Wilmington, DE, May 1, 2003 - - Hercules Incorporated (NYSE: HPC) today reported net income before the cumulative effect of a change in accounting principle for the first quarter ended March 31, 2003 of $13 million, or $0.12 per diluted share.  This compares with a net loss before the cumulative effect of a change in accounting principle of $212 million or $1.95 per diluted share for the same period in 2002.

Restructuring charges included in the results above were approximately $0.01 per diluted share in the first quarter 2003 and $0.02 per diluted share in the first quarter 2002.

Including the cumulative effect of changes in accounting principles in both years, net losses were $15 million or $0.14 per diluted share in the first quarter 2003 and $580 million or $5.32 per diluted share in the first quarter 2002.  In the first quarter of 2003, the Company recorded a non-cash charge to earnings of $28 million or $0.26 per diluted share as required by the adoption of Statement of Financial Accounting Standards 143.  In the first quarter of 2002, the Company recorded a non-cash charge to earnings of $368 million or $3.37 per diluted share for impairment of goodwill as required by the adoption of Statement of Financial Accounting Standards 142.  Also, in the first quarter 2002, the Company recognized a loss on discontinued operations of $209 million or $1.92 per diluted share related to the sale of the BetzDearborn Water Treatment business.

Net sales in the first quarter 2003 were $441 million, an increase of 10% from the same period last year and a 4% increase compared to the fourth quarter 2002.  Compared with the first quarter 2002, prices were flat while volume/mix had a 3% positive impact and rate of exchange had a 7% positive impact.

First quarter 2003 net sales compared to the same period in 2002 increased in all regions except Latin America; up 2% in North America, 24% in Europe, 15% in Asia Pacific, and down 12% in Latin America.

Profit from operations in the first quarter 2003 was $59 million compared to $54 million in the same period 2002, a 9% improvement.  Profit from ongoing operations(1) in the first quarter 2003 was $58 million, a 21% improvement compared to first quarter 2002 on a comparable basis.

"In this difficult economic environment the people of Hercules continue to deliver solid operating performance," said Dr. William H. Joyce, Chairman and Chief Executive Officer.  "Our improved results were achieved in the face of higher pension charges and higher energy and raw material costs. We remained focused on bringing value to our customers, increasing our competitive advantage and delivering significant financial improvement by upgrading operations, primarily through Work Process Redesign."

Interest and debt expense and preferred securities distributions were $34 million in the first quarter 2003, a decrease of $17 million compared to the first quarter 2002, due to lower outstanding debt balances resulting from asset sales.

Capital spending in the first quarter was $8 million.  Cash outflows for restructuring in the first quarter were $10 million.  Cash flow from operations in the first quarter was approximately $12 million.

Segment Results

In the Performance Products segment (Pulp and Paper, Aqualon), net sales in the first quarter grew 9% while profit from operations declined 3% versus the same quarter last year.  Net sales were up 4% and profit from operations increased 2% compared to the fourth quarter 2002.

In the Pulp and Paper Division, net sales grew 7% compared to the first quarter 2002 and were flat compared to the fourth quarter 2002.  Profit from operations decreased 16% compared to the first quarter 2002 and the fourth quarter 2002.  Profit from operations in the first quarter 2002 includes $4 million from the water treatment business, previously a part of Pulp and Paper, which was sold with BetzDearborn.  Both the North American and European paper industries were sluggish in the first quarter as a result of extended year-end shutdowns and curtailments due to wood chip supply shortages in the Southeastern U.S.

Aqualon’s net sales increased 12% compared to the first quarter 2002 and increased 11% compared to the fourth quarter 2002.  Profit from operations improved 6% and 17% compared to the first quarter 2002 and fourth quarter 2002, respectively.  Volumes and rate of exchange drove the improved results.

In the Engineered Materials and Additives segment (FiberVisions, Pinova), net sales in the quarter increased 13% and 6% compared to the first quarter 2002 and the fourth quarter 2002, respectively.  Profit from operations decreased $1 million compared to both the first quarter 2002 and the fourth quarter 2002.

First quarter 2003 net sales in FiberVisions increased 26% compared to the first quarter 2002 and increased 9% compared to the fourth quarter 2002.  Profit from operations was flat compared to the first quarter 2002 and down $1 million compared to the fourth quarter 2002.  Profits were impacted by higher polymer costs, partially offset by volume improvement and higher prices.

Pinova’s first quarter net sales declined 12% compared to the first quarter 2002 and were flat compared to the fourth quarter 2002.  Profit from operations was down $1 million versus the first quarter 2002 and was flat compared to the fourth quarter 2002.  Lower sales and profits in the quarter were driven by lower volumes.

First Quarter Conference Call

The Company will hold a teleconference for shareholders and analysts on May 1st beginning at 9 AM EST.  To participate in the conference call, dial 973-339-3086 10 to 15 minutes prior to the call.

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