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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, 1994 COMMISSION FILE NUMBER 1-3507
___________________________
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 10, 1995: $2,543,269,711
Common stock outstanding at March 10, 1995: 67,684,377 SHARES.
Documents incorporated by reference:
Part I -Annual Report to Stockholders for year ended December 31, 1994
Part II -Annual Report to Stockholders for year ended December 31, 1994
Part III -Definitive Proxy Statement to be filed with the Securities
and Exchange Commission on or about March 24, 1995, except
the Report on Executive Compensation and Graph titled
"Cumulative Total Return to Shareholders" on pages 12
through 15.
Part IV -Annual Report to Stockholders for year ended December 31, 1994
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PART I
ITEM 1. BUSINESS
The information indicated below appears in the 1994 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 .......................... 8
Plastics ............................................... 11
Performance Chemicals .................................. 14
Agricultural Chemicals ................................. 17
Industry segment information for years 1992-94 ............. 44
Foreign operations for years 1992-94 ....................... 44
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 8 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 $201,000,000, $205,000,000 and
$199,000,000 in 1994, 1993 and 1992, respectively. Approximately 15% of the
company's employees were engaged in research and development activities in
1994 and 16% in 1993 and 1992.
Environmental Matters
A discussion of environmental matters is incorporated herein by reference
to pages 27 through 29 of the Stockholders' Report and to Exhibit (13)(a),
Note 22: Subsequent Event.
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
8 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 51 of the Stockholders' Report and to Exhibit (13)(a), Note 22:
Subsequent Event.
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 1994.
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 4,889 registered common stockholders
as of March 10, 1995. The 1994 and 1993 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 1990 through 1994 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 1992 to 1994 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 and Exhibit (13)(a), Note 22: Subsequent Event.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets as of December 31, 1994, and 1993, and the
related consolidated statements of earnings, stockholders' equity and cash
flows for the years ended December 31, 1994, 1993, and 1992, are incorporated
in this Form 10-K by reference to pages 34 through 53 of the Stockholders'
Report and to Exhibit (13)(a), Note 22: Subsequent Event, together with the
report of KPMG Peat Marwick LLP dated February 20, 1995, except as to Note 22
which is as of March 20, 1995, on page 6 of this Form 10-K. 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 1994 or 1993 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, 1994, has been omitted, except for the
information presented below, because the company on or about March 24, 1995,
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 Proxy
Statement.
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Paul J. Baduini, 47, 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 from
1988 to 1991.
Albert H. Ceasar, 57, 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.
Nance K. Dicciani, 47, 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.
Robert M. Downing, 52, vice president since 1993; operations director for
the North American region since 1986.
David T. Espenshade, 56, vice president since 1993; director of materials
management since 1990.
J. Michael Fitzpatrick, 48, 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.
Donald C. Garaventi, 58, vice president since 1982; business group
executive for polymers, resins and monomers and business unit director for
polymers and resins since 1989.
Marisa Guerin, 42, vice president since 1994; director of human resources
since 1994; previously manager of training and development from 1991 to 1994
and director of human resources at the Philadelphia plant from 1990 to 1991.
Rajiv L. Gupta, 49, vice president since 1993; regional director of
Pacific since 1993; previously business unit director for plastics additives
from 1989 to 1993.
Howard C. Levy, 51, vice president since 1993; business unit director for
biocides since 1989.
Phillip G. Lewis, 44, 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, 57, vice president and regional director of Latin
America since 1989.
John P. Mulroney, 59, director since 1982; president and chief operating
officer since 1986; director of Teradyne Inc. and Aluminum Company of
America.
Robert E. Naylor, 62, director since 1986; group vice president and
regional director of North America since 1989; director of Airgas, Inc.
Richard G. Peterson, 56, vice president since 1987; business group
executive for performance chemicals since 1989.
Frank R. Robertson, 54, vice president since 1991; business unit director
for polymers and resins, North America, since 1989.
Fred W. Shaffer, 62, vice president since 1977; chief financial officer
since 1978.
William H. Staas, 51, vice president since 1993; business unit director
for monomers since 1990.
John F. Talucci, 55, vice president and business group executive for
agricultural chemicals since 1989.
Charles M. Tatum, 47, vice president since 1990; business unit director of
plastics additives since 1993; previously director of research from 1989 to
1993.
Basil A. Vassiliou, 60, vice president since 1986; regional director of
Europe since 1985; business group executive for plastics since 1991.
Robert P. Vogel, 50, 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, 59, 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 16 and 17 of the
definitive Proxy Statement to be filed with the Securities and Exchange
Commission on or about March 24, 1995.
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 16 and 17 of the definitive Proxy Statement to be filed
with the Securities and Exchange Commission on or about March 24, 1995.
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 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, and to Exhibit (13)(a),
Note 22: Subsequent Event, together with the report of KPMG
Peat Marwick LLP dated February 20, 1995, except as to Note 22,
which is as of March 20, 1995, on page 6 of this Form 10-K.
2. Financial Statement Schedule
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
Independent Auditors' Report .............................. 6
Schedule submitted:
VIII - Valuation and qualifying accounts for the years
1994, 1993 and 1992 .................................. 7
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 (3), Certificate of Incorporation and By-Laws, reflecting
amendments approved by the Board of Directors on October 13, 1994, is
attached as pages 8 through 22 of this Form 10-K.
Exhibit (12), Computation of Ratio of Earnings to Fixed Charges
for the company and subsidiaries, is attached as page 23 of this
Form 10-K.
Exhibit (13), Annual Report to Stockholders, which follows
page 6 of this Form 10-K.
Exhibit (13)(a), Note 22 to the Consolidated Financial Statements:
Subsequent Event, is attached as page 24 of this Form 10-K.
Exhibit (22), Subsidiaries of the registrant, is attached as
page 25 of this Form 10-K.
Exhibit (24), Consent of independent certified public accountants,
is attached as page 27 of this Form 10-K.
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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
---------------------------------
Fred W. Shaffer
Vice President and
Chief Financial Officer
March 27, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 27, 1995 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
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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.
-----------------------------------
Paul F. Miller, Jr.
Director
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Rohm and Haas Company:
We have audited the consolidated balance sheets of Rohm and Haas
Company and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of earnings, stockholders' equity and
cash flows for each of the years in the three-year period ended December
31, 1994. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedule on
page 7. These consolidated financial statements and financial statement
schedule are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule 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, 1994 and 1993,
and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1994, in conformity
with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, 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 8 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 Statement No. 106,
"Accounting for Postretirement Benefits Other Than Pensions," and No. 109,
"Accounting for Income Taxes" in 1992.
/s/ KPMG PEAT MARWICK LLP
---------------------------------
KPMG PEAT MARWICK LLP
Philadelphia, PA
February 20, 1995, except
as to Note 22, which is as of
March 20, 1995
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EXHIBIT (3)
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ROHM AND HAAS COMPANY
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CERTIFICATE OF INCORPORATION
(AS RESTATED APRIL 25, 1977; AND
AMENDED THROUGH JUNE 11, 1992)
AND
BYLAWS
(AS RESTATED JANUARY 31, 1977; AND
AMENDED THROUGH OCTOBER 13, 1994)
==============================================================================
DECEMBER, 1994
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ROHM AND HAAS COMPANY
CERTIFICATE OF INCORPORATION
I. The name of the Company is Rohm and Haas Company.
II. The principal office of the Company in the State of Delaware is
located at 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent is The Corporation Trust Company,
and the address of its registered agent is 1209 Orange Street, in the City of
Wilmington, County of New Castle.
III. The purpose of the Company is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
IV. The Company shall have authority to issue 100,000,000 shares of
Common Stock, of the par value of $2.50 per share, and 25,000,000 shares of
Preferred Stock, of the par value of $1.00 per share. The Board of Directors
of the Corporation is hereby expressly authorized, at any time and from time
to time, to divide the shares of Preferred Stock into one or more series, to
issue from time to time in whole or in part the shares of Preferred Stock, and
in the resolutions providing for the issue of such shares to fix and
determine, except as otherwise expressly limited by Delaware law, the voting
powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions as may be desired, to the fullest
extent permitted by Delaware law.
V. The Company is to have perpetual existence.
VI. The private property of the stockholders of the Company shall not
be subject to the payment of corporate debts to any extent whatever.
VII. The Board of Directors shall have the power to adopt, amend or
repeal the bylaws of the Company.
VIII. The Company shall have the power to keep its books of account,
documents and records outside of the state of Delaware at such places as the
Board of Directors may determine.
IX. No holder of securities of any class of the Company shall be
entitled as such, as a matter of right, to subscribe for or purchase any part
of any new or additional issue of securities of any class of the Company,
whether now or hereafter authorized. All securities of the Company shall be
issued and sold to such parties as the Board of Directors in its discretion
may determine.
X. No director of the Company shall be personally liable to the
Company or to any stockholder for monetary damages for any breach of duty as a
director except to the extent such exemption from liability is not permitted
under the Delaware General Corporation Law as currently in effect or hereafter
amended. Neither the amendment to nor repeal of this Article nor the adoption
of any provision of the Certificate of Incorporation inconsistent with this
Article shall apply to or have any effect in respect of any matter occurring,
or any cause of action, suit or claim that, but for this Article X would
accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
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On June 11, 1992, the Company filed a Certificate of Designation with the
office of the Secretary of the State of Delaware certifying the adoption by
the Board of Directors of the following resolution creating a series of
Preferred Stock, par value $1.00 per share (the "Preferred Stock"), designated
as $2.75 Cumulative Convertible Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock, par
value $1.00 per share, of the Corporation be hereby created, and that the
designation and amount thereof and the voting powers, preferences and
relative, participating, optional and other special rights of the shares of
such series, and the qualifications, limitations or restrictions thereof are
as follows:
1. DESIGNATION AND AMOUNT. The shares of such series shall be designated
as the "$2.75 Cumulative Convertible Preferred Stock" (the "$2.75 Preferred
Stock") and the number of shares constituting such series shall be 2,846,061,
which number may be decreased (but not increased) by the Board of Directors
without a vote of stockholders; provided, however, that such number may not be
decreased below the number of then currently outstanding shares of $2.75
Preferred Stock plus the number of shares of $2.75 Preferred Stock issuable
upon exercise of the then outstanding options to acquire shares of $2.75
Preferred Stock.
2. DIVIDENDS AND DISTRIBUTIONS.
2.1. The holders of shares of $2.75 Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out
of funds legally available for the purpose, cumulative dividends at the
annual rate of $2.75 per share, and no more, in equal quarterly payments on
the first business Day of March, June, September and December in each year
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date that is at
least ten days after the date of original issue of the $2.75 Preferred
Stock. The payment of dividends on the $2.75 Preferred Stock shall be made
before any cash dividends are paid on the Common Stock as provided in
Section 9.
2.2. Dividends payable pursuant to Section 2.1 shall begin to
accrue and be cumulative from the date of original issue of the $2.75
Preferred Stock. The amount of dividends so payable shall be determined on
the basis of twelve 30-day months and a 360-day year. Accrued but unpaid
dividends shall not bear interest. The Board of Directors may fix a record
date for the determination of holders of shares of $2.75 Preferred Stock
entitled to receive payment of a dividend declared thereon, which record
date shall be no more than 60 days prior to the date fixed for the payment
thereof.
2.3. If dividends are paid on the shares of $2.75 Preferred Stock
in an amount less than the total amount of dividends at the time accrued
and payable on such shares, (a) such dividends as are paid on the $2.75
Preferred Stock for any dividend period and on any class or series of stock
of the Corporation ranking on a parity (as to dividends) with the $2.75
Preferred Stock shall be paid pro rata so that the amount of dividends per
share for such period on the $2.75 Preferred Stock and on any other such
class or series of stock that was outstanding during such period shall in
all cases bear to each other the same ratio that the accrued dividends per
share on the shares of the $2.75 Preferred Stock and such other stock bear
to each other, and (b) such dividends as are paid on the $2.75 Preferred
Stock for any dividend period shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
3. VOTING RIGHTS. The holders of shares of $2.75 Preferred Stock shall
have the following voting rights:
3.1. Each share of $2.75 Preferred Stock shall be entitled to one
vote per share. The shares of $2.75 Preferred Stock and the shares of
Common Stock, par value $2.50 per share, of the Corporation (the "Common
Stock") (and any other shares of capital stock of the Corporation at the
time entitled thereto) shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation, except (a) as
otherwise provided by the Certificate of Incorporation of the Corporation,
as amended (the "Certificate of Incorporation"), or by law and (b) that
holders of shares of $2.75 Preferred Stock shall not have such power to
vote with the holders of other classes of capital stock on matters
submitted to a vote of stockholders (i) on any matters on which they are
entitled to vote separately as a series or as a part of the class of
Preferred Stock, regardless of series or (ii) in the election of directors
during any period when they are entitled to vote as part of the class of
Preferred Stock, regardless of series, to elect two directors as provided
in Section 3.2.
3.2. If on any date a total of six quarterly dividends on the $2.75
Preferred Stock have fully accrued but have not been paid in full, the
number of directors shall increase by two, and the holders of shares of
$2.75
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Preferred Stock, voting together as a class with the holders of any other
series of Preferred Stock upon which the same voting rights as those of the
$2.75 Preferred Stock have been conferred and are exercisable, shall have the
right to elect two directors. The right of such holders of Preferred Stock to
vote for the election of such two directors may be exercised at any annual
meeting or at any special meeting called for such purpose as hereinafter
provided or at any adjournment thereof, or by the written consent, delivered
to the Secretary of the Corporation, of the holders of a majority of all
outstanding shares of Preferred Stock entitled to vote thereon, until
dividends in default on the outstanding shares of Preferred Stock entitled to
vote thereon shall have been paid in full, at which time the term of office of
the two directors so elected shall terminate automatically; provided, that if
the dividends in default on the outstanding shares of $2.75 Preferred Stock
have been paid in full and the right to elect two directors continues to be
exercisable for other series of Preferred Stock, the holders of $2.75
Preferred Stock shall have no right to vote in the election of the two
directors. So long as such right to vote continues (and unless such right has
been exercised by written consent of the holders of a majority of the
outstanding shares of Preferred Stock as hereinabove authorized), the
Secretary of the Corporation may call, and upon the written request of the
holders of record of a majority of the outstanding shares of Preferred Stock
entitled to vote thereon addressed to the Secretary at the principal office of
the Corporation shall call, a special meeting of the holders of such shares
for the election of such two directors as provided herein. Such meeting shall
be held within 60 days after delivery of such request to the Secretary, at the
place and upon the notice provided by law and in the Bylaws for the holding of
meetings of stockholders. No such special meeting or adjournment thereof
shall be held on a date less than 60 days before an annual meeting of
stockholders or any special meeting in lieu thereof. If at any such annual or
special meeting or any adjournment thereof the holders of a majority of the
then outstanding shares of Preferred Stock entitled to vote in such election
shall be present or represented by proxy, or if the holders of a majority of
the outstanding shares of Preferred Stock shall have acted by written consent
in lieu of a meeting with respect thereto, then the authorized number of
directors shall be increased by two, and such holders of the Preferred Stock
shall be entitled to elect the two additional directors. Directors so elected
shall serve until the next annual meeting or until their successors shall be
elected and shall qualify, unless the term of office of the persons so elected
as directors shall have terminated under the circumstances set forth in this
Section 3.2. Any vacancy occurring among the directors elected by the holders
of Preferred Stock as a class shall be filled by the remaining such director,
if any, and otherwise by vote of holders of Preferred Stock as provided above.
3.3. The affirmative vote of the holders of at least 66-2/3% of the
outstanding shares of $2.75 Preferred Stock, voting separately as a single
series, in person or by proxy, at a special meeting or annual meeting of
stockholders called for the purpose, shall be necessary to (a) authorize,
or to increase the authorized number of shares of, or to issue, any class
or series of the Corporation's capital stock ranking senior (either as to
dividends or upon liquidation, dissolution or winding up) to the $2.75
Preferred Stock, (b) increase the authorized number of shares of $2.75
Preferred Stock or (c) amend, repeal or change any of the provisions of the
Certificate of Incorporation, or the provisions of the Certificate of
Designation of $2.75 Cumulative Convertible Preferred Stock which embodies
this resolution, in any manner that would alter the powers, preferences or
special rights of the shares of $2.75 Preferred Stock so as to affect them
materially and adversely; provided, that any authorization of, increase in
the authorized number of shares of, or issuance of, any class or series of
the Corporation's capital stock, in each case ranking on a parity with or
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the $2.75 Preferred Stock shall not be deemed to materially and
adversely alter such powers, preferences and special rights.
4. CERTAIN RESTRICTIONS. Whenever quarterly dividends payable on shares
of $2.75 Preferred Stock as provided in Section 2 hereof are in arrears,
thereafter and until all accrued and unpaid dividends, whether or not
declared, on the outstanding shares of $2.75 Preferred Stock shall have been
paid in full or declared and set apart for payment, the Corporation shall not
(a) declare or pay dividends, or make any other distributions, on any shares
of capital stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the $2.75 Preferred Stock ("Junior Stock"),
other than dividends or distributions payable in Junior Stock or options,
warrants or rights to subscribe for or purchase Junior Stock or (b) redeem,
purchase or otherwise acquire for consideration, or allow any Subsidiary of
the Corporation to redeem, purchase or acquire, any Junior Stock except in
connection with a reclassification or exchange of any Junior Stock or the
purchase, redemption or other acquisition of Junior Stock with proceeds of a
reasonably contemporaneously sale of Junior Stock.
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5. REDEMPTION.
5.1. The Corporation shall not have any right to redeem shares of
$2.75 Preferred Stock prior to June 15, 1999. On and after such date,
subject to and upon compliance with this Section 5, provided that the
Corporation shall not at the time be in default with respect to any
dividend payable on shares of $2.75 Preferred Stock, the Corporation shall
have the right, at its sole option and election, to call for redemption
shares of $2.75 Preferred Stock, in whole or in part, at any time and from
time to time.
5.2. Upon any call for redemption pursuant to Section 5.1, holders
of shares of $2.75 Preferred Stock called for redemption shall receive the
following:
5.2.1. The Corporation shall deliver to the holders of $2.75
Preferred Stock called for redemption, for each share of $2.75 Preferred
Stock called for redemption, a number of shares of Common Stock (of the
class thereof then most widely traded) equal to (a) the Redemption Price of
the $2.75 Preferred Stock in effect on the date fixed for redemption (the
"Redemption Date") plus any accrued and unpaid dividends thereon, divided
by (b) the Current Market Price of the Common Stock on the Redemption Date.
The "Redemption Price" for each share of $2.75 Preferred Stock redeemed
prior to June 15, 2000 is $50.62; on and after June 15, 2000 and prior to
June 15, 2001 is $50.415; on and after June 15, 2001 and prior to June 15,
2002 is $50.205; and thereafter is $50.00.
5.2.2. The foregoing notwithstanding, if the Redemption Date
is on a date when no class of Common Stock shall be listed or admitted to
trading on a national securities exchange or reported on by the National
Association of Securities Dealers, Inc. Automated Quotations Systems
("NASDAQ") or such other system then in use, or otherwise publicly traded,
then upon any call for redemption pursuant to Section 5.1, in lieu of the
Common Stock provided for in Section 5.2.1, the holders of $2.75 Preferred
Stock shall receive for each share thereof out of funds legally available
therefor, an amount in cash equal to the Redemption Price in effect on the
Redemption Date plus any accrued and unpaid dividends thereon. On the
Redemption Date, the Corporation shall in such event, and at any time after
the notice provided for in Section 5.3 shall have been mailed and before
the Redemption Date the Corporation may, deposit for the benefit of the
holders of shares of $2.75 Preferred Stock called for redemption the funds
necessary for such redemption with a bank or trust company in the Borough
of Manhattan, the City of New York, having a capital and surplus of at
least $100,000,000 in trust with instructions to apply such funds to the
payment of the Redemption Price upon receipt of the certificates for the
shares called for redemption. Any monies so deposited by the Corporation
and unclaimed at the end of one year from the date designated for such
redemption shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over
to the Corporation such unclaimed amounts and thereupon such bank or trust
company shall be relieved of all responsibility in respect thereof and any
holder of shares of $2.75 Preferred Stock so called for redemption shall
look only to the Corporation for the payment of the Redemption Price. In
the event that monies are deposited pursuant to this Section 5.2.2 in
respect of shares of $2.75 Preferred Stock that are converted in accordance
with the provisions of Section 8 hereof, such monies shall, upon such
conversion, revert to the general funds of the Corporation and, upon
demand, such bank or trust company shall pay over to the Corporation such
monies and shall be relieved of all responsibility to the holders of such
converted shares in respect thereof. Any interest accrued on funds
deposited pursuant to this Section 5.2.2 shall be paid from time to time to
the Corporation for its own account.
5.3. Notice of any redemption of shares of $2.75 Preferred Stock
shall be mailed at least 30 days, but not more than 90 days, prior to the
Redemption Date to each holder of shares of $2.75 Preferred Stock to be
redeemed, at such holder's address as it appears on the transfer books of
the Corporation. In order to facilitate the redemption of shares of $2.75
Preferred Stock, the Board of Directors may fix a record date for the
determination of shares of $2.75 Preferred Stock to be redeemed, not more
than 90 days or less than 30 days prior to the Redemption Date.
5.4. If a redemption shall be made pursuant to Section 5.2.1
hereof, then upon the Redemption Date, notwithstanding that any
certificates for such shares shall not have been surrendered for
cancellation, the shares represented thereby shall no longer be deemed
outstanding, the rights to receive dividends thereon shall cease to accrue
from and after the Redemption Date designated in the notice of redemption
and all rights of the holders of shares of $2.75 Preferred Stock called for
redemption shall cease and terminate, excepting only the right to receive
shares of Common Stock in accordance with Section 5.2.1. The person
entitled to receive the
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shares of Common Stock shall be treated for all purposes as having become
the record holder of such shares of Common Stock at such time. If a
redemption shall be pursuant to Section 5.2.2 hereof, then upon the deposit of
funds pursuant to Section 5.2.2, notwithstanding that any certificates for
such shares shall not have been surrendered for cancellation, the shares
represented thereby shall no longer be deemed outstanding, the rights to
receive dividends thereon shall cease to accrue from and after the Redemption
Date designated in the notice of redemption and all rights of the holders of
shares of $2.75 Preferred Stock called for redemption shall cease and
terminate, excepting only the right to receive the consideration provided for
in Section 5.2.2.
5.5. In connection with the redemption of any shares of $2.75
Preferred Stock, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Corporation shall pay a cash adjustment in respect
of such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price of the Common Stock on the
Redemption Date.
5.6. If less than all shares of $2.75 Preferred Stock at the time
outstanding are to be redeemed, the shares to be redeemed shall be selected
pro rata. Shares of $2.75 Preferred Stock which have been called for
redemption may be converted into shares of Common Stock at any time up to
the close of business on the Business Day preceding the Redemption Date, in
accordance with Section 8 hereof.
6. REACQUIRED SHARES. Any shares of $2.75 Preferred Stock converted,
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock.
7. LIQUIDATION, DISSOLUTION OR WINDING UP.
7.1. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, no distribution of the
assets of the Corporation shall be made (a) to the holders of shares of
Junior Stock unless, prior thereto, the holders of shares of $2.75
Preferred Stock shall have received the liquidation value of $50 per share,
plus an amount per share equal to all unpaid dividends thereon, including
accrued dividends, whether or not declared, to the date of such payment or
(b) if the assets of the Corporation, or proceeds thereof, shall be
insufficient to pay in full the amount in (a) and the liquidation value
with respect to any other shares of capital stock of the Corporation
ranking on a parity (upon liquidation, dissolution or winding up) to the
$2.75 Preferred Stock, then such assets, or the proceeds thereof, shall be
distributed among the holders of shares of $2.75 Preferred Stock and any
such other stock ratably in accordance with the respective amounts which
would be payable on such shares of $2.75 Preferred Stock and any such other
stock if all amounts payable thereon were paid in full.
7.2. After payment of the full amount provided in Section 7.1(a), a
holder of $2.75 Preferred Stock will not be entitled to any further
participation in any distribution of assets by the Corporation.
7.3. Neither the consolidation, merger or other business
combination of the Corporation with or into any other Person or Persons nor
the sale, transfer or lease of all or substantially all of the assets of
the Corporation shall be deemed to be a liquidation, dissolution or winding
up of all Corporation for purposes of this Section 7.
8. CONVERSION.
8.1. Subject to and upon compliance with this Section 8, each share
of $2.75 Preferred Stock shall be convertible at any time, at the option of
the holder thereof, into .7812 (the "Conversion Number") fully paid and
non-assessable shares of Common Stock.
8.2. The Conversion Number shall be subject to adjustment
from time to time as follows:
8.2.1. In case the Corporation shall at any time or from time
to time declare and pay a dividend, or make a distribution, on the
outstanding shares of Common Stock in shares of Common Stock or subdivide
or reclassify the outstanding shares of Common Stock into a greater number
of shares or combine or reclassify the outstanding shares of Common Stock,
then, and in each such case, the Conversion Number shall be adjusted so
that the holder of each share of $2.75 Preferred Stock shall be entitled to
receive, upon the conversion thereof, the number of shares of Common Stock
which the holder of $2.75 Preferred Stock would have been entitled to
receive after the happening of any of the events described above had such
share been converted immediately
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prior to the happening of such event or the record date therefor,
whichever is earlier. An adjustment made pursuant to this Section 8.2.1.
shall be effective (a) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (b) in the case of any such subdivision,
reclassification or combination, at the close of business on the day upon
which such corporate action becomes effective.
8.2.2. In case the Corporation shall at any time or from time
to time issue to holders of Common Stock rights, options or warrants,
exercisable within 45 days after the applicable record date for the right
to receive such rights, options or warrants, to acquire Common Stock at a
price per share of Common Stock less than 95% of the Current Market Price
of Common Stock as of the date of issuance of such rights, options or
warrants, then, and in each such case, such issuances shall be deemed to
constitute payment of a dividend in Common Stock pursuant to Section 8.2.1.
of that number of shares of Common Stock which is determined by dividing
the Current Market Price per share as of such time into the difference
between (a) the total Current Market Price as of such time of the number of
shares of Common Stock purchasable upon exercise of such rights, options or
warrants and (b) the aggregate consideration receivable by the Corporation
for the total number of shares of Common Stock into which such rights,
options or warrants may be exercised. An adjustment made pursuant to this
Section 8.2.2. shall be made on the next Business Day following the date on
which any such issuance is made and shall be effective retroactively
immediately after the close of business on such date. For purposes of this
Section 8.2, the aggregate consideration receivable by the Corporation in
connection with the issuance of such rights, options or warrants shall be
deemed equal to the sum of the aggregate offering price (before deduction
of underwriting discounts or commissions and expenses) of all such
securities plus the minimum aggregate amount, if any, payable upon exercise
of any such rights, options or warrants. No adjustment pursuant to this
Section 8.2.2. shall be required to be made for (a) the issuance of rights,
options or warrants to purchase Common Stock pursuant to any employee
benefit plan or program of the Corporation, (b) the issuance of Common
Stock pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of the Corporation or the investment of
additional optional amounts in shares of Common Stock or (c) any right,
option or warrant right outstanding as of the date hereof.
8.2.3. In case the Corporation shall at any time or from time
to time declare and pay or make a dividend or other distribution
(including, without limitation, any distribution of stock or other
securities or property or rights or warrants to subscribe for securities)
on its Common Stock, other than dividends payable in cash or shares of
Common Stock or issuances pursuant to Section 8.2.2., then, and in each
such case, the Conversion Number shall be adjusted so that the holder of
each share of $2.75 Preferred Stock shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock determined by
multiplying (a) the number of shares of Common Stock into which such share
was convertible on the day immediately prior to the record date fixed for
the determination of stockholders entitled to receive such dividend or
distribution by (b) a fraction, the numerator of which shall be the Current
Market Price per share of Common Stock as of such record date, and the
denominator of which shall be such Current Market Price per share of Common
Stock less the Fair Market Value per share of Common Stock (as determined
in good faith by the Board of Directors of the Corporation) of such
dividend or distribution. An adjustment made pursuant to this Section
8.2.3. shall be made upon the opening of business on the next Business Day
following the date on which any such dividend or distribution is made and
shall be effective retroactively immediately after the close of business on
the record date fixed for the determination of stockholders entitled to
receive such dividend or distribution.
8.2.4. In case at any time the Corporation shall be a party
to any transaction (including, without limitation, a merger, consolidation,
sale of all or substantially all of the Corporation's assets or
recapitalization of the Common Stock and excluding any transaction to which
Sections 8.2.1, 8.2.2 or 8.2.3 apply) in which the previously outstanding
Common Stock shall be changed into or exchanged for different securities of
the Corporation or common stock or other securities of another corporation
or interests in a noncorporate entity or other property (including cash) or
any combination of any of the foregoing (each such transaction being herein
called the "Transaction" and the date of consummation of the Transaction
being herein called the "Consummation Date"), then, each share of $2.75
Preferred Stock which is not converted into the right to receive stock,
securities or other property in connection with such transaction, shall
thereafter be convertible into, in lieu of the Common Stock issuable upon
such conversion prior to the Consummation Date, the amount of securities or
other property to which such holder would actually have been entitled as a
holder of shares of Common Stock upon the
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consummation of the Transaction if such holder had converted such shares
of $2.75 Preferred Stock immediately prior to such Transaction (subject to
adjustments from and after the Consummation Date as nearly equivalent as
possible to the adjustments provided for in this Section 8.2); provided, that
effective provision shall be made, in the Articles or Certificate of
Incorporation of the resulting or surviving corporation or otherwise, so that
the provisions set forth herein for the protection of the conversion rights of
the shares of $2.75 Preferred Stock shall thereafter be applicable, as nearly
as reasonably may be, to any such other shares of stock, securities and other
property deliverable upon conversion of the shares of $2.75 Preferred Stock
remaining outstanding; and provided, further, that any such resulting or
surviving corporation shall expressly assume the obligation to deliver, upon
the exercise of the conversion right, such shares, securities or property as
the holders of the shares of $2.75 Preferred Stock remaining outstanding,
shall be entitled to receive pursuant to these provisions, and to make
provisions for the protection of the conversion right, as provided above.
8.2.5. Upon the expiration of any rights, options, warrants
or conversion or exchange privileges, if any thereof shall not have been
exercised, the Conversion Number shall, upon such expiration, be readjusted
and shall thereafter, upon any further conversion, be such as it would have
been had it been originally adjusted (or had the original adjustment not
been required, as the case may be) as if (a) the only shares of Common
Stock so issued were the shares of Common Stock, if any, actually issued or
sold upon the exercise of such rights, options, warrants or conversion or
exchange privileges and (b) such shares of Common Stock, if any, were
issued or sold for the aggregate consideration receivable by the
Corporation upon such exercise plus the consideration, if any, actually
received by the Corporation for issuance, sale or grant of all such rights,
options, warrants or conversion or exchange rights whether or not
exercised.
8.2.6. The Corporation may, in its discretion, make such
increases in the Conversion Number in addition to any other adjustments
provided for in this Section 8.2 as it considers advisable in order that
any event treated for Federal income tax purposes as a dividend of stock or
stock rights shall not be taxable to the recipient.
8.2.7. If a plan to pay any dividend or make any distribution
by the Corporation is legally abandoned before payment, then any adjustment
made in the Conversion Number pursuant to this Section 8.2 in connection
with such dividend or distribution shall be cancelled as of the date the
plan is abandoned.
8.3. The holder of any shares of $2.75 Preferred Stock may exercise
his right to convert such shares into shares of Common Stock by
surrendering for such purposes to the Corporation, at its principal office
or at such other office or agency maintained by the Corporation for that
purpose, a certificate or certificates representing the shares of $2.75
Preferred Stock to be converted, duly endorsed to the Corporation on in
blank, accompanied by a written notice stating that such holder elects to
convert all or a specified whole number of such shares in accordance with
the provisions of this Section 8 and specifying the name or names in which
such holder wishes the certificate or certificates for shares of Common
Stock to be issued. In case such notice shall specify a name or names
other than that of such holder, such notice shall be accompanied by payment
of all transfer taxes payable upon the issuance of shares of Common Stock
in such name or names. Other than such taxes, the Corporation will pay any
and all issue and other taxes (other than taxes based on income) that may
be payable in respect of any issue or delivery of shares of Common Stock on
conversion of $2.75 Preferred Stock pursuant hereto. As promptly as
practicable, and in any event within ten Business Days after the surrender
of such certificate or certificates and the receipt of such notice relating
thereto and, if applicable, payment of all transfer taxes (or the
demonstration to the satisfaction of the Corporation that such taxes have
been paid), the Corporation shall deliver or cause to be delivered (a)
certificates representing the number of validly issued, fully paid and
nonassessable full shares of Common Stock to which the holder of shares of
$2.75 Preferred Stock so converted shall be entitled and (b) if less than
the full number of shares of $2.75 Preferred Stock evidenced by the
surrendered certificate or certificates are being converted, a new
certificate or certificates, of like tenor, for the number of shares
evidenced by such surrendered certificate or certificates less the number
of shares converted. Such conversion shall be deemed to have been made at
the close of business on the date of giving of such notice and of such
surrender of the certificate or certificates representing the shares of
$2.75 Preferred Stock to be converted so that the rights of the holder as
to the shares being converted shall cease except for the right to receive
shares of Common Stock in accordance herewith, and the person entitled to
receive the shares of Common Stock shall be treated for all purposes as
having become the record holder of such shares of Common Stock at such
time. The Corporation shall not be required to convert, and no surrender
of shares of $2.75 Preferred Stock shall be
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effective for that purpose, while the transfer books of the Corporation
for the Common Stock are closed for any purpose; provided, the surrender of
shares of $2.75 Preferred Stock for conversion during any period while such
books are closed shall become effective for conversion immediately upon the
reopening of such books, as if the conversion had been made on the date such
shares of $2.75 Preferred Stock were surrendered, and at the conversion rate
in effect at the date of such surrender.
8.4. Whenever the Conversion Number is adjusted as provided in this
Section 8, the Corporation shall as soon as practicable mail to the holders
of record of the outstanding shares of $2.75 Preferred Stock at their
respective addresses as the same shall appear in the Corporation's stock
records a notice stating that the Conversion Number has been adjusted and
setting forth the new number of shares of Common Stock (or describing the
new stock, securities, cash or other property) into which each share of
$2.75 Preferred Stock is convertible as a result of such adjustment, a
brief statement of the facts requiring such adjustment and the computation
thereof, and when such adjustment became effective.
8.5. No adjustment in the Conversion Number shall be required
unless such adjustment would result in an increase or decrease of at least
1% in the Conversion Number, provided that any adjustments which by reason
of this Section 8.5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations
under this Section 8.5 shall be made to the nearest one-hundredth of a
share.
8.6. Shares of $2.75 Preferred Stock may be converted at any time
up to the close of business on the Business Day preceding the Redemption
Date of such shares pursuant to Section 5 hereof.
8.7. Upon conversion of any shares of $2.75 Preferred Stock, the
holder thereof shall not be entitled to receive any accumulated, accrued or
unpaid dividends in respect of the shares so converted; provided, that such
holder shall be entitled to receive any dividends on such shares of $2.75
Preferred Stock declared prior to such conversion if such holder held such
shares on the record date fixed for the determination of holders of shares
of $2.75 Preferred Stock entitled to receive payment of such dividend.
8.8. In connection with the conversion of any shares of $2.75
Preferred Stock, no fractions of shares of Common Stock shall be issued,
but in lieu thereof the Corporation shall pay a cash adjustment in respect
of such fractional interest in an amount equal to such fractional interest
multiplied by the Current Market Price per share of Common Stock on the day
on which such shares of $2.75 Preferred Stock are deemed to have been
converted.
8.9. The Corporation shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the $2.75 Preferred Stock, such number of
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all then outstanding shares of $2.75 Preferred Stock.
The Corporation shall from time to time, subject to and in accordance with
the laws of Delaware, increase the authorized amount of Common Stock if at
any time the number of authorized shares of Common Stock remaining unissued
shall not be sufficient to permit the conversion at such time of all then
outstanding shares of $2.75 Preferred Stock.
8.10. Except as herein otherwise provided, no adjustment in the
Conversion Number shall be made by reason of the issuance, in exchange for
cash, property or services, of shares of Common Stock, or any securities
convertible into or exchangeable for shares of Common Stock, or carrying
the right to purchase any of the foregoing.
9. RANK. The $2.75 Preferred Stock shall, as to dividends and upon
liquidation, dissolution or winding up, rank senior to the Common Stock and
rank senior to or on a parity with all series of the Corporation's Preferred
Stock or other Capital Stock.
10. DEFINITIONS. For the purposes hereof:
"Business Day" means any day other than a Saturday, Sunday, or a day on
which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Current Market Price" per share of Common Stock on any date shall be
deemed to be the Trading Price on the Trading Day immediately prior to such
date. If the Common Stock is not listed or admitted to trading on a
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national securities exchange or reported on by NASDAQ or such other system
then in use or otherwise publicly trade, "Current Market Price" shall mean the
Fair Market Value per share as determined in good faith by the Board of
Directors of the Corporation.
"Fair Market Value" means the amount that a willing buyer would pay a
willing seller in an arm's-length transaction.
"Person" shall mean any individual, firm, corporation, or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"Subsidiary" of any Person means any corporation or other entity of which
a majority of the voting equity securities or interests is owned, directly or
indirectly, by such Person.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open
for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, any day other than a
Saturday, Sunday, or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
"Trading Price" per share of Common Stock on any date shall be the mean
between the high and low sale price, regular way, or, in case no sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, the mean between the high and low
quoted sale price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such
other system then in use, or, if on any such date the Common Stock is not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Common Stock selected by the Board of Directors.
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ROHM AND HAAS COMPANY
BYLAWS
ARTICLE I. MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of stockholders shall
be held on such day in April or May and at such time and place as shall be
fixed by the Board of Directors.
SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders may be
called at any time by the Board of Directors, the Chairman of the Board of
Directors or the President, and shall be called by the Secretary at the
request in writing of the holders of a majority of the outstanding shares
of stock of the Company entitled to vote on the matters to be considered at
the meeting. The date, time and place of any special meeting shall be
fixed by the Board of Directors.
SECTION 3. NOTICE OF MEETINGS. Notice of each meeting of stockholders
shall be given in writing to each stockholder entitled to vote at the
meeting ten to sixty days before the date of the meeting. The notice shall
state the date, time, place and purpose of the meeting.
SECTION 4. NOTICE OF ADJOURNED MEETINGS. If a meeting of stockholders
is adjourned to another date, time or place, no notice of the adjourned
meeting need be given other than announcement of its date, time and place
at the meeting at which the adjournment is taken. If the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
SECTION 5. QUORUM. The presence in person or by proxy of the holders
of a majority of the outstanding shares of stock entitled to vote on a
particular matter shall constitute a quorum for the purpose of considering
the matter. In the absence of a quorum, the holders of a majority of the
shares present or represented at the meeting of stockholders may adjourn a
meeting until a quorum shall be present or represented.
SECTION 6. VOTING. Each stockholder having the right to vote shall be
entitled to one vote for each share of stock registered in his name. Such
vote may be cast in person or by proxy complying with the requirements of
applicable law. Except as otherwise required by statute, the certificate
of incorporation of the Company or these bylaws, all matters, including the
election of directors, shall be decided by the vote of the holders of a
majority of the stock of the Company represented and entitled to vote,
provided that a quorum is present. Except for the election of directors
and in other cases required by statute, the vote on any question need not
be by ballot.
SECTION 7. LIST OF STOCKHOLDERS. The Secretary or another officer
designated by the Board of Directors shall prepare, at least ten days
before every meeting of stockholders, a complete list of stockholders
entitled to vote at the meeting. The list shall be arranged in
alphabetical order and shall show the address of each stockholder and the
number of shares registered in his name. The list shall be open to
examination by any stockholder for any purpose germane to the meeting
during ordinary business hours for at least ten days prior to the meeting.
The list shall also be available for inspection during the meeting by any
stockholder who is present.
SECTION 8. INSPECTORS OF ELECTION. In advance of each meeting of
stockholders, the Company shall appoint one or more inspectors of election
who shall perform the functions assigned to them by law.
SECTION 9. BUSINESS TO BE CONDUCTED AT MEETINGS. No matter may be
brought before, or acted upon at, any meeting of stockholders except (1) as
directed by the Board of Directors of the Company, or (2) upon motion of
any stockholder of the Company who has notified the Secretary of the
Company of such intent (a) in the case of the annual meeting of
stockholders, by such date as may be specified in the proxy statement for
the prior year's annual meeting of stockholders, or (b) in the case of a
meeting other than the annual meeting of stockholders, not less than 60 nor
more than 90 days prior to the meeting date. The stockholder's notice
shall include (1) a brief description of the matter to be brought before
the meeting of stockholders, (2) the name and address of the stockholder
and the number of shares of each class of stock of the Company beneficially
owned by
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him, and (3) the dates on which he acquired such securities. The chairman
of the meeting shall finally determine whether any matter may be properly
brought before, or acted upon at, any meeting of stockholders in accordance
with this Section.
ARTICLE II. BOARD OF DIRECTORS
SECTION 1. AUTHORITY. The business and affairs of the Company shall be
managed under the direction of the Board of Directors.
SECTION 2. NUMBER AND TERM OF OFFICE. The Board of Directors shall
consist of three to twenty directors, the number to be determined by
resolution of the Board of Directors at any regular or special meeting of
the Board. So long as at least three directors remain, the resignation,
removal or death of a director shall not create a vacancy in the Board of
Directors, but the number of directors constituting the whole Board shall
automatically decrease to the number of directors remaining, until such
number shall be changed by resolution of the Board of Directors. Each
director shall continue in office until the next annual meeting of
stockholders and until his successor shall have been elected and qualified,
or until he shall die or resign or shall have been removed in the manner
provided by statute.
SECTION 3. VACANCIES. Any vacancy in the Board of Directors, including
new directorships created by an increase in the authorized number of
directors, may be filled by a majority of the remaining directors even
though less than a quorum, or by the stockholders at any meeting held prior
to the filling of such position by the Board of Directors. If there are
fewer than three directors in office, the remaining director or directors
shall appoint the additional directors required to provide a Board of
Directors of at least three directors.
SECTION 4. PLACE OF MEETINGS. The Board of Directors shall hold its
meetings at such places as it shall determine.
SECTION 5. FIRST MEETING. Immediately after each annual meeting of
stockholders, the Board of Directors shall elect the officers of the
Company and appoint the members of its committees.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such times as the Board may
designate.
SECTION 7. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board of
Directors, the President or by any two members of the Board of Directors.
Written, telephone or personal notice of each such meeting shall be given
by the Secretary to each director not later than the day before the day on
which the meeting is to be held.
SECTION 8. QUORUM. A majority of the directors in office at the time
of any regular or special meeting of the Board of Directors shall
constitute a quorum for the transaction of business at such meeting. In
the absence of a quorum, a majority of the directors present may adjourn
the meeting from time to time until a quorum is present. No notice of the
adjourned meeting need be given other than announcement of its date, time
and place at the meeting at which the adjournment is taken.
SECTION 9. RELIANCE ON RECORDS. Each director, officer or member of
any committee appointed by the Board of Directors shall in the performance
of his duties be fully protected in relying in good faith upon the books of
account or reports made to the Company by any of its officers, agents or
employees or by duly qualified outside legal or engineering counsel or by
any independent accountant, or by any appraiser selected with reasonable
care by the Board of Directors or by any such committee, or in relying in
good faith upon other records of the Company.
ARTICLE III. COMMITTEES
SECTION 1. THE EXECUTIVE COMMITTEE. The Board of Directors may appoint
two or more of their number to constitute an Executive Committee, which may
exercise all the powers of the Board of Directors except that the Executive
Committee shall not have the power to take any action which under the
Delaware General
19
<PAGE>
Corporation Law is reserved to the Board of Directors, and the Executive
Committee shall not have the power to change the number of directors, to fill
any vacancy in the Board of Directors, to change the number of members of the
Executive Committee or to fill any vacancy in the Executive Committee.
SECTION 2. OTHER COMMITTEES. The Board of Directors may appoint
committees other than the Executive Committee. Each committee shall have
the powers specified by the Board of Directors.
SECTION 3. COMMITTEE CHAIRMEN. The chairman of each committee shall be
appointed by the Board, or, in the absence of such appointment, chosen by
the members of the committee.
SECTION 4. MEETINGS, NOTICE AND QUORUM. Regular meetings of any
committee of the Board of Directors may be held without notice at such
times as the committee may designate. Special meetings of any committee
may be held whenever called by the chairman. Notice of special meetings
shall be given as in the case of special meetings of the Board of
Directors. A majority of the members of any committee shall constitute a
quorum for the transaction of business.
SECTION 5. VACANCIES; DESIGNATION OF ALTERNATE MEMBERS. Vacancies in
any committee may be filled only by the Board of Directors. The Board of
Directors may also designate alternate members of any committee to serve in
the temporary absence or disqualification of any member of any committee.
ARTICLE IV. OFFICERS
SECTION 1. NUMBER. The officers of the Company shall be a Chairman of
the Board of Directors, a President, one or more Group Vice Presidents, one
or more Vice Presidents, a Chief Financial Officer, a Treasurer, a
Secretary and such other officers as may be appointed in accordance with
the provisions of Section 3 of this Article.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers
of the Company shall be chosen at least annually by the Board of Directors.
Each officer, except officers appointed in accordance with the provisions
of Section 3 of this Article, shall hold office until his successor shall
have been duly chosen and qualified, or until he shall die or resign, or
shall have been removed in the manner hereinafter provided. The Chairman
of the Board of Directors and the President shall be chosen from among the
directors, but the other officers need not be directors.
SECTION 3. OTHER OFFICERS. The Board of Directors may appoint such
other officers as the business of the Company may require, each to hold
office for such period, have such authority and perform such duties as the
Board of Directors may determine. The Board of Directors may delegate to
any officer or committee the power to appoint such other officers.
SECTION 4. REMOVAL. Any officer may be removed at any time, either
with or without cause, by the Board of Directors.
SECTION 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause may be filled by
the Board of Directors.
SECTION 6. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors shall be the Chief Executive Officer of the Company and
shall have general supervision over the business of the Company and over
its several officers, subject to the direction of the Board of Directors.
He shall preside at meetings of the Board of Directors and stockholders and
shall have such other duties as may be assigned by the Board of Directors.
SECTION 7. PRESIDENT. The President shall be the Chief Operating
Officer of the Company and shall have the responsibility for the day-to-day
operations of the business. He shall perform such other duties as from
time to time may be assigned to him by the Chairman. He shall also, in the
absence or at the request of the Chairman, exercise the powers and perform
the duties of the Chairman in his capacity as Chief Executive Officer.
SECTION 8. OTHER OFFICERS. The other officers shall have such powers
and perform such duties as are customarily incident to their offices and as
may be assigned by the Board of Directors or the Chairman of the Board of
Directors.
20
<PAGE>
ARTICLE V. INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. The Company shall indemnify any
person who was or is a party or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, either civil,
criminal, administrative or investigative, by reason of the fact that he is
or was a director, officer or employee of the company (including the
subsidiaries of the Company) or of a constituent corporation absorbed in a
consolidation or merger (a "Constituent Corporation"), or is or was serving
at the request of the Company or a Constituent Corporation as a director,
officer, or employee of another enterprise, or is or was a director,
officer or employee of the Company or a Constituent Corporation serving at
its request as an administrator, trustee or other fiduciary of one or more
of the employee benefit plans of the Company or of another enterprise,
against expenses (including attorney's fees), judgments, fines, excise
taxes, and amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding to the extent that
such person is not insured or otherwise indemnified and the power to so
indemnify has been or may be granted by statute. The determination of the
Company's duty or power to indemnify any such person under the applicable
statutory standards may be made in any manner permitted by law.
SECTION 2. ADVANCE OF EXPENSES. Expenses (including attorney's fees)
incurred in defending a civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Company in advance of the
final disposition of such action, suit or proceeding (a) for any present
director or officer of the Company upon receipt of an undertaking by or on
behalf of the director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Company, or (b) for any other person, upon such terms and conditions as the
audit Committee deems appropriate.
SECTION 3. FOREGOING NOT EXCLUSIVE. The foregoing indemnification and
advancement of expenses shall not be deemed exclusive of any other right to
which one indemnified may be entitled, both as to action in his official
capacity and as to action in another capacity while holding such office,
and shall inure to the benefit of the heirs, executors and administrators
of any such person.
SECTION 4. INSURANCE AND OTHER INDEMNIFICATION. The Board of Directors
shall have the power to purchase and maintain, at the Company's expense,
insurance on behalf of the Company and other persons to the extent that the
power to do so has been or may be granted by statute. This power shall
exist whether or not the Company would have had the power to indemnify such
person against the liability insured against under the provisions of
Section 1 of this Article. The Board of Directors shall also be empowered
to give any other indemnification to the extent permitted by law.
SECTION 5. CLAIMS. In any action brought against the Company by a
person claiming indemnification pursuant to the provisions of this Article,
the Company shall have the burden of proving that such person is not
entitled to indemnification. If any such action is successful, either in
whole or in part, the reasonable expenses incurred in prosecuting the
action shall also be paid by the Company.
ARTICLE VI. PROXIES FOR SECURITIES OF OTHER CORPORATIONS
Unless otherwise determined by the Board of Directors or the Executive
Committee, the Chairman of the Board of Directors, the President, any Vice
President or the Secretary of the Company may exercise for the Company the
powers and rights which the Company may have as the holder of stock or other
securities in any other corporation. Such persons may also execute all such
written proxies or other instruments as they may deem necessary so that the
Company may exercise such powers and rights.
ARTICLE VII. SHARES OF STOCK
SECTION 1. CERTIFICATES OF STOCK. Every stockholder shall be entitled
to have a certificate in such form as the Board of Directors shall approve,
certifying the number and class of shares of stock of the Company owned by
him.
21
<PAGE>
SECTION 2. TRANSFER OF SHARES. Shares of stock of the Company shall be
transferable on the books of the Company by the holder thereof in person or
by his attorney upon surrender for cancellation of certificates for the
same number of shares, duly endorsed or accompanied by a duly executed
stock transfer power and with such proof of the authenticity of signatures
as the Company or its agents may reasonably require.
SECTION 3. LOST, STOLEN AND DESTROYED CERTIFICATES. The Board of
Directors may make such rules as it may deem expedient concerning the
issue, transfer and registration of certificates for stock and the
replacement of lost, stolen or destroyed certificates.
ARTICLE VIII. SEAL
The seal of the Company shall be in the form of a circle which shall bear
the name of the Company and the phrase "Incorporated 1917 Delaware."
ARTICLE IX. FISCAL YEAR
The fiscal year of the Company shall end on December 31.
ARTICLE X. AMENDMENTS
These bylaws may be amended or repealed, or new bylaws may be adopted, at
any regular or special meeting of the Board of Directors by the vote of a
majority of the directors or at any annual or special meeting of the
stockholders by the vote of the holders of a majority of the outstanding stock
entitled to vote; provided that notice of such proposed action shall be
included in the notice of such meeting of directors or stockholders.
22
<PAGE>
EXHIBIT (12)
ROHM AND HAAS COMPANY
AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(millions of dollars)
Earnings before income taxes............. $407 $194 $261 $240 $313
Fixed charges............................ 82 79 83 79 77
Capitalized interest adjustment.......... (2) (7) (3) (6) (17)
Undistributed earnings adjustment........ (2) 6 2 (2) (5)
---- ---- ---- ---- ----
Earnings............................... $485 $272 $343 $311 $368
==== ==== ==== ==== ====
Ratio of earnings to fixed charges....... 5.9 3.4 4.1 3.9 4.8
==== ==== ==== ==== ====
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.
23
<PAGE>
ROHM AND HAAS COMPANY ANNUAL REPORT
IMPROVEMENT FROM ALL PERSPECTIVES
ID: GRAPHIC (ASSORTED PHOTOGRAPHS)
1 9 9 4
<PAGE>
ROHM AND HAAS COMPANY
Rohm and Haas makes specialty chemicals that
are used by industry to make or enhance everyday
consumer goods. Approximately 12,000 people work
in research facilities, manufacturing sites and sales
offices in countries throughout the world.
Expertise in polymer design and small-molecule
chemistry, along with an unwavering commitment to
customer service, have made Rohm and Haas what
it is today -- a premier supplier of specialty chemicals
with sales of $3.5 billion.
ID: GRAPHIC
THE PEOPLE OF
ROHM AND HAAS
Throughout the pages of this report you will find photos
of Rohm and Haas people working to improve the
company from many perspectives -- including customer
satisfaction, productivity and safety. They represent
just a few of the people who make Rohm and Haas
a leader in the chemical industry:
Christer Andersson, Ray Baker, Reid Banyay,
Cristobal Benavides, Carol Bloomfield, Beth Bloss,
Margaret Bowdery, Rob Buchler, Bob Cassidy, Luis
Cervera, Mike Cholod, Carl Coker, Pat Colau, Robert
Cowie, Braulio Cuentas, Blaine Davis, Dennis Dean,
Cheryl Deckert, Ernie Diebold, Jair Escalante,
Augusto Escorcia, Lonnie Ferris, Ron Fischer, Gary
Fischette, Michael Foster, Jeff Garry, Steve Gaskey,
Jonnie Gove, Pete Grant, John Graves, Kim Hall, Amy
Jordan, Takahiro Kawabe, Takuo Kawai, Paul Keating,
Dick Keough, Jim Kempner, Frank Lipiecki, Mike
Legenza, Chuck Mateer, Stephen Martin, Rafael
Niebles, Kenny Office, Adal Ortiz, Taka Otsuka, Cindy
Passamonti, Ruben Pulliam, Brenda Rangel,
Laudelino Rodriguez, Ralph Ruocco, Annie Ryan,
Doug Seewer, Dick Shipley, Richard Small, Jon
Spivey, Eiji Tsuchida, Jorge Vega, and Karl Weidner.
CONTENTS:
Financial Highlights ....................................... 1
Letter to Stockholders ..................................... 2
Rohm and Haas at a Glance .................................. 6
Business Discussions
Polymers, Resins and Monomers ............................ 8
Plastics ................................................. 11
Performance Chemicals .................................... 14
Agricultural Chemicals ................................... 17
Corporate Responsibility ................................... 19
Financial Review and Index ................................. 21
Shareholder Information .................................... 57
Directors and Management ................................... 58
Locations .................................................. 60
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Millions of dollars (except per-share amounts) 1994 1993
-----------------------------------------------------------------------------
<S> <C> <C>
FOR THE YEAR:
Net sales $3,534 $3,269
Earnings before cumulative effect
of accounting change 264 126
Net earnings applicable to
common shareholders 257 99
Net cash provided by operating activities 524 358
Cash dividends 102 97
Capital additions 339 382
Depreciation 231 226
-----------------------------------------------------------------------------
AT YEAR END:
Total assets $3,861 $3,524
Total debt 786 773
Stockholders' equity 1,620 1,441
-----------------------------------------------------------------------------
RATIOS:
Total debt-to-equity * 44% 48%
Return on net assets + 8 4
Return on common stockholders' equity * + 16 8
-----------------------------------------------------------------------------
PER COMMON SHARE:
Earnings before cumulative effect of
accounting change $3.79 $1.74
Net earnings 3.79 1.46
Common dividends 1.44 1.36
Stockholders' equity 23.93 21.31
-----------------------------------------------------------------------------
</TABLE>
* Stockholders' equity is before reduction for the ESOP transaction
+ Earnings are before cumulative effect of an accounting change in 1993
ID: GRAPHIC (PIE CHART)
1
<PAGE>
TO THE SHAREHOLDERS OF ROHM AND HAAS COMPANY
ID: GRAPHIC (PHOTOGRAPH)
2
<PAGE>
DEAR SHAREHOLDER:
In last year's letter we said Rohm and Haas would make a comeback from a
frustrating performance in 1993 -- and, with the help of 12,000 people
around the world -- we did.
We made progress in 1994 on every important measure:
SALES: Sales were up in every region and business, topping the $3.5
billion mark and exceeding 1993 by 8 percent.
VOLUME: We also sold more product, with unit volume up 8 percent in
the past twelve months. As of the end of 1994, we were making 40
percent more product than when the decade began.
EARNINGS: Net earnings per common share rebounded from $1.74 in 1993
to $3.79 in 1994, an increase of 118 percent.
SAFETY: Worker injuries and illnesses were reduced by more than 30
percent.
CUSTOMER SATISFACTION: Nearly every business earned a special
quality recognition award from at least one key customer in 1994, and
most won multiple awards. All nine businesses put mechanisms in place
to identify and serve the needs of customers who are most important to
us. These efforts included everything from ongoing customer service
audits to undertaking promotional campaigns in support of customers'
product lines.
PRODUCTIVITY: Selling and administrative costs remained flat. Plant
manufacturing expenses went down -- even as the amount of product we
made went up.
SHAREHOLDER RETURN: Return on common stockholders' equity (ROE)
moved up 8 percentage points during the year, ending at 16 percent.
ID: PHOTO CAPTION
LEFT: JOHN P. MULRONEY,
PRESIDENT
RIGHT: J. LAWRENCE WILSON,
CHAIRMAN
In addition, we invented new products and acquired others; built and
expanded plants to keep products in supply, and increased efficiency by
consolidating or closing manufacturing and sales operations.
WE'VE COME A LONG
WAY...BUT STILL HAVE
FAR TO GO
You can expect more of Rohm and Haas because we expect more of
ourselves.
Rohm and Haas has been in business since 1909. Throughout most of
that time, we have been regarded as a successful, innovative specialty
chemical company -- one renowned for its ability to use chemical
technology to serve industry in thousands of different ways.
For the past several years, we have been displeased with the pace of
progress. Our performance has been respectable, but respectability is
not good enough. Expectations of shareholders, customers, employees and
the public become higher with each passing year.
Our expectations of ourselves are high as well. Said simply, Rohm
and Haas strives to:
o Assure we are world class in all of our businesses -- world class
in terms of customer service, technology, manufacturing, geographic
reach and overall costs;
o Hold the first or second place in every market in which we
compete;
o Be in the forefront of employee safety, environmental security and
community acceptance;
o Expand geographically in high-growth markets, such as the Pacific
Rim;
o Exploit our prowess in differentiating products in high-growth
markets, such as water-borne coatings;
o Capture more of our customers' business by ensuring we are their
preferred supplier;
o Provide an excellent and consistent return to shareholders every
year, maintain a strong balance sheet and pay out about one-third of our
earnings in dividends.
Every business and staff group is committed to finding faster ways
of inventing, making, selling and delivering products to our customers
and to reducing costs.
We have established higher financial targets for sales and earnings
growth and for a return on stockholders' equity that will rank us among
industry leaders.
Rohm and Haas will improve its safety performance until no one is
hurt while working for this company. We have rededicated ourselves to
Total Quality Leadership as the overarching philosophy that guides us to
better quality, customer service and productivity.
TAKING ACTION,
MAKING PROGRESS
We are not seeking to make temporary changes for short-term gains at
the expense of permanent improvements. By re-analyzing the way we work,
and by focusing on reducing costs, lasting productivity improvements can
be achieved.
Here are a few of the examples of improvements. More can be found
throughout this report.
o We are building a single, integrated computer network that accepts
orders, assigns inventory, forecasts future requirements, schedules
plant production, replenishes stocks and keeps track of costs. This
system allows a person sitting in our French office to take a phone call
from a U.K. customer and -- while the customer is still on the phone --
arrange for product to be shipped from a plant or warehouse anywhere in
Europe or North America. This one transaction triggers hundreds of
others throughout the supply chain and accounting system. We began to
see cost savings from this system in 1994, and expect even greater
savings over the next few years -- perhaps as much as $75 million per
year by the end of the decade.
3
<PAGE>
o We closed offices in North America and Europe during the year and
reduced or consolidated others, including our regional headquarters in
Europe. Most of our sales personnel now work from their homes.
o People throughout the Research Division re-evaluated their work
and eliminated unnecessary spending. While this led to savings of $10
million in research and development costs in 1994, the true payout will
occur in coming years as this rededicated and refocused work group
unleashes a full pipeline of new products that have been tested against
market expectations at each stage of their development.
ID: GRAPHIC (BAR CHART)
o Our Engineering Division is streamlining construction processes in
order to build new plants faster and with dramatically lower costs. A
new biocides plant in Bayport, Texas, is the first plant to benefit from
this initiative and will be in operation early in 1996.
o Manufacturing operations were streamlined and consolidated,
particularly Polymers and Resins operations in North America. The
downsizing of the Philadelphia plant continued.
Productivity improvements are intended to reduce costs, not to
achieve some predetermined reduction in head count. Nevertheless, it is
clear that a streamlined company needs a smaller workforce. During
1994, nearly 800 people left the company, most through voluntary
separations.
CUSTOMERS,
CUSTOMERS,
CUSTOMERS
The redesign of work processes to lower costs took place right along
with the most important job at Rohm and Haas -- satisfying customers and
reaping the benefits of increased business.
The Polymers and Resins business, which was responsible for 41
percent of total company sales in 1994, saw across-the-board growth.
P&R's water-based emulsion technology continued to displace
solvent-based paints and coatings and found increasing acceptance around
the world in traffic paints, stucco-like wall mastics, bridge coatings
and adhesives.
The acrylic acid plants in Houston, Texas, ran flat out to supply
other Rohm and Haas businesses with raw material and to meet growing
demand for use in superabsorbent polymers. We expect supply to remain
tight through the first half of 1995 as we await the third-quarter
commencement of a 220-million pound acrylic acid expansion, a one-third
increase in capacity.
Our Plastics Additives business rebounded along with the
construction market, and made great strides in improving the efficiency
and networking of its operations worldwide.
AtoHaas North America increased profitability as the U.S. automotive
market improved.
Biocides received U.S. registration for Sea-Nine, a biocide used
primarily in marine applications. We expect to see strong sales growth
for this product in 1995.
Petroleum Chemicals weathered the loss of a large segment of its
U.S. product volume, yet maintained earnings through increased sales of
specialty polymethacrylate petroleum products and Primene amines used in
refinery processes, fuels and dyes.
Ion Exchange Resins rationalized its product line aggressively and
adopted a two-tiered marketing strategy that allows it to be the
low-cost producer of resins for water treatment, yet still offer
tailored products for specialty applications.
Shipley Company saw dramatic benefits from its cycle time initiative
and the introduction of state-of-the-art deep ultraviolet photoresist
technology.
Agricultural Chemicals expanded its portfolio of products, helped by
the mid-year acquisition of Monsanto's pyridine business and the
development of new generations of insecticides.
A RISING TIDE LIFTS
ALL BOATS
Overall, external factors trended in our favor -- as they did for
everyone in the chemical industry.
Sales of our specialty chemicals are affected by the regional
economies of Europe, North America and the Pacific. External economic
conditions in all three
4
<PAGE>
regions improved significantly in 1994. Industrial recovery in the
United States and Europe, along with increasing demand in Asia, fueled
volume growth. The double-digit sales and earnings gains for the
Pacific Region validated our commitment to the region. The
strengthening of the yen and European currencies enhanced the bottom
line.
Raw material costs began rising during the second half of 1994, and
skyrocketed 17 percent in the fourth quarter. Increases in propylene,
methanol, acetone, ammonia and styrene costs were the primary components
of the increase.
Average selling prices declined 1 percent in 1994, but the price
increases we put in place in the last half of the year will overcome the
effect of higher raw material costs in 1995. The higher production
volumes, smooth plant operations and reduction in manufacturing costs
mentioned earlier helped push up gross profit margin by two percentage
points in 1994, despite increased feedstock costs.
Our competitors sailed in the same waters we did. Rohm and Haas's
16 percent return on equity in 1994, compared against those of our
competition, reveals that we have improved our position in the industry
by a notch or two, but our relative improvement was measured, not
dramatic.
WE KNOW WE CAN DO
WHAT IS NECESSARY
We are not discouraged. In fact, we are more optimistic than ever.
Rohm and Haas has excellent technology. Our expertise in creating novel
acrylic polymers, for example, is unmatched. We have good market
positions around the world. We are especially well-positioned to take
advantage of growth in the Pacific Rim with an integrated network of
plants, sales offices and research sites devoted specifically to the
needs of that region.
Most important, we improved a lot during the past year.
We were able to change quickly in 1994: product portfolios were
strengthened; costs were reduced; business processes were redesigned; we
learned to listen and respond faster to customers. Because of this
experience, we now are confident that we can keep on changing -- faster
and better than ever before.
And that's what must be done. To be a leader in the chemical
industry, to win at this game, we must change faster than our
competition and have a leaner cost structure. Rohm and Haas must offer
better customer service than anyone else in the business -- in every
market in which we compete, on every day of the year.
The people who work for Rohm and Haas understand this and are
committed to taking the company to an overall leadership position. As
Winston Churchill wrote, "It's no use saying, 'We are doing our best.'
You have to succeed in doing what is necessary."
LOOKING AHEAD
What will be necessary in 1995 is more of the same. We will
generate profit growth and generate discretionary cash through a
combination of unit volume increases and an aggressive attack on
operating costs. We are hopeful that raw material costs will not
continue to increase at the late 1994 rate, but level off at a new
plateau until additional capacity comes on stream. However, we will
pursue price increases whenever necessary to cover raw material cost
increases. It's likely that the economies in North America and Europe
will continue to do well. We expect to make continued inroads into the
Pacific Rim with investments in new plants and sales offices. With this
outlook for 1995, Rohm and Haas should continue to grow unit volume,
revenues and earnings.
In summary, 1995 will be a time of excitement at Rohm and Haas. We
are confident in our abilities to adapt to fast-paced change and to turn
our speed into competitive advantage.
/s/ J. Lawrence Wilson
J. Lawrence Wilson
Chairman
/s/ John P. Mulroney
John P. Mulroney
President
March 24, 1995
5
<PAGE>
ROHM AND HAAS AT A GLANCE
BUSINESS UNITS
1994 SALES*
(IN MILLIONS)
------------------------------------------------------------------------------
POLYMERS, POLYMERS AND RESINS
RESINS AND FORMULATION CHEMICALS
MONOMERS $1,444 MILLION
ID: GRAPHIC
MONOMERS
$210 MILLION
------------------------------------------------------------------------------
PLASTICS PLASTICS ADDITIVES
$363 MILLION
ID: GRAPHIC
ATOHAAS
$272 MILLION
------------------------------------------------------------------------------
PERFORMANCE ELECTRONIC CHEMICALS
CHEMICALS $297 MILLION
ID: GRAPHIC
ION EXCHANGE RESINS
$204 MILLION
PETROLEUM CHEMICALS
$162 MILLION
BIOCIDES
$140 MILLION
------------------------------------------------------------------------------
AGRICULTURAL AGRICULTURAL CHEMICALS
CHEMICALS $439 MILLION
ID: GRAPHIC
------------------------------------------------------------------------------
6
<PAGE>
KEY MARKETS
------------------------------------------------------------------------------
POLYMERS, Professional and do-it-yourself home improvement,
RESINS AND construction, factory-applied finishes, road and
MONOMERS bridge maintenance, papermaking, water-treatment,
detergent, textile, packaging, leather goods and
apparel.
Primary source of starting materials for Rohm and Haas
products. Monomers also are sold to customers for use
in superabsorbent diapers, detergents and other
consumer products.
------------------------------------------------------------------------------
PLASTICS Construction materials, automotive parts, packaging,
home appliances, business machines and consumer
electronics.
Automotive parts, construction products,
transportation, sign, lighting and appliance markets.
------------------------------------------------------------------------------
PERFORMANCE Computer components and circuitry, telecommunications
CHEMICALS equipment, automotive products, medical equipment and
mainframe computers.
Water treatment, electronics, pharmaceuticals,
biotechnology and food processing.
Automotive industry, industrial equipment,aviation,
pharmaceuticals and oil refining.
Industrial water treatment, paper making, cosmetics,
household cleaning products, swimming pools and spas.
------------------------------------------------------------------------------
AGRICULTURAL High-value specialty agricultural crops,including
CHEMICALS fruits, vegetables, nuts, vines and flowers.
------------------------------------------------------------------------------
PRODUCTS
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POLYMERS, Acrylic and vinyl acetate emulsion polymers, resins
RESINS AND and additives for use in house paints,adhesives,
MONOMERS bridge and maintenance coatings, caulks, floor
polishes, inks, road-marking paints, paper coatings,
leather finishes, building products, patching cement,
textiles, nonwovens and wood finishes.
Water-soluble polymers for water treatment,
detergent/cleaner and mineral processing applications.
Acrylic acid and its derivatives, Methyl methacrylate
and its derivatives, Specialty monomers.
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PLASTICS Impact modifiers and processing aids for vinyl siding,
window profiles, pipe, film, bottles and engineering
plastics.
Acrylic sheet and resins for glazing, display cases,
automotive parts, lighting fixtures, signs and medical
devices.
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PERFORMANCE Specialty chemicals used to fabricate integrated
CHEMICALS circuits and printed wiring boards. Ultra-high purity
photoresists for imaging applications. Processes for
plating on plastic and on metal parts.
Ion exchange resins used to change the characteristics
of water and other fluids.
Polymethacrylate-based products usedin
high-performance lubricants. Amine-based
intermediates and salt-forming organic bases.
A full range of isothiazolone and bromine-based
biocides used to control algae, fungi and bacteria
growth.
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AGRICULTURAL A complete portfolio of herbicides, fungicides and
CHEMICALS insecticides for specialty crops around the world.
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KEY COMPETITORS
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POLYMERS, BASF, Hoechst, Union Carbide, Unilever/National Starch
RESINS AND
MONOMERS BASF, ICI, Elf Atochem, Hoechst, Cyro
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PLASTICS Kaneka, Mitsubishi Rayon, Dow, Elf Atochem, Huls
ICI, Cyro, Rohm, Mitsubishi Rayon
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PERFORMANCE TOK, JSR, Hoechst, Atotech, MacDermid
CHEMICALS
Dow, Bayer, Purolite, Mitsubishi Kasei
Shell, Lubrizol, Sanyo, Exxon
Dow, Union Carbide, Zeneca, Great Lakes
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AGRICULTURAL Elf Atochem, DuPont, Monsanto, Shell, Zeneca, FMC
CHEMICALS
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*Does not include sales related to some startup activities and new ventures,
which totaled $3 million in 1994.
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POLYMERS, RESINS AND MONOMERS
Polymers, Resins and Monomers (PRM) grew faster than the general
economy again in 1994, propelled by continued demand for environmentally
friendly, water-based products and growth in emerging markets.
Revenues and unit volume each increased 9 percent over 1993.
Earnings jumped to $167 million, a 39 percent increase from the year
before.
Polymers and Resins improved its safety record in 1994, with
on-the-job injuries dropping to 2.8 for every 200,000 hours worked.
Formulation Chemicals recorded zero job-related injuries and illnesses
in 1994, as did 5 of the 29 Polymers and Resins manufacturing plants
around the world. The Monomers business recorded an injury rate of 4.1,
a significant improvement from 1993. All PRM units will be working
throughout 1995 to achieve further safety improvements.
Monomers' plants ran extremely well in 1994 and provided a steady
supply of the acrylate and methacrylate monomers needed to fuel the
growth of two-thirds of the company's product portfolio. A critical
220-million pound expansion of the acrylic acid monomer plant in
Houston, Texas, will begin operating in the third quarter of 1995.
Until then, supply for acrylic acid will remain tight.
The Monomers business saw continued growth in sales of glacial
acrylic acid to customers who use it for applications which require
superabsorbency. These monomers find their way into disposable diapers,
feminine hygiene and adult incontinence products, as well as other
applications.
One way to determine customer satisfaction is to measure the sales
growth of a business. In those terms, Polymers and Resins did quite
well. Sales increased in every product segment -- architectural and
industrial coatings, adhesives, construction products, specialty
industrial polymers and leather.
Ropaque polymer remained one of the company's best-selling products.
This innovative opacifier was introduced more than 10 years ago as a
paint additive. And, while Ropaque sales as a paint additive continue
to increase, Ropaque today also is in great demand by the paper industry
for use in coatings that improve the gloss, opacity and print fidelity
of magazines, brochures and other high-quality publications.
In 1994, sales of vinyl acetate products for paper and paperboard
applications did particularly well in North America.
Ongoing demand for consumer paints which offer easy cleanup and emit
fewer volatile organic compounds (VOCs) to the air meant continued good
sales for Rhoplex paint emulsions. The company recently began offering
new lines of acrylic and vinyl acetate emulsions which permit paint
manufacturers to formulate essentially odor free, extremely low VOC
products.
Industrial coatings customers find water-borne technology valuable
in a variety of applications, including traffic paints and maintenance
coatings. Rohm and Haas saw a dramatic increase in the volume of
emulsions sold in the United States, Europe and Australia. Demand grew
at double-digit rates for acrylic maintenance coatings, which protect
storage tanks, bridges and sea-going shipping containers. Growth for
traffic paints uses also was dramatic.
Adhesive products for pressure-sensitive labels and tapes sold very
well in 1994, particularly in Europe. Clear labels take advantage of
the unique clarity of acrylics and are used where attractive packaging
is a marketing advantage, such as shampoo and deodorant containers.
Acrylic-based pressure-sensitive adhesives also are used in
polypropylene packaging tapes, and, increasingly, in food-packaging.
Construction products reported good sales growth in 1994 as the new
construction, home refurbishing and do-it-yourself markets rebounded
around the world. Energy efficient wall systems that incorporate
acrylic polymers continued to gain acceptance in North America. Sales
of Primal NT metal-free polymers were the basis for significant growth
of environmentally friendly floor polishes in Europe. Sales were also
good for a clear water-based gymnasium floor sealant that is an
alternative to solvent-based urethane coatings.
Lubritan WP, a product used to make leather washable or waterproof,
recorded good sales in Brazil, one of the world's largest leather
markets. Lubritan has proved to be especially useful in waterproofing
leather for casual shoes, a fast-growing style in the United States and
Europe. Lubritan SP, a product used to make car upholstery, was
introduced early in 1995.
Customer satisfaction sometimes can be improved in novel ways. Rohm
and Haas set up the Paint Quality Institute years ago to promote the
concept to consumers that high-quality acrylic paints are a better buy
because they are durable, easy to handle and often require only one coat
to get the job done. In 1994, the Institute took the next step --
providing training programs for paint customers' employees and, in some
cases, for people who sell the paint at the retail level.
Formulation Chemicals sells products used in laundry detergents
around the world. These Acusol water-soluble polymers help keep dirt
from reattaching itself to clothes before being washed away with the
rinse water. Sales growth slowed for the first time in 1994, due
primarily to detergent reformulations in Europe and cost pressures on
North American detergent makers.
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Early in 1995, the company announced it would begin offering market
development quantities of polyaspartic acid, a fully biodegradable
polymer for use in detergents.
Other Formulation Chemicals products, including water-treatment
polymers that provide scale control in industrial processes and rheology
modifiers for use in personal care products, did well.
(continued on page 10)
ID: PHOTO CAPTION
BELOW: The Landskrona, Sweden, plant was the first to demonstrate that
ultrafiltration could be used to recover solids from wastewater. This
cost-saving technology is being implemented at other plants around the world.
ID: GRAPHIC (PHOTOGRAPH)
ID: PHOTO CAPTION
THESE PAGES: Continuous improvement efforts at the Hayward, California,
plant led to higher plant productivity in 1994. It also led to better on-time
delivery rates, lower air emissions, and closer links with community schools.
ID: GRAPHIC (PHOTOGRAPH)
9
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Productivity improvement was a major PRM initiative in 1994 and took
many different forms, including:
o The consolidation/closure of a number of sales offices and order
centers. Many sales people now work from home.
o Adjustments in emulsion production, with a net overall increase in
emulsion capacity. These entail the closure of two plants in the United
States and the expansion of emulsion capacity at sites in California,
Illinois, France, Italy and the Philippines. Early in 1995, the company
announced that a 200-million pound emulsion facility will be built in
Texas to handle the needs of high-volume customers located in the
Southwest United States.
o The decision to sell the styrene-butadiene emulsion business,
including a plant in North Carolina, in order to focus better on the
acrylic and vinyl acetate emulsions businesses.
ID: GRAPHIC (BAR CHART)
Nineteen ninety-five should be another good year for PRM, though it
may be difficult to repeat the level of volume increases the business
has experienced during the past few years. However, continued growth in
world economies and continued demand for water-based products, combined
with productivity improvements throughout the business, should help PRM
do well. The business remains committed to improvement in safety,
productivity and customer satisfaction.
ID: GRAPHIC (PHOTOGRAPH)
ID: PHOTO CAPTION
ABOVE: Teams of volunteers from a variety of backgrounds and functions
at the Croydon, U.K. office worked throughout 1994 to improve communication
among employees.
ID: GRAPHIC (PHOTOGRAPH)
ID: PHOTO CAPTION
INSET: People working at the Jacryl manufacturing operation in Japan
realized a notable accomplishment in 1994 -- zero injuries for the year.
Emergency response training is just one aspect of their overall safety
effort.
10
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ID: GRAPHIC (PHOTOGRAPH)
ID: PHOTO CAPTION
THIS PAGE: The Plastics Additives team in Louisville, Kentucky,
turned a limited monetary investment into increased capacity and lower
cost per pound by getting rid of slow spots in the production process.
In 1994, Plastics followed through on its commitment to restore
profitability. The business reported earnings of $58 million, an
improvement of $26 million over 1993 earnings, excluding after-tax
charges of $34 million taken in 1993 for asset writedowns. Volume and
sales were up 10 percent.
PLASTICS ADDITIVES
Plastics Additives had a very positive year. Demand was up for all
product lines. Manufacturing facilities operated at high capacity with
no major interruptions. While competitive pressures suppressed selling
prices, increases were implemented late in the year which partially
offset rising raw material costs. Although business results were good,
safety performance was disappointing. Initiatives are in place to
eliminate workplace injuries in 1995.
Plastics Additives' customers use Paraloid impact modifiers and
processing aids to impart toughness, weatherability and improve
processing of base plastics and engineering plastics for a variety of
consumer and industrial applications.
11
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ID: GRAPHIC (PHOTOGRAPH)
ID: PHOTO CAPTION
ABOVE: This cross-functional AtoHaas team meets monthly to provide
quick, quality solutions for customers of Plexiglas and Oroglas molding
resins around the world.
Paraloid acrylic impact modifiers and processing aids reported
healthy sales and volume gains in the building and construction markets.
In North America and Europe, demand was strong for Paraloid in building
applications, such as vinyl siding and windows. New bulk delivery
systems and returnable bulk packaging which eliminate waste were
introduced.
Sales of methyl methacrylate butadiene styrene (MBS) modifiers also
were strong. MBS modifiers are used primarily in polyvinyl chloride
(PVC) packaging applications and for PVC film and sheet.
Recovery in the automotive industry helped sales of engineering
resin additives (ERAs), which are used in automotive bumpers and other
specialty applications.
Demand is expected to grow for all Plastics Additives products.
Capacity expansions are underway at all four additives plants worldwide.
In 1995, capacity at the Louisville, Kentucky plant will be increased by
60 million pounds. Early in 1995, the Plastics Additives business
announced it would expand manufacturing capacity for its joint venture
with Kureha Chemicals in Singapore in order to serve a growing market in
Asia.
ATOHAAS
AtoHaas offers a broad line of acrylic sheet, polycarbonate sheet
and pelletized polymethylmethacrylate resins that meet the performance
and processing needs of customers in the automotive, transportation,
construction, sign and lighting markets. AtoHaas is a joint venture
between Elf Atochem and Rohm and Haas Company.
The market for acrylic plastics improved with the economy and led to
a year of solid sales and profit growth for AtoHaas in North America.
Smooth running manufacturing operations helped
12
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improve productivity. Greater usage of Plexiglas acrylic
melt-calendared products caused the company to decide to discontinue
cell-cast sheet production at Morrisburg, Canada at year end. Cell-cast
sheet throughout North America is now supplied by manufacturing
operations in Matamoros, Mexico.
Acrylic sheet had a strong year highlighted by increased sales of
Implex acrylic sheet used in the sign and fabrication industries. Two
new high-performance sheet products for the sign industry, Plexiglas Q
and Implex Plus, were introduced late in the year. Tuffak polycarbonate
sheet also had good growth.
Plexiglas and Oroglas acrylic molding resins achieved good volume
growth, fueled by a thriving automotive industry in North America and
the start of economic recovery in Europe and Japan. The resins are used
in the manufacture of a variety of automobile lenses and commercial
lighting applications.
ID: GRAPHIC (BAR CHART)
AtoHaas's European business showed good improvement, though its
performance is still below expectations. A new, world-class resin
plant, located in Italy, will be in operation by mid-1996.
The Plastics business group anticipates further improvement in sales
and earnings. Both businesses expect to gain increased efficiencies in
1995 from efforts put forth this past year. The goal to be a reliable,
consistent and quality supplier is unwavering.
ID: PHOTO CAPTION
BELOW: The Engineering Division is using "business process
reengineering" to achieve radical new goals for building new plants for
less money in dramatically less time. At one critical stage, the
existing process is "mapped" using symbols so that inefficiencies can be
identified and eliminated.
ID: GRAPHIC (PHOTOGRAPH)
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PERFORMANCE CHEMICALS
ELECTRONIC CHEMICALS
Shipley Company had a strong year. Sales were up dramatically.
Earnings more than doubled. Continued growth in the semiconductor
industry, improved economic conditions, new industry alliances and
productivity gains accounted for Shipley's robust performance.
Shipley's Microposit photoresists are used to help make integrated
circuits for the microelectronics industry. In 1994, customers for new,
advanced photoresists in both the United States and Europe increased
their use of this technology. Photoresists help transfer complex
circuit patterns onto silicon wafers on their way to becoming computer
chips. Ultra-high purity product is essential for work which is
measured in submicrons (a micron is a measure of length equal to
one-millionth of a meter).
In March 1994, Shipley announced an alliance with IBM to sell a new
generation of deep ultraviolet photoresist systems under the Shipley
label. This technology enables powerful integrated circuits to be made
with features smaller than .35 microns.
ID: GRAPHIC (PHOTOGRAPH)
Shipley's chemical processes for making printed wiring boards
reported increased sales in 1994 as economies in North America and
Europe improved and additional business was captured with key customers.
Shipley continues to reap the rewards of a time-management philosophy
adopted to improve the quality, cost and speed of its business
processes. The steps needed to design and develop or to make and market
a product are mapped out with the goal of reducing the time it takes to
complete them. This cycle time management has been applied to both the
printed wiring board and microelectronic chemicals lines and has
improved cycle time by 30 to 45 percent. Productivity improvements have
been measured in both time and money.
Plaskon Electronic Materials, Inc., makes plastic encapsulating
compounds for the semiconductor industry. Sales in the first half of
1994 were hurt by customer inventory adjustments, but had nearly
recovered by the end of the fourth quarter.
ION EXCHANGE RESINS
Nineteen ninety-four was another difficult year for the Ion Exchange
Resins business. Sales and volume increased, but the business continued
to report a loss due to fierce competitive pricing, manufacturing
variances and inventory writeoffs. The business's overall safety record
improved, and one plant -- the Soma, Japan, manufacturing facility --
operated all year without a single injury.
Ion Exchange is transforming itself into a high-volume, leaner, more
efficient business with the goal of becoming the lowest-cost producer in
the industry. Again in 1994, steps were taken to reduce costs. The
number of product offerings was reduced and manufacturing operations
adopted continuous flow management techniques to improve scheduling and
reduce cycle time. In addition, the business increased its capacity for
making uniform particle size resins and has modified its distribution
channels in certain markets in order to improve service.
Sales of resins that remove nitrates from potable water continued to
do well, especially in Europe where home water purification units are
common. Sales of large-scale Amberpack resin systems also improved.
These are significantly more efficient than standard water-treatment
systems and require less than 50 percent of the normal regeneration
chemicals. Ion Exchange also introduced the latest generation of
high-efficiency catalysts used to manufacture gasoline additives.
TosoHaas sales increased as a result of favorable factors in the
pharmaceutical and biotechnology markets. TosoHaas is a joint venture
between Rohm and Haas and Tosoh Corporation that supplies bioseparation
products.
PETROLEUM CHEMICALS
Nineteen ninety-four was a year of change for the Petroleum
Chemicals business. Volume dropped early in the year with the loss of a
major, long-time crankcase additives customer. The business then
accelerated plans to place a greater emphasis on sales of higher-margin
specialty products, including Acryloid pour-point depressants and
Primene amines.
Primene amines continue to find increasing use in inks, dyes,
pigments, refinery process and oil field chemicals, plastics additives,
fuel and lubricant additives. Core products based on polymethacrylate
technology -- the backbone of the Petroleum Chemicals business -- also
found increasing value in uses beyond the oil industry.
This specialty business emphasis resulted in a signficant earnings
increase on essentially flat sales. Financial performance also was
helped by restructuring efforts and increased manufacturing
efficiencies.
Petroleum Chemicals made significant strides in customer service in
1994. By the end of the year, the business met customer-requested
delivery dates more than 95 percent of the time. The quality processes
of the Morrisburg, Canada, plant were confirmed when that site earned
ISO-9002 certification early in 1994.
Petroleum Chemicals bettered its overall safety record in 1994, with
the Morrisburg and Nagoya, Japan manufacturing operations reporting
excellent safety records for the year. Efforts are underway to ensure
further improvement in 1995.
BIOCIDES
Biocides reported a good year -- double-digit volume growth,
increased sales and earnings.
A milestone was reached in April when Sea-Nine 211 biocide earned
U.S. EPA registration as a marine antifoulant.
14
<PAGE>
ID: GRAPHIC (PHOTOGRAPH)
ID: PHOTO CAPTION
LEFT: In 1994 Rohm and Haas began to pursue marketing opportunities
for Petroleum Chemicals aggressively outside Japan. In the past year,
sales efforts were initiated for Primene and Plexol (also known as
Acryloid) in Korea, Taiwan, China and Singapore.
INSET: Customer service means getting product to customers on time.
In 1994, only two of the 8,000 shipments made from the plant in Nagoya,
Japan, were delayed.
15
<PAGE>
ID: GRAPHIC (PHOTOGRAPH)
ID: PHOTO CAPTION
LEFT: Time means everything in the electronics business. Shipley
people have used time-management based improvement techniques to shorten
both production and research and development cycles by as much as 60
percent. Today Shipley gets product to customers quickly, and saves
both time and money.
ID: GRAPHIC (BAR CHART)
The financial benefit of this registration will be felt beginning in
1995 when marine paints containing Sea-Nine are offered for sale in the
United States.
The U.S. registration completes the effort to make Sea-Nine a global
product, with significant sales in Japan, Southeast Asia and Europe.
Business was strong across all segments of the Biocides business.
Sales of Kathon biocides for water treatment and industrial applications
and sales of Kathon CG for use in cosmetics and toiletries did well.
During the year, quality and regulatory problems that hindered sales of
bromine-based biocides were resolved and resulted in a recovery of
business.
A new, 15 million-pound-per-year manufacturing facility is under
construction in Bayport, Texas. When completed early in 1996, the
Bayport plant will make isothiazolone biocides for both industrial and
marine paint applications.
16
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AGRICULTURAL
CHEMICALS
ID: PHOTO CAPTIONS
BELOW: Eighty thousand acres of Mississippi cotton were saved from
devastation during the summer when an emergency use permit was given for
Confirm, a reduced-risk pesticide awaiting U.S. registration. Sales
representatives spearheaded the company's effort to educate cotton
growers and dealers, and the entire crop was treated in 10 days.
INSET: Three years ago, the Barranquilla, Colombia, plant enlisted
employees in a campaign to improve safety performance. Today,
Barranquilla has the lowest injury rate in Latin America -- and has
earned the company's highest safety award two years in a row.
ID: GRAPHIC (PHOTOGRAPH)
Agricultural Chemicals, which accounted for more than 12 percent of
Rohm and Haas's revenues, reported continued improvement in 1994. Sales
grew 7 percent to $439 million. However, a $4 million after-tax charge
for the writedown of an underutilized research facility kept earnings
essentially flat at $40 million. Absent this charge, earnings increased
13 percent.
Earnings were further affected by adverse weather conditions and
increased competitive pressures in Europe, and by a decrease in Dithane
fungicide sales for bananas in the Latin American region.
Dithane fungicide, Agricultural Chemicals' mainstay product,
reported flat sales in 1994, due primarily to an extremely dry summer in
Europe, increased
17
<PAGE>
competition and continuing regulatory pressures in that region.
Drought conditions in Korea and Japan tempered Dithane sales in the
Pacific. Sales of Dithane for use on bananas were down in Latin America
as farmers relied more on alternative chemistries. However, Dithane did
well in Central and South America on potato crops.
Dithane sales increased in North America due to an outbreak of
disease in potatoes, tomatoes and other crops. In particular, farmers
relied on Dithane to control a strain of the same potato blight that
caused the Irish potato famine in the 19th century.
A consent decree entered in 1995 requires the EPA to enforce
provisions of the Delaney clause which prohibit the use of any potential
cancer-inducing product in processed foods. This strict interpretation
of the Delaney clause could curtail the use of Dithane for certain
applications in coming years, even though the EPA completed a favorable
review of Dithane fungicide in 1991.
Systhane fungicide sales were down in North America, due to lower
occurrence of powdery mildew in California grape crops and increased
competitive pressures.
Goal herbicide, used in orchards, in reforestation in Brazil, and on
vegetable crops, showed significant growth in all parts of the world.
Heavy rainfall on the U.S. West Coast created a strong demand for Goal.
In Latin America, growth was driven by the launching of the product for
use in sugar cane, as well as the recapturing of markets for rice in
Central America and the Caribbean.
Sales of Stam herbicide were up considerably in North America.
However, serious price erosion during the year squeezed margins. Kerb
herbicide sales posted a significant gain in Europe. Kerb provides
broad-spectrum weed control in
ID: GRAPHIC (BAR CHART)
lettuce, oil seed rape, turf, ornamentals, treefruit, grapes and
artichokes.
The business continues to make significant inroads in improving
productivity and increasing customer satisfaction. Design work was
completed on consolidation of Goal facilities at the Philadelphia,
Pennsylvania, plant, while the installation of a new reactor in
Barranquilla, Colombia, increased capacity and improved quality for
Dithane production.
In June, Rohm and Haas acquired Dimension and Visor herbicides and
related assets from Monsanto. Dimension is used to control crabgrass
and other problem weeds on golf courses, on lawns and in other
landscaping applications. Visor herbicide currently is registered in
Spain and South Africa for use in trees, vines, forestry and sugar cane.
Excitement continues to build over a new insecticide, Mimic (known
as Confirm in the United States). Mimic is used to control caterpillars
on apple and vine crops, forestry and in other applications by
"mimicking" a hormone found in caterpillar larvae. The U.S. EPA has
classified Mimic as a "reduced-risk pesticide" because it does not harm
beneficial insects and because of its low toxicity to mammals. In 1994,
Mimic was granted an emergency use exemption to treat cotton infested
with beet army worms in Mississippi and Alabama.
Nineteen ninety-four was an important year in the worldwide
introduction of Mimic. During the year, Mimic was granted registrations
in Japan, Korea, Thailand, Malaysia, Sri Lanka, Switzerland and Chile.
The product is following a first-of-its-kind, expedited joint review
process for registration in the United States and Canada. Registration
is expected in those countries in 1995.
In 1994 Rohm and Haas entered into a joint research agreement with
Shenyang Research Institute in China to discover and develop new
pesticides for China and the global market.
With the Monsanto acquisition, the introduction of second-generation
Mimic/Confirm products, as well as other technologies in the pipeline,
and by zeroing in on the untapped market potential for its complete
arsenal of products, Agricultural Chemicals looks forward to profitable
growth in the future.
18
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ID: GRAPHIC (PHOTOGRAPH)
ID: PHOTO CAPTIONS
INSET: An Eastern painted turtle.
LEFT: Rohm and Haas took extra care to see that turtles living near
a landfill remediation site were rescued and cared for by a professional
herpetologist. The turtles will be returned to Lake Alcyon when the
project is completed in 1995.
CORPORATE RESPONSIBILITY
Rohm and Haas has long believed it must conduct business in a manner
respectful of workers, neighbors and the environment. In 1994, this
commitment led to significant improvements in several areas. There were
dramatic reductions in workplace injuries, reduced emissions at
operating facilities, progress in remediating past disposal sites, an
innovative effort toward ecological preservation, and public recognition
for achievements in workforce diversity and safety education and
performance.
WORKPLACE SAFETY
In 1991, the company's occupational injury and illness rate (OII)
stood at 5.3 per 200,000 hours worked, a level much higher than the
chemical industry average.
Since that time, the company has stepped up training programs to
ensure that employees understand their site's safety requirements and
have the proper personal protective equipment needed to do their jobs
safely. Periodic audits ensure that all locations are in compliance
with government requirements and the company's "Corporate Safety
Principles."
The results have been dramatic. Rohm and Haas achieved a 30 percent
reduction from its 1993 OII rate of 3.7, ending 1994 at 2.5, an injury
rate now below the U.S. chemical industry average of 2.8. In 1994, the
Board of Directors established a Safety Excellence Award to recognize
sites that achieve a superior safety record. Initial winners for their
1993 safety performance were Lauterbourg, France; Nagoya, Japan;
Barranquilla, Colombia, and Knoxville, Tennessee. Early in 1995, the
Barranquilla and Knoxville plants became the first two-time award
winners when the board announced recipients for 1994 safety
improvements. Other awardees included Kankakee, Illinois; Soma, Japan;
Mozzanica, Italy, and Valbonne, France.
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ENVIRONMENTAL
PERFORMANCE
Progress was made in preventing pollution. The company reported its
lowest-ever SARA emissions to the U.S. EPA. Cumulative reductions in
SARA Title III air emissions since the initial year of reporting in 1987
now stand at 52 percent. Efforts continue toward achieving the
company's goal of a 75 percent reduction in SARA air emissions by 1996.
The company also achieved a 50 percent reduction of selected SARA
emissions under EPA's Voluntary Industrial Toxic Project two years ahead
of the federal agency's schedule.
The cost of operating and maintaining equipment designed to control
the company's impact on the environment rose to $107 million. Capital
spending for new environmental protection equipment in 1994 was $31
million, down from $55 million the year before.
LANDFILL REMEDIATION
The company saw its reserves for waste site accruals drop from $191
million at the end of 1993, to $176 million at the end of 1994. During
the year, $31 million was added to the reserve to cover anticipated
future costs; $46 million was spent to remediate existing sites.
This work included:
MOZZANICA, ITALY -- The cleanup of all waste materials was completed
by year end, and the site will be replanted with local vegetation this
Spring. The Mozzanica cleanup effort, one of the first of its kind in
Italy, was performed in cooperation with government authorities and
local regulators.
WHITMOYER, PENNSYLVANIA -- Rohm and Haas and another former owner
prepared site buildings for demolition and worked with EPA officials to
develop an off-site incineration solution for waste materials.
LIPARI LANDFILL, NEW JERSEY -- The offsite remediation project in
Pitman, New Jersey, progressed dramatically. Half of the marshland soil
surrounding the landfill had been removed and treated at an onsite
facility by December. Plans were formulated for draining, cleaning and
restoring Lake Alcyon, an 18-acre recreational resource, by the end of
1995.
ID: GRAPHIC (BAR CHART)
ECOLOGICAL
PRESERVATION
What began as a commitment to remediate the Lipari landfill evolved
into an innovative effort to preserve five different turtle species.
Turtles living in Lake Alcyon were in danger of harm from cleanup
equipment. Rohm and Haas consulted with representatives from the
Wetlands Institute of Stone Harbor, New Jersey, who provided expert
advice on turtle collection and designed a facility to house the
reptiles during the cleanup. The project earned the endorsement of the
U.S. Environmental Protection Agency and the Pitman Environmental
Commission, as well as an enthusiastic response from local educators who
helped design a curriculum and visiting schedule for students.
The effort, dubbed the "Lake Alcyon Turtle Rescue," has become an
educational exhibit which focuses on the lake's ecology and attracts
visits by scores of area school children. More than a hundred turtles
remain under the care of a professional herpetologist. The turtles will
be returned to the lake at the project's completion.
OTHER NOTEWORTHY
ACCOMPLISHMENTS
Rohm and Haas received two prestigious awards from separate
divisions of the U.S. Department of Labor. In September, the 1994
Exemplary Voluntary Efforts (EVE) Award was presented to the company for
its efforts to recruit, hire and promote minorities and women for
careers in chemistry.
Several U.S. plants are following the Occupational Safety and Health
Administration's (OSHA's) Voluntary Protection Program, which has
established stringent protocols for safety improvement.
In November, the Philadelphia plant became the first Rohm and Haas
site to reach the distinguished Star Award level, after on-site
evaluations by OSHA, more than two dozen interviews with plant managers
and employees, and demonstrated improvement in workplace safety and
reductions in injury rates. Houston, Louisville and Bristol are the
other U.S. sites following the Voluntary Protection Program guidelines.
RESPONSIBLE CARE
As a charter signatory to the Chemical Manufacturers Association's
Responsible Care program, the company seeks new ways to help industry
members improve environmental and safety performance. One effort was
the "Rohm and Haas Safety Train" and its participation in CMA's
TRANSCAER Whistle-Stop Tour, which reached 1,500 people in seven
communities in the Southeastern United States. The train made eight
more stops throughout the country and helped educate over two thousand
emergency-response and transportation representatives on the importance
of moving chemicals safely.
Early in 1995, the Chemical Manufacturers Association announced that
Rohm and Haas is one of two co-winners of the Association's TRANSCAER
Award for the company's leadership in transportation safety education.
20
<PAGE>
1994 FINANCIAL REVIEW
CONTENTS
MANAGEMENT DISCUSSION AND ANALYSIS
Results of Operations (1994, 1993 and 1992) 22
Summary by Business Group (1994, 1993 and 1992) 22
Liquidity, Capital Resources and Other Financial Data 27
Quarterly Results of Operations 32
CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies 34
Statements of Consolidated Earnings 35
Statements of Consolidated Cash Flows 36
Consolidated Balance Sheets 37
Statements of Consolidated Stockholders' Equity 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Acquisitions and Dispositions of Assets 39
Note 2 Investments 40
Note 3 Other Expense (Income), Net 40
Note 4 Financial Instruments 40
Note 5 Income Taxes 42
Note 6 Industry Segment Reporting and Information
about Foreign Operations 44
Note 7 Pension Plans 46
Note 8 Employee Benefits 47
Note 9 Accounts Receivable, Net 48
Note 10 Inventories 48
Note 11 Prepaid Expenses and Other Assets 48
Note 12 Land, Buildings and Equipment, Net 48
Note 13 Other Assets, Net 48
Note 14 Notes Payable 49
Note 15 Long-Term Debt 49
Note 16 Accounts Payable and Accrued Liabilities 49
Note 17 Other Liabilities 49
Note 18 Stockholders' Equity 50
Note 19 Stock Option Plan 50
Note 20 Lease and Rental Commitments 50
Note 21 Contingent Liabilities, Guarantees and
Commitments 51
Report on Financial Statements 53
Independent Auditors' Report 53
Eleven-Year Summary of Selected Financial Data 54
21
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS--1994, 1993 and 1992
Earnings for 1994 were $264 million, up from last year's earnings of
$181 million (before 1993 special charges and credits listed below).
Earnings per common share were $3.79 compared to $2.56 last year.
Favorable impacts on earnings included stronger European and Asian
economies and currencies, 8% higher sales and shipping volume, smooth
plant operations and reduced operating costs as a result of productivity
improvements. Lower startup costs, lower research and development costs
and improved affiliate results also contributed to the earnings gain.
Earnings were affected negatively by 1% lower selling prices, excluding
the effect of currencies, and 4% higher raw material costs.
Special charges and credits, totaling $55 million after tax, were
recognized in 1993 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 company
also recorded a one-time charge of $19 million for the cumulative effect
of adopting a new accounting standard for postemployment benefits.
Earnings in 1993 were $126 million (including special charges and the
credit listed above), down from $174 million in 1992, before the
cumulative effect of accounting changes in both years. Earnings per
common share were $1.74, compared to $2.53 in the prior year. The 1992
earnings included a charge for downsizing a manufacturing site.
Excluding the special charges in both years, earnings decreased 14%.
Though volume grew 12% in 1993, 1% lower selling prices, 12% weaker
European currencies and a lower-priced product mix yielded only a 7%
revenue gain. The lower selling prices reflected the global impact of
poor economic conditions in Europe and Japan.
These and other factors affecting earnings are discussed at right. They
are summarized on a per-share basis on page 26.
SUMMARY BY BUSINESS GROUP
(Refer to table on page 23)
The company's operations are organized by worldwide business groups. A
description of each business group's operations can be found in the
business review section of this report.
POLYMERS, RESINS AND MONOMERS (PRM) 1994 earnings were $167 million, up
39% from 1993. Sales and volume were up 9%, with all market segments
and regions reporting increases. Businesses with noteworthy increases
included Architectural Coatings, Industrial Coatings, Construction
Products and Adhesives. Earnings were helped by higher volume, smooth
plant operations, reduced operating costs and stronger Japanese
currencies. These factors offset higher raw material costs.
PRM earnings in 1993 were $120 million, down 3% compared to 1992. The
1992 results included an after-tax charge of $13 million related to
downsizing operations at 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 primary
reasons for the earnings decline.
PLASTICS reported 1994 earnings of $58 million compared to a loss of $2
million in 1993, which included after-tax charges of $34 million for
asset writedowns. Earnings increased 81% after excluding these charges.
Sales and volume grew 10%. The improved earnings also reflect smooth
plant operations and lower research costs; however, raw material costs
were up during the second half of the year, adversely impacting
earnings. Additives used in PVC and engineering resins had strong
volume gains in North America, Europe and the Pacific. AtoHaas North
America reported increased volume for all product lines. AtoHaas
Europe's losses were significantly lower than 1993; they reflected
improving economies in Europe.
Plastics recorded a 1993 loss of $2 million compared to earnings of $38
million in 1992. The 1993 results included after-tax charges of $34
million related to asset writedowns. Volume increased 9%; 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, but weaker
European currencies had a negative impact on sales and earnings.
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. These factors
led to reduced selling prices.
22
<PAGE>
<TABLE>
SALES BY BUSINESS GROUP AND CUSTOMER LOCATION
----------------------------------------------------------------------------------------------------------------
<CAPTION>
POLYMERS, RESINS PERFORMANCE AGRICULTURAL
AND MONOMERS PLASTICS CHEMICALS CHEMICALS TOTAL
----------- ---------------------- ---------------- ---------------- ---------------- ----------------------
(Millions
of dollars) 1994 1993 1992 1994 1993 1992 1994 1993 1992 1994 1993 1992 1994 1993 1992
----------- ---------------------- ---------------- ---------------- ---------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
North
America $1,145 $1,068 $ 961 $368 $342 $324 $335 $328 $295 $119 $107 $ 98 $1,967 $1,845 $1,678
Europe 260 225 250 203 176 194 220 206 211 143 137 133 826 744 788
Pacific 151 128 117 40 36 34 230 207 154 93 87 78 514 458 383
Latin
America 98 98 97 24 25 21 21 21 22 84 78 74 227 222 214
---------------------- ---------------- ---------------- ---------------- ----------------------
Total $1,654 $1,519 $1,425 $635 $579 $573 $806 $762 $682 $439 $409 $383 $3,534 $3,269 $3,063
----------------------------------------------------------------------------------------------------------------
</TABLE>
SUMMARY OF 1990-1994 RESULTS BY BUSINESS GROUP
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992 1991 1990
------------------------------------------------------------------------------
NET SALES
Polymers, Resins and Monomers $1,654 $1,519 $1,425 $1,290 $1,249
Plastics 635 579 573 546 561
Performance Chemicals 806 762 682 566 651
Agricultural Chemicals 439 409 383 361 363
---------------------------------------
Total $3,534 $3,269 $3,063 $2,763 $2,824
------------------------------------------------------------------------------
NET EARNINGS*
Polymers, Resins and Monomers $ 167 $ 120 $ 124 $ 116 $ 119
Plastics 58 (2) 38 8 37
Performance Chemicals 38 29 19 43 55
Agricultural Chemicals 40 39 25 33 22
Corporate (39) (60) (32) (37) (26)
---------------------------------------
Total $ 264 $ 126 $ 174 $ 163 $ 207
*Excludes charges for the cumulative effect of accounting changes in 1993
and 1992.
------------------------------------------------------------------------------
RONA
Polymers, Resins and Monomers 12.3% 9.7% 9.7% 11.0% 11.9%
Plastics 10.3 -- 5.8 1.3 5.7
Performance Chemicals 4.1 3.2 2.1 7.0 9.6
Agricultural Chemicals 11.1 13.4 7.8 11.3 7.7
Corporate (6.3) (10.7) (12.2) (11.7) (13.8)
---------------------------------------
Total 7.6% 4.3% 6.1% 6.8% 8.6%
------------------------------------------------------------------------------
Corporate includes non-operating items such as interest income and expense.
See page 26 for definition of RONA.
SUMMARY OF 1990-1994 RESULTS BY CUSTOMER LOCATION
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992 1991 1990
------------------------------------------------------------------------------
NET SALES
North America $1,967 $1,845 $1,678 $1,527 $1,565
Europe 826 744 788 727 775
Pacific 514 458 383 314 297
Latin America 227 222 214 195 187
---------------------------------------
Total $3,534 $3,269 $3,063 $2,763 $2,824
------------------------------------------------------------------------------
NET EARNINGS*
North America $ 175 $ 121 $ 83 $ 84 $ 144
Europe 71 27 77 59 70
Pacific 41 23 28 42 21
Latin America 16 15 18 15 (2)
Corporate (39) (60) (32) (37) (26)
---------------------------------------
Total $ 264 $ 126 $ 174 $ 163 $ 207
*Excludes charges for the cumulative effect of accounting changes in 1993
and 1992.
------------------------------------------------------------------------------
RONA
North America 10.6% 8.1% 4.7% 5.8% 10.1%
Europe 9.2 3.6 10.2 9.3 10.7
Pacific 6.7 4.0 5.6 11.9 7.5
Latin America 9.3 9.3 11.3 9.8 (1.1)
Corporate (6.3) (10.7) (12.2) (11.7) (13.8)
---------------------------------------
Total 7.6% 4.3% 6.1% 6.8% 8.6%
------------------------------------------------------------------------------
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 26 for definition of RONA.
23
<PAGE>
PERFORMANCE CHEMICALS earnings in 1994 were $38 million, up from $18
million in 1993, excluding an $11 million after-tax gain in 1993 on the
sale of Supelco, Inc. Sales increased 8% and volume was up 4%,
excluding Supelco. Earnings increased due to volume gains, a
higher-priced product mix, reduced operating costs and the strengthening
of the Japanese yen. Biocides had volume gains in all regions.
Electronic Chemicals had strong growth in North America and Europe. Ion
Exchange Resins reported higher volume in 1994, but selling prices
dropped below 1993's already depressed levels; excess worldwide
capacity, increased competition and reduced capital spending by
customers caused the selling price decline. Despite restructuring
initiatives begun in 1993, which significantly reduced selling,
administrative and research costs, Ion Exchange Resins continued to
report losses in 1994.
Performance Chemicals reported earnings of $29 million in 1993,
including an after-tax $11 million gain on the sale of Supelco.
Earnings declined 55%, excluding the gain and non-recurring charges
incurred in 1992. Volume increased 3% and sales declined 1%, excluding
1992 acquisitions and Supelco. Factors contributing to the earnings
decline included depressed conditions in Ion Exchange Resins, weaker
European currencies and costs related to the relocation of an electronic
chemicals manufacturing operation.
AGRICULTURAL CHEMICALS 1994 earnings were $40 million, 3% higher than
the prior year. Sales increased 7% due to 2% higher volume and a
higher-priced product mix. The benefits of a more favorable product mix
and a stronger Japanese yen were offset by higher selling,
administrative and research costs and the writedown of a research
facility. Dithane fungicide had sales gains in North America, but these
were partly offset by declines in all other regions due to adverse
weather conditions and lower spending by growers. Goal and Kerb
herbicides reported higher sales due to favorable weather conditions. A
new insecticide, Mimic, and newly acquired products also contributed to
the sales increase. In February 1995, a consent decree was entered
requiring the EPA to strictly enforce, within two to five years, the
Delaney clause (see page 18 in the business review section). While the
effect, if any, is unknown, the company believes this will not have a
material impact on its future financial results.
Agricultural Chemicals 1993 earnings were $39 million, up 26% from 1992,
excluding a 1992 charge for downsizing the Philadelphia plant. Sales
increased 7% on 11% higher volume. Lower raw material prices and high
utilization of manufacturing facilities also contributed to improved
earnings. 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.
CORPORATE expenses totaled $39 million in 1994, compared with $60
million in 1993 and $32 million in 1992. The 1993 expense included an
after-tax charge of $32 million for remediation of lake and marsh
property near the Lipari landfill. Interest expense increased in 1994
because of lower capitalization of interest expense due to lower capital
spending. Interest expense decreased in 1993 due to lower interest
rates and higher capitalization of interest expense due to higher
capital spending.
PHYSICAL VOLUME of shipments increased by 8% in 1994 from 1993, and by
12% in 1993 over 1992:
------------------------------------------------------------------------------
Percent change
Business group 1994 VS 1993 1993 vs 1992
------------------------------------------------------------------------------
Polymers, Resins and Monomers 9% 14%
Plastics 10 9
Performance Chemicals -- 6
Agricultural Chemicals 2 11
--- ---
Worldwide 8% 12%
------------------------------------------------------------------------------
Percent change
Customer location 1994 VS 1993 1993 vs 1992
------------------------------------------------------------------------------
North America 6% 15%
Europe 13 5
Pacific 11 15
Latin America 7 6
--- ---
Worldwide 8% 12%
------------------------------------------------------------------------------
[ID: GRAPHIC -- LINE CHART]
24
<PAGE>
SUMMARY OF CONSOLIDATED RESULTS
The graph on page 24 shows the historical trend of gross profit,
selling, administrative and research expenses and operating earnings as
a percent of sales.
An analysis of gross profit changes is summarized on a per-share basis
on page 26.
NET SALES of $3,534 million were 8% higher than 1993, reflecting 8%
higher shipping volume and 1% lower selling prices. Currency
translations contributed one percentage point of the 8% sales increase.
Net sales in 1993 were $3,269 million, up 2% from 1992 on 7% higher
volume, excluding the effect of 1992 acquisitions and a divestiture in
1993. Twelve percent weaker currencies in Europe and 1% lower selling
prices impacted 1993 sales negatively.
RAW MATERIAL PRICES began rising during the second half of 1994 and
skyrocketed 17% in the fourth quarter resulting in a 4% increase for the
full year. Key raw materials impacted included methanol, ammonia,
styrene and propylene. The higher prices are due to capacity shortages
and are expected to remain high for the foreseeable future. Raw
material prices in 1993 decreased 3% from 1992 levels. The charts below
and on page 26 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 $1,267 million in 1994, up 13% from the prior
year, excluding a $25 million charge in 1993 for the writedown of a
plastics production line in Kentucky. Gross profit in 1992 was reduced
by a charge of $56 million related to downsizing the Philadelphia plant.
[ID: GRAPHIC -- LINE CHART]
Excluding these charges, the gross profit margin was 36%, 34% and 36% in
1994, 1993 and 1992, respectively. The gross profit margin increased in
1994 because of higher production volume, smooth plant operations and
reduced operating costs resulting from productivity improvements. Lower
startup costs, decreased inventory writeoffs and stronger currencies in
Europe and Japan also contributed to the higher margin. However, 4%
higher raw material costs and 1% lower selling prices hurt margins. 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 were slightly down
in 1994 after rising 3% in 1993, excluding acquisitions, a divestiture,
currency exchange rates and the writedown of a research facility in
1994. The lower SAR expenses reflected cost containment efforts begun
in the latter part of 1993. Inflationary pressures and the startup of a
new research center in Japan contributed to the 1993 increase.
INTEREST EXPENSE was $46 million in 1994, up $5 million from 1993 due to
lower capitalization of interest expense because of lower capital
spending. Interest expense before capitalized interest was $60 million,
equal to 1993. Interest expense in 1993 decreased $12 million from 1992
due to lower interest rates and higher capitalization of interest
expense due to higher capital spending.
SHARE OF NET EARNINGS OF AFFILIATES was $2 million in 1994, compared to
a loss of $6 million in 1993. The improvement is due to reduced losses
from the AtoHaas affiliates. The higher AtoHaas losses in 1993
reflected the difficult economic conditions in Europe during that year.
[ID: GRAPHIC -- LINE CHART]
25
<PAGE>
OTHER EXPENSE, NET was $24 million, compared to $59 million in 1993.
The 1994 expense included $17 million of severance and early retirement
costs related to restructuring operations. The 1993 results included
charges of $56 million for cancelling construction of a plastics
facility in England and the cost of remediating lake and marsh property
near the Lipari landfill, net of the gain on the sale of Supelco.
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 1994, RONA was 8%, compared with 4% and 6%
in 1993 and 1992, 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. For 1994,
ROE was 16%, compared with 8% for 1993 and 11% for 1992.
The return on investment graph shows these measures for the past eleven
years.
[ID: GRAPHIC -- LINE CHART]
ANALYSIS OF CHANGE IN PER-COMMON-SHARE EARNINGS+
CURRENT YEAR RELATIVE TO YEAR EARLIER
------------------------------------------------------------------------------
$/Common Share
(after tax)
---------------------
1994 1993
------------------------------------------------------------------------------
GROSS PROFIT
Selling prices* $ (.24) $(1.15)
Physical volume and product mix 1.16 1.55
Raw material costs* (.36) .30
Other manufacturing costs* 1.09 (.24)
---------------------
Increase in gross profit 1.65 .46
------------------------------------------------------------------------------
OTHER CAUSES
Selling, administrative and research
expenses* .03 (.47)
Asset dispositions .01 (.10)
Certain waste disposal site cleanup costs .41 (.47)
Share of affiliate earnings (losses) .12 (.08)
Other (.17) (.13)
---------------------
Increase (decrease) from other causes .40 (1.25)
------------------------------------------------------------------------------
Increase (decrease) in per-common-share
earnings $ 2.05 $ (.79)
------------------------------------------------------------------------------
*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
for the cumulative effect of accounting changes for postemployment
benefits.
[ID: GRAPHIC -- LINE CHART]
26
<PAGE>
LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA
CASH FLOW Cash provided by operations for 1994 was $524 million. These
funds 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 1994 were $786 million, up $13
million from the prior year. At the end of 1994, the debt-to-equity
ratio, calculated without the reduction to stockholders' equity for the
ESOP transaction, was 44%, compared with 48% at the end of 1993 and 50%
at the end of 1992. 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.
On November 15, 1994, the company exercised the call provision on its
$75 million, 9.625% notes due 1998. The notes were redeemed at par plus
accrued interest on January 3, 1995 with available cash. At December
31, 1994, these notes were classified as current portion of long-term
debt.
[ID: GRAPHIC -- BAR CHART]
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. These laws and regulations require the company to make
significant expenditures for remediation, capital improvements and
operating environmental protection equipment. 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 party in various government enforcement and private
actions associated with former waste disposal sites, many of which are
on the U.S. Environmental Protection Agency's (EPA) Superfund priority
list. The company also is involved in corrective actions at some of its
manufacturing facilities. Accruals for expected future remediation
costs are in accordance with the provisions of SFAS No. 5, "Accounting
For Contingencies," which requires an
[ID: GRAPHIC -- LINE CHART]
27
<PAGE>
accrual to be recorded when it is probable a liability has been incurred
and costs are reasonably estimable. The company considers a broad range
of information when determining the amount of the accrual, including
available facts about the waste site, existing and proposed remediation
technology and the range of costs of applying those technologies, prior
experience, government proposals for this or similar sites, the
liability of other parties, 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.
The amounts charged to earnings before tax for environmental remediation
were $31 million, $57 million and $23 million in 1994, 1993 and 1992,
respectively. The charge in 1993 included $50 million for remediation
of lake and marsh property near the Lipari landfill. The reserves for
remediation were $176 million and $191 million at December 31, 1994, and
1993, respectively, and are recorded as "other liabilities" (current and
long-term). Probable insurance recoveries were $72 million at December
31, 1994, and 1993. 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 opinion 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
reasonably possible loss contingencies related to environmental matters
of approximately $110 million at December 31, 1994. Further, the
company knows that additional future environmental remediation may be
required, but these loss contingencies are not reasonably estimable at
this time. 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 alternative methods of remediation and the range of cost associated
with those alternatives. The company believes that these matters, when
ultimately resolved, which may be over an extended period of time, 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.
The company and SmithKline Beecham (SKB) are remediating the Whitmoyer
site under an interim cost-sharing agreement. SKB has sued the company
claiming indemnification pursuant to the agreement of sale under which
Rohm and Haas sold Whitmoyer to SKB. The company has accrued the amount
it is required to pay under the interim cost-sharing agreement and has
included the balance of the remedial costs in the reasonably possible
loss contingencies disclosed above. A decision is expected during 1995.
28
<PAGE>
Capital spending for new environmental protection equipment was $31
million in 1994. Spending for 1995 and 1996 is expected to be in the
range of $60 million and $34 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 $46 million
in 1994, $21 million in 1993 and $24 million in 1992. The expenditures
for remediation are charged against accrued remediation reserves. The
cost of operating and maintaining environmental facilities was $107
million, $105 million and $108 million in 1994, 1993 and 1992,
respectively, and were charged against current-year earnings.
DIVIDENDS Total common stock dividends paid in 1994 were $1.44 per
share, compared to $1.36 per share in 1993, and $1.28 per share in 1992.
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 1994 and 1993,
and $1.38 per share in 1992.
[ID: GRAPHIC -- LINE CHART]
29
<PAGE>
ADDITIONS TO LAND, BUILDINGS AND EQUIPMENT Fixed asset additions in 1994
totaled $339 million, down $43 million from last year's spending level.
Spending in 1994 included an acquired agricultural chemicals
manufacturing facility, capacity expansion for acrylic acid at Houston,
Texas, which will be completed in 1995, completion of a new research
laboratory building at Bristol, Pennsylvania and plant modifications at
La Mirada, California. The company has budgeted capital expenditures in
1995 of approximately $400 million. Spending for environmental
protection equipment, which is included in several of the categories on
the chart shown below, was $31 million in 1994 and $55 million in 1993
and 1992.
Expenditures for the past three years, categorized by primary purpose of
project, were:
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------------------
Environmental, cost savings
and infrastructure $158 $202 $180
Capacity additions and new products 139 144 75
Research facilities and equipment 28 17 15
Capitalized interest cost 14 19 13
-------------------------
Total $339 $382 $283
------------------------------------------------------------------------------
ACQUISITIONS AND DIVESTITURES During 1994, the company sold a small
emulsion plant located in Lemont, Illinois and the styrene butadiene
latex business which included a plant at Mallard Creek, North Carolina.
These transactions were not material to the company's financial results.
On June 29, 1994, the company acquired from Monsanto Company its
worldwide pyridine herbicide business and a new fungicide for about $51
million. The purchase price will be paid in equal installments over a
four-year period and has been recorded as current and long-term debt.
The assets acquired included a manufacturing facility, inventory and
patents.
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.
[ID: GRAPHIC -- LINE CHART]
30
<PAGE>
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.
WORKING CAPITAL (the excess of current assets over current liabilities)
was $508 million at year-end 1994, up $9 million from 1993. Accounts
receivable from customers increased $81 million due to sales growth.
Inventory increased $93 million due to the acquisition of the pyridine
herbicide business and a new fungicide, building monomer inventories for
growth in 1995 and higher electronic chemicals inventories. This
resulted in an increase in days cost of sales in ending inventory to 78
days from 66 days at year-end 1993. Details about two major components
of working capital at the end of 1994 and 1993 follow:
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
INVENTORIES
Year-end balance $487 $394
Annual turnover 4.7X 5.5x
CUSTOMER RECEIVABLES
Year-end balance $622 $541
Annual turnover 5.7X 6.0x
------------------------------------------------------------------------------
NET FIXED ASSETS Investment in net fixed assets is summarized below.
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Year-end balance $1,960 $1,869
Annual turnover 1.8X 1.8x
------------------------------------------------------------------------------
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]
31
<PAGE>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
First quarter 1994 earnings were $67 million, up 16% from the first
quarter of 1993 (before cumulative effect of an accounting change in
1993). Sales of $856 million were 4% higher than reported in the
prior-year period. The increase in earnings reflects strong volume
growth in most businesses and all regions, smooth manufacturing
operations and good cost management.
Earnings in the second quarter of 1994 were $95 million, up 40% from the
prior-year period, excluding a net charge in 1993 for asset writedowns
and the sale of a subsidiary. Sales of $944 million were 7% higher and
volume increased 9%. The increase in earnings reflects the benefit of
higher volumes and smooth plant operations.
[ID: GRAPHIC -- BAR CHART]
Third quarter 1994 earnings were $55 million, 90% higher than the prior
year, excluding charges in 1993 for asset writedowns and environmental
remediation costs. Sales increased 9% and volume was up 6%. Earnings
benefited from volume gains, excellent plant operations, reduced
selling, administrative and research costs and strengthening European
currencies. Selling prices were slightly lower than the prior-year
period, excluding currency effects. Raw material costs increased 7%.
Fourth quarter 1994 earnings were $47 million, up 81% from the 1993
period. Sales grew 13% on 9% higher volume, with all businesses and
regions contributing to the increase. The earnings growth is due to a
more favorable economic environment, smoothly running plant operations
and productivity improvements, increased volume and the strengthening of
European currencies and the yen. Selling prices were up 2%; however, raw
material costs skyrocketed 17%.
32
<PAGE>
1994 QUARTERLY RESULTS
------------------------------------------------------------------------------
1st 2nd 3rd 4th YEAR
(Millions of dollars) Quarter Quarter Quarter Quarter 1994
------------------------------------------------------------------------------
Net sales $ 856 $ 944 $ 874 $ 860 $3,534
Gross profit 317 351 298 301 1,267
Net earnings 67 95 55 47 264
------------------------------------------------------------------------------
Net earnings per common
share, in dollars $ .96 $1.37 $ .78 $ .68 $ 3.79
------------------------------------------------------------------------------
Cash dividends per common
share, in dollars $ .35 $ .35 $ .37 $ .37 $ 1.44
------------------------------------------------------------------------------
Percentage change from
prior year
Net sales 4 % 7 % 9 % 13 % 8 %
Physical volume 8 9 6 9 8
------------------------------------------------------------------------------
Net earnings 16 % 51 % -- % 81 % 110 %
------------------------------------------------------------------------------
Net earnings per common share 16 % 52 % -- % 94 % 118 %
------------------------------------------------------------------------------
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 -- --
------------------------------------------------------------------------------
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 environmental remediation are
recorded when it is probable a liability has been incurred and costs are
reasonably estimable. The estimated liabilities are recorded at
undiscounted amounts. The cost of operating and maintaining
environmental control 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.
34
<PAGE>
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED EARNINGS
<TABLE>
<CAPTION>
Years ended December 31, 1994, 1993 and 1992
------------------------------------------------------------------------------------------
(Millions of dollars, except per-share amounts) 1994 1993 1992
------------------------------------------------------------------------------------------
CURRENT EARNINGS
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $3,534 $3,269 $3,063
NOTE 10 Cost of goods sold 2,267 2,174 2,014
------------------------------
Gross profit 1,267 1,095 1,049
Selling and administrative expense 591 590 549
Research and development expense 201 205 199
NOTE 12 Interest expense 46 41 53
NOTE 2 Share of net earnings (losses) of affiliates 2 (6) (1)
NOTE 3 Other expense (income), net 24 59 (14)
------------------------------
Earnings before income taxes 407 194 261
NOTE 5 Income taxes 143 68 87
------------------------------
Earnings before cumulative effect of accounting changes 264 126 174
NOTES 5 Cumulative effect of accounting changes, net of income taxes -- (19) (179)
& 8 ------------------------------
NET EARNINGS (LOSS) $ 264 $ 107 $ (5)
------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 264 $ 107 $ (5)
NOTE 18 Less preferred stock dividends 7 8 4
Less earnings applicable to common stock that
was to be purchased in 1995:
Dividends -- -- 1
Increase in value -- -- 1
------------------------------
NET EARNINGS (LOSS) APPLICABLE TO COMMON SHAREHOLDERS $ 257 $ 99 $ (11)
PER COMMON SHARE:
Before cumulative effect of accounting changes $ 3.79 $ 1.74 $ 2.53
Cumulative effect of accounting changes -- (.28) (2.69)
Net earnings (loss) $ 3.79 $ 1.46 $ (.16)
------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (000'S) 67,707 67,619 66,396
------------------------------------------------------------------------------------------
</TABLE>
See accompanying summary of significant accounting policies
(page 34) and notes to consolidated financial statements
(pages 39-52).
35
<PAGE>
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
Years ended December 31, 1994, 1993 and 1992
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993* 1992*
------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 264 $ 107 $ (5)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Cumulative effect of accounting changes,
net of income taxes -- 19 179
Depreciation 231 226 203
Deferred income taxes (2) 9 (31)
Accounts receivable 75 (63) (1)
Inventories (93) 34 (49)
Accounts payable 67 (5) 36
Federal, foreign and other income taxes 73 (56) 7
Gain on disposition of facilities and
investments, net -- (24) (6)
Provision for writedown of plant assets -- 48 56
Other working capital changes, net 35 30 (27)
Other, net 24 33 39
-------------------------------
Net cash provided by operating
activities 524 358 401
------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and equipment (339) (382) (283)
Proceeds from sale of facilities
and investments 3 58 8
Collection of notes receivable -- 34 --
Acquisitions and long-term investments,
net of cash acquired -- -- (172)
-------------------------------
Net cash used by investing activities (336) (290) (447)
------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchases of treasury shares (7) -- (1)
Proceeds from issuance of long-term debt 38 105 32
Repayments of long-term debt (19) (156) (13)
Net change in short-term borrowings (21) 25 2
Payment of dividends (102) (97) (88)
Other, net 14 (1) (2)
-------------------------------
Net cash used by financing activities (97) (124) (70)
------------------------------------------------------------------------------
Effect of exchange rate changes on cash 1 -- (1)
-------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 92 $(56) $(117)
------------------------------------------------------------------------------
*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 39-52).
36
<PAGE>
Rohm and Haas Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
--------------------------------------------------------------------
(Millions of dollars) 1994 1993*
--------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $ 127 $ 35
NOTE 9 Accounts receivable, net 679 604
NOTE 10 Inventories 487 394
NOTE 11 Prepaid expenses and other assets 147 167
------------------
Total current assets 1,440 1,200
--------------------------------------------------------------------
NOTE 2 INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED
SUBSIDIARIES AND AFFILIATES 90 88
NOTE 12 LAND, BUILDINGS AND EQUIPMENT, NET 1,960 1,869
NOTE 13 OTHER ASSETS, NET 371 367
------------------
$3,861 $3,524
--------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------
CURRENT LIABILITIES
NOTE 14 Notes payable $ 157 $ 83
NOTE 16 Accounts payable and accrued liabilities 699 615
Federal, foreign and other income taxes 76 3
------------------
Total current liabilities 932 701
--------------------------------------------------------------------
NOTE 15 LONG-TERM DEBT 629 690
NOTE 5 DEFERRED INCOME TAXES 92 87
NOTE 8 EMPLOYEE BENEFITS 377 353
NOTE 17 OTHER LIABILITIES 150 181
NOTE 1 MINORITY INTEREST 61 71
--------------------------------------------------------------------
STOCKHOLDERS' EQUITY
$2.75 cumulative convertible preferred stock;
authorized -- 2,846,061 shares; issued -- 1994:
2,676,515 shares; 1993: 2,719,803 shares 134 136
Common stock; par value -- $2.50; authorized --
100,000,000 shares; issued -- 78,652,380 shares 197 197
Additional paid-in capital 151 150
Retained earnings 1,606 1,444
------------------
2,088 1,927
Less: Treasury stock (1994 -- 10,960,614 shares;
1993 -- 11,007,436 shares) 323 323
NOTE 18 Less: ESOP shares 156 163
Other equity adjustments 11 --
------------------
Total stockholders' equity 1,620 1,441
------------------
$3,861 $3,524
--------------------------------------------------------------------
*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 39-52).
37
<PAGE>
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
Years ended December 31, 1994, 1993 and 1992
--------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
--------------------------------------------------------------------
NOTE 18 PREFERRED STOCK
--------------------------------------------------------------------
Balance, beginning of year $ 136 $ 136 $ --
Conversion of shares to common stock (2) -- --
Shares issued for acquisition
of affiliate -- -- 136
-----------------------------
Balance, end of year $ 134 $ 136 $ 136
-----------------------------
COMMON STOCK
--------------------------------------------------------------------
Balance, beginning of year $ 197 $ 197 $ 190
Common stock that was to be
purchased in 1995 -- -- 7
-----------------------------
Balance, end of year $ 197 $ 197 $ 197
-----------------------------
ADDITIONAL PAID-IN CAPITAL
--------------------------------------------------------------------
Balance, beginning of year $ 150 $ 149 $ 37
Common stock that was to be
purchased in 1995 -- -- 94
Shares issued to employees
under bonus plan 1 1 2
Shares issued for acquisition
of affiliate -- -- 16
-----------------------------
Balance, end of year $ 151 $ 150 $ 149
-----------------------------
NOTE 15 RETAINED EARNINGS
--------------------------------------------------------------------
Balance, beginning of year $1,444 $1,434 $1,528
Net earnings (loss) 264 107 (5)
Common stock dividends paid ($1.44,
$1.36 and $1.28 per share in 1994,
1993 and 1992, respectively), net
of tax benefit of $3 million in
1994, 1993 and 1992 related to
the ESOP (95) (89) (84)
Preferred stock dividends ($2.75 per
share in 1994 and 1993 and $1.375
per share in 1992) (7) (8) (4)
Increase in value of common stock that
was to be purchased in 1995 -- -- (1)
-----------------------------
Balance, end of year $1,606 $1,444 $1,434
-----------------------------
NOTE 18 TREASURY STOCK, AT COST
--------------------------------------------------------------------
Balance, beginning of year $ 323 $ 328 $ 349
Shares issued to employees under
bonus plan (6) (2) (7)
Purchases 7 -- 1
Shares issued for conversion of
preferred stock (1) -- --
Adjustment to cost of previously
acquired shares -- (3) 3
Shares issued for acquisition of
affiliate -- -- (18)
-----------------------------
Balance, end of year $ 323 $ 323 $ 328
-----------------------------
OTHER EQUITY ADJUSTMENTS
--------------------------------------------------------------------
Balance, beginning of year $ -- $ 9 $ 4
Foreign currency translation 17 (3) 5
Pension adjustment (6) (6) --
-----------------------------
Balance, end of year $ 11 $ -- $ 9
------------------------------------------------------------------------------
See accompanying summary of significant accounting policies (page 34)
and notes to consolidated financial statements (pages 39-52).
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ACQUISITIONS AND DISPOSITIONS OF ASSETS
During 1994, the company sold a small emulsion plant located in Lemont,
Illinois and the styrene butadiene latex business which included a plant
at Mallard Creek, North Carolina. These transactions were not material
to the company's financial results.
In the second quarter of 1994, the company acquired from Monsanto
Company its worldwide pyridine herbicide business and a new fungicide
for $51 million. The purchase price will be paid in equal installments
over a four-year period and has been recorded as current and long-term
debt. The assets acquired include a manufacturing facility, inventory
and patents.
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 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.
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 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.
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 May 14, 1992, the company purchased Unocal Corporation's polymers
business for approximately $170 million. The business included 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.
39
<PAGE>
NOTE 2: INVESTMENTS
The company's investments in its affiliates (20-50%-owned) totaled $52
million and $62 million at December 31, 1994, and 1993, respectively.
The company's equity in the net assets of the affiliates exceeded the
amount of investments in affiliates by about $19 million and $8 million
at December 31, 1994, and 1993, respectively, primarily due to
investments in the AtoHaas affiliates. Consolidated retained earnings
include affiliate losses of $19 million and $17 million at December 31,
1994, and 1993, respectively.
NOTE 3: OTHER EXPENSE (INCOME), NET
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------------------
Interest income $ (7) $ (6) $(11)
Royalty income (11) (9) (9)
Foreign exchange losses (gains), net 8 13 (1)
Asset dispositions 6 1 1
Voluntary early retirement incentives,
severance, litigation settlements
and certain waste disposal site
cleanup costs 17 49 (2)
Other, net 11 11 8
--------------------------
Total $ 24 $ 59 $(14)
------------------------------------------------------------------------------
NOTE 4: FINANCIAL INSTRUMENTS
The company is exposed to interest rate and foreign exchange rate risk.
Non-leveraged derivative financial instruments are utilized to reduce
those risks. The company does not enter into financial instruments for
trading purposes. Credit risk associated with these derivative
financial instruments is mitigated by only using major financial
institutions who meet conservative credit ratings as counterparties.
The company enters into interest rate swaps and options to manage its
exposure to changes in interest rates. At December 31, 1994 and 1993,
there were interest rate swaps outstanding, with maturities through
1997, with total notional amounts of $225 million and $50 million,
respectively. The net swap position at December 31, 1994 converted $25
million of floating-rate debt to fixed-rate debt. At year-end 1993, the
net position was $50 million whereby the company converted fixed-rate
debt to floating-rate debt. The differential between the fixed and
floating rate amounts was accrued as an adjustment to interest expense.
Also at December 31, 1994, the company had outstanding an interest rate
option with a three-year term hedging $75 million of the company's
fixed-rate debt.
40
<PAGE>
Forward and option contracts are used to reduce foreign exchange rate
risk. Forward contracts are used to reduce the exchange rate risk of
certain foreign currency transactions. These agreements require the
exchange of a foreign currency for U.S. dollars at a fixed rate at a
future date. The carrying amounts of foreign currency forward contracts
were adjusted at each balance sheet date for changes in exchange rates.
At December 31, 1994 and 1993, there were contracts maturing within
three months and twelve months, respectively, to sell $52 million and
$98 million, respectively, of various foreign currencies. Option
contracts are used to hedge probable anticipated sales by certain
foreign subsidiaries. Gains and losses on these contracts are deferred
and included in income in the same period as the related sales. At
December 31, 1994, and 1993, the company had purchased currency options
to exchange various foreign currencies for U.S. dollars totaling $83
million and $135 million, respectively. The contracts outstanding at
December 31, 1994 mature within eighteen months and those outstanding at
December 31, 1993 matured within twelve months. At the end of both
years, net deferred unrealized gains were immaterial.
The fair value of financial instruments were estimated based on the
following methods and assumptions:
Cash and cash equivalents, accounts receivable and notes payable -- the
carrying amount approximates fair value due to the short maturity of
these instruments.
Long-term debt -- the fair value is based on quoted market prices
for the same or similar issues or the current rates offered to the
company or its subsidiaries for debt with the same remaining
maturities and terms.
Foreign currency forward contracts -- the carrying value approximates
fair value because these contracts are adjusted to their market
value at the balance sheet date.
Foreign currency option contracts and interest rate swaps and
option -- the fair value is the amount the company would receive or pay
to terminate the contracts based on quotes from brokers.
The carrying value and fair value of financial instruments are as
follows:
------------------------------------------------------------------------------
1994 1993
-------------------------------------
Carrying Fair Carrying Fair
(Millions of dollars) Amount Value Amount Value
------------------------------------------------------------------------------
Asset (Liability)
Long-term debt $(629) $(645) $(690) $(815)
Foreign currency
forwards (2) (2) 1 1
Foreign currency options 3 3 1 2
Interest rate swaps and
option -- 2 -- 1
------------------------------------------------------------------------------
41
<PAGE>
NOTE 5: INCOME TAXES
Effective January 1, 1992, the company adopted SFAS No. 109, "Accounting
for Income Taxes."
Earnings before income taxes earned within or outside the United States
are shown below:
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------------------
Domestic
Parent and subsidiaries $216 $ 43 $ 56
Affiliates -- -- 1
Foreign
Subsidiaries 189 157 206
Affiliates 2 (6) (2)
--------------------------
Earnings before income taxes $407 $194 $261
------------------------------------------------------------------------------
The provision for income taxes is composed of:
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------------------
Taxes on domestic earnings
Federal
Current $ 49 $ 14 $ 11
Deferred 23 (6) 1
--------------------------
72 8 12
--------------------------
State and other
Current 4 1 3
--------------------------
Total taxes on domestic earnings 76 9 15
------------------------------------------------------------------------------
Taxes on foreign earnings
Current 72 68 66
Deferred (5) (9) 6
--------------------------
Total taxes on foreign earnings 67 59 72
------------------------------------------------------------------------------
Total income taxes $143 $ 68 $ 87
------------------------------------------------------------------------------
Cash payments of income taxes were $93 million, $124 million and $106
million in 1994, 1993 and 1992, respectively.
Deferred income taxes reflect temporary differences between the
valuation of assets and liabilities for financial and tax reporting.
Details at December 31, 1994, and 1993 were:
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Deferred tax assets related to:
Compensation and benefit programs $181 $165
Alternative minimum tax credit carryforward 41 47
Research and foreign tax credit carryforwards 19 27
Accruals for waste disposal site remediation 30 36
Accruals for plant downsizing and writedowns 28 30
Inventories 27 22
All other 32 30
Valuation allowance (8) (11)
---------------
Total deferred tax assets $350 $346
---------------
Deferred tax liabilities related to:
Tax over book depreciation $269 $274
Pension 58 52
All other 7 9
---------------
Total deferred tax liabilities $334 $335
---------------
Net deferred tax asset $ 16 $ 11
------------------------------------------------------------------------------
42
<PAGE>
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) 1994 1993
------------------------------------------------------------------------------
Prepaid expenses and other assets $ 95 $ 94
Other assets, net 19 6
Accounts payable and accrued liabilities (6) (2)
Non-current deferred income taxes (92) (87)
---------------
Net deferred tax asset $ 16 $ 11
------------------------------------------------------------------------------
The valuation allowance was reduced by $3 million in 1994 and $6 million
in 1993 due to usage of tax credit carryforwards.
The effective tax rate on income differs from the U.S. statutory tax
rate due to the following:
------------------------------------------------------------------------------
1994 1993 1992
------------------------------------------------------------------------------
Statutory tax rate 35.0% 35.0% 34.0%
Research and other U.S. tax credits (0.9) (3.1) (1.1)
Asset dispositions -- 1.0 --
Effect of non-taxable currency items (0.7) 1.1 (0.4)
Taxes on foreign earnings and tax
adjustments of foreign subsidiaries 1.2 1.3 1.0
Other, net 0.5 (0.2) (0.2)
--------------------------
Effective tax rate 35.1% 35.1% 33.3%
------------------------------------------------------------------------------
At December 31, 1994, the company had research tax credit carryforwards
of $15 million and foreign tax credit carryforwards of $4 million
available to reduce future U.S. income tax payments through 2009 and
1999, respectively. The company also had alternative minimum tax credit
carryforwards of $41 million which are available to reduce future U.S.
regular income tax payments over an indefinite period. In addition, the
company has net operating loss carryforwards of $2 million and $20
million which are available to offset future U.S. taxable income through
2005 and future foreign taxable income through 2004, respectively.
Provision for U.S. income taxes, after applying statutory tax credits,
was made on the unremitted earnings of foreign subsidiaries and
affiliates which have not been reinvested abroad indefinitely.
Unremitted earnings, after provision for applicable foreign income
taxes, were approximately $374 million at December 31, 1994. 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.
43
<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 1992-1994 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) 1994 1993 1992
------------------------------------------------------------------------------
Sales to customers
Polymers, Resins and Monomers $1,654 $1,519 $1,425
Plastics 635 579 573
Performance Chemicals 806 762 682
Agricultural Chemicals 439 409 383
----------------------------
Total $3,534 $3,269 $3,063
------------------------------------------------------------------------------
Operating profit
Polymers, Resins and Monomers $ 268 $ 153 $ 200
Plastics 95 16 65
Performance Chemicals 58 34 29
Agricultural Chemicals 66 64 48
----------------------------
Total $ 487 $ 267 $ 342
------------------------------------------------------------------------------
Share of net earnings (losses) of affiliates
Polymers, Resins and Monomers $ 2 $ 1 $ 2
Plastics -- (7) (3)
Performance Chemicals -- -- 1
Corporate -- -- (1)
----------------------------
Total $ 2 $ (6) $ (1)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------------------
Identifiable assets at year end
Polymers, Resins and Monomers $1,525 $1,400 $1,325
Plastics 552 517 575
Performance Chemicals 1,004 970 926
Agricultural Chemicals 380 313 326
----------------------------
Total $3,461 $3,200 $3,152
------------------------------------------------------------------------------
Investment in affiliates
Polymers, Resins and Monomers $ 6 $ 6 $ 4
Plastics 46 56 79
----------------------------
Total $ 52 $ 62 $ 83
------------------------------------------------------------------------------
Depreciation expense
Polymers, Resins and Monomers $ 102 $ 101 $ 83
Plastics 44 44 49
Performance Chemicals 56 52 44
Agricultural Chemicals 17 17 17
Corporate 12 12 10
----------------------------
Total $ 231 $ 226 $ 203
------------------------------------------------------------------------------
Capital additions
Polymers, Resins and Monomers $ 176 $ 137 $ 108
Plastics 53 38 48
Performance Chemicals 60 165 86
Agricultural Chemicals 36 23 28
Corporate 14 19 13
----------------------------
Total $ 339 $ 382 $ 283
------------------------------------------------------------------------------
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.
44
<PAGE>
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------------------
Sales to customers
United States $2,037 $1,901 $1,735
Canada 107 101 98
Europe 808 719 765
Pacific 421 387 307
Latin America 161 161 158
----------------------------
Total $3,534 $3,269 $3,063
------------------------------------------------------------------------------
Transfers between geographic areas
United States $ 269 $ 292 $ 281
Canada 35 26 26
Europe 180 187 184
Pacific 4 1 1
Latin America 26 9 3
Adjustments and eliminations (514) (515) (495)
----------------------------
Total $ -- $ -- $ --
------------------------------------------------------------------------------
Total sales
United States $2,306 $2,193 $2,016
Canada 142 127 124
Europe 988 906 949
Pacific 425 388 308
Latin America 187 170 161
Adjustments and eliminations (514) (515) (495)
----------------------------
Total $3,534 $3,269 $3,063
------------------------------------------------------------------------------
Operating profit (loss)
United States $ 337 $ 164 $ 170
Canada 6 3 9
Europe 143 121 150
Pacific (3) (3) 2
Latin America (3) (3) 4
Adjustments and eliminations 7 (15) 7
----------------------------
Total $ 487 $ 267 $ 342
------------------------------------------------------------------------------
Identifiable assets at year end
United States $2,285 $2,122 $2,149
Canada 54 53 49
Europe 681 641 616
Pacific 469 445 344
Latin America 119 110 114
Adjustments and eliminations (147) (171) (120)
----------------------------
Total $3,461 $3,200 $3,152
------------------------------------------------------------------------------
United States export sales to customers were $188 million in 1994 and
$158 million in 1993 and 1992.
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) 1994 1993 1992
------------------------------------------------------------------------------
Total operating profit $ 487 $ 267 $ 342
Interest expense (46) (41) (53)
General corporate expense (36) (26) (27)
Interest in net earnings (losses) of affiliates 2 (6) (1)
----------------------------
Earnings before income taxes $ 407 $ 194 $ 261
------------------------------------------------------------------------------
Identifiable assets at year end $3,461 $3,200 $3,152
General corporate assets 348 262 282
Investment in affiliates 52 62 83
----------------------------
Total assets at year end $3,861 $3,524 $3,517
------------------------------------------------------------------------------
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 in 1993 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. 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.
45
<PAGE>
NOTE 7: PENSION PLANS
The company has noncontributory pension plans which provide defined
benefits to domestic and non-U.S. employees meeting age and length of
service requirements. The following 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) 1994 1993 1992
------------------------------------------------------------------------------
Pension cost $ (14) $ (14) $ (21)
Pension benefit payments 77 41 108
------------------------------------------------------------------------------
The negative pension cost primarily reflects recognition of favorable
investment experience as stipulated by SFAS No. 87. The pension benefit
payments in 1994 and 1992 included payments related to voluntary early
retirement incentives and a severance benefit program.
Pension cost includes the following components:
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------------------
Service cost -- benefits
earned during the year $ 36 $ 30 $ 29
Interest cost on projected
benefit obligation 56 55 54
Return on plan assets
-- actual $ 9 $(194) $(76)
-- less deferred (103) 109 (11)
----- ---- -----
(94) (85) (87)
Other amortization, net -- (2) (3)
Amortization of net gain
existing at adoption of
SFAS No. 87 (12) (12) (14)
---- ---- ----
Net pension cost $(14) $(14) $(21)
------------------------------------------------------------------------------
The early retirement and severance benefit programs resulted in a
pre-tax gain of $1 million in 1994 and $5 million in 1992, as settlement
gains from retirees electing lump-sum distributions exceeded the cost of
the special termination benefits.
The funded status of these plans at year end was as follows:
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Actuarial present value of plan benefits
Vested $ 559 $ 593
Nonvested -- --
----------------
Accumulated benefit obligation 559 593
Effect of projected future compensation increase 170 187
----------------
Projected benefit obligation 729 780
Plan assets at market value 1,067 1,165
----------------
Plan assets in excess of projected benefit obligation 338 385
Unrecognized net gain existing at adoption of SFAS No. 87 (81) (97)
Other unrecognized net gain (131) (166)
----------------
Prepaid pension cost $ 126 $ 122
------------------------------------------------------------------------------
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
1994 and 1993. Pension benefit obligations were determined from
actuarial valuations using an assumed discount rate of 8% at December
31, 1994, and 7% at December 31, 1993 and an assumed long-term rate of
compensation increase of 5% in 1994 and 1993. Non-U.S. plans assumed an
average rate of return on trust assets of 9.2% in 1994 and 1993, an
average discount rate for pension benefit obligations of 8.9% in 1994
and 8.5% in 1993, and an average 6.3% long-term rate of compensation
increase in 1994 and 1993. The company transferred excess pension plan
assets of $12 million and $15 million in 1994 and 1993, respectively, to
fund retiree medical expenses as allowed by U.S. tax regulations.
The company has a noncontributory unfunded pension plan which provides
supplemental defined benefits to senior U.S. managers meeting age and
length of service requirements. Pension cost determined in accordance
with plan provisions was $6 million, $5 million and $3 million in 1994,
1993 and 1992, respectively. Pension benefit payments for this plan
were $3 million in 1994 and $2 million in 1993 and 1992.
46
<PAGE>
The status of this plan at year end was as follows:
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Actuarial present value of plan benefits
Vested $ 44 $ 37
Nonvested -- --
----------------
Accumulated benefit obligation 44 37
Effect of projected future compensation increase 2 2
----------------
Projected benefit obligation 46 39
Unrecognized net loss existing at adoption of SFAS No. 87 (2) (2)
Other unrecognized loss (20) (16)
Adjusted minimum liability 20 12
----------------
Accrued pension benefit obligation $ 44 $ 33
------------------------------------------------------------------------------
Pension benefit obligations were determined from actuarial valuations
using an assumed discount rate of 8% at December 31, 1994, and 7% at
December 31, 1993, and an assumed long-term rate of compensation
increase of 5% in 1994 and 1993.
NOTE 8: EMPLOYEE BENEFITS
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Postretirement health care and life
insurance benefits $300 $280
Postemployment benefits 20 29
Unfunded executive pension plan (see Note 7) 41 31
Unfunded foreign pension liabilities (see Note 7) 16 13
--------------
Total $377 $353
------------------------------------------------------------------------------
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 decrease in 1994 was a result of a regulatory
change whereby Medicare became the primary insurer for certain disabled
persons and an increase in the discount rate from 6% to 8% due to higher
interest rates.
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 and are 55 years of age are eligible for continuing
health and life insurance coverage. Retirees contribute toward the cost
of such coverage.
The status of the plans at year end was as follows:
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Accumulated postretirement benefit obligation
Retirees $182 $185
Fully eligible active plan participants 76 96
Other active plan participants 69 76
--------------
Total accumulated postretirement benefit obligation $327 $357
Unrecognized prior service cost (1) (1)
Unrecognized losses (9) (58)
--------------
Total accrued postretirement benefit
obligation $317 $298
------------------------------------------------------------------------------
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) 1994 1993
------------------------------------------------------------------------------
Service cost of benefits earned $ 6 $ 5
Interest cost on accumulated postretirement
benefit obligation 24 24
Net amortization 2 --
-------------
Net periodic postretirement benefit cost $32 $29
------------------------------------------------------------------------------
The calculation of the accumulated postretirement benefit obligation
assumes a 10% annual rate of increase in the health care cost trend
rate. The company's plan limits its cost for health care coverage to an
increase of 10% or less each year, subject ultimately to a maximum cost
equal to double the 1992 cost level. Increases in retiree health care
costs in excess of these limits will be assumed by retirees.
A one percentage point increase in the annual health care cost trend
rate would increase the accumulated postretirement benefit obligation by
approximately $5 million, with an immaterial effect on annual
postretirement benefit cost. The weighted average discount rate used to
estimate the accumulated postretirement benefit obligation was 8% at
December 31, 1994, and 7% at December 31, 1993.
47
<PAGE>
NOTE 9: ACCOUNTS RECEIVABLE, NET
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Customers $622 $541
Unconsolidated subsidiaries and affiliates 23 25
Employees 4 6
Other 41 42
--------------
690 614
Less allowance for losses 11 10
--------------
Total $679 $604
------------------------------------------------------------------------------
NOTE 10: INVENTORIES
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Finished products and work in process $378 $297
Raw materials 52 49
Supplies 57 48
--------------
Total $487 $394
------------------------------------------------------------------------------
Beginning inventories used in determining 1994 and 1993 cost of goods
sold were $394 million and $437 million, respectively. Inventories
amounting to $417 million and $377 million were valued using the LIFO
method at December 31, 1994, and 1993, respectively. The excess of
current cost over the stated amount for inventories valued under the
LIFO method approximated $131 million and $98 million at December 31,
1994, and 1993, respectively. Liquidation of prior years' LIFO
inventory layers in 1994 and 1993 did not materially affect cost of
goods sold in either year.
NOTE 11: PREPAID EXPENSES AND OTHER ASSETS
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Prepaid expenses $ 41 $ 51
Deferred tax benefits 95 94
Notes receivable 2 5
Other current assets 9 17
--------------
Total $147 $167
------------------------------------------------------------------------------
NOTE 12: LAND, BUILDINGS AND EQUIPMENT, NET
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Land $ 53 $ 51
Buildings and improvements 710 679
Machinery and equipment 2,773 2,665
Capitalized interest cost 176 162
Construction 257 139
----------------
3,969 3,696
Less accumulated depreciation 2,009 1,827
----------------
Total $1,960 $1,869
------------------------------------------------------------------------------
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
$1,258 million and $1,298 million at December 31, 1994, and 1993,
respectively. Assets depreciated by the straight-line method totaled
$2,401 million and $2,208 million at December 31, 1994, and 1993,
respectively.
In 1994, 1993 and 1992 respectively, interest costs of $14 million, $19
million and $13 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
1994 and 1993, and $10 million in 1992.
NOTE 13: OTHER ASSETS, NET
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Prepaid pension costs $126 $122
Goodwill 101 104
Patents, trademarks, etc. 52 47
Probable insurance recoveries for
environmental remediation 72 72
Deferred tax benefits 19 6
Other noncurrent assets 29 37
--------------
399 388
Less accumulated amortization of intangible assets 28 21
---------------
Total $371 $367
------------------------------------------------------------------------------
48
<PAGE>
NOTE 14: NOTES PAYABLE
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Short-term borrowings $ 49 $ 69
Current portion of long-term debt 108 14
---------------
Total $157 $ 83
------------------------------------------------------------------------------
The majority of short-term borrowings represent bank debt owed by
foreign subsidiaries.
NOTE 15: LONG-TERM DEBT
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
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 88 83
9.625% notes due 1998 -- 75
9.50% notes due 2021 75 75
6.60% obligation due through 2012 52 55
5.67% notes due 1998 30 30
6.92% note due annually through 1997 22 --
4.50% note due 1995 -- 6
11.75% note (sterling denominated) due
annually to 1997 3 5
Other 9 11
---------------
Total $629 $690
------------------------------------------------------------------------------
On November 15, 1994, the company exercised the call provision on its
$75 million, 9.625% notes due 1998. The notes were redeemed at par plus
accrued interest on January 3, 1995 out of cash on hand. At December
31, 1994, these notes were classified as current portion of long-term
debt.
The company has revolving credit agreements totaling $250 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, 1994, $10 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 $45 million, $46 million and $54 million in 1994, 1993
and 1992, respectively.
Long-term debt maturing in the next five years is:
-------------------------------------------------------
(Millions of dollars)
-------------------------------------------------------
1995 $108 1998 $ 48
1996 30 1999 8
1997 25
-------------------------------------------------------
NOTE 16: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Trade payables $287 $234
Salaries and wages 69 61
Social Security and other taxes 25 33
Interest 16 15
Employee benefits 25 23
Reserves for environmental remediation 76 76
Reserves for plant shutdowns 32 7
Other 169 166
--------------
Total $699 $615
------------------------------------------------------------------------------
NOTE 17: OTHER LIABILITIES
------------------------------------------------------------------------------
(Millions of dollars) 1994 1993
------------------------------------------------------------------------------
Reserves for environmental remediation $100 $115
Reserves for plant shutdowns 28 43
Other 22 23
---------------
Total $150 $181
------------------------------------------------------------------------------
49
<PAGE>
NOTE 18: STOCKHOLDERS' EQUITY
The company has the authorization to issue up to 25 million shares of
preferred stock. The outstanding preferred stock was issued in
connection with the acquisition of Shipley Company in 1992. 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.
Dividends paid on ESOP shares, used as a source of funds for meeting the
ESOP financing obligation, were $9 million in 1994 and $8 million in
1993. 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, 1994, and 1993 were 5.3 million and 5.6 million,
respectively.
The company recorded compensation expense of $7 million in 1994 and $6
million in 1993 for ESOP shares allocated to plan members. The company
expects to record annual compensation expense at approximately this
level over the next 26 years as the remaining $156 million of ESOP
shares are allocated. The allocation of shares from the ESOP is
expected to fund a substantial portion of the company's future
obligation to match employees savings plan contributions as the market
price of Rohm and Haas stock appreciates.
Purchases of treasury stock in 1994 totaled 123,345 shares, compared
with 6,975 and 17,618 shares in 1993 and 1992, respectively.
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, 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
Granted 101 58.75- 62.44
Exercised 115 20.79- 54.19
Balance at December 31, 1994 749 20.79- 62.44
------------------------------------------------------------------------------
Exercisable stock options were 648,000, 659,000 and 597,000 at year-end
1994, 1993 and 1992, respectively. At December 31, 1994, 2,293,000
shares remain available for grant under the Stock Option Plan of 1992.
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 $63 million for 1994, $52 million in 1993
and $49 million in 1992.
The company is committed under the terms of non-cancellable operating
leases for future rentals as follows:
------------------------------------------------------
(Millions of dollars)
------------------------------------------------------
1995 $31 1999 $ 5
1996 20 2000-2004 11
1997 13 After 2004 13
1998 9
------------------------------------------------------
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 at the end of 1994 and
1993, for assets recorded under capitalized leases. The related
obligations for these leases, which totaled $2 million at the end of
1994 and 1993, are included in notes payable and long-term debt.
50
<PAGE>
NOTE 21: CONTINGENT LIABILITIES, GUARANTEES AND
COMMITMENTS
(a) 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. These laws and regulations require the company to make
significant expenditures for remediation, capital improvements and
operating environmental protection equipment. 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 party in various government enforcement and private
actions associated with former waste disposal sites, many of which are
on the U.S. Environmental Protection Agency's (EPA) Superfund priority
list. The company also is involved in corrective actions at some of its
manufacturing facilities. Accruals for expected future remediation
costs are in accordance with the provisions of SFAS No. 5, "Accounting
For Contingencies," which requires an accrual to be recorded when it is
probable a liability has been incurred and costs are reasonably
estimable. The company considers a broad range of information when
determining the amount of the accrual, including available facts about
the waste site, existing and proposed remediation technology and the
range of costs of applying those technologies, prior experience,
government proposals for this or similar sites, the liability of other
parties, 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.
The amounts charged to earnings before tax for environmental remediation
were $31 million, $57 million and $23 million in 1994, 1993 and 1992,
respectively. The charge in 1993 included $50 million for remediation
of lake and marsh property near the Lipari landfill. The reserves for
remediation were $176 million and $191 million at December 31, 1994, and
1993, respectively, and are recorded as "other liabilities" (current and
long-term). Probable insurance recoveries were $72 million at December
31, 1994, and 1993. 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 opinion of counsel, the company has concluded that the recorded
amount of insurance coverage is probable of recovery.
51
<PAGE>
In addition to accrued environmental liabilities, the company has
reasonably possible loss contingencies related to environmental matters
of approximately $110 million at December 31, 1994. Further, the
company knows that additional future environmental remediation may be
required, but these loss contingencies are not reasonably estimable at
this time. 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 alternative methods of remediation and the range of cost associated
with those alternatives. The company believes that these matters, when
ultimately resolved, which may be over an extended period of time, 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.
The company and SmithKline Beecham (SKB) are remediating the Whitmoyer
site under an interim cost-sharing agreement. SKB has sued the company
claiming indemnification pursuant to the agreement of sale under which
Rohm and Haas sold Whitmoyer to SKB. The company has accrued the amount
it is required to pay under the interim cost-sharing agreement and has
included the balance of the remedial costs in the reasonably possible
loss contingencies disclosed above. A decision is expected during 1995.
(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 1995. At December 31, 1994, construction
commitments totaled approximately $55 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 LLP, 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.
/s/ J. LAWRENCE WILSON /s/ 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 LLP
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, 1994 and 1993, and the
related consolidated statements of earnings, stockholders' equity and
cash flows for each of the years in the three-year period ended December
31, 1994. 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, 1994 and 1993, and the
results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Notes 5 and 8 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 LLP
February 20, 1995
53
<PAGE>
<TABLE>
Rohm and Haas Company and Subsidiaries
ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
(Millions of dollars, except
per-share amounts) 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $ 3,534 $ 3,269 $ 3,063 $ 2,763 $ 2,824 $ 2,661 $ 2,535 $ 2,203 $ 2,067 $ 2,051 $ 2,042
Cost of goods sold 2,267 2,174 2,014 1,861 1,894 1,820 1,646 1,430 1,346 1,400 1,365
----------------------------------------------------------------------------------------------------
Gross profit 1,267 1,095 1,049 902 930 841 889 773 721 651 677
Selling and administrative
expense 591 590 549 470 454 401 381 335 320 300 285
Research and development
expense 201 205 199 183 178 175 156 142 133 124 109
Interest expense 46 41 53 48 37 39 32 31 36 51 44
Other expense (income), net 22 65 (13) (39) (52) (25) (26) (38) 13 (51) (47)
----------------------------------------------------------------------------------------------------
Earnings before income taxes 407 194 261 240 313 251 346 303 219 227 286
Income taxes 143 68 87 77 106 75 116 108 81 86 114
----------------------------------------------------------------------------------------------------
EARNINGS BEFORE CUMULATIVE
EFFECT OF ACCOUNTING
CHANGES $ 264 $ 126 $ 174 $ 163 $ 207 $ 176 $ 230 $ 195 $ 138 $ 141 $ 172
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES -- (19) (179) -- -- -- -- -- -- -- --
NET EARNINGS (LOSS) $ 264 $ 107 $ (5) $ 163 $ 207 $ 176 $ 230 $ 195 $ 138 $ 141 $ 172
--------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS)
APPLICABLE TO COMMON
SHAREHOLDERS $ 257 $ 99 $ (11) $ 157 $ 207 $ 176 $ 230 $ 195 $ 138 $ 141 $ 172
--------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS PER COMMON
SHARE BEFORE CUMULATIVE
EFFECT OF ACCOUNTING
CHANGES $ 3.79 $ 1.74 $ 2.53 $ 2.45 $ 3.10 $ 2.65 $ 3.46 $ 2.85 $ 2.01 $ 2.01 $ 2.24
--------------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER
COMMON SHARE $ 1.44 $ 1.36 $ 1.28 $ 1.24 $ 1.22 $ 1.16 $ 1.02 $ .86 $ .78 $ .70 $ .60
--------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION--YEAR END
--------------------------------------------------------------------------------------------------------------------------------
Working capital $ 508 $ 499 $ 533 $ 606 $ 424 $ 434 $ 485 $ 486 $ 507 $ 480 $ 427
Gross fixed assets 3,969 3,696 3,470 3,015 2,770 2,396 2,062 1,754 1,627 1,503 1,446
Total assets 3,861 3,524 3,517 2,897 2,702 2,455 2,242 1,954 1,842 1,734 1,633
Long-term debt 629 690 699 718 598 359 288 258 278 245 172
Stockholders' equity 1,620 1,441 1,428 1,235 1,137 1,311 1,207 1,053 1,002 936 965
FINANCIAL RATIOS
--------------------------------------------------------------------------------------------------------------------------------
As a percent of sales
Gross profit 35.9% 33.5% 34.2% 32.6% 32.9% 31.6% 35.1% 35.1% 34.9% 31.7% 33.2%
Selling, administrative
and research expense 22.4 24.3 24.4 23.6 22.4 21.6 21.2 21.7 21.9 20.7 19.3
Earnings before cumulative
effect of accounting
changes 7.5 3.9 5.7 5.9 7.3 6.6 9.1 8.9 6.7 6.9 8.4
Debt-to-equity ratio at
year end* 44.3% 48.2% 50.1% 50.0% 48.0% 40.5% 37.6% 34.7% 38.7% 44.3% 31.8%
Return on common
stockholders' equity*+ 16.5% 8.1% 11.4% 11.2% 15.2% 14.0% 20.4% 19.0% 14.3% 14.9% 18.4%
Ten-year compound growth rate
Sales 5.6% 5.7% 5.3% 3.9% 5.1% 5.3% 7.3% 7.0% 7.4% 8.7% 8.9%
Earnings per common share
before cumulative effect
of accounting changes 5.4 (0.9) 8.6 7.4 9.9 7.1 17.0 19.0 13.4 17.5 8.7
Cash dividends per
common share 9.1 10.5 10.5 11.2 13.0 14.9 16.1 15.1 14.0 12.6 12.0
GENERAL
--------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR
Volume of shipments,
millions of units 4,549 4,214 3,750 3,267 3,336 3,259 3,143 2,808 2,619 2,735 2,695
Additions to land,
buildings and
equipment $ 339 $ 382 $ 283 $ 265 $ 412 $ 385 $ 338 $ 222 $ 179 $ 159 $ 134
Depreciation 231 226 203 183 159 150 128 112 103 101 93
Cash dividends 102 97 88 80 79 77 67 59 54 49 46
Wages and salaries $ 632 $ 616 $ 589 $ 540 $ 520 $ 481 $ 457 $ 420 $ 390 $ 367 $ 350
Common stock price
High $68-1/2 $ 62 $59-5/8 $48-1/2 $ 37 $37-1/2 $37-1/2 $53-1/4 $38-3/4 $26-1/2 $ 23
Low 53-1/4 47-1/4 42-3/4 32-3/4 24-1/4 31 28 24 23-7/8 18-1/2 16
Year-end close 57-1/8 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
Average number of
shares outstanding
in thousands 67,707 67,619 66,396 64,103 66,218 66,593 66,561 68,578 68,963 70,416 76,806
AT YEAR END
Number of registered
common stockholders 4,907 5,120 5,653 5,796 6,088 5,816 5,695 5,864 5,540 5,492 5,681
Number of employees 12,211 12,985 13,619 12,872 12,920 13,040 12,444 12,021 11,972 11,840 11,911
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Excluding ESOP adjustment and including common stock that was to be
purchased in 1995
+Earnings excluding cumulative effect of accounting changes
See accompanying notes on page 56.
See 1994, 1993 and 1992 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 included 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 postemployment benefits. The cumulative effect of the
change as of the adoption date was a charge of 28 cents per common
share. The impact on 1993 earnings 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 1992 results 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 certain
accruals for waste disposal site cleanup costs.
F. Unusual transactions in 1990 boosted net income by 6 cents per share.
The unusual transactions included gains from favorable litigation
settlements and asset sales, offset by asset writeoffs, increased
accruals for environmental cleanup costs, and charges for a voluntary
early retirement incentive.
56
<PAGE>
SHAREHOLDER INFORMATION
1995 ANNUAL MEETING
The 1995 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 1st. Formal notice of the
meeting, the proxy statement and form of proxy will be mailed on
March 24, 1995.
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 LLP
1600 Market Street
Philadelphia, Pennsylvania 19103
(215) 299-3100
57
<PAGE>
MANAGEMENT COMMITTEE:
ID: GRAPHIC (PHOTOGRAPH)
BASIL A. VASSILIOU
Vice President, Regional Director,
Europe; Business Group Executive,
Plastics
Dr. Vassiliou, 60, joined Rohm and
Haas in 1960.
ID: GRAPHIC (PHOTOGRAPH)
ROBERT P. VOGEL
Vice President and General Counsel
Mr. Vogel, 50, has been with the
company since 1977.
ID: GRAPHIC (PHOTOGRAPH)
ROBERT E. NAYLOR, JR.
Group Vice President, Regional
Director, North America
Dr. Naylor, 62, began his career
with Rohm and Haas in 1981.
ID: GRAPHIC (PHOTOGRAPH)
RAJIV L. GUPTA
Vice President, Regional Director,
Pacific
Mr. Gupta, 49, joined Rohm and Haas
in 1971.
ID: GRAPHIC (PHOTOGRAPH)
RICHARD G. PETERSON
Vice President, Business Group
Executive, Performance Chemicals
Dr. Peterson, 56, began his career
with the company in 1965.
ID: GRAPHIC (PHOTOGRAPH)
J. MICHAEL FITZPATRICK
Vice President, Director of
Corporate Research
Dr. Fitzpatrick, 48, has been with
Rohm and Haas since 1975.
ID: GRAPHIC (PHOTOGRAPH)
ENRIQUE F. MARTINEZ
Vice President, Regional Director,
Latin America
Mr. Martinez, 57, joined Rohm and
Haas in 1967.
ID: GRAPHIC (PHOTOGRAPH)
FRANK R. ROBERTSON
Vice President, Business Director,
Polymers and Resins, North America
Mr. Robertson, 54, has been with
Rohm and Haas since 1966.
DIRECTORS:
GEORGE B. BEITZEL
Retired Senior Vice President and
Director, International Business
Machines Corporation
Mr. Beitzel, 66, has been a
director since 1983.
Committees: 1, 5 (Chairman), 6, 7
DANIEL B. BURKE
Director and Retired Chief
Executive Officer and President,
Capital Cities/ABC, Inc.
Mr. Burke, 66, has been a director
since 1986.
Committees: 2, 4 (Chairman), 6, 7
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
Mr. Graves, 60, has been a director
since 1984.
Committees: 2, 4, 6, 7 (Chairman)
JAMES A. HENDERSON
Chairman, Chief Executive Officer
and Director, Cummins Engine
Company, Inc.
Mr. Henderson, 60, has been a
director since 1989.
Committees: 1, 5, 6, 7
JOHN H. MCARTHUR
Dean, Harvard Business School
Dr. McArthur, 60, has been a
director since 1977.
Committees: 1 (Chairman), 5, 6, 7
PAUL F. MILLER, JR.
Partner in Miller Associates, and
Limited Partner in Miller, Anderson
& Sherrerd, investment managers
Mr. Miller, 67, has been a director
since 1969.
Committees: 1, 3, 5, 6 (Chairman), 7
SANDRA O. MOOSE
Senior Vice President and Director,
The Boston Consulting Group, Inc.
Dr. Moose, 53, has been a director
since 1981.
Committees: 2 (Chairman), 3, 4, 6, 7
JOHN P. MULRONEY
President and Chief Operating
Officer, Rohm and Haas Company
Mr. Mulroney, 59, has been a
director since 1982.
Committees: 2, 3, 7
ROBERT E. NAYLOR, JR.
Group Vice President and Regional
Director for North America, Rohm
and Haas Company
Dr. Naylor, 62, has been a
director since 1986.
Committees: 5, 7
GILBERT S. OMENN
Dean, School of Public Health and
Community Medicine, University of
Washington, Seattle
Dr. Omenn, 53, has been a director
since 1987.
Committees: 1, 5, 6, 7
RONALDO H. SCHMITZ
Member of the Board of Managing
Directors of Deutsche Bank, AG
Dr. Schmitz, 56, has been a
director since 1992.
Committees: 1, 5, 6, 7
58
<PAGE>
ID: MANAGEMENT COMMITTEE:
CONTINUED FROM PAGE 58
ID: GRAPHIC (PHOTOGRAPH)
MARISA L. GUERIN
Vice President and Director,
Corporate Human Resources
Ms. Guerin, 42, joined the company
in 1984.
ID: GRAPHIC (PHOTOGRAPH)
J. LAWRENCE WILSON
Chairman and CEO
Mr. Wilson, 59, has been with Rohm
and Haas since 1965.
ID: GRAPHIC (PHOTOGRAPH)
JOHN P. MULRONEY
President and COO
Mr. Mulroney, 59, joined the
company in 1958.
ID: GRAPHIC (PHOTOGRAPH)
CHARLES M. TATUM
Vice President, Business Unit
Director, Plastics Additives
Dr. Tatum, 47, began his career
with the company in 1979.
ID: GRAPHIC (PHOTOGRAPH)
DONALD C. GARAVENTI
Vice President, Business Group
Executive, Polymers, Resins and
Monomers; Business Unit Director,
Polymers and Resins
Mr. Garaventi, 58, has been with
Rohm and Haas since 1958.
ID: GRAPHIC (PHOTOGRAPH)
FRED W. SHAFFER
Vice President, Chief Financial
Officer
Mr. Shaffer, 62, joined the company
in 1960.
ID: GRAPHIC (PHOTOGRAPH)
JOHN F. TALUCCI
Vice President, Business Group
Executive, Agricultural Chemicals
Mr. Talucci, 55, has been with the
company since 1962.
ID: DIRECTORS
CONTINUED FROM PAGE 58
ALAN SCHRIESHEIM
Chief Executive Officer and
Director, Argonne National
Laboratory
Dr. Schriesheim, 65, has been a
director since 1989.
Committees: 2, 4, 6, 7
MARNA C. WHITTINGTON
Partner, Miller, Anderson &
Sherrerd
Dr. Whittington, 47, has been a
director since 1989.
Committees: 1, 3, 5, 6, 7
J. LAWRENCE WILSON
Chairman of the Board and Chief
Executive Officer, Rohm and Haas
Company
Mr. Wilson, 59, has been a director
since 1977.
Committees: 3 (Chairman), 7
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
WILLIAM C. ANDREWS
Controller
GAIL P. GRANOFF
Secretary
ANGUS F. SMITH
Treasurer
DAVID A. STITELY
Chief Information Officer
STANLEY J. HARMER
Assistant Secretary
WILLIAM E. LAMBERT III
Assistant Secretary
THEODORE J. SUESS III
Assistant Treasurer
59
<PAGE>
ROHM
AND HAAS
COMPANY
LOCATIONS
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
SHIPLEY COMPANY L.L.C.
Marlboro, Massachusetts
XAMAK INC.
Wilmington, Delaware
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
Landskrona, Sweden
ROHM AND HAAS PHILIPPINES, INC.
Manila, Philippines
ROHM AND HAAS (SCOTLAND) LIMITED
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)
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) PTE. 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
GERMANY: Stockstadt, Stuttgart
ITALY: Mozzanica; Rho
JAPAN: Nagoya; Sasagami; Soma
MEXICO: Apizaco; Matamoros
THE NETHERLANDS: Leeuwarden
NEW ZEALAND: Auckland
PHILIPPINES: Las Pinas
SCOTLAND: Grangemouth
SINGAPORE: Singapore
SLOVENIA: Ljubljana
SPAIN: Tudela
SWEDEN: Landskrona
TAIWAN: Min-Hsiung
UNITED STATES:
California -- Carson; Hayward; LaMirada
Connecticut -- Kensington
Illinois -- Chicago Heights; Illiopolis; Kankakee
Kentucky -- Louisville
Massachusetts -- Marlboro
North Carolina -- Charlotte
Pennsylvania -- Bristol; Montgomeryville; 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
Himeji, Japan
Houston, Texas
Marlboro, Massachusetts
Newtown, Pennsylvania
Sasagami, Japan
Singapore, Singapore
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
TRADEMARKS
Acryloid, Acusol, Amberpack, Confirm, Dimension,
Dithane, Goal, Implex, Kerb, Lubritan, Mimic, Oroglas,
Paraloid, Plexiglas, Plexol, Primene, Ropague, Rhoplex,
Sea-Nine, Stam, Systhane, Tuffak and Visor are
trademarks of Rohm and Haas Company.
Microposit is a trademark of Shipley Company.
Responsible Care and TRANSCAER are trademarks of
the Chemical Manufacturers Association.
[LOGO] Printed on Recycled Paper
[LOGO] RESPONSIBLE CARE(R)
A PUBLIC COMMITMENT
Rohm and Haas is a Responsible Care(R) Company.
<PAGE>
ROHM
AND [LOGO]
HAAS
Philadelphia, PA 19106-2399
<PAGE>
APPENDIX TO ANNUAL REPORT TO STOCKHOLDERS
(Pursuant to Part 232.304(a) of Regulation S-T)
GRAPHIC DESCRIPTION/CROSS REFERENCE
------- ---------------------------
Cover Four photographs of employees at work, under the title,
"Improvement From All Perspectives." Clockwise from
upper right: employees from Croydon, U.K., discussing
communication issues; two sales people at Mississippi cotton
warehouse; a manager at work in Nagoya, Japan, and a group
of Louisvilee, Kentucky, employees in a plastics additives
warehouse.
Page 1 Pie charts
Sales by Business Group
-----------------------
Polymers, Resins and Monomers $1,654 million
Agricultural Chemicals 439 million
Performance Chemicals 806 million
Plastics 635 million
Sales by Customer Location
--------------------------
North America $1,967 million
Latin America 227 million
Pacific 514 million
Europe 826 million
Page 2 Photograph of:
J. Lawrence Wilson, Chairman
John P. Mulroney, President
Page 4 Bar Charts for Rohm and Haas Company of:
Volume
------
1990 3,336 million units
1991 3,267 million units
1992 3,750 million units
1993 4,214 million units
1994 4,549 million units
Sales
-----
1990 $2,824 million
1991 $2,763 million
1992 $3,063 million
1993 $3,269 million
1994 $3,534 million
Earnings, before cumulative effect of accounting change
1990 $207 million
1991 $163 million
1992 $174 million
1993 $126 million
1994 $264 million
Page 6 Photographs of end uses of the company's products
Page 10 Bar Charts for Polymers, Resins and Monomers Business
Group of:
Volume
------
1990 2,211 million units
1991 2,283 million units
1992 2,674 million units
1993 3,050 million units
1994 3,324 million units
Sales
-----
1990 $1,249 million
1991 $1,290 million
1992 $1,425 million
1993 $1,519 million
1994 $1,654 million
Earnings, before cumulative effect of accounting change
--------
1990 $119 million
1991 $116 million
1992 $124 million
1993 $120 million
1994 $167 million
Page 13 Bar Charts for Plastics Business Group of:
Volume
------
1990 505 million units
1991 495 million units
1992 533 million units
1993 580 million units
1994 638 million units
Sales
-----
1990 $561 million
1991 $546 million
1992 $573 million
1993 $579 million
1994 $635 million
Earnings, before cumulative effect of accounting change
--------
1990 $37 million
1991 $ 8 million
1992 $38 million
1993 $(2) million
1994 $58 million
Page 16 Bar Charts for Performance Chemicals Business Group of:
Volume
------
1990 438 million units
1991 324 million units
1992 377 million units
1993 399 million units
1994 399 million units
Sales
-----
1990 $651 million
1991 $566 million
1992 $682 million
1993 $762 million
1994 $806 million
Earnings, before cumulative effect of accounting change
--------
1990 $55 million
1991 $43 million
1992 $19 million
1993 $29 million
1994 $38 million
Page 18 Bar charts for the Agricultural Chemicals Business Group
Volume
------
1990 182 millions of units
1991 165 millions of units
1992 166 millions of units
1993 185 millions of units
1994 188 millions of units
Sales
-----
1990 $363 million
1991 $361 million
1992 $383 million
1993 $409 million
1994 $439 million
Earnings, before cumulative effect of accounting change
--------
1990 $22 million
1991 $33 million
1992 $25 million
1993 $39 million
1994 $40 million
Page 20 Bar chart of Rohm and Haas occupational injury and illness
average rate worldwide vs. U.S. chemical industry.
Cases per 200,000 hours worked:
Rohm and Haas U.S. chemical
worldwide average industry average
----------------- ----------------
1991 5.3 3.2
1992 4.4 3.2
1993 3.7 2.9
1994 2.5 2.8
Page 24 Line Chart of Gross Profit, Selling, Administrative and
Research Expense (SAR) and Operating Earnings (earnings
excluding after-tax interest expense) as a percent of sales:
Year Gross Profit SAR Operating Earnings
---- ------------ --- ------------------
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
1994 35.9 22.4 8.4
Page 25 Line Chart of Sales and Volume Indices
1984 = 100
Year Sales Dollars Physical Volume
---- ------------- ---------------
1984 100 100
1985 100 101
1986 101 97
1987 108 104
1988 124 117
1989 130 121
1990 138 124
1991 135 121
1992 150 139
1993 160 156
1994 173 169
Line Chart of Raw Material Cost Index
1984 = 100
Year Index Percentage Change
---- ----- -----------------
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)
1994 100 4
Page 26 Line Chart of Selling Price Index
1984 = 100
Year Index Percentage Change
---- ----- -----------------
1984 100 0
1985 98 (2)
1986 100 3
1987 104 3
1988 109 5
1989 110 1
1990 113 3
1991 116 2
1992 115 (1)
1993 110 (4)
1994 110 0
Line Chart of Return on Investment
Year Stockholders' Equity Net Assets
---- -------------------- ----------
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
1994 16.5 7.6
Page 27 Stacked Bar Chart of Cash Flow
Provided by operations
----------------------
1990 $336 million
1991 357 million
1992 401 million
1993 358 million
1994 524 million
Treasury Stock Purchases, ESOP
------------------------------
1990 $213 million
1991 1 million
1992 1 million
1993 0 million
1994 7 million
Capital Additions & Acquisitions Net of Divestitures
----------------------------------------------------
1990 $280 million
1991 208 million
1992 447 million
1993 290 million
1994 336 million
Dividends
---------
1990 $79 million
1991 80 million
1992 88 million
1993 97 million
1994 102 million
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
1994 107 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
1994 31 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
1994 31 million
Page 29 Line Chart of Earnings and Common Dividends
Dollars per Share
Year Earnings Common Dividends
---- -------- ----------------
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
1994 3.79 1.44
Page 30 Line Chart of Capital Additions and Depreciation
Year Additions Depreciation
---- --------- ------------
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
1994 339 million 231 million
Page 31 Line Chart of Assets as a Percent of Sales
Year Fixed Assets Inventories Receivables
---- ------------ ----------- -----------
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
1994 55.5 13.8 19.2
Page 32 High-Low Chart of Quarterly Stock Prices in Dollars
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
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
1994
----
High 60 64 1/2 68 1/2 61 3/8
Low 53 1/2 53 1/4 54 3/8 54 1/8
Close 54 5/8 62 1/4 57 1/8 57 1/8
EXHIBIT (13)(A)
NOTE 22: SUBSEQUENT EVENT
On March 20, 1995, the Federal District Court in Philadelphia ruled that
Rohm and Haas must indemnify SmithKline Beecham for costs related to the
cleanup of contamination at the Whitmoyer waste site. As a result of
this court order, the company will record a charge to first quarter 1995
earnings of $17 million after tax, or $.25 per common share, to
recognize increased potential liability for remediating the site. The
company strongly disagrees with the decision and intends to appeal.
24
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
25
<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 Company L.L.C. Massachusetts
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.
26
<PAGE>
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 report dated February 20, 1995, except as to Note 22 which is as of
March 20, 1995, relating to the consolidated balance sheets of Rohm and
Haas Company and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of earnings, stockholders' equity, and
cash flows and the related schedule for each of the years in the
three-year period ended December 31, 1994, which report appears on
page 6 of Form 10-K of Rohm and Haas Company and subsidiaries.
As discussed in Notes 5 and 8 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 Statement No. 106, "Accounting for Postretirement Benefits Other
Than Pensions," and No. 109, "Accounting for Income Taxes" in 1992.
/s/ KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania ----------------------------
March 27, 1995 KPMG PEAT MARWICK LLP
27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FINANCIAL STATEMENTS AS OF DECEMBER 31, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 127
<SECURITIES> 0
<RECEIVABLES> 622
<ALLOWANCES> 11
<INVENTORY> 487
<CURRENT-ASSETS> 1,440
<PP&E> 3,969
<DEPRECIATION> 2,009
<TOTAL-ASSETS> 3,861
<CURRENT-LIABILITIES> 932
<BONDS> 629
0
134
<COMMON> 197
<OTHER-SE> 1,289
<TOTAL-LIABILITY-AND-EQUITY> 3,861
<SALES> 3,534
<TOTAL-REVENUES> 3,534
<CGS> 2,267
<TOTAL-COSTS> 2,267
<OTHER-EXPENSES> 789
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 407
<INCOME-TAX> 143
<INCOME-CONTINUING> 264
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 264
<EPS-PRIMARY> 3.79
<EPS-DILUTED> 3.79
</TABLE>
SCHEDULE VIII
ROHM AND HAAS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
---- ---- ----
(millions of dollars)
Deducted from Accounts Receivable--
Allowances for losses:
Balance at beginning of year..... $10 $12 $10
Additions charged to earnings.... 3 2 2
Charge-offs, net of recoveries... (2) (4) --
--- --- ---
Balance at end of year........... $11 $10 $12
=== === ===
Deducted from Notes Receivable--
Allowances for losses:
Balance at beginning of year..... $-- $ 4 $ 4
Additions charged to earnings.... -- -- --
Recoveries....................... -- (4) --
--- --- ---
Balance at end of year........... $-- $-- $ 4
=== === ===
7
