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, 1998 COMMISSION FILE NUMBER 1-3507
R O H M A N D H A A S C O M P A N Y
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(Exact name of registrant as specified in its charter)
DELAWARE 23-1028370
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 INDEPENDENCE MALL WEST, PHILADELPHIA, PENNSYLVANIA 19106
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 592-3000
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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
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Common stock outstanding at August 7, 1998: 59,411,762 SHARES
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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 1998, 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 6 of the company's Quarterly Report to
Stockholders for the second quarter of 1998, a complete copy of which is
attached as Exhibit 20.
ITEM 3. - MARKET RISK DISCUSSION
Management's discussion of market risk is incorporated herein by reference
to page 32 of the 1997 Stockholders' Report filed as Exhibit 13 to the
report on Form 10-K for the year ended December 31, 1997, filed with the
Securities and Exchange Commission on March 27, 1998.
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 1998, 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 79th annual meeting of stockholders was held on May 4,
1998, in Philadelphia, Pennsylvania.
(c) The following is a tabulation of the results of voting by security
holders:
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Election of directors:
Nominees Votes For Votes Withheld
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William J. Avery 57,075,811 356,246
Daniel B. Burke 57,000,063 431,994
Earl G. Graves 57,054,926 377,131
James A. Henderson 57,069,445 372,612
John H. McArthur 57,081,424 350,633
Jorge P. Montoya 57,069,587 362,470
Sandra O. Moose 57,047,381 384,676
John P. Mulroney 57,077,265 354,792
Gilbert S. Omenn 57,097,839 334,218
Ronaldo H. Schmitz 57,080,696 351,361
Alan Schriesheim 57,028,740 403,317
Marna C. Whittington 57,079,427 352,630
J. Lawrence Wilson 57,082,617 349,440
Proposal to increase the number of authorized shares of common stock:
Common stock only: Total common and preferred stock combined:
For 52,168,027 For 54,405,631
Against 2,771,777 Against 2,771,777
Abstain 254,239 Abstain 254,649
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit (3)(i) - Articles of Incorporation restated as of
May 4, 1998.
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, 1998.
Exhibit (27) - Financial Data Schedules
(b) On May 7, 1998 the company filed a Report on Form 8-K with the
Securities and Exchange Commission, reporting, under Item 4 of
said Report, a change in its certifying accountants.
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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 12, 1998 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
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(3)(i) Articles of Incorporation restated as of May 4, 1998
(12) Computation of Ratio of Earnings to Fixed Charges
(20) Copy of Quarterly Report to Stockholders
(27.1) Financial Data Schedule
(27.2) Financial Data Schedule
Exhibit (3)(i)
ROHM AND HAAS COMPANY
RESTATED CERTIFICATE OF INCORPORATION
Originally incorporated April 23, 1917
under the name Rohm & Haas Company
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, Delaware 19801.
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 200,000,000 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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IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates and integrates (including the provisions in the Certificate of
Designation of $2.75 Cumulative Convertible Preferred Stock of the
Corporation as filed with the Secretary of State of Delaware on June 11,
1992 which is attached to this Restated Certificate as Exhibit A) and does
not further amend the provisions of the Corporation's Certificate of
Incorporation as previously restated and amended and which has no
discrepancy between itself and those provisions and having been duly
adopted by the Board of Directors of the Corporation in accordance with the
provisions of Section 245 of the General Corporation Laws of the State of
Delaware, has been executed this 4th day of May, 1998, by its authorized
officer.
S/GAIL P. GRANOFF
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Gail P. Granoff
Corporate Secretary
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATION
OF
$2.75 CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
ROHM AND HAAS COMPANY
Rohm and Haas Company, a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article IV of its
Certificate of Incorporation, as amended, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, its Board of Directors has adopted the following resolution
creating a series of its 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.
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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 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
<PAGE>
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.
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.
<PAGE>
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.
<PAGE>
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 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.
<PAGE>
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 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)
<PAGE>
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 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.
<PAGE>
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
<PAGE>
such time. The Corporation shall not be required to convert, and no
surrender of shares of $2.75 Preferred Stock shall be 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.
<PAGE>
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
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.
<TABLE>
<CAPTION>
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, --------------------------------------
1998 1997 1996 1995 1994 1993
------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Earnings before income
taxes $ 446 $ 611 $ 530 $ 441 $ 407 $ 194
Fixed charges 37 71 75 84 82 79
Capitalized interest
adjustment 3 3 (1) (5) (2) (7)
Undistributed earnings
adjustment (2) (11) 12 (3) (2) 6
------------ ------ ------ ------ ------ ------
Earnings $ 484 $ 674 $ 616 $ 517 $ 485 $ 272
------------ ------ ------ ------ ------ ------
Ratio of earnings to
fixed charges 13.1 9.5 8.2 6.2 5.9 3.4
------------ ------ ------ ------ ------ ------
</TABLE>
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 1998
ID: COVER GRAPHIC
<PAGE>
FINANCIAL HIGHLIGHTS (Millions of dollars, except earnings per share)
- --------------------------------------------------------------------------------
Second Quarter Six Months
----------------------- -----------------------
Percent Percent
1998 1997 Change 1998 1997 Change
----------------------- -----------------------
Net sales $ 990 $1,089 (9) $1,927 $2,075 (7)
Net earnings 170 117 45 279 221 26
Net earnings,
excluding non-
recurring items* 122 117 4 231 221 5
Net earnings per
common share:
-- Basic $ 2.78 $ 1.85 50 $ 4.54 $ 3.47 31
-- Diluted $ 2.72 $ 1.82 49 $ 4.46 $ 3.42 30
Net earnings per
common share,
excluding non-
recurring items:
-- Basic $ 1.99 $ 1.85 7 $ 3.75 $ 3.47 8
-- Diluted $ 1.95 $ 1.82 7 $ 3.69 $ 3.42 8
- -------------------------------------------------------------------------------
*non-recurring items include gains on the sale of joint venture interests in
AtoHaas and RohMax, asset write-downs, business realignment costs, and loss
on early extinguishment of debt during the quarter ended June 30, 1998.
SALES BY BUSINESS GROUP
Millions of dollars
- ---------------------------------------------------
PERFORMANCE POLYMERS $659
CHEMICAL SPECIALTIES $234 [PIE CHART]
ELECTRONIC MATERIALS $ 97
SALES BY CUSTOMER LOCATION
Millions of dollars
- ---------------------------------------------------
NORTH AMERICA $554
[PIE CHART] EUROPE $257
ASIA-PACIFIC $114
LATIN AMERICA $ 65
<PAGE>
=======================
== CHAIRMAN'S LETTER ==
=======================
Rohm and Haas posted a good performance, for the second quarter in
spite of a difficult business environment. Demand for most of our
portfolio of specialty products was healthier than the industry's during
the second quarter. The company grew earnings per share by 7 percent from
the second quarter of 1997.
This good news is the result of focusing on customers' specialized
needs, maintaining our strong market positions, improving productivity,
and keeping our manufacturing facilities running smoothly. The earnings
per share growth was assisted by our continued share buy-back program.
Rohm and Haas's volume was flat for the second quarter compared with a
year ago, after adjusting for the sales of Rohm and Haas's stakes in
AtoHaas and RohMax. These divestitures were completed during the
quarter, and resulted in a pre-tax gain of $102 million, which was
partially offset by several other one-time items.
On a comparable basis, sales were down 4 percent. The lower sales
figure reflects the continued strength of the U.S. dollar.
After the quarter ended, Rohm and Haas made several important
announcements. President and Chief Operating Officer John P. Mulroney
has decided to retire at the end of this year. On July 27, the Board of
Directors named J. Michael Fitzpatrick, currently vice president and
chief technology officer of Rohm and Haas, to replace Jack effective
January 1, 1999.
I will retire by the end of 1999. The board also named Rajiv L. Gupta,
currently vice president for the Asia-Pacific Region and the Electronics
Materials group, to the new post of vice chairman, effective January 1,
1999. Raj will be named chairman and chief executive officer upon
my retirement.
In addition, the Board of Directors approved a recapitalization plan for
the company, a three-for-one stock split and a dividend increase of
8 percent.
Each of these announcements is evidence that Rohm and Haas continues to
refine its strategy for profitable growth. As long as economies
worldwide remain on their current path, I expect Rohm and Haas to report
a good performance for the year.
/s/ J. LAWRENCE WILSON
J. Lawrence Wilson
August 14, 1998
<PAGE>
========================================
== MANAGEMENT DISCUSSION AND ANALYSIS ==
========================================
SECOND QUARTER 1998 VERSUS
SECOND QUARTER 1997
Earnings increased 45% in the second quarter of 1998 to $170 million
from $117 million in the second quarter of 1997. Diluted earnings per
common share for the quarter were $2.72 compared to $1.82 in 1997.
Included in the 1998 results is a one-time gain of $48 million, or $.77
per share, net of non-recurring items. This net gain affected all
segments and regions, except Latin America, and was the net result of
the sale of the company's interest in the AtoHaas and RohMax joint
ventures, an early extinguishment of debt, the write-off of certain
intangible assets in Europe and business realignment costs primarily in
Asia. (Earnings by business segment and by region excluding these
non-recurring items are presented in the tables on page 3.)
Volume decreased 2% for the quarter and sales decreased 9%. On a
comparable-business basis, volume was flat and sales decreased 4%.
In addition to the divestiture of two businesses, resulting in the
exclusion of AtoHaas' sales from 1998 results, the remaining 50% of
NorsoHaas was acquired and operations in China were consolidated in
1998. The sales decrease on flat volume was primarily a result of
weaker European and Asia-Pacific currencies and slightly lower selling
prices. Volume gains in Europe and Latin America, on a comparable
basis, were overcome by volume losses due to poor business conditions in
the Asia-Pacific region and flat volume in North America. In the Asia
Pacific region sales declined 16% on a 10% volume decrease. The
company's earnings increased 4%, excluding non-recurring items,
primarily as a result of lower raw material costs and efficient plant
operations. Diluted earnings per common share excluding non-recurring
items was $1.95 for the second quarter, up 7% versus 1997. The increase
in earnings per share also reflects the impact of the company's stock
repurchase program.
In the first quarter of 1998, the company changed its financial
reporting structure and, in August 1998, the related management
structure to better reflect its technical strengths and focus on key
markets. Rohm and Haas now reports by three business segments:
Performance Polymers, consisting of the Polymers and Resins, Monomers,
Formulation Chemicals and Plastics Additives businesses; Chemical
Specialties, consisting of the Agricultural Chemicals, Ion Exchange and
Biocides businesses; and Electronic Materials, consisting of Shipley and
Rodel, Inc., an affiliate. The 1997 presentation of sales and earnings
has been restated to reflect these changes. In the restatement, 1997
results of AtoHaas and RohMax are reported under Performance Polymers.
Performance Polymers earnings of $96 million, excluding non-recurring
items, were unchanged from the prior year. Sales were down 13% to $659
million from $757 million in the 1997 period, largely as a result of the
absence of AtoHaas sales. On a comparable basis volume decreased 1% and
sales decreased 6%. The sales decrease on slightly lower volume is
primarily a result of unfavorable currencies in Europe and Asia-Pacific
and lower selling prices in North America. In Asia-Pacific, volume and
sales were down, reflecting the generally unfavorable economic
conditions in the region. Earnings excluding non-recurring items were
unchanged, despite lower volume and weaker currencies in Europe and
Asia-Pacific, largely as a result of lower raw material prices and lower
plant operating costs.
Chemical Specialties earnings of $28 million for the second quarter of
1998, excluding non-recurring items, compared favorably to earnings of
$27 million in the prior-year period. A volume increase of 6% resulted
from strong demand in the Agricultural Chemicals business in North
America, largely driven by weather conditions favorable to sales of
fungicides such as Dithane and Systhane. Sales were flat despite the
volume growth, reflecting weaker currencies in Europe and Asia-Pacific.
The earnings increase was primarily the result of volume growth in
Agricultural Chemicals.
Electronic Materials earnings of $13 million, excluding non-recurring
items, were flat compared to the 1997 period. Sales were essentially
unchanged while volume increased 9%, reflecting pricing pressure in the
printed wiring board industry and the weakened economy in Asia-Pacific
where sales and earnings were down. Earnings decreases in Shipley
Company were largely offset by the contribution of Rodel, Inc., a
31%-owned affiliate acquired in June 1997.
Corporate expenses totaled $25 million in the second quarter of 1998
compared to $19 million in the prior year period. The second quar-
2
<PAGE>
EARNINGS BY BUSINESS GROUP AND CUSTOMER LOCATION
EXCLUDING NON-RECURRING ITEMS*
- ------------------------------------------------------------------------------
Quarter Ended Six Months Ended
June 30, June 30,
----------------- ------------------
1998 1997 1998 1997
--------------------------------------
BUSINESS GROUP (Millions of dollars)
--------------------------------------
Performance Polymers $ 96 $ 96 $179 $174
Chemical Specialties 28 27 57 55
Electronic Materials 13 13 26 25
Corporate (15) (19) (31) (33)
- --------------------------------------------------------- ------------------
Total $122 $117 $231 $221
- --------------------------------------------------------- ------------------
CUSTOMER LOCATION
North America $ 97 $ 87 $180 $154
Europe 23 25 54 55
Asia-Pacific 9 13 15 28
Latin America 8 11 13 17
Corporate (15) (19) (31) (33)
- --------------------------------------------------------- ------------------
Total $122 $117 $231 $221
- --------------------------------------------------------- ------------------
*must be read in conjunction with presentation by business group and customer
location on page 8. Non-recurring items include gains on the sale of joint
venture interests in AtoHaas and RohMax, asset write-downs, business
realignment costs, and loss on early extinguishment of debt during the
quarter ended June 30, 1998.
ter of 1998 includes a $10 million after-tax extraordinary loss on the
early extinguishment of debt.
The second quarter gross profit margin of 41% was up from 37% in the
prior-year period, largely as a result of 10% lower raw material costs
which overcame selling prices and weaker European and Asia-Pacific
currencies.
Selling, administrative and research expenses decreased 2% for the
quarter versus the 1997 period, reflecting the net effect of higher
research expense and lower selling and administrative expense due to the
absence of AtoHaas costs. Interest expense was flat, while the absence
of earnings from RohMax and AtoHaas Europe resulted in a decrease of $3
million in affiliate earnings. Other income of $108 million reflects
the net before-tax gain on the non-recurring items discussed above,
excluding debt extinguishment. The most significant factor was the sale
of the AtoHaas and RohMax businesses, which resulted in a gain after-tax
of $102 million, offset by a charge of $15 million related to cumulative
translation adjustments and $11 million of asset write-downs and
business realignment costs.
The effective tax rate for the second quarter of 1998 was 39%, up from
33% for the second quarter of 1997, largely as a result of non-recurring
items for which there is no tax benefit, primarily the cumulative
translation adjustment associated with the AtoHaas divestiture and an
intangible asset write-off in Europe.
SIX MONTHS 1998 VERSUS
SIX MONTHS 1997
Earnings for the first six months of 1998 were $279 million, an increase
of 26% over last year's earnings of $221 million. Diluted earnings per
common share were $4.46 compared to $3.42 in 1997. As discussed above,
included in 1998 results are a second quarter one-time net gain of $48
million, or $.77 per share. (Earnings for the first six months of 1998
by business segment and by region excluding these non-recurring items
are presented in the tables above, which should be read in conjunction
with the presentation on page 8.) Sales decreased 7% and volume was
flat. On a comparable-business basis, sales decreased 3% on a 1% volume
increase. In addition to the divestiture of two businesses, resulting
in the exclusion of AtoHaas' sales from 1998, the remaining 50%
3
<PAGE>
of NorsoHaas was acquired and operations in China were consolidated
during the year. The sales decrease on higher volume is primarily a result
of weaker European and Asia-Pacific currencies. Volume was strong in
Europe while an unfavorable business environment hurt volume in the
Asia-Pacific region. Volume in North America and Latin America was flat.
Through six months of 1998, on a comparable basis, Asia-Pacific region
sales declined 17% and volume decreased 9%. The company's earnings
increased 5% excluding non-recurring items primarily as a result of lower
raw material costs, higher volume and efficient plant operations. Earnings
per common share before non-recurring items were $3.69 for the first half
of 1998, up 8% versus 1997. The increase in earnings per share also
reflects the impact of the company's stock repurchase program.
Performance Polymers earnings, excluding non-recurring items, were $179
million compared to $174 million in the prior year, an increase of 3%.
Sales of $1,277 million were down 10% from $1,425 million in 1997,
largely as a result of the absence of AtoHaas sales. On a comparable
basis, volume was flat and sales decreased 4%. The decrease in sales
was a result of unfavorable currencies in Europe and Asia-Pacific and
lower selling prices in North America. Performance Polymer sales in the
Asia-Pacific region were down more than 25% from the prior year while
volume decreased 9%. Earnings increased excluding non-recurring items
largely as a result of lower raw material prices and Polymers and Resins
volume in North America.
Chemical Specialties earnings were $57 million for the first half of
1998, excluding non-recurring items, increasing 4% from $55 million in
1997. Sales of $453 million decreased 2% from 1997 sales of $461
million, largely because of weaker currencies in Europe and
Asia-Pacific. Volume increased 2% primarily as a result of strong
second quarter demand in the Agricultural Chemicals business. The
earnings increase was a result of improved results for Agricultural
Chemicals and improved earnings in the Biocides business.
Electronic Materials earnings of $26 million, excluding non-recurring
items, increased $1 million, or 4%, from the 1997 period. Sales
increased 4% on an increase in volume of 10%. Shipley Company volume
increased in all of its regions. Lower sales and earnings in
Asia-Pacific mitigated the effects of growth in Europe and North
America. Earnings also benefited from the contribution of Rodel, an
affiliate acquired in June 1997.
Corporate expenses of $41 million compared unfavorably to expenses of
$33 million in 1997. 1998 included a second quarter after-tax charge of
$10 million related to an extraordinary loss on the early extinguishment
of debt.
The gross profit margin for the first six months was 40%, up from 37% in
the prior-year period, largely as a result of 7% lower raw material
costs. Selling prices were down slightly while currency fluctuations in
Europe and Japan were unfavorable.
Selling, administrative and research expenses for the period were
essentially flat compared to the 1997 period, reflecting the net effect
of higher research expense and lower selling and administrative expense
due to the absence of AtoHaas costs. Interest expense was flat, while
affiliate earnings decreased to $2 million compared to 1997 earnings of
$6 million, due to the absence of affiliate earnings of RohMax and
AtoHaas Europe. Other income of $111 million reflects the net
before-tax gain on second quarter non-recurring items, including the
divestiture of the AtoHaas and RohMax businesses.
The effective tax rate for the first six months was 37%, up from 33% for
the first six months of 1997, largely as a result of the tax treatment
of the non-recurring items in the second quarter.
LIQUIDITY, CAPITAL RESOURCES
AND OTHER FINANCIAL DATA
In June 1998 the company sold its interest in the AtoHaas and RohMax
businesses for cash proceeds of $287 million resulting in a net
after-tax gain of $76 million, or $1.22 per share. Also in June, the
company retired $115 million of high interest long- term debt through a
tender offer. This debt retirement resulted in an after-tax
extraordinary loss of $10 million, or $.16 per share. The net cash
in-flows during the quarter included these transactions and resulted in
a $27 million increase in cash and cash equivalents versus year-end 1997.
4
<PAGE>
Free cash flows for the first six months of 1998 versus the prior-year
period were as follows:
Six Months Ended
June 30,
----------------
1998 1997
----------------
Cash provided by
operating activities $194 $253
Capital additions (89) (116)
Dividends (62) (58)
----------------
Free cash flow $ 43 $ 79
----------------
The decrease in cash provided by operating activities is primarily a
result of the increase in Accounts Receivable, net, during the first
half of 1998 versus the 1997 period, in part a result of the strong
performance in Agricultural Chemicals in 1998. Fixed asset additions
during the first six months of 1998 totaled $89 million, compared to
$116 million in the prior year. The decrease reflects the absence of
significant projects that were active during the same period of 1997,
such as the completion of capacity expansion in Texas. Efforts to
improve asset utilization also contributed to the lower spending.
Spending for the full year is expected to be approximately $225 million,
and will include spending on emulsions capacity in Europe, ion exchange
resin and emulsions capacity in Asia-Pacific and further investment in
the Electronic Materials businesses.
On July 27, 1998, the board of directors approved a three-for-one stock
split, an increase in the quarterly dividend on common shares from 50
cents to 54 cents per common share and declared a regular quarterly
dividend of $.6875 per preferred share. The stock split will occur in
the form of a 200 percent common stock dividend paid on September 1,
1998 to shareholders of record on August 7, 1998. The common and
preferred dividends are payable September 1, 1998, to stockholders of
record on August 7, 1998. Had the stock split been effective for the
periods presented, the pro-forma diluted earnings per common share for
the second quarter of 1998 would have been $.91 compared to $.61 in
1997. For the first half of 1998, the pro-forma amounts would have been
$1.49 versus $1.14 for the prior year period.
The debt-to-capital ratio, calculated without the reduction to
stockholders' equity for the ESOP transaction, was 19% at the end of the
quarter, compared with 23% at year-end 1997 and 30% at the end of the
second quarter of 1997. (Debt-to-capital is total debt divided by the sum
of total debt, minority interest, shareholders' equity and ESOP shares.)
During the first six months of 1998, the company repurchased 1,277,000
shares of common stock at a cost of $135 million. With 2 million shares
remaining in its most recent authorization, on July 27, 1998 the Board of
Directors authorized the purchase of an additional 4 million shares. The
company entered an agreement to repurchase 4 million shares on August 13,
1998. The company also held discussions with the Haas Family and related
trusts about converting 4 million common shares under their control to
convertible preferred stock. After careful evaluation, the company and the
family jointly decided it would be in the best interests of all the parties
to maintain the existing relationship.
In 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting
comprehensive income and its components. The company adopted this
standard in the first quarter of 1998. As permitted under the standard,
the company will present the components of comprehensive income in its
Statement of Consolidated Stockholders' Equity. Because this Statement
is not part of the company's required interim reporting, comprehensive
income is disclosed in a note to the financial statements.
Also in 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" and, in 1998, SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits."
Both standards establish guidance for disclosure in annual financial
statements. The company expects its business segment reporting under SFAS
No. 131 will be consistent with the changes in its financial reporting
structure incorporated in the company's reporting since the first quarter
of 1998. The company will adopt the disclosures prescribed by both
statements in its 1998 annual report as required.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and
5
<PAGE>
Hedging Activities," which establishes a new model for the accounting and
reporting of derivative and hedging transactions. The statement amends a
number of existing standards and is effective for fiscal years beginning
after June 15, 1999. The company expects to adopt this standard as
required in fiscal year 2000 and has not yet fully assessed its potential
impact on financial position or results of operations.
During 1996 management initiated an enterprise-wide program to prepare
the company's computer systems and applications for the year 2000 and,
in 1997, began assessing supply chain and customer implications. To
date, all of the company's centralized internal computer systems have
been inventoried, and work has begun on investigation, remediation and
testing, which the company expects to have substantially completed by
June 1999. At this time, the company believes there may be risk to
itself and others in its industry presented by possible failure of
systems that are not under its direct control, such as those of
financial and government institutions, and transportation, utility and
some other suppliers. However, the company continues to actively
monitor the year 2000 readiness of such third parties and expects to
prepare contingency plans where appropriate. A significant proportion
of the costs associated with the year 2000 effort represent the
redeployment of existing information technology resources. In addition,
consulting and other expenses related to software application and
facilities enhancements necessary to prepare the systems for the year
2000 are expected to be incurred over the next eighteen months. All of
these costs, which are not expected to exceed $15 million, are charged
to expense as incurred.
This year 2000 discussion contains forward-looking statements based, in
part, on assumptions such as the following: that the manufacturers of
the company's computer systems and software have correctly represented
the year 2000 status of their products; that the company's suppliers and
customers will meet their stated year 2000 compliance obligations; and
that the company's own investigation, remediation and testing are
successful. This discussion, and other forward-looking statements made
in this quarterly report, are based on current expectations and are
subject to the risks and uncertainties detailed in the company's March
27, 1998, Form 10-K filing with the Securities and Exchange Commission.
Actual results in the future may differ from those projected.
6
<PAGE>
============================================
== ROHM AND HAAS COMPANY AND SUBSIDIARIES ==
============================================
SALES BY BUSINESS GROUP AND CUSTOMER LOCATION (Millions of dollars)
- ------------------------------------------------------------------------------
SECOND QUARTER 1998 AND 1997
- ------------------------------------------------------------------------------
Performance Chemical Electronic
Polymers Specialties Materials Total
--------------- ----------- ---------- --------------
1998 1997* 1998 1997* 1998 1997* 1998 1997*
--------------- ----------- ---------- --------------
North America $ 423 $ 486 $ 87 $ 84 $ 44 $ 44 $ 554 $ 614
Europe 160 164 73 78 24 23 257 265
Asia-Pacific 45 69 40 38 29 31 114 138
Latin America 31 38 34 34 -- -- 65 72
--------------- ----------- ---------- --------------
Total $ 659 $ 757 $234 $234 $ 97 $ 98 $ 990 $1,089
--------------- ----------- ---------- --------------
- ------------------------------------------------------------------------------
FIRST SIX MONTHS 1998 AND 1997
- ------------------------------------------------------------------------------
Performance Chemical Electronic
Polymers Specialties Materials Total
--------------- ----------- ---------- --------------
1998 1997* 1998 1997* 1998 1997* 1998 1997*
--------------- ----------- ---------- --------------
North America $ 809 $910 $165 $155 $ 91 $ 84 $1,065 $1,149
Europe 317 318 153 162 47 44 517 524
Asia-Pacific 92 126 72 84 59 61 223 271
Latin America 59 71 63 60 -- -- 122 131
--------------- ----------- ---------- --------------
Total $1,277 $1,425 $453 $461 $197 $189 $1,927 $2,075
--------------- ----------- ---------- --------------
*Restated to reflect the 1998 change in financial reporting structure.
PHYSICAL VOLUME CHANGE
CURRENT QUARTER RELATIVE TO YEAR-EARLIER QUARTER
- -----------------------------------------------------------------------
Percent CUSTOMER Percent
BUSINESS GROUP Change LOCATION Change
- -----------------------------------------------------------------------
North America (4)
Performance Polymers (3) Europe 7
Chemical Specialties 6 Asia-Pacific (7)
Electronic Materials 9 Latin America (3)
- -----------------------------------------------------------------------
Worldwide (2) Worldwide (2)
- -----------------------------------------------------------------------
CURRENT SIX MONTHS RELATIVE TO YEAR-EARLIER SIX MONTHS
- -----------------------------------------------------------------------
Percent CUSTOMER Percent
BUSINESS GROUP Change LOCATION Change
- -----------------------------------------------------------------------
North America (2)
Performance Polymers -- Europe 12
Chemical Specialties 2 Asia-Pacific (5)
Electronic Materials 10 Latin America (5)
- -----------------------------------------------------------------------
Worldwide -- Worldwide --
- -----------------------------------------------------------------------
7
<PAGE>
NET EARNINGS BY BUSINESS GROUP AND CUSTOMER LOCATION
- -------------------------------------------------------------------------------
Quarter Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
1998 1997* 1998 1997*
--------------------------------------------
BUSINESS GROUP (Millions of dollars)
--------------------------------------------
Performance Polymers $170 $ 96 $253 $174
Chemical Specialties 13 27 42 55
Electronic Materials 12 13 25 25
Corporate (25) (19) (41) (33)
- --------------------------------------------------------- -------------------
Total $170 $117 $279 $221
- --------------------------------------------------------- -------------------
CUSTOMER LOCATION
North America $137 $ 87 $220 $154
Europe 47 25 78 55
Asia-Pacific 3 13 9 28
Latin America 8 11 13 17
Corporate (25) (19) (41) (33)
- --------------------------------------------------------- -------------------
Total $170 $117 $279 $221
- --------------------------------------------------------- -------------------
Corporate includes non-operating items such as interest income and expense,
corporate governance costs and corporate exploratory research expense.
* Restated to reflect the 1998 change in financial reporting structure.
ANALYSIS OF CHANGE IN BASIC PER-SHARE EARNINGS
CURRENT PERIOD RELATIVE TO YEAR-EARLIER PERIOD
- ----------------------------------------------------------------------
$/Share
(after-tax)
-----------------------------
SECOND FIRST
GROSS PROFIT QUARTER SIX MONTHS
------------ --------------
Selling prices $(.06) $(.05)
Physical volume and product mix (.16) (.09)
Raw material costs .29 .44
Other manufacturing costs .16 .28
Currency effect on gross profit (.18) (.40)
- ----------------------------------------------------- ---------------
Increase in gross profit .05 .18
- ----------------------------------------------------- ---------------
OTHER CAUSES
Gain on sale of facilities and
investments, net 1.22 1.22
Selling, administrative and
research expenses* .04 .01
Share of affiliate earnings (.05) (.06)
Extraordinary loss on early
extinguishment of debt (.16) (.16)
Provision for write-down of assets (.22) (.21)
Reduction in outstanding shares of
common stock .08 .14
Other (.03) (.05)
- ----------------------------------------------------- ---------------
Increase from other causes .88 .89
- ----------------------------------------------------- ---------------
Increase in basic per-share earnings $ .93 $1.07
- ----------------------------------------------------- ---------------
*Amounts shown are on a U.S. dollar basis and include the impact of
currency movements 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,
------------------------ --------------------
1998 1997 1998 1997
------------------------ --------------------
CURRENT EARNINGS (Millions of dollars, except per share amounts)
-----------------------------------------------
Net sales $ 990 $ 1,089 $ 1,927 $ 2,075
Cost of goods sold 584 688 1,148 1,313
- -------------------------------------------------------- --------------------
Gross profit 406 401 779 762
Selling and administrative expense 156 162 306 316
Research and development expense 52 50 104 95
Interest expense 11 11 21 21
Share of affiliate net earnings -- 3 2 6
Other (income) expense, net (108) 6 (111) 6
- -------------------------------------------------------- --------------------
Earnings before income taxes and
extraordinary item 295 175 461 330
Income taxes 115 58 172 109
- -------------------------------------------------------- --------------------
EARNINGS BEFORE EXTRAORDINARY
ITEM $ 180 $ 117 $ 289 $ 221
Extraordinary loss on early
extinguishment of debt (net
of income tax benefit of $5) 10 -- 10 --
- -------------------------------------------------------- --------------------
NET EARNINGS $ 170 $ 117 $ 279 $ 221
Less preferred stock dividends 2 2 4 4
- -------------------------------------------------------- --------------------
NET EARNINGS APPLICABLE TO
COMMON SHAREHOLDERS $ 168 $ 115 $ 275 $ 217
- -------------------------------------------------------- --------------------
EARNINGS PER COMMON SHARE
BEFORE EXTRAORDINARY ITEM:
-- Basic $ 2.95 $ 1.85 $ 4.70 $ 3.47
-- Diluted 2.88 1.82 4.61 3.42
NET EARNINGS PER COMMON SHARE:
-- Basic $ 2.78 $ 1.85 $ 4.54 $ 3.47
-- Diluted 2.72 1.82 4.46 3.42
Common dividends $ .50 $ .45 $ 1.00 $ .90
Average number of common shares
outstanding (000's) 60,415 62,174 60,578 62,523
- -------------------------------------------------------- --------------------
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,
---------------------------
1998 1997
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES (Millions of dollars)
---------------------------
Net earnings $ 279 $ 221
Adjustments to reconcile net earnings
to cash provided by operating activities,
net of the effects of acquisitions and
divestitures:
Depreciation 132 135
Deferred income taxes (15) (5)
Accounts receivable (145) (100)
Inventories (9) 35
Accounts payable and accrued liabilities (47) (73)
Income taxes payable 21 37
Gain on sale of facilities and investments (76) --
Extraordinary loss on early extinguishment
of debt, net of tax 10 --
Provision for the write-down of assets 16 --
Other working capital changes, net (9) (11)
Other, net 37 14
- ------------------------------------------------------------------------
Net cash provided by operating activities 194 253
- ------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sales of facilities and investments,
net of cash sold 287 5
Additions to land, buildings and equipment (89) (116)
Investments in affiliates, net of cash acquired (21) (65)
- ------------------------------------------------------------------------
Net cash provided by (used by)
investing activities 177 (176)
- ------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 7 5
Purchase of treasury stock (135) (133)
Repayments of long-term debt (169) (24)
Net change in short-term borrowings 20 160
Payment of dividends (62) (58)
Other, net (5) 1
- ------------------------------------------------------------------------
Net cash used by financing activities (344) (49)
- ------------------------------------------------------------------------
Effect of exchange rate changes on cash -- (1)
- ------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS $ 27 $ 27
- ------------------------------------------------------------------------
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,
1998 1997 1997
------------------------------------
ASSETS (Millions of dollars)
------------------------------------
Current assets:
Cash and cash equivalents $ 67 $ 40 $ 38
Receivables, net 855 755 941
Inventories (note d) 437 459 448
Prepaid expenses and other assets 149 143 128
- -----------------------------------------------------------------------------
Total current assets 1,508 1,397 1,555
- -----------------------------------------------------------------------------
Land, buildings and equipment 4,373 4,492 4,418
Less accumulated depreciation 2,484 2,484 2,376
- -----------------------------------------------------------------------------
Net land, buildings and equipment 1,889 2,008 2,042
- -----------------------------------------------------------------------------
Other assets 434 495 477
- -----------------------------------------------------------------------------
$3,831 $3,900 $4,074
- -----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 84 $ 97 $ 305
Accounts payable and accrued
liabilities 616 669 592
Accrued income taxes 157 84 108
- -----------------------------------------------------------------------------
Total current liabilities 857 850 1,005
- -----------------------------------------------------------------------------
Long-term debt 402 509 543
Employee benefits 408 410 415
Other liabilities 290 334 346
Stockholders' equity:
$2.75 Cumulative convertible preferred
stock (note f) 110 126 127
Common stock: shares
issued -- 78,652,380 197 197 197
Additional paid-in capital 118 135 136
Retained earnings 2,542 2,325 2,199
- -----------------------------------------------------------------------------
2,967 2,783 2,659
Less: Treasury stock (note g) 934 820 743
Less: ESOP shares 135 138 142
Other comprehensive income (24) (28) (9)
- -----------------------------------------------------------------------------
Total stockholders' equity 1,874 1,797 1,765
- -----------------------------------------------------------------------------
$3,831 $3,900 $4,074
- -----------------------------------------------------------------------------
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. Certain
prior year amounts in the Statements of Cash Flows have been
restated to conform to current year presentation. 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, 1997.
(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, 1998, the reserves for remediation were
$140 million, compared to $147 million at December 31, 1997.
Insurance recoveries receivable were $2 million at June 30, 1998 and
$19 million at December 31, 1997, the change resulting largely from
collections in the first half of 1998. 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. Recoveries typically determine coverage for both past and
future environmental spending. The amounts charged to earnings
before tax for environmental remediation, net of insurance, were $7
million in the first half of 1998 and $8 million in the first half
of 1997. In the 1997 period, there were charges of $27 million
resulting largely from an unfavorable arbitration decision related
to the Woodland sites. These charges were offset by a $25 million
increase in insurance recoveries receivable resulting from
agreements reached during that quarter with certain insurance
carriers. The 1998 charge includes the aggregation of smaller
environmental accruals.
In addition to accrued environmental liabilities, the company has
reasonably possible loss contingencies relating to environmental
matters of approximately $65 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,
1998 1997 1997
--------- -------- ---------
Finished products and work in process $334 $352 $347
Raw materials and supplies 103 107 101
---- ---- ----
Total inventories $437 $459 $448
---- ---- ----
(E) The components of second quarter and first half 1998
comprehensive income are as follows (millions of dollars):
June 30, 1998
-------------
Qtr. YTD
---- ----
Net income $180 $289
Other comprehensive income,
net of tax: Foreign
currency translation
adjustment (6) (10)
---- ----
Comprehensive income $174 $279
---- ----
(F) The number of preferred shares issued and outstanding were:
June 30, 1998 2,199,842
December 31, 1997 2,522,926
June 30, 1997 2,530,836
(G) The number of common treasury shares were:
June 30, 1998 18,846,969
December 31, 1997 17,776,731
June 30, 1997 16,935,690
Dithane and Systhane are trademarks 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 An illustration of a chemical molecule and words
"Second Quarter 1998"
Pie Charts Description included in introduction to Exhibit 20
(not incorporated by reference)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FINANCIAL STATEMENTS AS OF JUNE 30, 1998 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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 67
<SECURITIES> 0
<RECEIVABLES> 794
<ALLOWANCES> 13
<INVENTORY> 437
<CURRENT-ASSETS> 1,508
<PP&E> 4,373
<DEPRECIATION> 2,484
<TOTAL-ASSETS> 3,831
<CURRENT-LIABILITIES> 857
<BONDS> 402
0
110
<COMMON> 197
<OTHER-SE> 1,567
<TOTAL-LIABILITY-AND-EQUITY> 3,831
<SALES> 1,927
<TOTAL-REVENUES> 1,927
<CGS> 1,148
<TOTAL-COSTS> 1,148
<OTHER-EXPENSES> 299
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21
<INCOME-PRETAX> 461
<INCOME-TAX> 172
<INCOME-CONTINUING> 289
<DISCONTINUED> 0
<EXTRAORDINARY> 10
<CHANGES> 0
<NET-INCOME> 279
<EPS-PRIMARY> 4.54
<EPS-DILUTED> 4.46
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> 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
<RESTATED>
<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> 417
<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> 3.42
</TABLE>
