|
|
| |
|
 |
HERCULES REPORTS FOURTH QUARTER AND FULL YEAR 2007 RESULTS |
|
|
WILMINGTON, DE, January 29, 2008 . . . Hercules Incorporated (NYSE: HPC) today reported net income for the quarter ended December 31, 2007 of $28.5 million, or $0.25 per diluted share, as compared to net income of $242.1 million, or $2.14 per diluted share, for the fourth quarter of 2006. The fourth quarter of 2006 included $242 million of one-time tax benefits.Net income for the year ended December 31, 2007 was $178.9 million, or $1.56 per diluted share, as compared to net income of $238.7 million, or $2.14 per diluted share, in 2006. Net income from ongoing operations(1) for the fourth quarter of 2007 was $35.0 million, or $0.31 per diluted share. Net income from ongoing operations for the fourth quarter of 2006 was $34.8 million, or $0.31 per diluted share, including $0.04 of land sales and $0.04 in favorable tax rate impacts. The fourth quarter 2006 ongoing tax rate was 19%, whereas the ongoing tax rate was 29% in the fourth quarter of this year. Net income from ongoing operations(1) for the year ended December 31, 2007 was $169.9 million, or $1.48 per diluted share, an increase of 20% per diluted share versus 2006. Cash flow from operations for the year ended December 31, 2007 was $299.9 million, an increase of $127.0 million as compared to the prior year. Net sales in the fourth quarter of 2007 were $540.7 million, an increase of 9% from the same period last year. Sales increased due to 6% higher volume and 5% favorable rates of exchange, partially offset by unfavorable mix of 2%. Pricing in the aggregate was flat. Net sales for the year ended December 31, 2007 were $2.136 billion, an increase of 9% as compared to 2006, excluding the impact of the FiberVisions transaction. Net sales in the fourth quarter of 2007 increased in all regions of the world. Sales increased 1% in North America, 14% in Europe (3% excluding the strong Euro), 38% in Latin America and 17% in Asia Pacific as compared to the same period last year. Reported profit from operations in the fourth quarter of 2007 was $56.9 million, an increase of 6% compared with the same period in 2006. Profit from ongoing operations(1) in the fourth quarter of 2007 was $68.9 million, an increase of 10% compared with $62.7 million in the fourth quarter of 2006. Excluding land sales, profit from ongoing operations increased 21% from the fourth quarter of 2006. "We continue to demonstrate strong growth in revenue, earnings per share and cash flow," commented Craig A. Rogerson, President and Chief Executive Officer. "Our employees, along with our global market leadership and strong innovation, continue to drive solid results." During the quarter, the Company purchased 1.65 million shares of common stock for a cost of $31.6 million. To date, the Company has purchased 3.0 million shares for $58.0 million under its $200 million share repurchase authorization. Interest and debt expense was $16.6 million in the fourth quarter of 2007, down $0.5 million compared with the fourth quarter of 2006. Interest expense for the year ended December 31, 2007 was $68.6 million, a decrease of $2.6 million from 2006. Net debt, total debt less cash and cash equivalents, was $679.5 million at December 31, 2007, a decrease of $144.2 million from year-end 2006. Capital spending was $40.5 million in the fourth quarter and $118.3 million in 2007. This compares to $44.4 million and $93.6 million in the fourth quarter and year 2006, respectively. The increase in capital expenditures was primarily for growth projects including expanded production capacity. The Company completed the transition of its U.S. defined benefit pension plan to a liability driven investment strategy in 2007. The assets of the plan were transitioned from a portfolio that had a strong equity bias, to one where greater than 80% of the assets are invested in fixed income securities. The funding level improved from 90% at the end of 2006 to 96% at the end of 2007 on a projected benefit obligation basis. Segment Results – Reported Basis All Aqualon business units had increased sales in the fourth quarter as compared to the prior year. In the aggregate, the sales increase was driven by 14% higher volume (12% excluding an acquisition), 1% increased pricing and 4% favorable rates of exchange partially offset by 3% unfavorable mix. "We continue to show strong growth outside of North America, more than offsetting the challenging conditions experienced in this region," commented Mr. Rogerson. "We made significant progress with our expanded methylcellulose capacity in China. While we experienced a setback due to an incident at the facility in January, we expect to meet customer orders and resume operations during the first quarter and be able to support the growing demand in the Asia Pacific region and other fast growing markets," noted Mr. Rogerson. Coatings and construction sales increased 22% (or 17% excluding an acquisition) in the fourth quarter of 2007 as compared to the same period of last year, primarily due to 21% higher volume (16% excluding an acquisition), 1% increased pricing and 7% favorable rates of exchange, partially offset by 7% unfavorable mix. Coatings sales increased 26% (or 18% excluding an acquisition) compared to last year with increases in all major regions of the world except North America. Sales increased in Europe by 32%, Asia Pacific by 19% and Latin America by 77%. North America was up 14%, but down 11% versus the fourth quarter of 2006, excluding the impact of an acquisition. Sales into construction markets were up 20% globally (12% from volume) compared to the prior year. Strong growth in Asia, Europe and Latin America offset a decline in North America. Asia sales growth of 34% reflected the improved operability of our methylcellulose joint venture in China. The facility ran at near capacity during the latter part of the fourth quarter. Regulated Industries sales increased 6% in the fourth quarter of 2007 as compared to the same period of last year, primarily due to a 4% favorable mix, and 3% favorable rates of exchange, partially offset by 1% lower volume. Pricing was flat in the aggregate. The improved sales mix reflects a higher portion of sales in the higher priced pharmaceutical and personal care markets. Volume was lower in the aggregate as growth achieved in Europe and China was offset by declines in North America. Energy & Specialties sales increased 18% in the fourth quarter of 2007 as compared to the same period of last year. The increase was due to 16% higher volume and 2% favorable rates of exchange. Pricing and mix were flat from 2006. Specialty volumes increased 30% and oilfield volumes increased 2%. Aqualon Group's profit from operations for the fourth quarter of 2007 increased $1.9 million due to higher volume and the associated contribution margin and increased pricing, partially offset by higher raw material, utility and severance and exit costs and lower gains on land sales. Raw materials were $3.1 million higher than the prior year, partially offset by increased selling prices of $1.4 million versus the prior year. Margins were adversely impacted due to start up costs associated with our CMC expansion in China and changes in VAT treatment associated with export sales from China. Selling, general and administrative (SG&A) costs were flat from the prior year reflecting increased sales and marketing, business management, and technology costs incurred to support growth initiatives offset by lower corporate support costs. Severance and exit costs, primarily associated with our business infrastructure project, were $1.5 million in the fourth quarter of 2007, while severance costs in the prior year's fourth quarter were $0.1 million. Gain on sale of excess land at operating sites was $0.8 million in the quarter, lower than the $3.6 million recorded in the fourth quarter of the prior year. In the Paper Technologies and Ventures Group
("PTV"), net sales in the fourth quarter increased 4% and
profit from operations increased 4% compared with the same
quarter of 2006. Paper Technologies sales increased 3% primarily due to 6% favorable rates of exchange, partially offset by an unfavorable mix of 2% and lower pricing of 1%. Volume in the aggregate was flat as compared to the prior year. Volume growth was achieved in the Americas and Europe, whereas Asia was lower. Price increases were achieved in North America, while pricing was lower in both Europe and Asia. Venture sales increased 8% primarily due to 1% higher volume, 4% higher price and 4% favorable rates of exchange, partially offset by 1% unfavorable mix. Sales increased in most of the Venture businesses, while pricing increased across all of Ventures. The unfavorable mix reflects higher sales of lower priced building adhesives and tolled products. PTV’s increased profit from operations reflects favorable rates of exchange, lower SG&A costs and increased pricing (Ventures offsetting Paper Technologies), partially offset by higher raw material, severance and other exit costs, and an unfavorable product mix. Also, gains on land sales were $2.9 million in the fourth quarter of 2006. Price increases were $0.4 million in the aggregate, whereas raw material cost increases were $3.0 million. Severance, restructuring and other exit costs in the fourth quarter of 2007 were $3.2 million as compared to $2.3 million in the same period of 2006. SG&A costs were lower than the prior year primarily due to lower bad debt, incentive accruals and corporate support costs, partially offset by increased legal and personnel costs. "Strong performance in the Americas helped offset weaker European and Asian performance. Our success with new product launch and emphasis on productivity improvement continue to support overall margins," commented Mr. Rogerson. Outlook Fourth 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. T his 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 raw materials and 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, the impact of adverse events relating to the operation of the Company's facilities and to the transportation and storage of hazardous materials (including equipment malfunction, explosions, fires, spills, and the effects of severe weather conditions), 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)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
