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, 1997
Title of the Plan:
---------------------------
HERCULES INCORPORATED EMPLOYEE SAVINGS PLAN
Issuer of the securities held pursuant to the Plan:
------------------------------------------------------------------
HERCULES INCORPORATED
Hercules Plaza
1313 North Market Street
Wilmington, Delaware 19894
2
HERCULES INCORPORATED EMPLOYEE SAVINGS PLAN
------------------------------------------------------------------------------
FINANCIAL STATEMENTS
--------------------------------------------
STATEMENT OF NET ASSETS AVAILABLE
FOR BENEFITS WITH FUND INFORMATION
at December 31, 1997 and 1996
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS WITH FUND INFORMATION
for the year ended December 31, 1997
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.
1
3
HERCULES INCORPORATED EMPLOYEE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
DECEMBER 31, 1997
PARTICIPANT DIRECTED
-----------------------------------------------------------------------
HERCULES BLENDED
INCORPORATED INTEREST RATE FIDELITY
COMMON STOCK EQUITY SAVINGS MAGELLAN LOAN
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
ASSETS
Allocated Share of Master Savings
Trust Investments $654,845(a) $886,024(b) $5,297,044 $1,362,345(c) $963
Allocated Share of Master Savings
Trust Cash 9,052 -- 44,715 -- --
----------- ----------- ---------- ---------- ----
Total Assets $663,897 $886,024 $5,341,759 $1,362,345 $963
----------- ----------- ---------- ---------- ----
LIABILITIES
Accounts Payable -- 620 -- -- --
----------- ----------- ---------- ---------- ----
Net Assets Available for Benefits $663,897 $885,404 $5,341,759 $1,362,345 $963
======== ======== ========== ========== ====
DECEMBER 31, 1997
PARTICIPANT DIRECTED
----------------------------------------------------------------------
SEI SEI
FRANK INTERNA- SEI SMALL DIVERSIFIED
RUSSELL TIONAL CAP. MODERATE
EQUITY INDEX EQUITY GROWTH GROWTH TOTAL
FUND FUND FUND FUND
---- ---- ---- ----
ASSETS
Allocated Share of Master Savings
Trust Investments $79,576(d) $32(e) $34,817(f) $295(g) $8,315,941
Allocated Share of Master Savings
Trust Cash -- -- (30) -- 53,737
------- --- ------- ---- ----------
Total Assets $79,576 $32 $34,787 $295 $8,369,678
------- --- ------- ---- ----------
LIABILITIES
Accounts Payable -- -- -- 3 623
------- --- ------- ---- ----------
Net Assets Available for Benefits $79,576 $32 $34,784 $292 $8,369,055
======= === ======= ==== ==========
(a) At fair value. Cost: $ 360,085. Shares: 13,081.
(b) At fair value. Cost: $ 363,399.
(c) At fair value. Cost: $1,059,224.
(d) At fair value. Cost: $ 69,912.
(e) At fair value. Cost: $ 36.
(f) At fair value. Cost: $ 37,815.
(g) At fair value. Cost: $ 293.
DECEMBER 31, 1996
PARTICIPANT DIRECTED
------------------------------------------------------------------------
BLENDED
HERCULES INTEREST RATE FIDELITY
INCORPORATED EQUITY SAVINGS MAGELLAN LOAN
COMMON STOCK FUND FUND FUND FUND TOTAL
------------ ---- ---- ---- ---- -----
ASSETS
Allocated Share of Master Savings
Trust Investments $599,692(a) $534,665(b) $5,167,781 $1,106,394(c) $ 5,035 $7,413,567
Contributions Receivable -- 2,176 58,854 9,897 -- 70,927
Allocated Share of Master Savings
Trust Cash 50,795 3,037 79,758 23,306 (4,072) 152,824
-------- -------- ---------- ---------- ------- ----------
Net Assets Available for Benefits $650,487 $539,878 $5,306,393 $1,139,597 $ 963 $7,637,318
======== ======== ========== ========== ======= ==========
(a) At fair value. Cost: $ 352,502. Shares: 13,866.
(b) At fair value. Cost: $ 432,326.
(c) At fair value. Cost: $1,135,867.
The accompanying notes are an integral part of the financial statements.
2
4
HERCULES INCORPORATED EMPLOYEE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
YEAR ENDED DECEMBER 31, 1997
PARTICIPANT DIRECTED
------------------------------------------------------------------------------------------
HERCULES BLENDED
INCORPORATED INTEREST RATE FIDELITY
COMMON STOCK SAVINGS MAGELLAN LOAN
FUND EQUITY FUND FUND FUND FUND
----- ----------- ---- ---- ----
CONTRIBUTIONS:
Participating Employees
$ (36,309) $ 93,609 $ 362,651 $ 106,845 $ --
Company Contributions -- -- 113,484 28,849 --
----------- ----------- ----------- ----------- -----------
Subtotal Contributions (36,309) 93,609 476,135 135,694 --
Interplan Transfers -- (23,462) (15,146) 39,045 (438,275)
ALLOCATED SHARE OF MASTER
SAVINGS TRUST INVESTMENT
ACTIVITIES:
Cash Dividends 13,516 -- -- 93,379 --
Interest 867 472 338,402 (2,385) --
Change in Market Value 90,905 204,170 (126) 218,980 --
----------- ----------- ----------- ----------- -----------
Total 68,979 274,789 799,265 484,713 (438,275)
Withdrawals (55,569) (69,814) (623,016) (152,018) 438,275
Interfund Transfers -- 140,551 (140,883) (109,947) --
----------- ----------- ----------- ----------- -----------
Change in Net Assets Available for
Benefits 13,410 345,526 35,366 222,748 --
Net Assets Available for Benefits,
December 31, 1996 650,487 539,878 5,306,393 1,139,597 963
----------- ----------- ----------- ----------- -----------
Net Assets Available for Benefits,
December 31, 1997 $ 663,897 $ 885,404 $ 5,341,759 $ 1,362,345 $ 963
=========== =========== =========== =========== ===========
PARTICIPANT DIRECTED
----------------------------------------------------------------------
SEI
FRANK SEI SEI SMALL DIVERSIFIED
RUSSELL INTERNATIONAL CAP. MODERATE
EQUITY INDEX EQUITY GROWTH GROWTH
FUND FUND FUND FUND TOTAL
---- ---- ---- ---- -----
CONTRIBUTIONS:
Participating Employees
$ 1,417 $ 31 $ 225 $ 289 $ 528,758
Company Contributions -- -- -- -- 142,333
----------- ----------- ----------- ----------- -----------
Subtotal Contributions 1,417 31 225 289 671,091
Interplan Transfers -- -- -- -- (437,838)
ALLOCATED SHARE OF MASTER
SAVINGS TRUST INVESTMENT
ACTIVITIES:
Cash Dividends -- -- 1,253 7 108,155
Interest (1) -- -- -- 337,355
Change in Market Value 1,901 1 (711) (4) 515,116
----------- ----------- ----------- ----------- -----------
Total 3,317 32 767 292 1,193,879
Withdrawals -- -- -- -- (462,142)
Interfund Transfers 76,259 -- 34,020 -- --
----------- ----------- ----------- ----------- -----------
Change in Net Assets Available for
Benefits 79,576 32 34,787 292 731,737
Net Assets Available for Benefits,
December 31, 1996 -- -- -- -- 7,637,318
----------- ----------- ----------- ----------- -----------
Net Assets Available for Benefits,
December 31, 1997 $ 79,576 $ 32 $ 34,787 $ 292 $ 8,369,055
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
3
5
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Hercules Incorporated Employee Savings 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 Savings and Investment 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 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 2.53% and 2.32% at December 31, 1997 and 1996,
respectively.
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.
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 Fidelity Magellan Fund, the
Frank Russell Equity Index Fund, and the SEI group of funds 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.
4
6
The Plan presents in the statement of changes in net assets available
for benefits its allocated share of the Trust's investment activities that
include 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 media are available under the Employee Savings
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 1997 and 1996, the blended
yield of these contracts was approximately 6.4% and 6.1%,
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. Fidelity Magellan Fund is a Long-Term Capital Appreciation 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.
5. Frank Russell Equity Index Fund sells high long-term returns by
investing in common stocks of the largest companies in the U.S.
stock market.
6. SEI International Equity Fund seeks to provide aggressive
long-term growth from investments in foreign stocks and
diversification in domestic stock portfolios.
7. SEI Small Cap. Growth Fund invests in stocks of smaller companies
that are in an early stage or transition point in their
development.
8. SEI Diversified Moderate Growth Fund invests in U.S. and
international stocks and provides a limited level of current
income by investing in bonds.
The Company contribution, as defined in the Plan, is equal to 25% of
the participants' contribution.
There were 378 participants at December 31, 1997 who participated in
one or more of the four investment media. At December 31, 1997 the number of
participants selecting each of the investment media for their contributions was
as follows:
Hercules Incorporated Common Stock ....................... 342
Equity Fund............................................... 64
Blended Interest Rate Savings Fund ....................... 199
Fidelity Magellan Fund.................................... 86
Frank Russell Equity Index Fund........................... 9
SEI Diversified Moderate Growth Fund...................... 1
SEI International Equity Fund............................. 1
SEI Small Cap. Growth Fund................................ 4
5
7
3. INTEREST IN HERCULES INCORPORATED MASTER SAVINGS TRUST
The Plan's allocated share of the Savings 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:
1997 1996
---- ----
Hercules Incorporated Common Stock Fund........................ 0.9% 0.8%
Equity Fund.................................................... 1.4% 1.1%
Blended Interest Rate Savings Fund............................. 4.4% 3.5%
Fidelity Magellan Fund......................................... 4.2% 3.9%
Frank Russell Equity Index Fund................................ 1.1% 0%
SEI Small Cap. Growth Fund..................................... 0.8% 0%
Loan Fund...................................................... 0% 0%
SEI Diversified Moderate Growth Fund........................... 0% 0%
SEI International Equity Fund.................................. 0% 0%
4. INTERPLAN TRANSFERS
Interplan transfers represent transfers to acquiring Company plans, the
Hercules Incorporated Savings and Investment 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, 1997 or 1996 are as follows:
1997 1996
---- ----
Hercules Incorporated Common Stock $ 654,845 $ 599,692
Equity Fund $ 886,024 $ 534,665
Fidelity Magellan Fund $1,362,345 $1,106,394
Group Annuity Contract with Peoples
Life Insurance Company (#BDA 00002TR) $1,056,404 $ 799,930
Group Annuity Contract with Metropolitan Life
Insurance Company (#12833) -- $ 667,065
GIC Prudential (#GA 8083) $1,185,706 $ 896,254
Hartford Life Contract (#GA 10226) $ 494,418 $ 397,444
Group Annuity Contract with Transamerica Life
(#76589) $ 844,109 $ 640,992
6
8
7. 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,
------------------------------------
1997 1996
---- ----
Net Assets Available for Benefits
per the financial statements $8,369,055 $7,637,318
Amounts Allocated to Withdrawing Participants (8,978) (102,435)
---------- -----------
Net Assets Available for Benefits
per the Form 5500 $8,360,077 $7,534,883
========== ===========
The following is a reconciliation of withdrawals per the financial
statements to the Form 5500:
YEAR ENDED
DECEMBER 31, 1997
-----------------
Withdrawals per the financial statements $462,142
Add: Amounts Allocated to Withdrawing Participants at
December 31, 1997 8,978
Less: Amounts Allocated to Withdrawing Participants at
December 31, 1996 (102,630)
---------
Withdrawals per the Form 5500 $368,490
========
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.
7
9
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 Employee Savings Plan as of December 31, 1997 and 1996,
and the related statement of changes in net assets available for benefits for
the year ended December 31, 1997. 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 Employee Savings Plan as of December 31, 1997 and 1996, and the
changes in net assets available for benefits for the year ended December 31,
1997 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
Employee Savings 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 25, 1998
8
10
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 EMPLOYEE SAVINGS PLAN
H. Eugene McBrayer
---------------------------------------------
H. Eugene McBrayer, Chairman
Finance Committee, Hercules Incorporated,
Plan Administrator
Date: June 30, 1998
9
11
EXHIBIT INDEX
Number Description
23 Consent of Independent Accountants.
10