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 JUNE 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 August 8, 1997: 61,597,235 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 second 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 second 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
second quarter of 1997, a complete copy of which is attached as Exhibit 20.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The company's 78th annual meeting of stockholders was held on
May 5, 1997, in Philadelphia, Pennsylvania.
(c) The following is a tabulation of the results of voting by security
holders:
Election of directors:
Nominees Votes For Votes Withheld
---------------------- --------- --------------
George B. Beitzel 58,349,026 649,641
Daniel B. Burke 58,490,493 508,174
Earl G. Graves 58,329,424 669,243
<PAGE>
Election of directors, continued:
James A. Henderson 58,512,126 486,541
John H. McArthur 58,494,062 504,605
Paul F. Miller, Jr. 58,412,913 585,754
Jorge P. Montoya 58 433,183 565,484
Sandra O. Moose 58,417,775 580,912
John P. Mulroney 58,523,231 475,436
Gilbert S. Omenn 58,428,864 569,803
Ronaldo H. Schmitz 58,346,488 652,179
Alan Schriesheim 58,500,890 497,777
Marna C. Whittington 58,491,157 507,510
J. Lawrence Wilson 58,434,033 564,634
Proposal to adopt the Rohm and Haas Company Annual Bonus Plan:
For 57,102,249
Against 1,655,652
Abstain 240,766
Proposal to adopt the Rohm and Haas Company Long-Term Bonus Plan:
For 56,158,739
Against 2,362,047
Abstain 477,881
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit (12) -- Computation of Ratio of Earnings to Fixed Charges
for the company and subsidiaries.
Exhibit (20) -- Copy of the company's Quarterly Report to
Stockholders for the quarter ended June 30, 1997.
Exhibit (27) -- Financial Data Schedule
(b) On June 4, 1997, the company filed a Report on Form 8-K with the
Securities and Exchange Commission, reporting, under Item 5 of said
Report, the updating of its Medium Term Note program.
<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: August 13, 1997 ROHM AND HAAS COMPANY
--------------- (Registrant)
FRED W. SHAFFER
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
<PAGE>
EXHIBIT INDEX
(Pursuant to Part 232.102(d) of Regulation S-T)
Exhibit
No. Description
- ------- -----------------------------------------------------------
(12) Computation of Ratio of Earnings to Fixed Charges
(20) Copy of Quarterly Report to Stockholders
(27) Financial Data Schedule
EXHIBIT 12
ROHM AND HAAS COMPANY
AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(MILLIONS OF DOLLARS)
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------
1997 1996 1995 1994 1993 1992
------------ ------ ------ ------ ------ ------
Earnings before income
taxes $ 330 $ 530 $ 441 $ 407 $ 194 $ 261
Fixed charges 37 75 84 82 79 83
Capitalized interest
adjustment 1 (1) (5) (2) (7) (3)
Undistributed earnings
adjustment (6) 12 (3) (2) 6 2
------------ ------ ------ ------ ------ ------
Earnings $ 362 $ 616 $ 517 $ 485 $ 272 $ 343
------------ ------ ------ ------ ------ ------
Ratio of earnings to
fixed charges 9.8 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
SECOND QUARTER 1997
ID: COVER GRAPHIC
<PAGE>
FINANCIAL HIGHLIGHTS (Millions of dollars, except earnings per share)
- --------------------------------------------------------------------------------
Second Quarter Six Months
----------------------- -----------------------
Percent Percent
1997 1996 Change 1997 1996 Change
----------------------- -----------------------
Net sales $1,089 $1,054 3 $2,075 $2,048 1
Net earnings 117 101 16 221 201 10
Net earnings per
common share $ 1.85 $ 1.50 23 $ 3.47 $ 2.96 17
- -------------------------------------------------------------------------------
SALES BY BUSINESS GROUP
Millions of dollars
- ---------------------------------------------------
Polymers, Resins and Monomers $571
[PIE CHART] Performance Chemicals $192
Plastics $186
Agricultural Chemicals $140
SALES BY CUSTOMER LOCATION
Millions of dollars
- ---------------------------------------------------
North America $614
[PIE CHART] Europe $265
Asia-Pacific $138
Latin America $ 72
<PAGE>
CHAIRMAN'S LETTER
Rohm and Haas reported an excellent second quarter:
o Unit volume was up 10 percent, due to increased demand for our acrylic
products and electronic chemicals. Polymers and Resins, in particular,
reported an outstanding increase in business;
o Sales were up 3 percent over the same period in 1996, up 7 percent after
adjustments for a discontinued business and the formation of the RohMax
joint venture;
o The higher demand, outstanding manufacturing operations and the net
effect of the ongoing share repurchase program boosted earnings per
common share by 23 percent over the second quarter of 1996.
These factors transcended the negative impact of weaker foreign currencies,
a slowdown in Agricultural Chemicals and the absence of a tax credit that
was booked in the second quarter of last year.
At a meeting at the end of July, the Board of Directors voted to increase
the dividend on common shares by 11 percent. Nineteen ninety-seven marks
the twentieth consecutive year of increases in the dividends paid on Rohm
and Haas common stock.
There's no question that Rohm and Haas is off to a great start for the
year. As long as external factors remain steady, I am confident the
company will report an overall earnings improvement for the full year.
I remind shareholders that Rohm and Haas had an unusually strong second half
in 1996, so our comparative financial performance will not be as dramatic
for the rest of 1997 as it was during the first half of the year. However,
you will continue to see evidence of the underlying strength of our
businesses, the ongoing demand for our technology and our commitment to
profitable growth.
/s/ J. LAWRENCE WILSON
J. Lawrence Wilson
August 12, 1997
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
SECOND QUARTER 1997 VERSUS
SECOND QUARTER 1996
Second quarter 1997 earnings were $117 million, up 16% from last year's
results of $101 million. Earnings per common share of $1.85 rose 23% from
$1.50 per common share in 1996. Volume increased 10% in the quarter as a
result of strong growth in Polymers, Resins and Monomers, Plastics and the
Electronic Chemicals businesses. Sales of $1,089 million were 3% above the
prior year period due to higher volume balanced by weaker currencies in
Japan and in Europe, slightly lower selling prices and the exclusion of
sales of businesses accounted for through joint ventures. Earnings
increased as a result of higher volume and earnings from affiliates
compared with losses in the prior year. Offsetting these increases were an
increase in selling, administrative and research expenses and a
non-recurring $10 million ($.15 per common share) retroactive tax credit on
sales outside the United States recorded in the second quarter of 1996. 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 $80 million, up 45% compared
with the prior year. Excluding the Petroleum Chemicals business, now
accounted for through the RohMax joint venture, sales were up 12% on a 15%
volume increase. The earnings increase was largely driven by volume. This
increase in volume was neutralized, in part, by weaker currencies in Europe
and Japan and slightly lower selling prices. Volume was strong in all
regions, with growth of Polymers and Resins showing particular strength in
Europe. The paper, adhesives and overall coatings segments all reported
strong growth for the quarter.
Performance Chemicals recorded earnings of $22 million, up $2 million from
last year's earnings. Sales essentially were unchanged, while volume
increased 3%. Electronic Chemicals reported double-digit sales and
earnings growth for the quarter. Biocides saw solid growth, though the
comparison with last year suffers a bit because of the absence of the
bromine biocide business and the impact of currencies. Ion Exchange Resins
saw some increase in volume, but a lower priced product mix and the effect
of currencies held back sales growth.
Plastics reported earnings of $16 million, up 23% from $13 million reported
in the 1996 period. Sales increased 5% on volume growth of 12%. The
strong worldwide volume growth had a favorable impact on earnings, but the
impact on sales was mitigated by weaker currencies and lower overall
selling prices. The absence of losses in AtoHaas Europe also increased
Plastics' earnings.
Agricultural Chemicals earnings of $18 million were $2 million lower than
the second quarter of 1996. Sales of $140 million were 4% lower than 1996,
which reflected 6% lower volume and the effect of weaker cur-
2
<PAGE>
rencies in Europe and Japan. The volume decrease was most significant in
Europe where weather conditions had an unfavorable impact on Dithane
shipments. Increased demand for this product in Latin America partially
compensated for this decrease.
Corporate expenses of $19 million in 1997 were up $12 million from last
year's second quarter due to a non-recurring $10 million retroactive tax
credit on sales outside of the United States recorded in 1996.
Net sales were $1,089 million, up 3% from 1996. The second quarter gross
profit margin was 37%, up from 34% last year. Strong volume growth and
slightly lower raw material prices outweighed the impact of weak currencies
in Europe and Japan and lower selling prices.
Selling, administrative and research expenses increased 3%. This increase
is a result of higher incentive compensation expense and costs related to
spending on systems infrastructure. Affiliate earnings for the quarter
were $3 million. This compared with a 1996 loss of $5 million. The 1997
earnings improvement is the result of a return to profitability for AtoHaas
Europe and a strong performance by the RohMax joint venture. Other
expense, net, was $6 million, compared with expense of $3 million in 1996,
largely the result of unfavorable currency impacts.
The effective tax rate for the quarter was 33% compared with 28% a year
ago. The prior-year period included a $10 million retroactive tax credit
on sales outside of the United States. Absent this credit, the rates in
the two periods were comparable.
SIX MONTHS 1997 VERSUS
SIX MONTHS 1996
Earnings for the first six months were $221 million, 10% higher than last
year's earnings of $201 million. Earnings per common share were $3.47, up
17% from the 1996 period. Sales increased 1% to $2,075 million. 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 overall. Unit volume increased 9%. Earnings for the first
six months were driven largely by higher volume, but also were improved by
earnings from affiliates versus losses in 1996. 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 $142 million were up 31% from
1996. Excluding the effect of the former Petroleum Chemicals business,
sales were up 9% on a 13% volume increase. Earnings increases primarily
are a result of higher volume. Volume was strong in all regions, with the
favorable impact outweighing weaker currencies and slightly lower selling
prices. The paper, adhesives and overall coatings businesses reported
particularly strong volume growth versus 1996.
Performance Chemicals reported earnings of $43 million, essentially
unchanged from last year's earnings. Sales were down 2% and
3
<PAGE>
volume decreased 1%. The volume decrease was primarily the result of the
discontinuation of the Biocides joint venture with Dead Sea Bromine.
Higher volume reported by Shipley Company offset some of this decrease.
Flat earnings reflect the strong performance of the Shipley electronics
chemicals business, offset by a weaker performance for Biocides and Ion
Exchange Resins.
Plastics recorded earnings of $32 million, an increase from $27 million in
1996. Volume increased 11% while sales increased 3%. This reflects both
lower selling prices and weaker currencies in Europe. Despite the impact
of these factors, the Plastics segment reported 19% higher earnings due to
the absence of losses in the AtoHaas Europe business.
Agricultural Chemicals earnings were $37 million, down $3 million from the
first half 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
lower Dithane shipments in Europe which were somewhat offset by higher
shipments in Latin America.
Corporate expenses of $33 million were $15 million higher than 1996. The
1996 period included a $10 million ($.15 per common share) retroactive tax
credit on sales outside the United States. Higher interest expense also
increased 1997 expense versus prior year.
The gross profit margin for the first six months was 37%, an increase from
35% in the prior-year period. Margins improved largely due to higher
volume. Negative impacts on margins resulted from lower selling prices and
weaker currencies in Europe and Japan.
Selling, administrative and research expenses were up 2% compared with 1996
due, in part, to higher incentive compensation and costs relating to
spending on systems infrastructure. Interest expense of $21 million was $4
million higher because of lower capitalized interest resulting from lower
capital spending. Affiliate earnings of $6 million increased from losses
of $8 million reported last year, due largely to the absence of losses in
AtoHaas Europe. Other expense, net, was $6 million, compared with expense
of $3 million in 1996 largely because of unfavorable currency fluctuations.
The effective tax rate for the first six months was 33%, up slightly from
32% for the first six months of 1996. The 1996 rate includes the effect of
a $10 million second 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 $38 million,
up $27 million from the 1996 year-end balance. Accounts receivable were up
$100 million during the first six months, reflecting a normal seasonal
pattern, while inventories decreased $35 million reflecting tighter
inventory management.
The debt-to-equity ratio, calculated without the reduction to stockholders'
equity for
4
<PAGE>
the ESOP transaction, was 44% at the end of June 1997, compared with 38% at
year-end 1996. The increase in the debt-to-equity ratio is due to higher
debt levels that are consistent with the company's seasonal borrowing
pattern. During the first six months the company purchased 1.6 million
shares of its common stock at a cost of $133 million.
Fixed asset additions during the first half of 1997 totaled $116 million.
Spending for the full year is estimated to be below $300 million.
Expenditures include new emulsion facilities in Thailand, Indonesia and
Sweden, capacity expansion for acrylic acid at Houston, Texas and
investment in electronic chemicals manufacturing in the Far East. The
estimated spending for the year was decreased from previous estimates based
on savings achieved on certain projects and expected spending delays.
During the first half of 1997 environmental remediation expense of
approximately $8 million was recorded compared with $15 million for the
first half of 1996. Also, the company collected $56 million of previously
recorded remediation-related settlements with insurance carriers. The
company is in the midst of law suits in both Pennsylvania and New Jersey
over insurance coverage for certain environmental liabilities. The trial
judge in the Pennsylvania case has ruled that the company may recover from
insurance carriers for certain of its claims.
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
will be accounted for on the equity basis with Rohm and Haas' share of
earnings reported as equity in affiliates. Rodel's annual sales are
approximately $150 million.
On July 21, 1997, the board of directors approved an 11% increase in the
quarterly dividend on common shares from 45 cents to 50 cents per share.
The board also declared a regular quarterly dividend of $.6875 per
preferred share. Both dividends are payable September 1, 1997, to
stockholders of record on August 8, 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
<TABLE>
<CAPTION>
SALES BY BUSINESS GROUP AND CUSTOMER LOCATION (Millions of dollars)
- ------------------------------------------------------------------------------
SECOND QUARTER 1997 AND 1996
- ------------------------------------------------------------------------------
Polymers,
Resins and Performance Agricultural
Monomers Chemicals Plastics Chemicals Total
-------------- -------------- ------------- ------------- --------------
1997 1996* 1997 1996* 1997 1996 1997 1996 1997 1996
- ------- -------------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
North
America $ 387 $ 356 $ 78 $ 72 $ 99 $ 95 $ 50 $ 49 $ 614 $ 572
- ------- -------------- -------------- ------------- ------------- --------------
Europe 100 101 55 56 65 64 45 56 265 277
- ------- -------------- -------------- ------------- ------------- --------------
Asia-
Pacific 55 55 55 59 13 10 15 16 138 140
- ------- -------------- -------------- ------------- ------------- --------------
Latin
America 29 26 4 6 9 8 30 25 72 65
- ------- -------------- -------------- ------------- ------------- --------------
Total $ 571 $538 $192 $193 $186 $177 $140 $146 $1,089 $1,054
- ------- -------------- -------------- ------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FIRST SIX MONTHS 1997 AND 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
North
America $ 717 $ 673 $152 $145 $193 $183 $ 87 $ 87 $1,149 $1,088
- ------- -------------- -------------- ------------- ------------- --------------
Europe 191 203 104 108 128 128 101 116 524 555
- ------- -------------- -------------- ------------- ------------- --------------
Asia-
Pacific 105 106 106 112 20 21 40 46 271 285
- ------- -------------- -------------- ------------- ------------- --------------
Latin
America 55 50 8 11 16 14 52 45 131 120
- ------- -------------- -------------- ------------- ------------- --------------
Total $1,068 $1,032 $370 $376 $357 $346 $280 $294 $2,075 $2,048
- ------- -------------- -------------- ------------- ------------- --------------
</TABLE>
* 1996 sales have been restated to reclassify the results of the Petroleum
Chemicals business from Performance Chemicals to Polymers, Resins and
Monomers. The Petroleum Chemicals business has been accounted for through
the RohMax joint venture since July 1, 1996.
6
<PAGE>
PHYSICAL VOLUME CHANGE
CURRENT QUARTER RELATIVE TO YEAR-EARLIER QUARTER
- -----------------------------------------------------------------------
Percent CUSTOMER Percent
BUSINESS GROUP Change LOCATION Change
- -----------------------------------------------------------------------
Polymers, Resins and Monomers 11 North America 10
Performance Chemicals 3 Europe 10
Plastics 12 Asia-Pacific 11
Agricultural Chemicals (6) Latin America 8
- -----------------------------------------------------------------------
Worldwide 10 Worldwide 10
- -----------------------------------------------------------------------
CURRENT SIX MONTHS RELATIVE TO YEAR-EARLIER SIX MONTHS
- -----------------------------------------------------------------------
Percent CUSTOMER Percent
BUSINESS GROUP Change LOCATION Change
- -----------------------------------------------------------------------
Polymers, Resins and Monomers 10 North America 9
Performance Chemicals (1) Europe 8
Plastics 11 Asia-Pacific 7
Agricultural Chemicals (2) Latin America 11
- -----------------------------------------------------------------------
Worldwide 9 Worldwide 9
- -----------------------------------------------------------------------
7
<PAGE>
NET EARNINGS BY BUSINESS GROUP AND CUSTOMER LOCATION
- -------------------------------------------------------------------------------
Quarter Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
1997 1996* 1997 1996*
--------------------------------------------
BUSINESS GROUP (Millions of dollars)
--------------------------------------------
Polymers, Resins and Monomers $ 80 $ 55 $142 $108
Performance Chemicals 22 20 43 44
Plastics 16 13 32 27
Agricultural Chemicals 18 20 37 40
Corporate (19) (7) (33) (18)
- --------------------------------------------------------- -------------------
Total $117 $101 $221 $201
- --------------------------------------------------------- -------------------
CUSTOMER LOCATION
North America $ 87 $ 60 $154 $113
Europe 25 26 55 63
Asia-Pacific 13 13 28 28
Latin America 11 9 17 15
Corporate (19) (7) (33) (18)
- --------------------------------------------------------- -------------------
Total $117 $101 $221 $201
- --------------------------------------------------------- -------------------
Corporate includes non-operating items such as interest income and expense,
corporate governance costs and corporate exploratory research expense.
* 1996 sales have been restated to reclassify the results of the Petroleum
Chemicals business from Performance Chemicals to Polymers, Resins and
Monomers. The Petroleum Chemicals business has been accounted for through
the RohMax joint venture since July 1, 1996.
ANALYSIS OF CHANGE IN PER-SHARE EARNINGS
CURRENT PERIOD RELATIVE TO YEAR-EARLIER PERIOD
- ----------------------------------------------------------------------
$/Share
(after-tax)
-----------------------------
SECOND FIRST
GROSS PROFIT QUARTER SIX MONTHS
------------ --------------
Selling prices $(.02) $(.21)
Physical volume and product mix .18 .31
Raw material costs .04 .08
Other manufacturing costs .33 .46
Currency effect on gross profit (.16) (.29)
- ----------------------------------------------------- ---------------
Increase in gross profit .37 .35
- ----------------------------------------------------- ---------------
OTHER CAUSES
Selling, administrative and
research expenses* (.07) (.07)
Interest expense (.01) (.04)
Share of affiliate earnings .12 .21
Prior year retroactive tax credit
on export sales (.15) (.15)
Reduction in outstanding shares of
common stock .11 .21
Other (.02) .00
- ----------------------------------------------------- ---------------
(Decrease) increase from other causes (.02) .16
- ----------------------------------------------------- ---------------
Increase in per-share earnings $ .35 $ .51
- ----------------------------------------------------- ---------------
*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 Six Months Ended
June 30, June 30,
------------------------ --------------------
1997 1996 1997 1996
------------------------ --------------------
CURRENT EARNINGS (Millions of dollars, except per share amounts)
-----------------------------------------------
Net sales $ 1,089 $ 1,054 $ 2,075 $ 2,048
Cost of goods sold 688 691 1,313 1,322
- -------------------------------------------------------- --------------------
Gross profit 401 363 762 726
Selling and administrative
expense 162 157 316 310
Research and development
expense 50 48 95 94
Interest expense 11 10 21 17
Share of affiliate net
earnings (losses) 3 (5) 6 (8)
Other expense, net 6 3 6 3
- -------------------------------------------------------- --------------------
Earnings before income taxes 175 140 330 294
Income taxes 58 39 109 93
- -------------------------------------------------------- --------------------
NET EARNINGS $ 117 $ 101 $ 221 $ 201
Less preferred stock dividends 2 2 4 4
- -------------------------------------------------------- --------------------
NET EARNINGS APPLICABLE TO
COMMON SHAREHOLDERS $ 115 $ 99 $ 217 $ 197
- -------------------------------------------------------- --------------------
PER COMMON SHARE:
Net earnings $ 1.85 $ 1.50 $ 3.47 $ 2.96
Common dividends $ .45 $ .41 $ .90 $ .82
Average number of common shares
outstanding (000's) 62,174 65,990 62,523 66,542
- -------------------------------------------------------- --------------------
See notes to consolidated financial statements.
9
<PAGE>
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS (Subject to Year-end Audit)
- ------------------------------------------------------------------------
Six Months Ended June 30,
---------------------------
1997 1996
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES (Millions of dollars)
---------------------------
Net earnings $ 221 $ 201
Adjustments to reconcile net earnings
to cash provided by operating activities:
Depreciation 135 125
Deferred income taxes (5) 20
Accounts receivable (100) (169)
Inventories 35 27
Accounts payable (64) (33)
Income taxes payable 37 10
Other working capital changes, net (20) (36)
Other, net 14 35
- ------------------------------------------------------------------------
Net cash provided by operating
activities 253 180
- ------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and equipment (116) (153)
Investment in affiliate (65) --
Proceeds from the sale of facilities and
investments 5 --
- ------------------------------------------------------------------------
Net cash used by investing activities (176) (153)
- ------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury shares (133) (144)
Proceeds from issuance of long-term debt 5 1
Repayments of long-term debt (24) (21)
Net change in short-term borrowings 160 198
Payment of dividends (58) (57)
Other, net 1 (2)
- ------------------------------------------------------------------------
Net cash used by financing activities (49) (25)
- ------------------------------------------------------------------------
Effect of exchange rate changes on cash (1) --
- ------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS $ 27 $ 2
- ------------------------------------------------------------------------
See notes to consolidated financial statements.
10
<PAGE>
Rohm and Haas Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS (Subject to Year-end Audit)
- -----------------------------------------------------------------------------
JUNE 30, December 31, June 30,
1997 1996 1996
------------------------------------
ASSETS (Millions of dollars)
------------------------------------
Current assets:
Cash and cash equivalents $ 38 $ 11 $ 45
Receivables, net 941 841 925
Inventories (note d) 448 483 477
Prepaid expenses and other assets 128 121 116
- -----------------------------------------------------------------------------
Total current assets 1,555 1,456 1,563
- -----------------------------------------------------------------------------
Land, buildings and equipment 4,418 4,327 4,282
Less accumulated depreciation 2,376 2,261 2,223
- -----------------------------------------------------------------------------
Net land, buildings and equipment 2,042 2,066 2,059
- -----------------------------------------------------------------------------
Other assets 477 411 438
- -----------------------------------------------------------------------------
$4,074 $3,933 $4,060
- -----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 305 $ 145 $ 288
Accounts payable and accrued
liabilities 592 669 600
Accrued income taxes 108 72 82
- -----------------------------------------------------------------------------
Total current liabilities 1,005 886 970
- -----------------------------------------------------------------------------
Long-term debt 543 562 583
Employee benefits 415 405 398
Other liabilities 346 352 325
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 136 143 146
Retained earnings 2,199 2,036 1,933
- -----------------------------------------------------------------------------
2,659 2,507 2,408
Less: Treasury stock (note f) 743 629 477
Less: ESOP shares 142 145 147
Other equity adjustments (9) (5) --
- -----------------------------------------------------------------------------
Total stockholders' equity 1,765 1,728 1,784
- -----------------------------------------------------------------------------
$4,074 $3,933 $4,060
- -----------------------------------------------------------------------------
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 June 30, 1997, the reserves for remediation were $142
million, compared to $139 million at December 31, 1996. The probable
insurance recovery asset was $17 million and $48 million at June 30,
1997 and December 31, 1996, respectively. During the first half of
1997 environmental remediation expense of approximately $8 million was
recorded compared with $15 million for the first half of 1996. Also,
the company collected $56 million of previously recorded remediation-
related settlements with insurance carriers. The company is in the
midst of law suits in both Pennsylvania and New Jersey over insurance
coverage for certain environmental liabilities. The trial judge in the
Pennsylvania case has ruled that the company may recover from insurance
carriers for certain of its claims.
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)
JUNE 30, Dec. 31, June 30,
1997 1996 1996
--------- -------- ---------
Finished products and work in process $347 $375 $349
Raw materials and supplies 101 108 128
---- ---- ----
Total inventories $448 $483 $477
---- ---- ----
(E) The number of preferred shares issued and outstanding were:
June 30, 1997 2,530,836
December 31, 1996 2,631,822
June 30, 1996 2,644,403
(F) The number of common treasury shares were:
June 30, 1997 16,935,690
December 31, 1996 15,507,629
June 30, 1996 13,291,530
Dithane is a trademark of Rohm and Haas Company.
12
<PAGE>
[LOGO]
RESPONSIBLE CARE(R)
A PUBLIC COMMITMENT
[LOGO]
ROHM AND HAAS
<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 "Second 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 JUNE 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 38
<SECURITIES> 0
<RECEIVABLES> 838
<ALLOWANCES> 16
<INVENTORY> 448
<CURRENT-ASSETS> 1,555
<PP&E> 4,418
<DEPRECIATION> 2,376
<TOTAL-ASSETS> 4,074
<CURRENT-LIABILITIES> 1,005
<BONDS> 543
0
127
<COMMON> 197
<OTHER-SE> 1,441
<TOTAL-LIABILITY-AND-EQUITY> 4,074
<SALES> 2,075
<TOTAL-REVENUES> 2,075
<CGS> 1,313
<TOTAL-COSTS> 1,313
<OTHER-EXPENSES> 411
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21
<INCOME-PRETAX> 330
<INCOME-TAX> 109
<INCOME-CONTINUING> 221
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 221
<EPS-PRIMARY> 3.47
<EPS-DILUTED> 3.47
</TABLE>
