Part
I - Financial Information
|
3
|
Item
1. Consolidated Financial Statements
|
3
|
Consolidated
Statements of Operations and Comprehensive (Loss) Income
|
3
|
Consolidated
Balance Sheets
|
4
|
Consolidated
Statements of Cash Flows
|
5
|
Notes
to Consolidated Financial Statements
|
7
|
Item
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
|
37
|
Business
Overview
|
37
|
Critical
Accounting Estimates
|
40
|
Results
of Operations
|
42
|
Liquidity
and Capital Resources
|
53
|
Risk
Factors
|
56
|
Forward-Looking
Statements
|
59
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
59
|
Item
4. Controls and Procedures
|
59
|
Part
II - Other Information
|
60
|
Item
1. Legal Proceedings
|
60
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
60
|
Item
6. Exhibits
|
60
|
Signature
|
61
|
Exhibit
Index
|
62
|
(Unaudited)
|
|||||||||||||
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
sales
|
$
|
501.0
|
$
|
534.7
|
$
|
1,028.3
|
$
|
1,036.6
|
|||||
Cost
of sales
|
324.7
|
351.2
|
685.4
|
688.8
|
|||||||||
Selling,
general and administrative expenses
|
90.7
|
99.9
|
182.0
|
199.6
|
|||||||||
Research
and development
|
9.4
|
10.0
|
19.0
|
20.3
|
|||||||||
Intangible
asset amortization (Note 5)
|
2.0
|
2.0
|
3.6
|
4.0
|
|||||||||
Other
operating expense, net (Note 13)
|
8.6
|
10.4
|
15.8
|
20.1
|
|||||||||
Profit
from operations
|
65.6
|
61.2
|
122.5
|
103.8
|
|||||||||
Interest
and debt expense
|
16.7
|
22.8
|
37.4
|
45.0
|
|||||||||
Vertac
litigation charge (Note 9)
|
106.0
|
—
|
106.0
|
14.9
|
|||||||||
Other
expense, net (Note 14)
|
21.1
|
25.7
|
31.7
|
32.0
|
|||||||||
(Loss)
income before income taxes and equity loss
|
(78.2
|
)
|
12.7
|
(52.6
|
)
|
11.9
|
|||||||
(Benefit)
provision for income taxes (Note 15)
|
(27.5
|
)
|
3.1
|
(16.8
|
)
|
(3.4
|
)
|
||||||
(Loss)
income before minority interests and equity loss (income)
|
(50.7
|
)
|
9.6
|
(35.8
|
)
|
15.3
|
|||||||
Minority
interests in earnings of consolidated subsidiaries
|
(0.3
|
)
|
(0.2
|
)
|
(0.4
|
)
|
(0.6
|
)
|
|||||
Equity
(loss) income of affiliated companies, net of tax
|
(0.6
|
)
|
—
|
(1.0
|
)
|
0.3
|
|||||||
Net
(loss) income from continuing operations before discontinued operations
and cumulative effect of change in accounting principle
|
(51.6
|
)
|
9.4
|
(37.2
|
)
|
15.0
|
|||||||
Net
loss from discontinued operations, net of tax (Note 17)
|
(0.7
|
)
|
(0.2
|
)
|
(1.3
|
)
|
(0.9
|
)
|
|||||
Net
(loss) income before cumulative effect of change in accounting
principle
|
(52.3
|
)
|
9.2
|
(38.5
|
)
|
14.1
|
|||||||
Cumulative
effect of change in accounting principle, net of tax (Note
3)
|
—
|
—
|
0.9
|
—
|
|||||||||
Net
(loss) income
|
$
|
(52.3
|
)
|
$
|
9.2
|
$
|
(37.6
|
)
|
$
|
14.1
|
|||
(Loss)
earnings per share (Note 16):
|
|||||||||||||
Basic
(loss) earnings per share
|
|||||||||||||
Continuing
operations
|
$
|
(0.46
|
)
|
$
|
0.09
|
$
|
(0.34
|
)
|
$
|
0.14
|
|||
Discontinued
operations
|
(0.01
|
)
|
(0.01
|
)
|
(0.01
|
)
|
(0.01
|
)
|
|||||
Cumulative
effect of change in accounting principle
|
—
|
—
|
0.01
|
—
|
|||||||||
Net
(loss) income
|
$
|
(0.47
|
)
|
$
|
0.08
|
$
|
(0.34
|
)
|
$
|
0.13
|
|||
Weighted
average number of shares (millions)
|
110.8
|
108.8
|
110.5
|
108.6
|
|||||||||
Diluted
(loss) earnings per share
|
|||||||||||||
Continuing
operations
|
$
|
(0.46
|
)
|
$
|
0.08
|
$
|
(0.34
|
)
|
$
|
0.14
|
|||
Discontinued
operations
|
(0.01
|
)
|
—
|
(0.01
|
)
|
(0.01
|
)
|
||||||
Cumulative
effect of changes in accounting principle
|
—
|
—
|
0.01
|
—
|
|||||||||
Net
(loss) income
|
$
|
(0.47
|
)
|
$
|
0.08
|
$
|
(0.34
|
)
|
$
|
0.13
|
|||
Weighted
average number of shares (millions)
|
110.8
|
110.7
|
110.5
|
110.5
|
|||||||||
Net
(loss) income
|
$
|
(52.3
|
)
|
$
|
9.2
|
$
|
(37.6
|
)
|
$
|
14.1
|
|||
Foreign
currency translation
|
30.5
|
(39.5
|
)
|
37.9
|
(64.9
|
)
|
|||||||
Decrease
(increase) in additional minimum pension liability due to:
|
|||||||||||||
Remeasurement
adjustments (Note 7)
|
—
|
—
|
64.7
|
—
|
|||||||||
Foreign
currency translation
|
(1.5
|
)
|
2.0
|
(1.8
|
)
|
3.7
|
|||||||
Other,
net including hedging activities
|
(22.4
|
)
|
—
|
(27.6
|
)
|
—
|
|||||||
Comprehensive
(loss) income
|
$
|
(45.7
|
)
|
$
|
(28.3
|
)
|
$
|
35.6
|
$
|
(47.1
|
)
|
(Dollars
in millions)
|
(Unaudited)
|
||||||
June
30
2006
|
December 31,
2005
|
||||||
ASSETS
|
|||||||
Current
assets
|
|||||||
Cash
and cash equivalents
|
$
|
81.9
|
$
|
77.3
|
|||
Accounts
receivable, net (Note 10)
|
333.1
|
289.7
|
|||||
Inventories
(Note 10)
|
199.4
|
179.6
|
|||||
Deferred
income taxes
|
37.3
|
39.3
|
|||||
FiberVisions
assets held for sale (Note 4)
|
—
|
202.7
|
|||||
Current
assets of discontinued operations (Note 17)
|
1.1
|
6.7
|
|||||
Other
current assets
|
48.1
|
48.1
|
|||||
Total
current assets
|
700.9
|
843.4
|
|||||
Property,
plant, and equipment, net (Note 10)
|
553.4
|
535.4
|
|||||
Intangible
assets, net (Note 5)
|
146.5
|
142.8
|
|||||
Goodwill
(Note 5)
|
476.9
|
441.0
|
|||||
Deferred
income taxes
|
242.7
|
240.4
|
|||||
Asbestos-related
assets (Note 9)
|
102.9
|
120.7
|
|||||
Deferred
charges and other assets
|
262.1
|
245.1
|
|||||
Total
assets
|
$
|
2,485.4
|
$
|
2,568.8
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|||||||
Current
liabilities
|
|||||||
Accounts
payable
|
$
|
190.6
|
$
|
172.9
|
|||
FiberVisions
liabilities held for sale (Note 4)
|
—
|
66.6
|
|||||
Asbestos-related
liabilities (Note 9)
|
36.4
|
36.4
|
|||||
Current
debt obligations (Note 6)
|
13.1
|
16.7
|
|||||
Vertac
litigation liability (Note 9)
|
121.0
|
—
|
|||||
Accrued
expenses
|
218.9
|
217.0
|
|||||
Current
liabilities of discontinued operations (Note 17)
|
0.9
|
2.8
|
|||||
Total
current liabilities
|
580.9
|
512.4
|
|||||
Long-term
debt (Note 6)
|
973.1
|
1,092.3
|
|||||
Deferred
income taxes
|
80.8
|
75.8
|
|||||
Pension
liability
|
246.5
|
323.4
|
|||||
Other
postretirement benefits
|
56.2
|
65.5
|
|||||
Deferred
credits and other liabilities
|
296.1
|
289.4
|
|||||
Asbestos-related
liabilities (Note 9)
|
220.4
|
233.6
|
|||||
Total
liabilities
|
2,454.0
|
2,592.4
|
|||||
Commitments
and contingencies (Note 9)
|
—
|
—
|
|||||
Minority
interests
|
12.4
|
1.1
|
|||||
Stockholders’
equity (deficit)
|
|||||||
Series preferred
stock
|
—
|
—
|
|||||
Common
stock, $25/48 par value (shares issued at both 2006 and 2005 -
160.0
million)
|
83.3
|
83.3
|
|||||
Additional
paid-in capital
|
512.6
|
548.9
|
|||||
Unearned
compensation
|
(45.5
|
)
|
(65.7
|
)
|
|||
Accumulated
other comprehensive losses
|
(314.4
|
)
|
(387.6
|
)
|
|||
Retained
earnings
|
1,457.7
|
1,495.4
|
|||||
1,693.7
|
1,674.3
|
||||||
Reacquired
stock, at cost (2006 - 46.6 million shares; 2005 - 47.2 million
shares)
|
1,674.7
|
1,699.0
|
|||||
Total
stockholders’ equity (deficit)
|
19.0
|
(24.7
|
)
|
||||
Total
liabilities and stockholders’ equity (deficit)
|
$
|
2,485.4
|
$
|
2,568.8
|
(Dollars
in millions)
|
(Unaudited)
|
||||||
Six
Months Ended
June
30,
|
|||||||
2006
|
2005
|
||||||
Cash
Flows from Operating Activities:
|
|||||||
Net
(loss) income
|
$
|
(37.6
|
)
|
$
|
14.1
|
||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation
|
36.9
|
39.5
|
|||||
Amortization
|
11.7
|
12.5
|
|||||
Deferred
income tax provision
|
(32.8
|
)
|
12.2
|
||||
Gain
on disposals
|
(0.1
|
)
|
(0.3
|
)
|
|||
Write-off
of debt issuance costs
|
1.5
|
1.1
|
|||||
Loss
on sale of 51% interest in FiberVisions
|
10.6
|
—
|
|||||
Minority
interests in earnings of consolidated subsidiaries
|
0.4
|
0.6
|
|||||
Other
non-cash charges and credits, net
|
3.2
|
5.0
|
|||||
Accruals
and deferrals of cash receipts and payments (net of acquisitions
and
dispositions):
|
|||||||
Accounts
receivable
|
(30.3
|
)
|
(10.7
|
)
|
|||
Inventories
|
(1.0
|
)
|
(20.9
|
)
|
|||
Asbestos-related
assets and liabilities, net
|
6.5
|
15.2
|
|||||
Other
current assets
|
3.4
|
4.6
|
|||||
Accounts
payable and accrued expenses
|
108.4
|
(0.1
|
)
|
||||
Income
taxes payable
|
(5.2
|
)
|
(20.9
|
)
|
|||
Pension
and postretirement benefits
|
12.7
|
(31.3
|
)
|
||||
Non-current
assets and liabilities
|
(16.4
|
)
|
(0.6
|
)
|
|||
FiberVisions
net assets held for sale
|
(7.9
|
)
|
—
|
||||
Net
cash provided by operating activities
|
64.0
|
20.0
|
|||||
Cash
Flows from Investing Activities:
|
|||||||
Capital
expenditures
|
(22.9
|
)
|
(25.9
|
)
|
|||
Proceeds
from sale of 51% interest in FiberVisions, net of transaction
costs
|
25.1
|
—
|
|||||
Acquisition
of the net assets of Benchmark Polymer Products, L.P and
investment
in
Benchmark Performance Group.
|
(22.7
|
)
|
—
|
||||
Investment
in Hercules Tianpu Chemical Co., net of cash recognized upon
consolidation
|
(3.4
|
)
|
—
|
||||
Proceeds
of fixed asset disposals
|
0.3
|
3.2
|
|||||
Other,
net
|
(1.0
|
)
|
—
|
||||
Net
cash used in investing activities
|
(24.6
|
)
|
(22.7
|
)
|
|||
Cash
Flows from Financing Activities:
|
|||||||
Long-term
debt issued by FiberVisions, net of issuance costs
|
83.7
|
—
|
|||||
Long-term
debt payments
|
(122.7
|
)
|
(62.4
|
)
|
|||
Change
in short-term debt
|
(0.8
|
)
|
(0.9
|
)
|
|||
Treasury
stock issued
|
3.5
|
2.3
|
|||||
Other,
net
|
0.4
|
(0.3
|
)
|
||||
Net
cash used in financing activities
|
(35.9
|
)
|
(61.3
|
)
|
|||
Effect
of exchange rate changes on cash
|
1.1
|
(3.5
|
)
|
||||
Net
increase (decrease) in cash and cash equivalents
|
4.6
|
(67.5
|
)
|
||||
Cash
and cash equivalents - beginning of period
|
77.3
|
126.5
|
|||||
Cash
and cash equivalents - end of period
|
$
|
81.9
|
$
|
59.0
|
Supplemental
Disclosures of Cash Flow Information:
|
|||||||
Cash
paid during the period for:
|
|||||||
Interest
|
$
|
45.8
|
$
|
44.2
|
|||
Income
taxes, net of refunds received
|
19.3
|
3.8
|
|||||
Non-cash
investing and financing activities:
|
|||||||
De-consolidation
of debt issued by FiberVisions
|
90.0
|
—
|
|||||
De-consolidation
of FiberVisions capitalized debt issuance costs
|
(6.3
|
)
|
—
|
||||
Incentive
and other employee benefit stock plan issuances
|
11.8
|
10.8
|
Expected
volatility
|
30.10
|
%
|
||
Expected
dividend yield
|
0
|
%
|
||
Expected
life (in years)
|
6.0
|
|||
Risk
free interest rate
|
4.60
|
%
|
Regular
|
Performance
Accelerated
|
||||||||||||
Number
of
Shares
|
Weighted-
Average
Price
|
Number
of
Shares
|
Weighted-Average
Price
|
||||||||||
Outstanding
at January 1, 2006
|
8,382,012
|
$
|
21.31
|
1,342,115
|
$
|
43.49
|
|||||||
Granted
|
477,228
|
12.22
|
—
|
—
|
|||||||||
Exercised
|
(302,391
|
)
|
11.68
|
—
|
—
|
||||||||
Forfeited
|
(412,685
|
)
|
37.31
|
(208,475
|
)
|
51.36
|
|||||||
Outstanding
at June 30, 2006
|
8,144,164
|
$
|
20.33
|
1,133,640
|
$
|
42.04
|
|||||||
Exercisable
at June 30, 2006
|
7,521,599
|
$
|
20.97
|
—
|
$
|
—
|
Number
of
Shares
|
Weighted-Average
Grant Date Fair
Value
|
||||||
Outstanding
at January 1, 2006
|
2,121,533
|
$
|
11.39
|
||||
Granted
|
565,168
|
12.22
|
|||||
Vested
|
(389,052
|
)
|
8.99
|
||||
Forfeited
|
(85,644
|
)
|
12.68
|
||||
Converted
|
(76,490
|
)
|
12.22
|
||||
Outstanding
at June 30, 2006
|
2,135,515
|
$
|
11.96
|
Three
Months
|
Six
Months
|
||||||
Net
income as reported
|
$
|
9.2
|
$
|
14.1
|
|||
Add:
Stock-based compensation expense recognized in reported results,
net of
tax
|
1.4
|
4.3
|
|||||
Deduct:
Stock-based compensation expense determined under the fair value
based
method for all awards , net of tax
|
(1.5
|
)
|
(4.8
|
)
|
|||
Pro
forma net income
|
$
|
9.1
|
$
|
13.6
|
|||
Earnings
per share:
|
|||||||
Basic
- as reported
|
$
|
0.08
|
$
|
0.13
|
|||
Basic
- pro forma
|
$
|
0.08
|
$
|
0.13
|
|||
Diluted
- as reported
|
$
|
0.08
|
$
|
0.13
|
|||
Diluted
- pro forma
|
$
|
0.08
|
$
|
0.13
|
4. |
Sale
of Interest in FiberVisions
Division
|
5. |
Goodwill
and Other Intangible Assets
|
Paper
Technology and Ventures
|
Aqualon
Group
|
Total
|
||||||||
Balance,
December 31, 2005
|
$
|
402.6
|
$
|
38.4
|
$
|
441.0
|
||||
Acquisition
|
—
|
16.9
|
16.9
|
|||||||
Foreign
currency translation
|
18.4
|
0.6
|
19.0
|
)
|
||||||
Balance,
June 30, 2006
|
$
|
421.0
|
$
|
55.9
|
$
|
476.9
|
Customer
Relationships
|
Trademarks
and
Tradenames
|
Other
Intangibles
|
Total
|
||||||||||
Gross
carrying amount
|
|||||||||||||
Balance,
December 31, 2005
|
$
|
90.0
|
$
|
73.9
|
$
|
24.8
|
$
|
188.7
|
|||||
Balance,
June 30, 2006
|
90.0
|
73.9
|
32.0
|
195.9
|
|||||||||
Accumulated
amortization
|
|||||||||||||
Balance,
December 31, 2005
|
$
|
16.4
|
$
|
13.5
|
$
|
16.0
|
$
|
45.9
|
|||||
Balance,
June 30, 2006
|
17.5
|
14.6
|
17.3
|
49.4
|
June
30,
2006
|
December 31,
2005
|
||||||
Term
B Loan due 2010
|
$
|
391.0
|
$
|
393.0
|
|||
6.60%
notes due 2027
|
100.0
|
100.0
|
|||||
Term
notes at various rates from 5.00% to 7.16%
|
—
|
6.8
|
|||||
11.125%
senior notes due 2007
|
16.1
|
130.0
|
|||||
6.75%
senior subordinated notes due 2029
|
250.0
|
250.0
|
|||||
8%
convertible subordinated debentures due 2010
|
2.6
|
2.6
|
|||||
6.50%
junior subordinated deferrable interest debentures due
2029
|
217.4
|
217.0
|
|||||
Other
|
9.1
|
9.6
|
|||||
986.2
|
1,109.0
|
||||||
Less:
Current debt obligations
|
13.1
|
16.7
|
|||||
Long-term
debt
|
$
|
973.1
|
$
|
1,092.3
|
Pension
Benefits
|
|||||||||||||
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
periodic benefit cost:
|
|||||||||||||
Service
cost
|
$
|
4.1
|
$
|
4.8
|
$
|
8.8
|
$
|
9.9
|
|||||
Interest
cost
|
25.0
|
24.5
|
49.9
|
50.8
|
|||||||||
Expected
return on plan assets
|
(28.0
|
)
|
(28.4
|
)
|
(56.4
|
)
|
(58.6
|
)
|
|||||
Amortization
and deferrals
|
(0.5
|
)
|
0.6
|
(1.0
|
)
|
1.1
|
|||||||
Actuarial
losses recognized
|
10.5
|
9.8
|
22.5
|
19.6
|
|||||||||
$
|
11.1
|
$
|
11.3
|
$
|
23.8
|
$
|
22.8
|
Other
Postretirement Benefits
|
|||||||||||||
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
periodic benefit cost:
|
|||||||||||||
Service
cost
|
$
|
0.1
|
$
|
0.2
|
$
|
0.3
|
$
|
0.4
|
|||||
Interest
cost
|
2.2
|
2.6
|
4.3
|
5.2
|
|||||||||
Expected
return on plan assets
|
—
|
—
|
—
|
—
|
|||||||||
Amortization
and deferrals
|
(1.9
|
)
|
(2.1
|
)
|
(4.0
|
)
|
(4.2
|
)
|
|||||
Actuarial
losses recognized
|
1.9
|
1.3
|
3.6
|
2.6
|
|||||||||
$
|
2.3
|
$
|
2.0
|
$
|
4.2
|
$
|
4.0
|
Active
Sites
|
Inactive
Sites
|
Total
|
||||||||
Balance,
January 1, 2006
|
$
|
10.2
|
$
|
80.1
|
$
|
90.3
|
||||
Accretion
|
0.3
|
0.8
|
1.1
|
|||||||
Settlement
payments
|
(1.3
|
)
|
(5.5
|
)
|
(6.8
|
)
|
||||
Changes
in estimated obligations
|
(0.1
|
)
|
0.3
|
0.2
|
||||||
Foreign
currency translation
|
0.4
|
—
|
0.4
|
|||||||
Balance,
June 30, 2006
|
$
|
9.5
|
$
|
75.7
|
$
|
85.2
|
Balance
January 1, 2006
|
Interest
Income/
Additional
Accruals
|
Insurance
Recovered/
Liabilities
Settled
|
Accretion/
Reclassifi-
cation
|
Balance
June 30, 2006
|
||||||||||||
Asbestos-related
assets:
|
||||||||||||||||
Insurance
receivable
|
$
|
65.2
|
$
|
—
|
$
|
(33.3
|
)
|
$
|
0.5
|
$
|
32.4
|
|||||
Restricted
cash in trust (1)
|
55.5
|
1.4
|
13.6
|
—
|
70.5
|
|||||||||||
Asbestos-related
assets, non-current
|
$
|
120.7
|
$
|
1.4
|
$
|
(19.7
|
)
|
$
|
0.5
|
$
|
102.9
|
|||||
Asbestos-related
liabilities:
|
||||||||||||||||
Asbestos-related
liabilities, current
|
$
|
36.4
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
36.4
|
||||||
Asbestos-related
liabilities, non-current
|
233.6
|
—
|
(13.2
|
)
|
—
|
220.4
|
||||||||||
Total
asbestos-related liabilities
|
$
|
270.0
|
$
|
—
|
$
|
(13.2
|
)
|
$
|
—
|
$
|
256.8
|
June
30,
2006
|
December 31,
2005
|
||||||
Accounts
receivable, gross
|
$
|
337.5
|
$
|
293.7
|
|||
Allowance
for doubtful accounts
|
(4.4
|
)
|
(4.0
|
)
|
|||
Accounts
receivable, net
|
$
|
333.1
|
$
|
289.7
|
|||
Inventories:
|
|||||||
Finished
goods
|
$
|
111.8
|
$
|
98.4
|
|||
Raw
materials and work-in-process
|
65.6
|
60.5
|
|||||
Supplies
|
22.0
|
20.7
|
|||||
$
|
199.4
|
$
|
179.6
|
||||
Property,
plant and equipment:
|
|||||||
Land
|
$
|
16.3
|
$
|
15.7
|
|||
Buildings
and equipment
|
1,660.2
|
1,608.5
|
|||||
Construction
in progress
|
46.1
|
38.0
|
|||||
1,722.6
|
1,662.2
|
||||||
Accumulated
depreciation and amortization
|
(1,169.2
|
)
|
(1,126.8
|
)
|
|||
Property,
plant and equipment, net
|
$
|
553.4
|
$
|
535.4
|
Severance
|
Other
Exit Costs
|
Accelerated
Depreciation
|
Total
|
||||||||||
Research
and development consolidation
|
|||||||||||||
Jacksonville,
FL
|
$
|
1.3
|
$
|
1.1
|
$
|
0.4
|
$
|
2.8
|
|||||
Wilmington,
DE
|
0.8
|
—
|
0.6
|
1.4
|
|||||||||
2.1
|
1.1
|
1.0
|
4.2
|
||||||||||
Manufacturing
rationalization
|
|||||||||||||
Pendlebury,
UK
|
—
|
0.3
|
2.5
|
2.8
|
|||||||||
Business
segment realignment
|
|||||||||||||
Paper
Technologies and Ventures
|
4.2
|
—
|
—
|
4.2
|
|||||||||
Aqualon Group
|
2.7
|
—
|
—
|
2.7
|
|||||||||
6.9
|
—
|
—
|
6.9
|
||||||||||
Alliance-related
rationalization (1)
|
0.3
|
—
|
0.4
|
0.7
|
|||||||||
Corporate
stranded cost reduction
|
1.6
|
0.2
|
—
|
1.8
|
|||||||||
Total
restructuring and accelerated depreciation charges
|
$
|
10.9
|
$
|
1.6
|
$
|
3.9
|
$
|
16.4
|
(1)
|
Savannah,
GA, Hattiesburg, MS and Portland,
OR.
|
Balance,
January 1, 2006
|
$
|
16.6
|
||
Additional
severance and related costs recognized (SFAS 112)
|
8.6
|
|||
Charges
for SFAS 146 terminations and relocations
|
3.1
|
|||
Cash payments
|
(13.4
|
)
|
||
Other,
including foreign currency translation
|
0.4
|
|||
Balance,
June 30, 2006
|
$
|
15.3
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Severance,
restructuring and other exit costs, net
|
$
|
5.2
|
$
|
9.7
|
$
|
12.5
|
$
|
18.0
|
|||||
Legal
settlements
|
1.5
|
—
|
(2.1
|
)
|
—
|
||||||||
Accelerated
depreciation (see Note 12)
|
0.9
|
0.4
|
3.9
|
0.9
|
|||||||||
Consulting
charges related to legacy issues
|
—
|
—
|
—
|
0.8
|
|||||||||
Other
miscellaneous charges, net
|
1.0
|
0.3
|
1.5
|
0.4
|
|||||||||
$
|
8.6
|
$
|
10.4
|
$
|
15.8
|
$
|
20.1
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Litigation
settlements and accruals
|
$
|
1.4
|
$
|
16.4
|
$
|
2.0
|
$
|
16.5
|
|||||
Loss
on repurchase of debt
|
10.7
|
4.7
|
12.2
|
9.7
|
|||||||||
Loss
on sale of 51% interest in FiberVisions
|
5.5
|
—
|
10.6
|
—
|
|||||||||
Asbestos-related
costs, net
|
2.3
|
2.1
|
4.5
|
3.8
|
|||||||||
Environmental
charges
|
0.3
|
1.1
|
1.3
|
2.1
|
|||||||||
Other,
net
|
0.9
|
1.4
|
1.1
|
(0.1
|
)
|
||||||||
$
|
21.1
|
$
|
25.7
|
$
|
31.7
|
$
|
32.0
|
Three
Months Ended June 30,
|
|||||||||||||
2006
|
2005
|
||||||||||||
(Loss)Income
|
(Loss)Earnings
Per
Share
|
Income(Loss)
|
Earnings(Loss)
Per
Share
|
||||||||||
Basic
(loss) earnings per share:
|
|||||||||||||
Continuing
operations
|
$
|
(51.6
|
)
|
$
|
(0.46
|
)
|
$
|
9.4
|
$
|
0.09
|
|||
Discontinued
operations
|
(0.7
|
)
|
(0.1
|
)
|
(0.2
|
)
|
(0.01
|
)
|
|||||
Net
(loss) income
|
$
|
(52.3
|
)
|
$
|
(0.47
|
)
|
$
|
9.2
|
$
|
0.08
|
|||
Weighted-average
number of basic shares (millions)
|
110.8
|
108.8
|
|||||||||||
Diluted
(loss) earnings per share:
|
|||||||||||||
Continuing
operations
|
$
|
(51.6
|
)
|
$
|
(0.46
|
)
|
$
|
9.4
|
$
|
0.08
|
|||
Discontinued
operations
|
(0.7
|
)
|
(0.1
|
)
|
(0.2
|
)
|
—
|
||||||
Net
(loss) income
|
$
|
(52.3
|
)
|
$
|
(0.47
|
)
|
$
|
9.2
|
$
|
0.08
|
|||
Weighted-average
number of diluted shares (millions)
|
110.8
|
110.7
|
Six
Months Ended June 30,
|
|||||||||||||
2006
|
2005
|
||||||||||||
(Loss)
Income
|
Earnings(Loss)
Per
Share
|
Income(Loss)
|
Earnings(Loss)
Per
Share
|
||||||||||
Basic
(loss) earnings per share:
|
|||||||||||||
Continuing
operations
|
$
|
(37.2
|
)
|
$
|
(0.34
|
)
|
$
|
15.0
|
$
|
0.14
|
|||
Discontinued
operations
|
(1.3
|
)
|
(0.01
|
)
|
(0.9
|
)
|
(0.01
|
)
|
|||||
Cumulative
effect of changes in accounting principle
|
0.9
|
0.01
|
—
|
—
|
|||||||||
Net
(loss) income
|
$
|
(37.6
|
)
|
$
|
(0.34
|
)
|
$
|
14.1
|
$
|
0.13
|
|||
Weighted-average
number of basic shares (millions)
|
110.5
|
108.6
|
|||||||||||
Diluted
(loss) earnings per share:
|
|||||||||||||
Continuing
operations
|
$
|
(37.2
|
)
|
$
|
(0.34
|
)
|
$
|
15.0
|
$
|
0.14
|
|||
Discontinued
operations
|
(1.3
|
)
|
(0.01
|
)
|
(0.9
|
)
|
(0.01
|
)
|
|||||
Cumulative
effect of changes in accounting principle
|
0.9
|
0.01
|
—
|
—
|
|||||||||
Net
(loss) income
|
$
|
(37.6
|
)
|
$
|
(0.34
|
)
|
$
|
14.1
|
$
|
0.13
|
|||
Weighted-average
number of diluted shares (millions)
|
110.5
|
110.5
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
sales
|
$
|
0.6
|
$
|
3.8
|
$
|
2.3
|
$
|
7.1
|
|||||
Loss
from operations before income taxes
|
(1.1
|
)
|
(0.3
|
)
|
(2.0
|
)
|
(1.4
|
)
|
|||||
Income
tax benefit on operations
|
0.4
|
0.1
|
0.7
|
0.5
|
|||||||||
Net
loss from discontinued operations, net of tax
|
$
|
(0.7
|
)
|
$
|
(0.2
|
)
|
$
|
(1.3
|
)
|
$
|
(0.9
|
)
|
June
30,
|
December
31,
|
||||||
2006
|
2005
|
||||||
Accounts
receivable, net
|
$
|
0.2
|
$
|
1.3
|
|||
Inventories
|
0.9
|
5.4
|
|||||
Current
assets of discontinued operation
|
$
|
1.1
|
$
|
6.7
|
|||
Accounts
payable
|
—
|
$
|
0.5
|
||||
Accrued
liabilities
|
0.9
|
2.3
|
|||||
Current
liabilities of discontinued operation
|
$
|
0.9
|
$
|
2.8
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
sales:
|
|||||||||||||
Paper
Technology and Ventures
|
$
|
266.4
|
$
|
260.7
|
$
|
520.6
|
$
|
511.2
|
|||||
Aqualon
Group
|
234.6
|
204.9
|
438.5
|
380.9
|
|||||||||
FiberVisions
|
—
|
69.1
|
69.2
|
144.5
|
|||||||||
Consolidated
|
$
|
501.0
|
$
|
534.7
|
$
|
1,028.3
|
$
|
1,036.6
|
|||||
Profit
from operations:
|
|||||||||||||
Paper
Technology and Ventures
|
$
|
16.6
|
$
|
16.1
|
$
|
31.2
|
$
|
29.2
|
|||||
Aqualon
Group
|
54.7
|
48.2
|
94.2
|
84.0
|
|||||||||
FiberVisions
|
—
|
(0.2
|
)
|
0.5
|
(2.3
|
)
|
|||||||
Corporate
items (a)
|
(5.7
|
)
|
(2.9
|
)
|
(3.4
|
)
|
(7.1
|
)
|
|||||
Consolidated
|
$
|
65.6
|
$
|
61.2
|
$
|
122.5
|
$
|
103.8
|
Unconsolidated
|
||||||||||||||||
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantor
Subsidiaries
|
Eliminations
and
Adjustments
|
Consolidated
|
||||||||||||
Net
sales
|
$
|
148.1
|
$
|
114.3
|
$
|
281.5
|
$
|
(42.9
|
)
|
$
|
501.0
|
|||||
Cost
of sales
|
104.0
|
80.4
|
183.7
|
(43.4
|
)
|
324.7
|
||||||||||
Selling,
general and administrative expenses
|
27.2
|
26.0
|
37.5
|
—
|
90.7
|
|||||||||||
Research
and development
|
4.7
|
4.1
|
0.6
|
—
|
9.4
|
|||||||||||
Intangible
asset amortization
|
1.5
|
0.4
|
0.1
|
—
|
2.0
|
|||||||||||
Other
operating expense (income), net
|
5.9
|
(1.0
|
)
|
3.7
|
—
|
8.6
|
||||||||||
Profit
from operations
|
4.8
|
4.4
|
55.9
|
0.5
|
65.6
|
|||||||||||
Interest
and debt expense (income), net
|
41.3
|
(24.8
|
)
|
0.2
|
—
|
16.7
|
||||||||||
Vertac
litigation charge
|
106.0
|
—
|
—
|
—
|
106.0
|
|||||||||||
Other
expense, net
|
18.8
|
2.1
|
0.2
|
—
|
21.1
|
|||||||||||
(Loss)
income before income taxes and equity (loss) income
|
(161.3
|
)
|
27.1
|
55.5
|
0.5
|
(78.2
|
)
|
|||||||||
(Benefit)
provision for income taxes
|
(52.1
|
)
|
9.6
|
14.7
|
0.3
|
(27.5
|
)
|
|||||||||
(Loss
) income before minority interests and equity (loss)
income
|
(109.2
|
)
|
17.5
|
40.8
|
0.2
|
(50.7
|
)
|
|||||||||
Minority
interests in earnings of consolidated subsidiaries
|
—
|
—
|
(0.3
|
)
|
—
|
(0.3
|
)
|
|||||||||
Equity
(loss) income of affiliated companies
|
—
|
(1.0
|
)
|
0.7
|
(0.3
|
)
|
(0.6
|
)
|
||||||||
Equity
income (loss) from consolidated subsidiaries
|
57.6
|
(2.5
|
)
|
2.5
|
(57.6
|
)
|
—
|
|||||||||
Net
(loss) income from continuing operations before discontinued operations
and cumulative effect of change in accounting principle
|
(51.6
|
)
|
14.0
|
43.7
|
(57.7
|
)
|
(51.6
|
)
|
||||||||
Net
loss from discontinued operations, net of tax
|
(0.7
|
)
|
—
|
—
|
—
|
(0.7
|
)
|
|||||||||
Net
(loss) income before cumulative effect of change in accounting
principle
|
(52.3
|
)
|
14.0
|
43.7
|
(57.7
|
)
|
(52.3
|
)
|
||||||||
Cumulative
effect of change in accounting principle, net of tax
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
Net
(loss) income
|
$
|
(52.3
|
)
|
$
|
14.0
|
$
|
43.7
|
$
|
(57.7
|
)
|
$
|
(52.3
|
)
|
Unconsolidated
|
||||||||||||||||
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantor
Subsidiaries
|
Eliminations
and
Adjustments
|
Consolidated
|
||||||||||||
Net
sales
|
$
|
288.5
|
$
|
254.1
|
$
|
567.6
|
$
|
(81.9
|
)
|
$
|
1,028.3
|
|||||
Cost
of sales
|
201.6
|
185.7
|
380.6
|
(82.5
|
)
|
685.4
|
||||||||||
Selling,
general and administrative expenses
|
50.6
|
58.3
|
73.1
|
—
|
182.0
|
|||||||||||
Research
and development
|
9.3
|
8.6
|
1.1
|
—
|
19.0
|
|||||||||||
Intangible
asset amortization
|
3.0
|
0.4
|
0.2
|
—
|
3.6
|
|||||||||||
Other
operating expense
|
4.6
|
1.7
|
9.5
|
—
|
15.8
|
|||||||||||
Profit
(loss) from operations
|
19.4
|
(0.6
|
)
|
103.1
|
0.6
|
122.5
|
||||||||||
Interest
and debt expense (income), net
|
84.7
|
(47.8
|
)
|
0.5
|
—
|
37.4
|
||||||||||
Vertac
litigation charge
|
106.0
|
—
|
—
|
—
|
106.0
|
|||||||||||
Other
expense, net
|
27.7
|
3.6
|
0.4
|
—
|
31.7
|
|||||||||||
(Loss)
income before income taxes and equity (loss) income
|
(199.0
|
)
|
43.6
|
102.2
|
0.6
|
(52.6
|
)
|
|||||||||
(Benefit)
provision for income taxes
|
(53.8
|
)
|
15.6
|
21.1
|
0.3
|
(16.8
|
)
|
|||||||||
(Loss)
income before minority interests and equity (loss) income
|
(145.2
|
)
|
28.0
|
81.1
|
0.3
|
(35.8
|
)
|
|||||||||
Minority
interests in earnings of consolidated subsidiaries
|
—
|
—
|
(0.4
|
)
|
—
|
(0.4
|
)
|
|||||||||
Equity
(loss) income of affiliated companies
|
—
|
(1.1
|
)
|
0.4
|
(0.3
|
)
|
(1.0
|
)
|
||||||||
Equity
income (loss) from consolidated subsidiaries
|
108.0
|
0.5
|
(0.8
|
)
|
(107.7
|
)
|
—
|
|||||||||
Net
(loss) income from continuing operations before discontinued operations
and cumulative effect of change in accounting principle
|
(37.2
|
)
|
27.4
|
80.3
|
(107.7
|
)
|
(37.2
|
)
|
||||||||
Net
loss from discontinued operations, net of tax
|
(1.3
|
)
|
—
|
—
|
—
|
(1.3
|
)
|
|||||||||
Net
(loss) income before cumulative effect of change in accounting
principle
|
(38.5
|
)
|
27.4
|
80.3
|
(107.7
|
)
|
(38.5
|
)
|
||||||||
Cumulative
effect of change in accounting principle, net of tax
|
0.9
|
—
|
—
|
—
|
0.9
|
|||||||||||
Net
(loss) income
|
$
|
(37.6
|
)
|
$
|
27.4
|
$
|
80.3
|
$
|
(107.7
|
)
|
$
|
(37.6
|
)
|
Unconsolidated
|
||||||||||||||||
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantor
Subsidiaries
|
Eliminations
and
Adjustments
|
Consolidated
|
||||||||||||
Net
sales
|
$
|
139.3
|
$
|
125.2
|
$
|
313.7
|
$
|
(43.5
|
)
|
$
|
534.7
|
|||||
Cost
of sales
|
94.8
|
94.8
|
203.5
|
(41.9
|
)
|
351.2
|
||||||||||
Selling,
general and administrative expenses
|
24.6
|
35.4
|
39.9
|
—
|
99.9
|
|||||||||||
Research
and development
|
4.4
|
4.7
|
0.9
|
—
|
10.0
|
|||||||||||
Intangible
asset amortization
|
1.5
|
0.4
|
0.1
|
—
|
2.0
|
|||||||||||
Other
operating expense (income), net
|
(0.5
|
)
|
1.8
|
9.1
|
—
|
10.4
|
||||||||||
Profit
(loss) from operations
|
14.5
|
(11.9
|
)
|
60.2
|
(1.6
|
)
|
61.2
|
|||||||||
Interest
and debt expense (income), net
|
46.2
|
(20.0
|
)
|
(3.4
|
)
|
—
|
22.8
|
|||||||||
Vertac
litigation charge
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
Other
expense, net
|
24.2
|
1.1
|
0.4
|
—
|
25.7
|
|||||||||||
Income
(loss) before income taxes and equity (loss) income
|
(55.9
|
)
|
7.0
|
63.2
|
(1.6
|
)
|
12.7
|
|||||||||
Provision
(benefit) for income taxes
|
(26.8
|
)
|
2.6
|
27.9
|
(0.6
|
)
|
3.1
|
|||||||||
Income
(loss) before minority interests and equity (loss) income
|
(29.1
|
)
|
4.4
|
35.3
|
(1.0
|
)
|
9.6
|
|||||||||
Minority
interests in earnings of consolidated subsidiaries
|
—
|
—
|
(0.2
|
)
|
—
|
(0.2
|
)
|
|||||||||
Equity
(loss) income of affiliated companies
|
—
|
(0.4
|
)
|
0.2
|
0.2
|
—
|
||||||||||
Equity
income (loss) from consolidated subsidiaries
|
38.5
|
(1.5
|
)
|
(0.4
|
)
|
(36.6
|
)
|
—
|
||||||||
Net
income from continuing operations before discontinued
operations
|
9.4
|
2.5
|
34.9
|
(37.4
|
)
|
9.4
|
||||||||||
Net
loss from discontinued operations, net of tax
|
(0.2
|
)
|
—
|
—
|
—
|
(0.2
|
)
|
|||||||||
Net
income
|
$
|
9.2
|
$
|
2.5
|
$
|
34.9
|
$
|
(37.4
|
)
|
$
|
9.2
|
Unconsolidated
|
||||||||||||||||
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantor
Subsidiaries
|
Eliminations
and
Adjustments
|
Consolidated
|
||||||||||||
Net
sales
|
$
|
274.9
|
$
|
250.1
|
$
|
597.7
|
$
|
(86.1
|
)
|
$
|
1,036.6
|
|||||
Cost
of sales
|
189.6
|
189.4
|
392.0
|
(82.2
|
)
|
688.8
|
||||||||||
Selling,
general and administrative expenses
|
52.7
|
67.3
|
79.6
|
—
|
199.6
|
|||||||||||
Research
and development
|
9.1
|
9.1
|
2.1
|
—
|
20.3
|
|||||||||||
Intangible
asset amortization
|
3.0
|
0.8
|
0.2
|
—
|
4.0
|
|||||||||||
Other
operating expense, net
|
4.8
|
3.2
|
12.1
|
—
|
20.1
|
|||||||||||
Profit
(loss) from operations
|
15.7
|
(19.7
|
)
|
111.7
|
(3.9
|
)
|
103.8
|
|||||||||
Interest
and debt expense (income), net
|
89.3
|
(37.6
|
)
|
(6.7
|
)
|
—
|
45.0
|
|||||||||
Vertac
litigation charge
|
14.9
|
—
|
—
|
—
|
14.9
|
|||||||||||
Other
expense (income), net
|
31.2
|
1.6
|
(0.8
|
)
|
—
|
32.0
|
||||||||||
Income
(loss) before income taxes and equity income (loss)
|
(119.7
|
)
|
16.3
|
119.2
|
(3.9
|
)
|
11.9
|
|||||||||
(Benefit)
provision for income taxes
|
(48.7
|
)
|
5.7
|
41.0
|
(1.4
|
)
|
(3.4
|
)
|
||||||||
Income
(loss) before minority interests and equity income (loss)
|
(71.0
|
)
|
10.6
|
78.2
|
(2.5
|
)
|
15.3
|
|||||||||
Minority
interests in earnings of consolidated subsidiaries
|
—
|
—
|
(0.6
|
)
|
—
|
(0.6
|
)
|
|||||||||
Equity
income (loss) of affiliated companies
|
—
|
(0.8
|
)
|
0.9
|
0.2
|
0.3
|
||||||||||
Equity
income (loss) from consolidated subsidiaries
|
86.0
|
3.8
|
(1.1
|
)
|
(88.7
|
)
|
—
|
|||||||||
Net
income from continuing operations before discontinued
operations
|
15.0
|
13.6
|
77.4
|
(91.0
|
)
|
15.0
|
||||||||||
Net
loss from discontinued operations, net of tax
|
(0.9
|
)
|
—
|
—
|
—
|
(0.9
|
)
|
|||||||||
Net
income
|
$
|
14.1
|
$
|
13.6
|
$
|
77.4
|
$
|
(91.0
|
)
|
$
|
14.1
|
Unconsolidated
|
||||||||||||||||
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantor
Subsidiaries
|
Eliminations
and
Adjustments
|
Consolidated
|
||||||||||||
Assets
|
||||||||||||||||
Current
assets
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
10.6
|
$
|
0.5
|
$
|
70.8
|
$
|
—
|
$
|
81.9
|
||||||
Accounts
receivable, net
|
69.3
|
43.2
|
222.8
|
(2.2
|
)
|
333.1
|
||||||||||
Intercompany
receivables
|
59.1
|
16.6
|
(5.9
|
)
|
(69.8
|
)
|
—
|
|||||||||
Inventories
|
51.8
|
64.6
|
83.5
|
(0.5
|
)
|
199.4
|
||||||||||
Deferred
income taxes
|
23.3
|
3.3
|
10.7
|
—
|
37.3
|
|||||||||||
Current
assets of discontinued operations
|
1.1
|
—
|
—
|
—
|
1.1
|
|||||||||||
Other
current assets
|
28.8
|
3.4
|
15.9
|
—
|
48.1
|
|||||||||||
Total
current assets
|
244.0
|
131.6
|
397.8
|
(72.5
|
)
|
700.9
|
||||||||||
Property,
plant and equipment, net
|
139.2
|
123.0
|
291.2
|
—
|
553.4
|
|||||||||||
Investments
in subsidiaries and advances, net
|
2,456.5
|
86.5
|
44.9
|
(2,587.9
|
)
|
—
|
||||||||||
Goodwill
and other intangible assets, net
|
193.4
|
48.1
|
381.9
|
—
|
623.4
|
|||||||||||
Deferred
income taxes
|
364.4
|
—
|
22.5
|
(144.2
|
)
|
242.7
|
||||||||||
Asbestos-related
assets
|
102.9
|
—
|
—
|
—
|
102.9
|
|||||||||||
Deferred
charges and other assets
|
160.3
|
42.6
|
59.2
|
—
|
262.1
|
|||||||||||
Total
assets
|
$
|
3,660.7
|
$
|
431.8
|
$
|
1,197.5
|
$
|
(2,804.6
|
)
|
$
|
2,485.4
|
|||||
Liabilities
and Stockholders’ Equity
|
||||||||||||||||
Current
liabilities
|
||||||||||||||||
Accounts
payable
|
$
|
53.3
|
$
|
25.1
|
$
|
112.2
|
$
|
—
|
$
|
190.6
|
||||||
Intercompany
payables
|
1.6
|
44.6
|
23.4
|
(69.6
|
)
|
—
|
||||||||||
Asbestos-related
liabilities
|
36.4
|
—
|
—
|
—
|
36.4
|
|||||||||||
Current
debt obligations
|
4.0
|
—
|
9.1
|
—
|
13.1
|
|||||||||||
Current
liabilities of discontinued operations
|
0.9
|
—
|
—
|
—
|
0.9
|
|||||||||||
Vertac
litigation
|
121.0
|
—
|
—
|
—
|
121.0
|
|||||||||||
Accrued
expenses
|
118.9
|
85.6
|
73.7
|
(59.3
|
)
|
218.9
|
||||||||||
Total
current liabilities
|
336.1
|
155.3
|
218.4
|
(128.9
|
)
|
580.9
|
||||||||||
Long-term
debt
|
973.1
|
—
|
—
|
—
|
973.1
|
|||||||||||
Deferred
income taxes
|
—
|
144.2
|
80.8
|
(144.2
|
)
|
80.8
|
||||||||||
Pension
liability
|
168.2
|
—
|
78.3
|
—
|
246.5
|
|||||||||||
Other
postretirement benefits
|
53.7
|
2.3
|
0.2
|
—
|
56.2
|
|||||||||||
Deferred
credits and other liabilities
|
252.0
|
23.9
|
20.2
|
—
|
296.1
|
|||||||||||
Asbestos-related
liabilities
|
220.4
|
—
|
—
|
—
|
220.4
|
|||||||||||
Intercompany
notes payable (receivable)
|
1,638.2
|
(1,364.6
|
)
|
(332.9
|
)
|
59.3
|
—
|
|||||||||
Minority
Interests
|
—
|
—
|
1.0
|
11.4
|
12.4
|
|||||||||||
Total
stockholders’ equity
|
19.0
|
1,470.7
|
1,131.5
|
(2,602.2
|
)
|
19.0
|
||||||||||
Total
liabilities and stockholders’ equity
|
$
|
3,660.7
|
$
|
431.8
|
$
|
1,197.5
|
$
|
(2,804.6
|
)
|
$
|
2,485.4
|
Unconsolidated
|
||||||||||||||||
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantor
Subsidiaries
|
Eliminations
and
Adjustments
|
Consolidated
|
||||||||||||
Net
Cash Provided By (Used in) Operating Activities
|
$
|
(64.4
|
)
|
$
|
71.7
|
$
|
365.8
|
$
|
(309.1
|
)
|
$
|
64.0
|
||||
Cash
Flows From Investing Activities:
|
||||||||||||||||
Capital
expenditures
|
(5.9
|
)
|
(8.6
|
)
|
(8.4
|
)
|
—
|
(22.9
|
)
|
|||||||
Proceeds
from sale of 51% interest in FiberVisions, net
|
25.1
|
—
|
—
|
—
|
25.1
|
|||||||||||
Investment
in Benchmark , net
|
—
|
(22.7
|
)
|
—
|
—
|
(22.7
|
)
|
|||||||||
Investment
in Hercules Tianpu Chemical Co., net
|
—
|
—
|
(3.4
|
)
|
—
|
(3.4
|
)
|
|||||||||
Proceeds
of fixed asset disposals
|
—
|
0.1
|
0.2
|
0.3
|
||||||||||||
Other,
net
|
(0.2
|
)
|
—
|
(0.8
|
)
|
—
|
(1.0
|
)
|
||||||||
Net
cash (used in) provided by investing activities
|
19.0
|
(31.2
|
)
|
(12.4
|
)
|
—
|
(24.6
|
)
|
||||||||
Cash
Flows From Financing Activities:
|
||||||||||||||||
Long-term
debt issued by FiberVisions, net of issuance costs
|
83.7
|
—
|
—
|
—
|
83.7
|
|||||||||||
Long
-term debt payments
|
(115.9
|
)
|
—
|
(6.8
|
)
|
—
|
(122.7
|
)
|
||||||||
Change
in short-term debt
|
—
|
—
|
(0.8
|
)
|
—
|
(0.8
|
)
|
|||||||||
Change
in intercompany, non-current
|
77.8
|
(41.0
|
)
|
(246.6
|
)
|
209.8
|
—
|
|||||||||
Dividends
paid
|
—
|
—
|
(99.3
|
)
|
99.3
|
—
|
||||||||||
Treasury
stock issued
|
3.5
|
—
|
—
|
—
|
3.5
|
|||||||||||
Other,
net
|
0.4
|
—
|
—
|
—
|
0.4
|
|||||||||||
Net
cash (used in) provided by financing activities
|
49.5
|
(41.0
|
)
|
(353.5
|
)
|
309.1
|
(35.9
|
)
|
||||||||
Effect
of exchange rate changes on cash
|
—
|
—
|
1.1
|
—
|
1.1
|
|||||||||||
Net
increase (decrease) in cash and cash equivalents
|
4.1
|
(0.5
|
)
|
1.0
|
—
|
4.6
|
||||||||||
Cash
and cash equivalents - beginning of period
|
6.5
|
1.0
|
69.8
|
—
|
77.3
|
|||||||||||
Cash
and cash equivalents - end of period
|
$
|
10.6
|
$
|
0.5
|
$
|
70.8
|
$
|
—
|
$
|
81.9
|
Unconsolidated
|
||||||||||||||||
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantor
Subsidiaries
|
Eliminations
and
Adjustments
|
Consolidated
|
||||||||||||
Net
Cash Provided By (Used In) Operating Activities
|
$
|
14.5
|
$
|
(9.8
|
)
|
$
|
(133.0
|
)
|
$
|
148.3
|
$
|
20.0
|
||||
Cash
Flows From Investing Activities:
|
||||||||||||||||
Capital
expenditures
|
(5.8
|
)
|
(10.6
|
)
|
(9.5
|
)
|
—
|
(25.9
|
)
|
|||||||
Proceeds
of fixed asset disposals
|
—
|
—
|
3.2
|
—
|
3.2
|
|||||||||||
Net
cash used in investing activities
|
(5.8
|
)
|
(10.6
|
)
|
(6.3
|
)
|
—
|
(22.7
|
)
|
|||||||
Cash
Flows From Financing Activities:
|
||||||||||||||||
Long-term
debt repayments
|
(54.9
|
)
|
—
|
(7.5
|
)
|
—
|
(62.4
|
)
|
||||||||
Change
in short-term debt
|
—
|
—
|
(0.9
|
)
|
—
|
(0.9
|
)
|
|||||||||
Change
in intercompany advances
|
6.2
|
21.6
|
156.4
|
(184.2
|
)
|
—
|
||||||||||
Dividends
paid
|
—
|
—
|
(35.9
|
)
|
35.9
|
—
|
||||||||||
Treasury
stock issued
|
2.3
|
—
|
—
|
—
|
2.3
|
|||||||||||
Other,
net
|
(0.3
|
)
|
—
|
—
|
—
|
(0.3
|
)
|
|||||||||
Net
cash (used in) provided by financing activities
|
(46.7
|
)
|
21.6
|
112.1
|
(148.3
|
)
|
(61.3
|
)
|
||||||||
Effects
of exchange rate changes on cash
|
—
|
—
|
(3.5
|
)
|
—
|
(3.5
|
)
|
|||||||||
Net
( decrease) increase in cash and cash equivalents
|
(38.0
|
)
|
1.2
|
(30.7
|
)
|
—
|
(67.5
|
)
|
||||||||
Cash
and cash equivalents - beginning of period
|
42.8
|
0.9
|
82.8
|
—
|
126.5
|
|||||||||||
Cash
and cash equivalents - end of period
|
$
|
4.8
|
$
|
2.1
|
$
|
52.1
|
$
|
—
|
$
|
59.0
|
2006
|
2005
|
||||||
Pulp
and Paper
|
50
|
%
|
49
|
%
|
|||
Regulated
Industries (including food, pharmaceutical and personal
care)
|
21
|
%
|
20
|
%
|
|||
Energy
and Specialties
|
13
|
%
|
13
|
%
|
|||
Coatings
and Construction
|
16
|
%
|
18
|
%
|
|||
Consolidated
|
100
|
%
|
100
|
%
|
2006
|
2005
|
||||||
North
America
|
49
|
%
|
46
|
%
|
|||
Europe
|
34
|
%
|
38
|
%
|
|||
Asia
Pacific
|
11
|
%
|
11
|
%
|
|||
Latin
America
|
6
|
%
|
5
|
%
|
|||
Consolidated
|
100
|
%
|
100
|
%
|
2006
|
2005
|
||||||
Paper
Technologies and Ventures
|
51
|
%
|
49
|
%
|
|||
Aqualon
Group
|
43
|
%
|
37
|
%
|
|||
FiberVisions
|
6
|
%
|
14
|
%
|
|||
Consolidated
|
100
|
%
|
100
|
%
|
Severance
|
Other
Exit Costs
|
Accelerated
Depreciation
|
Total
|
||||||||||
Research
and development consolidation
|
|||||||||||||
Jacksonville,
FL
|
$
|
1.3
|
$
|
1.1
|
$
|
0.4
|
$
|
2.8
|
|||||
Wilmington,
DE
|
0.8
|
—
|
0.6
|
1.4
|
|||||||||
2.1
|
1.1
|
1.0
|
4.2
|
||||||||||
Manufacturing
rationalization
|
|||||||||||||
Pendlebury,
UK
|
—
|
0.3
|
2.5
|
2.8
|
|||||||||
Business
segment realignment
|
|||||||||||||
Paper
Technologies and Ventures
|
4.2
|
—
|
—
|
4.2
|
|||||||||
Aqualon Group
|
2.7
|
—
|
—
|
2.7
|
|||||||||
6.9
|
—
|
—
|
6.9
|
||||||||||
Alliance-related
rationalization(1)
|
0.3
|
—
|
0.4
|
0.7
|
|||||||||
Corporate
stranded cost reduction
|
1.6
|
0.2
|
—
|
1.8
|
|||||||||
Total
restructuring and accelerated depreciation charges
|
$
|
10.9
|
$
|
1.6
|
$
|
3.9
|
$
|
16.4
|
(1)
|
Savannah,
GA, Hattiesburg, MS and Portland,
OR.
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Net
sales
|
$
|
501.0
|
$
|
534.7
|
$
|
(33.7
|
)
|
$
|
1,028.3
|
$
|
1,036.6
|
$
|
(8.3
|
)
|
(Dollars
in millions)
|
Three
Months
|
%
Change
Excluding
|
|||||||||||
Regions
|
2006
|
2005
|
%Change
|
ROE
|
|||||||||
North
America
|
$
|
242.6
|
$
|
243.6
|
—
|
(1
|
)%
|
||||||
Europe
|
176.0
|
205.3
|
(14
|
)%
|
(12
|
)%
|
|||||||
Asia
Pacific
|
57.3
|
58.9
|
(3
|
)%
|
(3
|
)%
|
|||||||
Latin
America
|
25.1
|
26.9
|
(7
|
)%
|
(11
|
)%
|
|||||||
All
regions
|
$
|
501.0
|
$
|
534.7
|
(6
|
)%
|
(6
|
)%
|
(Dollars
in millions)
|
Six
Months
|
%
Change
Excluding
|
|||||||||||
Regions
|
2006
|
2005
|
%Change
|
ROE
|
|||||||||
North
America
|
$
|
505.4
|
$
|
478.6
|
6
|
%
|
5
|
%
|
|||||
Europe
|
353.1
|
395.5
|
(11
|
)%
|
(5
|
)%
|
|||||||
Asia
Pacific
|
114.7
|
112.7
|
2
|
%
|
2
|
%
|
|||||||
Latin
America
|
55.1
|
49.8
|
11
|
%
|
6
|
%
|
|||||||
All
regions
|
$
|
1,028.3
|
$
|
1,036.6
|
(1
|
)%
|
1
|
%
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Cost
of sales
|
$
|
324.7
|
$
|
351.2
|
$
|
(26.5
|
)
|
$
|
685.4
|
$
|
688.8
|
$
|
(3.4
|
)
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Selling,
general and administrative expenses
|
$
|
90.7
|
$
|
99.9
|
$
|
(9.2
|
)
|
$
|
182.0
|
$
|
199.6
|
$
|
(17.6
|
)
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Research
and development
|
$
|
9.4
|
$
|
10.0
|
$
|
(0.6
|
)
|
$
|
19.0
|
$
|
20.3
|
$
|
(1.3
|
)
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Intangible
asset amortization
|
$
|
2.0
|
$
|
2.0
|
—
|
$
|
3.6
|
$
|
4.0
|
$
|
(0.4
|
)
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Other
operating expense, net
|
$
|
8.6
|
$
|
10.4
|
$
|
(1.8
|
)
|
$
|
15.8
|
$
|
20.1
|
$
|
(4.3
|
)
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Interest
and debt expense
|
$
|
16.7
|
$
|
22.8
|
$
|
(6.1
|
)
|
$
|
37.4
|
$
|
45.0
|
$
|
(7.6
|
)
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Vertac
litigation charge
|
$
|
106.0
|
—
|
$
|
106.0
|
$
|
106.0
|
14.9
|
$
|
91.1
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Other
expense, net
|
$
|
21.1
|
$
|
25.7
|
$
|
(4.6
|
)
|
$
|
31.7
|
$
|
32.0
|
$
|
(0.3
|
)
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
(Benefit)
provision for income taxes
|
$
|
(27.5
|
)
|
$
|
3.1
|
$
|
(30.6
|
)
|
$
|
(16.8
|
)
|
$
|
(3.4
|
)
|
$
|
(13.4
|
)
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Minority
interests in earnings of consolidated
subsidiaries
|
$
|
(0.3
|
)
|
$
|
(0.2
|
)
|
$
|
(0.1
|
)
|
$
|
(0.4
|
)
|
$
|
(0.6
|
)
|
$
|
0.2
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Equity
(loss) income of affiliated companies, net of tax
|
$
|
(0.6
|
)
|
—
|
$
|
(0.6
|
)
|
$
|
(1.0
|
)
|
$
|
0.3
|
$
|
(1.3
|
)
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Net
loss from discontinued operations, net of tax
|
$
|
(0.7
|
)
|
$
|
(0.2
|
)
|
$
|
(0.5
|
)
|
$
|
(1.3
|
)
|
$
|
(0.9
|
)
|
$
|
(0.4
|
)
|
Three
Months
|
Six
Months
|
||||||||||||||||||
(Dollars
in millions)
|
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||
Cumulative
effect of change in accounting principle, net of
tax
|
—
|
—
|
—
|
$
|
0.9
|
$
|
—
|
$
|
0.9
|
Three
Months Ended June 30,
|
|||||||||||||
2006
|
2005
|
Change
|
%
Change
|
||||||||||
Net
sales:
|
|||||||||||||
Paper
Technologies and Ventures
|
$
|
266.4
|
$
|
260.7
|
$
|
5.7
|
2
|
%
|
|||||
Aqualon
Group
|
234.6
|
204.9
|
29.7
|
14
|
%
|
||||||||
FiberVisions
|
—
|
69.1
|
(69.1
|
)
|
(100
|
)%
|
|||||||
Consolidated
|
$
|
501.0
|
$
|
534.7
|
$
|
33.7
|
(6
|
)%
|
|||||
Profit
from operations:
|
|||||||||||||
Paper
Technologies and Ventures
|
$
|
16.6
|
$
|
16.1
|
$
|
0.5
|
3
|
%
|
|||||
Aqualon
Group
|
54.7
|
48.2
|
6.5
|
13
|
%
|
||||||||
FiberVisions
|
—
|
(0.2
|
)
|
0.2
|
NM
|
||||||||
Corporate
Items
|
(5.7
|
)
|
(2.9
|
)
|
(2.8
|
)
|
NM
|
||||||
Consolidated
|
$
|
65.6
|
$
|
61.2
|
$
|
4.4
|
8
|
%
|
Six
Months Ended June 30,
|
|||||||||||||
2006
|
2005
|
Change
|
%
Change
|
||||||||||
Net
sales:
|
|||||||||||||
Paper
Technologies and Ventures
|
$
|
520.6
|
$
|
511.2
|
$
|
9.4
|
2
|
%
|
|||||
Aqualon
Group
|
438.5
|
380.9
|
57.6
|
15
|
%
|
||||||||
FiberVisions
|
69.2
|
144.5
|
(75.3
|
)
|
(52
|
)%
|
|||||||
Consolidated
|
$
|
1,028.3
|
$
|
1,036.6
|
$
|
(8.3
|
)
|
(1
|
)%
|
||||
Profit
from operations:
|
|||||||||||||
Paper
Technologies and Ventures
|
$
|
31.2
|
$
|
29.2
|
$
|
2.0
|
7
|
%
|
|||||
Aqualon
Group
|
94.2
|
84.0
|
10.2
|
12
|
%
|
||||||||
FiberVisions
|
0.5
|
(2.3
|
)
|
2.8
|
NM
|
||||||||
Corporate
Items
|
(3.4
|
)
|
(7.1
|
)
|
3.7
|
NM
|
|||||||
Consolidated
|
$
|
122.5
|
$
|
103.8
|
$
|
18.7
|
18
|
%
|
Three
Months Ended June 30, 2006
|
Net
Sales Percentage Increase (Decrease) from Prior Year Due
To:
|
|||||||||||||||
Volume
|
Product
Mix
|
Price
|
Rates
of
Exchange
|
Total
|
||||||||||||
Paper
Technologies and Ventures
|
(4
|
)%
|
3
|
%
|
3
|
%
|
—
|
2
|
%
|
|||||||
Aqualon
Group
|
24
|
%
|
(9
|
)%
|
—
|
(1
|
)%
|
14
|
%
|
|||||||
FiberVisions
|
(100
|
)%
|
—
|
—
|
—
|
(100
|
)%
|
|||||||||
Consolidated
|
(6
|
)%
|
(2
|
)%
|
2
|
%
|
—
|
(6
|
)%
|
Six
Months Ended June 30, 2006
|
Net
Sales Percentage Increase (Decrease) from Prior Year Due
To:
|
|||||||||||||||
Volume
|
Product
Mix
|
Price
|
Rates
of
Exchange
|
Total
|
||||||||||||
Paper
Technologies and Ventures
|
(3
|
)%
|
3
|
%
|
3
|
%
|
(1
|
)%
|
2
|
%
|
||||||
Aqualon
Group
|
23
|
%
|
(7
|
)%
|
1
|
%
|
(2
|
)%
|
15
|
%
|
||||||
FiberVisions
|
(52
|
)%
|
—
|
1
|
%
|
(1
|
)%
|
(52
|
)%
|
|||||||
Consolidated
|
(1
|
)%
|
(1
|
)%
|
2
|
%
|
(1
|
)%
|
(1
|
)%
|
Three
Months Ended
June
30,
|
Six
months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Accelerated
vesting of stock-based compensation for retirement eligible
employees
|
$ —
|
$ —
|
$ —
|
$ 2.8
|
|||||||||
Severance,
restructuring costs and other exit costs
|
1.7
|
2.9
|
2.6
|
3.6
|
|||||||||
FiberVisions
stranded corporate costs
|
2.2
|
—
|
2.2
|
—
|
|||||||||
Consulting
charges related to legacy issues
|
—
|
—
|
—
|
0.8
|
|||||||||
Accelerated
depreciation
|
0.3
|
—
|
0.6
|
—
|
|||||||||
Legal
settlement on price fixing litigation, net
|
0.3
|
—
|
(3.3
|
)
|
—
|
||||||||
Other
miscellaneous expense (income), net
|
1.2
|
—
|
1.3
|
(0.1
|
)
|
||||||||
Corporate
items - net expense
|
$
|
5.7
|
$
|
2.9
|
$
|
3.4
|
$
|
7.1
|
(Dollars
in millions)
|
||||||||||||||||
Payments
Due by Period
(1)
|
||||||||||||||||
Less
than
|
1
-
3
|
4
-
5
|
After
5
|
|||||||||||||
Total
|
1
year
|
Years
|
years
|
years
|
||||||||||||
Debt
obligations
(2)
|
$
|
986.2
|
$
|
13.1
|
$
|
28.1
|
$
|
377.6
|
$
|
567.4
|
||||||
Operating
lease obligations
|
117.5
|
18.5
|
37.4
|
38.4
|
23.2
|
|||||||||||
Other
long-term liabilities reflected on the
registrant's
balance sheet under GAAP
(3)
|
586.5
|
211.3
|
69.6
|
59.9
|
245.7
|
|||||||||||
Total
contractual cash obligations
|
$
|
1,690.2
|
$
|
242.9
|
$
|
135.1
|
$
|
475.9
|
$
|
836.3
|
(1)
|
Does
not include the anticipated future interest payments to be made
under the
Company's current debt agreements; however, based upon current
indebtedness and interest rates at June 30, 2006, such interest
obligations are estimated to be approximately $74.2 million in
2007, $73.0
million in 2008, $71.8 million in 2009, $71.5 million in 2010,
$64.4
million in 2011 and $756.9 million thereafter. A one percent increase
or
decrease in the LIBOR rate would have an impact of approximately
plus or
minus $3.9 million on the Company’s interest payments in each of the next
five years.
|
(2)
|
The
6.60% Debentures due 2027, which are included in “After 5 years” amount,
are redeemable, in whole or in part, at the option of each of the
holders
on August 1, 2007 at a redemption price equal to 100% of the principal
amount thereof.
|
(3)
|
Includes
amounts pertaining to asbestos-related matters, asset retirement
obligations, post-employment and post-retirement obligations and
workers
compensation claims. Due to the dynamic nature of asbestos litigation,
it
is impractical to determine the anticipated payments in any given
year.
Therefore, the non-current asbestos-related liability of $220.4
million
has been reflected in the after five years
column.
|
1. |
Election
of Directors
|
Director
Name
|
For
|
Withheld
Authority
|
Broker
Non-Votes
|
||||
Thomas
P. Gerrity
|
90,481,768
|
10,095,437
|
—
|
||||
Joe
B. Wyatt
|
90,735,603
|
9,841,602
|
—
|
2. |
Ratification
of the Appointment of BDO Seidman, LLP as Hercules’ Independent Registered
Public Accountants for 2006, which proposal received more than a
majority
of the votes necessary for ratification.
|
For
|
Against
|
Abstain
|
Broker
Non-Votes
|
||||
99,613,962
|
216,568
|
746,674
|
—
|
HERCULES
INCORPORATED
|
|||
By:
|
/s/
Allen A. Spizzo
|
||
Allen
A. Spizzo
|
|||
Vice
President and Chief Financial Officer
|
|||
(Principal
Financial Officer and Duly
|
|||
Authorized
Signatory)
|
|||
August
3, 2006
|
Number
|
Description
|
|
31.1*
|
Certification
of President and Chief Executive Officer Pursuant to Exchange Act
Rule 13a-14(a)/15d-14(a)
|
|
31.2*
|
Certification
of Vice President and Chief Financial Officer Pursuant to Exchange
Act
Rule 13a-14(a)/15d-14(a)
|
|
32.1*
|
Section 1350
Certification of President and Chief Executive Officer
|
|
32.2*
|
Section 1350
Certification of Vice President and Chief Financial
Officer
|