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HERCULES REPORTS THIRD QUARTER 2007 RESULTS |
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Net income from ongoing operations(1) for the third quarter of 2007 was $53.4 million, or $0.46 per diluted share, an increase of 28% per diluted share as compared to net income from ongoing operations of $40.9 million, or $0.36 per diluted share, in the third quarter of 2006. Approximately $0.06 per share of the third quarter 2007 earnings are attributable to the sale of certain patents related to paper treatments to enhance printing. Net income from ongoing operations(1) for the nine months ended September 30, 2007 was $134.9 million, or $1.17 per diluted share, an increase of 27% per diluted share versus the same period in 2006. Cash flow from operations for the nine months ended September 30, 2007 was $247.5 million, an increase of $140.5 million as compared to the same period last year. The Company has now received $223.2 million of tax refunds during the year and expects to receive an additional $21.2 million in the first half of 2008. During the quarter, the Company purchased approximately 1.15 million shares of common stock for a cost of approximately $22.8 million, or $19.75 per share, pursuant to its previously announced $200 million share repurchase authorization. Net sales in the third quarter of 2007 were $544.2 million, an increase of 6% from the same period last year. Volume and pricing increased by 4% and 1%, respectively. Rates of exchange also increased sales by 3%, while product mix was 2% unfavorable during the quarter. Net sales for the nine months ended September 30, 2007 were $1.596 billion, an increase of 8% as compared to the same period in 2006, excluding the impact of the FiberVisions transaction. "We continue to demonstrate solid growth in
revenues, earnings per share and cash flow," commented Craig
A. Rogerson, President and Chief Executive Officer. "Our
priority is to continue to invest in high return
opportunities supporting our two global franchises. We also
began returning excess cash flow to our shareholders by
reinstituting a common stock dividend and through share
repurchases." Net sales in the third quarter of 2007 increased in all regions of the world. Sales increased 1% in North America, 7% in Europe (primarily Euro related), 28% in Latin America and 17% in Asia Pacific as compared to the same period last year. Reported profit from operations in the third quarter of 2007 was $72.9 million, an increase of 1% compared with the same period in 2006. Profit from ongoing operations(1) in the third quarter of 2007 was $84.2 million, an increase of 10% compared with $76.4 million in the third quarter of 2006. The third quarter of this year included a gain of $7.4 million on the sale of the Paper Technology patents. Interest and debt expense was $17.0 million in the third quarter of 2007, up $0.3 million compared with the third quarter of 2006. Interest expense for the nine months ended September 30, 2007 was $52.0 million, a decrease of $2.1 million from the same period of last year. Net debt, total debt less cash and cash equivalents, was $669.0 million at September 30, 2007, a decrease of $154.7 million from year-end 2006. Capital spending was $24.0 million in the third quarter and $77.8 million year to date. This compares to $26.3 million and $49.2 million in the third quarter and year to date periods last year, respectively. Segment Results – Reported Basis In the Aqualon Group, net sales increased 8% while profit from operations decreased 3% in the third quarter as compared with the third quarter of 2006. All Aqualon business units had increased sales in the third quarter as compared to the prior year. In the aggregate, the sales increase was driven by 7% higher volume, 3% unfavorable product mix, 1% increased pricing and 3% favorable rates of exchange. "We continue to show strong growth outside
of North America, more than offsetting the challenging
conditions experienced in this region. However, third
quarter margins were impacted by higher supply chain and
startup costs associated with our two major expansions in
China to support growing demand in that region", noted Mr.
Rogerson. Coatings and construction sales increased 13% in the third quarter of 2007 as compared to the same period of last year, primarily due to 11% higher volume and 4% favorable rates of exchange, partially offset by 2% unfavorable product mix. Coatings sales were up 15% globally (14% from volume), with strong growth in many regions except the U.S. and Europe. The U.S. region increased 1% versus the third quarter of last year, while Europe was flat versus the prior year, excluding the favorable Euro. Sales into construction markets were up 11% globally (9% from volume) compared to the prior year. Strong growth in Asia, the Middle East, South America and Canada offset declines in Europe and the U.S. The Company recently acquired a specialty
surfactants business which will broaden Aqualon's product
offering to the coatings markets and provide an additional
growth platform. Regulated Industries sales increased 3% in the third quarter of 2007 as compared to the same period of last year, primarily due to 2% increased price, 2% favorable mix, and 2% from favorable rates of exchange. Volume in the aggregate was down 3%. Price increases were achieved in many end markets. The improved sales mix reflects a higher portion of sales in the higher priced personal care markets. Volumes were lower in the aggregate as growth achieved in Europe and China was offset by declines in the U.S. Energy & Specialties sales increased 3% in the third quarter of 2007 as compared to the same period of last year. The increase was due to 9% higher volume and 1% favorable rates of exchange, partially offset by 7% unfavorable mix. Pricing in the aggregate was flat. Lower oilfield volumes were offset by higher volumes in the specialty markets. The unfavorable mix is primarily attributable to a higher portion of guar versus other oilfield product sales. Aqualon Group's profit from operations decreased $1.4 million as the higher volume and the associated contribution margin was offset by higher raw material, utility and supply chain costs. Margins were adversely impacted due to increased sales of third party materials as a result of our delayed capacity expansions as well as startup costs incurred by the China expansions. Selling, general and administrative (SG&A) costs were also higher compared to the prior year, reflecting increased sales and marketing, business management, and technology costs incurred to support growth initiatives. In the Paper Technologies and Ventures Group ("PTV"), net sales in the third quarter increased 5% and profit from operations increased 34% compared with the same quarter in 2006. Paper Technologies sales increased 4% due to 1% increased volume and 4% favorable rates of exchange, partially offset by an unfavorable mix of 1%. Pricing in the aggregate was flat as compared to the prior year. Volume growth was achieved in the Americas and in Europe, whereas Asia was lower. Price increases were achieved in North America, while pricing was lower in both Europe and Asia. Venture sales increased 7% primarily due to 3% higher volume, 4% higher price, and 2% favorable rates of exchange, partially offset by 2% unfavorable mix. Volumes increased in most of the Venture businesses, while pricing increased in all of the Ventures. The unfavorable mix reflects higher sales of lower priced pulp and tolled products. The Company recently invested in a joint venture, H2H Innovations, to expand our product offering of specialty formaldehyde-free adhesives which should enable faster penetration into the wood products industry. PTV’s increased profit from operations
reflects higher volume, improved selling price, a favorable
product mix and the gain on the sale of the PTV patents,
partially offset by higher raw material, transportation,
utility and SG&A costs. Price increases were $1.5 million in
the aggregate, whereas raw material cost increases were $3.0
million. Severance, restructuring and other exit costs in
the third quarter of 2007 were $1.2 million as compared to
$1.5 million in the same period of 2006. SG&A costs were
higher than the prior year primarily due to increased
personnel related costs, partially offset by lower legal and
bad debt expenses. Outlook Third Quarter Conference Call and Webcast
# # # 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. The words or phrases "will likely result," "should," "are expected to," "will continue," "is anticipated," "expect," "estimate," "project" or similar expressions are among those which identify forward-looking statements. 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, the success of outsourcing initiatives, 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 or expanding capacity, 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 achievement, expressed or implied by such forward-looking statements, or continue the stock repurchase program or the payment of dividends.. 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 (Dollars in millions, except per share data) (Unaudited)
(Unaudited)
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