UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 1994 COMMISSION FILE NUMBER 1-3507
R O H M A N D H A A S C O M P A N Y
(Exact name of registrant as specified in its charter)
DELAWARE 23-1028370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 INDEPENDENCE MALL WEST, PHILADELPHIA, PENNSYLVANIA 19106
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 592-3000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Common stock outstanding at May 4, 1994: 67,704,636 SHARES
<PAGE>
ROHM AND HAAS COMPANY AND SUBSIDIARIES
FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following are incorporated herein by reference to pages 6 through 9
of the company's Quarterly Report to Stockholders for the first quarter of
1994, a complete copy of which is attached as Exhibit 20.
1. Statements of Consolidated Earnings
2. Statements of Consolidated Cash Flows
3. Consolidated Balance Sheets
4. Notes to Consolidated Financial Statements
ITEM 2. - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The management discussion and analysis is incorporated herein by
reference to pages 2 and 3 of the company's Quarterly Report to
Stockholders for the first quarter of 1994, a complete copy of which is
attached as Exhibit 20.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A discussion of legal proceedings is incorporated herein by reference
to page 9 of the company's Quarterly Report to Stockholders for the first
quarter of 1994, a complete copy of which is attached as Exhibit 20.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit (12) - Computation of Ratio of Earnings to Fixed Charges
for the company and subsidiaries.
Exhibit (20) - Copy of the company's Quarterly Report to Stockholders
for the quarter ended March 31, 1994.
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
DATE: May 12, 1994 ROHM AND HAAS COMPANY
------------- (Registrant)
FRED W. SHAFFER
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
<PAGE>
EXHIBIT INDEX
(Pursuant to Part 232.102(d) of Regulation S-T)
Exhibit
No. Description
- - ------- -----------------------------------------------------------
(12) Computation of Ratio of Earnings to Fixed Charges
(20) Copy of Quarterly Report to Stockholders
EXHIBIT 12
ROHM AND HAAS COMPANY
AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(millions of dollars)
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, --------------------------------------
1994 1993 1992 1991 1990 1989
------------ ------ ------ ------ ------ ------
Earnings before
income taxes $ 108 $ 194 $ 261 $ 240 $ 313 $ 251
Fixed charges 19 79 83 79 77 70
Capitalized
interest
adjustment 1 (7) (3) (6) (17) (12)
Undistributed
earnings
adjustment -- 6 2 (2) (5) 2
------------ ------ ------ ------ ------ ------
Earnings $ 128 $ 272 $ 343 $ 311 $ 368 $ 311
------------ ------ ------ ------ ------ ------
Ratio of
earnings to
fixed charges 6.7 3.4 4.1 3.9 4.8 4.4
------------ ------ ------ ------ ------ ------
Note: Earnings consist of earnings before income taxes and fixed charges
after eliminating undistributed earnings (losses) of affiliates and
capitalized interest net of amortization of previously capitalized
interest. Fixed charges consist of interest expense, including
capitalized interest, and amortization of debt discount and expense on
all indebtedness, plus one-third of rent expense deemed to represent an
interest factor.
EXHIBIT 20
COPY OF QUARTERLY REPORT TO STOCKHOLDERS
<PAGE>
ROHM AND HAAS COMPANY
FIRST QUARTER REPORT 1994
ID: COVER GRAPHIC
<PAGE>
FINANCIAL HIGHLIGHTS (Millions of dollars, except earnings per share)
- - -----------------------------------------------------------------------------
First Quarter
--------------------------
Percent
1994 1993* Change
--------------------------
Net sales $856 $826 4
Net earnings 67 58 16
Net earnings per common share $.96 $.83 16
- - -----------------------------------------------------------------------------
*Earnings for 1993 have been restated to reflect the adoption of a new
accounting standard for post-employment benefits. However, amounts shown
above do not reflect a charge of $19 million for the cumulative effect
of adopting this standard effective January 1, 1993.
SALES BY BUSINESS GROUP
Millions of dollars
Agricultural Chemicals $130
Plastics $152
Performance Chemicals $187
Polymers, Resins and Monomers $387
ID: GRAPHIC (STACKED BAR CHARTS)
SALES BY CUSTOMER LOCATION
Millions of dollars
Latin America $51
Pacific $118
Europe $209
North America $478
ID: GRAPHIC (STACKED BAR CHARTS)
<PAGE>
CHAIRMAN'S LETTER
The first three months of 1994 were good for Rohm and Haas. Unit volume
grew 8 percent and we reported earnings of $67 million, up substantially
from the same period a year ago.
The U.S. economy continued to improve and European economies also began to
show signs of life. Currency effects are still unfavorable, but less so
than they were last year. Our people are running the plants smoothly and
keeping a tight lid on selling, administrative and research costs.
As for the rest of the year, I would expect selling prices, currency
changes and raw material costs to be more stable in 1994 than they have
been in recent history. Our financial success will rely primarily on
volume growth and good cost control. Every part of the organization has
been asked to hold costs flat and to find new ways of meeting higher demand
for products and services without increasing spending. As we improve our
efficiency we estimate we will reduce the size of the worldwide workforce
by approximately 10 percent over the next three years.
Barring the unpredictable, 1994 will be a comeback year for Rohm and Haas
in terms of its financial performance.
On a somber note, James C. Tabb, vice president and director of Corporate
Human Resources, passed away on February 20th. Jim was a champion for a
diverse, multi-cultural workforce who promoted leadership, training and
teamwork throughout his 27-year career with Rohm and Haas. Marisa L.
Guerin was appointed to fill this position. She was elected a vice
president by the Board of Directors on May 2nd.
(J. LAWRENCE WILSON)
J. Lawrence Wilson
Chairman May 12, 1994
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
FIRST QUARTER 1994 VERSUS
FIRST QUARTER 1993
First quarter 1994 earnings were $67 million or 96 cents per common share,
up 16% from last year's earnings of $58 million and 83 cents per common
share (before cumulative effect of an accounting change). Sales of $856
million were 4% higher than reported in the prior-year period. The
increase in earnings reflects strong volume growth in most businesses and
all regions, smooth manufacturing operations and good cost management.
Polymers, Resins and Monomers (PRM) earnings were $36 million, up 3%
compared to the prior period. Sales increased 5% due to 10% higher volume
and a lower-priced product mix. Volume gains were due to strong sales in
North America, particularly in architectural coatings, adhesives and
specialty industrial polymers, and strong sales in Europe for all product
lines. These volume gains, lower raw material costs and smooth plant
operations were partly offset by the effect of 7% weaker European
currencies and lower selling prices.
Plastics reported earnings of $15 million, up from $8 million reported in
1993. Sales increased 9% reflecting volume gains of 11%. Additives used
in PVC and engineering resins had strong volume growth in the North
American, European and Pacific regions. AtoHaas North America reported
volume increases for Plexiglas MC sheet and molding powder. The improved
earnings reflect the benefit of the volume increases and smooth plant
operations partly offset by weaker European currencies. AtoHaas Europe
reported a small loss for the quarter, a significant improvement compared
to losses reported in the first quarter of 1993.
Performance Chemicals recorded earnings of $11 million, up from last year's
earnings of $7 million. Sales and volume increased 4%, excluding the
effect of the Supelco divestiture in 1993. The earnings increase was due
to volume gains in Petroleum Chemicals and Shipley. Separations
Technologies had volume increases in North America and Europe, but this was
not enough to overcome continued erosion of selling prices due to intense
competition, especially in the United States.
Agricultural Chemicals earnings of $18 million were flat compared to the
first quarter of 1993. Sales increased 2% and volume was up 3%, primarily
due to growth of Dithane fungicide in North America and Europe.
North American region earnings were $43 million, up 5% from 1993. PRM,
Plastics and Performance Chemicals reported good growth resulting in a 9%
volume increase and a 5% sales increase, excluding the Supelco divestiture.
Lower raw material costs and smooth plant operations, along with the volume
growth, were responsible for the earnings increase.
European region earnings were $22 million, up 22% from 1993. Excluding the
effect of the sale of Supelco in 1993, volume increased 12% and sales were
up 4%, reflecting 7% weaker European curren-
2
<PAGE>
cies. PRM, Plastics and Agricultural Chemicals were responsible for the
volume growth. Plants ran smoothly and raw material costs were below the
1993 first quarter, contributing to the earnings improvement.
Pacific region earnings of $11 million were up $6 million from the first
quarter of 1993. Sales increased 11% on 6% higher volume, excluding the
Supelco sale. The sales growth outpaced the volume growth due to the
strengthening of the Japanese yen and a higher-priced product mix.
Latin America posted earnings of $4 million, flat compared with the first
quarter of 1993. Sales were flat due to a 2% volume increase and a 2%
decrease in selling prices. Good cost control throughout the region held
selling and administrative and plant costs flat compared to last year.
Net sales were $856 million, up 4% from 1993 on an 8% volume increase. The
first quarter gross profit margin was 37%, up from 36% in the prior period.
Increased volume, smooth plant operations and favorable raw material prices
were partly offset by lower selling prices and weaker European currencies.
Selling, administrative and research (SAR) expenses rose 4%, excluding the
effect of currencies and the sale of Supelco, mainly due to inflationary
pressures. Interest expense was flat because the benefit of lower interest
rates was offset by lower capitalization of interest expense as part of
construction costs. Affiliate earnings were breakeven in the current
quarter compared to losses of $3 million in 1993 due to lower losses from
the AtoHaas affiliates. Other expense, net, was $3 million for the period,
up from $2 million in 1993. The effective tax rate for the quarter was 38%
compared to 36% in 1993, reflecting the higher U.S. tax rate and higher
taxes on foreign earnings.
LIQUIDITY, CAPITAL RESOURCES
AND OTHER FINANCIAL DATA
At the end of the quarter, cash and cash equivalents totaled $33 million,
down $2 million from the 1993 year-end balance. Receivables and
inventories were up $106 million and $20 million, respectively, during the
first three months of the year, reflecting a normal seasonal pattern. The
debt-to-equity ratio, calculated without the reduction to stockholders'
equity for the ESOP transaction, was 50% at the end of March, compared with
48% at year-end 1993.
Fixed asset additions during the first three months of 1994 totaled $45
million. Spending for the full year is estimated to be in the range of
$385 million, and includes expenditures for capacity expansion for acrylic
acid at Houston, Texas, a new research laboratory building at Bristol,
Pennsylvania and a new biocides production facility at Bayport, Texas.
On May 2, 1994, the board of directors declared a regular quarterly
dividend of $.35 per common share and $.6875 per preferred share, payable
June 1, 1994, to stockholders of record on May 13, 1994.
3
<PAGE>
ROHM AND HAAS COMPANY AND SUBSIDIARIES
SALES BY BUSINESS GROUP AND CUSTOMER LOCATION (Millions of dollars)
- - ------------------------------------------------------------------------------
FIRST QUARTER 1994 AND 1993
- - ------------------------------------------------------------------------------
Polymers,
Resins and Performance Agricultural
Monomers Plastics Chemicals Chemicals Total
------------- ------------- ------------- ------------- -------------
1994 1993 1994 1993 1994 1993 1994 1993 1994 1993
- - ------- ------------- ------------- ------------- ------------- -------------
North
America $272 $257 $ 91 $ 84 $ 82 $ 86 $ 33 $ 37 $478 $464
- - ------- ------------- ------------- ------------- ------------- -------------
Europe 60 57 47 44 52 53 50 50 209 204
- - ------- ------------- ------------- ------------- ------------- -------------
Pacific 33 29 9 7 48 47 28 24 118 107
- - ------- ------------- ------------- ------------- ------------- -------------
Latin
America 22 24 5 5 5 6 19 16 51 51
- - ------- ------------- ------------- ------------- ------------- -------------
Total $387 $367 $152 $140 $187 $192 $130 $127 $856 $826
- - ------- ------------- ------------- ------------- ------------- -------------
PHYSICAL VOLUME CHANGE
CURRENT QUARTER RELATIVE TO YEAR-EARLIER QUARTER
- - -----------------------------------------------------------------------
Percent CUSTOMER Percent
BUSINESS GROUP Change LOCATION Change
- - -----------------------------------------------------------------------
Polymers, Resins and Monomers 10 North America 8
Plastics 11 Europe 11
Performance Chemicals (8) Pacific 5
Agricultural Chemicals 3 Latin America 2
- - -----------------------------------------------------------------------
Worldwide 8 Worldwide 8
- - -----------------------------------------------------------------------
4
<PAGE>
NET EARNINGS** BY BUSINESS GROUP AND CUSTOMER LOCATION
- - -----------------------------------------------------------------------------
Quarter Ended March 31,
---------------------------
1994 1993+
---------------------------
BUSINESS GROUP (Millions of dollars)
---------------------------
Polymers, Resins and Monomers $ 36 $ 35
Plastics 15 8
Performance Chemicals 11 7
Agricultural Chemicals 18 18
Corporate (13) (10)
- - -----------------------------------------------------------------------------
Total $ 67 $ 58
- - -----------------------------------------------------------------------------
CUSTOMER LOCATION
North America $ 43 $ 41
Europe 22 18
Pacific 11 5
Latin America 4 4
Corporate (13) (10)
- - -----------------------------------------------------------------------------
Total $ 67 $ 58
- - -----------------------------------------------------------------------------
Corporate includes non-operating items such as interest income and expense.
ANALYSIS OF CHANGE IN PER-SHARE EARNINGS**
CURRENT PERIOD RELATIVE TO YEAR-EARLIER PERIOD
- - -----------------------------------------------------------
$/Share+
GROSS PROFIT (after tax)
-------------
Selling prices* $(.17)
Physical volume and product mix .18
Raw material costs* .07
Other manufacturing costs* .08
- - -----------------------------------------------------------
Increase in gross profit .16
- - -----------------------------------------------------------
OTHER CAUSES
Selling, administrative and research expenses* (.01)
Share of affiliate losses .04
Other (.06)
- - -----------------------------------------------------------
Decrease from other causes (.03)
- - -----------------------------------------------------------
Increase in per-share earnings $ .13
- - -----------------------------------------------------------
* The amounts shown are on a U.S. dollar basis and include the impact of
currency movements as compared to the prior-year period.
** Net earnings and earnings per share for 1993 are before a charge of $19
million for the cumulative effect of an accounting change.
+ 1993 results have been restated to reflect a new accounting standard
for postemployment benefits.
5
<PAGE>
ROHM AND HAAS COMPANY AND SUBSIDIARIES
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED EARNINGS (Subject to Year-end Audit)
- - ------------------------------------------------------------------------------
Quarter Ended March 31,
-------------------------
1994 1993*
-------------------------
CURRENT EARNINGS (Millions of dollars)
-------------------------
Net sales $ 856 $ 826
Cost of goods sold 539 526
- - ------------------------------------------------------------------------------
Gross profit 317 300
Selling and administrative expense 147 145
Research and development expense 47 48
Interest expense 12 12
Share of net losses of affiliates -- (3)
Other expense, net 3 2
- - ------------------------------------------------------------------------------
Earnings before income taxes 108 90
Income taxes 41 32
- - ------------------------------------------------------------------------------
Earnings before cumulative effect
of accounting change 67 58
Cumulative effect of accounting change -- (19)
- - ------------------------------------------------------------------------------
NET EARNINGS $ 67 $ 39
Less preferred stock dividends 2 2
- - ------------------------------------------------------------------------------
NET EARNINGS APPLICABLE TO
COMMON SHAREHOLDERS $ 65 $ 37
- - ------------------------------------------------------------------------------
PER COMMON SHARE:
Earnings before cumulative effect
of accounting change $ .96 $ .83
Cumulative effect of accounting change -- (.28)
-------------------------
Net earnings $ .96 $ .55
------------------------
Dividends $ .35 $ .33
Average number of common shares outstanding (000's) 67,672 67,579
- - ------------------------------------------------------------------------------
* Restated to reflect adoption of a new accounting standard for postemployment
benefits in the third quarter of 1993, effective January 1, 1993.
See notes to consolidated financial statements.
6
<PAGE>
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS (Subject to Year-end Audit)
- - ------------------------------------------------------------------------
Quarter Ended March 31,
---------------------------
1994 1993*
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES (Millions of dollars)
---------------------------
Net earnings $ 67 $ 39
Adjustments to reconcile net earnings
to cash provided by operating activities:
Cumulative effect of accounting
change, net of tax -- 19
Depreciation 57 53
Deferred income taxes 15 13
Accounts receivable (106) (111)
Inventories (20) (9)
Accounts payable (14) (25)
Gain on sale of facilities and
investments -- (1)
Other working capital changes, net 8 (29)
Other, net 5 25
- - ------------------------------------------------------------------------
Net cash provided (used) by
operating activities 12 (26)
- - ------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and equipment (45) (72)
Proceeds from the sale of facilities and
investments 3 1
Collection of notes receivable -- 23
- - ------------------------------------------------------------------------
Net cash used by investing activities (42) (48)
- - ------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt -- 30
Repayments of long-term debt (3) (32)
Net change in short-term borrowings 46 63
Payment of dividends (25) (24)
Other, net 10 3
- - ------------------------------------------------------------------------
Net cash used by financing activities (28) (40)
- - ------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (2) $ (34)
- - ------------------------------------------------------------------------
* Restated to reflect adoption of a new accounting standard for postemployment
benefits in the third quarter of 1993, effective January 1, 1993.
See notes to consolidated financial statements.
7
<PAGE>
ROHM AND HAAS COMPANY AND SUBSIDIARIES
Rohm and Haas Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS (Subject to Year-end Audit)
- - -----------------------------------------------------------------------------
MARCH 31, December 31, March 31,
1994 1993 1993*
------------------------------------
ASSETS (Millions of dollars)
------------------------------------
Current assets:
Cash and cash equivalents $ 33 $ 35 $ 57
Receivables, net 710 604 660
Inventories (note d) 414 394 446
Prepaid expenses and other assets 156 167 171
- - -----------------------------------------------------------------------------
Total current assets 1,313 1,200 1,334
- - -----------------------------------------------------------------------------
Land, buildings and equipment 3,748 3,696 3,524
Less accumulated depreciation 1,881 1,827 1,736
- - -----------------------------------------------------------------------------
Net land, buildings and equipment 1,867 1,869 1,788
- - -----------------------------------------------------------------------------
Other assets 442 455 468
- - -----------------------------------------------------------------------------
$3,622 $3,524 $3,590
- - -----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 127 $ 83 $ 135
Accounts payable and accrued
liabilities 572 615 503
Accrued income taxes 27 3 72
- - -----------------------------------------------------------------------------
Total current liabilities 726 701 710
- - -----------------------------------------------------------------------------
Long-term debt 698 690 729
Other liabilities 711 692 723
Stockholders' equity:
$2.75 Cumulative convertible preferred
stock (note e) 135 136 136
Common stock: shares
issued -- 78,652,380 197 197 197
Additional paid-in capital 151 150 149
Retained earnings 1,486 1,444 1,449
- - -----------------------------------------------------------------------------
1,969 1,927 1,931
Less: Treasury stock (note f) 321 323 323
Less: ESOP shares 161 163 167
Other equity adjustments -- -- (13)
- - -----------------------------------------------------------------------------
Total stockholders' equity 1,487 1,441 1,428
- - -----------------------------------------------------------------------------
$3,622 $3,524 $3,590
- - -----------------------------------------------------------------------------
* Restated to reflect adoption of a new accounting standard for postemployment
benefits in the third quarter of 1993, effective January 1, 1993.
Additionally, certain items have been reclassified to conform with current
year financial statement presentation.
See notes to consolidated financial statements.
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - -----------------------------------------------------------------------------
(A) These interim financial statements are unaudited, but, in the opinion
of management, all adjustments, which are of a normal recurring nature,
have been made to present fairly the company's financial position,
results of operations and cash flows. It is suggested that these
financial statements be read in conjunction with the financial
statements, accounting policies and the notes included in the company's
annual report for the year ended December 31, 1993.
(B) The company is a named party in various government enforcement and
private actions associated with former waste disposal sites. The
amounts charged to earnings before tax for environmental remediation
were $4 million and $3 million for the three months ended March 31,
1994 and 1993, respectively. At March 31, 1994, the reserves for
remediation were $191 million and probable insurance recoveries were
$72 million.
(C) The company and its subsidiaries are parties to litigation arising out
of the ordinary conduct of its business. Recognizing the amounts
reserved for such items and the uncertainty of the outcome, it is the
company's opinion that the resolution of all pending lawsuits and
claims will not have a material adverse effect, individually or in the
aggregate, upon the results of operations and the consolidated
financial position of the company.
(D) Inventories consist of:
(Millions of dollars)
MAR. 31, Dec. 31, Mar. 31,
1994 1993 1993
--------- -------- ---------
Finished products and
work in process $310 $297 $342
Raw materials and
supplies 104 97 104
---- ---- ----
Total inventories $414 $394 $446
---- ---- ----
(E) The number of preferred shares issued
and outstanding were:
March 31, 1994 2,703,301
December 31, 1993 2,719,803
March 31, 1993 2,722,186
(F) The number of common treasury shares were:
March 31, 1994 10,955,398
December 31, 1993 11,007,436
March 31, 1993 11,041,113
Dithane and Plexiglas are trademarks of Rohm and Haas Company.
<PAGE>
APPENDIX TO EXHIBIT 20
(Pursuant to Part 232.304(a) of Regulation S-T)
Graphic Description/Cross Reference
- - ----------- ----------------------------------------------------------
Cover Company name with enlarged number 1
Stacked Bar Description included in introduction to Exhibit 20
Charts (not incorporated by reference)
