UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 30, 1997 COMMISSION FILE NUMBER 1-3507
R O H M A N D H A A S C O M P A N Y
(Exact name of registrant as specified in its charter)
DELAWARE 23-1028370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 INDEPENDENCE MALL WEST, PHILADELPHIA, PENNSYLVANIA 19106
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 592-3000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Common stock outstanding at October 28, 1997: 61,213,092 SHARES
<PAGE>
ROHM AND HAAS COMPANY AND SUBSIDIARIES
FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following are incorporated herein by reference to pages 9 through 12
of the company's Quarterly Report to Stockholders for the third quarter
of 1997, a complete copy of which is attached as Exhibit 20.
1. Statements of Consolidated Earnings
2. Statements of Consolidated Cash Flows
3. Consolidated Balance Sheets
4. Notes to Consolidated Financial Statements
ITEM 2. - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The management discussion and analysis is incorporated herein by
reference to pages 2 through 5 of the company's Quarterly Report to
Stockholders for the third quarter of 1997, a complete copy of which is
attached as Exhibit 20.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A discussion of legal proceedings is incorporated herein by reference to
pages 5 and 12 of the company's Quarterly Report to Stockholders for the
third quarter of 1997, a complete copy of which is attached as Exhibit 20.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit (10) - Rohm and Haas Company Non-Qualified Savings Plan.
Exhibit (12) - Computation of Ratio of Earnings to Fixed Charges for
the company and subsidiaries.
Exhibit (20) - Copy of the company's Quarterly Report to Stockholders
for the quarter ended September 30, 1997.
Exhibit (27) - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: November 3, 1997 ROHM AND HAAS COMPANY
---------------- (Registrant)
BRADLEY J. BELL
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
<PAGE>
EXHIBIT INDEX
(Pursuant to Part 232.102(d) of Regulation S-T)
Exhibit
No. Description
- ------- -----------------------------------------------------
(10) Rohm and Haas Company Non-Qualified Savings Plan
(12) Computation of Ratio of Earnings to Fixed Charges
(20) Copy of Quarterly Report to Stockholders
(27) Financial Data Schedule
EXHIBIT 10
ROHM AND HAAS COMPANY
NON-QUALIFIED SAVINGS PLAN
General Description of the Plan:
Purpose.
--------
The purpose of the Plan is to provide additional retirement savings
benefits beyond the otherwise determined savings benefits provided by
the Rohm and Haas Company Employee Stock Ownership and Savings Plan (the
"Savings Plan") for management and highly compensated employees of the
Company whose pre-retirement income involves significant performance
related award payments and for eligible employees whose savings benefits
from the Savings Plan are limited by Section 415 or Section 401(a)(17)
of the Internal Revenue Code of 1986, as amended.
Eligibility.
------------
Employees level 14 and above are eligible to participate.
Participation.
--------------
Eligible employees must elect to participate by December 31 of the
preceding year following procedures established by the Rohm and Haas
Benefits Administrative Committee.
Contributions and Investments.
------------------------------
Each participant's contributions will be notionally invested in the
same investment funds as the participant has elected for investment of
his or her Savings Plan account. The Company will contribute a notional
amount equal to 60% of the first 6% of the amount deferred by a
participant who is a Rohm and Haas Company employee and 120% of the
first 3% of the amount deferred by a participant who is a Shipley
Company LLC employee. The Company's matching contributions will be
allocated to deferred stock units. At the time of distribution, each
deferred stock unit will be distributed as one share of Rohm and Haas
Company common stock.
EXHIBIT 12
ROHM AND HAAS COMPANY
AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(MILLIONS OF DOLLARS)
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPT. 30, --------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ------ ------ ------ ------ ------
Earnings before
income taxes $ 464 $ 530 $ 441 $ 407 $ 194 $ 261
Fixed charges 55 75 84 82 79 83
Capitalized interest
adjustment 2 (1) (5) (2) (7) (3)
Undistributed earnings
adjustment (10) 12 (3) (2) 6 2
----------- ------ ------ ------ ------ ------
Earnings $ 511 $ 616 $ 517 $ 485 $ 272 $ 343
----------- ------ ------ ------ ------ ------
Ratio of earnings
to fixed charges 9.3 8.2 6.2 5.9 3.4 4.1
------------ ------ ------ ------ ------ ------
Note: Earnings consist of earnings before income taxes and fixed charges after
eliminating undistributed earnings (losses) of affiliates and capitalized
interest net of amortization of previously capitalized interest. Fixed
charges consist of interest expense, including capitalized interest, and
amortization of debt discount and expense on all indebtedness, plus
one-third of rent expense deemed to represent an interest factor.
EXHIBIT 20
COPY OF QUARTERLY REPORT TO STOCKHOLDERS
<PAGE>
ROHM AND HAAS COMPANY
THIRD QUARTER 1997
ID: COVER GRAPHIC
<PAGE>
FINANCIAL HIGHLIGHTS (Millions of dollars, except earnings per share)
- --------------------------------------------------------------------------
Third Quarter Nine Months
------------------------ -----------------------
Percent Percent
1997 1996 Change 1997 1996 Change
------------------------ -----------------------
Net sales $ 974 $ 969 1 $3,049 $3,017 1
Net earnings 91 87 5 312 288 8
Net earnings per
common share $1.45 $1.31 11 $ 4.92 $ 4.28 15
- --------------------------------------------------------------------------
SALES BY BUSINESS GROUP
Millions of dollars
- -----------------------
Polymers, Resins and Monomers $526
ID: GRAPHIC Plastics $165
(PIE CHART) Performance Chemicals $196
Agricultural Chemicals $ 87
SALES BY CUSTOMER LOCATION
Millions of dollars
- --------------------------
North America $543
ID: GRAPHIC Europe $215
(PIE CHART) Asia-Pacific $142
Latin America $ 74
<PAGE>
CHAIRMAN'S LETTER
Rohm and Haas had a terrific third quarter, one that reflects the
continuation of trends seen all year:
o Unit volume grew a solid 5 percent. Most of that growth occurred in
the more specialty areas of our portfolio -- in Electronic Chemicals
and the higher end of the Polymers and Resins business.
o The sales increase was limited to 1 percent for the quarter, due to
the ongoing impact of weaker foreign currencies.
o The company reported record earnings of $91 million for the quarter,
thanks to strong ongoing demand, an excellent job of controlling
internal costs, and the increased efficiency of manufacturing
operations. Earnings per common share were up 11 percent.
Looking ahead, I expect to see the trends of the first three quarters
continue through the end of the year, as long as there are no surprises in
economic conditions or currency exchange rates during the fourth quarter.
Fred W. Shaffer, Vice President and Chief Financial Officer, retired at the
end of August after 37 years of service. Fred's legacy can be seen in the
strong financial structure that underpins the company's performance in
1997. On behalf of the Board of Directors and the employees of Rohm and
Haas, I thank him for his excellent work over the years and wish him and
his wife, Meriel, a happy retirement.
On October 24th, the Board of Directors authorized the repurchase of an
additional 3 million shares of common stock, or approximately 5 percent of
the 61 million shares outstanding as of September 30, 1997.
(J. LAWRENCE WILSON)
J. Lawrence Wilson
Chairman November 3, 1997
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
THIRD QUARTER 1997 VERSUS
THIRD QUARTER 1996
Third quarter 1997 earnings were $91 million, up 5% from last year's
earnings of $87 million. Earnings per common share of $1.45 rose 11% from
$1.31 per common share in 1996. Volume increased 5% in the quarter as a
result of strong demand in Polymers, Resins and Monomers and Performance
Chemicals. The latter segment's performance was helped largely by the
Electronic Chemicals businesses. Despite good volume growth, sales of $974
million were just 1% above the prior-year period, reflecting weaker
currencies in Japan and in Europe and moderately lower selling prices.
Earnings increased as a result of higher volume, smooth plant operations,
earnings from affiliates and lower interest expense. In addition to higher
earnings, the per-share increase reflects the impact of the company's
common share repurchase program.
Polymers, Resins and Monomers earnings were $69 million, down 4% compared
with the prior year. Sales increased 3% as a result of a 7% increase in
volume offset by weaker currencies and slightly lower selling prices.
Volume strength was evident in all regions, reaching double digits in
Europe, Latin America and Asia-Pacific, with particularly strong
contributions from products for the paper, adhesives and coatings markets.
The decrease in earnings was driven largely by unfavorable currencies.
Performance Chemicals recorded earnings of $24 million, a 20% increase from
last year's earnings on 9% higher volume and 6% higher sales. The
Electronic Chemicals business reported strong sales and earnings increases
in all regions in which they participate. Electronic Chemicals earnings
were also helped by the contribution of Rodel, Inc., an affiliate acquired
in the second quarter of 1997. Despite strong volume growth, sales and
earnings in both Ion Exchange Resins and Biocides were essentially flat
because of unfavorable currencies and selling prices.
Plastics reported earnings of $17 million up from $14 million reported for
the same period in 1996. A volume decrease of 6%, combined with weaker
currencies in Europe and lower overall selling prices, led to 8% lower
sales. Though the volume decrease had a negative earnings impact, roughly
break-even results in AtoHaas Europe (compared to losses in the 1996
period) allowed Plastics to show an earnings improvement.
Agricultural Chemicals recorded losses of $2 million compared with earnings
of $2 million in the third quarter of 1996. Sales were 5% lower than 1996,
which reflected 2% lower volume and the effect of weaker currencies in
Europe and Japan. The volume decrease is the net effect of lower sales of
Dithane in all regions, except Latin America, largely related to weather
conditions. The earnings decrease is a result of lower volume and
unfavorable currency impacts.
Corporate expenses of $17 million in 1997 were down $4 million from last
year's third quarter due largely to lower interest expense resulting from
lower average debt balances during the quarter.
Net sales were $974 million, up 1% from 1996. The third quarter gross
profit margin was 35%, down from 36% for the 1996 period due to weaker
currencies in Europe
2
<PAGE>
and Japan and slightly lower selling prices offset by higher volume.
Affiliate earnings for the quarter were $4 million, compared to a 1996 loss
of $1 million. This increase reflects the contribution of Rodel, Inc., the
RohMax joint venture and improved results in AtoHaas Europe.
The effective tax rate for the quarter was 32%, compared with 34% a year
ago. This decrease is primarily a result of the effect of affiliate
earnings, which are recorded on an after-tax basis.
NINE MONTHS 1997 VERSUS
NINE MONTHS 1996
Earnings for the first nine months were $312 million, 8% higher than last
year's earnings of $288 million. Earnings per common share were $4.92, up
15% from the 1996 period. Sales increased 1% to $3,049 million. Unit
volume increased 8%. Sales growth was hindered by weaker currencies, the
absence of Petroleum Chemicals sales now part of the RohMax joint venture,
and slightly lower selling prices. Earnings for the first nine months were
driven by higher volume and earnings from affiliates. In addition to
higher earnings, the per-share increase reflects the impact of the
company's common share repurchase program.
Polymers, Resins and Monomers earnings of $211 million were up 17% from
1996. Excluding the effect of the former Petroleum Chemicals business,
sales were up 7% on an 11% volume increase. All regions reported strong
volume growth, but the favorable impact on sales was offset, in part, by
weaker currencies and slightly lower selling prices. Products for the
paper, adhesives and coatings markets reported particularly strong volume
growth versus 1996. Earnings increases are primarily a result of higher
volume.
Performance Chemicals reported earnings of $67 million, a 5% increase over
last year's number. Sales essentially were unchanged from 1996. Volume
increased 3%. The volume increase did not result in sales growth because
of weaker currencies in Europe and in the Asia-Pacific region. The extent
of the volume increase was hindered by the discontinuation of the Biocides
joint venture with Dead Sea Bromine. Higher volumes in Electronic
Chemicals and in Ion Exchange Resins offset some of this decrease. The
increased earnings reflect strong results reported by the Electronic
Chemicals businesses, including a contribution from the recent investment
in Rodel, Inc. This offset weaker results for Biocides and Ion Exchange
Resins.
Plastics recorded earnings of $49 million, an increase from $41 million in
1996. Volume increased 5% while sales essentially were unchanged, due to
lower selling prices and weaker currencies in Europe. Plastics reported
20% higher earnings due to modest results reported in the AtoHaas Europe
business through nine months of 1997 versus losses in the same period of
1996.
Agricultural Chemicals earnings were $35 million, down $7 million from the
same period of 1996. Sales were down 5% due to 2% lower volume and weaker
currencies in Europe and Japan. The volume decrease was due primarily to
weather-related lower Dithane shipments in all regions except Latin
America. The 17% earnings decrease
3
<PAGE>
was a result of negative currency impacts and lower volume.
Corporate expenses of $50 million were $11 million higher than 1996. The
1996 period included a $10 million ($.15 per common share) retroactive tax
credit on sales outside the United States.
The gross profit margin for the first nine months was 36%, unchanged from
the prior-year period. Despite higher volume, margins were hindered by
unfavorable currency impacts in Europe and Japan and lower selling prices.
Selling, administrative and research expenses largely were unchanged
compared with 1996. This reflects weaker currencies and good overall cost
control even as spending to support business growth has increased.
Affiliate earnings were $10 million, compared to losses of $9 million last
year. This improvement is due to the contribution of Rodel, Inc., the
RohMax joint venture and earnings in AtoHaas Europe versus losses in 1996.
Other expense, net, was $8 million, compared with $6 million in 1996
largely because of unfavorable currency fluctuations.
The effective tax rate for the first nine months was 33%, up slightly from
32% for the first nine months of 1996. The 1996 rate includes the effect
of a $10 million third quarter retroactive tax credit on sales outside of
the United States.
LIQUIDITY, CAPITAL RESOURCES
AND OTHER FINANCIAL DATA
At the end of the quarter, cash and cash equivalents totaled $33 million,
up $22 million from the 1996 year-end balance. Accounts receivable were
down $65 million versus year-end 1996. This decrease was due, in part, to
the collection of $67 million of insurance proceeds during the first nine
months of 1997, relating to settlements of environmental remediation cost
claims against certain insurers. Inventories decreased $41 million
reflecting tighter inventory management.
Higher cash flow from operations and lower capital spending enabled the
company to lower short-term borrowings and decrease the debt-to-equity
ratio while repurchasing two million shares of common stock at a cost of
$169 million during the first nine months of 1997. The debt-to-equity
ratio, calculated without the reduction to stockholders' equity for the
ESOP transaction, was 32% at the end of September, compared with 38% at
year-end 1996. On October 24, 1997 the Board of Directors authorized the
additional repurchase of up to three million shares of common stock over
the next two years. These shares, combined with .4 million
previously-authorized shares, represent approximately 6% of the 61 million
shares outstanding as of September 30, 1997. From year-end 1995 through
the first nine months of 1997, the company repurchased 6.4 million shares,
or approximately 10% of common shares outstanding, at a cost of $471
million.
Fixed asset additions during the first nine months of 1997 totaled $172
million. Spending for the full year is estimated to be approximately $270
million. Expenditures include new emulsion facilities outside of North
America as well as capacity expansion for acrylic acid in Texas.
Investment in electronic chemicals also is a factor.
4
<PAGE>
The company is in the midst of lawsuits over insurance coverage for
environmental liabilities. It is the company's practice to reflect
environmental insurance recoveries in the results of operations for the
quarter in which litigation is resolved through settlement or other
appropriate legal process. Resolutions typically determine coverage for
both past and future environmental spending. During the first nine months
of 1997, environmental remediation expense of approximately $10 million was
recorded, net of insurance recoveries, compared with $19 million for the
first nine months of 1996. In October 1997 the company reached an
additional remediation-related insurance settlement with a number of
insurance companies for a total of $34 million. As a result of settlements
to date, cash flows from insurance proceeds during the next six months are
expected to exceed spending for environmental remediation by approximately
$25 million.
During the second quarter, the company purchased a 25% interest in Rodel,
Inc. for approximately $65 million. Rodel is a privately held,
Delaware-based leader in precision polishing technology serving the
semiconductor, memory disk and glass polishing industries. The investment
is accounted for on the equity basis with Rohm and Haas's share of earnings
reported as equity in affiliates. Rodel's annual sales are approximately
$150 million.
On October 24, 1997, the board of directors declared regular quarterly
dividends of $.50 per common share and $.6875 per preferred share. Both
dividends are payable December 1, 1997 to stockholders of record on
November 7, 1997.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share." Effective for year-end 1997, the statement
establishes guidance intended to simplify the computation and presentation
of earnings per share. The company does not expect that the adoption of
this standard will have a significant impact on its reported earnings per
share.
5
<PAGE>
ROHM AND HAAS COMPANY AND SUBSIDIARIES
SALES BY BUSINESS GROUP AND CUSTOMER LOCATION (Millions of dollars)
- -------------------------------------------------------------------------------
THIRD QUARTER 1997 AND 1996
- -------------------------------------------------------------------------------
Polymers,
Resins and Performance Agricultural
Monomers Chemicals Plastics Chemicals Total
----------- ----------- ----------- ------------ -----------
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ------------ -----------
North
America $351 $340 $ 77 $ 73 $ 96 $ 99 $19 $22 $543 $534
- ------- ----------- ----------- ----------- ------------ -----------
Europe 89 90 52 50 53 62 21 21 215 223
- ------- ----------- ----------- ----------- ------------ -----------
Asia-
Pacific 55 55 62 58 10 11 15 20 142 144
- ------- ----------- ----------- ----------- ------------ -----------
Latin
America 31 28 5 4 6 7 32 29 74 68
- ------- ----------- ----------- ----------- ------------ -----------
Total $526 $513 $196 $185 $165 $179 $87 $92 $974 $969
- ------- ----------- ----------- ----------- ------------ -----------
- -------------------------------------------------------------------------------
FIRST NINE MONTHS 1997 AND 1996
- -------------------------------------------------------------------------------
North
America $1,067 $1,013 $229 $218 $289 $282 $107 $109 $1,692 $1,622
- ------- ------------- ----------- ----------- ----------- --------------
Europe 281 293 156 158 180 190 122 137 739 778
- ------- ------------- ----------- ----------- ----------- --------------
Asia-
Pacific 160 161 168 170 31 32 54 66 413 429
- ------- ------------- ----------- ----------- ----------- --------------
Latin
America 86 78 13 15 22 21 84 74 205 188
- ------- ------------- ----------- ----------- ----------- --------------
Total $1,594 $1,545 $566 $561 $522 $525 $367 $386 $3,049 $3,017
- ------- ------------- ----------- ----------- ----------- --------------
6
<PAGE>
PHYSICAL VOLUME CHANGE
CURRENT QUARTER RELATIVE TO YEAR-EARLIER QUARTER
- -------------------------------------------------------------------------------
Percent CUSTOMER Percent
BUSINESS GROUP Change LOCATION Change
- -------------------------------------------------------------------------------
Polymers, Resins and Monomers 7 North America 3
Performance Chemicals 9 Europe 6
Plastics (6) Asia-Pacific 9
Agricultural Chemicals (2) Latin America 18
- -------------------------------------------------------------------------------
Worldwide 5 Worldwide 5
- -------------------------------------------------------------------------------
CURRENT NINE MONTHS RELATIVE TO YEAR-EARLIER NINE MONTHS
- -------------------------------------------------------------------------------
Percent CUSTOMER Percent
BUSINESS GROUP Change LOCATION Change
- -------------------------------------------------------------------------------
Polymers, Resins and Monomers 9 North America 7
Performance Chemicals 3 Europe 8
Plastics 5 Asia-Pacific 8
Agricultural Chemicals (2) Latin America 13
- -------------------------------------------------------------------------------
Worldwide 8 Worldwide 8
- -------------------------------------------------------------------------------
7
<PAGE>
NET EARNINGS BY BUSINESS GROUP AND CUSTOMER LOCATION
- -------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
1997 1996 1997 1996
------------------- --------------------
BUSINESS GROUP (Millions of dollars)
----------------------------------------------
Polymers, Resins and Monomers $ 69 $ 72 $211 $180
Performance Chemicals 24 20 67 64
Plastics 17 14 49 41
Agricultural Chemicals (2) 2 35 42
Corporate (17) (21) (50) (39)
- ------------------------------------------------------- ----------------------
Total $ 91 $ 87 $312 $288
- ------------------------------------------------------- ----------------------
CUSTOMER LOCATION
North America $ 70 $ 68 $224 $181
Europe 17 18 72 81
Asia-Pacific 12 14 40 42
Latin America 9 8 26 23
Corporate (17) (21) (50) (39)
- ------------------------------------------------------- ----------------------
Total $ 91 $ 87 $312 $288
- ------------------------------------------------------- ----------------------
Corporate includes non-operating items such as interest income and
expense, corporate governance costs and corporate exploratory research
expense.
ANALYSIS OF CHANGE IN PER-SHARE EARNINGS
CURRENT PERIOD RELATIVE TO YEAR-EARLIER PERIOD
- -----------------------------------------------------------------------
$/Share (after-tax)
----------------------------------
THIRD FIRST
GROSS PROFIT QUARTER NINE MONTHS
--------------- -----------------
Selling prices $(.05) $(.26)
Physical volume and product mix .09 .40
Raw material costs (.01) .07
Other manufacturing costs .13 .59
Currency effect on gross profit (.21) (.50)
- ---------------------------------------------------- -----------------
(Decrease) increase in gross profit (.05) .30
- ---------------------------------------------------- -----------------
OTHER CAUSES
Selling, administrative and
research expenses* (.01) (.08)
Interest expense .03 (.01)
Share of affiliate earnings .08 .29
Prior year retroactive tax credit
on export sales -- (.15)
Reduction in outstanding shares of
common stock .07 .28
Other .02 .01
- ---------------------------------------------------- -----------------
Increase from other causes .19 .34
- ---------------------------------------------------- -----------------
Increase in per-share earnings $ .14 $ .64
- ---------------------------------------------------- -----------------
*The amounts shown are on a U.S. dollar basis and include the impact of
currency movements as compared to the prior-year period.
8
<PAGE>
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED EARNINGS (Subject to Year-end Audit)
- -------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
1997 1996 1997 1996
----------------------- ------------------------
CURRENT EARNINGS (Millions of dollars, except per share amounts)
--------------------------------------------------
Net sales $ 974 $ 969 $ 3,049 $ 3,017
Cost of goods sold 632 622 1,945 1,944
- ---------------------------------------------------- -----------------------
Gross profit 342 347 1,104 1,073
Selling and administrative
expense 151 156 467 466
Research and development
expense 50 44 145 138
Interest expense 9 12 30 29
Share of affiliate net
earnings (losses) 4 (1) 10 (9)
Other expense, net 2 3 8 6
- ---------------------------------------------------- -----------------------
Earnings before income taxes 134 131 464 425
Income taxes 43 44 152 137
- ---------------------------------------------------- -----------------------
NET EARNINGS $ 91 $ 87 $ 312 $ 288
Less preferred stock dividends 2 2 6 6
- ---------------------------------------------------- -----------------------
NET EARNINGS APPLICABLE TO
COMMON SHAREHOLDERS $ 89 $ 85 $ 306 $ 282
- ---------------------------------------------------- -----------------------
PER COMMON SHARE:
Net earnings $ 1.45 $ 1.31 $ 4.92 $ 4.28
Common dividends $ .50 $ .45 $ 1.40 $ 1.27
Average number of common
shares outstanding (000's) 61,562 64,718 62,219 65,930
- ---------------------------------------------------- ------------------------
See notes to consolidated financial statements.
9
<PAGE>
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS (Subject to Year-end audit)
- -------------------------------------------------------------------------------
Nine Months Ended
September 30,
---------------------------
1997 1996
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES (Millions of dollars)
---------------------------
Net earnings $ 312 $ 288
Adjustments to reconcile net earnings
to cash provided by operating activities:
Depreciation 206 192
Deferred income taxes 10 28
Accounts receivable 67 (55)
Inventories 41 39
Accounts payable (66) (29)
Income taxes payable 17 25
Other working capital changes, net (12) (17)
Other, net 21 33
- -------------------------------------------------------------------------------
Net cash provided by operating activities 596 504
- -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and equipment (172) (218)
Investments in joint ventures, affiliates
and subsidiaries (73) (7)
Proceeds from the sale of facilities and investments 10 --
- -------------------------------------------------------------------------------
Net cash used by investing activities (235) (225)
- -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury shares (169) (230)
Proceeds from issuance of long-term debt 14 1
Repayments of long-term debt (38) (38)
Net change in short-term borrowings (56) 87
Payment of dividends (89) (87)
Other, net (2) (5)
- -------------------------------------------------------------------------------
Net cash used by financing activities (340) (272)
- -------------------------------------------------------------------------------
Effect of exchange rate changes on cash 1 --
- -------------------------------------------------------------------------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS $ 22 $ 7
- -------------------------------------------------------------------------------
See notes to consolidated financial statements.
10
<PAGE>
Rohm and Haas Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS (Subject to Year-end Audit)
- -------------------------------------------------------------------------------
SEPT. 30, December 31, Sept. 30,
1997 1996 1996
-----------------------------------------
ASSETS (Millions of dollars)
-----------------------------------------
Current assets:
Cash and cash equivalents $ 33 $ 11 $ 50
Receivables, net 776 841 812
Inventories (note d) 442 483 455
Prepaid expenses and other assets 140 121 133
- -------------------------------------------------------------------------------
Total current assets 1,391 1,456 1,450
- -------------------------------------------------------------------------------
Land, buildings and equipment 4,440 4,327 4,288
Less accumulated depreciation 2,429 2,261 2,245
- -------------------------------------------------------------------------------
Net land, buildings and equipment 2,011 2,066 2,043
- -------------------------------------------------------------------------------
Other assets 481 411 480
- -------------------------------------------------------------------------------
$3,883 $3,933 $3,973
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 74 $ 145 $ 167
Accounts payable and accrued
liabilities 625 669 628
Accrued income taxes 88 72 99
- -------------------------------------------------------------------------------
Total current liabilities 787 886 894
- -------------------------------------------------------------------------------
Long-term debt 551 562 574
Employee benefits 411 405 402
Other liabilities 350 352 350
Stockholders' equity:
$2.75 Cumulative convertible
preferred stock (note e) 127 131 132
Common stock: shares issued
--78,652,380 197 197 197
Additional paid-in capital 134 143 146
Retained earnings 2,259 2,036 1,990
- -------------------------------------------------------------------------------
2,717 2,507 2,465
Less: Treasury stock (note f) 774 629 563
Less: ESOP shares 140 145 146
Other equity adjustments (19) (5) (3)
- -------------------------------------------------------------------------------
Total stockholders' equity 1,784 1,728 1,753
- -------------------------------------------------------------------------------
$3,883 $3,933 $3,973
- -------------------------------------------------------------------------------
See notes to consolidated financial statements.
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(A) These interim financial statements are unaudited, but, in the opinion
of management, all adjustments, which are of a normal recurring nature,
have been made to present fairly the company's financial position,
results of operations and cash flows. These financial statements
should be read in conjunction with the financial statements, accounting
policies and the notes included in the company's annual report for the
year ended December 31, 1996.
(B) The company is a party in various government enforcement and private
actions associated with former waste disposal sites. The company is
also involved in potential remediations at some of its manufacturing
facilities. At September 30, 1997, the reserves for remediation were
$140 million, compared to $139 million at December 31, 1996. The
company collected $67 million of previously recorded remediation-
related settlements with insurance carriers during the first nine
months of 1997. As a result, the insurance recovery receivable was $5
million at September 30, 1997, compared to $48 million at December 31,
1996. The company is in the midst of lawsuits over insurance coverage
for environmental liabilities. It is the company's practice to reflect
environmental insurance recoveries in the results of operations for the
quarter in which litigation is resolved through settlement or other
appropriate legal process. Resolutions typically determine coverage
for both past and future environmental spending. During the first nine
months of 1997 environmental remediation expense of approximately $10
million was recorded, net of insurance recoveries, compared with $19
million for the first nine months of 1996. In October 1997 the company
reached an additional remediation-related insurance settlement with a
number of insurance companies for a total of $34 million.
In addition to accrued environmental liabilities, the company has
reasonably possible loss contingencies relating to environmental
matters of approximately $50 million. The company has also identified
other sites, including its larger manufacturing facilities in the
United States, where future environmental remediation expenditures may
be required, but these expenditures are not reasonably estimable at
this time. The company believes that these matters, when ultimately
resolved, which may be over the next decade, will not have a material
adverse effect on the consolidated financial position of the company,
but could have a material adverse effect on consolidated results of
operations in any given year.
(C) The company and its subsidiaries are parties to litigation arising out
of the ordinary conduct of its business. The company is also a subject
of an investigation by U.S. Customs into the labeling of some products
imported into the U.S. from some of the company's non-U.S. locations.
Recognizing the amounts reserved for such items and the uncertainty of
the outcome, it is the company's opinion that the resolution of all
pending lawsuits and claims will not have a material adverse effect,
individually or in the aggregate, upon the results of operations and
the consolidated financial position of the company.
(D) Inventories consist of:
(Millions of dollars)
SEPT. 30, Dec. 31, Sept. 30,
1997 1996 1996
--------- -------- ---------
Finished products and work in process $331 $375 $335
Raw materials and supplies 111 108 120
---- ---- ----
Total inventories $442 $483 $455
---- ---- ----
(E) The number of preferred shares issued and outstanding were:
September 30, 1997 2,530,805
December 31, 1996 2,631,822
September 30, 1996 2,642,894
(F) The number of common treasury shares were:
September 30, 1997 17,255,217
December 31, 1996 15,507,629
September 30, 1996 14,682,007
Dithane is a trademark of Rohm and Haas Company.
12
<PAGE>
APPENDIX TO EXHIBIT 20
(Pursuant to Part 232.304(a) of Regulation S-T)
Graphic Description/Cross Reference
- ----------- -----------------------------------------------------------
Cover A flask with a globe inside and words "Third Quarter 1997"
Pie Charts Description included in introduction to Exhibit 20
(not incorporated by reference)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> ROHM AND HAAS COMPANY AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE (MILLIONS OF DOLLARS)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1997 AND IS QUAL-
IFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 33
<SECURITIES> 0
<RECEIVABLES> 692
<ALLOWANCES> 15
<INVENTORY> 442
<CURRENT-ASSETS> 1,391
<PP&E> 4,440
<DEPRECIATION> 2,429
<TOTAL-ASSETS> 3,883
<CURRENT-LIABILITIES> 787
<BONDS> 551
0
127
<COMMON> 197
<OTHER-SE> 1,460
<TOTAL-LIABILITY-AND-EQUITY> 3,883
<SALES> 3,049
<TOTAL-REVENUES> 3,049
<CGS> 1,945
<TOTAL-COSTS> 1,945
<OTHER-EXPENSES> 612
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 464
<INCOME-TAX> 152
<INCOME-CONTINUING> 312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 312
<EPS-PRIMARY> 4.92
<EPS-DILUTED> 4.92
</TABLE>
