Reconciliation for Quarters and Full Year 2005


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RECONCILIATION OF REPORTED TO ONGOING OPERATIONS
FOR
QUARTERS AND FULL YEAR 2005


HERCULES INCORPORATED Reconciliation to Ongoing Operations	Twelve Months Ended December 31, 2005
(Dollars in millions, except per share)	Net Income (Loss)	Basic & Diluted EPS	Profit From Operations	EBITDA
As Reported	($29.8)	($0.27)	$141.7	$159.1
Cumulative effect of changes in accounting principle, net of tax	2.5	0.02	–	–
Gain on sale of minority interest in CP Kelco	–	–	–	–
Asbestos expense (income), net of insurance settlements	24.0	0.22	–	36.9
Legal accruals and settlements⁽²⁾	21.5	0.20	0.5	33.0
Severance, restructuring and other exit costs	23.5	0.21	36.2	36.2
FiberVisions goodwill impairment	41.6	0.38	41.6	41.6
Tax on undistributed earnings of FiberVisions	7.6	0.07	–	–
Asset impairments and accelerated depreciation	6.0	0.05	9.3	5.7
Loss on debt prepayment, net, and write-off of debt issuance costs	9.2	0.08	–	14.2
Gain on asset dispositions	(7.1)	(0.06)	–	(10.9)
Accelerated vesting of stock compensation	1.8	0.02	2.8	2.8
Other⁽³⁾	1.7	0.02	1.0	2.7
Subtotal adjustment items⁽⁴⁾	132.3	1.20	91.4	162.2
Tax valuation allowances	–	–	–	–
Tax benefit (detriment) to adjust to the ongoing tax rate	(8.9)	(0.08)	–	–
Ongoing Operations⁽¹⁾	$93.6	$0.85	$233.1	$321.3

HERCULES INCORPORATED Reconciliation to Ongoing Operations	Three Months Ended December 31, 2005
(Dollars in millions, except per share)	Net Income (Loss)	Basic & Diluted EPS	(Loss) Profit From Operations	EBITDA
As Reported	($67.9)	($0.62)	($10.1)	($22.5)
Cumulative effect of changes in accounting principle, net of tax	2.5	0.02	–	–
Gain on sale of minority interest in CP Kelco	–	–	–	–
Asbestos expense, net of insurance settlements	24.4	0.22	–	37.5
Legal accruals and settlements⁽²⁾	0.6	–	0.5	0.9
Severance, restructuring and other exit costs	5.5	0.05	8.5	8.5
FiberVisions goodwill impairment	41.6	0.38	41.6	41.6
Tax on undistributed earnings of FiberVisions	7.6	0.07	–	–
Asset impairments and accelerated depreciation	4.4	0.04	6.9	5.2
Gain (loss) on debt prepayment, net, and write-off of debt issuance costs	(0.5)	–	–	(0.7)
Other⁽³⁾	(0.5)	–	0.1	(0.7)
Subtotal adjustment items⁽⁴⁾	85.6	0.78	57.6	92.3
Tax valuation allowances	–	–	–	–
Tax benefit (detriment) to adjust to the ongoing tax rate	1.2	0.01	–	–
Ongoing Operations⁽¹⁾	$18.9	$0.17	$47.5	$69.8

HERCULES INCORPORATED Reconciliation to Ongoing Operations	THREE MONTHS ENDED SEPTEMBER 30, 2005
(Dollars in millions ,except per share)	Net Income (Loss)	Diluted EPS	Profit From Operations	EBITDA
As Reported	$24.0	$0.22	$49.4	$75.7
Asbestos expense (income), net of insurance settlements	(0.4)	-	-	(0.7)
Legal accruals and settlements⁽²⁾	1.0	-	-	1.5
Severance, restructuring and other exit costs	6.1	0.06	9.4	9.4
Asset impairments and accelerated depreciation	1.0	-	1.5	-
Loss on debt prepayment and write-off of debt issuance costs	3.4	0.03	-	5.2
Gain on asset dispositions	(7.1)	(0.06)	-	(10.9)
Other⁽³⁾	1.7	0.01	0.1	2.7
Subtotal adjustment items⁽⁴⁾	5.7	0.04	11.0	7.2
Tax valuation allowances	-	-	-	-
Tax benefit (detriment) to adjust to the ongoing tax rate	(5.5)	(0.04)	-	-
Ongoing Operations⁽¹⁾	$24.2	$0.22	$60.4	$82.9

HERCULES INCORPORATED Reconciliation to Ongoing Operations	THREE MONTHS ENDED JUNE 30, 2005
(Dollars in millions ,except per share)	Net Income (Loss)	Diluted EPS	Profit From Operations	EBITDA
As Reported	$ 9.2	$0.08	$61.0	$60.7
Asbestos expense, net of insurance settlements	—	—	—	—
Legal accruals and settlements⁽²⁾	10.2	0.09	—	15.7
Severance and restructuring costs	6.2	0.06	9.5	9.5
Loss on debt prepayment and write-off of debt issuance costs	3.0	0.03	—	4.7
Other⁽³⁾	0.9	—	0.6	0.8
Subtotal adjustment items⁽⁴⁾	20.3	0.18	10.1	30.7
Tax adjustment to the ongoing effective tax rate	0.5	0.01	—	—
Ongoing Operations⁽¹⁾	$30.0	$0.27	$71.1	$91.4

HERCULES INCORPORATED Reconciliation to Ongoing Operations	THREE MONTHS ENDED MARCH 31, 2005
(Dollars in millions ,except per share)	Net Income (Loss)	Diluted EPS	Profit From Operations	EBITDA
As Reported	$ 4.9	$0.04	$41.4	$45.7
Gain on sale of minority interest in CP Kelco	–	–	–	–
Legal accruals and settlements⁽⁴⁾	9.6	0.09	–	14.8
Severance and restructuring costs	5.6	0.05	8.6	8.6
Asset Impairments	–	–	–	–
Loss on debt prepayment and write-off of debt issuance costs	3.3	0.03	–	5.0
Accelerated vesting of stock compensation	1.8	0.02	2.8	2.8
Other⁽²⁾	0.4	0.01	1.3	0.2
Subtotal adjustment items⁽³⁾	$20.7	$0.20	$12.7	$31.4
Tax adjustment to the ongoing effective tax rate	(5.1)	(0.05)	–	–
Ongoing Operations⁽¹⁾	$20.5	$0.19	$54.1	$77.1

NOTES:

(1) Ongoing operations, EBIT and EBITDA are non-GAAP financial measures. The ongoing operations include Pulp and Paper, Aqualon, FiberVisions and Pinova. Results from ongoing operations exclude impairment charges for certain facilities within these businesses, which will have no further operating impact, charges related to divested businesses, litigation against and settlements with the Company's insurance carriers, executive retirement benefits, and legal accruals and settlements. It also excludes the impact of the prepayment and refinancing of long-term debt. Please refer to Tables 2, 3, 4 and 5 for the reconciliation of reported to ongoing operations for the quarter and year-to-date respectively.

EBIT is calculated as net income (loss) before income taxes plus interest and debt expense. EBITDA is calculated as net income (loss) before income taxes plus interest and debt expense, depreciation and amortization, net of amortization of debt issuance costs.

EBIT and EBITDA are measures commonly used by the capital markets to value enterprises. Interest, taxes, depreciation and amortization can vary significantly between companies due in part to differences in accounting policies, tax strategies, levels of indebtedness and interest rates. Excluding these items provides insight into the underlying results of operations and facilitates comparisons between Hercules and other companies. In addition, EBITDA is considered a reasonable approximation of gross cash flow and is one of the measures used for determining debt covenant compliance. Management believes that EBIT and EBITDA information is useful to investors for these reasons. This measurement is not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance.

(2) These accruals relate to non-asbestos litigation matters.

(3) Other includes gains and losses related to formerly divested businesses, special executive retirement benefit costs, tax restatement costs, net environmental remediation accruals and recoveries, and other costs.

(4) Adjustment items have been tax affected at the U.S. federal statutory tax rate of 35% for 2005 and 2004, except the 2004 gain on the sale of CP Kelco, which had nominal net taxes and the FiberVisions goodwill impairment, which does not have a corresponding tax benefit associated with it. Additionally, the related earnings per share impact is based upon diluted shares totaling 110.1 million and 110.4 million, respectively, for the three months and twelve months ended December 31, 2005.