Hercules Comments On Impact of Planned Divestiture of Water Treatment Business

March 12, 2002

Hercules Incorporated has commented on the impact of the planned sale of its BetzDearborn Water Treatment Division on the company. In addition, the company discussed how it planned to use the proceeds and the effect of the divestiture on the company's cost savings program.

Upon completion of the divestiture, estimated net proceeds of $1.665 billion will be used to pay down debt in accordance with bank agreements and to provide collateral for currently outstanding letters of credit. Dr. William H. Joyce, Chairman and Chief Executive Officer, said, "This significant debt reduction will bring our credit profile in line with that of the industry, allowing us to focus on improving and growing the remaining businesses."

As the sale of the Water Treatment business awaits regulatory and other customary approvals, Hercules is continuing with the Work Process Redesign Program for the entire company.

After the divestiture has been completed, this cost reduction program will continue in 2002 for the remaining businesses, which include Aqualon, Pulp and Paper (including the retained BetzDearborn Paper Process Chemical Products acquired in 1998), FiberVisions and Rosins and Terpenes.

The previously announced cost reduction goal of $200 million annual run rate savings, as compared to those costs that existed in 2000, included $125 million for the remaining businesses and $75 million for the BetzDearborn Division.

Run rate savings of approximately $38 million for the remaining businesses and $61 million for the BetzDearborn Division had been achieved as of December 31, 2001. "Our company-wide effort to redesign business processes and reduce the fixed costs, while providing better service to our customers continues in 2002," Dr. Joyce emphasized.

"The sale of the BetzDearborn Water Treatment Business is expected to reduce the revenues of the company by approximately 36 percent," he continued. "BetzDearborn services many industries while our remaining businesses are focused on specific end use industries; therefore, the separation allows us to further simplify our work processes and overall corporate structure to support a less complex organization. This simplification is expected to give us additional net annual savings of $25 million, bringing the total savings goal for the remaining company, including the cost reductions implemented in 2001, to $150 million."

Programs to deliver the additional $25 million in annual savings opportunities are planned to begin at the time of closing of the sale of the Water Treatment Business. For a limited time after closing, a portion of these expenses will be reimbursed by GE Specialty Materials, a unit of General Electric Company, through a transitional services agreement.

Plans are being formulated to eliminate these costs within 90 days of the conclusion of the transition services.

Assuming market conditions for the company's businesses remain the same as in the fourth quarter 2001, the previously estimated 2002 EBITDA (earnings before interest, taxes, depreciation and amortization) for all Hercules businesses including BetzDearborn continues to be in excess of $550 million.

Under the market conditions described above, and assuming the $125 million of savings continues as originally planned and the additional $25 million of savings associated with the divestiture had occurred as of January 1, 2002, pro forma 2002 EBITDA for the remaining businesses would be expected to exceed $320 million.

Conference Call

The company will host a conference call to discuss the divestiture and cost savings plan on March 12, 2002 at 9:00 a.m. EST. To participate in the conference call, dial 973-321-1020 ten minutes prior to the call. A replay of the conference call will be available continuously beginning 12:30 p.m., March 12, 2002 until March 18, 2002 by dialing 973-341-3080. The conference PIN number is 3158843.

Source: Hercules Incorporated