
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 SAVINGS AND INVESTMENT PLAN
/s/ Gaynor Kelley
Gaynor Kelley, Chairman
Finance Committee, Hercules Incorporated,
Plan Administrator
Date: June 29, 2001
10
EXHIBIT INDEX
Number Description
23 Consent of Independent Accountants.