United
States
Securities
and Exchange Commission
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of
Report (Date of earliest event reported): March
31, 2006
Hercules
Incorporated
(Exact
name of registrant as specified in its charter)
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Delaware
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001-00496
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51-0023450
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(State
or other jurisdiction of
incorporation)
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(Commission
File Number)
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(IRS
Employer Identification
Number)
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Hercules
Plaza
1313
North Market Street
Wilmington,
Delaware 19894-0001
(Address
of principal executive offices) (Zip Code)
(302)
594-5000
(Registrant’s
telephone number, including area code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the Registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
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Item
2.01 Completion
of Acquisition or Disposition of Assets.
On
March
31, 2006, Hercules Incorporated (the “Company”) completed the sale of a 51%
interest in FiberVisions Delaware Corporation (formerly FiberVisions L.L.C.
or
“FiberVisions” and, prior to the sale, a wholly-owned subsidiary) to SPG/FV
Investor LLC (“SPG”), an affiliate of SPG Partners, LLC, a New York-based
private equity firm. In connection with the transaction, FiberVisions issued
long-term debt in the amount of $90.0 million and simultaneously completed
a
distribution of $82.0 million to the Company and its wholly-owned subsidiary,
WSP Inc. (“WSP”) in proportion to their ownership interests. Immediately
thereafter, the Company received $27.0 million from SPG in exchange for its
51%
interest. WSP will retain its 49% interest in FiberVisions. As previously
announced, the contribution agreement (“Agreement”) provides SPG with an option
to purchase an additional 14% interest in FiberVisions from WSP for $7.4
million
within one year. The Agreement also provides for the receipt of additional
payments should FiberVisions meet certain defined performance measures in
2006
and/or 2007. Conversely, should performance fall below certain defined
performance measures during either year, the Company will be required to
provide
additional contributions to FiberVisions with a maximum commitment of $4.5
million for 2006 and $1.2 million for 2007. The exposure for additional
contributions is thereby limited to a maximum of $5.7 million.
The
disposition of the Company’s 51% interest in FiberVisions meets the threshold
for filing pro forma financial statements under Item 2.01, Completion of
Acquisition or Disposition of Assets. Those financial statements are provided
in
Item 9.01.
-2-
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
following unaudited condensed consolidated balance sheet as of December 31,
2005
and the unaudited condensed consolidated statement of operations for the
year
ended December 31, 2005, have been prepared to present the consolidated
financial position and the consolidated results of operations of the Company
as
if the sale of the Company’s 51% interest in FiberVisions had occurred on
December 31, 2005 for the unaudited pro forma condensed consolidated balance
sheet and on January 1, 2005 for the unaudited condensed consolidated statement
of operations.
These
statements are not indicative of the financial position or results of operations
of the Company as of December 31, 2005 or for the year ended December 31,
2005,
nor are they indicative of future results. In addition, these pro forma
financial statements do not reflect changes that may occur as a result of
activities subsequent to the disposition of the Company’s 51% interest in
FiberVisions.
For
pro
forma balance sheet presentation purposes, the receipt of the distribution
from
FiberVisions as well as the proceeds, net of transaction costs, from SPG
in
exchange for the Company’s 51% interest have been reflected as a reduction of
long-term debt attributable to the Company’s 11.125% senior notes due 2007. For
pro forma statement of operations purposes, interest expense has been decreased
by the reduction of interest expense related to the Company’s 11.125% senior
notes due 2007.
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Pro
Forma Condensed Consolidated Balance Sheet
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|||||||||||||
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As
of December 31, 2005
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|||||||||||||
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(Dollars
in millions)
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|||||||||||||
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Pro
Forma
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|||||||||||||
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As
Reported
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Adjustments
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As
Adjusted
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|||||||||||
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ASSETS
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Current
assets
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|||||||||||||
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Cash
and cash equivalents
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$
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77.3
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$
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-
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$
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77.3
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|||||||
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Accounts
receivable, net
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291.0
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-
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291.0
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||||||||||
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Inventories
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185.0
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-
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185.0
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||||||||||
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FiberVisions
assets held for sale
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202.7
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(202.7
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)
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(a)
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-
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|||||||
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Other
current assets
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87.4
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-
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87.4
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||||||||||
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Total
current assets
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843.4
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(202.7
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)
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640.7
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|||||||||
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Property,
plant and equipment, net
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535.4
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-
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535.4
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||||||||||
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Goodwill
and intangible assets, net
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583.8
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-
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583.8
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||||||||||
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Deferred
charges and other assets
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606.2
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26.0
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(a)
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632.2
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||||||||
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Total
assets
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$
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2,568.8
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$
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(176.7
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)
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$
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2,392.1
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||||||
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LIABILITIES
AND STOCKHOLDERS' DEFICIT
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Current
liabilities
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Accounts
payable and accrued expenses
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$
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429.1
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$
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-
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$
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429.1
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|||||||
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FiberVisions
liabilities held for sale
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66.6
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(66.6
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)
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(a)
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-
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|||||||
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Current
debt obligations
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16.7
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-
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16.7
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||||||||||
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Total
current liabilities
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512.4
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(66.6
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)
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445.8
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Long-term
debt
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1,092.3
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(107.2
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)
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(b)
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985.1
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|||||||
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Pension
liability
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323.4
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-
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323.4
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||||||||||
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Deferred
credits and other liabilities
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665.4
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-
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665.4
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||||||||||
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Total
liabilities
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2,593.5
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(173.8
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)
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2,419.7
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|||||||||
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Total
stockholders' deficit
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(24.7
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)
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(2.9
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)
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(a)
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(27.6
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)
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Total
liabilities and stockholders' deficit
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$
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2,568.8
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$
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(176.7
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)
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$
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2,392.1
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-3-
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Pro
Forma Condensed Consolidated Statement of Operations
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For
the Year Ended December 31, 2005
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|||||||||||||
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(Dollars
in millions, except per share data)
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|||||||||||||
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Pro
Forma
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|||||||||||||
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As
Reported
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Adjustments
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As
Adjusted
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|||||||||||
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Net
sales
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$
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2,068.8
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$
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(282.7
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)
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(c)
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$
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1,786.1
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||||
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Cost
of sales
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1,406.3
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(261.4
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)
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(c)
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1,144.9
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|||||||
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Selling,
general and administrative expenses
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382.8
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(13.4
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)
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(c)
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369.4
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Research
and development
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40.9
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(2.7
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)
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(c)
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38.2
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|||||||
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Intangible
asset amortization
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8.0
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(1.5
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)
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(c)
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6.5
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|||||||
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Impairment
of FiberVisions goodwill
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52.9
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(52.9
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)
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(c)
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-
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|||||||
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Other
operating expense
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47.5
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(5.4
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)
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(c)
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42.1
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|||||||
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Profit
from operations
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130.4
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54.6
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(c)
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185.0
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||||||||
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Interest
and debt expense
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89.4
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(12.3
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)
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(c)(e)
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77.1
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|||||||
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Other
expense, net
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86.3
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(0.4
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)
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(c)
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85.9
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|||||||
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Loss
before income taxes and equity loss
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(45.3
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)
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67.3
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(c)(e)
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22.0
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|||||||
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Benefit
for income taxes
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(7.2
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)
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2.7
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(c)(e)
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(4.5
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)
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||||||
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Loss
before equity loss
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(38.1
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)
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64.6
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(c)(e)
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26.5
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|||||||
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Equity
loss of affiliated companies, net of tax
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(0.5
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)
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(27.3
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)
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(c)(d)
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(27.8
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)
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Net
loss from continuing operations
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$
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(38.6
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)
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$
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37.3
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(c)(d)(e)
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$
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(1.3
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)
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Earnings
per share from continuing operations:
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|||||||||||||
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Basic
and diluted
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$
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(0.36
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)
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$
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0.34
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(c)(d)(e)
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$
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(0.01
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)
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|||
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Weighted
average number of shares (millions)
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108.7
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-
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108.7
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||||||||||
Note:
Pro forma adjustments
Pro
forma
adjustments giving effect to the disposition of the Company's 51% interest
in
FiberVisions in the unaudited financial statements are as follows:
(a)
To
reclassify assets and liabilities held for sale to an equity investment after
adjusting for transaction-related cash flows as follows: (1) the receipt
of
distributions in the amount of $82.0 million prior to the sale transaction,
(2)
the receipt of $27.0 million in proceeds for Hercules' 51% interest in
FiberVisions and (3) to pay cash transaction costs and expenses of $1.8
million.
(b)
To
apply the cash proceeds of $107.2 (net of $1.8 million in transaction costs
and
expenses) million against outstanding 11.125% senior notes due
2007.
(c)
To
reflect the elimination of FiberVisions results of operations excluding $12.0
million of corporate expense allocations which will remain as stranded costs
subsequent to the transaction.
(d)
To
reflect the equity loss, net of income tax from the resulting 49% interest
in
FiberVisions.
(e)
To
reduce interest expense for the assumed pay down of the 11.125% senior notes
due
2007, net of income taxes at the statutory rate of 35%.
-4-
Item
9.01 Financial
Statements and Exhibits.
(b) Pro
forma financial information.
(a)
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31,
2005.
(b)
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
year
ended
December
31, 2005.
(d) Exhibits.
10.1 First
Amendment to Contribution Agreement Dated March 31, 2006
99.1 Press
Release of Hercules Incorporated dated March 31, 2006.
-5-
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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April 6,
2006
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By:
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HERCULES
INCORPORATED
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/s/
Allen A. Spizzo
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Allen
A. Spizzo
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Vice
President and Chief Financial
Officer
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-6-