WILMINGTON, DE, April 30, 2007 . . . Hercules Incorporated (NYSE: HPC) today reported net income for the quarter ended March 31, 2007 of $73.5 million, or $0.64 per diluted share, as compared to $14.7 million, or $0.13 per diluted share, for the first quarter of 2006. The first quarter of 2007 includes approximately $0.41 per diluted share from the resolution of the remaining IRS audit items for the years 1993-2003.

Net income from ongoing operations(1) for the first quarter of 2007 was $35.7 million, or $0.31 per diluted share, an increase of 29% per diluted share compared to $26.4 million, or $0.24 per diluted share, in the first quarter of 2006. Please refer to Table 2 for a reconciliation of net income from ongoing operations to reported net income.

Net sales in the first quarter of 2007 were $502.3 million, an increase of 10% from the same period last year excluding the impact of the FiberVisions transaction. Volume and pricing increased by 6% and 2%, respectively. Rates of exchange increased sales by 3% during the quarter, while mix was 1% unfavorable.

Net sales in the first quarter of 2007 increased in all major regions of the world versus the prior year. Sales increased 8% in North America, 5% in Latin America, 14% in Europe (5% excluding the impact of the Euro), and 8% in Asia Pacific.

Reported profit from operations in the first quarter of 2007 was $59.9 million, an increase of 5% compared with $56.9 million for the same period in 2006. Profit from ongoing operations in the first quarter of 2007 was $72.2 million, an increase of 14% compared with $63.6 million in the first quarter of 2006.

"The first quarter results continue a pattern of excellent sales and earnings growth for our Company," said Craig A. Rogerson, President and Chief Executive Officer. "Both business franchises, Aqualon and Paper Technologies and Ventures, delivered solid performance. Our employees continue to deliver and execute well in a number of key areas – serving our customers, innovation, capital projects and emerging markets penetration."

Cash flow from operations for the quarter ended March 31, 2007 was $25.8 million as compared to $27.7 million for the same period last year. The Company voluntarily contributed $17 million to its UK pension plan in the first quarter of 2007 to essentially fully fund this plan.

Interest and debt expense was $17.2 million in the first quarter of 2007, down $3.5 million or 17% compared with the first quarter of 2006, reflecting lower outstanding debt balances and improved debt mix, partially offset by increased variable short term rates.

Total debt was $977.1 million at March 31, 2007, a decrease of $18.4 million from year-end 2006. Cash and cash equivalents were $159.8 million at March 31, 2007, as compared to $171.8 million at year-end 2006.

Capital spending was $24.2 million in the first quarter as compared to $8.1 million in the same period last year. Cash outflows for severance, restructuring and other exit costs were $4.3 million in the quarter.

Segment Results – Reported Basis

In the Aqualon Group, net sales increased 7% while profit from operations increased 21% in the first quarter as compared with the first quarter of 2006. All business units had increased sales in the first quarter as compared to the prior year. In the aggregate, the sales increase was driven by 5% higher volumes, 2% higher prices and 3% favorable rates of exchange, partially offset by 3% unfavorable product mix. Hercules Tianpu, which was consolidated beginning in the second quarter of 2006, accounted for a 1% sales increase.

Coatings and construction sales increased 9% in the first quarter of 2007 as compared to the same period of last year, due to 4% higher volumes, 1% increased pricing and 4% favorable rates of exchange. Sales into the coatings markets were up 8% in the first quarter of 2007 as compared to the same period of last year. Strong volume growth in China, and 5% growth in Europe, offset a 4% decline in North America. Construction market sales increased 10% as compared to the first quarter of last year. Strong growth was achieved in Europe, Latin America and China. Eastern European markets were especially strong. Pricing improvements were achieved in both the coatings and construction markets.

Regulated industry sales increased 6% in the first quarter of 2007 as compared to the same period of last year, primarily due to 6% improved product mix, 2% increased pricing and 2% favorable rates of exchange, partially offset by 4% lower volumes. Sales were higher in all segments. Sales increased in the pharmaceutical, personal care and food markets by 17%, 6% and 2%, respectively, as compared to the first quarter of last year. The Middle East and Asian markets were especially strong during the quarter.

Energy and specialties sales increased 6% in the first quarter of 2007 as compared to the same period of last year. The increase was due to 14% higher volumes, 2% higher prices, and 2% favorable rates of exchange, partially offset by 12% unfavorable product mix. The natural gas and oil services sector demand continues to be strong and price increases were achieved across all products families.

Profit from operations increased $8.1 million, primarily as a result of the higher volumes and the associated contribution margin, increased selling prices and favorable rates of exchange, partially offset by higher raw material and transportation costs. Selling, general and administrative (SG&A) costs were slightly higher compared to the prior year, reflecting increased sales, marketing, business management, technology and other spending to support growth, and accelerated vesting of incentive awards.

"Aqualon’s improved results reflect continued growth in emerging markets and improved selling prices," said Mr. Rogerson. "Aqualon’s global diversity and scale have offset weaker demand in some of our North American markets."

In the Paper Technologies and Ventures Group, net sales in the first quarter increased 11% and profit from operations increased 92% compared with the same quarter in 2006.

Paper Technologies sales increased 12% due to 8% increased volumes, 1% increased prices, and 4% favorable rates of exchange, partially offset by 1% unfavorable product mix. Volumes increased in North America and Europe, while Asia volume was lower. Sales in emerging markets were up 14% compared to the prior year. Price increases were achieved primarily in North America with modestly lower pricing in both Europe and Asia. Sales of new products continued to drive growth in overall sales and profitability.

Ventures sales increased 10% primarily due to 2% higher volumes, 4% higher prices, 2% improved product mix, and 2% favorable rates of exchange. Sales increased in all Ventures business units except pulp mill products. Significant growth was achieved in both building products and lubricants. Pricing was favorable across all Ventures businesses.

The increase in profit from operations reflects higher volumes, improved selling prices, favorable rates of exchange and lower SG&A costs, partially offset by higher raw material and tolling costs. Severance, restructuring and other exit costs and accelerated depreciation of impaired assets taken in the first quarter of 2007 were $0.5 million, significantly lower than the $6.4 million recorded in the same period of 2006. SG&A costs were lower primarily due to lower patent defense costs, partially offset by accelerated vesting of incentive awards.

"North American market conditions remain favorable and Europe has shown solid improvement from the prior year," commented Mr. Rogerson. "Sales of higher margin new products continue to support margins overall."

Outlook

“We are optimistic about revenue, earnings and cash flow in 2007," said Mr. Rogerson. "We expect continued profitable growth through utilization of our recent capacity expansions and new product introductions as well as bolt-on acquisition opportunities for our businesses."

First Quarter Conference Call and Webcast

The Company will discuss first quarter 2007 results tomorrow, May 1st, at 9:00 a.m. EDST.

Teleconference: (973) 582-2750 – Ask for Conference ID # 8679973
Please call 10 to 15 minutes prior to the call.

Webcast: Listen-only mode via Internet broadcast from www.herc.com
under Shareholder Information.

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Hercules manufactures and markets chemical specialties globally for 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 what management believes to be reasonable assumptions. Forward-looking statements may involve known and unknown risks, uncertainties and other factors, which may cause the actual results to differ materially from those projected, stated or implied, depending on such factors as: ability to generate cash, changes resulting from ongoing reviews of tax liabilities, ability to raise capital, ability to refinance, ability to execute productivity improvements and reduce costs, ability to execute and integrate acquisitions, ability to execute divestitures, ability to increase prices, business climate, business performance, changes in tax laws or regulations and related liabilities, changes in tax rates, economic and competitive uncertainties, higher manufacturing costs, reduced level of customer orders, changes in strategies, risks in developing new products and technologies, risks in developing new market opportunities, environmental and safety regulations and clean-up costs, foreign exchange rates, asset dispositions, the impact of changes in the value of pension fund assets and liabilities, changes in generally accepted accounting principles, adverse legal and regulatory developments, including increases in the number or financial exposures of claims, lawsuits, settlements or judgments, the financial capacity of settling insurers, the impact of increased accruals and reserves for such exposures, the outcome of litigation and appeals, and adverse changes in economic and political climates around the world, including terrorist activities, international hostilities and potential natural disasters. Accordingly, there can be no assurance that the Company will meet future results, performance or achievements expressed or implied by such forward-looking statements. As appropriate, additional factors are contained in reports filed by the Company with the Securities and Exchange Commission. This paragraph is included to provide safe harbor for forward-looking statements, which are not generally required to be publicly revised as circumstances change, and which the Company does not intend to update.

HERCULES INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS  

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