Special Edition!
Reprinted with permission by The News Journal, Wilmington, Delaware
Hercules details employee woes
15 percent of its people have left
August 14, 2001
By Seth Agulnick, Staff Reporter
Hercules Inc. has lost "a large number of employees" since the company was put up for sale last fall and is having trouble replacing them as it tries to cut costs, executives said in a regulatory filing.
If no buyer is found for the specialty chemical maker, executives said they may have to hire additional workers to fill the void caused by recent departures - and they are not sure they will be able to do so.
Employment at the Wilmington-based company has fallen from 11,347 at the end of 1999 to 9,599 as of June 30. Some of that 15 percent decline has come through the sale of businesses and planned layoffs.
Company spokesman John Riley downplayed the significance of losing workers.
"In times of uncertainty, these kinds of things happen," Riley said. "Right now, we're where we need to be in terms of people."
Management experts said it is not unusual for a company in Hercules' situation to lose employees.
"When people have the sense they might not survive a shake-up, they're going to look somewhere else," said Terry Wall, president of T.G. Wall Management Consulting in New Jersey.
Hercules announced in late November that it would seek to sell itself after its steep debt and declining profits sent the company's stock price plummeting.
Hercules employs about 1,200 in Delaware at its Wilmington headquarters and Mill Creek research center.
"When we announced that we were considering the merger or sale of the company or one or more of our businesses, we lost a large number of employees," the company said in its filing. "It is difficult to retain and replace employees in these circumstances, especially in light of our recently announced cost reduction program."
Hercules' new chief executive officer, William H. Joyce, announced a $100 million cost-cutting plan in late June. The plan will include job cuts, executives said, but they said no target has been established.
The discussion of the company's employment picture was part of a document filed Friday with the U.S. Securities and Exchange Commission. The document outlines a company plan to exchange $400 million in debt for the same amount in new debt.
Holders of the new notes will be allowed to sell or trade them, something they are not allowed to do now. Hercules will not get any proceeds from the exchange, the company said.
In the 320-page filing, the company outlined its business operations in detail and disclosed for potential buyers of its debt all of the risks the company faces - from outstanding lawsuits to the employment matters.
David Begleiter, a chemical-industry analyst for ABN Amro in New York, said the uncertainty about the company's future is likely "creating a lousy working environment" at Hercules.
"It clearly is impacting the health of these businesses," he said. "That's why they need to either end the [sale] process now or complete it."
Riley disagreed about the impact of the company's lingering "for sale" status.
He said the loss of employees has forced the company to hire temporary workers in some instances, but has not been a major problem.
"I'm not dismissing that. In times of uncertainty, you certainly get some [morale problems]. But you also have opportunities, and there are people in this company who will rise to the top," he said.
Hercules executives said in the SEC filing that they are still talking to potential buyers.
But many of the company's recent moves - including the hiring of Joyce and the beginning of the cost-cutting program - have Wall Street analysts convinced that a sale is not close.
"If we are not successful in merging or selling the company ... we may have to hire additional employees," the company said.
Executives added that they are not sure they will be able to hire the workers they need, or do so on "favorable terms."
The best way for Hercules management to combat the staffing problems is to be as open as possible with workers about what's happening, Wall said.
Since Joyce became CEO in May, Hercules executives have told employees that they will not be free to offer much information about the sale process. They have said public discussions about the company's status will not help find a buyer. "You can't tell them everything, but at least you can reassure them," Wall said. "If you take the position that you're not going to tell them anything, you can imagine what you'll get [in terms of people leaving]."