Hercules Reports Fourth Quarter Sales and Earnings
- Strong Sales Momentum Entering 2000
WILMINGTON, Del.--(BUSINESS WIRE)--Feb. 3, 2000-- - Initiatives Underway to Improve Cash Flow and Earnings
Performance
Hercules Incorporated (NYSE: HPC - news) today reported fourth quarter earnings of $49 million, or $0.46 per share on a diluted basis, up 39% from $0.33 reported last year excluding net non-recurring expenses in both years. Net non-recurring expenses in the quarter totaled $44 million pre-tax and included initiatives underway to improve the performance of the Resins, Aqualon, and Food Gums businesses, as well as integration related costs arising from the BetzDearborn acquisition. Net earnings for the quarter, as reported, were $17 million, and diluted earnings per share were $0.16.
Operating profit rose to $125 million, up 11% versus last year, while operating margin was 15.1% compared to 13.9% last year on a proforma basis.
Net sales for the quarter hit $827 million, up 2% from last year on a proforma basis. The strong dollar reduced sales by $20 million and, without this impact, sales would have been up over 4%. For the 12-month period ending December 31, net sales were $3.25 billion, down 1% from $3.28 billion on a proforma basis. For the year, the strong dollar reduced sales by $28 million, and without this impact, sales would have been flat year-over-year. Diluted earnings per share for the year were $2.03 exclusive of non- recurring expenses and $1.62 on a reported basis.
``Taking the full-year view,' said Vincent J. Corbo, Hercules chief executive officer and president, ``we recognize many accomplishments recorded in 1999. The performance decline in the fourth quarter, however, raises challenges as we face the new year. Actions are being taken to enhance cash flow, accelerate debt repayment and focus our future in major core markets. As a part of this, it is imperative that we make adjustments in our business portfolio as we establish a new strategic direction.'
The shortfall in the fourth quarter earnings compared to third quarter was largely due, the company emphasized, to increased costs including those for implementing a new information system on global basis, as well as higher interest charges and employee benefits costs.
``Like most specialty chemical companies, we have also faced very competitive market conditions in most of our businesses in 1999,' said Corbo. ``Average selling prices are down for the full year by about 2-3%. Although there are concerns in several areas, we do expect an improvement in the pricing environment as global business conditions strengthen in 2000. The 4% year-over-year revenue increase in the quarter is by far the best revenue performance of the year and we expect this momentum to continue in the first quarter.'
On a regional proforma basis, North America experienced the best year-over-year revenue comparison all year with sales up over 4%. Sales in Asia Pacific were up 18% reflecting the economic pickup in the region. Sales in Latin America were down 11%, almost entirely due to the devaluation of the Brazilian real. In Europe sales were down 2% primarily due to the strong dollar. In local currencies Europe sales were up 4% reflecting some improved economic conditions there.
``During the quarter we took steps to increase the profitability of our businesses,' said Corbo. ``We announced our intention to exit the nitrocellulose business. We sold our Agar business in Chile, and will discontinue manufacture of pure dicumyl peroxide at Beringen, Belgium. Other actions underway include rationalizing our CTO production facilities to improve performance of our rosin resins business.
``Also during the quarter, we announced a new alliance linking BetzDearborn with USFilter to jointly sell products and services to industrial and municipal markets as well as the outsourcing market for water treatment systems. We continue to look at other opportunities to expand our businesses,' Corbo said.
Finally, during the quarter, the company settled lawsuits and claims arising from alleged exposures to products which are no longer sold by Hercules. ``We settled these longstanding matters in order to avoid the cost and uncertainty of protracted litigation,' Corbo said. The majority of the monies paid or to be paid in both settlements is covered by insurance. Additionally, a settlement was reached on insurance claims regarding a longstanding environmental matter. Terms for all settlements are confidential.
Hercules manufactures chemical specialties used in making a variety of products for home, office and industrial markets. For more information, visit the Hercules website at www.herc.com.
This news release includes forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, reflecting management's current analysis and expectations, based on reasonable assumptions. Results could differ materially depending on such factors as business climate, economic and competitive uncertainties, higher manufacturing costs, reduced level of customer orders, ability to integrate BetzDearborn, changes in strategies, risks in developing new products and technologies, the ability of Hercules' customers and suppliers to achieve Year 2000 readiness, environmental and safety regulations and clean-up costs, foreign exchange rates, adverse legal and regulatory developments, and adverse changes in economic and political climates around the world. Accordingly, there can be no assurance that the company will meet analysts' earnings estimates. As appropriate, additional factors are contained in reports filed with the Securities and Exchange Commission. This paragraph is included to provide safe harbor for forward-looking statements, which are not required to be publicly revised as circumstances change.
HERCULES INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
(Dollars in millions, except per share)
(Unaudited)
Three Months Twelve Months
Ended Dec. 31 Ended Dec. 31
1999(A) 1998(B) 1999(A) 1998(B)
------- ------- ------- -------
Net sales $827 $760 $3,248 $2,145
Cost of sales 462 435 1,770 1,287
Selling, general, and 209 182 787 377
administrative expenses
Research and development 23 19 85 61
Goodwill and intangible
asset amortization 19 17 79 22
Purchased in-process
research & development - 130 - 130
Other operating expenses, net 33 81 47 76
----- ------ ------ -------
Profit from operations 81 (104) 480 192
Equity in income of
affiliated companies - - 1 10
Interest and debt expense 40 59 185 101
Preferred security
distributions
of subsidiary trusts 18 2 51 2
Other expense, net (7) (12) (2) (22)
Income before income taxes 16 (177) 243 77
Provision for income taxes (1) (13) 75 68
------ ------ ----- -------
Net income $ 17 $ (164) $ 168 $ 9
====== ====== ===== =======
Earnings per share:
Basic: Earnings per share $0.17 $(1.64) $1.63 $0.10
------ ------ ----- --------
Weighted average
# shares (millions) 106.3 99.8 103.2 96.3
Diluted: Earnings per share $0.16 $(1.64) $1.62 $0.10
------ ------ ----- --------
Weighted average
# shares (millions) 106.9 99.8 103.9 97.4
Note: Depreciation and
amortization $ 67 $ 50 $ 250 $ 108
SEGMENT DATA
(Dollars in millions)
Three Months Twelve Months
Ended Dec. 31 Ended Dec. 31
1999 1998 1999 1998
------- ------- ------- -------
Net Sales By Industry Segment
Process Chemicals
and Services $436 $383 $1,705 $717
Functional Products 215 206 861 863
Chemical Specialties 178 172 685 566
Reconciling Items (2) (1) (3) (1)
------- ------- -------- -------
TOTAL $827 $760 $3,248 $2,145
Profit from Operations by Industry
Segment
Process Chemicals
and Services $ 80 $59 $338 $131
Functional Products 54 45 218 215
Chemical Specialties 21 20 89 75
Reconciling Items (74) (228) (165) (229)
------- ------- --------- --------
TOTAL $ 81 $(104) $480 $192
======= ======= ========= ========
Excluding Nonrecurring Items; 1998
Reflects Proforma Results
Three Months Twelve Months
Ended Dec. 31 Ended Dec. 31
1999 1998¸ 1999 1998¸
------- -------- ------ --------
Net Sales By Industry Segment
Process Chemicals and Services $436 $434 $1,705 $1,716
Functional Products 215 206 861 863
Chemical Specialties 178 172 685 698
Reconciling Items (2) (1) (3) (1)
------ ------ ------- -------
TOTAL $827 $811 $3,248 $3,276
====== ====== ======= =======
Profit from Operations by Industry Segment
Process Chemicals and Services $ 80 $69 $340 $281
Functional Products 57 45 225 215
Chemical Specialties 21 20 91 96
Reconciling Items (33) (21) (114) (73)
------ ------ ------- ------
TOTAL $125 $113 $542 $519
====== ====== ======= ======
(A) The fourth quarter and full year 1999 Profit from operations
include net non-recurring integration costs of $22 million and
$35 million, respectively. Additionally, the quarter and year
also reflects $38 million and $43 million, respectively, for
restructuring costs, asset write-downs and other charges net of
litigation and insurance settlements, partially offset by a $16
million fourth quarter gain on the sale of a subsidiary.
(B) The fourth quarter and full year 1998 includes non-recurring
charges primarily associated with the acquisitions of
BetzDearborn of $215 million in Profit from operations (including
$130 million for purchased in-process R&D) and $17 million in
Other expense. Additionally, the full year 1998 also includes a
$59 million charge for a legal settlement in Other expense.
(C) 1998 results include proforma adjustments for BetzDearborn and
FiberVisions assuming the acquisitions occurred as of January 1,
1998.
--------------------------------------------------------------------------------
Contact:
Hercules Inc.
Media Contact: Sue Towers
302/594-6025
stowers@herc.com
or
Investor Contact: Bill Drury
302/594-5800, wdrury@herc.com |
