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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, 1996
Title of the Plan:
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HERCULES INCORPORATED SAVINGS AND INVESTMENT 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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HERCULES INCORPORATED SAVINGS AND INVESTMENT PLAN
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FINANCIAL STATEMENTS
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STATEMENT OF NET ASSETS AVAILABLE
FOR BENEFITS WITH FUND INFORMATION
at December 31, 1996 and 1995
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS WITH FUND INFORMATION
for the year ended December 31, 1996
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 supplemental schedules
as part of their Financial Statements.
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HERCULES INCORPORATED SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1996
PARTICIPANT DIRECTED
---------------------------------------------------------------------------------
Hercules Blended
Incorporated Interest Rate Fidelity
Common Savings Balanced Magellan
Stock Fund Equity Fund Asset Fund Fund
------------ ------------ ------------ ------------ ------------
Assets
Allocated Share of Master
Savings Trust Investments $ 24,250,083(a) $141,736,081 $ 47,885,550(b) $ 6,210,650(c) $ 27,017,123(d)
Contributions Receivable -- -- 74,634 56,815 39,867
Allocated Share of Master
Savings Trust Cash 271,439 2,358,103 266,683 321,998 501,330
------------ ------------ ------------ ------------ ------------
Total Assets $ 24,521,522 $144,094,184 $ 48,226,867 $ 6,589,463 $ 27,558,320
============ ============ ============ ============ ============
Liabilities
Accounts Payable $ 80,940 $ 646,001 $ 24,332 $ 63,507 $ 20,067
============ ============ ============ ============ ============
Net Assets Available for
Benefits $ 24,440,582 $143,448,183 $ 48,202,535 $ 6,525,956 $ 27,538,253
============ ============ ============ ============ ============
NONPARTICIPANT
PARTICIPANT DIRECTED DIRECTED
------------------------------- ------------
Hercules
Gov't. Bond Incorporated
Fund Loan Fund Common Stock Total
------------ ------------ ------------ ------------
Assets
Allocated Share of Master
Savings Trust Investments $ 2,379,885(e) $ 10,584,045(f) $ 52,563,611(a) $312,627,028
Contributions Receivable -- -- -- 171,316
Allocated Share of Master
Savings Trust Cash 23,381 (222,602) 588,361 4,108,693
------------ ------------ ------------ ------------
Total Assets $ 2,403,266 $ 10,361,443 $ 53,151,972 $316,907,037
============ ============ ============ ============
Liabilities
Accounts Payable $ 5,416 $ 18,385 $ 175,445 $ 1,034,094
============ ============ ============ ============
Net Assets Available for
Benefits $ 2,397,850 $ 10,343,058 $ 52,976,527 $315,872,944
============ ============ ============ ============
(a) At Fair Value. Cost $40,363,347. Shares 1,776,039
(b) At Fair Value. Cost $29,990,475.
(c) At Fair Value. Cost $5,735,246.
(d) At Fair Value. Cost $25,222,593.
(e) At Fair Value. Cost $2,167,946.
(f) Represents Loans to Plan Participants.
The Accompanying Notes are an Integral Part of the Financial Statements.
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HERCULES INCORPORATED SAVINGS AND INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1995
PARTICIPANT DIRECTED
---------------------------------------------------------------------------------
Hercules Blended
Incorporated Interest Rate Fidelity
Common Savings Balanced Magellan
Stock Fund Equity Fund Asset Fund Fund
------------ ------------ ------------ ------------ ------------
Assets
Allocated Share of Master
Savings Trust Investments $ 31,146,381(a) $153,802,968 $ 30,778,359(b) $ 3,771,170(c) $ 26,518,658(d)
Contributions Receivable -- -- 22,496 -- 26,010
Allocated Share of Master
Savings Trust Cash 477,028 4,599,287 182,040 31,468 178,953
------------ ------------ ------------ ------------ ------------
Total Assets $ 31,623,409 $158,402,255 $ 30,982,895 $ 3,802,638 $ 26,723,621
============ ============ ============ ============ ============
Liabilities
Accounts Payable $ 7,198 $ 2,754,984 $ 401,477 $ 1,956 $ 5,833
============ ============ ============ ============ ============
Net Assets Available for
Benefits $ 31,616,211 $155,647,271 $ 30,581,418 $ 3,800,682 $ 26,717,788
============ ============ ============ ============ ============
NONPARTICIPANT
PARTICIPANT DIRECTED DIRECTED
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Hercules
Gov't. Bond Incorporated
Fund Loan Fund Common Stock Total
------------ ------------ ------------ ------------
Assets
Allocated Share of Master
Savings Trust Investments $ 2,726,446(e) $ 9,995,295(f) $ 69,293,417(a) $328,032,694
Contributions Receivable 448 -- -- 48,954
Allocated Share of Master
Savings Trust Cash 25,043 (39,658) 1,061,276 6,515,437
------------ ------------ ------------ ------------
Total Assets $ 2,751,937 $ 9,955,637 $ 70,354,693 $334,597,085
============ ============ ============ ============
Liabilities
Accounts Payable $ 63,032 $ 30,505 $ 11,863 $ 3,276,848
============ ============ ============ ============
Net Assets Available for
Benefits $ 2,688,905 $ 9,925,132 $ 70,342,830 $331,320,237
============ ============ ============ ============
(a) At Fair Value. Cost: $33,427,384. Shares: 1,781,637.
(b) At Fair Value. Cost: $19,235,342.
(c) At Fair Value. Cost $3,580,959.
(d) At Fair Value. Cost: $23,075,217.
(e) At Fair Value. Cost $2,516,930.
(f) Represents Loans to Plan Participants.
The Accompanying Notes are an Integral Part of the Financial Statements.
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HERCULES INCORPORATED SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
YEAR ENDED DECEMBER 31, 1996
PARTICIPANT DIRECTED
--------------------------------------------------------------------------------------------------
Hercules Blended
Incorporated Interest Rate Fidelity
Common Savings Balanced Magellan Gov't. Bond
Stock Fund Equity Fund Asset Fund Fund Fund
------------- ------------- ------------- ------------- ------------- -------------
Contributions
Participating Employees $ 1,824,907 $ 5,640,962 $ 2,225,966 $ 329,132 $ 1,778,636 $ 223,726
Company Contributions -- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Subtotal Contributions 1,824,907 5,640,962 2,225,966 329,132 1,778,636 223,726
Interplan Transfers (1,442,783) (5,576,940) 11,867,982 1,832,607 (257,561) (326,363)
Allocated Share of Master
Savings Trust Investment
Activities:
Cash Dividends 465,296 -- -- 334,229 4,573,843 --
Interest 104 8,903,301 32,245 1,830 -- 1,082
Change in Market Value (6,306,639) -- 8,156,073 407,638 (1,535,925) 129,052
------------- ------------- ------------- ------------- ------------- -------------
Total $ (5,459,115) $ 8,967,323 $ 22,282,266 $ 2,905,436 $ 4,558,993 $ 27,497
Withdrawals (2,024,570) (20,424,094) (4,987,278) (220,727) (2,306,509) (308,730)
Interfund Transfers 308,056 (742,317) 326,129 40,565 (1,432,019) (9,822)
------------- ------------- ------------- ------------- ------------- -------------
Change in Net Assets
Available for Benefits (7,175,629) (12,199,088) 17,621,117 2,725,274 820,465 (291,055)
Net Assets Available for
Benefits, Dec. 31, 1995 31,616,211 155,647,271 30,581,418 3,800,682 26,717,788 2,688,905
------------- ------------- ------------- ------------- ------------- -------------
Net Assets Available for
Benefits, Dec. 31, 1996 $ 24,440,582 $ 143,448,183 $ 48,202,535 $ 6,525,956 $ 27,538,253 $ 2,397,850
============= ============= ============= ============= ============= =============
Nonparticipant
Participant Directed Directed
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Hercules
Incorporated
Loan Fund Common Stock Total
------------- ------------- -------------
Contributions
Participating Employees $ -- $ -- $ 12,023,329
Company Contributions -- 7,782,198 7,782,198
------------- ------------- -------------
Subtotal Contributions -- 7,782,198 19,805,527
Interplan Transfers 427,473 (4,030,596) 2,493,819
Allocated Share of Master
Savings Trust Investment
Activities:
Cash Dividends -- 1,299,863 6,673,231
Interest 634,425 291 9,573,278
Change in Market Value -- (17,622,758) (16,772,559)
------------- ------------- -------------
Total $ 1,061,898 $ (12,571,002) $ 21,773,296
Withdrawals (1,292,787) (5,655,894) (37,220,589)
Interfund Transfers 648,815 860,593 --
------------- ------------- -------------
Change in Net Assets
Available for Benefits 417,926 (17,366,303) (15,447,293)
Net Assets Available for
Benefits, Dec. 31, 1995 9,925,132 70,342,830 331,320,237
------------- ------------- -------------
Net Assets Available for
Benefits, Dec. 31, 1996 $ 10,343,058 $ 52,976,527 $ 315,872,944
============= ============= =============
The Accompanying Notes are an Integral Part of the Financial Statements.
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NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Hercules Incorporated Savings and Investment Plan (the Plan) is a
defined-contribution plan subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
Upon hire, employees are immediately eligible to participate in the Plan
and obtain immediate, nonforfeitable (vested) rights to the full market value of
their account. At time of enrollment in the Plan, a participant, by giving
written notice to the Trustee, shall direct the investment of his monthly
savings in any of the Plan's investment media, or a combination thereof,
providing his monthly savings in any one medium selected is not less than 20% of
the total amount saved and is stated in 5% increments.
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 commingled for investment purposes 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 Plan's allocated share of Master Trust investments in the
accompanying statements of net assets available for Plan benefits represent the
Plan's share of the investments in the Trust, which was 97.68% and 95.83% at
December 31, 1996 and 1995, respectively.
The Plan includes an employee loan provision authorizing participants to
borrow an amount from 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 significant estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. 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
accrued interest, which is equivalent to contract value, which approximates fair
value. The market value of the Equity Fund, the Balanced Asset Fund, the
Government Bond Fund and the Fidelity Magellan Fund 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.
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 up to age 70 in which the distribution is requested.
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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
(under the caption Change in Market Value), which consists of the realized gains
or losses and the change in 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 percent vested in their accounts.
2. INVESTMENT PROGRAM
The following investment medium are available under the Savings and
Investment Plan:
1. Hercules Incorporated Common Stock.
2. A Blended Interest Rate Savings Fund, wherein savings so directed are
deposited with various major insurance companies, who guarantee the
payment of principal. For 1996 and 1995, the blended yield of these
contracts was approximately 6.1% and 6.6%, respectively.
3. Equity Fund. This Fund is made up of substantially all the stocks
that make up the Standard and Poor's 500 Index in such a mix as to
track as closely as possible the movement of the Index.
4. U.S. Government Bond Fund, which invests in U.S. Treasury and Agency
issues and fully insured savings bank deposits.
5. Balanced Asset Management Fund, which invests in a managed portfolio
of stocks, bonds and money market instruments.
6. Fidelity Magellan Fund is a Long-Term Capital Appreciation (Fidelity)
Fund, which invests in common stocks, and securities convertible to
common stock, issued by companies operating in the U.S. and abroad as
well as foreign companies.
The Company contribution, as defined in the Plan, is equal to 50% of
that portion of the participants' contribution which does not exceed 6% of
earnings or base pay and must be invested in common stock of Hercules
Incorporated.
There were 5,288 participants at December 31, 1996 who participated in
one or more of the six investment media. At December 31, 1996 the number of
participants selecting each of the investment media for their contributions was
as follows:
Hercules Incorporated Common Stock ............. 4,257
Blended Interest Rate Savings Fund ............. 3,783
Equity Fund..................................... 1,633
Balanced Asset Fund............................. 437
Fidelity Magellan Fund.......................... 1,236
Government Bond Fund............................ 382
3. INTEREST IN HERCULES INCORPORATED MASTER SAVINGS TRUST
The Plan's allocated share of the Trust's net assets is based upon the
total of each individual Plan's interest in investments of the Trust. The
allocated interest of the net assets of each fund in the Trust at December 31
was as follows:
1996 1995
---- ----
Hercules Incorporated Common Stock.................. 99.2% 99.1%
Blended Interest Rate Savings Fund.................. 96.5% 93.6%
Equity Fund......................................... 98.9% 98.3%
Balanced Asset Fund................................. 100% 100%
Fidelity Magellan Fund.............................. 96.1% 93.2%
Government Bond Fund................................ 100% 100%
Loan Fund........................................... 100% 96.9%
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4. INTERPLAN TRANSFERS
Interplan transfers represent transfers from acquired company plans and
the Hercules Incorporated Employee Savings Plan and rollovers of new employees'
distributions from defined contribution Plans.
5. TAX STATUS
The United States Treasury Department advised on June 21, 1995, that the
Plan as amended through January 1, 1995 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 currently being operated in compliance with the
applicable provisions of the Internal Revenue Code.
6. INVESTMENTS
The Plan's allocated interest in investments in the Trust that represent
five percent or more of net assets available for benefits at December 31, 1996
or 1995 are as follows:
1996 1995
---- ----
Hercules Incorporated Common Stock
(Participant/Nonparticipant) $ 76,813,694 $100,439,798
Bankers Trust Equity Index Fund $ 47,885,550 $ 30,778,359
Fidelity Magellan Fund $ 27,017,123 $ 26,518,658
Group Annuity Contract with Peoples
Life Insurance Company (#BDA 00002TR) $ 21,939,567 $ 20,918,395
Group Annuity Contract with Provident Life and
Accident Insurance Company (#630-05537) $ -- $ 16,790,244
Group Annuity Contract with Metropolitan Life
Insurance Company (#12833) $ 18,295,494 $ 17,635,628
GIC Prudential (#GA 8083) $ 24,581,444 $ 23,286,112
Group Annuity Contract with Transamerica $ 17,580,387 $ --
7. DIVESTITURE
On March 15, 1995 Hercules completed the sale of its Aerospace business
to Alliant Techsystems Inc. (Alliant). The sale agreement provided for a
transfer of Plan assets (approximately $200 million) and assumption of Plan
obligations to Alliant as of April 1, 1995.
8. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
DECEMBER 31,
------------------------------
1996 1995
------------ ------------
Net Assets Available for Benefits
per the financial statements $315,872,944 $331,320,237
Amounts Allocated to Withdrawing Participants (3,388,339) (4,921,995)
------------ ------------
Net Assets Available for Benefits
per the Form 5500 $312,484,605 $326,398,242
============= ============
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The following is a reconciliation of withdrawals per the financial
statements to the Form 5500:
YEAR ENDED
DECEMBER 31, 1996
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Withdrawals per the financial statements $37,220,589
Add: Amounts Allocated to Withdrawing Participants at
December 31, 1996 3,388,339
Less: Amounts Allocated to Withdrawing Participants at
December 31, 1995 (4,921,995)
-----------
Withdrawals per the Form 5500 $35,686,933
===========
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.
9. SUBSEQUENT EVENT
Effective July 1, 1997, the following changes will be made to the
investment medium available under the Plan: the U.S. Government Bond Fund and
Balanced Asset Management Fund are being eliminated, six new fund options (fixed
income fund, diversified conservative fund, diversified moderate growth fund,
equity fund, small cap growth fund, and an international equity fund) will
become available.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors,
Hercules Incorporated,
Wilmington, Delaware
We have audited the accompanying statements of net assets available for benefits
of Hercules Incorporated Savings and Investment Plan as of December 31, 1996 and
1995, and the related statement of changes in net assets available for benefits
for the year ended December 31, 1996. These financial statements are the
responsibility of the Plan's administrators. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits 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 audits provide 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 Hercules
Incorporated Savings and Investment Plan as of December 31, 1996 and 1995, and
the changes in net assets available for benefits for the year ended December 31,
1996 in conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Fund Information in the accompanying
statements of net assets available for benefits of the Hercules Incorporated
Savings and Investment Plan and the related 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 plan benefits and changes in net
assets available for plan benefits of each fund. The Fund Information has been
subjected to the auditing procedures applied in the audits 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.
Coopers & Lybrand L.L.P
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103
June 26, 1997
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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.
HERCULES INCORPORATED SAVINGS AND INVESTMENT PLAN
-------------------------------------------------
H. Eugene McBrayer, Chairman
Finance Committee, Hercules Incorporated,
Plan Administrator
Date: June 26, 1997
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EXHIBIT INDEX
Number Description
23 Consent of Independent Accountants.
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