UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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HERCULES INCORPORATED
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Dear Fellow Shareholder: As
the management team of Hercules, we would like to set the record straight with
regard to what Sam Heyman has been saying about Hercules operating performance.
We are troubled, not only by his attacks on the leadership of our Company, but
also by the inferences that follow from those allegations—that our businesses
are not being effectively managed. Nothing could be further from the truth. In
2002, Hercules achieved year-over-year improvements in market share, sales,
and earnings for the first time since 1998. New product introductions were strong,
with key innovations in Aqualon, Pulp and Paper, FiberVisions and Pinova. Furthermore,
our relationships with customers are the strongest they have been in a long
time. This progress continues into 2003. The
improvements have not been limited to our businesses. Our support functions,
which provide critical services to our businesses, have aggressively redesigned
their work processes resulting in a more efficient, customer focused organization. In
mid-2001, the Company was in serious financial difficulty. Hercules had a balance
sheet that was tremendously over-leveraged, with massive short-term debt maturities,
and negative cash flow from its businesses. We were running out of time with
our bankers. Moreover, sales, volumes and margins were declining in our businesses,
costs were rising, and business conditions were continuing to deteriorate in
one of the worst recessions the chemical industry had experienced. There
was no question that it was time to take dramatic action and, under the new
leadership of Dr. Joyce, Hercules did so. Difficult
decisions had to be made, part of them related to a significant reduction in
the workforce. At the same time, we identified key areas and functions where
work processes clearly had to be improved.
We
instituted a global management structure that improved the cost efficiency of
both the Finance and Information Technology functions by approximately 40% from
2000 year-end levels. These cost improvements
are now saving Hercules over $32 million annually. Through
redesign of our accounts receivables process, we significantly reduced past
due balances, resulting in more than $20 million of improvements to Hercules
working capital. Cost
savings from Work Process Redesign also allowed us to improve BetzDearborns
operations, eventually enabling the sale of the Water Treatment Business to
GE for $1.8 billion in cash. The sale allowed
us to dramatically reduce our debt, strengthen the balance sheet and significantly
improve the Companys financial health. The
real key to Hercules and its future is the performance of its four businesses.
Highlighted below are some examples of the positive developments in our businesses,
which demonstrate the high caliber of performance at Hercules over the past
two years:
The
above are examples of the many actions we have taken to revitalize our businesses —
and how our actions are delivering results. We
have also regenerated our organization by bringing on fresh talent in business
management, manufacturing, finance and control and Work Process Redesign. We
are progressing with a program to add complementary bolt-on acquisitions to
each of our three largest businesses that would increase top line growth and
take advantage of existing resources to increase profitability. We
have strengthened our organization by enhancing our employees skills through
training seminars on Work Process Redesign and effective Project Management.
More than 500 employees have gone through this training. Currently, Hercules
employees are actively working on over 130 Work Process Redesign projects to
be implemented in 2003 and 2004 which are designed to improve our future annual
operating performance by more than $70 million. During
all of this activity, we did not compromise our commitment to high safety and
environmental standards. We initiated a comprehensive global Manufacturing Excellence
program, dramatically improving our global planning and implementation of key
Safety, Health, Environmental and Regulatory Affairs programs. In
short, our businesses are on solid footing and are growing. We
have turned the Company around — and we have a well-mapped strategy
to continue to strengthen Hercules and deliver increased value to shareholders. We
ask that you let us continue our progress, by rejecting Heymans nominees
and not giving him control of your Company. We
urge you to vote FOR the Hercules nominees by signing, dating and returning
the enclosed GOLD proxy card.
If
you have any questions, or need assistance in voting your GOLD
proxy card, please call MacKenzie Partners, Inc., toll-free at (800) 322-2885
or collect at (212) 929-5500. Thank you for your continued support. Sincerely, 1 Kendall
W. Patterson is Vice President, SHERA and Manufacturing Excellence. As of the
record date, Mr. Patterson beneficially owned 99,016 shares of common stock
of the Company, including 12,582 shares in the Savings and Investments Plans
and 20,832 shares under the Companys Long Term Incentive Compensation
Plan (LTICP). Over the past two years, Mr. Patterson sold 191 shares to pay
withholding tax on restricted shares whose restrictions had lapsed on 2/15/2001
and acquired 1,485 restricted shares, 9,347 restricted shares and 10,000 restricted
shares on each of 2/21/2002, 2/21/2003 and 4/24/2003, respectively, pursuant
to the Companys LTICP, including purchases made from payments above target
awarded under the Companys Management Incentive Compensation Plan (MICP).
This information updates the participant information contained in Appendix I
to the Companys definitive proxy statement. 2 Richard
J. Sujdak is Director, Central Research Services. As of the record date, Mr. Sujdak
beneficially owned 36,903 shares of common stock of the Company, including 6,235
shares in the Savings and Investments Plans and 8,328 shares under the Companys
LTICP. Over the past two years, Mr. Sujdak acquired 1,336 restricted shares,
1,992 restricted shares and 5,000 restricted shares on each of 2/21/2002, 2/21/2003
and 4/24/2003, respectively, pursuant to the Companys LTICP, including
purchases made from payments above target awarded under the Companys MICP.
This information updates the participant information contained in Appendix I
to the Companys definitive proxy statement.
This
letter includes forward-looking statements, as defined in the Private Securities
Litigation Reform Act of 1995, reflecting managements 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, ability to raise capital, ability to refinance, the result of
the pursuit of strategic alternatives, ability to execute work process redesign
and reduce costs, business climate, business performance, economic and competitive
uncertainties, higher manufacturing costs, reduced level of customer orders,
changes in strategies, risks in developing new products and technologies, environmental
and safety regulations and clean-up costs, foreign exchange rates, 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, or the inability to eliminate or reduce such financial exposures
by collecting indemnity payments from insurers, the impact of increased accruals
and reserves for such exposures, and adverse changes in economic and political
climates around the world, including terrorist activities and international
hostilities. 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 other 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.
July 9, 2003 Today,
Hercules businesses are in the best operating condition and are more competitive
than they have been in years.
This
improved performance has been a key contributor to the turnaround of Hercules.
It is a testament to the talent and resourcefulness of the employees of Hercules.
We
generated immediate cash through the sale of non-strategic assets with more
than $25 million being realized to date.
Pulp and Paper Division
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Aqualon
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FiberVisions
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Pinova
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Fred G. Aanonsen
Vice President and Controller
Edward V. Carrington
Vice President, Human
Resources Richard G. Dahlen
Chief Legal Officer
Robert C. Flexon
Vice President, Work Processes,
Corporate Resources and
Development Israel J. Floyd
Corporate Secretary and
General CounselBrian L. Pahl
Vice President, Hercules
Incorporated and President,
Pulp and Paper Division
Kendall W. Patterson1
Vice President, SHERA and
Manufacturing ExcellenceCraig A. Rogerson
President, FiberVisions;
President, Pinova; and Vice
President, Global ProcurementStuart C. Shears
Vice President and Treasurer
Allen A. Spizzo
Vice President, Corporate
Affairs, Strategic Planning and
Corporate DevelopmentRichard J. Sujdak2
Director, Central Research
ServicesJohn Televantos
Vice President, Hercules
Incorporated and President,
Aqualon Division
Stop Heyman and
protect your interest in Hercules. Please sign, date and
return the enclosed GOLD proxy card today.
We urge you to discard any white proxy cards that you receive from Heyman
or
the Hercules Shareholders Committee for New Management.
If you have any questions or require assistance
in voting your GOLD proxy card,
please call MacKenzie Partners at the phone numbers listed below.
105
Madison Avenue
New York, New York 10016
email: proxy@mackenziepartners.com
Call collect: (212) 929-5500
or
Toll Free: (800) 322-2885