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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER 1-3507
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ROHM AND HAAS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 23-1028370
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 INDEPENDENCE MALL WEST, PHILADELPHIA, PA 19106
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 215-592-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock of $2.50 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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 / /.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / X /
Aggregate market value of voting stock held by nonaffiliates of the
registrant as of March 4, 1994: $2,635,443,696
Common stock outstanding at March 4, 1994: 67,588,811 SHARES.
Documents incorporated by reference:
Part I -- Annual Report to Stockholders for year ended December 31, 1993
Part II -- Annual Report to Stockholders for year ended December 31, 1993
Part III -- Definitive Proxy Statement to be filed with the Securities and
Exchange Commission on or about March 28, 1994, except the
Report on Executive Compensation and Graph titled "Cumulative
Total Return to Shareholders" on pages 12 to 14.
Part IV -- Annual Report to Stockholders for year ended December 31, 1993
-- Form 8K filed with the Securities and Exchange Commission
on October 18, 1993
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PART I
ITEM 1. BUSINESS
The information indicated below appears in the 1993 Annual Report to
Stockholders (Stockholders' Report) and is incorporated by reference:
PAGE OF
STOCKHOLDERS'
REPORT
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Business operations:
Polymers, Resins and Monomers .......................... 12
Plastics ............................................... 14
Performance Chemicals .................................. 15
Agricultural Chemicals ................................. 17
Industry segment information for years 1991-93 ............. 42
Foreign operations for years 1991-93 ....................... 42
Employees .................................................. 54
Raw Materials
The company uses a variety of commodity chemicals as raw materials in its
operations. In most cases, these raw materials are purchased from multiple
sources under long-term contracts. Most of these materials are hydrocarbon
derivatives such as propylene, acetone and styrene.
Competition
The principal market segments in which the company competes are described
in the company's Annual Report to Stockholders on pages 12 through 18. The
company experiences vigorous competition in each of these segments. The
company's competitors include many large multinational chemical firms based in
Europe, Japan and the United States. In some cases, the company competes
against firms which are producers of commodity chemicals which the company
must purchase as the raw materials to make its products. The company,
however, does not believe this places it at any significant competitive
disadvantage. The company's products compete with products offered by other
manufacturers on the basis of price, product quality and specifications, and
customer service. Most of the company's products are specialty chemicals
which are sold to customers who demand a high level of customer service and
technical expertise from the company and its sales force.
Research and Development
The company maintains its principal research and development laboratories
at Spring House, Pennsylvania. Research and development expenses,
substantially all company sponsored, totaled $204,990,000, $199,520,000, and
$182,963,000 in 1993, 1992 and 1991, respectively. Approximately 16% of the
company's employees have been engaged in research and development activities
in each of the past three years.
Environmental Matters
A discussion of environmental matters is incorporated herein by reference
to pages 28 and 29 of the Stockholders' Report.
ITEM 2. PROPERTIES
The company, its subsidiaries and affiliates presently operate 47
manufacturing facilities in 21 countries. A list identifying those facilities
is found on page 60 of the company's Annual Report to Stockholders which is
hereby incorporated by reference. Additional information addressing the
suitability, adequacy and productive capacity of the company's facilities is
found on page 30 of the company's Stockholders' Report and throughout the
various business discussions of the company's industry segments found on pages
12 through 18 of the Stockholders' Report.
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ITEM 3. LEGAL PROCEEDINGS
A discussion of legal proceedings is incorporated herein by reference to
page 52 of the Stockholders' Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1993.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The company's common stock of $2.50 par value is traded on the New York
Stock Exchange (Symbol: ROH). There were 4,973 registered common stockholders
as of March 4, 1994. The 1993 and 1992 quarterly summaries of the high and
low prices of the company's common stock and the amounts of dividends paid on
common stock are presented on pages 32 and 33 of the Stockholders' Report and
are incorporated in this Form 10-K by reference.
ITEM 6. SELECTED FINANCIAL DATA
The company's summary of selected financial data and related notes for the
years 1989 through 1993 are incorporated in this Form 10-K by reference to
pages 54 through 56 of the Stockholders' Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of 1991 to 1993 results is
incorporated herein by reference to pages 22 through 31 of the Stockholders'
Report. These items should be read in conjunction with the consolidated
financial statements presented on pages 34 through 53 of the Stockholders'
Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets as of December 31, 1993, and 1992, and the
related statements of consolidated earnings and retained earnings and cash
flows for the years ended December 31, 1993, 1992, and 1991, together with the
report of KPMG Peat Marwick dated February 21, 1994, are incorporated in this
Form 10-K by reference to pages 34 through 53 of the Stockholders' Report.
Supplementary selected quarterly financial data is incorporated in this Form
10-K by reference to pages 32 and 33 of the Stockholders' Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No reports on Form 8-K were filed during 1993 or 1992 relating to any
disagreements with accountants on accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
AND
ITEM 11. EXECUTIVE COMPENSATION
The information called for by Items 10 and 11 of this Form 10-K report for
the fiscal year ended December 31, 1993, has been omitted, except for the
information presented below, because the company on or about March 28, 1994,
will file with the Securities and Exchange Commission a definitive Proxy
Statement pursuant to regulation 14(a) under the Securities Exchange Act of
1934.
Executive Officers
The company's executive officers along with their present position,
offices held and activities during the past five years are presented below.
All officers normally are elected annually and serve at the pleasure of the
Board of Directors. The company's non-employee directors and their business
experience during the past five years are listed in the company's definitive
Proxy Statement.
Paul J. Baduini, 46, vice president since 1993; business unit director for
ion exchange resins since 1992; previously manager of the Southern Cone
countries from 1990 to 1991 and general manager of Rohm and Haas Brazil form
1988 to 1991.
Albert H. Caesar, 56, vice president since 1993: business unit director
and president of AtoHaas North America Inc. since 1992; previously business
unit director for performance plastics from 1989 to 1992.
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Nance K. Dicciani, 46, vice president since 1993; business unit director
for petroleum chemicals since 1991; previously general manager for business
development and technology, chemicals group for Air Products and Chemicals,
Inc. from 1990 to 1991 and director commercial development and technology,
specialty chemicals division for Air Products and Chemicals, Inc. from 1988
to 1990.
Robert M. Downing, 51, vice president since 1993; operations director for
the North American region since 1986.
David T. Espenshade, 55, vice president since 1993; director of materials
management since 1990; previously business unit director for formulation
chemicals from 1989 to 1990.
J. Michael Fitzpatrick, 47, vice president since 1993; director of
research since 1993; previously general manager of Rohm and Haas (UK) Limited
and business director for polymers and resins from 1990 to 1993 and general
manager of Rohm and Haas Mexico from 1988 to 1990.
Donald C. Garaventi, 57, vice president since 1982; business group
executive for polymers, resins and monomers and business unit director for
polymers and resins since 1989; previously corporate business director for
industrial chemicals and polymers, resins and monomers from 1986 to 1989.
Rajiv L. Gupta, 48, vice president since 1993; regional director of
Pacific since 1993; previously business unit director for plastics additives
from 1989 to 1993.
Howard C. Levy, 50, vice president since 1993; business unit director for
biocides since 1989.
Phillip G. Lewis, 43, vice president since 1993; director of safety,
health and environmental affairs and product integrity since 1993; previously
director of safety, health and environmental affairs from 1989 to 1993 and
corporate medical director from 1987 to 1993.
Enrique F. Martinez, 56, vice president and regional director of Latin
America since 1989.
John P. Mulroney, 58, director since 1982; president and chief operating
officer since 1986; director of Teradyne Inc. and Aluminum Company of America.
Robert E. Naylor, Jr., 61, director since 1986; group vice president and
regional director of North America since 1989; previously group vice president
for research and corporate development from 1985 to 1989; director of Airgas,
Inc.
Richard G. Peterson, 55, vice president since 1987; business group
executive for performance chemicals and business unit director for separations
since 1989; previously corporate business director for agricultural chemicals
from 1987 to 1989.
Frank R. Robertson, 53, vice president since 1991; business director for
polymers and resins, North America, since 1989; previously business director
for polymers, resins and monomers, European region, from 1985 to 1989.
Fred W. Shaffer, 61, vice president since 1977; chief financial officer
since 1978; previously controller from 1972 to 1990.
William H. Staas, 50, vice president since 1993; business unit director
for monomers since 1990; previously president of TosoHaas from 1988 to 1990.
John F. Talucci, 54, vice president and business group executive for
agricultural chemicals since 1989; previously director of polymers, resins and
monomers business group for the North America region from 1983 to 1989.
Charles M. Tatum, 46, vice president since 1990; business unit director of
plastics additives since 1993; previously director of research from 1989 to
1993 and business director of agricultural chemicals business group, North
America, from 1988 to 1989.
Basil A. Vassiliou, 59, vice president since 1986; regional director of
Europe since 1985; business group executive for plastics since 1991.
Robert P. Vogel, 49, vice president since 1993; general counsel
responsible for legal, insurance, tax and regulatory matters since 1994;
previously associate general counsel, regulatory counsel and director of
safety, health and environment and product integrity from 1991 to 1993 and
associate general counsel and regulatory counsel from 1983 to 1990.
J. Lawrence Wilson, 58, director since 1977; chairman of the board and
chief executive officer since 1988; director of The Vanguard Group of
Investment Companies and Cummins Engine Company, Inc.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The security ownership of certain beneficial owners and management is
incorporated in this Form 10-K by reference to pages 18 and 19 of the
definitive Proxy Statement to be filed with the Securities and Exchange
Commission on or about March 28, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by Item 13 is incorporated in this Form 10-K by
reference to pages 18 and 19 of the definitive Proxy Statement to be filed
with the Securities and Exchange Commission on or about March 28, 1994.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements
The consolidated financial statements of Rohm and Haas Company
and the accompanying report of KPMG Peat Marwick dated February 21,
1994, are incorporated in this Form 10-K by reference to pages 34
through 53 of the Stockholders' Report, a complete copy of which
follows page 6 of this report:
2. Financial Statement Schedules
The following supplementary financial information is filed in
this Form 10-K and should be read in conjunction with the financial
statements in the Stockholders' Report:
PAGE
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Independent Auditors' Report on Financial Statement Schedules ... 6
Schedules submitted:
V -- Land, buildings and equipment for the years 1993,
1992 and 1991 ............................................ 7
VI -- Accumulated depreciation of buildings and equipment
for the years 1993, 1992 and 1991 ........................ 8
VIII -- Valuation and qualifying accounts for the years 1993,
1992 and 1991 ............................................ 9
The schedules not included herein are omitted because they are
not applicable or the required information is presented in the
financial statements or related notes.
3. Exhibits
Exhibit (10), Material Contracts. The following management
compensatory plans, which are subject to stockholders' approval at
the annual meeting on May 2, 1994, are incorporated in this Form 10-K
by reference to Exhibits A, B and C of the definitive Proxy Statement
to be filed with the Securities and Exchange Commission on or about
March 28, 1993:
(a) Rohm and Haas Top Executive Annual Performance Award
(b) Rohm and Haas Top Executive Long-Term Award Plan
(c) Amended Rohm and Haas Stock Option Plan of 1992
Exhibit (12), Computation of Ratio of Earnings to Fixed Charges
for the company and subsidiaries, is attached as page 10 of this
Form 10-K.
Exhibit (22), Subsidiaries of the registrant, is attached as
page 11 of this Form 10-K.
Exhibit (24), Consent of independent certified public
accountants, is attached as page 13 of this Form 10-K.
(b) On October 18, 1993, the company filed Form 8-K for reporting and
filing a copy of the company's press release dated October 15, 1993,
disclosing that the company expected to report a loss for the quarter
ended September 30, 1993, due to charges not related to ongoing
operations totaling $50 million, after tax, or 74 cents per share.
These charges included an accrual for a landfill in New Jersey and a
writedown of a plastics manufacturing facility in Kentucky. The
company also restated first quarter earnings to reflect an after-tax
charge of $20 million related to the adoption of a new accounting
standard.
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SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, Rohm and Haas Company has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
/s/ Fred W. Shaffer
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Fred W. Shaffer
Vice President and
Chief Financial Officer
March 25, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 25, 1994 by the following persons on behalf of
the registrant and in the capacities indicated.
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SIGNATURE AND TITLE SIGNATURE AND TITLE
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/s/ J. Lawrence Wilson /s/ Sandra O. Moose
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J. Lawrence Wilson Sandra O. Moose
Director, Chairman of the Board and Director
Chief Executive Officer
/s/ Fred W. Shaffer /s/ John P. Mulroney
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Fred W. Shaffer John P. Mulroney
Vice President and Director
Chief Financial Officer
/s/ George B. Beitzel /s/ Robert E. Naylor, Jr.
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George B. Beitzel Robert E. Naylor, Jr.
Director Director
/s/ Daniel B. Burke /s/ Gilbert S. Omenn
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Daniel B. Burke Gilbert S. Omenn
Director Director
/s/ Earl G. Graves /s/ Ronaldo H. Schmitz
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Earl G. Graves Ronaldo H. Schmitz
Director Director
/s/ James A. Henderson /s/ Alan Schriesheim
- ----------------------------------- -----------------------------------
James A. Henderson Alan Schriesheim
Director Director
/s/ John H. McArthur /s/ Marna C. Whittington
- ----------------------------------- -----------------------------------
John H. McArthur Marna C. Whittington
Director Director
/s/ Paul F. Miller, Jr.
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Paul F. Miller, Jr.
Director
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Rohm and Haas Company:
Under date of February 21, 1994, we reported on the consolidated balance
sheets of Rohm and Haas Company and subsidiaries as of December 31, 1993 and
1992, and the related statements of consolidated earnings and retained
earnings, and cash flows for each of the years in the three-year period ended
December 31, 1993, as contained in the 1993 Annual Report to Stockholders.
These consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the year 1993.
In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedules as
listed under the heading "Financial Statement Schedules" on page 4. These
financial statement schedules are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
As discussed in Notes 5 and 16 to the consolidated financial statements,
the company adopted the provisions of Financial Accounting Standards Board
Statement No. 112, "Accounting for Postemployment Benefits" in 1993, and the
provisions of Financial Accounting Standards Board Statements No. 106,
"Accounting for Postretirement Benefits Other Than Pensions" and No. 109,
"Accounting for Income Taxes," in 1992.
/s/ KPMG PEAT MARWICK
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KPMG PEAT MARWICK
Philadelphia, PA
February 21, 1994
<PAGE>
ROHM AND HAAS COMPANY
ANNUAL REPORT
1993
ID: GRAPHIC (ASSORTED PHOTOGRAPHS)
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ROHM AND HAAS COMPANY
Rohm and Haas makes specialty chemicals and plastics that find their way
into thousands of uses around the world.
Most of our products are sold to industrial companies who use them to make
consumer goods. The Rohm and Haas identity may get lost along the way, but
our technology is often the "invisible" ingredient that makes things work
better and longer. You can find Rohm and Haas products in your home (pipes,
paint, furniture fabrics and finishes, carpets and roofing materials); in your
car (taillights, hydraulic fluids, bumpers and motor oil); in your
neighborhood (signs, road-marking paints, power generating plants) and in
items you encounter everyday (shampoos, leather goods, fruit juices and soft
drinks, magazines, newspapers and packaging materials). Our products also
help improve the quality and yield of food crops around the world.
A tradition of expertise in polymer design and small-molecule chemistry,
along with dedicated customer service, make Rohm and Haas what it is today --
a premier manufacturer of specialty chemicals with sales of $3.3 billion.
On the cover: The contribution of every employee is critical to the
success of Rohm and Haas Company. See the essay beginning on page 6. Featured
on the cover: Nagi Zeenny, Plastics Additives, Paris (upper left); Hideo
Naotsuka, Ion Exchange, Washimiya (right); Robert Frye and Karen Frazier,
Polymers and Resins, Hayward (lower left)
CONTENTS:
Letter to
Stockholders ...............2
People Make
the Difference .............6
Polymers, Resins
and Monomers ..............12
Plastics ..................14
Performance Chemicals .....15
Agricultural Chemicals ....17
Corporate Responsibility ..19
Financial Review
and Index .................21
Directors and
Officers ..................57
Company
Locations .................59
Stockholder
Information
..........Inside back Cover
<PAGE>
FINANCIAL HIGHLIGHTS
Dollars in millions (except per-share amounts) 1993 1992
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FOR THE YEAR:
Net sales $3,269 $3,063
Earnings before cumulative effect
of accounting changes 126 174
Net earnings (loss) applicable to
common shareholders 99 (11)
Research and development expense 205 199
Cash dividends 97 88
Capital additions 382 283
Depreciation 226 203
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AT YEAR END:
Total assets $3,524 $3,517
Total debt 773 800
Stockholders' equity 1,441 1,428
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RATIOS:
Total debt-to-equity * 48% 50%
Return on net assets + 4 6
Return on common stockholders' equity * + 8 11
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PER COMMON SHARE:
Earnings before cumulative effect of
accounting changes $1.74 $2.53
Net earnings (loss) 1.46 (.16)
Dividends 1.36 1.28
Stockholders' equity 21.31 21.51
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* excluding ESOP adjustment
+ before cumulative effect of accounting changes
ID: GRAPHIC (STACKED BAR CHART)
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TO THE STOCKHOLDERS ...
... OF ROHM AND HAAS COMPANY
ID: GRAPHIC (PHOTOGRAPH OF J. LAWRENCE WILSON, CHAIRMAN)
ID: GRAPHIC (PHOTOGRAPH OF JOHN P. MULRONEY, PRESIDENT)
Nineteen ninety-three was a frustrating year:
o Rohm and Haas made and shipped 12 percent more product than it
did in 1992.
o Sales revenue was up 7 percent over 1992.
o Yet in spite of the unit volume and sales increases, earnings per common
share fell 17 percent from 1992, absent unusual charges in both years.
The earnings decline is outside of North America. Our domestic earnings
have been rising for two years in almost every business despite declining
selling prices. That's what you would expect from Rohm and Haas during an
economic recovery, even a weak one. It's a different story overseas.
Earnings in Latin America and in the Pacific are off some, but Europe is
the real problem. Unlike most of our competition, our unit volume in Europe
was up, but earnings there were decimated by the double whammy of declining
prices in local currency and the declining value of local currency versus the
U.S. dollar. Normalized earnings in Europe were $77 million in 1992, but were
only $43 million in 1993. This $34 million decline more than accounts for the
earnings decline of the total company. The European Region has been a
substantial contributor to earnings for more than a decade, but the malaise in
Europe finally caught up with us.
Nine of our ten business units had unit volume gains; the ion exchange
resins business did not. The majority of ion exchange products are sold to
the water-treatment industry, which has been severely depressed for the past
few years. Competition for existing business has been fierce as many
customers deferred purchases of new resins or have felt the need to buy lower
priced products. Over the past two years, ion exchange manufacturing
operations have been realigned and the product line has been rationalized.
In October, we restructured research and marketing operations in North America
and Europe to reduce costs even further.
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There were bright spots. The Agricultural Chemicals business had a
stellar year. Improved sales of Dithane fungicide, along with manufacturing
efficiencies and strong partnerships with U.S. distributors propelled earnings
to a record $39 million in 1993. The Petroleum Chemicals business reported
increases in volume, sales and earnings as it captured increased market share
in the automatic transmission fluid market. Formulation Chemicals did well,
in part because of the success of the NorsoHaas joint venture in France.
We continued to expand operations in the high-growth Pacific market. In
1993, we opened a new manufacturing facility and sales service laboratory in
Japan, purchased an emulsion plant in China and saw the first full year of
operation of our Taiwanese plant. Sales in the Pacific have more than doubled
during the past seven years. Japan now represents our second-largest sales
market after the United States.
A continued emphasis on working safely helped reduce our overall injury
rate by 19 percent for the year. Nevertheless, too many Rohm and Haas people
are being hurt on the job. Both of us are personally committed to making Rohm
and Haas a leader in worker safety.
We kept a tight rein on expenses and the capital budget, and made
improvements in our debt-to-equity ratio.
Our manufacturing plants ran quite well during the year. Ongoing efforts
to strengthen the quality of our operations were helped by an increase of five
ISO-certified sites in 1993. The quality systems of these operations were
certified by independent auditors to meet or exceed worldwide benchmarks set
by the International Organization for Standardization for purchasing,
production, packaging, handling, storage and delivery. Today, most of our
production volume comes from our 24 ISO-certified sites. We expect to add
six more in 1994. In the not too distant future, every site in every region
will be ISO certified.
EXTERNAL CONDITIONS AFFECTING THE BUSINESS
The chemical industry and our company are enduring the toughest times
ever, and it is not a temporary phenomenon. The crisis has been building for
years. Our selling prices have risen only 9 percent in a decade, yet the U.S.
consumer price index surged 50 percent over the same period. In many other
countries, inflation has been even higher. Our costs have been propelled
skyward by exploding environmental spending, dramatic increases in U.S.
medical costs, and wage increases that grew faster than general inflation in
other parts of the world.
By traditional measures, our productivity increases have been okay --
during the decade production volume jumped 62 percent. Head count went up by
14 percent, and all of the increase came as a result of acquisitions.
But traditional measures are inadequate today. The business has become
far more capital intensive. The cost of investing in sophisticated equipment
to meet new and higher environmental standards, the cost of upgrading old
plants and the cost to build new ones to meet higher demand for our products
are rising far faster than our selling prices.
The inevitable result is a smaller return on assets. Our returns have
been going down steadily for ten years. We are not alone. In fact, for the
chemical industry as a whole, selling prices today are below the level they
were ten years ago. The wrenching change in this industry is manifested in
plant closures, layoffs and distressed asset sales in Europe, in Japan and in
North America.
While a pick up in the U.S. economy may bring temporary relief, over the
long haul external conditions are unlikely to improve. Our markets will
remain intensely competitive. Cost pressures will continue their unrelenting
march. The only path to success for any company is an extraordinary increase
in productivity -- overall costs as a percentage of sales must be reduced
every year.
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For eighty-five years we have provided customers with differentiated,
quality products. In recent years, Total Quality Leadership has been the
philosophy that has guided us to even better quality and marvelous strides in
customer service. TQL will again be the path we follow to achieve mammoth
productivity increases in the same dramatic fashion.
This mandate demands that we examine every activity to see if it is
essential, adds value for strategic customers, and is accomplished as
efficiently as possible.
INTERNAL CHANGES COMING INTO PLAY
We already are working to improve productivity in numerous ways.
For example:
o We are on the verge of completing a multi-million dollar integrated,
worldwide computer system that will accept orders, assign inventory, forecast
product demand, schedule production, replenish stocks and keep track of costs.
It is an extremely ambitious effort, but the payoff will be tremendous --
better customer service with lower inventory and lower cost.
o We are aligning manufacturing operations with the businesses they serve
and are challenging them to find ways of increasing capacity with minimal
investment. Product lines are being consolidated so that customers obtain
products that meet their needs at the best value we can offer.
o We have placed careful limits on spending. Increases in research and
development expense were limited to 3 percent in 1993 and will be held flat in
1994, as will selling and administrative costs. We will take $150 million out
of the fixed cost base by 1996. Capital spending in 1994 will approximate
the $382 million spent in 1993.
Finding more efficient ways of meeting customer needs means that we will
require fewer people each year for an indefinite period of time. This is a
difficult fact that we must accept. A small number of involuntary separations
were effected in 1993. We will try hard in 1994 to use attrition and
transfers to effect staff reductions, but involuntary separations will again
be necessary.
ID: GRAPHIC (BAR CHARTS)
EVERYONE HAS A CONTRIBUTION TO MAKE
Everyone will be asked to work smarter -- we are confident that our people
are up to the challenge. During the course of the past few years, Rohm and
Haas has re-learned what it knew years ago when it was a small entrepreneurial
company -- that the creative power of the human brain, teamed with the
enthusiasm of the human spirit, are powerful resources. We made sizable
investments in people development in 1993:
o The first-ever survey of all 13,000 employees was completed early in the
year. We were pleased to learn that nine out of ten people worldwide would
recommend Rohm and Haas as a good place to work and believe what they do is
necessary and worthwhile. Just as important, we learned we have to improve
the way we identify performance standards, train people for future job
requirements, evaluate their performance, and reward those who do well. We
have been developing processes that will help us achieve these performance
management objectives. Repeat surveys in future years will chart our
progress.
o More than 600 managers from around the world attended "Leadership in a
World Class Chemical Company" -- taught by members of our Management Committee.
Over the course of several days, participants learned more about the
challenges we face in an increasingly competitive industry and about the
behaviors we must change in order to improve our performance. An additional
200 managers will attend "Rohm and Haas University" in 1994.
o Jack Mulroney spent much of 1993 visiting with groups of employees,
encouraging them to become more energetic about their work. In his talks,
Jack stresses that a strong personal commitment, clear communication, respect
for the individual, teamwork and reaching for exceptional achievement are the
softer, less technical characteristics we need to add to our scientific
expertise.
Rohm and Haas needs the very best that every person has to offer if it is
to succeed against the talented and often much larger competitors it faces.
We will continue to invest heavily in training and to believe that the
individual energies of our people are critical to the overall success of the
company.
ORGANIZATIONAL CHANGES
William A. Kulik, vice president and director of the Pacific Region,
retired in August. Bill's insight and enthusiasm for the Pacific Rim has been
the inspiration behind that region's growth in recent years.
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John T. Subak, group vice president, general counsel and a director,
retired in December. While John principally was responsible for legal issues,
his wisdom and advice on all matters were valued throughout the company.
Rajiv L. Gupta assumed responsibility for the Pacific Region after Bill
Kulik's retirement; Robert P. Vogel succeeded John Subak as General Counsel.
During the summer, J. Michael Fitzpatrick became director of Research when
Chuck Tatum assumed responsibility for the Plastics Additives business. Raj,
Bob and Mike all were elected vice presidents and became members of the
Management Committee in 1993.
OUTLOOK
We were quite pleased with volume growth in 1993 and expect that to
continue in 1994.
The unfavorable currency situation will continue to hurt European
earnings. The pricing environment will remain difficult, but we will continue
to pursue price increases to recoup at least part of our higher costs. We do
expect relief in external economic conditions as 1994 progresses. The U.S.
economy is doing well, and should record solid growth. The European and
Japanese economies should not fall any further and may begin to recover.
In short, we expect to see better earnings in 1994.
It is clear, however, that we can no longer rely on better economies and
product price increases to improve our financial performance. Productivity
improvement is the key. We will implement additional internal cost reduction
measures throughout 1994. Even though our financial performance will improve,
Rohm and Haas will remain a lean, competitive company. The agility we will
gain as we make ourselves more fiscally fit will help us outpace our
competition and serve our customers better.
[J. LAWRENCE WILSON]
J. Lawrence Wilson
Chairman
[JOHN P. MULRONEY]
John P. Mulroney
President
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Dr. F. Otto Haas, retired President and Chief Executive Officer of Rohm
and Haas, died on January 2, 1994, at the age of 78.
Dr. Haas took control of the company in 1959 and accomplished one of the
most difficult feats of all: He transformed a modest, family-run enterprise
into a highly diverse global competitor with employees who understand and
embrace his family's core values.
Trained as a scientist, Dr. Haas demonstrated expertise as a business
leader and a commitment to the community that grew throughout his career.
He served Rohm and Haas with vision, courage and integrity.
The success of our company today is a tribute to the leadership he
provided during his long career.
We mourn his passing.
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PEOPLE MAKE THE DIFFERENCE
It is a time of great change in the chemical industry. This world of
change is so profound and rapid that all of us feel tested. Old paradigms are
breaking down, with new ones yet to be formed. A sense of urgency exists.
Change must happen -- and happen now.
Our heritage at Rohm and Haas has always been to master change, to use it
to our advantage to stimulate the invention of new products or to seek new
markets. Time and again, we have found a way to use our science, our
technology and our engineering expertise to rise above the confusion of the
day and chart a clear path to financial success.
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But today's challenges go beyond chemistry, beyond science. In order to
compete most effectively in a global economy we must think and act in new
ways. We must have the courage to face facts as they are, care enough to
confront the status quo and have enough spirit to capture the collective
leadership that each of us has to offer.
There are people coming forward from every part of Rohm and Haas Company
who acknowledge the growing role that commitment and empowerment have in
crafting a company that is good today and can be great tomorrow.
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Our goal is to be the best chemical company in the world. To be the best,
we must satisfy customers better than anyone else. To do that, each of us
must continually improve the way we do our jobs. We also must do them safely.
Taking customer orders correctly, making product right the first time,
following up on customer complaints immediately, delivering product on the day
the customer wants it, sending accurate bills, giving people solid answers to
any questions that are asked -- each of these tasks is critically important
to the overall success of Rohm and Haas. Promising to catch a mistake "the
next time it happens" or "letting it slide this time" diminishes the
reputation of us all.
Rohm and Haas today is in a position of strength in many ways. We have
excellent products, we have satisfied customers -- and we are willing to
continually improve the way we do business.
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On the pages of this report, you will see just some of the 13,000 people
who make up Rohm and Haas. We differ in many ways -- by nationality, gender,
age, race and education -- but we share a common identity as Rohm and Haas
people. It is this identity and this commitment to do our jobs the very best
we can that have taken us from a small entrepreneurial company to where we are
today. It is the spirit and excitement of our people that will sustain our
drive toward success in the next century.
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POLYMERS, RESINS
Polymers, Resins and Monomers (PRM) makes emulsion polymers, water-soluble
polymers, monomers, resins and additives for use in hundreds of products,
including house paints, adhesives, bridge and maintenance coatings,
detergents, sealants, floor polishes, inks, paper, leather, building products,
cement modifiers, textiles and nonwoven materials.
PRM recorded a 14 percent volume increase in 1993, 8 percent without the
effect of the recent Unocal acquisition. However, pressure on selling prices
and the effect of currency translations led to a 3 percent decline in reported
earnings. The earnings decline was 12 percent when the effect of a one-time
1992 charge for a plant writedown is excluded.
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POLYMERS AND RESINS
The worldwide trend to use water-based materials instead of solvents in
consumer and industrial products helped this business again in 1993.
Nowhere was the trend more evident than in the robust sales increase for
emulsions used in bridge coatings and road-marking traffic paints. In 1993,
traffic paint emulsion sales continued to grow in the United States, doubled
in Europe and made good progress in Japan.
More established products, such as water-based coatings used on hardboard
and concrete roof tiles, reported good growth worldwide. Water-based
technology also is being introduced for factory-applied furniture coatings.
Ropaque polymer sales grew in both the paint and paper markets in Europe
and the United States. New differentiated products based on the original
reflective capabilities of the hollow-sphere technology were well received.
Paper producers want product that improves the printing surface of papers.
Paint makers rely on Ropaque to improve paint's ability to reflect light and
to reduce formulation costs.
Architectural coatings continued to grow. Demand for Multilobe emulsion
binder used to make exterior acrylic paints increased, as did demand for
high-performance gloss and semi-gloss emulsions for use in interior trim
paints.
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Several products for the construction market showed good growth during the
year -- elastomeric coatings used on roofs and walls, cement modifiers for
ceramic tiles, caulks and sealants.
Elastene polymer was used by several companies worldwide in the launch of
high-performance water-based sealants. This polymer is used in interior and
exterior applications to seal windows, doors, tubs and sinks. The technology
behind Elastene matches or exceeds many of the performance properties of
silicone, but is simple to apply and can be painted -- big advantages for both
contractors and homeowners faced with do-it-yourself projects.
Adhesive products did well in Europe and the United States, particularly
those used for pressure-sensitive applications. Vinyl acetate acrylic
technology is penetrating markets with versatile, high-performance products
for a variety of difficult-to-bond surfaces. These polymers currently are
being used in adhesive applications rang-
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MONOMERS
ing from printed frozen food cartons to flexible plastic-lined bags used
to hold premium-brand snack foods.
The innovative line of Lubritan softening and waterproofing polymers
doubled in volume in 1993 due to rapid acceptance by the leather industry.
The vinyl acetate business acquired from Unocal in 1992 is fully
integrated, but has not yet contributed to earnings. Redundancies in product
lines and manufacturing sites are being addressed.
At mid-year, Polymers and Resins announced plans to close manufacturing
sites in North America to reduce operating costs and eliminate the geographic
duplication that was a result of the acquisition. One plant in California
and one in Illinois have been shut down, with plans to close a second Illinois
site by the end of 1994.
In August, Rohm and Haas dedicated a technical service laboratory in
Japan. Later in the year, the company acquired the remaining ownership in
Jacryl, a former joint venture that manufactures emulsions in that country.
Rohm and Haas strengthened its commitment to the Chinese market through the
formation of a joint venture to manufacture and sell emulsion products in the
People's Republic of China. Early in 1994, a new emulsion facility was
dedicated in Mozzanica, Italy.
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Polymers and Resins strengthened its efforts to meet customer needs during
the year. Improvements were made in the customer complaint handling system in
North America in 1993. Three additional plants earned ISO 9002 registration.
MONOMERS
The Monomers business produces key products which form the backbone for
nearly 70 percent of the Rohm and Haas product portfolio -- acrylic acid, its
esters, and methyl methacrylate. The business also makes specialty monomers
for use in paints and coatings, and other everyday products.
Acrylic acid and its derivatives are used when adhesion, flexibility,
toughness, absorbency or weatherability are needed. Demand for acrylic acid
has grown steadily during the past few years, driven primarily by its use in
superabsorbent products. In the fall, diaper makers announced changes in the
design of ultra-absorbent diapers which dramatically increased demand for
monomer. Worldwide supply will tighten further in 1994. The company has
accelerated the construction timetable for its 200-million pound acrylic acid
expansion in Houston, Texas. The plant now is slated for completion during
the latter half of 1995.
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FORMULATION CHEMICALS
The Formulations Chemicals business produces water-soluble polymers and
thickeners for use in detergent, water-treatment, mineral processing and
personal-care products.
Volume growth continued in every geographic region in 1993.
Growth in the household laundry detergent segment was helped by increasing
regulatory pressure and market trends to replace phosphates in detergent
formulations with acrylic-based polymers.
NorsoHaas, a joint venture with Elf Atochem, continues to be the primary
thrust for development of new business in Europe.
OUTLOOK
PRM faces challenges in 1994, but should continue to report very good
volume increases. The vinyl acetate business will begin to contribute to
earnings as plant and product adjustments are completed. Other productivity
improvements planned across the PRM businesses will help increase earnings
overall.
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PLASTICS
Plastics is comprised of Plastics Additives and AtoHaas. Plastics
additives are marketed under the Paraloid trademark. They add impact
strength, aid in processing and impart a variety of performance properties to
plastics, like polyvinyl chloride, other base plastics and high-performance
engineering plastics.
AtoHaas, a joint venture between Elf Atochem and Rohm and Haas, combines
the poly methylmethacrylate businesses of both firms. AtoHaas manufactures
and sells acrylic molding resins, acrylic sheet and polycarbonate sheet for
use in the automotive, construction, transportation, sign and lighting
markets.
In 1993, volume was up 9 percent for the Plastics business group on
slightly higher sales. Earnings declined by $40 million, in large part due to
the elimination of two programs that were burdening the business. Plastics
took after-tax writedowns totaling $34 million to discontinue imidized-acrylic
resin technology and a program to make plastics directly from emulsions.
Absent these unusual items, earnings declined $6 million, attributable to the
Plastics Additives business.
PLASTICS ADDITIVES
Marketplace dynamics challenged profitability for the Plastics Additives
business as competitive pressures and excess industry capacity drove down
selling prices worldwide. In Europe, devalued local currencies strained
profits even further.
Despite increased competition, Plastics Additives reported volume gains
for acrylic impact modifiers (AIMs) and processing aids in the growing
construction market. AIMs add toughness to normally brittle PVC plastic. In
Europe, customers who manufacture vinyl window profiles embraced Paraloid
KM-355 for its improved performance properties. In North America, the market
for AIMs remained strong for use in vinyl siding and window frames. A newer
product, Paraloid K-400, which gives hot-melt strength to vinyl foam, did well
worldwide. Vinyl foam is used as a lightweight core for PVC pipe and as an
alternative to wood for decorative trim and moldings, furniture and interior
signs.
Growth was slow for methyl methacrylate-butadiene-styrene (MBS) modifiers,
used primarily in the PVC packaging market. Environmental concerns
surrounding PVC packaging are limiting growth in the European and North
American markets.
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Plastics Additives is focusing on reducing costs to improve its margins.
Two development projects -- imidized additives sold under the Paraloid
trademark, and polyolefin modifiers for thermoforming applications -- were
terminated. High research and market development costs made it unlikely these
products would achieve commercial success. Research continues on new
modifiers for other polyolefin applications.
Sales of additive products used in specialty and engineering resins grew.
Automotive end uses, a key market for these resins, prospered in North
America, but slowed in Europe.
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AmeriHaas, a marketing joint venture with Dead Sea Bromine Group, moved
forward with its campaign to market flame retardant additives and additives
for higher value engineering plastics.
A joint venture with Kureha Chemical in Singapore produces plastics
additives for the rapidly emerging customer base in Asia.
ATOHAAS
In 1993, AtoHaas completed its first full year of
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operation. Market demand in North America and the Pacific fostered good
volume growth, which accounted for a slight increase in total sales. However,
pricing pressures caused by excess capacity worldwide and the economic
recession in Europe permeated most of its key markets.
Plexiglas acrylic sheet had a good year, highlighted by sales growth.
Smooth manufacturing operations at Matamoros, Mexico, for acrylic cell-cast
sheet gave the business the capacity and quality it needed to regain lost
market share in Mexico and the United States. Cell-cast sheet operations were
reduced at Morrisburg, Canada, and Plexiglas MC sheet production was
consolidated at Kensington, Connecticut, to lower overall manufacturing costs.
The business also announced it would terminate production of
imidized-acrylic technology, sold as Kamax resins, by mid-year 1994. Despite
valiant efforts by employees, the market for this technology had changed. The
resins were supported by one manufacturing line in Louisville, Kentucky. A
writedown also was taken for unfinished construction of a facility in Jarrow,
England, that was part of a research program to make plastics directly from
emulsions.
Plexiglas acrylic molding resins saw modest volume growth as the
automotive industry improved. The commercial lighting market, also a
significant market for the resins, remained soft and negatively affected
sales. Growth looks promising in Japan for acrylic resins used in the
manufacture of Japanese cars.
AtoHaas Europe faced a year of declining sales characterized by devalued
currencies in the region and a depressed European economy, reducing market
demand by 15 percent.
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OUTLOOK
For the most part, competitive pressures are expected to continue through
1994. The Plastics business group is aggressively seeking lower costs while
maintaining an emphasis on customer service and product quality. With several
major cost reductions in place, the business expects profitability to improve.
PERFORMANCE ...
Performance Chemicals includes four diverse businesses -- Separation
Technologies, Biocides, Petroleum Chemicals and Electronic Chemicals.
SEPARATION TECHNOLOGIES
In May of 1993, Rohm and Haas completed the sale of its Supelco subsidiary, a
manufacturer of chromatographic materials and supplies, to Sigma-Aldrich. The
sale contributed $11 million after-tax to company earnings.
At the heart of Separation Technologies are ion exchange resins, products
used primarily to purify water, food and beverages, and to increase the
efficiency of utility plant operations.
Earnings were down in all markets as ion exchange resins felt the
continuing effects of sluggish demand and excess capacity worldwide. A number
of one-time factors had a significant impact on profitability, including
startup expenses associated with a new plant in Soma, Japan; the shutdown of
anion processes at Mozzanica, Italy, and Philadelphia, Pennsylvania, and a
series of writedowns on inventory that did not meet specifications.
The ion exchange business instituted a series of aggressive moves to
enhance efficiencies and to align itself with a global marketplace. The
business
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... CHEMICALS
completed a $25 million expansion of its Chauny, France, operation. A new
plant started up in Soma, Japan, to produce anion and cation ion exchange
resins used primarily in water-treatment applications. The North American
business was restructured, which will reduce overall SAR costs substantially
in 1994.
TosoHaas, a joint venture between Tosoh Corporation and Rohm and Haas,
supplies bioseparation products to the pharmaceutical and biotechnology
industries. TosoHaas sales increased 19 percent over 1992. However, the
business reported a loss for the year because of currency effects.
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PETROLEUM CHEMICALS
Nineteen ninety-three was a good year for Petroleum Chemicals. Buoyed by
increased volume in North America and lower raw material costs, Petroleum
Chemicals reported increases in all key financial measures. Volume in North
America was up significantly, driven by increased market share in the
automatic transmission fluid market. Volume was up slightly in Europe, where
severe pricing pressures and negative exchange rates left their mark. Volume
was down in the Pacific region, due to the poor Japanese economy. Pacific
region results also were affected by charges associated with the integration
of Jacryl.
The crankcase market for viscosity index improvers remained flat.
Tightened specifications in the classification system for motor oils required
significantly increased engine testing costs. A new line of pour-point
depressants had a positive impact in 1993.
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Primene amines are beginning to show promise. They are used as
deposit-control agents in fuel additives and refinery chemicals, as
intermediates in plastic additives, and even for laser jet printing inks and
metalworking fluids. An expansion of Primene amines manufacturing capacity at
the Houston plant was completed in December 1993.
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ELECTRONIC CHEMICALS
Shipley Company manufactures specialty chemicals for the fabrication of
printed wiring boards and integrated circuits. Although sales grew in both
the printed circuit board and microelectronics businesses, earnings were flat
due to costs associated with site consolidations, pricing pressures in the
printed circuit board business and the recession in Japan.
Plaskon Electronic Materials, which supplies plastic encapsulating
materials to the semiconductor industry, reported a small profit after a
challenging year in 1993.
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Low operating rates and low margins hampered performance. Plaskon was
able to meet customer needs despite a disruption in the supply of high-purity
epoxy resin which threatened the semiconductor industry in the second half.
BIOCIDES
Biocides reported increased sales. However, earnings were down slightly
due to the end of a duty suspension on the import of biocides into the United
States and negative exchange rates.
Sea-Nine marine antifoulant did very well in the Pacific. Sea-Nine is an
environmentally acceptable replacement for harsh tin-based products. An
expansion of the Jarrow, U.K. plant to manufacture Sea-Nine was completed in
1993 and will come onstream in the first quarter of 1994. A new plant to
manufacture Sea-Nine and other Kathon products will be constructed in Bayport,
Texas, and is scheduled for operation early in 1996. Sea-Nine is expected to
receive registration by the U.S. Environmental Protection Agency in the first
half of 1994.
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Bromine biocide sales grew slightly, hampered by the suspension of sales
of a key product in order to resolve quality and safety issues. Manufacturing
adjustments have been made to ensure that the product remains intact during
shipment. Sales will resume early in 1994. These products, produced and sold
through a venture with the Dead Sea Bromine Group, are used in swimming pools,
spas and industrial water treatment.
AGRICULTURAL ...
Nineteen ninety-three was a stellar year. Volume growth in all regions
led to record sales of $409 million, a 7 percent improvement over 1992.
Earnings of $39 million were 26 percent higher than the previous year,
excluding a 1992 charge of $6 million for a plant writedown. Favorable
growing conditions in key markets, manufacturing efficiency, and a vigorous
marketing effort to build customer partnerships all contributed to this robust
performance.
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Dithane fungicide is the foundation of the Agricultural Chemicals
business. In 1993, every region reported volume increases. Sales continued
the rebound begun after the fungicide completed an extensive safety review by
the U.S. Environmental Protection Agency late in 1991. Customer needs led to
innovations in packaging. In North America, 50-pound vacuum-packed containers
were well received. A similar
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package is available for Japan in quantities as small as one-half pound.
This packaging innovation adds structural integrity to the containers and
diminishes the volume of packaging waste.
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Sales of Systhane fungicide exceeded expectations and benefited from a
widening list of applications in North America. During the year, Systhane
gained important registrations for food uses in Germany and Holland. Demand
for Indar, a cereal fungicide, remained flat. New trade agreements will
result in an 8 to 10 percent further reduction in acreage planted for European
cereal crops in the years ahead.
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Herbicides represent more than 20 percent of total revenue. Sales were
lower in 1993, reflecting reduced business for Stam herbicide for rice. Stam
business eroded in the North and Latin American regions because of adverse
weather conditions and competitive pressures. Kerb herbicide rebounded in all
of its worldwide markets, including some recovery in European rapeseed. Goal
herbicide enjoyed an exceptionally strong year in the United States, due to
increased demand by growers in Western states where rainfall patterns and crop
prices were favorable.
The company's novel insecticide, Mimic, earned government registration in
1993 for commercial sale on apple and vine crops in France. Mimic controls
caterpillar pests, yet remains harmless to beneficial and predatory insects.
Late in 1993, the U.S. Environmental Protection Agency and Agriculture Canada
embarked on a first-ever joint review of a new pesticide designed to bring the
registration processes into greater harmony. Mimic was chosen by these
governments for the parallel review processes. The company expects this will
result in "fast track" approval of Mimic for forestry and apple use in Canada
and for walnuts in the United States.
OUTLOOK
In January 1994, Rohm and Haas Company announced plans to acquire the
pyridine herbicide business and certain other assets of Monsanto Company.
These products complement the company's existing portfolio of specialty
herbicides.
Manufacturing capacity utilization rates remain high. The pipeline of new
products includes a second-generation version of Mimic insecticide designed
for use on turf and ornamentals. The company has a focused development
program geared toward further applications for this proprietary chemistry.
The year ahead should mark another year of solid performance for
Agricultural Chemicals.
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... CHEMICALS
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CORPORATE ...
How well a company manages safety, health and environmental
responsibilities is one expression of its concern for employees, customers and
neighbors. As a Responsible Care company, Rohm and Haas has pledged to behave
in a manner which reflects adedication to corporate responsibility.
INTERNATIONAL PROGRESS
Nineteen ninety-three proved to be a year of international progress in
communication and performance. Community surveys, modeled on those conducted
in the United States since 1985, were completed at Jarrow, England;
Lauterbourg, France; Landskrona, Sweden; and Jacarei, Brazil. The findings
enable management to incorporate community sentiment into business strategy.
Another milestone was reached when the European Region published the company's
first regional environmental report. This document, which was printed in six
languages, details past performance and establishes future commitments.
Environmental enhancements also were evident as the Lauterbourg plant
dedicated an $8 million biological treatment facility to purify the waste
stream before discharge to the Rhine. This event was applauded by French and
German officials, who support improved water quality in the region.
In Mexico, the transportation system for monomers and acids was revamped
to include prescribed routing, dedicated drivers, cellular communications and
emergency response capabilities to ensure the safe transport of materials.
And, in an example of how industry and nature can coexist, the Geelong,
Australia, facility transformed a portion of its property into a wetland to
both treat waste and provide a fresh water habitat for plants and wildlife.
ENVIRONMENTAL PERFORMANCE
Ongoing efforts to reduce the amount of U.S. air emissions, as reported
under SARA Title III, were set back when the company reported a 14 percent
increase in emissions over the previous year. Higher production accounted for
the increase. Cumulative reductions since 1987 now stand at 45 percent. The
goal of a 75 percent reduction by 1996 remains an achievable target, albeit
one which presents a significant challenge. On a more positive note, progress
continued on two fronts: a 50 percent reduction in toxic air emissions, and a
25 percent reduction in process wastes by the end of 1995.
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WORKPLACE SAFETY
Tangible evidence of the value of a continuing emphasis on workplace
safety emerged during the year as the workplace injury and illness rate fell
by 19 percent from 1992. The company's ultimate objective is to eliminate all
workplace injuries and illnesses. An aggressive program designed to meet this
objective is in place, with training, accountability and management
involvement as its foundation.
LANDFILL REMEDIATION
Remediation activities at several former waste disposal sites made
significant progress.
o Lipari, New Jersey: Early in 1993, the company signed a consent
agreement to reimburse $43 million to the government for work it performed on
the landfill portion of this Superfund site. In October, Rohm and Haas
announced that it would undertake the cleanup of a marsh, several streams and
Alcyon Lake which are near the landfill. EPA's estimate of costs is about $50
million and the work should be completed in 1996.
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... RESPONSIBILITY
o Mozzanica, Italy: Final preparations and contractor selection occurred
during the Fall at this plant waste site. Some wastes will be removed and the
entire area will be covered with a protective cap.
o Bristol, Pennsylvania: The first of two phases for remediation of this
company-owned landfill was completed, including the relocation of perimeter
wastes in preparation for the construction of a cap and containment system.
The company is awaiting government approval for phase two.
o Whitmoyer, Pennsylvania: The company, along with another former owner,
continued to remove wastes contained in an on-site vault. Wastes are being
characterized in preparation for ultimate disposal. The activity is being
performed cooperatively with the EPA.
o Woodland, New Jersey: This project entered its final stage during the
year as the company, along with several others, moved toward groundwater
remediation design and testing, under the supervision of the New Jersey State
Department of Environmental Protection.
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ENVIRONMENTAL ADVISORY COUNCIL
Nineteen ninety-three marked completion of ten years of meetings of the
Environmental Advisory Council. The EAC, formed at the direction of the Board
in 1984, serves as a consulting body to management and is comprised of
non-management directors and experts from science, industry and government.
It has stimulated a decade of focus on workplace safety, environmental audits,
and process improvements.
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1993 FINANCIAL REVIEW
ACCOUNTING CHANGE
POSTEMPLOYMENT BENEFITS Effective January 1, 1993, the company adopted
SFAS No. 112, "Employers' Accounting for Postemployment Benefits." This new
accounting standard requires the recognition of the liability for future costs
of compensation and benefits which will be paid to employees who are on
disability leave. The company recorded an after-tax charge of $19 million
(28 cents per common share), net of a tax benefit of $11 million, as the
cumulative effect of the accounting change at the adoption date. The
accounting change also increased 1993 after-tax postemployment benefit expense
by $1 million.
CONTENTS
MANAGEMENT DISCUSSION AND ANALYSIS
Results of Operations (1993, 1992 and 1991) 22
Results by Business Group (1989 -- 1993) 22
Results by Customer Location (1989 -- 1993) 24
Liquidity, Capital Resources and Other Financial Data 28
Quarterly Results of Operations 32
CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies 34
Statements of Consolidated Earnings and Retained Earnings 35
Statements of Consolidated Cash Flows 36
Consolidated Balance Sheets 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Acquisitions and Dispositions of Assets 38
Note 2 Investments 39
Note 3 Other Income (Expense), Net 39
Note 4 Supplementary Income Statement Information 39
Note 5 Income Taxes 40
Note 6 Industry Segment Reporting and Information
about Foreign Operations 42
Note 7 Pension Plans 44
Note 8 Accounts Receivable, Net 46
Note 9 Inventories 46
Note 10 Prepaid Expenses and Other Assets 46
Note 11 Land, Buildings and Equipment, Net 46
Note 12 Other Assets, Net 47
Note 13 Notes Payable 47
Note 14 Long-Term Debt 48
Note 15 Accounts Payable and Accrued Liabilities 48
Note 16 Employee Benefits 49
Note 17 Other Liabilities 49
Note 18 Stockholders' Equity 50
Note 19 Stock Option Plan 51
Note 20 Lease and Rental Commitments 51
Note 21 Contingent Liabilities, Guarantees and Commitments 52
Report on Financial Statements 53
Independent Auditors' Report 53
Eleven-Year Summary of Selected Financial Data 54
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MANAGEMENT DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS -- 1993, 1992 and 1991
Rohm and Haas earnings performance for 1993 was not typical for a year in
which the U.S. economy is recovering from a recession. Normally, a recovery
generates good volume and sales growth with low inflation and favorable
feedstock costs. The result is a solid earnings performance. In 1993, the
company realized the volume growth -- 12% over 1992. However, declining
selling prices, weaker European currencies and a lower-priced product mix
yielded only a 7% revenue gain. The lower selling prices in many markets
reflected the global impact of poor economic conditions in Europe and Japan,
which account for approximately one-third of the company's revenues. As a
result of the poor revenue growth and 12% weaker European currencies, 1993
earnings from ongoing operations (before the special charges and credits
listed below) totaled $173 million or $2.56 per common share, which was 17%
below comparable figures for 1992 ($205 million and $3.09 per common share).
Special charges and credits recognized in 1993 on an after-tax basis are
as follows: $16 million for asset writeoffs related to cancelling construction
of a plastics manufacturing facility in England; $18 million for asset
writedowns and costs associated with discontinuing production of the imidized
plastics product line at Louisville, Kentucky; $32 million for accrual of
remediation costs for lake and marsh property near the Lipari landfill in New
Jersey, and an $11 million gain on the sale of a subsidiary, Supelco, Inc.
The 1992 earnings included an after-tax charge of $37 million related to
downsizing a manufacturing site in Philadelphia, Pennsylvania. After these
charges and credits, 1993 earnings were $118 million or $1.74 per common
share, down 31% from the comparable figures of $168 million and $2.53 per
common share in 1992.
The company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" in 1993. In 1992, the company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" and
SFAS No. 109, "Accounting for Income Taxes." The company's one-time charge in
1993 for past liabilities from adopting SFAS No. 112 was $19 million or 28
cents per common share. The cumulative catch-up adjustment for adopting SFAS
No. 106 and SFAS No. 109 in 1992 was $179 million or $2.69 per common share.
Hence, net income after all charges and adjustments was $99 million or $1.46
per common share in 1993 as compared with a loss of $11 million or 16 cents
per common share in 1992.
In 1992, net earnings before cumulative effect of accounting changes were
$168 million and $2.53 per common share, up 7% and 3%, respectively, from
1991. Excluding the charge for the Philadelphia plant downsizing, earnings
were $205 million and $3.09 per common share, up 31% and 26%, respectively,
from 1991. Volume grew 6%, excluding acquisitions. This volume growth, along
with lower raw material costs, stronger European currencies and smoother plant
operations were the main drivers of 1992's strong operating performance.
Acquisitions during the year did not have a material impact on earnings.
These and other factors affecting earnings are discussed below. They are
summarized on a per-share basis on page 27.
SUMMARY BY BUSINESS GROUP
(Refer to table on page 23)
The company's industry segments are consistent with its worldwide business
group organization. A description of each segment's operations can be found
in the business review section of this report.
POLYMERS, RESINS AND MONOMERS (PRM) earnings were $120 million, down 3%
compared to 1992. The 1992 results included an after-tax charge of $13
million related to the Philadelphia plant. Excluding this charge, earnings
decreased 12%. Volume increased 8%, excluding the 1992 acquisitions, with all
major businesses contributing to the increase. Weaker European currencies and
lower selling prices were the main reasons for the earnings decline.
PRM reported 1992 earnings of $124 million, up 7% from 1991. The improved
performance reflected volume growth, stronger European currencies and lower
accruals for waste disposal site cleanup costs. Sales increased 10% due to
acquisitions and good demand for architectural and industrial coatings,
specialty industrial polymers, construction products and adhesives.
PLASTICS recorded a loss of $2 million compared to earnings of $38 million
in 1992. The current-year results included after-tax charges of $34 million
related to cancelling construction of a manufacturing facility in England and
the writedown of the imidized plastics production line in Kentucky. Volume
increased 9%, but sales were flat due to lower selling prices caused by
overcapacity in the industry and competitive pricing to maintain market share.
Plastics Additives reported good volume growth in North America and Europe.
AtoHaas North America's sheet business reported good volume and earnings
improvements. AtoHaas Europe reported a loss caused by weaker European
currencies and poor economic conditions in the region resulting in reduced
selling prices. Weaker European currencies also had a negative impact on
Plastics Additives sales and earnings.
Plastics earnings were $38 million in 1992, up $30 million from 1991.
Volume growth, lower raw material prices, stronger European currencies, smooth
plant operations and lower research expense contributed to the earnings
22
<PAGE>
<TABLE>
SALES BY BUSINESS GROUP AND CUSTOMER LOCATION
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
POLYMERS, RESINS PERFORMANCE AGRICULTURAL
AND MONOMERS PLASTICS CHEMICALS CHEMICALS TOTAL
- ----------- ---------------------- ---------------- ---------------- ---------------- ----------------------
(Millions
of dollars) 1993 1992 1991 1993 1992 1991 1993 1992 1991 1993 1992 1991 1993 1992 1991
- ----------- ---------------------- ---------------- ---------------- ---------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
North
America $1,068 $ 961 $ 863 $342 $324 $311 $328 $295 $258 $107 $ 98 $ 95 $1,845 $1,678 $1,527
Europe 225 250 230 176 194 180 206 211 184 137 133 133 744 788 727
Pacific 128 117 109 36 34 34 207 154 102 87 78 69 458 383 314
Latin
America 98 97 88 25 21 21 21 22 22 78 74 64 222 214 195
---------------------- ---------------- ---------------- ---------------- ----------------------
Total $1,519 $1,425 $1,290 $579 $573 $546 $762 $682 $566 $409 $383 $361 $3,269 $3,063 $2,763
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SUMMARY OF 1989-1993 RESULTS BY BUSINESS GROUP
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------
NET SALES
Polymers, Resins and Monomers $1,519 $1,425 $1,290 $1,249 $1,182
Plastics 579 573 546 561 512
Performance Chemicals 762 682 566 651 600
Agricultural Chemicals 409 383 361 363 367
---------------------------------------
Total $3,269 $3,063 $2,763 $2,824 $2,661
- ------------------------------------------------------------------------------
NET EARNINGS*
Polymers, Resins and Monomers $ 120 $ 124 $ 116 $ 119 $ 112
Plastics (2) 38 8 37 53
Performance Chemicals 29 19 43 55 11
Agricultural Chemicals 39 25 33 22 13
Corporate (60)+ (32) (37) (26) (13)
---------------------------------------
Total $ 126 $ 174 $ 163 $ 207 $ 176
- ------------------------------------------------------------------------------
*Excludes charges for the cumulative effect of accounting changes in 1993
and 1992 and preferred dividends.
+Includes an after-tax charge of $32 million for certain environmental
remediation.
- ------------------------------------------------------------------------------
RONA
Polymers, Resins and Monomers 9.7% 9.7% 11.0% 11.9% 13.3%
Plastics -- 5.8 1.3 5.7 10.4
Performance Chemicals 3.2 2.1 7.0 9.6 1.9
Agricultural Chemicals 13.4 7.8 11.3 7.7 4.7
Corporate (10.7) (12.2) (11.7) (13.8) (5.4)
---------------------------------------
Total 4.3% 6.1% 6.8% 8.6% 8.3%
- ------------------------------------------------------------------------------
Corporate includes non-operating items such as interest income and expense.
See page 27 for definition of RONA.
SUMMARY OF 1989-1993 RESULTS BY CUSTOMER LOCATION
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------
NET SALES
North America $1,845 $1,678 $1,527 $1,565 $1,511
Europe 744 788 727 775 685
Pacific 458 383 314 297 279
Latin America 222 214 195 187 186
---------------------------------------
Total $3,269 $3,063 $2,763 $2,824 $2,661
- ------------------------------------------------------------------------------
NET EARNINGS*
North America $ 121 $ 83 $ 84 $ 144 $ 81
Europe 27 77 59 70 82
Pacific 23 28 42 21 14
Latin America 15 18 15 (2) 12
Corporate (60)+ (32) (37) (26) (13)
---------------------------------------
Total $ 126 $ 174 $ 163 $ 207 $ 176
*Excludes charges for the cumulative effect of accounting changes in 1993
and 1992 and preferred dividends.
+Includes an after-tax charge of $32 million for certain environmental
remediation.
- ------------------------------------------------------------------------------
RONA
North America 8.1% 4.7% 5.8% 10.1% 6.5%
Europe 3.6 10.2 9.3 10.7 13.9
Pacific 4.0 5.6 11.9 7.5 6.4
Latin America 9.3 11.3 9.8 (1.1) 8.5
Corporate (10.7) (12.2) (11.7) (13.8) (5.4)
---------------------------------------
Total 4.3% 6.1% 6.8% 8.6% 8.3%
- ------------------------------------------------------------------------------
The four geographic regions reflect the company's major marketing profit
centers relative to customer location. Corporate includes non-operating items
such as interest income and expense.
See page 27 for definition of RONA.
23
<PAGE>
increase. Demand for PVC additives and molding resins in North America
and Europe was largely responsible for the 8% volume increase. Selling prices
were below 1991.
On October 1, 1992, the company and Elf Atochem formed a global joint venture,
AtoHaas, for the production and sale of acrylic sheet, polycarbonate sheet and
acrylic molding resins. The new venture consists of AtoHaas North America,
majority-owned by Rohm and Haas, AtoHaas Europe, majority-owned by Elf
Atochem, and an equally owned company for the Pacific. The company has fully
consolidated the results of AtoHaas North America and accounted for its
investment in the European and Pacific companies on an equity basis. The
startup of the joint venture had no material impact on 1992 sales or earnings.
PERFORMANCE CHEMICALS reported earnings of $29 million in 1993, which included
an after-tax $11 million gain on the sale of Supelco. Excluding the gain and
non-recurring charges incurred in 1992, earnings declined 55%. Volume
increased 3% and sales declined 1%, excluding 1992 acquisitions and Supelco.
Factors contributing to the earnings decline included depressed conditions in
the ion exchange resin business, weaker European currencies and costs related
to the relocation of an electronic chemicals manufacturing operation.
Depressed conditions in the ion exchange resin business are attributable to
excess capacity worldwide, increased competition and reduced capital spending
by customers which caused selling prices to decrease dramatically and volume
to decline. One-time factors which impacted the ion exchange resin business
1993 results included the startup of a new plant in Japan to produce anion and
cation ion exchange resins; the shutdown of anion processes in Italy, and
inventory writedowns due to excess supplies. In 1993, the company started a
restructuring of ion exchange resin operations in North America and Europe to
substantially reduce selling, administrative and research expenses by
rationalizing product lines and focusing the market strategy.
Performance Chemicals 1992 earnings were $19 million, down 56% from 1991.
Results included after-tax charges of $21 million related to the Philadelphia
plant and the shutdown of the precious metals recovery business. Results in
1991 included an after-tax $9 million gain from the sale of land in Tokyo.
Absent these non-recurring items, earnings increased 18%. The increase in
operating earnings was due to volume growth, stronger local currencies in
Europe and Japan, and the acquisition of Shipley Company. Biocides grew
worldwide, and Petroleum Chemicals had good volume increases in the European
and Pacific regions. Demand for ion exchange resins continued to be weak.
The acquisition of the remaining ownership of Shipley Company, an electronics
chemicals manufacturer, contributed over 90% of the sales increase.
AGRICULTURAL CHEMICALS earnings were $39 million, up 26% from 1992, excluding
a 1992 charge for downsizing the Philadelphia plant. Sales increased 7% on
11% higher volume. Dithane fungicide reported strong growth in the North
American, European and Pacific regions. Sales of Systhane fungicide in North
America increased as a result of new registrations. Goal herbicide had good
growth in North America due to favorable weather conditions and new
registrations. Stam herbicide volume declined in North America due to poor
planting conditions, competition from a new rice herbicide and reduced rice
acreage. Lower raw material prices and high utilization of manufacturing
facilities also contributed to the improved earnings.
Agricultural Chemicals reported 1992 earnings of $25 million, down 24% from
1991. Earnings included an after-tax charge of $6 million related to the
Philadelphia plant. Results in 1991 included a $9 million gain on the sale of
land in Tokyo. Absent these unusual items, earnings increased 29%. Sales
increased 6%, reflecting a higher-priced product mix and a 1% volume increase.
Other factors that helped earnings were 5% stronger European currencies and
smooth plant operations. Dithane fungicide experienced strong growth in the
Latin American and Pacific regions and Systhane fungicide had strong sales in
North America and Europe.
CORPORATE expenses totaled $60 million in 1993, compared with $32 million in
1992 and $37 million in 1991. In 1993, the company recorded an after-tax
charge of $32 million for remediation of lake and marsh property near the
Lipari landfill. Results in 1992 included a $2 million gain on the sale of
securities options and a $3 million settlement gain, net of the cost of the
early retirement incentive, from retirees electing lump sum distributions
under the company's 1992 early retirement program. Expenses in 1991 included
accruals of $10 million for certain future waste disposal site cleanup as well
as a $5 million gain on the sale of securities. Interest expense decreased in
1993 due to lower interest rates and higher capitalization of interest expense
as part of construction in progress. Interest expense increased in 1992
because of lower capitalization of interest expense as part of construction in
progress.
SUMMARY BY CUSTOMER LOCATION
(Refer to table on page 23)
Sales, net earnings and return on net assets (RONA) are shown relative to
shipments to customers located in each of four marketing regions: North
America (including Canada), Europe (including the Middle East and Africa),
Latin America (including Mexico) and Pacific.
NORTH AMERICAN region earnings were $121 million, up 46% from the prior-year
period. Excluding non-recurring
24
<PAGE>
items in both years, earnings increased 6%. The non-recurring items in 1993
included an after-tax charge of $17 million for the writedown of the imidized
plastics production line and an after-tax gain of $11 million from the sale of
Supelco. Results in 1992 included an after-tax charge of $37 million related
to downsizing a manufacturing site in Philadelphia. Sales grew 5% on an 8%
volume increase, excluding acquisitions and the divestiture. All business
groups contributed to the higher volume. Although sluggish worldwide
economies continued to put downward pressure on selling prices, earnings
improved due to increased volume, smooth plant operations and lower raw
material costs.
North American region earnings were $83 million in 1992, flat compared to
1991. Results in 1992 included an after-tax charge of $37 million for
estimated costs related to downsizing a manufacturing site in Philadelphia.
This included costs for relocating, training or retiring plant employees,
demolishing buildings, writing down the book value of plant assets and site
cleanup. Accruals for waste site cleanup costs decreased $14 million from
amounts charged to 1991 earnings. Excluding these unusual items, North
America earnings increased 22%. Sales increased 10% reflecting 18% volume
growth and a lower-priced product mix. Excluding the effect of the acquired
polymers business and Shipley Company, sales increased 2%, reflecting 5%
volume growth and lower selling prices. Raw material costs declined 11%. The
Polymers and Resins, Plastics and Biocides businesses reported strong growth
despite weak economic conditions in the region.
EUROPEAN region earnings were $27 million and included an after-tax charge of
$16 million for cancelling construction of a plastics facility in England.
Excluding this charge, earnings were $43 million, down 44% from 1992. Sales
declined 7% though volume increased 5%, excluding acquisitions and the
divestiture. Businesses with good volume increases included Polymers and
Resins, Plastics Additives, Biocides and Agricultural Chemicals. Economies in
the region struggled all year with severe recessionary conditions resulting in
lower local currency selling prices. Twelve percent weaker European
currencies were another major reason for the lower earnings.
European earnings were $77 million in 1992, up 31% from 1991. Sales increased
8% due to 11% higher volume and 5% stronger local currencies. Local currency
selling prices were lower. The acquisition of Shipley Company contributed 28%
of the volume increase. The Polymers and Resins, Plastics Additives,
Petroleum Chemicals and Biocides businesses reported good volume and earnings
growth in the region.
PACIFIC region earnings were $23 million, 18% below 1992. Sales increased 7%
and volume increased 8%, excluding acquisitions completed in 1992 and the
Supelco divestiture. All business groups contributed to the volume growth.
The benefit of volume gains and the Shipley acquisition were offset by costs
associated with the startup of an ion exchange resin plant and a new research
center in Japan.
Pacific region earnings in 1992 were $28 million compared to $42 million in
1991. The decline reflects the absence of an $18 million gain realized in
1991 on the sale of land and securities in Tokyo. The acquisition of Shipley
Company had a positive impact on the region's earnings. Excluding the Shipley
acquisition and the consolidation of Jacryl, previously a 47.5%-owned
affiliate, sales increased 6% reflecting 4% volume growth. Sales growth was
concentrated in the Polymers and Resins, Biocides and Agricultural Chemicals
businesses.
LATIN AMERICA posted earnings of $15 million, 17% lower than 1992. Sales
increased 4% due to 6% higher volume and lower selling prices. Polymers and
Resins and Formulation Chemicals had good growth and AtoHaas North America
reported higher volume in all product lines. Economies in the region slowed
during the fourth quarter and selling, administrative and research expenses
increased due to inflationary pressures in the region.
Latin America reported 1992 earnings of $18 million, up 20% from the prior
year. Sales increased 10% and volume was up 13% reflecting improved economic
conditions, especially in Mexico, Argentina and Chile. The improved
performance resulted from strong sales of PVC additives, resurgence of Dithane
fungicide for use on banana crops and volume growth for Polymers and Resins.
ID: GRAPHIC (LINE CHART OF GROSS PROFIT, SAR AND OPERATING EARNINGS)
25
<PAGE>
PHYSICAL VOLUME of shipments increased by 12% in 1993 from 1992 and by 17%
in 1992 over 1991:
- ------------------------------------------------------------------------------
Percent change
Business group 1993 VS 1992 1992 vs 1991
- ------------------------------------------------------------------------------
Polymers, Resins and Monomers 14% 17%
Plastics 9 8
Performance Chemicals 6 38
Agricultural Chemicals 11 1
--- ---
Worldwide 12% 17%
- ------------------------------------------------------------------------------
Percent change
Customer location 1993 VS 1992 1992 vs 1991
- ------------------------------------------------------------------------------
North America 15% 18%
Europe 5 11
Pacific 15 23
Latin America 6 13
--- ---
Worldwide 12% 17%
- ------------------------------------------------------------------------------
SUMMARY OF CONSOLIDATED RESULTS
The graph on page 25 shows the historical trend of gross profit, selling,
administrative and research (SAR) expenses and operating earnings as a percent
of sales.
An analysis of gross profit changes is summarized on a per-share basis on
page 27.
NET SALES were $3,269 million in 1993, up 7% from 1992 on 12% higher volume.
Excluding the effect of acquisitions and the divestiture, sales increased 2%,
reflecting 7% volume growth, 12% weaker currencies in Europe and 1% lower
selling prices. Net sales in 1992, excluding the effect of acquisitions, were
4% higher compared to 1991, reflecting 6% higher volume, stronger currencies
in Europe and lower selling prices.
RAW MATERIAL PRICES continued to decline since they peaked in the first
quarter of 1991 during the Gulf war. Raw material prices decreased 3% from
1992 levels. The charts below identify year-to-year changes for average unit
raw material costs and average unit selling prices based on the company's
product mix.
GROSS PROFIT increased to $1,095 million in 1993, up 4% from the prior year.
Gross profit in 1993 was reduced by a $25 million charge for the writedown of
the imidized plastics production line and in 1992 by a charge of $56 million
related to the company's Philadelphia plant. Excluding these charges, the
gross profit margin was 34%, 36% and 33% in 1993, 1992 and 1991, respectively.
The decline in gross profit margin in 1993 was the result of lower selling
prices and weaker European currencies.
SELLING, ADMINISTRATIVE AND RESEARCH (SAR) EXPENSES rose 6% in 1993 and 15% in
1992. Excluding acquisitions, divestitures and the effect of European
currencies, SAR expenses were 3% higher in 1993. Inflationary pressures and
the startup of a new research center in Japan contributed to the increase.
SAR expenses rose 6% in 1992, excluding acquisitions, the change in accounting
method for postretirement benefits and the effect of currencies.
INTEREST EXPENSE was $41 million in 1993, down $12 million from 1992 due to
lower interest rates and higher capitalization of interest expense as part of
construction cost. In 1992, interest expense increased $5 million due to
lower capitalization of interest expense as part of construction cost.
ID: GRAPHIC (LINE CHART OF SALES AND VOLUME INDICES)
ID: GRAPHIC (LINE CHART OF RAW MATERIAL COST INDEX)
26
<PAGE>
SHARE OF NET LOSSES OF AFFILIATES were $6 million in 1993, compared to $1
million in 1992. The 1993 results primarily relate to the AtoHaas affiliates,
reflecting the difficult economic conditions in Europe. In 1992, the company
acquired the remaining 70% of Shipley Company, previously a 30%-owned
affiliate, and an additional 19.5% of Jacryl, previously a 47.5%-owned
affiliate in Japan. In December 1993, the company acquired the remaining 33%
ownership of Jacryl. The decrease in equity in net earnings of affiliates in
1992 resulted from fully consolidating these companies and from losses of the
AtoHaas affiliates.
OTHER EXPENSE, NET was $59 million compared to income of $14 million in 1992.
The 1993 results included charges of $56 million for cancelling construction
of a plastics facility in England and the cost of the Lipari remediation, net
of the gain on the sale of Supelco. Included in 1992 were gains of $11
million on the sale of technology and securities options and pension
settlement gains, net of the cost of the early retirement incentive.
THE EFFECTIVE TAX RATE was 35%, up from 1992's 33% rate. The higher effective
rate resulted primarily from higher taxes on foreign earnings due to
non-deductible currency losses.
RETURN ON NET ASSETS (RONA) equals net earnings before cumulative effect of
accounting changes plus after-tax interest expense, divided by year-end total
assets. For 1993, RONA was 4%, compared with 6% and 7% in 1992 and 1991,
respectively.
RETURN ON COMMON STOCKHOLDERS' EQUITY (ROE) is obtained by dividing net
earnings (before reduction for the cumulative effect of accounting changes)
less preferred stock dividends by average year-end common stockholders'
equity. Average year-end common stockholders' equity is calculated without
the reduction for the ESOP transaction, but including the common stock that
was to be purchased in 1995. For 1993, ROE was 8%, compared with 11% for 1992
and 1991.
The return on investment graph shows these measures for the past eleven years.
ANALYSIS OF CHANGE IN PER-COMMON-SHARE EARNINGS+
CURRENT YEAR RELATIVE TO YEAR EARLIER
$/Common Share
(after tax)
---------------------
1993 1992
- ------------------------------------------------------------------------------
GROSS PROFIT
Selling prices* $(1.15) $ (.04)
Physical volume and product mix 1.55 .65
Raw material costs* .30 .76
Other manufacturing costs, including
plant downsizing* (.24) .15
---------------------
Increase in gross profit .46 1.52
- ------------------------------------------------------------------------------
OTHER CAUSES
Selling, administrative and research
expenses* (.47) (.99)
Asset dispositions (.10) (.31)
Certain waste disposal site cleanup costs (.47) --
Share of affiliate losses (.08) (.06)
Other (.13) (.08)
---------------------
Decrease from other causes (1.25) (1.44)
- ------------------------------------------------------------------------------
Increase (decrease) in per-common-share
earnings $ (.79) $ .08
- ------------------------------------------------------------------------------
*The amounts shown are on a U.S. dollar basis and include the impact of
currency movements as compared to the prior period.
+Net earnings per share are before a charge of $19 million in 1993 and $179
million in 1992 for the cumulative effect of accounting changes.
ID: GRAPHIC (LINE CHART OF SELLING PRICE INDEX)
ID: GRAPHIC (LINE CHART OF RETURN ON INVESTMENT)
27
<PAGE>
LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA
CASH FLOW Cash provided by operations for 1993 was $358 million. These
funds, plus cash from the sale of assets, were used to finance the company's
capital expenditures and to pay dividends during the year. The company
maintains an "A" debt rating and has adequate financial resources available to
provide cash required for future operations.
FINANCING Total borrowings at year-end 1993 were $773 million, down $27
million from the prior year. At the end of 1993, the debt-to-equity ratio,
calculated without the reduction to stockholders' equity for the ESOP
transaction, was 48%, compared with 50% at the end of 1992 and 1991. The
company's capital structure is based upon a planned 50% debt-to-equity ratio.
This financial policy was established to ensure strong financial ratios and
access to external financing.
In connection with the Shipley acquisition in 1992, the company issued
2,721,502 shares of cumulative convertible preferred stock and 611,340 shares
of common stock from treasury, for a total value of about $170 million. The
preferred stock pays an annual cumulative dividend of $2.75 per share. It is
convertible at any time at the holder's option into Rohm and Haas common stock
at the rate of .7812 shares of common stock for each share of preferred stock.
Holders of preferred stock are entitled to one vote per share. The company
has the option to redeem the preferred stock on or after June 12, 1999, at a
fixed redemption price of $50.62, payable in Rohm and Haas common stock. The
redemption price reduces each year to a final price of $50 on or after
June 12, 2002.
ENVIRONMENTAL There is an inherent risk of environmental damage in chemical
manufacturing operations. The company's environmental policies and practices
are designed to ensure compliance with existing laws and regulations and to
minimize the possibility of significant environmental damage. Future
developments and even more stringent environmental regulations may require the
company to make additional unforeseen environmental expenditures. The
company's major competitors are confronted by substantially similar
environmental risks and regulations.
The company is a named party in various government enforcement and private
actions associated with former waste disposal sites. Most of these are on the
U.S. Environmental Protection Agency's (EPA) Superfund priority list.
Accruals for the expected future costs of remediating these waste sites are in
accordance with the provisions of SFAS No. 5, "Accounting For Contingencies."
The company considers a broad range of information when determining the amount
of the accrual, including available facts about the waste site, existing
technology, prior experience, the ability of other principally responsible
parties to pay costs apportioned to them and current laws and regulations.
These accruals are updated quarterly as additional technical and legal
information becomes available. Major sites for which reserves have been
provided are: the non-company-owned Lipari and Woodland sites in New Jersey
and Whitmoyer in Pennsylvania, and company-owned sites in Bristol and
Philadelphia, Pennsylvania. In addition, the company has provided for future
costs at approximately 80 other sites where it has been identified as
potentially responsible for cleanup costs and, in some cases, damages for
alleged personal injury or property damage.
On November 15, 1993, Rohm and Haas and the EPA signed a consent decree
whereby the company will assume responsibility for managing the cleanup of
lake and marsh property near the Lipari landfill and will pay the cost of
remediation. The company increased its reserves for remediation in the third
quarter of 1993 by $50 million to cover the estimated costs. In early 1993,
Rohm and Haas agreed to pay about $43 million for the remediation of the
Lipari landfill itself; that cost had been accrued in prior years. The
agreement with the EPA ends a decade of negotiations to resolve the cleanup of
a site that had been an approved landfill when the company sent wastes there
in the 1960s.
ID: GRAPHIC (STACKED BAR CHART OF CASH FLOW)
28
<PAGE>
The amounts charged to earnings before tax for environmental remediation,
including the Lipari remediation in 1993, were $57 million, $23 million and
$49 million in 1993, 1992 and 1991, respectively. The reserves for
remediation were $191 million and $155 million at December 31, 1993 and 1992,
respectively, and are recorded as "other liabilities" (current and long-term).
At December 31, 1993, probable insurance recoveries of $72 million were
classified and recorded as "other assets." Probable insurance recoveries of
$72 million at December 31, 1992, have been reclassified to conform with
current financial statement presentation. Insurance carriers have denied
coverage in most cases and the company has initiated legal action in New
Jersey and Pennsylvania. In estimating probable insurance recovery amounts,
the company has considered various factors, including the terms of the
insurance policies which are applicable to each site, policy limits, the law
which is likely to be applied in the jurisdiction, and the facts as currently
understood by the company. Based upon all of these factors and the opinions
of counsel, the company has concluded that the recorded amount of insurance
coverage is probable of recovery.
In addition to accrued environmental liabilities, the company has loss
contingencies related to environmental matters estimated to be approximately
$180 million at December 31, 1993. Losses relating to these matters, although
not probable of occurrence, are reasonably possible. These matters involve
significant unresolved issues, including the number of parties found liable at
each site and their ability to pay, the outcome of negotiations with
regulatory authorities, the actual method of remediation, technological
developments and changes in environmental laws. The company believes that
these matters, when ultimately resolved, which may be over the next decade,
will not have a material adverse effect on the consolidated financial position
of the company, but could have a material adverse effect on consolidated
results of operations in any given year.
Capital spending for new environmental protection equipment was $55 million in
1993. Spending for 1994 and 1995 is expected to be in the range of $40
million and $45 million, respectively. Capital expenditures in this category
include projects whose primary purpose is pollution control and safety, as
well as environmental aspects of projects in other categories on page 30 which
are intended primarily to improve operations or increase plant efficiency.
The company expects future capital spending for environmental protection
equipment to be consistent with prior-year spending patterns. Capital
spending does not include the cost of environmental remediation of waste
disposal sites.
Cash expenditures for waste disposal site remediation were $21 million in
1993, $24 million in 1992 and $21 million in 1991. The expenditures for
remediation are charged against accrued remediation liabilities. The cost of
operating and maintaining environmental facilities was $105 million, $108
million and $92 million in 1993, 1992 and 1991, respectively, and are charged
against current year earnings.
ID: GRAPHIC (LINE CHART OF ENVIRONMENTAL EXPENSES AND CAPITAL SPENDING)
ID: GRAPHIC (LINE CHART OF EARNINGS AND COMMON DIVIDENDS)
29
<PAGE>
DIVIDENDS Total common stock dividends paid in 1993 were $1.36 per share,
compared with $1.28 per share in 1992, and $1.24 per share in 1991. The
company's common stock dividend payout is targeted at 35% of earnings. Common
stock dividends have been paid each year since 1927. Total preferred
dividends paid were $2.75 per share in 1993 and $1.38 per share in 1992.
STOCK REPURCHASES In April 1992, the William Penn Foundation released the
company from its obligation to buy 2.6 million shares of the company's common
stock from the foundation in 1995. The 2.6 million shares of common stock,
previously classified outside of stockholders' equity, were reclassified to
stockholders' equity in the second quarter of 1992.
ADDITIONS TO LAND, BUILDINGS AND EQUIPMENT Fixed asset additions in 1993
totaled $382 million, up $99 million from last year's spending level. The
company has budgeted capital expenditures in 1994 of approximately $400
million. Spending for environmental protection equipment, which is included
in several of the categories on the chart shown below, was $55 million in 1993
and 1992 and $48 million in 1991.
Expenditures for the past three years, categorized by primary purpose of
project, were:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991
- ------------------------------------------------------------------------------
Environmental, cost savings
and infrastructure $202 $180 $193
Capacity additions and new products 144 75 40
Research facilities and equipment 17 15 16
Capitalized interest cost 19 13 16
-------------------------
Total $382 $283 $265
- ------------------------------------------------------------------------------
ACQUISITIONS AND DIVESTITURES In the second quarter of 1993, the company
entered into a joint venture with Beijing Chemicals Industry Corporation to
manufacture and sell acrylic emulsions and related products in the People's
Republic of China. The joint venture superseded a cooperative marketing
venture that had been in place since 1988. Rohm and Haas contributed $6
million to the venture for a 60% ownership interest in the new firm. The
venture is not expected to have a material effect on the company's financial
results.
On May 6, 1993, the company completed the sale of its Separations Technologies
subsidiary, Supelco, Inc., to Sigma-Aldrich Corporation. The sale resulted in
an after-tax gain of $11 million.
On December 13, 1993, the company acquired the remaining 33% ownership of
Japan Acrylic Chemical Company Ltd. (Jacryl) from Toagosei Chemical and Sanyo
Trading Co., Ltd. for $5 million. In 1992, the company had increased its
ownership from 47.5% to 67% through the purchase of 178,000 shares from
Toagosei Chemical for $4 million. Jacryl manufactures and sells acrylic
emulsions used to make paints, paper coatings, textile finishes, adhesives and
oil additives used in motor and gear oils and hydraulic fluids. Jacryl's
operating results, previously recorded using the equity method, have been
fully consolidated since June 29, 1992.
On May 14, 1992, the company purchased Unocal Corporation's polymers business
for approximately $170 million. This business includes emulsion polymers sold
to companies that make paint, paper, textiles, adhesives and carpet. The
assets acquired included six U.S. plants and a technical center in North
Carolina. The acquisition was accounted for using the purchase method and,
accordingly, operating results have been included in the company's
consolidated results from the date of acquisition.
On June 12, 1992, the company acquired the remaining 70% ownership of Shipley
Company, previously a 30%-owned affiliate. Shipley manufactures electronic
chemicals used in the manufacture of microelectronic devices, printed circuit
boards, plating-on-plastics and metal finishing. The acquisition was funded
by issuing preferred stock and common stock out of treasury (see Financing
section on page 28). The acquisition was accounted for as a purchase
transaction and, accordingly, the operating results of Shipley Company have
been included in the company's consolidated results from the date of
acquisition. Prior to the acquisition, the company accounted for its 30%
ownership using the equity method. The excess of the purchase price over the
fair value of the net assets acquired (goodwill) was $69 million and is being
amortized on a straight-line basis over 40 years.
ID: GRAPHIC (PHOTOGRAPH)
30
<PAGE>
On October 1, 1992, the company and Elf Atochem completed the formation of a
joint venture, AtoHaas, for the production and sale of acrylic and
polycarbonate sheet products and acrylic molding resins. The venture consists
of AtoHaas North America, majority-owned by Rohm and Haas, AtoHaas Europe,
majority-owned by Elf Atochem, and an equally owned company for the Pacific.
The company contributed all of its Performance Plastics assets and liabilities
to AtoHaas North America. Elf Atochem contributed all of the assets and
liabilities of its related plastics business to AtoHaas Europe. Rohm and Haas
exchanged a 49% ownership interest in AtoHaas North America with a value of
$73 million for a 49% ownership interest in AtoHaas Europe amounting to $94
million. The difference between Rohm and Haas's investment in AtoHaas Europe
and its equity in the underlying net assets of AtoHaas Europe is amortized, as
income, over the weighted-average remaining life of the European fixed assets.
The company has fully consolidated the results of AtoHaas North America and
accounted for its interest in the European and Pacific companies on an equity
basis.
WORKING CAPITAL (the excess of current assets over current liabilities) was
$499 million at year-end 1993, down $34 million from 1992. Accounts
receivable from customers increased $48 million due to volume growth.
Inventory decreased $43 million. Days cost of sales in 1993 ending inventory
was 66 days, compared to 79 days for year-end 1992. Details about two major
components of working capital at the end of 1993 and 1992 follow:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
INVENTORIES
Year-end balance $394 $437
Annual turnover 5.5X 4.6x
CUSTOMER RECEIVABLES
Year-end balance $541 $493
Annual turnover 6.0X 6.2x
- ------------------------------------------------------------------------------
NET FIXED ASSETS Investment in net fixed assets is summarized below.
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Year-end balance $1,869 $1,768
Annual turnover 1.8X 1.7x
- ------------------------------------------------------------------------------
These annual turnover figures were calculated by dividing annual sales (for
customer receivables and net fixed assets) or cost of goods sold (for
inventories) by the year-end balance. Days cost of sales in ending inventory
was calculated by dividing ending inventory by daily cost of sales.
The graph below presents the trend of receivables, inventories and net fixed
assets as a percent of sales.
ID: GRAPHIC (LINE CHART OF CAPITAL ADDITIONS AND DEPRECIATION)
ID: GRAPHIC (LINE CHART OF ASSETS)
31
<PAGE>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
First quarter 1993 earnings before the cumulative effect of accounting changes
were $58 million, up 2% from the first quarter of 1992. Volume grew 7%,
excluding acquisitions, raw material costs were 5% lower, plants ran smoothly
and costs were under control. Selling prices were under pressure worldwide
and European currencies weakened 9% from the first quarter of 1992.
Earnings in the second quarter of 1993 were $63 million, down 15% from the
prior-year period. The results included an after-tax charge of $5 million for
costs related to cancelling construction of a plastics manufacturing facility
in England, net of a gain on the sale of Supelco, Inc. Volume grew 7%,
excluding acquisitions, but selling prices declined due to poor economic
conditions in Europe and Japan. European currencies weakened 6% contributing
to the earnings decline.
ID: GRAPHIC (PHOTOGRAPH)
Third quarter 1993 losses were $21 million compared to income of $51 million
in the prior year. The 1993 results included after-tax charges of $50 million
for remediation of lake and marsh property near the Lipari landfill in New
Jersey and the writedown of the imidized plastics production line in Kentucky.
Excluding these items, earnings were $29 million, 43% below 1992. Volume
increased 7% and plants ran smoothly, but this was not enough to overcome the
effect of 19% weaker European currencies and lower selling prices due to
severe recessionary conditions in Europe and Japan.
Fourth quarter 1993 earnings were $26 million compared to a loss of $8 million
in last year's fourth quarter. Results in 1992 included a charge of $37
million related to downsizing the Philadelphia plant. Excluding this charge,
earnings were down 10% compared to 1992. Sales increased 1% and volume
grew 6%. Selling prices continued to be under pressure worldwide and
European currencies weakened 12% contributing to the lower earnings.
ID: GRAPHIC (HIGH-LOW CHART OF QUARTERLY STOCK PRICES IN DOLLARS)
32
<PAGE>
1993 QUARTERLY RESULTS
- ------------------------------------------------------------------------------
1st 2nd 3rd 4th YEAR
(Millions of dollars) Quarter Quarter Quarter Quarter 1993
- ------------------------------------------------------------------------------
Net sales $826 $884 $799 $760 $3,269
Gross profit 300 312 235 248 1,095
Earnings (loss) before
cumulative effect of
accounting change 58 63 (21) 26 126
Net earnings (loss) 39 63 (21) 26 107
- ------------------------------------------------------------------------------
Per common share, in dollars:
Earnings (loss) before
cumulative effect of
accounting change $ .83 $ .90 $(.34) $ .35 $ 1.74
Net earnings (loss) .55 .90 (.34) .35 1.46
- ------------------------------------------------------------------------------
Cash dividends per common
share, in dollars $ .33 $ .33 $ .35 $ .35 $ 1.36
- ------------------------------------------------------------------------------
Percentage change from
prior year
Net sales 16 % 13 % (1)% 1 % 7 %
Physical volume 22 15 7 6 12
- ------------------------------------------------------------------------------
Earnings (loss) before
cumulative effect of
accounting change 2 % (15)% -- % -- % (28)%
Net earnings (loss) -- (15) -- -- --
- ------------------------------------------------------------------------------
Earnings (loss) per common
share before cumulative
effect of accounting change (3)% (20)% -- % -- % (31)%
Net earnings (loss) per
common share -- (20) -- -- --
- ------------------------------------------------------------------------------
1992 QUARTERLY RESULTS
- ------------------------------------------------------------------------------
1st 2nd 3rd 4th Year
(Millions of dollars) Quarter Quarter Quarter Quarter 1992
- ------------------------------------------------------------------------------
Net sales $ 714 $ 783 $810 $756 $3,063
Gross profit 273 290 285 201 1,049
Earnings (loss) before
cumulative effect of
accounting changes 57 74 51 (8) 174
Net earnings (loss) (122) 74 51 (8) (5)
- ------------------------------------------------------------------------------
Per common share, in dollars:
Earnings (loss) before
cumulative effect of
accounting changes $ .86 $1.12 $ .72 $(.15) $ 2.53
Net earnings (loss) (1.92) 1.12 .72 (.15) (.16)
- ------------------------------------------------------------------------------
Cash dividends per common
share, in dollars $ .31 $ .31 $ .33 $ .33 $ 1.28
- ------------------------------------------------------------------------------
Percentage change from
prior year
Net sales 5% 4% 20% 15% 11%
Physical volume 8 11 24 25 17
- ------------------------------------------------------------------------------
Earnings (loss) before
cumulative effect of
accounting changes 39% 40% 31% --% 7%
Net earnings (loss) -- 40 31 -- --
- ------------------------------------------------------------------------------
Earnings (loss) per common
share before cumulative
effect of accounting changes 39% 42% 22% --% 3%
Net earnings (loss) per
common share -- 42 22 -- --
- ------------------------------------------------------------------------------
1991 QUARTERLY RESULTS
- ------------------------------------------------------------------------------
1st 2nd 3rd 4th Year
(Millions of dollars) Quarter Quarter Quarter Quarter 1991
- ------------------------------------------------------------------------------
Net sales $680 $753 $672 $658 $2,763
Gross profit 216 243 219 224 902
Net earnings 41 53 39 30 163
- ------------------------------------------------------------------------------
Net earnings per share,
in dollars $.62 $.79 $.59 $.45 $ 2.45
- ------------------------------------------------------------------------------
Cash dividends per share,
in dollars $.31 $.31 $.31 $.31 $ 1.24
- ------------------------------------------------------------------------------
Percentage change from prior year
Net sales (2)% (2)% (2)% (3)% (2)%
Physical volume (6) (3) 1 1 (2)
- ------------------------------------------------------------------------------
Net earnings (24)% (25)% (14)% (20)% (21)%
- ------------------------------------------------------------------------------
Net earnings per share (24)% (25)% (14)% (20)% (21)%
- ------------------------------------------------------------------------------
33
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include
the accounts of the company and its subsidiaries engaged in manufacturing
operations. Investments in unconsolidated subsidiaries, which are involved
mainly in selling operations outside of the United States, are carried at cost
and are insignificant in total. Investments in affiliates (20-50%-owned) are
recorded at cost plus equity in their undistributed earnings since
acquisition. Intercompany accounts, transactions and unrealized profits and
losses on transactions within the consolidated group and with significant
affiliates are eliminated in consolidation.
TRANSLATION PROCEDURES Foreign currency accounts are translated into U.S.
dollars under the provisions of SFAS No. 52, with the U.S. dollar as the
functional currency for the majority of international operations. Under this
standard: (1) land, buildings and equipment and related depreciation,
inventories and cost of goods sold, goodwill and intangibles and related
amortization and minority interest are translated at historical rates of
exchange; (2) all other assets and liabilities are translated at current rates
of exchange, and (3) monthly income, costs and expenses other than
depreciation, amortization of goodwill and intangibles and cost of goods sold
are translated at current rates of exchange. Translation gains and losses of
those operations that use local currencies as the functional currency are
included as a separate component of stockholders' equity. Foreign exchange
adjustments, including recognition of unperformed foreign exchange contracts
which are not intended to hedge an identifiable foreign currency commitment,
are charged or credited to income based on current exchange rates.
ENVIRONMENTAL ACCOUNTING Accruals for remediation of former waste disposal
sites are recorded when it is both probable a liability has been incurred and
a reasonable estimate of the cost can be made. The liabilities are recorded
at undiscounted amounts. The cost of operating and maintaining environmental
facilities are charged to expense. Expenditures which mitigate or prevent
contamination from future operations are capitalized and depreciated under
normal depreciation policies.
CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash, time
deposits and readily marketable securities with original maturities of three
months or less.
INVENTORIES are stated at the lower of cost or market. Cost is primarily
determined under the last-in, first-out (LIFO) method.
LAND, BUILDINGS AND EQUIPMENT AND RELATED DEPRECIATION Land, buildings and
equipment are carried at cost. Assets are depreciated over their estimated
useful lives on the straight-line and accelerated methods. Maintenance and
repairs are charged to earnings; replacements and betterments are capitalized.
The cost and related accumulated depreciation of buildings and equipment are
removed from the accounts upon retirement or other disposition; any resulting
profit or loss is reflected in earnings.
INTANGIBLE ASSETS The company amortizes identifiable intangible assets
such as patents and trademarks on the straight-line basis over their estimated
useful lives. Goodwill is amortized on the straight-line basis over periods
not greater than 40 years.
INCOME TAXES The company uses the asset and liability method of accounting
for income taxes. Under this method, deferred tax assets and liabilities are
recognized for the estimated future consequences of temporary differences
between the financial statement carrying value of assets and liabilities and
their values as measured by tax laws.
Under the deferred method, which was applied in 1991 and prior years,
deferred income taxes are recognized for income and expense items that are
reported in different years for financial reporting purposes and income tax
purposes.
34
<PAGE>
<TABLE>
ROHM AND HAAS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS AND RETAINED EARNINGS
<CAPTION>
Years ended December 31, 1993, 1992 and 1991
------------------------------------------------------------------------------------------
(Millions of dollars, except per-share amounts) 1993 1992 1991
------------------------------------------------------------------------------------------
CURRENT EARNINGS
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $3,269 $3,063 $2,763
NOTE 9 Cost of goods sold 2,174 2,014 1,861
------------------------------
Gross profit 1,095 1,049 902
Selling and administrative expense 590 549 470
Research and development expense 205 199 183
NOTE 11 Interest expense 41 53 48
NOTE 2 Share of net earnings (losses) of affiliates (6) (1) 3
NOTE 3 Other income (expense), net (59) 14 36
------------------------------
Earnings before income taxes 194 261 240
NOTE 5 Income taxes 68 87 77
------------------------------
Earnings before cumulative effect of accounting changes 126 174 163
NOTES 5 Cumulative effect of accounting changes, net of income taxes (19) (179) --
& 16 ------------------------------
NET EARNINGS (LOSS) $ 107 $ (5) $ 163
------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 107 $ (5) $ 163
NOTE 18 Less preferred stock dividends 8 4 --
NOTE 18 Less earnings applicable to common stock that
was to be purchased in 1995:
Dividends -- 1 3
Increase in value -- 1 3
------------------------------
NOTE 18 NET EARNINGS (LOSS) APPLICABLE TO COMMON SHAREHOLDERS $ 99 $ (11) $ 157
PER COMMON SHARE:
Before cumulative effect of accounting changes $ 1.74 $ 2.53 $ 2.45
Cumulative effect of accounting changes (.28) (2.69) --
Net earnings (loss) $ 1.46 $ (.16) $ 2.45
------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (000'S) 67,619 66,396 64,103
------------------------------------------------------------------------------------------
RETAINED EARNINGS
------------------------------------------------------------------------------------------
RETAINED EARNINGS AT BEGINNING OF YEAR $1,434 $1,528 $1,448
Net earnings (loss) for the year 107 (5) 163
------------------------------
1,541 1,523 1,611
Common stock dividends paid ($1.36, $1.28 and $1.24
per share in 1993, 1992 and 1991, respectively), net
of tax benefit of $3 million in 1993, 1992 and 1991
related to the ESOP 89 84 80
Preferred stock dividends 8 4 --
Increase in value of common stock that was to be
purchased in 1995 -- 1 3
------------------------------
RETAINED EARNINGS AT END OF YEAR $1,444 $1,434 $1,528
------------------------------------------------------------------------------------------
</TABLE>
See accompanying summary of significant accounting policies
(page 34) and notes to consolidated financial statements
(pages 38-52).
35
<PAGE>
ROHM AND HAAS COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Years ended December 31, 1993, 1992 and 1991
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992* 1991
- ------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 107 $ (5) $ 163
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Cumulative effect of accounting changes,
net of tax 19 179 --
Depreciation 226 203 183
Deferred income taxes 9 (31) 8
Accounts receivable (63) (1) (12)
Inventories 34 (49) 46
Accounts payable (5) 36 (55)
Gain on disposition of facilities and
and investments, net (24) (6) (40)
Provision for writedown of plant assets 48 56 --
Other working capital changes, net (26) (20) 29
Other, net 33 39 35
-------------------------------
Net cash provided by operating
activities 358 401 357
- ------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and equipment (382) (283) (265)
Proceeds from sale of facilities
and investments 58 8 98
Collection of notes receivable 34 -- --
Acquisitions and long-term investments,
net of cash acquired (Note 1) -- (172) (41)
-------------------------------
Net cash used by investing activities (290) (447) (208)
- ------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury shares -- (1) (1)
Proceeds from issuance of long-term debt 105 32 137
Repayments of long-term debt (156) (13) (15)
Net change in short-term borrowings 25 2 (45)
Payment of dividends (97) (88) (80)
Other, net (1) (2) (2)
Net cash used by financing activities (124) (70) (6)
- ------------------------------------------------------------------------------
Effect of exchange rate changes on cash -- (1) --
-------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (56) $(117) $ 143
- ------------------------------------------------------------------------------
*Certain items have been reclassified to conform with current financial
statement presentation.
See accompanying summary of significant accounting policies (page 34) and
notes to consolidated financial statements (pages 38-52).
36
<PAGE>
ROHM AND HAAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992
--------------------------------------------------------------------
(Millions of dollars) 1993 1992*
--------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $ 35 $ 91
NOTE 8 Accounts receivable, net 604 549
NOTE 9 Inventories 394 437
NOTE 10 Prepaid expenses and other assets 167 186
------------------
Total current assets 1,200 1,263
--------------------------------------------------------------------
NOTE 2 INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED
SUBSIDIARIES AND AFFILIATES 88 98
NOTE 11 LAND, BUILDINGS AND EQUIPMENT, NET 1,869 1,768
NOTE 12 OTHER ASSETS, NET 367 388
------------------
$3,524 $3,517
--------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------
CURRENT LIABILITIES
NOTE 13 Notes payable $ 83 $ 101
NOTE 15 Accounts payable and accrued liabilities 615 568
Federal, foreign and other income taxes 3 61
------------------
Total current liabilities 701 730
--------------------------------------------------------------------
NOTE 14 LONG-TERM DEBT 690 699
NOTE 5 DEFERRED INCOME TAXES 87 75
NOTE 16 EMPLOYEE BENEFITS 340 289
NOTE 17 OTHER LIABILITIES 194 224
NOTE 1 MINORITY INTEREST 71 72
--------------------------------------------------------------------
STOCKHOLDERS' EQUITY
NOTE 18 $2.75 cumulative convertible preferred stock;
authorized -- 2,846,061 shares; issued -- 1993:
2,719,803 shares; 1992: 2,723,547 shares 136 136
NOTE 18 Common stock; par value -- $2.50; authorized --
100,000,000 shares; issued -- 78,652,380 shares 197 197
NOTE 18 Additional paid-in capital 150 149
NOTE 14 Retained earnings 1,444 1,434
------------------
1,927 1,916
NOTE 18 Less: Treasury stock (1993 -- 11,007,436 shares;
1992 -- 11,088,412 shares) 323 328
NOTE 18 Less: ESOP shares 163 169
NOTE 18 Other equity adjustments -- 9
------------------
Total stockholders' equity 1,441 1,428
------------------
$3,524 $3,517
--------------------------------------------------------------------
*Certain items have been reclassified to conform with current
financial statement presentation.
See accompanying summary of significant accounting policies
(page 34) and notes to consolidated financial statements
(pages 38-52).
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ACQUISITIONS AND DISPOSITIONS OF ASSETS
In the second quarter of 1993, the company entered into a joint venture with
Beijing Chemicals Industry Corporation to manufacture and sell acrylic
emulsions and related products in the People's Republic of China. The joint
venture superseded a cooperative marketing venture that had been in place
since 1988. Rohm and Haas contributed $6 million to the venture for a 60%
ownership interest in the new firm. The venture is not expected to have a
material effect on the company's financial results.
On May 6, 1993, the company completed the sale of its Separations Technologies
subsidiary, Supelco, Inc., to Sigma-Aldrich Corporation at an after-tax gain
of $11 million.
On December 13, 1993, the company acquired the remaining 33% ownership of
Japan Acrylic Chemical Company Ltd. (Jacryl) from Toagosei Chemical and Sanyo
Trading Co., Ltd. for $5 million. In 1992, the company had increased its
ownership from 47.5% to 67% through the purchase of 178,000 shares from
Toagosei Chemical for $4 million. Jacryl manufactures and sells acrylic
emulsions used to make paints, paper coatings, textile finishes, adhesives and
oil additives used in motor and gear oils and hydraulic fluids. Jacryl's
operating results, previously recorded using the equity method, have been
fully consolidated since June 29, 1992.
On May 14, 1992, the company purchased Unocal Corporation's polymers business
for approximately $170 million. This business includes emulsion polymers sold
to companies that make paint, paper, textiles, adhesives and carpet. The
assets acquired included six U.S. plants and a technical center in North
Carolina. The acquisition was accounted for using the purchase method and,
accordingly, operating results have been included in the company's
consolidated results from the date of acquisition.
On June 12, 1992, the company acquired the remaining 70% ownership of Shipley
Company, previously a 30%-owned affiliate. Shipley manufactures electronic
chemicals used in the manufacture of microelectronic devices, printed circuit
boards, plating-on-plastics and metal finishing. The acquisition was funded
by issuing 2,721,502 shares of cumulative convertible preferred stock and
611,340 shares of common stock from treasury with a total value of about $170
million. The preferred stock pays an annual dividend of $2.75 per share and
is convertible at any time at the holder's option into Rohm and Haas common
stock at the rate of one share of preferred stock for .7812 shares of common
stock. The acquisition was accounted for as a purchase transaction and,
accordingly, operating results of Shipley Company have been included in the
company's consolidated results from the date of acquisition. Prior to the
acquisition, the company accounted for its 30% ownership using the equity
method. A total of $15 million of the purchase price was allocated to
technology and is being amortized over the remaining useful lives, ranging
from 3 to 16 years. The excess of the purchase price over the fair value of
the net assets acquired (goodwill) was approximately $69 million and is being
amortized on a straight-line basis over 40 years.
On October 1, 1992, the company and Elf Atochem completed the formation of a
joint venture, AtoHaas, for the production and sale of acrylic and
polycarbonate sheet products and acrylic molding resins. The venture consists
of AtoHaas North America, majority-owned by Rohm and Haas, AtoHaas Europe,
majority-owned by Elf Atochem, and an equally owned company for the Pacific.
The company contributed all of its Performance Plastics assets and liabilities
to AtoHaas North America. Elf Atochem contributed all of the assets and
liabilities of its related plastics business to AtoHaas Europe. Rohm and Haas
exchanged a 49% ownership interest in AtoHaas North America with a value of
$73 million for a 49% ownership interest in AtoHaas Europe amounting to $94
million. The difference between Rohm and Haas's investment in AtoHaas Europe
and its equity in the underlying net assets of AtoHaas Europe is amortized as
income over 7 years, reflecting the weighted-average remaining life of the
European fixed assets. The company has fully consolidated the results of
AtoHaas North America and accounted for its interest in the European and
Pacific companies on an equity basis.
In 1991, Tocil, a 50%-owned Japanese affiliate, sold securities and the land
upon which it was located for $104 million. The proceeds included $34 million
in notes, which were paid to Tocil in 1993. Rohm and Haas reported an
after-tax gain of $18 million, or 28 cents per share, as a result of the sale.
Nine million dollars was allocated to Performance Chemicals and $9 million to
Agricultural Chemicals. A portion of the proceeds of the land sale was used
by Tocil to purchase non-Rohm and Haas interests for $41 million. Following
this transaction, Tocil became a wholly owned subsidiary of Rohm and Haas.
The acquisition of the remaining 50% of Tocil was recorded using the purchase
method of accounting. In February 1991, a new site was purchased and an ion
exchange resin production facility was constructed. The plant began operating
in 1993.
Asset dispositions in 1991 included the sale of securities at an after-tax
gain of $5 million, the company's 37% interest in an Indian affiliate and its
wholly owned ultrafiltration business. Neither the sale of the Indian
affiliate, nor the ultrafiltration business materially impacted earnings.
38
<PAGE>
NOTE 2: INVESTMENTS
The company's investments in its affiliates (20-50%-owned) totaled $62 million
and $83 million at December 31, 1993, and 1992, respectively. The company's
equity in the net assets of the affiliates exceeded the amount of investments
in affiliates by about $8 million and $13 million at December 31, 1993, and
1992, respectively, primarily due to investments in the AtoHaas affiliates.
During 1993, the company acquired the remaining 33% ownership of Jacryl. In
1992, the company increased its ownership of Jacryl from 47.5% to 67% and
acquired the remaining 70% of Shipley Company. These companies, previously
reported as affiliates, were fully consolidated in 1992. Also in 1992, the
company formed a joint venture, AtoHaas, with Elf Atochem (see Note 1). Rohm
and Haas holds a 49% interest in AtoHaas Europe and a 50% interest in AtoHaas
Pacific, which are being accounted for as affiliates. Consolidated retained
earnings include affiliate losses of $17 million and $3 million at December
31, 1993, and 1992, respectively.
NOTE 3: OTHER INCOME (EXPENSE), NET
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991
- ------------------------------------------------------------------------------
Interest income $ 6 $11 $12
Royalty income 9 9 10
Foreign exchange gains (losses), net (13) 1 (15)
Asset dispositions (Note 1) (1) (1) 40
Voluntary early retirement incentives,
litigation settlements and certain
waste disposal site cleanup costs (49) 2 (14)
Other, net (11) (8) 3
--------------------------
Total $(59) $14 $36
- ------------------------------------------------------------------------------
In general, the company enters into foreign exchange forward contracts to
hedge specific exposures. The carrying amounts of foreign currency forward
contracts were adjusted at each balance sheet date for changes in exchange
rates. Therefore, the carrying value is equal to the fair value of these
contracts. At December 31, 1993, the company had contracts maturing in 1994
and 1995 to sell $98 million of various foreign currencies.
The company entered into option contracts to hedge probable anticipated sales
of certain foreign subsidiaries. Gains and losses on these contracts, which
are designated and effective as hedges, are deferred and included in income in
the same period as the underlying transaction. At December 31, 1993, the
company had option contracts, expiring in January through October 1994, with
the option to sell $105 million in deutschmarks, $10 million in Italian lira,
$10 million in Spanish pesetas and $10 million in Japanese yen. The recorded
value of these foreign exchange options was $1 million and their fair value,
estimated by obtaining quotes from brokers, was $2 million at December 31,
1993.
Counterparties to foreign exchange forward and option contracts are major
financial institutions. Management believes the risk of incurring losses
related to credit risk is remote.
NOTE 4: SUPPLEMENTARY INCOME STATEMENT INFORMATION
The following amounts were charged to costs and expenses:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991
- ------------------------------------------------------------------------------
Taxes other than income taxes
Payroll $ 45 $ 47 $ 44
Sales and use 24 23 20
Other 33 32 26
---------------------------
$102 $102 $ 90
- ------------------------------------------------------------------------------
Maintenance and repairs $171 $171 $153
- ------------------------------------------------------------------------------
Other principally includes state and local taxes.
39
<PAGE>
NOTE 5: INCOME TAXES
Effective January 1, 1992, the company adopted SFAS No. 109, "Accounting for
Income Taxes." Prior years' financial statements have not been restated to
apply the provisions of SFAS 109.
The components of earnings before income taxes presented as either domestic or
foreign (i.e., generated by operations within or outside the United States)
are shown below:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991
- ------------------------------------------------------------------------------
Domestic
Parent and subsidiaries $ 43 $ 56 $ 25
Affiliates -- 1 1
Foreign
Subsidiaries 157 206 212
Affiliates (6) (2) 2
--------------------------
Earnings before income taxes $194 $261 $240
- ------------------------------------------------------------------------------
Earnings before income taxes presented above differ from the operating profit
(loss) presented in Note 6, Industry Segment Reporting and Information about
Foreign Operations. Earnings presented above are distributed geographically
according to where the income is taxed, while Note 6 earnings are presented in
accordance with SFAS No. 14 requirements in which expenses are allocated to
the region where revenues are generated.
The provision for income taxes is composed of:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991
- ------------------------------------------------------------------------------
Taxes on domestic earnings
Federal
Current $14 $11 $ 16
Deferred (6) 1 (11)
--------------------------
8 12 5
--------------------------
State and other
Current 1 3 --
--------------------------
Total taxes on domestic earnings 9 15 5
- ------------------------------------------------------------------------------
Taxes on foreign earnings
Current 68 66 58
Deferred (9) 6 14
--------------------------
Total taxes on foreign earnings 59 72 72
- ------------------------------------------------------------------------------
Total income taxes $68 $87 $ 77
- ------------------------------------------------------------------------------
Total cash used for the payment of income taxes was $124 million, $106 million
and $39 million in 1993, 1992 and 1991, respectively.
Deferred income taxes for 1993 and 1992 reflect the impact of temporary
differences between the valuation of assets and liabilities for financial
reporting and their tax bases. Temporary differences and carryforwards at
December 31, 1993, and 1992 were:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Deferred tax assets related to:
Compensation and benefit programs $165 $134
Alternative minimum tax credit carryforward 47 37
Research and foreign tax credit carryforwards 27 40
Accruals for waste disposal site remediation 36 29
Accruals for plant downsizing and writedowns 30 29
Inventories 22 22
All other 30 64
---------------
Total gross deferred tax assets 357 355
Less valuation allowance (11) (17)
---------------
Net deferred tax assets $346 $338
---------------
Deferred tax liabilities related to:
Tax over book depreciation $274 $257
Pension 52 49
All other 9 24
---------------
Total gross deferred tax liabilities $335 $330
---------------
Net deferred tax asset $ 11 $ 8
- ------------------------------------------------------------------------------
Deferred taxes, which are classified into a net current and non-current
balance by tax jurisdiction, are presented in the balance sheet as follows:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Prepaid expenses and other assets $ 94 $ 82
Other assets, net 6 3
Accounts payable and accrued liabilities (2) (2)
Non-current deferred income taxes (87) (75)
---------------
Net deferred tax asset $ 11 $ 8
- ------------------------------------------------------------------------------
40
<PAGE>
In 1993, the valuation allowance was reduced by $6 million due to expected
usage of tax credit carryforwards. Two million dollars was recorded as a
reduction to tax expense and $4 million was recorded as a reduction to
goodwill. If the tax benefits related to the remaining $11 million valuation
allowance at December 31, 1993 are realized in the future, net earnings will
be increased by $4 million and goodwill will be reduced by $7 million.
During 1991, deferred income taxes were provided on the difference in earnings
as determined for tax and financial reporting purposes. The significant
components of the deferred tax portion of the total income tax provision were
as follows:
- ----------------------------------------------------------
(Millions of dollars)
- ----------------------------------------------------------
Tax over book depreciation $ 5
Asset dispositions 9
Alternative minimum tax (9)
Other, net (2)
---
Deferred income taxes $ 3
- ----------------------------------------------------------
ID: GRAPHIC (PHOTOGRAPH)
The effective tax rate on income differs from the U.S. statutory tax rate due
to the following:
- ------------------------------------------------------------------------------
1993 1992 1991
- ------------------------------------------------------------------------------
Statutory tax rate 35.0% 34.0% 34.0%
Research and other U.S. tax credits (3.1) (1.1) (2.0)
Asset dispositions 1.0 -- 2.2
Effect of non-taxable currency items 1.1 (0.4) (1.1)
Taxes on foreign earnings and tax
adjustments of foreign subsidiaries 1.3 1.0 (0.6)
Other, net (0.2) (0.2) (0.4)
--------------------------
Effective tax rate 35.1% 33.3% 32.1%
- ------------------------------------------------------------------------------
At December 31, 1993, the company had research tax credit carryforwards of $23
million and foreign tax credit carryforwards of $4 million available to reduce
future federal income taxes through 2008 and 1998, respectively. The company
also had alternative minimum tax credit carryforwards of $47 million which are
available to reduce future federal regular income taxes over an indefinite
period. In addition, the company has net operating loss carryforwards of $6
million and $8 million which are available to offset future federal taxable
income through 2008 and future foreign taxable income through 1998,
respectively.
No provision for U.S. income taxes, after applying statutory tax credits, was
made on the earnings of foreign subsidiaries and affiliates which have been
reinvested abroad indefinitely. Unremitted earnings, after provision for
applicable foreign income taxes, were approximately $378 million at December
31, 1993. If the foreign subsidiary and affiliate earnings were remitted as
dividends, the amount of additional U.S. income taxes, after applying
statutory tax adjustments, would not be material.
41
<PAGE>
NOTE 6: INDUSTRY SEGMENT REPORTING AND
INFORMATION ABOUT FOREIGN OPERATIONS
In accordance with the provisions of SFAS No. 14, the tables below present
information for the years 1991-1993 related to the company's results in four
industry segments: Polymers, Resins and Monomers; Plastics; Performance
Chemicals, and Agricultural Chemicals. The results by industry segment are
based on the company's current business organization. The company defines the
industry segment for each product shipment (including intermediates) by the
customer's use of the product shipped. Therefore, no inter-segment sales or
eliminations are shown. In computing each segment's identifiable assets,
production facilities that are shared by more than one segment are allocated
to each segment on an annual utilization basis.
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991
- ------------------------------------------------------------------------------
Sales to customers
Polymers, Resins and Monomers $1,519 $1,425 $1,290
Plastics 579 573 546
Performance Chemicals 762 682 566
Agricultural Chemicals 409 383 361
----------------------------
Total $3,269 $3,063 $2,763
- ------------------------------------------------------------------------------
Operating profit
Polymers, Resins and Monomers $ 153 $ 200 $ 183
Plastics 16 65 16
Performance Chemicals 34 29 66
Agricultural Chemicals 64 48 62
----------------------------
Total $ 267 $ 342 $ 327
- ------------------------------------------------------------------------------
Interest in earnings (losses) of affiliates
Polymers, Resins and Monomers $ 1 $ 2 $ 3
Plastics (7) (3) --
Performance Chemicals -- 1 1
Corporate -- (1) (1)
----------------------------
Total $ (6) $ (1) $ 3
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991
- ------------------------------------------------------------------------------
Identifiable assets at year end*
Polymers, Resins and Monomers $1,400 $1,325 $1,039
Plastics 517 575 620
Performance Chemicals 970 926 543
Agricultural Chemicals 313 326 293
----------------------------
Total $3,200 $3,152 $2,495
- ------------------------------------------------------------------------------
Investment in affiliates
Polymers, Resins and Monomers $ 6 $ 4 $ 8
Plastics 56 79 9
Performance Chemicals -- -- 55
----------------------------
Total $ 62 $ 83 $ 72
- ------------------------------------------------------------------------------
Depreciation expense
Polymers, Resins and Monomers $ 101 $ 83 $ 70
Plastics 44 49 47
Performance Chemicals 52 44 37
Agricultural Chemicals 17 17 19
Corporate 12 10 10
----------------------------
Total $ 226 $ 203 $ 183
- ------------------------------------------------------------------------------
Capital additions
Polymers, Resins and Monomers $ 137 $ 108 $ 107
Plastics 38 48 54
Performance Chemicals 165 86 71
Agricultural Chemicals 23 28 17
Corporate 19 13 16
----------------------------
Total $ 382 $ 283 $ 265
- ------------------------------------------------------------------------------
*Certain items in 1992 have been reclassified to conform with current
financial statement presentation
In addition, the tables on the following page provide information pertaining
to the company's operations in different geographic areas, in accordance with
SFAS No. 14. Transfers between geographic areas are accounted for at market
prices.
42
<PAGE>
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991
- ------------------------------------------------------------------------------
Sales to customers
United States $1,901 $1,735 $1,559
Canada 101 98 104
Europe 719 765 710
Pacific 387 307 239
Latin America 161 158 151
----------------------------
Total $3,269 $3,063 $2,763
- ------------------------------------------------------------------------------
Transfers between geographic areas
United States $ 292 $ 281 $ 278
Canada 26 26 21
Europe 187 184 152
Pacific 1 1 1
Latin America 9 3 7
Adjustments and eliminations (515) (495) (459)
----------------------------
Total $ -- $ -- $ --
- ------------------------------------------------------------------------------
Total sales
United States $2,193 $2,016 $1,837
Canada 127 124 125
Europe 906 949 862
Pacific 388 308 240
Latin America 170 161 158
Adjustments and eliminations (515) (495) (459)
----------------------------
Total $3,269 $3,063 $2,763
- ------------------------------------------------------------------------------
Operating profit (loss)
United States $ 164 $ 170 $ 156
Canada 3 9 13
Europe 121 150 115
Pacific (3) 2 46
Latin America (3) 4 --
Adjustments and eliminations (15) 7 (3)
----------------------------
Total $ 267 $ 342 $ 327
- ------------------------------------------------------------------------------
Identifiable assets at year end*
United States $2,122 $2,149 $1,644
Canada 53 49 39
Europe 641 616 610
Pacific 445 344 199
Latin America 110 114 103
Adjustments and eliminations (171) (120) (100)
----------------------------
Total $3,200 $3,152 $2,495
- ------------------------------------------------------------------------------
*Certain items in 1992 have been reclassified to conform with current
financial statement presentation
United States export sales to customers were $158 million in 1993 and
1992, and $139 million in 1991.
Total operating profit and total identifiable assets for both the segment
and geographic results are reconciled below to consolidated earnings before
income taxes and consolidated total assets. General corporate income
(expense) represents interest income earned by general corporate assets,
offset by the portion of total expenses incurred at corporate headquarters
that do not relate directly to the operations of any geographic area or
industry segment. General corporate assets primarily include cash and cash
equivalents, advances to unconsolidated subsidiaries and affiliates, and
capitalized interest. Corporate capital additions include capitalized
interest cost. The reconciliation of operating profits and identifiable
assets to consolidated totals is as follows:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991
- ------------------------------------------------------------------------------
Total operating profit $ 267 $ 342 $ 327
Interest expense (41) (53) (48)
General corporate income (expense) (26) (27) (42)
Interest in net earnings (losses) of affiliates (6) (1) 3
----------------------------
Earnings before income taxes $ 194 $ 261 $ 240
- ------------------------------------------------------------------------------
Identifiable assets at year end* $3,200 $3,152 $2,495
General corporate assets 262 282 330
Investment in affiliates 62 83 72
----------------------------
Total assets at year end $3,524 $3,517 $2,897
- ------------------------------------------------------------------------------
*Certain items in 1992 have been reclassified to conform with current
financial statement presentation
The data presented above differ in certain ways from the company's results
by business group and customer location presented on page 23. The customer
location data on page 23 reflect the company's major marketing profit centers
relative to customer location, while the above data are categorized by the
geographic location from which the goods were shipped. Charges associated
with the Lipari lake and marsh remediation are included in Corporate for
management purposes, but are allocated among businesses for purposes of this
footnote. Except for these differences, industry segmentation is generally
the same for management reporting purposes and SFAS No. 14 requirements.
Other differences include the manner of directly assigning or allocating
certain parts of administrative expense, research expense, interest income and
expense, other income and expense and equity in affiliates. In addition, the
earnings data on page 23 are on an after-tax basis.
43
<PAGE>
NOTE 7: PENSION PLANS
The company maintains noncontributory pension plans which provide defined
benefits to substantially all domestic employees meeting age and length of
service requirements. Disclosures include amounts for both the U.S. and
significant foreign pension plans. Pension cost determined in accordance with
plan provisions is presented below:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991
- ------------------------------------------------------------------------------
Pension cost $ (14) $ (21) $ (20)
Pension benefit payments 41 108 45
- ------------------------------------------------------------------------------
The negative pension cost primarily reflects recognition of favorable
investment experience as stipulated by SFAS No. 87. The pension benefit
payments in 1992 included payments related to a voluntary early retirement
incentive offered to U.S. salaried employees meeting certain age and length
of service requirements.
ID: GRAPHIC (PHOTOGRAPH)
Pension cost includes the following components:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992 1991
- ------------------------------------------------------------------------------
Service cost -- benefits
earned during the year $ 30 $ 29 $ 26
Interest cost on projected
benefit obligation 55 54 51
Return on plan assets
-- actual $(194) $(76) $(241)
-- less deferred 109 (11) 159
----- ---- -----
(85) (87) (82)
Other amortization, net (2) (3) (1)
Amortization of net gain
existing at adoption of
SFAS No. 87 (12) (14) (14)
---- ---- ----
Net pension cost $(14) $(21) $(20)
- ------------------------------------------------------------------------------
In addition to the 1992 pension income noted above, the company's 1992
early retirement program resulted in a pre-tax gain of $5 million, as the
settlement gains from retirees electing lump-sum distributions exceeded the
cost of the special termination benefits. The gain was recorded as other
income for the period ended December 31, 1992. In 1993, an early retirement
incentive was offered to employees of the Philadelphia plant as part of the
downsizing. A total of 129 employees accepted the incentive in late 1993 and
will be eligible to retire in 1994.
44
<PAGE>
The funded status of these plans at year end was as follows:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Actuarial present value of plan benefits
Vested $ 593 $ 461
Nonvested -- --
----------------
Accumulated benefit obligation 593 461
Effect of projected future compensation increase 187 154
----------------
Projected benefit obligation 780 615
Plan assets at market value 1,165 1,017
----------------
Plan assets in excess of projected benefit obligation 385 402
Unrecognized net gain existing at adoption of SFAS No. 87 (97) (110)
Other unrecognized net gain (166) (169)
----------------
Prepaid pension cost $ 122 $ 123
- ------------------------------------------------------------------------------
Net assets of the pension trusts, which primarily consist of common stocks
and debt securities, were measured at market value. For U.S. plans, the
assumed long-term rate of return on trust assets was 8.5% in 1993 and 1992.
Pension benefit obligations were determined from actuarial valuations using an
assumed discount rate of 7% at December 31, 1993, and 8.5% at December 31,
1992, and an assumed long-term rate of compensation increase of 5% in 1993 and
6% in 1992. Non-U.S. plans assumed an average rate of return on trust assets
of 9.2% in 1993 and 9.1% in 1992, an average discount rate for pension benefit
obligations of 8.5% in 1993 and 9.1% in 1992, and an average 6.3% and 6.6%
long-term rate of compensation increase in 1993 and 1992, respectively. The
remaining non-U.S. subsidiaries which maintain pension plans are not material
in total. As of their latest valuation dates, the fair market value of assets
of these plans exceeded the present value of vested benefits. The Revenue
Reconciliation Act of 1990 allows the transfer of excess pension plan assets
to fund annual retiree medical expenses (Section 401(h) account). The company
transferred excess pension plan assets of $15 million and $7 million in 1993
and 1992, respectively, to the 401(h) account to fund retiree health costs.
Additionally, the company maintains a noncontributory unfunded pension plan
which provides supplemental defined benefits to certain executives meeting age
and length of service requirements. Pension cost determined in accordance
with plan provisions was $5 million, $3 million and $4 million in 1993, 1992
and 1991, respectively. Pension benefit payments for this plan were $2
million in 1993, 1992 and 1991.
The funded status of this plan at year end was as follows:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Actuarial present value of plan benefits
Vested $ 37 $ 33
Nonvested -- --
----------------
Accumulated benefit obligation 37 33
Effect of projected future compensation increase 2 2
----------------
Projected benefit obligation 39 35
Plan assets at market value -- --
----------------
Projected benefit obligation in excess of plan assets 39 35
Unrecognized net loss existing at adoption of SFAS No. 87 (2) (2)
Other unrecognized loss (16) (14)
Adjusted minimum liability 12 --
----------------
Accrued pension benefit obligation $ 33 $ 19
- ------------------------------------------------------------------------------
Pension benefit obligations were determined from actuarial valuations using an
assumed discount rate of 7% at December 31, 1993, and 8.5% at December 31,
1992, and an assumed long-term rate of compensation increase of 5% in 1993
and 6% in 1992.
45
<PAGE>
NOTE 8: ACCOUNTS RECEIVABLE, NET
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Customers $541 $493
Unconsolidated subsidiaries and affiliates 25 20
Employees 6 7
Other 42 41
--------------
614 561
Less allowance for losses 10 12
--------------
Total $604 $549
- ------------------------------------------------------------------------------
The carrying value approximates fair value because of the short maturity of
these receivables.
NOTE 9: INVENTORIES
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Finished products and work in process $297 $333
Raw materials 49 57
Supplies 48 47
--------------
Total $394 $437
- ------------------------------------------------------------------------------
Beginning inventories used in determining 1993 and 1992 cost of goods sold
were $437 million and $343 million, respectively. Inventories amounting to
$377 million and $407 million were valued using the LIFO method at December
31, 1993, and 1992, respectively. The excess of current cost over the stated
amount for inventories valued under the LIFO method approximated $98 million
and $93 million at December 31, 1993, and 1992, respectively. Liquidation of
prior years' LIFO inventory layers in 1993 and 1992 did not materially affect
cost of goods sold in either year.
NOTE 10: PREPAID EXPENSES AND OTHER ASSETS
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Prepaid expenses $ 51 $ 54
Deferred tax benefits 94 82
Notes receivable 5 36
Other current assets 17 14
--------------
Total $167 $186
- ------------------------------------------------------------------------------
NOTE 11: LAND, BUILDINGS AND EQUIPMENT, NET
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Land $ 51 $ 51
Buildings and improvements 679 588
Machinery and equipment 2,665 2,493
Capitalized interest cost 162 143
Construction 139 195
----------------
3,696 3,470
Less accumulated depreciation 1,827 1,702
----------------
Total $1,869 $1,768
- ------------------------------------------------------------------------------
The principal lives (in years) used in determining depreciation rates of
various assets are: buildings and improvements (10-50); machinery and
equipment (5-20); automobiles, trucks and tank cars (3-10); furniture and
fixtures, laboratory equipment and other assets (5-10).
Gross book values of assets depreciated by accelerated methods totaled $1,298
million and $1,401 million at December 31, 1993, and 1992, respectively.
Assets depreciated by the straight-line method totaled $2,208 million and
$1,823 million at December 31, 1993, and 1992, respectively.
In 1993, 1992 and 1991 respectively, interest costs of $19 million, $13
million and $16 million were capitalized and added to the gross book value of
land, buildings and equipment. Amortization of such capitalized costs
included in depreciation expense was $12 million in 1993 and $10 million in
1992 and 1991.
46
<PAGE>
NOTE 12: OTHER ASSETS, NET
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Contract advances $ 6 $ 10
Patents, trademarks, etc. 47 65
Goodwill 104 113
Prepaid pension costs 122 123
Deferred tax benefits 6 3
Probable insurance recoveries for
environmental remediation 72 72
Other noncurrent assets 31 32
--------------
388 418
Less accumulated amortization of intangible assets 21 30
---------------
Total $367 $388
- ------------------------------------------------------------------------------
The large decrease in "Patents, trademarks, etc." and related accumulated
amortization resulted from the sale of Supelco, Inc.
NOTE 13: NOTES PAYABLE
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Short-term borrowings $69 $ 44
Current portion of long-term debt 14 57
---------------
Total $83 $101
- ------------------------------------------------------------------------------
Information for 1993 and 1992 as to short-term borrowings is as follows:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Average year-end interest rate 4% 7%
Average interest rate for year 5% 9%
Average annual amount outstanding $105 $ 67
Maximum month-end amount outstanding $157 $139
- ------------------------------------------------------------------------------
The majority of short-term borrowings represent bank debt owed by foreign
subsidiaries. The carrying amount approximates fair value because of the
short maturity of the instruments.
ID: GRAPHIC (PHOTOGRAPH)
47
<PAGE>
NOTE 14: LONG-TERM DEBT
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
9.80% notes due 2020 $150 $150
9.875% notes due 2000 100 100
9.375% debentures due 2019 100 100
4.40% - 6.72% notes (yen denominated)
due 1996 to 2008 83 22
9.625% notes due 1998 75 75
9.50% notes due 2021 75 75
6.60% obligation due 2011 55 55
5.67% notes due 1998 30 --
4.50 % note due 1995 6 6
11.75% note (sterling denominated) due
annually to 1997 5 7
8.125% notes due 1996 -- 50
9.875% debentures due 1994 to 2000 -- 26
6.25% environmental improvement
revenue bonds due 1994 to 2002 -- 23
Other 11 10
---------------
Total $690 $699
- ------------------------------------------------------------------------------
The company has revolving credit agreements totaling $200 million which
expire in 1999. These agreements, which carry various interest rates and
fees, are available to support commercial paper borrowings. Several permit
foreign subsidiaries to borrow local currencies and Eurocurrencies. At
December 31, 1993, $8 million was outstanding under these agreements.
The various loan agreements contain certain restrictions with respect to
tangible net worth and maintenance of working capital. Due to the repayment
of certain debt in 1993, retained earnings are now free of any dividend
restrictions.
Total cash used for the payment of interest expense, net of amounts
capitalized, was $46 million, $54 million and $49 million in 1993, 1992 and
1991, respectively.
The fair value of the company's long-term debt is estimated at $815 million
based on quoted market prices for the same or similar issues or on the current
rates offered to the company or its subsidiaries for debt with the same
remaining maturities and terms.
The company enters into interest rate swap agreements to manage its exposure
to interest rate changes and to lower the overall cost of borrowing. At
December 31, 1993, the company had outstanding two interest rate swap
agreements with commercial banks, having a total notional principal amount of
$50 million and a duration of three years. These agreements effectively
change the company's interest rate exposure on $50 million of its fixed rate
debt to floating rate debt based on the six-month London Interbank Offered
Rate (LIBOR).
Long-term debt maturing in the next five years is:
- -------------------------------------------------------
(Millions of dollars)
- -------------------------------------------------------
1994 $14 1997 $ 10
1995 16 1998 118
1996 18
- -------------------------------------------------------
NOTE 15: ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Trade payables $234 $244
Salaries and wages 61 74
Social Security and other taxes 33 31
Interest 15 19
Employee benefits 23 19
Reserves for environmental remediation 76 32
Other 173 149
--------------
Total $615 $568
- ------------------------------------------------------------------------------
48
<PAGE>
NOTE 16: EMPLOYEE BENEFITS
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Postretirement health care and life
insurance benefits $280 $272
Postemployment benefits 29 --
Executive pension plan 31 17
--------------
Total $340 $289
- ------------------------------------------------------------------------------
The company provides health care and life insurance benefits for substantially
all of its domestic retired employees, for which the company is self-insured.
In general, employees who have at least 15 years of service at retirement are
eligible for continuing health and life insurance coverage. Retirees
contribute towards the cost of such coverage. In 1992, the company adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," changing to the accrual method of accounting for these benefits
effective January 1, 1992. The new accounting standard also was adopted for
foreign subsidiaries providing postretirement benefits. These plans are not
significant. Prior to 1992, the company charged the annual cash cost of these
benefits for both active and retired employees against current period income.
Prior-year financial statements have not been restated.
The status of the plans at year end was as follows:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Accumulated postretirement benefit obligation
Retirees $185 $133
Fully eligible active plan participants 96 108
Other active plan participants 76 48
--------------
Total accumulated postretirement benefit obligation $357 $289
Unrecognized prior service cost (1) --
Unrecognized losses (58) --
--------------
Total accrued postretirement benefit
obligation $298 $289
- ------------------------------------------------------------------------------
The accrued postretirement benefit obligation is recorded in "accrued
liabilities" (current) and "employee benefits" (non-current).
Net periodic postretirement benefit cost includes the following components:
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Service cost of benefits earned $ 5 $ 4
Interest cost on accumulated postretirement
benefit obligation 24 23
-------------
Net periodic postretirement benefit cost $29 $27
- ------------------------------------------------------------------------------
In order to measure the expected postretirement benefit obligation, a 10%
annual rate of increase in the health care cost trend rate was assumed. The
company's substantive plan contains provisions that limit its cost for health
care coverage to an increase of 10% or less each year subject ultimately to a
maximum cost equal to 200% of the 1992 cost level. The maximum cost is
expected to be reached in the year 2000. Increases in retiree health care
costs in excess of these limits will be passed on to retirees through their
required contributions.
A one percentage point increase in this annual health care cost trend rate
would increase the accumulated postretirement benefit obligation by
approximately $3 million, with an immaterial effect on postretirement benefit
cost. The weighted average discount rate used to estimate the accumulated
postretirement benefit obligation was 7% at December 31, 1993, and 8.5% at
December 31, 1992.
Effective January 1, 1993, the company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." This accounting standard requires
the recognition of the liability for future costs of compensation and benefits
which will be paid to employees who are on disability leave. The company
recorded a liability of $30 million as the cumulative liability at the
adoption date.
NOTE 17: OTHER LIABILITIES
- ------------------------------------------------------------------------------
(Millions of dollars) 1993 1992
- ------------------------------------------------------------------------------
Reserves for environmental remediation $115 $123
Reserves for plant shutdowns 43 57
Foreign pension liabilities 13 8
Other 23 36
---------------
Total $194 $224
- ------------------------------------------------------------------------------
49
<PAGE>
NOTE 18: STOCKHOLDERS' EQUITY
The changes in the components of stockholders' equity are summarized as
follows:
- ------------------------------------------------------------------------------
Addi- Other
Pre- tional Treasury Equity
ferred Common Paid-in Stock, Adjust-
(Millions of dollars) Stock Stock Capital at Cost ments
- ------------------------------------------------------------------------------
Balance at January 1, 1991 $ -- $190 $ 37 $357 $ --
Adjustment to cost of
previously acquired shares -- -- -- (3) --
Purchase of treasury stock -- -- -- 1 --
Foreign currency translation -- -- -- -- 4
Shares issued to employees
under bonus plan -- -- -- (6) --
-----------------------------------------------
Balance at December 31, 1991 -- 190 37 349 4
Adjustment to cost of
previously acquired shares -- -- -- 3 --
Shares issued for acquisition
of affiliate 136 -- 16 (18) --
Common stock that was to be
purchased in 1995 -- 7 94 -- --
Purchase of treasury stock -- -- -- 1 --
Foreign currency translation -- -- -- -- 5
Shares issued to employees
under bonus plan -- -- 2 (7) --
-----------------------------------------------
Balance at December 31, 1992 136 197 149 328 9
Adjustment to cost of
previously acquired shares -- -- -- (3) --
Foreign currency translation -- -- -- -- (3)
Shares issued to employees
under bonus plan -- -- 1 (2) --
Pension adjustment -- -- -- -- (6)
-----------------------------------------------
Balance at December 31, 1993 $136 $197 $150 $323 $ --
- ------------------------------------------------------------------------------
The company has the authorization to issue up to 25 million shares of
preferred stock. On June 12, 1992, the company issued 2,721,502 shares of
$2.75 cumulative convertible preferred stock in connection with the
acquisition of Shipley Company (see Note 1). The company may issue up to an
additional 124,535 of these preferred shares for the exercise of outstanding
Shipley stock options. This preferred stock pays an annual cumulative
dividend of $2.75 per share. It has antidilution protection against stock
splits, stock dividends and certain issuances of additional securities and
extraordinary dividends. This preferred stock is convertible at any time at
the holder's option into Rohm and Haas common stock at the rate of .7812
shares of common stock for each share of preferred stock. Holders of the
preferred stock are entitled to one vote per share. The company has the
option to redeem the preferred stock on or after June 12, 1999, at a fixed
redemption price of $50.62, payable in Rohm and Haas common stock. The
redemption price reduces each year to a final price of $50 on or after
June 12, 2002.
In April 1992, the William Penn Foundation released the company from its
obligation to buy 2.6 million shares of the company's common stock from the
foundation in 1995. The 2.6 million shares of common stock, previously
classified outside of stockholders' equity, were reclassified to stockholders'
equity in the second quarter of 1992.
50
<PAGE>
Dividends paid on ESOP shares, used as a source of funds for meeting the ESOP
financing obligation, were $8 million in 1993 and in 1992. These dividends
were recorded net of the related U.S. tax benefit. The number of ESOP shares
not allocated to plan members at December 31, 1993 and 1992 were 5.6 million
and 5.8 million, respectively.
The company recorded compensation expense of $6 million in 1993 and 1992. The
company expects to record annual compensation expense of approximately this
amount over the next 27 years as the remaining $163 million of ESOP shares are
allocated to plan members. The allocation of shares from the ESOP is expected
to fund a substantial portion of the company's total obligation to match
employees savings plan contributions as the market price of Rohm and Haas
stock appreciates.
Purchases of treasury stock in 1993 totaled 6,975 shares, compared with 17,618
and 15,816 shares in 1992 and 1991, respectively. At year-end 1993 and 1992
there were 11,007,436 and 11,088,412, respectively, reacquired shares in
treasury.
NOTE 19: STOCK OPTION PLAN
The company has granted stock options to key employees under its Stock Option
Plans of 1975, 1984 and 1992. Options granted pursuant to the plans are
priced at the fair market value of the common stock on the date of the grant.
The status of the company's stock options is presented below:
- ------------------------------------------------------------------------------
Shares Per-share
(Thousands) Outstanding Price
- ------------------------------------------------------------------------------
Balance at December 31, 1991 785 $12.75-$46.94
Granted 116 43.44- 54.63
Exercised 188 12.75- 46.94
Balance at December 31, 1992 713 20.13- 54.63
Granted 104 52.19- 54.19
Exercised 54 20.13- 43.44
Balance at December 31, 1993 763 20.79- 54.63
- ------------------------------------------------------------------------------
Exercisable stock options were 659,000, 597,000 and 645,000 at year-end 1993,
1992 and 1991, respectively. At December 31, 1993, 2,394,000 shares remain
available for grant under the Stock Option Plan of 1992.
On May 4, 1992, the stockholders approved the Stock Option Plan of 1992 which
replaced the Stock Option Plan of 1984. The 1992 plan covers an aggregate of
2,500,000 shares of Rohm and Haas common stock.
NOTE 20: LEASE AND RENTAL COMMITMENTS
The company leases certain properties and equipment used in its operations,
primarily under operating leases. Under most operating lease agreements, the
company pays a minimum rental, plus contingent rental, based on equipment
usage and escalation factors. The net rental expense for such property was
$52 million for 1993, $49 million in 1992 and $44 million in 1991.
The company is committed under the terms of non-cancellable operating leases
for future rentals as follows:
- ------------------------------------------------------
(Millions of dollars)
- ------------------------------------------------------
1994 $26 1998 $ 5
1995 24 1999-2003 9
1996 13 After 2003 12
1997 8
- ------------------------------------------------------
Leases that meet the criteria for capitalization set forth in SFAS No. 13 have
been classified and accounted for as capital leases. Land, buildings and
equipment, net includes $3 million and $4 million at the end of 1993 and 1992,
respectively, for assets recorded under capitalized leases. The related
obligations for these leases, which totaled $2 million at the end of 1993 and
$3 million at the end of 1992, are included in notes payable and long-term
debt.
In December 1991, the company sold and leased back certain Houston plant
assets in a financing lease. The related $55 million debt has a 20-year
maturity at an effective interest rate of 6.6%. See Note 14 for the long-term
debt maturing in the next five years.
51
<PAGE>
NOTE 21: CONTINGENT LIABILITIES, GUARANTEES AND
COMMITMENTS
(a) Environmental
The company is a named party in various government enforcement and private
actions associated with former waste disposal sites, most of which are on the
U.S. Environmental Protection Agency's (EPA) Superfund priority list.
Accruals for the expected future costs of remediating these sites are in
accordance with the provisions of SFAS No. 5, "Accounting For Contingencies."
The company considers a broad range of information when determining the amount
of the accrual, including available facts about the waste site, existing
technology, prior experience, the ability of other principally responsible
parties to pay costs apportioned to them and current laws and regulations.
These accruals are updated quarterly as additional technical and legal
information becomes available. Major sites for which reserves have been
provided are: the non-company-owned Lipari and Woodland sites in New Jersey
and Whitmoyer in Pennsylvania, and company-owned sites in Bristol and
Philadelphia, Pennsylvania. In addition, the company has provided for future
costs at approximately 80 other sites where it has been identified as
potentially responsible for cleanup costs and, in some cases, damages for
alleged personal injury or property damage.
On November 15, 1993, Rohm and Haas and the EPA signed a consent decree
whereby the company will assume responsibility for managing the cleanup of
lake and marsh property near the Lipari landfill and will pay the cost of
remediation. The company increased its reserves for remediation in the third
quarter by $50 million to cover the estimated costs. Earlier this year, Rohm
and Haas agreed to pay about $43 million for the remediation of the Lipari
landfill itself; that cost had been accrued in prior years. The agreement
with the EPA ends a decade of negotiations to resolve the cleanup of a site
that had been an approved landfill when the company sent its wastes there in
the 1960s.
The amounts charged to earnings before tax for environmental remediation,
including the Lipari remediation, were $57 million, $23 million and $49
million in 1993, 1992 and 1991, respectively. The reserves for remediation
were $191 million and $155 million at December 31, 1993, and 1992,
respectively and are recorded as "other liabilities" (current and long-term).
At December 31, 1993, probable insurance recoveries of $72 million were
classified and recorded as "other assets." Probable insurance recoveries of
$72 million at December 31, 1992 have been reclassified to conform with
current year financial statement presentation. Insurance carriers have denied
coverage in most cases and the company has initiated legal action in New
Jersey and Pennsylvania. In estimating probable insurance recovery amounts,
the company has considered various factors, including the terms of the
insurance policies which are applicable to each site, policy limits, the law
which is likely to be applied in the jurisdiction, and the facts as currently
understood by the company. Based upon all of these factors and the opinions
of counsel, the company has concluded that the recorded amount of insurance
coverage is probable of recovery.
In addition to accrued environmental liabilities, the company has loss
contingencies related to environmental matters estimated to be approximately
$180 million at December 31, 1993. Losses relating to these matters, although
not probable of occurrence, are reasonably possible. These matters involve
significant unresolved issues, including the number of parties found liable at
each site and their ability to pay, the outcome of negotiations with
regulatory authorities, the actual method of remediation, technological
developments and changes in environmental laws. The company believes that
these matters, when ultimately resolved, which may be over the next decade,
will not have a material adverse effect on the consolidated financial position
of the company, but could have a material adverse effect on consolidated
results of operations in any given year.
(b) Other
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 ultimate 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.
In the ordinary course of business, the company has entered into certain
purchase commitments, has guaranteed certain loans (with recourse to the
issuer), and has made certain financial guarantees, primarily for the benefit
of its non-U.S. and unconsolidated subsidiaries and affiliates. It is
believed that these commitments and any liabilities which may result from
these guarantees will not have a material adverse effect upon the consolidated
financial position of the company.
Additions to land, buildings and equipment are scheduled at approximately $400
million for 1994. At December 31, 1993, construction commitments totaled
approximately $20 million.
52
<PAGE>
REPORT ON FINANCIAL STATEMENTS
The financial statements of Rohm and Haas Company and subsidiaries were
prepared by the company in accordance with generally accepted accounting
principles. The financial statements necessarily include some amounts that
are based on the best estimates and judgments of the company. The financial
information in this annual report is consistent with that in the financial
statements.
The company maintains accounting systems and internal accounting controls
designed to provide reasonable assurance that assets are safeguarded,
transactions are executed in accordance with the company's authorization and
transactions are properly recorded. The accounting systems and internal
accounting controls are supported by written policies and procedures, by the
selection and training of qualified personnel and by an internal audit
program. In addition, the company's code of business conduct requires
employees to discharge their responsibilities in conformity with the law and
with a high standard of business conduct.
The company's financial statements have been audited by KPMG Peat Marwick,
independent certified public accountants, as stated in their report below.
Their audit was conducted in accordance with generally accepted auditing
standards and included a review of internal accounting controls to the extent
considered necessary to determine the audit procedures required to support
their opinion.
The audit committee of the board of directors, composed entirely of
non-employee directors, recommends to the board of directors the selection of
the company's independent auditors, approves their fees and considers the
scope of their audits, audit results, the adequacy of the company's internal
accounting control systems and compliance with the company's code of business
conduct.
[J. LAWRENCE WILSON] [FRED W. SHAFFER]
J. LAWRENCE WILSON FRED W. SHAFFER
Chairman of the Board Vice President and
and Chief Executive Officer Chief Financial Officer
- ------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders KPMG PEAT MARWICK
1600 Market Street
Rohm and Haas Company: Philadelphia, Pennsylvania 19103
We have audited the accompanying consolidated balance sheets of Rohm and
Haas Company and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of earnings and retained earnings and cash
flows for each of the years in the three-year period ended December 31, 1993.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Rohm and
Haas Company and subsidiaries at December 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in Notes 5 and 16 to the consolidated financial statements,
the company adopted the provisions of Financial Accounting Standards Board
Statement No. 112, "Accounting for Postemployment Benefits" in 1993, and the
provisions of Financial Accounting Standards Board Statements No. 106,
"Accounting for Postretirement Benefits Other Than Pensions" and No. 109,
"Accounting for Income Taxes," in 1992.
[KPMG Peat Marwick]
February 21, 1994
53
<PAGE>
<TABLE>
Rohm and Haas Company and Subsidiaries
ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
(Millions of dollars, except
per share amounts) 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $ 3,269 $ 3,063 $ 2,763 $ 2,824 $ 2,661 $ 2,535 $ 2,203 $ 2,067 $ 2,051 $ 2,042 $ 1,876
Cost of goods sold 2,174 2,014 1,861 1,894 1,820 1,646 1,430 1,346 1,400 1,365 1,276
-----------------------------------------------------------------------------------------------------
Gross profit 1,095 1,049 902 930 841 889 773 721 651 677 600
Selling and administrative
expense 590 549 470 454 401 381 335 320 300 285 255
Research and development
expense 205 199 183 178 175 156 142 133 124 109 100
Interest expense 41 53 48 37 39 32 31 36 51 44 37
Other income (expense), net (65) 13 39 52 25 26 38 (13) 51 47 38
-----------------------------------------------------------------------------------------------------
Earnings before income taxes 194 261 240 313 251 346 303 219 227 286 246
Income taxes 68 87 77 106 75 116 108 81 86 114 108
-----------------------------------------------------------------------------------------------------
EARNINGS BEFORE CUMULATIVE
EFFECT OF ACCOUNTING
CHANGES $ 126 $ 174 $ 163 $ 207 $ 176 $ 230 $ 195 $ 138 $ 141 $ 172 $ 138
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES (19) (179) -- -- -- -- -- -- -- -- --
NET EARNINGS (LOSS) $ 107 $ (5) $ 163 $ 207 $ 176 $ 230 $ 195 $ 138 $ 141 $ 172 $ 138
- ---------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS)
APPLICABLE TO COMMON
SHAREHOLDERS $ 99 $ (11) $ 157 $ 207 $ 176 $ 230 $ 195 $ 138 $ 141 $ 172 $ 138
- ---------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS PER COMMON
SHARE BEFORE CUMULATIVE
EFFECT OF ACCOUNTING
CHANGES $ 1.74 $ 2.53 $ 2.45 $ 3.10 $ 2.65 $ 3.46 $ 2.85 $ 2.01 $ 2.01 $ 2.24 $ 1.78
- ---------------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER
COMMON SHARE $ 1.36 $ 1.28 $ 1.24 $ 1.22 $ 1.16 $ 1.02 $ .86 $ .78 $ .70 $ .60 $ .50
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION--YEAR END
- ---------------------------------------------------------------------------------------------------------------------------------
Working capital+ $ 499 $ 533 $ 606 $ 424 $ 434 $ 485 $ 486 $ 507 $ 480 $ 427 $ 533
Gross fixed assets 3,696 3,470 3,015 2,770 2,396 2,062 1,754 1,627 1,503 1,446 1,344
Total assets+ 3,524 3,517 2,897 2,702 2,455 2,242 1,954 1,842 1,734 1,633 1,511
Long-term debt 690 699 718 598 359 288 258 278 245 172 228
Stockholders' equity 1,441 1,428 1,235 1,137 1,311 1,207 1,053 1,002 936 965 904
FINANCIAL RATIOS
- ---------------------------------------------------------------------------------------------------------------------------------
As a percent of sales
Gross profit 33.5% 34.2% 32.6% 32.9% 31.6% 35.1% 35.1% 34.9% 31.7% 33.2% 32.0%
Selling, administrative
and research expense 24.3 24.4 23.6 22.4 21.6 21.2 21.7 21.9 20.7 19.3 18.9
Earnings before cumulative
effect of accounting
changes 3.9 5.7 5.9 7.3 6.6 9.1 8.9 6.7 6.9 8.4 7.3
Debt-to-equity ratio at
year end* 48.2% 50.1% 50.0% 48.0% 40.5% 37.6% 34.7% 38.7% 44.3% 31.8% 30.6%
Return on common
stockholders' equity*# 8.1% 11.4% 11.2% 15.2% 14.0% 20.4% 19.0% 14.3% 14.9% 18.4% 16.1%
Ten-year compound growth rate
Sales 5.7% 5.3% 3.9% 5.1% 5.3% 7.3% 7.0% 7.4% 8.7% 8.9% 11.2%
Earnings per common share
before cumulative effect
of accounting changes (0.9) 8.6 7.4 9.9 7.1 17.0 19.0 13.4 17.5 8.7 8.8
Cash dividends per share 10.5 10.5 11.2 13.0 14.9 16.1 15.1 14.0 12.6 12.0 11.6
GENERAL
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR
Volume of shipments,
millions of units 4,214 3,750 3,267 3,336 3,259 3,143 2,808 2,619 2,735 2,695 2,594
Additions to land,
buildings and
equipment $ 382 $ 283 $ 265 $ 412 $ 385 $ 338 $ 222 $ 179 $ 159 $ 134 $ 72
Depreciation 226 203 183 159 150 128 112 103 101 93 93
Cash dividends 97 88 80 79 77 67 59 54 49 46 39
Wages and salaries $ 616 $ 589 $ 540 $ 520 $ 481 $ 457 $ 420 $ 390 $ 367 $ 350 $ 316
Common stock price
High $ 62 $59-5/8 $48-1/2 $ 37 $37-1/2 $37-1/2 $53-1/4 $38-3/4 $26-1/2 $ 23 $ 27
Low 47-1/4 42-3/4 32-3/4 24-1/4 31 28 24 23-7/8 18-1/2 16 12-1/2
Year-end close 59-1/2 53-1/2 43-1/2 34-7/8 34-3/4 34-3/8 31-5/8 34-7/8 25-1/2 21-1/4 20-1/4
Average number of
shares outstanding
in thousands 67,619 66,396 64,103 66,218 66,593 66,561 68,578 68,963 70,416 76,806 77,472
AT YEAR END
Number of registered
common stockholders 5,120 5,653 5,796 6,088 5,816 5,695 5,864 5,540 5,492 5,681 5,444
Number of employees 12,985 13,619 12,872 12,920 13,040 12,444 12,021 11,972 11,840 11,911 11,379
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Excluding ESOP adjustment and including common stock that was to be
purchased in 1995
#Earnings excluding cumulative effect of accounting changes
+1992 restated to conform with current year classification
See accompanying notes on page 56.
See 1993, 1992 and 1991 results in Management Discussion and Analysis on
pages 22 to 31.
54 55
<PAGE>
NOTES
A. Earnings in 1993 included charges of 47 cents per common share for
remediation of property near the Lipari landfill, 24 cents per common share
for cancelling construction of a plastics manufacturing facility in England
and 27 cents per common share for the writedown of the imidized plastics
production line in Kentucky. Results also include a gain of 16 cents per
common share for the sale of Supelco, Inc.
B. Effective January 1, 1993 the company adopted a new accounting standard for
disability benefits. The cumulative effect of the change as of the adoption
date was a charge of 28 cents per common share. The impact on the
current-year operations was an after-tax charge of 1 cent per common share.
C. Results in 1992 included a 56 cents-per-common-share charge for the
estimated costs of downsizing a manufacturing site in Philadelphia.
D. Effective January 1, 1992, the company adopted new accounting standards for
postretirement benefits and income taxes. The cumulative effect of these
accounting changes as of the adoption date was a charge of $2.69 per common
share. The impact on current-year operations was an after-tax charge of 11
cents per common share.
E. Earnings in 1991 included a gain of 36 cents per share on the sales of land
and securities and a 50 cents-per-share charge for additional accruals for
waste disposal site cleanup costs.
F. Unusual transactions in 1990 boosted net income by 6 cents per share and
included net favorable litigation settlements and gains from the sale and
writeoff of assets, offset by increased accruals for waste disposal site
cleanup costs and charges for a voluntary early retirement incentive.
G. Earnings in 1989 included unusual items which reduced earnings by $2
million, or 3 cents per share, and included the discontinuance of a business,
the planned shutdown of a production facility and a gain on the sale of a 25%
interest in a plastics additives manufacturing operation.
H. In 1989, the company changed its method of depreciation for newly acquired
buildings and equipment to the straight-line method. This change, which had
no cumulative effect on prior years' earnings, resulted in an increase in net
earnings of $9 million, or 14 cents per share in 1989.
56
<PAGE>
DIRECTORS:
ID: GRAPHIC (PHOTOGRAPH)
GEORGE B. BEITZEL
Retired Senior Vice President
and Director, International
Business Machines Corporation
Audit
Finance (Chairman)
Nominating
Strategic Planning
ID: GRAPHIC (PHOTOGRAPH)
DANIEL B. BURKE
Director and Retired Chief
Executive Officer and President,
Capital Cities/ABC, Inc.
Corporate Responsibility
Executive Compensation
(Chairman)
Nominating
Strategic Planning
ID: GRAPHIC (PHOTOGRAPH)
EARL G. GRAVES
Chairman and Chief Executive
Officer, Earl G. Graves, Ltd.;
Chairman and Chief Executive
Officer of Pepsi-Cola of
Washington, D.C.;
Publisher and Editor of Black
Enterprise Magazine
Corporate Responsibility
Executive Compensation
Nominating
Strategic Planning
(Chairman)
ID: GRAPHIC (PHOTOGRAPH)
JAMES A. HENDERSON
President, Chief Operating
Officer and Director,
Cummins Engine Company, Inc.
Audit
Finance
Nominating
Strategic Planning
ID: GRAPHIC (PHOTOGRAPH)
JOHN H. MCARTHUR
Dean, Harvard Business School
Audit (Chairman)
Finance
Nominating
Strategic Planning
ID: GRAPHIC (PHOTOGRAPH)
PAUL F. MILLER, JR.
Partner in Miller Associates,
and Limited Partner in Miller,
Anderson & Sherrerd,
investment managers
Audit
Executive
Finance
Nominating (Chairman)
Strategic Planning
ID: GRAPHIC (PHOTOGRAPH)
SANDRA O. MOOSE
Senior Vice President and
Director, The Boston Consulting
Group, Inc.
Corporate Responsibility (Chairman)
Executive
Executive Compensation
Nominating
Strategic Planning
ID: GRAPHIC (PHOTOGRAPH)
JOHN P. MULRONEY
President and Chief Operating
Officer, Rohm and Haas Company
Corporate Responsibility
Executive
Strategic Planning
ID: GRAPHIC (PHOTOGRAPH)
ROBERT E. NAYLOR, JR.
Group Vice President and
Regional Director for North
America, Rohm and Haas Company
Finance
Strategic Planning
ID: GRAPHIC (PHOTOGRAPH)
GILBERT S. OMENN
Dean, School of Public Health
and Community Medicine,
University of Washington, Seattle
Audit
Finance
Nominating
Strategic Planning
ID: GRAPHIC (PHOTOGRAPH)
RONALDO H. SCHMITZ
Member of the Board of
Managing Directors of
Deutsche Bank AG
Audit
Finance
Nominating
Strategic Planning
ID: GRAPHIC (PHOTOGRAPH)
ALAN SCHRIESHEIM
Chief Executive Officer and
Director, Argonne National
Laboratory
Corporate Responsibility
Executive Compensation
Nominating
Strategic Planning
57
<PAGE>
AND OFFICERS:
ID: GRAPHIC (PHOTOGRAPH)
MARNA C. WHITTINGTON
Partner, Miller, Anderson &
Sherrerd
Audit
Executive
Finance
Nominating
Strategic Planning
ID: GRAPHIC (PHOTOGRAPH)
J. LAWRENCE WILSON
Chairman of the Board and
Chief Executive Officer,
Rohm and Haas Company
Executive (Chairman)
Strategic Planning
ID: GRAPHIC (PHOTOGRAPH)
John T. Subak served as Group
Vice President and General
Counsel of Rohm and Haas until
his retirement at the end of the
year. He was a director from
1976 to 1993.
MANAGEMENT
COMMITTEE
J. LAWRENCE WILSON
Chairman of the Board
and Chief Executive Officer
JOHN P. MULRONEY
President and Chief
Operating Officer
MARK X. FECK
Assistant to the Chairman
J. MICHAEL FITZPATRICK
Vice President
DONALD C. GARAVENTI
Vice President
RAJIV L. GUPTA
Vice President
ENRIQUE F. MARTINEZ
Vice President
ROBERT E. NAYLOR, JR.
Group Vice President
RICHARD G. PETERSON
Vice President
FRANK R. ROBERTSON
Vice President
FRED W. SHAFFER
Vice President and
Chief Financial Officer
JOHN F. TALUCCI
Vice President
CHARLES M. TATUM
Vice President
BASIL A. VASSILIOU
Vice President
ROBERT P. VOGEL
Vice President and
General Counsel
OTHER OFFICERS
PAUL J. BADUINI
Vice President
ALBERT H. CAESAR
Vice President
NANCE K. DICCIANI
Vice President
ROBERT M. DOWNING
Vice President
DAVID T. ESPENSHADE
Vice President
HOWARD C. LEVY
Vice President
PHILIP G. LEWIS
Vice President
WILLIAM H. STAAS
Vice President
GAIL P. GRANOFF
Secretary
ANGUS F. SMITH
Treasurer
DAVID A. STITELY
Chief Information Officer
WILLIAM C. ANDREWS
Assistant Controller
STANLEY J. HARMER
Assistant Secretary
WILLIAM E. LAMBERT III
Assistant Secretary
THEODORE J. SUESS III
Assistant Treasurer
58
<PAGE>
COMPANY ...
CORPORATE
HEADQUARTERS
ROHM AND HAAS COMPANY
100 Independence Mall West
Philadelphia, Pennsylvania
19106-2399
(215) 592-3000
(Delaware Corporation)
UNITED STATES
SUBSIDIARIES
ATOHAAS MEXICO INC.
Wilmington, Delaware
(51% owned)
ATOHAAS
NORTH AMERICA INC.
Philadelphia, Pennsylvania
(51% owned)
PLASKON ELECTRONIC
MATERIALS, INC.
Philadelphia, Pennsylvania
POLYTRIBO, INC.
Bristol, Pennsylvania
(60% owned)
ROHM AND HAAS
BAYPORT INC.
Bayport, Texas
ROHM AND HAAS
CALIFORNIA INCORPORATED
Hayward, California
ROHM AND HAAS
CAPITAL CORPORATION
Wilmington, Delaware
ROHM AND HAAS
CREDIT CORPORATION
Wilmington, Delaware
ROHM AND HAAS
DELAWARE VALLEY INC.
Bristol, Pennsylvania
ROHM AND HAAS
EQUITY CORPORATION
Wilmington, Delaware
ROHM AND HAAS
FINANCE COMPANY
Wilmington, Delaware
ROHM AND HAAS FOREIGN
SALES CORPORATION
St. Thomas, U.S. Virgin Islands
ROHM AND HAAS ILLINOIS INC.
Illiopolis, Illinois
ROHM AND HAAS
KENTUCKY INCORPORATED
Louisville, Kentucky
ROHM AND HAAS
LATIN AMERICA, INC.
Wilmington, Delaware
ROHM AND HAAS
PERFORMANCE PLASTICS INC.
Wilmington, Delaware
ROHM AND HAAS
SOUTHERN CALIFORNIA INC.
Carson, California
ROHM AND HAAS
TENNESSEE INCORPORATED
Knoxville, Tennessee
ROHM AND HAAS
TEXAS INCORPORATED
Houston, Texas
XAMAK INC.
Wilmington, Delaware
(51% owned)
SUBSIDIARIES OUTSIDE
THE UNITED STATES
ATOHAAS CANADA INC.
West Hill, Canada
(51% owned)
BEIJING EASTERN ROHM AND
HAAS COMPANY, LIMITED
Beijing, China
(60% owned)
JAPAN ACRYLIC
CHEMICAL COMPANY. LTD.
Tokyo, Japan
MAQUILADORA GENERAL DE
MATAMOROS, S.A. DE C.V.
Matamoros, Mexico
(51% owned)
PLASKON ELECTRONIC
MATERIALS, LTD.
Hamilton, Bermuda
ROHM AND HAAS
AUSTRALIA PTY. LTD.
Melbourne, Australia
ROHM AND HAAS
(BERMUDA), LTD.
Hamilton, Bermuda
ROHM AND HAAS BRASIL LTDA.
Sao Paulo, Brazil
ROHM AND HAAS CANADA INC.
West Hill, Canada
ROHM AND HAAS
COLOMBIA S.A.
Bogota, Colombia
ROHM AND HAAS
DEUTSCHLAND GMBH
Frankfurt, Germany
ROHM AND HAAS ESPANA S.A.
Barcelona, Spain
ROHM AND HAAS
FAR EAST LTD.
Central, Hong Kong
ROHM AND HAAS
FRANCE S.A.
Paris, France
ROHM AND HAAS
HOLDINGS LTD.
Hamilton, Bermuda
ROHM AND HAAS
ITALIA S.R.L.
Milan, Italy
ROHM AND HAAS JAPAN K.K.
Tokyo, Japan
ROHM AND HAAS
MEXICO S.A. DE C.V.
Mexico City, Mexico
ROHM AND HAAS
NEW ZEALAND LIMITED
Auckland, New Zealand
ROHM AND HAAS
NORDISKA AB
Stockholm, Sweden
ROHM AND HAAS
PHILIPPINES, INC.
Manila, Philippines
ROHM AND HAAS SCOTLAND
Grangemouth, Scotland
(75% owned)
ROHM AND HAAS
SINGAPORE (PTE.) LTD.
Singapore, Singapore
ROHM AND HAAS
TAIWAN INC.
Taipei, Taiwan
ROHM AND HAAS (UK)
LIMITED
Croydon, England
SHIPLEY EUROPE, LIMITED
Coventry, England
SHIPLEY FAR EAST LIMITED
Tokyo, Japan
TOKYO ORGANIC CHEMICAL
INDUSTRIES, LTD.
Tokyo, Japan
YUGOCRYL
Ljubljana, Slovenia
(51% owned)
59
<PAGE>
... LOCATIONS
AFFILIATES
ATOHAAS B.V.
Haarlem, The Netherlands
(50% owned)
ATOHAAS EUROPE S.C.A.
Paris, France
(49% owned)
ATOHAAS HOLDING C.V.
Haarlem, The Netherlands
(50% owned)
ATOHAAS PACIFIC B.V.
Haarlem, The Netherlands
(50% owned)
ATOHAAS TECHNOLOGIES B.V.
Haarlem, The Netherlands
(50% owned)
KUREHA CHEMICALS
SINGAPORE LTD.
Singapore, Singapore
(25% owned)
NORSOHAAS, S.A.
Villers-Saint-Paul, France
(50% owned)
TOSOHAAS
Montgomeryville, Pennsylvania
(50% owned)
MANUFACTURING
LOCATIONS
AUSTRALIA: Geelong
BRAZIL: Jacarei
CANADA: Morrisburg;
West Hill
CHINA: Beijing
COLOMBIA: Barranquilla
ENGLAND: Coventry; Jarrow
FRANCE: Bernouville; Chauny;
Lauterbourg; Saint Avold; Villers-Saint-Paul (2)
GERMANY: Lunen
ITALY: Mozzanica; Rho
JAPAN: Nagoya;
Sasagami; Soma
MEXICO: Apizaco; Matamoros
NEW ZEALAND: Auckland
PHILIPPINES: Las Pinas
SCOTLAND: Grangemouth
SINGAPORE: Singapore
SLOVENIA: Ljubljana
SPAIN: Tudela
SWEDEN: Landskrona
TAIWAN: Chiayi
THE NETHERLANDS:
Leeuwarden
UNITED STATES:
California -- Carson; Hayward;
LaMirada
Connecticut -- Kensington
Illinois -- Chicago Heights;
Illiopolis; Kankakee
Kentucky -- Louisville
Massachusetts -- Marlboro
North Carolina -- Charlotte (2)
Pennsylvania -- Bristol;
Philadelphia
Tennessee -- Knoxville
Texas -- Bayport; Houston
RESEARCH LABORATORIES
CORPORATE RESEARCH
HEADQUARTERS
Spring House, Pennsylvania
Bristol, Pennsylvania
OTHER RESEARCH
FACILITIES
Campinas, Brazil
Charlotte, North Carolina
Chauny, France
Geelong, Australia
Houston, Texas
Marlboro, Massachusetts
Newtown, Pennsylvania
Philadelphia, Pennsylvania
Sasagami, Japan
Singapore, Singapore
Tokyo, Japan
Valbonne, France
Waller County, Texas
Washimiya, Japan
SALES OFFICES
IN MAJOR CITIES OF
THE WORLD
The company owns a number
of other domestic and foreign
subsidiaries which are involved
primarily in sales activities.
These subsidiaries, either singly
or in the aggregate, are not
significant. These accounts are
not included in the consolidated
financial statements.
60
<PAGE>
1994 ANNUAL MEETING
The 1994 Annual Meeting of Stockholders will be held at WHYY Studios,
Independence Mall West, 150 N. Sixth Street, Philadelphia, Pennsylvania, at
10:30 a.m. on Monday, May 2nd. Formal notice of the meeting, the proxy
statement and form of proxy will be mailed on March 28, 1994.
FORM 10-K REPORT
A copy of the company's annual report to the Securities and Exchange
Commission on Form 10-K will be provided upon request to the Public Relations
Department, Rohm and Haas Company, 100 Independence Mall West, Philadelphia,
Pennsylvania, 19106-2399, (215) 592-3045.
STOCK EXCHANGE LISTING
Rohm and Haas Company stock trades on the New York Stock Exchange under
the ROH symbol.
STOCK TRANSFER AGENT AND REGISTRAR
Wachovia Bank of North Carolina, N.A.
Corporate Trust Department
P.O. Box 3001
Winston-Salem, North Carolina 27102
1-800-633-4236
INDEPENDENT AUDITORS
KPMG Peat Marwick
1600 Market Street
Philadelphia, Pennsylvania 19103
(215) 299-3100
TRADEMARKS
Acumer, Dithane, Elastene, Indar, Kamax, Kerb, Lubritan, Mimic,
Oropon, Paraloid, Plexiglas, Primene, Sea-Nine, Stam and Systhane
are trademarks of Rohm and Haas Company.
Responsible Care is a trademark of the Chemical Manufacturers Association.
[LOGO] RESPONSIBLE CARE(R)
A PUBLIC COMMITMENT
Rohm and Haas is a Responsible Care(R) Company.
[LOGO] Printed on recycled paper
<PAGE>
ROHM
AND [LOGO]
HAAS
Philadelphia, PA 19106
<PAGE>
APPENDIX TO ANNUAL REPORT TO STOCKHOLDERS
(Pursuant to Part 232.304(a) of Regulation S-T)
GRAPHIC DESCRIPTION/CROSS REFERENCE
- ------- ---------------------------
Cover A montage of individual employee photographs
Page 1 Stacked bar chart
Sales by Business Group
-----------------------
Agricultural Chemicals $ 409 million
Plastics 579 million
Performance Chemicals 762 million
Polymers, Resins and Monomers 1,519 million
Sales by Customer Location
--------------------------
Latin America $ 222 million
Pacific 458 million
Europe 744 million
North America 1,845 million
Page 2 Individual photographs of:
J. Lawrence Wilson, Chairman
John P. Mulroney, President
Page 4 Bar Charts for Rohm and Haas Company of:
Volume
------
1989 3,259 million units
1990 3,336 million units
1991 3,267 million units
1992 3,750 million units
1993 4,214 million units
Sales
-----
1989 $2,661 million
1990 $2,824 million
1991 $2,763 million
1992 $3,063 million
1993 $3,269 million
Earnings, before cumulative effect of accounting change
--------
1989 $176 million
1990 $207 million
1991 $163 million
1992 $174 million
1993 $126 million
Page 5 Photograph of Dr. F. Otto Haas
Page 6 Individual photographs of:
Tom Shannon, Polymers and Resins Latin
America, Spring House
Ricky Hunter, Agricultural Chemicals, Spring House
Yoshie Wakabayashi, Biocides, Washimiya
Page 7 Photograph of Dan Foo, Biocides, Singapore
Page 8 Photograph of Barry Tiernan, Biocides, Jarrow
Page 9 Individual photographs of:
Pattie Crye, Petroleum Chemicals, Houston
Antonis Papadourakis, Engineering, Bristol
Robin Cole, Environmental, Bristol
Rafael Aviles, Formulation Chemicals, Spring House
Group photo of:
Benoit Bender, Plastics Additives, Lauterbourg
Albert Mastio, Agricultural Chemicals, Lauterbourg
Page 10 Individual photographs of:
Toni Davis, Human Resources, Philadelphia
Dan Hoyt, Production, Philadelphia
Group photograph of:
Sue Coghlan, Pat Carpitella, Suzanne Baldino, and
Linda Karcher, Plastics Additives Customer
Service, Philadelphia
Page 11 Individual photographs of:
Angelo Venegoni, Polymers and Resins, Milan
Marisa Guerin, Human Resources, Philadelphia
Tom Tillet, Agricultural Chemicals, Paris
Page 12 Photograph of Heinz Neumann, Polymers and Resins,
Philadelphia
Page 12 Bar Charts for Polymers, Resins and Monomers
Business Group
Volume
------
1989 2,128 million units
1990 2,211 million units
1991 2,283 million units
1992 2,674 million units
1993 3,050 million units
Sales
-----
1989 $1,182 million
1990 $1,249 million
1991 $1,290 million
1992 $1,425 million
1993 $1,519 million
Earnings, before cumulative effect of accounting change
--------
1989 $112 million
1990 $119 million
1991 $116 million
1992 $124 million
1993 $120 million
Page 13 Individual photographs of:
Nicola Lombardo, Polymers and Resins, Milan
Chong Hui Choo, Polymers and Resins, Singapore
Page 14 Group photograph of:
Joaquin Amezaga and Mario Llamas, AtoHaas,
Matamoros
Bar charts for Plastics Business Group
Volume
------
1989 486 million units
1990 505 million units
1991 495 million units
1992 533 million units
1993 580 million units
Sales
-----
1989 $512 million
1990 $561 million
1991 $546 million
1992 $573 million
1993 $579 million
Earnings, before cumulative effect of accounting change
--------
1989 $53 million
1990 $37 million
1991 $ 8 million
1992 $38 million
1993 $(2) million
Page 15 Individual photographs of:
Mike Bonaroti, Plastics Additives, Philadelphia
Kelly Harrison, AtoHaas, Chicago
Page 16 Individual photographs of:
Tom MacPhee, Plaskon, Philadelphia
Debbie Plantz, Specialty Purifications, Spring House
Bar charts for the Performance Chemicals
Business Group
Volume
------
1989 445 millions of units
1990 438 millions of units
1991 324 millions of units
1992 377 millions of units
1993 399 millions of units
Sales
-----
1989 $600 million
1990 $651 million
1991 $566 million
1992 $682 million
1993 $762 million
Earnings before cumulative effect of accounting change
--------
1989 $11 million
1990 $55 million
1991 $43 million
1992 $19 million
1993 $29 million
Page 17 Group photograph of:
Jimmy Chen, Ion Exchange, and Marie Tang,
Financial, Taiwan
Individual photographs of:
Andrew Cameron, Biocides, Jarrow
Pierre Weinstoerffer, Agricultural Chemicals, Lauterbourg
Page 18 Individual photographs of:
Jan Ollinger, Agricultural Chemicals, Philadelphia
Ross McGibbon, Agricultural Chemicals, Latin
American Region, Coral Gables
Bar charts for the Agricultural Chemicals Business Group
Volume
------
1989 200 millions of units
1990 182 millions of units
1991 165 millions of units
1992 166 millions of units
1993 185 millions of units
Sales
-----
1989 $367 million
1990 $363 million
1991 $361 million
1992 $383 million
1993 $409 million
Earnings, before cumulative effect of accounting change
--------
1989 $13 million
1990 $22 million
1991 $33 million
1992 $25 million
1993 $39 million
Page 19 Photograph of Patrick Webb, Environmental, Bristol
Page 20 Photograph of Mike McLaughlin, Legal, Philadelphia
Page 25 Line Chart of Gross Profit, Selling, Administrative and
Research Expense (SAR) and Operating Earnings as a
percent of sales:
Year Gross Profit SAR Operating Earnings
---- ------------ --- ------------------
1983 32.0% 18.9% 7.5%
1984 33.2 19.4 8.1
1985 31.7 20.7 6.7
1986 34.9 21.9 7.5
1987 35.1 21.7 9.3
1988 35.1 21.2 9.6
1989 31.6 21.6 7.1
1990 32.9 22.4 8.3
1991 32.6 23.6 7.1
1992 34.2 24.4 6.8
1993 33.5 24.3 4.7
Page 26 Line Chart of Sales and Volume Indices
1983 = 100
Year Sales Dollars Physical Volume
---- ------------- ---------------
1983 100 100
1984 109 104
1985 109 105
1986 110 101
1987 117 108
1988 135 121
1989 142 126
1990 151 129
1991 147 126
1992 163 145
1993 174 162
Line Chart of Raw Material Cost Index
1983 = 100
Year Index Percentage Change
---- ----- -----------------
1983 100 (9)%
1984 100 0
1985 95 (5)
1986 88 (8)
1987 93 5
1988 105 13
1989 108 3
1990 109 0
1991 109 0
1992 99 (9)
1993 96 (3)
Page 27 Line Chart of Selling Price Index
1983 = 100
Year Index Percentage Change
---- ----- -----------------
1983 100 0%
1984 99 (1)
1985 97 (2)
1986 99 3
1987 103 3
1988 108 5
1989 109 1
1990 113 3
1991 115 2
1992 114 (1)
1993 109 (4)
Line Chart of Return on Investment
Year Stockholders' Equity Net Assets
---- -------------------- ----------
1983 16.1% 10.5%
1984 18.4 12.2
1985 14.9 10.0
1986 14.3 8.7
1987 19.0 11.0
1988 20.4 11.2
1989 14.0 8.3
1990 15.2 8.6
1991 11.2 6.8
1992 11.4 6.1
1993 8.1 4.3
Page 28 Stacked Bar Chart of Cash Flow
Provided by operations
----------------------
1989 $309 million
1990 336 million
1991 357 million
1992 401 million
1993 358 million
Treasury Stock Purchases, ESOP
------------------------------
1989 $0 million
1990 213 million
1991 1 million
1992 1 million
1993 0 million
Capital Additions & Acquisitions Net of Divestitures
----------------------------------------------------
1989 $380 million
1990 280 million
1991 208 million
1992 447 million
1993 290 million
Dividends
---------
1989 $77 million
1990 79 million
1991 80 million
1992 88 million
1993 97 million
Page 29 Line Chart of Environmental Expenses and Capital Spending
Operating and Maintaining Environmental Facilities
--------------------------------------------------
1987 $54 million
1988 66 million
1989 77 million
1990 82 million
1991 92 million
1992 108 million
1993 105 million
Capital Spending for New Environmental Protection Equipment
-----------------------------------------------------------
1987 $17 million
1988 34 million
1989 50 million
1990 54 million
1991 48 million
1992 55 million
1993 55 million
Waste Site Remediation Accruals
-------------------------------
1987 $12 million
1988 5 million
1989 12 million
1990 46 million
1991 49 million
1992 23 million
1993 57 million
Line Chart of Earnings and Common Dividends
Dollars per Share
Year Earnings Common Dividends
---- -------- ----------------
1983 $1.78 $ .50
1984 2.24 .60
1985 2.01 .70
1986 2.01 .78
1987 2.85 .86
1988 3.46 1.02
1989 2.65 1.16
1990 3.10 1.22
1991 2.45 1.24
1992 2.53 1.28
1993 1.74 1.36
Page 30 Photograph of Karla Elrod, Monomers, Philadelphia
Page 31 Line Chart of Capital Additions and Depreciation
Year Additions Depreciation
---- --------- ------------
1983 $ 72 million $ 93 million
1984 134 million 93 million
1985 159 million 101 million
1986 179 million 103 million
1987 222 million 112 million
1988 338 million 128 million
1989 385 million 150 million
1990 412 million 159 million
1991 265 million 183 million
1992 283 million 203 million
1993 382 million 226 million
Line Chart of Assets as a Percent of Sales
Year Fixed Assets Inventories Receivables
---- ------------ ----------- -----------
1983 27.6% 15.6% 13.5%
1984 27.2 17.4 13.3
1985 28.3 16.5 15.3
1986 31.3 14.9 15.4
1987 33.2 14.0 16.1
1988 36.9 13.4 15.5
1989 43.1 13.0 15.8
1990 49.2 13.7 16.2
1991 53.2 12.4 17.1
1992 57.7 14.3 17.9
1993 57.2 12.1 18.5
Page 32 Photograph of Sandy Sica, Accounting, Philadelphia
High-Low Chart of Quarterly Stock Prices in Dollars
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
1991
----
High 46 3/8 45 3/8 48 1/2 45 5/8
Low 32 3/4 35 3/4 41 1/2 35
Close 45 5/8 43 45 5/8 43 1/2
1992
----
High 52 1/2 58 7/8 59 5/8 57 5/8
Low 42 3/4 46 1/2 51 3/8 50 1/2
Close 49 5/8 55 1/4 54 3/4 53 1/2
1993
----
High 61 1/4 62 55 1/2 59 1/2
Low 52 5/8 52 7/8 49 1/2 47 1/4
Close 53 5/8 53 5/8 50 3/8 59 1/2
Page 41 Photograph of Mark Pajer, External Financial Reporting,
Philadelphia
Page 44 Photograph of Luiz Gustavo Araujo, Financial, Sao Paulo
Page 47 Photograph of Geoff Wilson, Financial, Croydon
Page 57 Individual photographs of the Board of Directors:
George B. Beitzel
Daniel B. Burke
Earl G. Graves
James A. Henderson
John H. McArthur
Paul F. Miller, Jr.
Sandra O. Moose
John P. Mulroney
Robert E. Naylor, Jr.
Gilbert S. Omenn
Ronaldo H. Schmitz
Alan Schriesheim
Page 58 Individual photographs of the Board of Directors:
Marna C. Whittington
J. Lawrence Wilson
Photograph of former director John T. Subak
SCHEDULE V
ROHM AND HAAS COMPANY AND SUBSIDIARIES
LAND, BUILDINGS AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1993
--------------------------------------------------
BALANCE ADDITIONS
AT AT COST RETIRE- BALANCE
BEGINNING (NET OF MENTS OTHER AT END
OF YEAR TRANSFERS) OR SALES CHANGES OF YEAR
--------- ---------- -------- ------- -------
(millions of dollars)
Land ....................... $ 51 $ -- $ -- $ -- $ 51
Buildings and improvements.. 588 115 (7) (17) 679
Machinery and equipment..... 2,493 282 (100) (10) 2,665
Capitalized interest cost... 143 19 -- -- 162
Construction................ 195 (34) -- (22) 139
------ ---- ----- ---- ------
$3,470 $382 $(107) $(49) $3,696
====== ==== ===== ==== ======
YEAR ENDED DECEMBER 31, 1992
--------------------------------------------------
BALANCE ADDITIONS
AT AT COST RETIRE- OTHER BALANCE
BEGINNING (NET OF MENTS CHANGES AT END
OF YEAR TRANSFERS) OR SALES (NOTE A) OF YEAR
--------- ---------- -------- -------- -------
(millions of dollars)
Land........................ $ 34 $ 2 $ -- $ 15 $ 51
Buildings and improvements.. 507 34 (2) 49 588
Machinery and equipment..... 2,213 190 (54) 144 2,493
Capitalized interest cost... 130 13 -- -- 143
Construction................ 131 44 -- 20 195
------ ---- ----- ---- ------
$3,015 $283 $ (56) $228 $3,470
====== ==== ===== ==== ======
YEAR ENDED DECEMBER 31, 1991
--------------------------------------------------
BALANCE ADDITIONS
AT AT COST RETIRE- OTHER BALANCE
BEGINNING (NET OF MENTS CHANGES AT END
OF YEAR TRANSFERS) OR SALES (NOTE B) OF YEAR
--------- ---------- -------- -------- -------
(millions of dollars)
Land........................ $ 17 $ 9 $ -- $ 8 $ 34
Buildings and improvements.. 464 43 (3) 3 507
Machinery and equipment..... 1,944 298 (55) 26 2,213
Capitalized interest cost... 114 16 -- -- 130
Construction................ 231 (101) -- 1 131
------ ---- ----- ---- ------
$2,770 $265 $ (58) $ 38 $3,015
====== ==== ===== ==== ======
Note A: Other changes primarily consist of the consolidation of Shipley
and Jacryl, previously less than 50%-owned equity consolidated
affiliates.
Note B: Other changes primarily consist of the consolidation of Tocil,
previously a 50%-owned equity consolidated affiliate.
7
SCHEDULE VI
ROHM AND HAAS COMPANY AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF BUILDINGS AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1993
--------------------------------------------------
BALANCE
AT RETIRE- BALANCE
BEGINNING MENTS OTHER AT END
OF YEAR PROVISION OR SALES CHANGES OF YEAR
--------- --------- -------- ------- -------
(millions of dollars)
Buildings and improvements.. $ 224 $ 23 $ (5) $(1) $ 241
Machinery and equipment..... 1,412 191 (87) (8) 1,508
Capitalized interest cost... 66 12 -- -- 78
------ ---- ---- --- ------
$1,702 $226 $(92) $(9) $1,827
====== ==== ==== === ======
YEAR ENDED DECEMBER 31, 1992
--------------------------------------------------
BALANCE
AT RETIRE- BALANCE
BEGINNING MENTS OTHER AT END
OF YEAR PROVISION OR SALES CHANGES OF YEAR
--------- --------- -------- ------- -------
(millions of dollars)
Buildings and improvements.. $ 205 $ 19 $ (2) $ 2 $ 224
Machinery and equipment..... 1,284 174 (46) -- 1,412
Capitalized interest cost... 56 10 -- -- 66
------ ---- ---- --- ------
$1,545 $203 $(48) $ 2 $1,702
====== ==== ==== === ======
YEAR ENDED DECEMBER 31, 1991
--------------------------------------------------
BALANCE
AT RETIRE- BALANCE
BEGINNING MENTS OTHER AT END
OF YEAR PROVISION OR SALES CHANGES OF YEAR
--------- --------- -------- ------- -------
(millions of dollars)
Buildings and improvements.. $ 190 $ 17 $ (3) $ 1 $ 205
Machinery and equipment..... 1,144 156 (42) 26 1,284
Capitalized interest cost... 46 10 -- -- 56
------ ---- ---- --- ------
$1,380 $183 $(45) $27 $1,545
====== ==== ==== === ======
8
SCHEDULE VIII
ROHM AND HAAS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1992 1991
---- ---- ----
(millions of dollars)
Deducted from Accounts Receivable--
Allowances for losses:
Balance at beginning of year..... $12 $10 $ 7
Additions charged to earnings.... 2 2 4
Other (Note A)................... (4) -- (1)
--- --- ---
Balance at end of year........... $10 $12 $10
=== === ===
Deducted from Notes Receivable--
Allowances for losses:
Balance at beginning of year..... $ 4 $ 4 $--
Additions charged to earnings.... -- -- 4
Recoveries....................... (4) -- --
--- --- ---
Balance at end of year........... $-- $ 4 $ 4
=== === ===
Note A: Other changes primarily consist of uncollectible balances charged to
allowance, net of recoveries.
9
EXHIBIT (12)
ROHM AND HAAS COMPANY
AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(millions of dollars)
Earnings before income taxes............. $194 $261 $240 $313 $251
Fixed charges............................ 79 83 79 77 70
Capitalized interest adjustment.......... (7) (3) (6) (17) (12)
Undistributed earnings adjustment........ 6 2 (2) (5) 2
---- ---- ---- ---- ----
Earnings................................. $272 $343 $311 $368 $311
==== ==== ==== ==== ====
Ratio of earnings to fixed charges....... 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 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.
10
EXHIBIT (22)
SUBSIDIARIES OF REGISTRANT
STATE OR COUNTRY
NAME OF SUBSIDIARY OF INCORPORATION
------------------ ----------------
Atohaas Canada Inc. Canada
Atohaas Mexico Inc. Delaware
Atohaas North America Inc. Delaware
Beijing Eastern Rohm and Haas Company Limited China
Japan Acrylic Chemical Co., Ltd. Japan
Maquiladora General de Matamoros, S.A. de C.V. Mexico
Plaskon Electronic Materials, Inc. Delaware
Plaskon Electronic Materials, Ltd. Bermuda
Polytribo, Inc. Delaware
Rohm and Haas Australia Pty. Ltd. Australia
Rohm and Haas Bayport Inc. Texas
Rohm and Haas (Bermuda), Ltd. Bermuda
Rohm and Haas Brasil Ltda. Brazil
Rohm and Haas California Incorporated California
Rohm and Haas Canada Inc. Canada
Rohm and Haas Capital Corporation Delaware
Rohm and Haas Colombia S.A. Colombia
Rohm and Haas Credit Corporation Delaware
Rohm and Haas Delaware Valley Inc. Delaware
Rohm and Haas Deutschland GmbH Germany
Rohm and Haas Equity Corporation Delaware
Rohm and Haas Espana S.A. Spain
Rohm and Haas Far East Ltd. Hong Kong
Rohm and Haas Finance Company Delaware
Rohm and Haas Foreign Sales Corporation U.S. Virgin Islands
Rohm and Haas France S.A. France
Rohm and Haas Holdings Ltd. Bermuda
Rohm and Haas Illinois Inc. Delaware
Rohm and Haas Italia S.r.l. Italy
Rohm and Haas Japan K.K. Japan
Rohm and Haas Kentucky Incorporated Kentucky
Rohm and Haas Latin America, Inc. Delaware
Rohm and Haas Mexico S.A. de C.V. Mexico
Rohm and Haas New Zealand Limited New Zealand
Rohm and Haas Nordiska AB Sweden
Rohm and Haas Performance Plastics, Inc. Delaware
Rohm and Haas Philippines, Inc. Philippines
11
<PAGE>
EXHIBIT (22)
SUBSIDIARIES OF REGISTRANT (CONTINUED)
STATE OR COUNTRY
NAME OF SUBSIDIARY OF INCORPORATION
------------------ ----------------
Rohm and Haas Scotland Ltd. England
Rohm and Haas Singapore (Pte.) Ltd. Singapore
Rohm and Haas Southern California Inc. Delaware
Rohm and Haas Taiwan Inc. Taiwan
Rohm and Haas Tennessee Incorporated Tennessee
Rohm and Haas Texas Incorporated Texas
Rohm and Haas (UK) Limited England
Shipley Europe Limited England
Shipley Far East Limited Japan
Tokyo Organic Chemical Industries, Ltd. Japan
Yugocryl Slovenia
Xamak Inc. Delaware
NOTE: All subsidiaries listed are greater than 50% owned, directly or
indirectly, by Rohm and Haas Company. The company owns a number
of other domestic and foreign subsidiaries which are involved
primarily in sales activities. These subsidiaries, either singly
or in the aggregate, are not significant and their accounts are
not included in the consolidated financial statements.
12
EXHIBIT (24)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Rohm and Haas Company:
We consent to incorporation by reference in the Prospectuses constituting
part of Registration Statements No. 2-53516, No. 2-90736 and No. 33-56842 on
Form S-8 and Registration Statements No. 33-33670, No. 33-37757 and No.
33-42590 on Form S-3 of Rohm and Haas Company of our reports dated February
21, 1994, relating to the consolidated balance sheets of Rohm and Haas Company
and subsidiaries as of December 31, 1993 and 1992, and the related statements
of consolidated earnings and retained earnings, and cash flows and related
schedules for each of the years in the three-year period ended December 31,
1993, which reports are incorporated by reference or appear in the December
31, 1993 Annual Report on Form 10-K of Rohm and Haas Company and subsidiaries.
As discussed in Notes 5 and 16 to the consolidated financial statements,
the company adopted the provisions of Financial Accounting Standards Board
Statement No. 112, "Accounting for Postemployment Benefits" in 1993, and the
provisions of Financial Accounting Standards Board Statements No. 106,
"Accounting for Postretirement Benefits Other Than Pensions" and No. 109,
"Accounting for Income Taxes," in 1992.
/s/ KPMG PEAT MARWICK
------------------------------------
KPMG PEAT MARWICK
Philadelphia, Pennsylvania
March 25, 1994
13
