1995 ANNUAL REPORT
ROHM AND HAAS COMPANY
BECAUSE PEOPLE NEED SHELTER AND FOOD
BECAUSE PEOPLE LIKE TO PLAY
BECAUSE PEOPLE WANT TO TRAVEL
ID: GRAPHIC (3 PHOTOS)
ROHM AND HAAS COMPANY
People will always have needs for food, shelter, travel and play. Rohm
and Haas exists because its technology helps meet those needs. Since
1909, we have been developing innovative chemical products used by
industry to make life a little easier for people around the world.
Most of our products are sold to industrial companies who use them to
make consumer goods. The Rohm and Haas identity may get lost along the
way, but our technology often is the "invisible" ingredient that makes
things work better and longer.
Today's Rohm and Haas consists of 10 businesses, each aiming to meet
customer needs for innovative chemistry in the fastest, most efficient
and most profitable manner possible. Because of this commitment, Rohm
and Haas enjoys technical and market leadership in virtually all of the
markets it serves. (See "Rohm and Haas at a Glance" on pages 6 and 7
for more detail.)
People will always have needs. Our goal is to make certain that they
will always need Rohm and Haas.
Table of Contents
FINANCIAL HIGHLIGHTS ......................... 1
LETTER TO SHAREHOLDERS ....................... 2
ROHM AND HAAS AT A GLANCE .................... 6
BUSINESS DISCUSSIONS
POLYMERS, RESINS AND MONOMERS .............. 9
PERFORMANCE CHEMICALS ...................... 12
PLASTICS ................................... 14
AGRICULTURAL CHEMICALS ..................... 17
CORPORATE RESPONSIBILITY ..................... 19
FINANCIAL REVIEW AND INDEX ................... 21
SHAREHOLDER INFORMATION ...................... 53
DIRECTORS AND OFFICERS ....................... 54
LOCATIONS .................................... 56
Forward-looking statements appear throughout this report, including the
Chairman's Letter and Business Discussion sections. These statements
reflect current expectations for economic and business growth. Actual
results could differ materially if economies, raw material prices or
currencies fluctuate beyond expected ranges. Additional factors which
could affect segments of the company's performance are mentioned within
the text of the report.
FINANCIAL HIGHLIGHTS
MILLIONS OF DOLLARS (EXCEPT PER-SHARE AMOUNTS) 1995 1994
- -------------------------------------------------------------------
FOR THE YEAR:
Net sales $3,884 $3,534
Net earnings 292 264
Net cash provided by operating activities 513 524
Capital additions 417 339
- -------------------------------------------------------------------
AT YEAR END:
Total assets $3,916 $3,861
Total debt 696 786
Stockholders' equity 1,781 1,620
- -------------------------------------------------------------------
RATIOS:
Total debt-to-equity* 36% 44%
Return on net assets 8 8
Return on common stockholders' equity* 17 16
- -------------------------------------------------------------------
PER COMMON SHARE:
Net earnings $ 4.22 $ 3.79
Common dividends 1.56 1.44
- -------------------------------------------------------------------
* Stockholders' equity is before reduction for the ESOP transaction.
ID: GRAPHICS -- PIE CHARTS ...
SALES BY BUSINESS GROUP
SALES BY CUSTOMER LOCATION
1
ID: GRAPHIC -- PHOTOGRAPHS
LEFT: J. LAWRENCE WILSON,
CHAIRMAN
RIGHT: JOHN P. MULRONEY,
PRESIDENT
TO THE SHAREHOLDERS
OF ROHM AND HAAS COMPANY
Nineteen ninety-five was a good year for Rohm and Haas. Sales of $3.9
billion were 10 percent higher than in 1994. Earnings of $292 million
represented an 11 percent increase. In contrast, sluggish economies
brought our three-year string of strong unit volume growth to a halt.
Return on equity at 17 percent was one of the highest in our history,
but fell short of the U.S. chemical industry average.
A CHALLENGING YEAR
It is easy to be a success when conditions are right, but that wasn't
the case for Rohm and Haas in 1995. The challenges we faced were
considerable:
Sharply higher raw material costs -- Prices for raw materials, including
acetone, propylene, styrene and butanol, soared 18 percent in 1995.
This surge in raw materials continued through the third quarter, then
began to drift downward as the year came to a close.
Lagging selling price increases -- We pursued selling price increases
relentlessly in order to recover from the effects of skyrocketing raw
material costs. By the end of 1995, overall selling prices were up 4
percent, which restored profit margins to late 1994 levels, but we did
not recover fully the impact of rising raw material costs that began in
mid-1994.
Slowing economies -- The year started with strong growth in every region.
Then, in the second quarter, a slowdown began in North America that
later spread to Europe. As consumers spent less for new homes, home
renovation and automobiles, we saw declining demand for our products,
especially those made by the Polymers and Resins, Plastics Additives and
AtoHaas Americas businesses. Only the Asia-Pacific region remained as a
bright spot. Strong, sustained volume growth there nearly offset lack
of growth in the rest of the world.
2
Other challenges included a first-quarter charge of $17 million
after-tax for the cleanup of a former manufacturing site contaminated by
a previous owner, and $20 million after-tax for the full year in higher
costs associated with meeting increased demand for monomer and
difficulties resulting from a small fire at the acrylic monomer
production facility in Houston.
Not everything went against us. On the plus side, a weaker U.S. dollar
gave a boost to reported sales for Europe and Japan. And our
performance at the end of the year was stronger than first anticipated,
due primarily to the improving relationship between selling prices and
raw material costs and outstanding late-year performances by Shipley,
Agricultural Chemicals and Biocides.
A STRONG PERFORMANCE
After reading through this litany of challenges, one might have expected
Rohm and Haas to report decreased earnings in 1995, rather than the 11
percent increase that's on the books. How did we turn potential
disappointment into strong success?
We refused to be the victim of external circumstances.
It was Oliver Wendell Holmes who said, "We must sail. Sometimes with
the wind and sometimes against it -- but we must sail and not drift, nor
lie at anchor." And a favorite Latin proverb -- "if there is no wind,
row."
So we rowed. Rohm and Haas people made the difference between moving
forward or slipping behind in 1995 by concentrating on the things that
could be changed for the better.
First, we improved the profitability of our overall product portfolio by
shedding low-margin business and increasing sales of higher-margin
products such as electronic and agricultural chemicals. Second, we took
advantage of economic growth wherever we found it, particularly in the
Asia-Pacific region. Third, we did an exceptional job of controlling
internal costs.
LEVERAGING OUR BEST TECHNOLOGIES
Rohm and Haas continues to be the world's largest producer of acrylic
emulsions. Again in 1995, segments of our Polymers and Resins business
demonstrated remarkable growth, especially water-based maintenance
coatings, traffic paints, adhesives and rheology modifiers.
Shipley Company had an outstanding year. Shipley sells electronic
chemicals, including photoresists used by semiconductor manufacturers to
etch complicated circuitry onto silicon chips. Sales improved by 25
percent last year alone, and more than 50 percent since we acquired
Shipley in mid-1992.
Strong growth also came from the newest products offered by the
Agricultural Chemicals business. For example, Confirm insecticide sold
exceptionally well in the United States, where it helped protect the
cotton crop from devastation by beet armyworms. In 1995, this low-risk
insecticide was the first product to complete fast-track review by the
U.S. Environmental Protection Agency and Agriculture Canada. In
addition the inventors of this product -- Dr. Harold Aller and Dr.
Adam Hsu -- were recognized by the Intellectual Property Owners
association as U.S. Inventors of the Year.
EXPANDING IN ASIA-PACIFIC
Strong growth continued in Asia-Pacific. Unit volume increased by 14
percent and sales grew to represent more than 15 percent of total Rohm
and Haas sales. In 1995, the company re-established a subsidiary in
India, firmed up a research agreement with the government of the
People's Republic of China, expanded emulsions in the Philippines,
announced new manufacturing facilities for Thailand and Indonesia, and
an expansion of an existing facility in Taiwan. Rohm and Haas expects
to achieve $1 billion in sales in the Asia-Pacific Region before the
turn of the century.
(continued on page 4)
3
STRIVING FOR OPERATIONAL EXCELLENCE
Last year, we said that you could expect more from Rohm and Haas because
we expect more of ourselves. We want to be world class in all aspects
of our business. We made progress on a number of fronts, but our
achievements in safety and productivity were exceptional.
SAFETY -- Over the last several years we have moved from being a company
with a below-average safety performance to one with an excellent record.
Our workplace injury rate dropped from 2.5 injuries per 200,000 hours
worked in 1994 to 1.8 in 1995 -- an improvement of nearly 30 percent!
Our challenge now is to push that number even lower, until no one is hurt
while working for Rohm and Haas.
PRODUCTIVITY/COST CONTROL -- Our achievements in this area are no less
remarkable. Literally thousands of individuals and small groups around
the world found new, more efficient ways to make, sell and deliver
product again in 1995. Rohm and Haas's selling, administrative and
research costs were just two percent higher in 1995 than they were in
1994 and 1993. In short, we have been able to expand operations in the
Pacific, support the growth of businesses like Shipley and Agricultural
Chemicals and still beat the effects of inflation.
It's important to note that Rohm and Haas has never been a bloated
bureaucracy. Reducing costs has meant being persistent in finding new
and innovative ways to serve customers. Across-the-board employee
cutbacks have not been our solution to reducing costs. However, work
redesign has resulted in fewer positions. At the end of 1995, staffing
was 14 percent lower than it was three years ago.
LOOKING AHEAD
We were successful in 1995 because we set goals for ourselves, then
pressed forward despite the obstacles posed along the way. The key to
success in 1996 can be summed up in just a few words: "stick with it."
We continue to search for newer and better ways to run our operations
and to grow key aspects of our product line. To be a leader in today's
chemical industry, we must have a leaner cost structure and respond
faster to external conditions than our competition.
Looking ahead in 1996, we think our unit volume will grow by 3 to 5
percent. This is faster than the predicted growth for the global GDP.
Since we typically hold first or second place in the markets in which we
compete, high growth rates are difficult to achieve. To grow faster
than the economy, we must bring new technology to the market, take share
away from someone else, or expand into new geography. We are confident
that we are capable of doing all three things.
We will maintain our hard-earned selling price increases. Lower raw
material costs and a continued emphasis on cost control should lead to
improved profit margins as the year progresses.
In short, 1996 should be a better year for Rohm and Haas than 1995. How
much better -- a lot or a little -- will depend upon the pace of
economic growth and the extent of the decline in raw material costs.
RE-ALIGNING MANAGEMENT
There is no topic more important in our company today than that of
alignment. All of the productivity, cost control and growth initiatives
must work in harmony to have a smoothly running, first-class
organization that delivers value to the shareholder year after year.
Late in 1995, management changes were made to help further this cause.
The Chairman's Committee was expanded to include six executives (Larry
Wilson, Jack Mulroney and Basil Vassiliou, along with Raj Gupta, Mike
Fitzpatrick and Chuck Tatum). This group is responsible for overall
company strategy and for allocating resources among the businesses.
4
A Leadership Council was formed, and is responsible for alignment and
execution. It is this group of 26 managers, representing all businesses
and staff areas, that must shape company-wide initiatives, see that they
are understood across the organization, and deliver the expected
results.
In 1995, four senior executives retired -- Bob Naylor, Don Garaventi,
Dick Peterson, and Frank Robertson. Each of these men made invaluable
contributions to the company during their time with Rohm and Haas. Don
and Frank grew the Polymers and Resins business at tremendous rates for
most of the last decade. Dick championed employee empowerment and
energized the Performance Chemicals group. And Bob's ability to see
beyond traditional boundaries served as the inspiration for today's
efforts to streamline our business supply chain. We are grateful for
their contributions and wisdom, for we benefited greatly from their time
with us.
/s/ J. Lawrence Wilson
J. Lawrence Wilson
Chairman
/s/ John P. Mulroney
John P. Mulroney
President
March 22, 1996
ID: GRAPHICS -- 3 BAR CHARTS ...
VOLUME, SALES, AND EARNINGS
5
R O H M A N D H A A S
BUSINESS 1995 SALES KEY MARKETS
UNITS (in millions)
==============================================================================
POLYMERS, RESINS AND MONOMERS
POLYMERS AND $ 1,479 Professional and do-it-yourself home
RESINS improvement, construction, factory-applied
finishes, road and bridge maintenance,
papermaking, textile, packaging, leather
goods and apparel
- ------------------------------------------------------------------------------
FORMULATION $ 88* Water-treatment, detergent, industrial
CHEMICALS cleaning, personal care, oil production and
mining
*excludes sales of NorsoHaas
- ------------------------------------------------------------------------------
MONOMERS $ 230 Primary source of starting materials for
Rohm and Haas products, also sold for use
in detergent, paint and superabsorbent
materials markets
==============================================================================
PERFORMANCE CHEMICALS
ELECTRONIC $ 354 Computer components and circuitry,
CHEMICALS telecommunications equipment, automotive
products, medical equipment and mainframe
computers
- ------------------------------------------------------------------------------
ION EXCHANGE $ 233 Water treatment, electronics,
RESINS pharmaceuticals, biotechnology and food
processing
- ------------------------------------------------------------------------------
PETROLEUM $ 156 Automotive, industrial equipment, aviation,
CHEMICALS metal working and oil refining
- ------------------------------------------------------------------------------
BIOCIDES $ 152 Industrial water treatment, papermaking,
cosmetics, household cleaning products,
paints and coatings, marine paints,
swimming pools and spas
==============================================================================
PLASTICS
PLASTICS $ 384 Construction, automotive, packaging, home
ADDITIVES appliances, business machines and consumer
electronics
- ------------------------------------------------------------------------------
ATOHAAS $ 309 Automotive, construction, transportation,
AMERICAS sign, lighting and appliances
==============================================================================
AGRICULTURAL CHEMICALS
AGRICULTURAL $ 498 High-value specialty agricultural crops,
CHEMICALS including fruits, vegetables, nuts, vines
and flowers
==============================================================================
TOTAL $ 3,884
ID: GRAPHIC -- DRAWINGS OF END USES OF PRODUCTS
6
A T A G L A N C E
PRODUCTS COMPETITORS
==============================================================================
Acrylic and vinyl acrylic emulsion polymers, BASF, Hoechst,
resins and additives used in house paints, bridge Union Carbide, Dow
and maintenance coatings, adhesives, caulks, floor
polishes, inks, road-marking paints, paper
coatings, leather finishes, building products,
patching cement, exterior home finishes, textiles,
nonwovens and wood finishes
- ------------------------------------------------------------------------------
Water-soluble polymers that boost power of laundry BASF, National Starch,
detergents and industrial cleaners; scale Rhone Poulenc
inhibitors for cooling tower and boiler
applications; thickeners and fixatives for
personal care applications; dispersants for mining
and oil production applications
- ------------------------------------------------------------------------------
Acrylic acid and its derivatives; methyl BASF, ICI, Elf Atochem,
methacrylate and its derivatives; specialty Hoechst, Cyro
monomers
==============================================================================
Specialty chemicals used to fabricate integrated TOK, JSR, Hoechst,
circuits and printed wiring boards; ultra-high Atotech, MacDermid,
purity photoresists for imaging applications; Olin
processes for plating on plastic and on metal
parts
- ------------------------------------------------------------------------------
Ion exchange resins used to change the Dow, Bayer, Purolite,
characteristics of water and other fluids; Mitsubishi Kasei
adsorbents for specialty purifications, and
uniform particle-sized resins for chromatographic
separations and high-performance applications
- ------------------------------------------------------------------------------
Polymethacrylate-based products used in Shell, Lubrizol,
high-performance lubricants; amine-based Sanyo, Exxon
intermediates and salt-forming organic bases
- ------------------------------------------------------------------------------
Isothiazolone and bromine-based biocides used to Dow, Union Carbide,
control algae, fungi and bacterial growth Zeneca, Great Lakes,
Lonza
==============================================================================
Impact modifiers and processing aids for vinyl Kaneka, Mitsubishi Rayon,
siding, window profiles, pipe, film, bottles and Dow, Elf Atochem
engineering plastics
- ------------------------------------------------------------------------------
Acrylic sheet and resins for glazing, automotive ICI, Cyro, Rohm,
taillights and other parts, lighting fixtures, Mitsubishi Rayon
signs and medical devices
==============================================================================
A complete portfolio of herbicides, fungicides and Elf Atochem, DuPont,
insecticides Monsanto, Shell,
Zeneca, FMC
==============================================================================
7
BECAUSE PEOPLE TRAVEL ...
Everyone is on the move these days. Rohm and Haas technology helps you
get there by air, rail or car. Lightweight plastic for shiny red
taillights, additives for transmission fluids and high-tech hydraulics,
water-based paints to protect bridges and mark the lines on the
roads -- Rohm and Haas is there to make your ride quieter, smoother and
safer in many, many ways.
TRAVEL IS EASIER BECAUSE OUR TECHNOLOGY IS IN TRAINS AND PLANES AND CARS.
ID: GRAPHICS -- PHOTOGRAPHS (CAPTIONS BELOW)
PLEXIGLAS MOLDING RESINS ARE USED IN CAR TAILLIGHTS THROUGHOUT THE WORLD.
OUR TECHNOLOGY HELPS YOUR SPEEDOMETER RECORD HOW FAST YOU GO.
RHOPLEX WATER-BASED ROAD PAINTS ARE LESS POLLUTING TO THE AIR.
8
POLYMERS, RESINS AND MONOMERS
Polymers, Resins and Monomers (PRM) includes the financial results of three
businesses: Monomers, Polymers and Resins and Formulation Chemicals.
Together, these businesses reported sales of $1.8 billion in 1995, an increase
of 9 percent over the year before. Earnings were $162 million.
MONOMERS
The Monomers business is the primary source for the acrylic and methacrylic
monomers used to make more than two-thirds of Rohm and Haas products.
Monomers also sells products to external customers for use in superabsorbent
diapers, detergents and other consumer products.
A May fire knocked out production in one segment of the acrylic acid
production unit in Houston, Texas. The Monomers team worked heroically to
repair the damage and bring another unit into production ahead of schedule.
As a result, customers continued to receive acrylic acid without interruption
throughout the summer.
During the year, Monomers incurred approximately $20 million in higher costs
resulting from the fire, higher monomer transportation costs and purchase
price premiums for monomer bought on the open market.
By year end, all existing acrylic acid units were in full production and
ground had been broken for yet another 220-million-pound expansion. When this
expansion is completed in 1997, total acrylic acid capacity will exceed one
billion pounds a year.
Demand for acrylic acid has remained strong -- both to feed the growing
segments of the Rohm and Haas acrylic portfolio, and to match the needs of
producers of superabsorbent materials. Supply will remain snug throughout the
next few years. Already the company is evaluating sites for additional
acrylic acid production to meet projected needs at the turn of the century.
Monomers is expected to make the siting decision during 1996.
There was some relief from the relentless upward pressure in raw material
costs as 1995 came to a close. Declining prices for propylene, styrene and
methanol combined with modest selling price increases to help profit margins
begin to improve at the end of the year. The exception was acetone, a key
ingredient in the manufacture of methyl methacrylate. Prices here remain
high, with only modest relief in sight.
Monomers employees recorded a 21 percent reduction in workplace injuries in
1995. Finding new ways to work safely remains a priority for this business.
POLYMERS AND RESINS
Nineteen ninety-five was a mixed year for the largest business operated by
Rohm and Haas. Early volume gains all but disappeared after the economies in
North and Latin America slowed at mid-year. Strong growth in Europe and the
Asia-Pacific region compensated somewhat and enabled Polymers and Resins to
report flat volume for the year, excluding the styrene-butadiene-latex
business that was divested early in 1995.
Markets around the world continued the shift from solvent to water-based
materials, primarily for environmental reasons. Rohm and Haas's water-based,
acrylic technology continues to meet the needs for cleaner technology and
products. Water-based products for road-marking traffic paints and
maintenance coatings did quite well again in 1995. Maintenance coatings are
used on storage tanks, bridges and overpasses. More traditional water-based
materials used to coat hardboard and roofing tiles also saw good sales
increases.
The Ropaque polymer line had strong sales in both the paper and coatings
markets. Sales were helped by the introduction of Ropaque OP-96, a new
generation of hollow-sphere technology which can be used cost effectively as
an opacifier in a broader range of paint formulations.
Polymers and Resins extended its line of Rhoplex paint emulsions which emit
lower levels of volatile organic compounds (VOCs) to include products for use
in flat exterior paints. Not only is this new emulsion beneficial to the
environment, but it also reduces dirt pickup. Other Rhoplex water-based
emulsion products saw good sales in China and elsewhere in the Asia-Pacific
region. Rheology modifiers
(continued on page 10)
ID: GRAPHICS ... INSET PHOTOGRAPH
JOAN SOUCHIK, LAURA McCLURE, BERNIE KINKER AND TOM McGREGOR
ARE PART OF THE TEAM THAT ENSURES ACRYLOID POUR-POINT
DEPRESSANTS KEEP ENGINES RUNNING, EVEN AT VERY LOW
TEMPERATURES.
ID: GRAPHICS ... 3 BAR CHARTS
VOLUME, SALES AND EARNINGS
9
POLYMERS, RESINS AND MONOMERS
did well during 1995, and introduced new technology that improves paint
manufacturing reliability at lower cost than traditional thickener technology.
While volume was down for vinyl acrylics, profitability improved, primarily
the result of shedding low-margin business in various market segments and an
aggressive pursuit of selling price increases. Rohm and Haas is expanding its
sales efforts of vinyl acrylic products into European and Asia-Pacific markets
and intends to be a major vinyl acrylic emulsions supplier in that part of the
world.
Water-based adhesive products used in pressure-sensitive tapes and labels sold
well in nearly all markets. Energy-efficient, acrylic-based exterior wall
systems did well in an otherwise depressed U.S. construction market.
In February 1995, Rohm and Haas completed the sale of its
styrene-butadiene-latex business and a manufacturing facility to Ameripol
Synpol Corporation. These products were used in carpet and paper
applications.
Polymers and Resins is building new manufacturing capacity to keep up with
demand in its fast-growing European and Asia-Pacific markets. During the
year, expansions were completed in France, and new plants were announced for
Thailand and Indonesia. The company's largest emulsion facility, the
200-million pound Lone Star plant in Houston, Texas, will come on-stream
during the second quarter of 1996 to meet the needs of high-volume customers
in that region of the United States. Early in 1996, the company announced
plans to expand capacity at its plant in Sweden. An expansion also is under
way in Taiwan.
As 1996 begins, the outlook for the North American market remains uncertain.
However, the Polymers and Resins business expects continued strong growth in
Asia-Pacific and Europe, led by paint, adhesive and construction products.
FORMULATION CHEMICALS
Though volume declined for this business, sales and earnings increased,
reflecting improved productivity and selling price increases that compensated
for the effect of higher raw material costs.
Early in 1995, the company announced it would offer market-development
quantities of polyaspartic acid, a readily biodegradable polymer for use in
detergents and oil field production. This niche product is more expensive
than the industry standards, but is expected to have a good future in
environmentally sensitive applications.
Forming strong alliances with key customers around the world remains an
important growth strategy for this business. During the year, Formulation
Chemicals participated in joint supply chain projects with customers in North
America, Europe and Latin America. This business continues to lead the way in
supplier-owned inventory. Under this program, Rohm and Haas delivers product
to customers' manufacturing sites and stores it there for use as needed. In
turn, customers share demand forecasts with Rohm and Haas so that the company
can ensure product is there when needed.
Formulation Chemicals began manufacturing product in Taiwan during the year in
support of strong growth in the Asia-Pacific region. In Europe, the NorsoHaas
joint venture with Elf Atochem made inroads into the Eastern European market
with sales of water-treatment chemicals. Europe also was the location for
initial sales of a low-VOC resin for use in hair sprays.
Rationalization continued in the worldwide water-treatment and mineral
processing industries. Even though less product was sold by Rohm and Haas,
profitability and sales improved through new product innovations. Early in
1996, the company expanded its product line to include a polymaleic acid-based
calcium carbonate inhibitor for cooling tower and boiler applications.
Closer customer relationships and new technologies for new markets look
promising for Formulation Chemicals in 1996.
ID: GRAPHIC -- PHOTOGRAPHS
10
BECAUSE PEOPLE LIKE TO PLAY ...
Race down the road like the wind. Dive in the pool and stretch for the
perfect stroke, master that elusive golf swing -- just have fun. Rohm
and Haas technology is there with you to strengthen your helmet, treat
the water and keep the fields growing healthy and green. We're even
there to help clean your clothes when the day is done.
ID: GRAPHIC -- PHOTOGRAPH (CAPTION BELOW)
YOU WILL FIND ROHM AND HAAS INVOLVED NO MATTER WHAT THE GAME.
11
On the field, in the water or in the gym ...
Clean water is the last thing on your mind in competitive swimming, but it's a
primary concern at Rohm and Haas. Our technology removes impurities at
municipal water-treatment sites, it modifies the pipes that carry the water to
the pool, it even keeps bacteria from growing as you glide toward the finish
line.
Performance Chemicals includes the results of four businesses: Electronic
Chemicals, Ion Exchange Resins, Biocides and Petroleum Chemicals. In 1995,
volume increased 4 percent, sales improved 11 percent, and earnings improved
71 percent over the previous year.
ELECTRONIC CHEMICALS
Shipley Company performed extremely well again in 1995. Sales were up 25
percent and earnings doubled. Growth in the semiconductor industry, increased
sales to the flat panel display market in Asia, and strong sales worldwide
contributed to the excellent performance.
Shipley manufactures Microposit photoresists used in making integrated
circuits for the microelectronics industry. Sales and market share continued
to grow in spite of fierce competition in this market. The increased demand
for electronic devices, such as cellular telephones and laptop computers, is
expected to provide further growth.
An alliance with IBM to market the next generation of photoresists led to the
introduction of a second- generation ultraviolet photoresist system.
Shipley's printed wiring board business also had a good year worldwide. The
company is leveraging its imaging strength in microelectronics by bringing
that technology into the printed wiring board market. Progress in this effort
was made in 1995.
The intense competition in the industry demands extraordinarily fast product
development, high quality and efficient manufacturing operations. Shipley
continues to benefit from using a cycle
ID: GRAPHICS -- PHOTOGRAPHS (CAPTION BELOW)
OUR KNOW-HOW ALSO KEEPS CLEAN WATER RUNNING THROUGH INDUSTRIAL OPERATIONS,
HELPS SEMICONDUCTOR MANUFACTURERS INCREASE CHIP PURITY AND EVEN CLEANS
WATER IN HOME WATER FILTERS ONE LAST TIME BEFORE YOU DRINK IT.
12
PERFORMANCE CHEMICALS
time management philosophy to help keep pace with market demands.
Plaskon Electronic Materials, Ltd. was sold to Amoco Chemical Company on
July 31, 1995. The company manufactured molding compounds used to
encapsulate semiconductors.
ION EXCHANGE RESINS
The Ion Exchange business made further progress in streamlining the product
portfolio, reducing operating costs and winning back market share.
Volume and sales increased in 1995. Ion Exchange reduced selling,
administrative and research expenses as a percent of sales and
rationalized its product offerings. However, these achievements were
overcome by startup costs for process improvements at several
manufacturing locations and inventory writeoffs. Consequently, the
business reported a loss for the year.
Overall safety performance improved, as all locations continued to emphasize
employee awareness and training to reduce workplace injuries.
Ion exchange resins are used to purify water, food and beverages, and to
increase the efficiency of utility plant operations. Sales of resins to the
nuclear power industry did well, particularly in North America, France and
China. The business continues to grow in Japan.
Sales of resins for catalysts used to manufacture gasoline additives remained
strong. The home water purification market also contributed to increased
sales, particularly in Europe and North America. The Ion Exchange business
has made a strategic decision to increase its participation in the
pharmaceutical market with its cholestyramine resins and expects significant
sales in 1996.
The Ion Exchange business expects to return to positive earnings in 1996.
Cost reduction efforts are now in place and product rationalization is nearly
complete.
BIOCIDES
Biocides had another good year in 1995, with sales, volume and earnings all up
from the previous year.
Contributing to the growth was the strong recovery in Europe and continued
strength in the U.S. and Canadian markets for both isothiazolone- and
bromine-based products. Results in the Asia-Pacific and Latin American
Regions were hampered by the slow economies in Japan and Mexico.
Sales of bromine biocides, manufactured through a joint venture with the
Dead-Sea Bromine Group, increased, particularly in industrial water treatment
applications in Europe.
Sales of the Sea-Nine biocides used in marine paint and plastics applications,
also grew. Rohm and Haas received U.S. registration for Sea-Nine in 1994.
Strong sales are expected in 1996, once manufacturers receive EPA approvals
for their paint formulations.
Business expansion will be supported by a new manufacturing facility in
Bayport, Texas, which will come on- stream in the first quarter of 1996. This
plant will provide additional capacity for both the Kathon and Sea-Nine
product lines.
Biocides' safety performance improved dramatically. Workplace injuries were
reduced by 84 percent, and earned Biocides one of the lowest injury rates in
the company.
PETROLEUM CHEMICALS
Petroleum Chemicals had a strong year, posting higher earnings on lower
volumes. The results reflect the successful repositioning of the business
from high-volume, commodity additives to more customized, higher margin
products.
Overall sales increased dramatically in North America, Latin America and
Europe. Results in the Asia-Pacific region were down, due to the sluggish
Japanese economy and fierce competition. Significant gains were made in other
parts of the region, particularly India and Taiwan.
Efforts continued to find new applications for the polymethacrylate product
line outside the traditional petroleum sector. The business also has achieved
success in meeting increased technical and commercial demands of the
pour-point depressant market.
Petroleum Chemicals also benefited from significant cost saving initiatives at
the Houston plant. Additional capacity was brought on line at the Morrisburg,
Canada plant to produce customized methacrylates for use in a variety of
specialty products.
Use of Primene amines expanded significantly in the oil recovery and refinery
process chemicals markets. Water treatment, metal working, inks, lubricant
additives, dyes and pigment uses also continued to grow.
Petroleum Chemicals has achieved compliance with Responsible Care standards
throughout its operations. In addition, the business cut workplace injuries
by 50 percent in 1995 through increased employee awareness and involvement.
In 1996, Petroleum Chemicals will be looking for innovative ways to shift the
business further into high- performance applications and to improve the reach
and efficiency of its operations around the world.
ID: GRAPHICS -- INSET PHOTOGRAPHS
ID: GRAPHICS ... BAR CHARTS
VOLUME, SALES AND EARNINGS
13
Rohm and Haas technology is there.
Rohm and Haas products are in leather sporting equipment. Our
agricultural technology also is used to keep turf in top condition
around the world.
PLASTICS
The Plastics Business Group includes the financial results of two
businesses -- AtoHaas and Plastics Additives. In 1995, this group
reported earnings of $63 million, a 9 percent increase over 1994.
Volume declined 5 percent, due primarily to sluggish markets for both
businesses.
ATOHAAS
AtoHaas is a joint venture between Elf Atochem and Rohm and Haas
Company. The business offers a broad line of acrylic sheet,
polycarbonate sheet and pelletized polymethylmethacrylate resins for
customers in the automotive, transportation, construction, sign and
lighting markets.
Late in the year, AtoHaas North America changed its name to AtoHaas
Americas to better reflect its North and Latin American regional
presence. In 1995, this business also recorded sales in Europe and
Asia-Pacific. AtoHaas Americas improved sales and earnings in 1995,
while volume was even with last year. Manufacturing operations ran
smoothly and cost reductions put in place led to a more productive and
profitable year. Higher selling prices helped compensate for higher raw
material costs.
Acrylic molding resins are used primarily in the manufacture of
automobile light lenses and other lighting applications. Molding resin
sales were robust outside of North
ID: GRAPHICS -- PHOTOGRAPHS (CAPTIONS BELOW)
OUR DETERGENT ADDITIVES LIFT DIRT AWAY FROM CLOTHES, THEN WASH IT AWAY
IN THE RINSE CYCLE.
PACKAGING IS IMPROVED BECAUSE OF PLASTICS ADDITIVES TECHNOLOGY.
14
America and contributed significantly to AtoHaas's sales growth in 1995.
Demand from the U.S. automotive sector weakened as the year progressed,
reflecting reduced automobile production in North America. In 1995,
AtoHaas introduced two new resins for the medical and commercial
lighting industries.
Profitability of acrylic sheet in North America was boosted by cost
reductions and sales of specialty-grade sheet products.
Impact-resistant Implex and Tuffak polycarbonate sheets did well.
Plexiglas Q and Implex Plus, high-performance acrylic sheet products
for the sign and fabrication industries, made good progress in their
first full year of sales.
The overall performance improved for AtoHaas Europe. Volume was healthy
in the first half of the year, but an economic slowdown in the second
half kept volume flat with last year. The business was able to recover
increases in raw material prices. Manufacturing costs were reduced as
three operations in Europe were discontinued to pave the way for a new
molding resin plant in Rho, Italy, in early 1997. The new operation
will utilize Rohm and Haas technology.
Together, AtoHaas Americas and AtoHaas Europe are the number one
producer of acrylic sheet and acrylic molding resins in the world.
PLASTICS ADDITIVES
Plastics Additives makes polymers that dramatically improve the
capabilities of polyvinyl chloride (PVC) and various engineering
thermoplastics. They are grouped within three major product families:
acrylic processing aids, acrylic impact modifiers and MBS (methyl
methacrylate butadiene styrene) impact modifiers. These additives are
used in a variety of consumer, building, packaging and industrial
applications.
Safety remained a priority for Plastics Additives' employees worldwide.
In 1995, the business surpassed its targets and improved its
occupational injury and illness (OII) rate by 65 percent.
Markets were strong early in 1995, but demand weakened when the
building, construction and automotive industries slowed in both North
America and Europe later in the year. Consequently, volume decreased
considerably. Temporary operating difficulties placed an additional
burden on profits. As a result, Plastics Additives earnings declined in
1995.
In the European building sector, demand for Paraloid KM-355, a
high-impact acrylic modifier used mainly in PVC window applications,
remained strong for most of the year. Other highlights in European
markets include Paraloid KM-365, an impact modifier designed for highly
specialized injection molding applications, and Paraloid K-400, a
processing aid for foamed PVC applications.
Late in 1995, the business introduced a new acrylic impact modifier for
the North American building market. Paraloid KM-377 combines impact
performance with low-gloss properties, which is particularly desirable
in specialized vinyl siding.
Sales declined during the year for methyl methacrylate butadiene styrene
(MBS) impact modifiers. In Europe, the shift accelerated away from PVC
for bottling applications to polyethylene terephthalate (PET). The PVC
film and sheet packaging markets remained healthy.
Engineering resin additives, which are used in automotive bumpers and
other specialty applications, made progress despite the weak automotive
industry. Work continues on new applications for these additives.
The business continues its worldwide 55,000 metric ton expansion program
started in 1994 to maintain its strong global position. It includes
major capacity increases at Louisville, Kentucky, and Grangemouth,
Scotland, and a new packaging line at Lauterbourg, France. Construction
commenced to expand manufacturing capabilities for acrylic impact
modifiers in Singapore for the business's joint venture with Kureha
Chemicals in Singapore. The joint venture is integral to the business's
long-term growth in Asia.
OUTLOOK
The Plastics Business group has the organization and the capacity to
respond to a strengthening economy. Both businesses are confident they
are poised for success in the majority of markets in which they compete.
ID: GRAPHIC ... PHOTOGRAPHS
ID: GRAPHIC ... 3 BAR CHARTS
VOLUME, SALES, AND EARNINGS
15
BECAUSE PEOPLE NEED SHELTER AND FOOD ...
We invented products for your home ...
Home. A place to call your own. Rohm and Haas technology is here, too
- -- from the roof to the windows, from pipes that carry your water to the
paint you choose for the walls.
ID: GRAPHIC -- PHOTOGRAPHS (CAPTION BELOW)
OUR ACRYLIC TECHNOLOGY IS AN ESSENTIAL COMPONENT OF BUILDING MATERIALS,
SUCH AS CAULKS, CEMENT MODIFIERS AND ROOF MASTICS.
16
AGRICULTURAL CHEMICALS
The Agricultural Chemicals business had the best year in its history.
Worldwide sales of $498 million represented a 13 percent increase.
Earnings reached $51 million, an increase of almost 30 percent over the
$40 million high-water mark of 1994. All regions contributed to the
increase in sales, with the greatest gains coming from North America and
Europe.
INSECTICIDES
Strong growth came from the newest products in the Agricultural
Chemicals line, led by Confirm insecticide, which is sold under the
Mimic tradename outside the United States. Confirm (Mimic) controls
caterpillars on various crops by imitating a growth hormone in
caterpillar larvae and causing premature molting. The product poses
little risk to humans and animals and does not harm beneficial insects.
As a result, Confirm has been classified as a reduced risk pesticide by
the EPA.
Sales of Confirm were especially strong in North America where it was
used under emergency use permits to protect cotton crops. However, all
regions reported excellent results. The product was launched
successfully in several countries in the Asia-Pacific region, including
China.
The value of Confirm insecticide was further recognized when its
inventors, Rohm and Haas scientists Dr. Adam Chi-Tung Hsu and Dr.
Harold E. Aller, were named U. S. Inventors of the Year by the
Intellectual Property Owners association.
Rohm and Haas Company and American Cyanamid Company formed RohMid
L.L.C., a joint venture to develop, register and commercialize a new
insecticide, RH-0345, for the turf and ornamental market in the United
States. RH-0345 provides superior control of grubs and other soil-borne
pests on golf courses, lawns, and other landscaping applications. The
product can be applied at low-use rates, does not harm earthworms,
honeybees, or other beneficial insects, and is less toxic to birds, fish
and mammals than grub control insecticides currently on the market.
Registration was submitted in mid-1995. The product has been classified
as a low-risk pesticide by the EPA. The company expects a fast-track
registration process and to receive full registration by 1997.
TURF AND ORNAMENTALS
Visor and Dimension herbicides, acquired from Monsanto in 1994, also
showed good sales growth. Sales of Dimension, used to control weeds and
crabgrass on golf courses, lawns and in various landscape applications,
were strong in North America, achieving growth in market share. The
company received expanded registrations for Dimension for use on turf in
California and New York, and anticipates gaining nationwide registration
for use on ornamentals in 1997.
Rohm and Haas also added a number of formulator partners to register,
sell and use Dimension in combination with fertilizer. The company
found expanded uses for this product in Japan and Canada and explored a
number of new registrations in Europe and Asia-Pacific.
The excellent sales record of Dimension herbicide helped the turf
segment of the business grow by 29 percent, far exceeding business plan.
In this specialized market, there was also significant growth among core
products such as Dithane and Fore fungicides, Kerb herbicide, and
Kelthane miticide. A new, water-soluble package was introduced for Fore
fungicide which makes the product easier to use and reduces potential
worker exposure. Another new product, Eagle fungicide, was launched
successfully into the turf market.
FUNGICIDES
Fungicide sales were very good in the North American region. The
increase was spurred by registrations for Indar and Enable, two new
systemic fungicides that were able to replace older, less user-friendly
products in some areas. Sales increases of these products were helped
by good first-year sales on stone fruits and pecans in North America and
excellent sales in Europe on cereal grains. Indar also received key
registrations in banana markets in Latin America. Registrations for
Indar and Dithane were received in China.
(continued on page 18)
ID: GRAPHICS -- INSET PHOTOGRAPHS (CAPTIONS BELOW)
DEBBIE ZIMMER AND WALT GOZDAN HELP SPREAD THE WORD ABOUT THE BENEFITS OF
WATER-BASED PAINTS THROUGH THE PAINT QUALITY INSTITUTE.
PARALOID ADDITIVES ARE FOUND IN VINYL SIDING, WINDOW PROFILES AND PIPES.
17
AGRICULTURAL CHEMICALS
And new ways
Sales of Dithane fungicide, the company's bellwether agricultural
chemical product, were flat in the face of increased competitive
pressure from generic products and weather conditions requiring less
fungicide use. Flat Dithane sales in North America and declines in the
Asia-Pacific region were offset by gains in Latin America and Europe.
Dithane had strong sales gains in traditional markets in Colombia and
Brazil and in bananas in Central America. The Latin American region
implemented bulk shipments of Dithane flowable to banana customers.
This eliminated drum disposal problems and facilitated product handling.
Rally and Nova (sold under the Systhane tradename outside the United
States) made significant inroads into established markets, especially in
grapes in North America. Increased shipments in Italy and eastern
Europe also contributed to sales gains. Rohm and Haas introduced a new,
faster dissolving formulation of the systemic fungicide into several
markets.
HERBICIDES
In the Asia-Pacific region, sales of Stam and Kerb herbicides showed
modest gains. In Europe, herbicide sales grew 30 percent. Kerb gained
increased use on oilseed rape in the United Kingdom as more acreage was
planted and weather conditions favored its use. Compete herbicide found
a number of new applications. Goal was strong in specialty markets
throughout Europe, and Stam enjoyed good sales in Italy, largely due to
weather conditions favorable for its use and by growing acceptance of
Stam 80 EDF, an extruded dry flowable formulation. The Latin American
region reported record sales of Goal, led by growth in the sugar cane
and coffee markets.
OUTLOOK
Considering the excellent results for the year, trends favoring gains in
existing and new markets, and a pipeline full of products under
development, Rohm and Haas is confident about continued profitable
growth for the Agricultural Chemicals business.
ID: GRAPHICS ... PHOTOGRAPHS
ID: GRAPHICS ... 3 BAR CHARTS
VOLUME, SALES, AND EARNINGS
18
to protect important crops.
CORPORATE
RESPONSIBILITY
In 1995, Rohm and Haas again demonstrated that policies on safety,
health and environmental issues and a concern for the communities where
it does business, can yield tangible benefits to both the company and
its neighbors.
SAFETY IN THE WORKPLACE
Rohm and Haas employees worked more safely in 1995 than ever before.
During 1995, the company's rate of occupational injury and illness
(OII), as measured by standards established by the U.S. Occupational
Safety and Health Administration (OSHA), fell to an all-time low of 1.8,
down nearly 30 percent from 2.5 in 1994, and a full two-thirds lower
than just four years ago.
This tremendous progress is the result of a concerted effort by
employees around the world. In 1995, employees at twenty-eight
locations worked without an injury, and an additional eighteen sites
improved their safety performance over the previous year.
The Board of Directors Award for Safety Excellence, which honors company
locations achieving exceptional safety records, were earned by the
following sites in 1995: the Apizaco, Mexico plant; the Japan Research
Center in Washimiya, Japan; manufacturing plants in Kankakee, Illinois
and in Lauterbourg, France; the NorsoHaas joint venture in
Villers-Saint-Paul, France, and the Spring House research laboratories
in Pennsylvania.
The Board of Directors Award recognizes the employees of these locations
for their efforts at achieving an injury-free workplace, as well as for
their leadership in sending the safety message to locations the world
over. Rohm and Haas will continue driving toward its goal of seeing
that no one gets hurt while working for the company.
ENVIRONMENTAL PROGRESS
At mid-year, the company reported its U.S. emission measurements to that
country's Environmental Protection Agency. Total U.S. plant emissions
of 7.8 million pounds annually are now at their lowest point since these
measures were instituted six years ago. This represents a 51 percent
reduction since 1987, a period during which U.S. plant production rose
by more than 60 percent.
Progress on a voluntary air emissions goal has been even more dramatic.
The company pledged a 75 percent reduction in these U.S. air emissions
by the end of 1996 (based on 1987 releases). To date, it has achieved
reductions of 62 percent.
Five years ago, the company also pledged a 25 percent reduction in all
manufacturing wastes, despite its expectation of increased production
during that period. Our plants have made significant progress in a
number of major processes. At the end of 1995, process waste reduction
stood at just over 10 percent. We expect to make dramatic progress on
this measure in 1996.
(continued on page 20)
ID: GRAPHICS -- PHOTOGRAPHS (CAPTIONS BELOW)
CONFIRM IS A REDUCED RISK INSECTICIDE THAT CONTROLS CATERPILLARS WITHOUT
HARM TO BENEFICIAL INSECTS.
ADAM HSU AND HAL ALLER WERE NAMED "INVENTORS OF THE YEAR" FOR THEIR
DISCOVERY OF CONFIRM/MIMIC INSECTICIDE.
19
Because we want people to work safely.
CORPORATE RESPONSIBILITY
MEASURING COMMUNITY RELATIONSHIPS
Early in 1995, the company conducted the fifth round of community
surveys in the United States, established ten years ago to accurately
determine external perceptions of its performance at key operating
locations. Surveys now have been conducted in North America, Europe,
and Latin America to guide facility managers in relationships with
neighboring communities.
One measure of how well a facility relates to its neighbors is the
degree of favorability expressed by the community. In the ten years
during which these measurements have been taken, average favorability at
five U.S. locations has risen by seven percent. This, despite the
ever-increasing challenges of operating chemical facilities, reflects a
continuing commitment by plant management to factor community concerns
into their daily operations.
REMEDIATION EFFORTS
Rohm and Haas completed the remediation of marshland surrounding the
Lipari Landfill and restored nearby Alcyon Lake to the Pitman, New
Jersey community. This completes all but a small portion of the site
cleanup. Rohm and Haas joined with residents and representatives of the
EPA at a fall rededication of the lake. Nature trails and athletic
fields will soon exist in the remediated areas.
During the same time period, Rohm and Haas Italia completed work at a
former waste site adjacent to the Mozzanica plant. This
company-initiated project, included local government involvement in the
planning and construction phases, and careful monitoring by Italian
environmental authorities. A tree planting ceremony by local children
symbolized the successful restoration of the area that will now be used
for botanical studies by local schools.
In March 1995, Rohm and Haas took a $17 million after-tax charge to
earnings following a court ruling that ordered it to indemnify another
firm involved in the cleanup of the Whitmoyer site in Myerstown,
Pennsylvania. Nearly all contaminants were removed from a storage vault
at this Pennsylvania site during the year and are being stored prior to
disposal. Designs for the most effective method for treating
groundwater were further explored under the oversight of the EPA.
ID: GRAPHICS -- PHOTOGRAPHS (CAPTIONS BELOW)
ID: GRAPHICS -- BAR CHART
YUKISATO KUROKAWA, N. K. SUZUKI AND KUNIO TAKASE HELPED THE JAPAN RESEARCH
CENTER EARN THE COMPANY'S TOP SAFETY AWARD.
ROHM AND HAAS SPONSORS THE KIDSAFE ID PROGRAM IN LOUISVILLE, KENTUCKY.
20
1995 FINANCIAL REVIEW
CONTENTS
MANAGEMENT DISCUSSION AND ANALYSIS
Results of Operations (1995, 1994 and 1993) 22
Summary by Business Group (1995, 1994 and 1993) 22
Liquidity, Capital Resources and Other Financial Data 27
Quarterly Results of Operations 31
CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies 33
Statements of Consolidated Earnings 34
Statements of Consolidated Cash Flows 35
Consolidated Balance Sheets 36
Statements of Consolidated Stockholders' Equity 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Acquisitions and Dispositions of Assets 38
Note 2 Investments 38
Note 3 Other Expense, Net 38
Note 4 Financial Instruments 39
Note 5 Income Taxes 39
Note 6 Industry Segment Reporting and Information
about Foreign Operations 40
Note 7 Pension Plans 42
Note 8 Employee Benefits 43
Note 9 Accounts Receivable, Net 44
Note 10 Inventories 44
Note 11 Prepaid Expenses and Other Assets 44
Note 12 Land, Buildings and Equipment, Net 45
Note 13 Other Assets, Net 45
Note 14 Notes Payable 45
Note 15 Long-Term Debt 45
Note 16 Accounts Payable and Accrued Liabilities 46
Note 17 Other Liabilities 46
Note 18 Stockholders' Equity 46
Note 19 Stock Option Plan 46
Note 20 Lease and Rental Commitments 47
Note 21 Contingent Liabilities, Guarantees and
Commitments 47
Report on Financial Statements 49
Independent Auditors' Report 49
Eleven-Year Summary of Selected Financial Data 50
21
MANAGEMENT DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS --
1995, 1994 AND 1993
Earnings in 1995 totaled $292 million, 11% higher than the $264 million
reported in 1994. Earnings per common share were $4.22, up from $3.79
the year before. Charges for waste site accruals in 1995 were $.43 per
common share compared to $.30 in 1994. The 1995 amount included a $.25
first-quarter charge for the cleanup of a former manufacturing site
contaminated by a previous owner. Sales of $3,884 million were 10%
higher than 1994, though volume decreased 2%. The sales growth reflects
4% higher selling prices, a higher-priced product mix, 9% stronger
European currencies and a 10% stronger Japanese yen. Volume declined as
a result of the sale of several small businesses, shedding unprofitable
products and a slowdown in certain end-use markets. The earnings growth
is due to a more profitable product mix, cost control programs and
favorable foreign currency movements which offset the negative impact of
18% higher raw material prices. In 1995, the benefits of increased
productivity and cost control efforts offset the impact of inflation on
the company's operating results.
Earnings for 1994 were $264 million, up from 1993 earnings of $181
million (before 1993 special charges and credits). Earnings per common
share were $3.79 compared to $2.56 in 1993. In 1993, special items
totaled a net after-tax charge of $55 million for asset writedowns and
environmental remediation related to the Lipari waste site, net of a
gain on the sale of a subsidiary. Favorable impacts on earnings in 1994
included stronger European and Asian economies and currencies, 8% higher
sales and shipping volume, smooth plant operations and reduced operating
costs as a result of productivity improvements. Lower startup costs,
lower research and development costs and improved affiliate results also
contributed to the earnings gain. Earnings were affected negatively by
1% lower selling prices, excluding the effect of currencies, and 4%
higher raw material prices.
These and other factors affecting earnings are discussed at right. They
are summarized on a per-share basis on page 26.
SUMMARY BY BUSINESS GROUP
(Refer to table on page 23)
The company's operations are organized by worldwide business groups. A
description of each business group's operations can be found in the
business review section of this report.
POLYMERS, RESINS AND MONOMERS (PRM) earnings in 1995 were $162 million,
down 3% from 1994. Sales increased 9%, though volume declined 2% due to
higher selling prices, a higher-priced product mix and stronger
currencies in Europe and Japan. Volume was lower due to the sale of the
styrene butadiene latex business, shedding unprofitable products and the
slowdown in certain end-use markets. Architectural Coatings and
Adhesives had strong volume growth in Europe and Asia-Pacific and
Industrial Coatings had volume gains in all regions. Architectural
Coatings reported lower volume in North America due to a slowdown in the
construction markets and shedding unprofitable products. Earnings were
hurt by higher raw material prices and costs resulting from a fire in
one of the acrylic acid units at Houston, Texas, earlier in the year.
PRM 1994 earnings were $167 million, up 39% from 1993. Sales and volume
were up 9%, with all market segments and regions reporting increases.
Businesses with noteworthy increases included Architectural Coatings,
Industrial Coatings, Construction Products and Adhesives. Earnings were
helped by higher volume, smooth plant operations, reduced operating
costs and stronger Japanese currencies. These factors offset higher raw
material prices.
PERFORMANCE CHEMICALS reported 1995 earnings of $65 million, up sharply
from 1994 earnings of $38 million. Sales increased 11% and volume grew
5%, excluding the effect of the sale of Plaskon, a small electronic
chemicals subsidiary, because of a higher-priced product mix, higher
selling prices and stronger foreign currencies. The earnings growth was
fueled by a stellar performance by Shipley, the company's electronic
chemicals subsidiary. Shipley reported double-digit increases in volume
and sales and more than doubled its 1994 earnings as a result of
worldwide growth of the semiconductor market. Ion Exchange Resins
reported lower losses in 1995 as a result of higher volume in all
regions, tight cost control, lower inventory writeoffs and the strength
of the Japanese yen. However, selling prices continued to be lower than
the prior year. Biocides benefited from strong volume growth worldwide
and the strengthening of foreign currencies.
Performance Chemicals earnings in 1994 were $38 million, up from $18
million in 1993, excluding an $11 million after-tax gain in 1993 on the
sale of Supelco, Inc., a manufacturer of chromatographic supplies.
Sales increased 8% and volume was up 4%, excluding Supelco. Earnings
increased due to volume gains, a higher-priced product mix, reduced
operating costs and the strengthening of the Japanese yen. Biocides had
volume gains in all regions. Electronic Chemicals had strong growth in
North America and Europe. Ion Exchange Resins reported higher volume in
1994, but selling prices dropped below 1993's already depressed levels.
Despite restructuring initiatives begun in 1993 which significantly
reduced selling, administrative and research costs, Ion Exchange Resins
continued to report losses in 1994.
22
NET SALES BY BUSINESS GROUP AND CUSTOMER LOCATION
- ----------------------------------------------------------------------------------------------------------------
POLYMERS, RESINS PERFORMANCE AGRICULTURAL
AND MONOMERS CHEMICALS PLASTICS CHEMICALS TOTAL
- ----------------------------------------------------------------------------------------------------------------
(Millions
of dollars) 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------
North
America $1,188 $1,145 $1,068 $361 $335 $328 $384 $368 $342 $141 $119 $107 $2,074 $1,967 $1,845
Europe 317 260 225 256 220 206 238 203 176 165 143 137 976 826 744
Asia-Pacific 193 151 128 257 230 207 47 40 36 100 93 87 597 514 458
Latin
America 99 98 98 22 21 21 24 24 25 92 84 78 237 227 222
----------------------------------------------------------------------------------------------------
Total $1,797 $1,654 $1,519 $896 $806 $762 $693 $635 $579 $498 $439 $409 $3,884 $3,534 $3,269
- ----------------------------------------------------------------------------------------------------------------
SUMMARY OF 1991-1995 RESULTS BY BUSINESS GROUP
- ------------------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------
NET SALES
Polymers, Resins and Monomers $1,797 $1,654 $1,519 $1,425 $1,290
Performance Chemicals 896 806 762 682 566
Plastics 693 635 579 573 546
Agricultural Chemicals 498 439 409 383 361
---------------------------------------
Total $3,884 $3,534 $3,269 $3,063 $2,763
- ------------------------------------------------------------------------------
NET EARNINGS*
Polymers, Resins and Monomers $ 162 $ 167 $ 120 $ 124 $ 116
Performance Chemicals 65 38 29 19 43
Plastics 63 58 (2) 38 8
Agricultural Chemicals 51 40 39 25 33
Corporate (49) (39) (60) (32) (37)
---------------------------------------
Total $ 292 $ 264 $ 126 $ 174 $ 163
*Excludes charges for the cumulative effect of accounting changes in 1993
and 1992.
- ------------------------------------------------------------------------------
RONA
Polymers, Resins and Monomers 10.9% 12.3% 9.7% 9.7% 11.0%
Performance Chemicals 7.2 4.1 3.2 2.1 7.0
Plastics 10.3 10.3 -- 5.8 1.3
Agricultural Chemicals 14.7 11.1 13.4 7.8 11.3
Corporate (9.1) (6.3) (10.7) (12.2) (11.7)
---------------------------------------
Total 8.1% 7.6% 4.3% 6.1% 6.8%
- ------------------------------------------------------------------------------
Corporate includes non-operating items such as interest income and expense.
See page 26 for definition of RONA.
SUMMARY OF 1991-1995 RESULTS BY CUSTOMER LOCATION
- ------------------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------
NET SALES
North America $2,074 $1,967 $1,845 $1,678 $1,527
Europe 976 826 744 788 727
Asia-Pacific 597 514 458 383 314
Latin America 237 227 222 214 195
---------------------------------------
Total $3,884 $3,534 $3,269 $3,063 $2,763
- ------------------------------------------------------------------------------
NET EARNINGS*
North America $ 175 $ 175 $ 121 $ 83 $ 84
Europe 96 71 27 77 59
Asia-Pacific 55 41 23 28 42
Latin America 15 16 15 18 15
Corporate (49) (39) (60) (32) (37)
---------------------------------------
Total $ 292 $ 264 $ 126 $ 174 $ 163
*Excludes charges for the cumulative effect of accounting changes in 1993
and 1992.
- ------------------------------------------------------------------------------
RONA
North America 10.0% 10.6% 8.1% 4.7% 5.8%
Europe 11.2 9.2 3.6 10.2 9.3
Asia-Pacific 8.0 6.7 4.0 5.6 11.9
Latin America 7.5 9.3 9.3 11.3 9.8
Corporate (9.1) (6.3) (10.7) (12.2) (11.7)
---------------------------------------
Total 8.1% 7.6% 4.3% 6.1% 6.8%
- ------------------------------------------------------------------------------
The four geographic regions reflect the company's major marketing profit
centers relative to customer location. Corporate includes non-operating items
such as interest income and expense.
See page 26 for definition of RONA.
23
PLASTICS 1995 earnings were $63 million, up 9% from 1994 earnings.
Sales increased 9%, though volume declined 5%, reflecting higher selling
prices and stronger European currencies. The earnings growth was due to
a strong performance by AtoHaas Americas and its affiliates resulting
from volume gains in Europe and Asia-Pacific. Plastics Additives
reported lower volume across all regions as a result of the slowdown in
construction and automotive markets and production outages earlier in
the year at the Louisville, Kentucky production facility.
Plastics reported 1994 earnings of $58 million, compared to a loss of $2
million in 1993, which included after-tax charges of $34 million for
asset writedowns. Earnings increased 81%, excluding these charges.
Sales and volume grew 10%. The improved earnings also reflect smooth
plant operations and lower research costs; however raw material prices
were up during the second half of the year, adversely impacting
earnings. Additives used in PVC and engineering resins had strong
volume gains in North America, Europe and Asia-Pacific. AtoHaas North
America reported increased volume for all product lines. AtoHaas
Europe's losses were significantly lower than 1993; they reflected
improving economies in Europe.
AGRICULTURAL CHEMICALS 1995 earnings were $51 million, up 28% from 1994.
Sales of $498 million were 13% higher, despite flat volume, due to a
higher-priced product mix and stronger currencies in Europe and Japan.
Mimic, a new insecticide used to control caterpillar infestations,
reported strong growth in North America and Asia-Pacific. Systhane
fungicide had volume gains in North America due to heavy disease
pressure on California grapes and in Europe and Asia-Pacific due to new
promotions. Total volume was flat due to lower shipments of Dithane
fungicide in Europe and Asia-Pacific caused by softness in demand and
increased competition. The earnings comparison was helped by a more
profitable product mix, stronger currencies in Japan and Europe and
reduced asset writeoffs recorded in 1995 compared to 1994.
Agricultural Chemicals had 1994 earnings of $40 million, 3% higher than
the prior year. Sales increased 7% due to 2% higher volume and a
higher-priced product mix. The benefits of a more favorable product mix
and a stronger Japanese yen were offset by higher selling,
administrative and research costs and the writedown of a research
facility. Dithane fungicide had sales gains in North America, but these
were partly offset by declines in all other regions due to adverse
weather conditions and lower spending by growers. Goal and Kerb
herbicides reported higher sales due to favorable weather conditions.
Mimic insecticide and newly acquired products also contributed to the
sales increase.
CORPORATE expenses totaled $49 million in 1995, compared with $39
million in 1994 and $60 million in 1993. The 1995 period included an
after-tax charge of $17 million for additional potential liability
related to the cleanup of the Whitmoyer waste site. The 1993 expense
included an after-tax charge of $32 million for remediation of lake and
marsh property near the Lipari landfill. The change in interest expense
in 1995 and 1994 versus the prior year was due to changes in interest
capitalized as part of construction in progress resulting from different
levels of capital spending. Lower interest rates and debt levels in
1995 also contributed to lower interest expense in that year.
PHYSICAL VOLUME of shipments decreased by 2% in 1995 from 1994 and
increased by 8% in 1994 over 1993:
- ------------------------------------------------------------------------------
Percent change
BUSINESS GROUP 1995 VS 1994 1994 vs 1993
- ------------------------------------------------------------------------------
Polymers, Resins and Monomers (2)% 9%
Performance Chemicals 4 --
Plastics (5) 10
Agricultural Chemicals -- 2
--- ---
Worldwide (2)% 8%
- ------------------------------------------------------------------------------
Percent change
CUSTOMER LOCATION 1995 VS 1994 1994 vs 1993
- ------------------------------------------------------------------------------
North America (5)% 6%
Europe 4 13
Asia-Pacific 14 11
Latin America 2 7
--- ---
Worldwide (2)% 8%
- ------------------------------------------------------------------------------
ID: GRAPHIC -- LINE CHART
24
SUMMARY OF CONSOLIDATED RESULTS
The graph on page 24 shows the historical trend of gross profit,
selling, administrative and research expenses and operating earnings as
a percent of sales.
An analysis of gross profit changes is summarized on a per-share basis
on page 26.
NET SALES of $3,884 million were 10% higher than 1994, and volume
decreased 2%. The sales growth reflects 4% higher selling prices, a
higher-priced product mix and stronger currencies in Europe and Japan.
The favorable currency movements accounted for three percentage points
of the 10% sales increase. Volume declined as a result of the sale of
several small businesses, shedding unprofitable products and a slowdown
in certain end-use markets. Sales in 1994 of $3,534 million were 8%
higher than 1993, due to 8% higher shipping volume and 1% lower selling
prices. Currency translations contributed one percentage point of the
8% sales increase in 1994.
RAW MATERIAL PRICES started escalating rapidly during the second half of
1994 and continued to climb sharply in 1995, peaking in the third
quarter. Prices for raw materials, including acetone, propylene,
styrene and butanol, soared 18% in 1995 after increasing 4% in 1994,
excluding currency impacts. The higher prices were due to tightness in
supply in the petrochemical markets. Raw material prices declined in
the fourth quarter, though they still remained 1% higher than the fourth
quarter of 1994. The charts below and on page 26 identify year-to- year
changes for average unit raw material costs and average unit selling
prices based on the company's product mix.
GROSS PROFIT increased to $1,333 million in 1995, up 5% from 1994. The
gross profit margin was 34%, 36% and 34% in 1995, 1994 and 1993,
respectively, excluding a $25 million charge in 1993 for asset
writeoffs. The gross profit margin decreased in 1995 because the
escalation of raw material prices outpaced selling price increases, the
benefits of productivity improvements and lower waste accruals recorded
as part of gross profit. Costs resulting from a fire in one of the
acrylic acid units at Houston, Texas, earlier in the year also hurt
margins. The increase in gross profit margin in 1994 was the result of
higher production volume, smooth plant operations and reduced operating
costs resulting from productivity improvements.
SELLING, ADMINISTRATIVE AND RESEARCH (SAR) EXPENSES in 1995 were up less
than 2% from 1994, excluding the impact of stronger foreign currencies
and divestitures in 1995 and the writeoff of a research facility in
1994. The flat spending reflects the success of internal cost control
efforts offsetting higher spending for new Agricultural Chemicals
products and new business operations in Asia-Pacific. SAR expenses were
down slightly in 1994 compared to 1993, excluding acquisitions, a
divestiture, currency exchange rates and the writedown of a research
facility in 1994. The lower SAR expenses reflected cost containment
efforts begun in the latter part of 1993.
INTEREST EXPENSE was $39 million in 1995, down $7 million from 1994, due
to lower interest rates and debt levels and higher capitalization of
interest due to higher capital spending. Interest expense before
capitalized interest was $57 million compared to $60 million in 1994.
Interest expense in 1994 increased $5 million from 1993 due to lower
capitalization of interest expense as a result of lower capital
spending.
ID: GRAPHIC -- LINE CHARTS
25
SHARE OF AFFILIATE NET EARNINGS was $5 million in 1995 compared to $2
million in 1994 and a loss of $6 million in 1993. The improvement is
due to earnings from the AtoHaas affiliates in 1995 compared to a small
loss in 1994 and higher losses in 1993, reflecting the difficult
economic conditions in Europe during 1993.
OTHER EXPENSE, NET was $48 million, compared to $24 million in 1994 and
$59 million in 1993. The 1995 period included $26 million for
additional potential liability related to the cleanup of the Whitmoyer
waste site, $16 million for severance and early retirement costs and $4
million for the settlement of litigation. The 1994 expense included $17
million of severance and early retirement costs related to restructuring
operations. The charge in 1993 included $56 million for the writedown
of assets in England and environmental remediation costs related to the
Lipari waste site, net of a gain on the sale of Supelco, Inc.
THE EFFECTIVE TAX RATE was 34%, down from 35% in 1994 and 1993, due to
lower taxes on foreign earnings.
RETURN ON NET ASSETS (RONA) equals net earnings before cumulative effect
of an accounting change plus after-tax interest expense, divided by
year-end total assets. RONA was 8% in 1995 and 1994 and 4% in 1993.
RETURN ON COMMON STOCKHOLDERS' EQUITY (ROE) is obtained by dividing net
earnings (before reduction for the cumulative effect of an accounting
change) less preferred stock dividends by average year-end common
stockholders' equity. Average year-end common stockholders' equity is
calculated without the reduction for the ESOP transaction. ROE was 17%
in 1995, 16% in 1994 and 8% in 1993.
The return on investment graph shows these measures for the past eleven
years.
ANALYSIS OF CHANGE IN PER-COMMON-SHARE EARNINGS
CURRENT YEAR RELATIVE TO YEAR EARLIER
- -------------------------------------------------------------------
$/Common Share
(after tax)
---------------------
1995 1994+
- -------------------------------------------------------------------
GROSS PROFIT
Selling prices $ 1.27 $ (.11)
Raw material costs (1.66) (.39)
Physical volume and product mix .67 .83
Other manufacturing costs (.11) 1.17
Currency effect on gross profit .46 .15
---------------------
Increase in gross profit .63 1.65
- -------------------------------------------------------------------
OTHER CAUSES
Selling, administrative and research
expenses* (.17) .03
Asset dispositions .09 .01
Certain waste disposal site cleanup costs (.25) .41
Share of affiliate earnings .04 .12
Other .09 (.17)
---------------------
Increase (decrease) from other causes (.20) .40
- -------------------------------------------------------------------
Increase in per-common-share
earnings $ .43 $ 2.05
- -------------------------------------------------------------------
*The amounts shown are on a U.S. dollar basis and include the
impact of currency movements as compared to the prior period.
+Restated to conform to current-year presentation.
ID: GRAPHIC -- LINE CHARTS
26
LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA
CASH FLOW Cash provided by operations for 1995 was $513 million. These
funds were used to finance the company's capital expenditures, pay
dividends and repay debt during the year. The company maintains an "A"
debt rating and has adequate financial resources available to provide
cash required for future operations.
FINANCING Total borrowings at year-end 1995 were $696 million, down $90
million from the prior year. During 1995, the company redeemed its $75
million, 9.625% notes due 1998 at par plus accrued interest. At the end
of 1995, the debt-to-equity ratio, calculated without the reduction to
stockholders' equity for the ESOP transaction, was 36%, compared with
44% at the end of 1994 and 48% at the end of 1993. The company's
capital structure is based upon a planned maximum 50% debt-to-equity
ratio. This financial policy was established to ensure strong financial
ratios and access to external financing.
ENVIRONMENTAL There is an inherent risk of environmental damage in
chemical manufacturing operations. The company's environmental policies
and practices are designed to ensure compliance with existing laws and
regulations and to minimize the possibility of significant environmental
damage. These laws and regulations require the company to make
significant expenditures for remediation, capital improvements and
operating environmental protection equipment. Future developments and
even more stringent environmental regulations may require the company to
make additional unforeseen environmental expenditures. The company's
major competitors are confronted by substantially similar environmental
risks and regulations.
The company is a party in various government enforcement and private
actions associated with former waste disposal sites, many of which are
on the U.S. Environmental Protection Agency's (EPA) Superfund priority
list. The company also is involved in corrective actions at some of its
manufacturing facilities. Accruals for expected future remediation
costs are in accordance with the provisions of SFAS No. 5, "Accounting
For Contingencies," which requires an accrual to be recorded when it is
probable a liability has been incurred and costs are reasonably
estimable. The company considers a broad range of information when
determining the amount of the accrual, including available facts about
the waste site, existing and proposed remediation technology and the
range of costs of applying those technologies, prior experience,
government proposals for this or similar sites, the liability of other
parties, the ability of other principally responsible parties to pay
costs apportioned to them and current laws and regulations. These
accruals are updated quarterly as additional technical and legal
information becomes available. Major sites for which reserves have been
provided are: the non-company-owned Lipari and Woodland sites in New
Jersey and Whitmoyer in Pennsylvania, and company-owned sites in Bristol
and Philadelphia, Pennsylvania and in Houston, Texas. In addition, the
company has provided for future costs at approximately 80 other sites
where it has been identified as potentially responsible for cleanup
costs and, in some cases, damages for alleged personal injury or
property damage.
The amounts charged to earnings before tax for environmental remediation
were $45 million, $31 million and $57
ID: GRAPHIC -- LINE CHART
-- BAR CHART
27
million in 1995, 1994 and 1993, respectively. The charge in 1995
included $26 million for additional potential liability related to the
cleanup of the Whitmoyer waste site as a result of an adverse court
ruling, which the company is appealing. The 1994 charge included $14
million related to the company-owned Bristol site. The charge in 1993
included $50 million for remediation of lake and marsh property near the
Lipari landfill. The reserves for remediation were $170 million and
$176 million at December 31, 1995, and 1994, respectively, and are
recorded as "other liabilities" (current and long-term). Probable
insurance recoveries were $72 million at December 31, 1995, and 1994.
In 1995 and early 1996, the company reached agreements with certain
insurance carriers regarding the company's claims for environmental
remediation costs and related legal expenses. Accordingly, $24 million
of probable insurance recoveries were classified as accounts receivable
at December 31, 1995, and were collected in early 1996. Other insurance
carriers have denied coverage in most cases and the company has
initiated legal action in New Jersey and Pennsylvania. In estimating
probable insurance recovery amounts, the company has considered various
factors, including the terms of the insurance policies which are
applicable to each site, policy limits, the law which is likely to be
applied in the jurisdiction, collections from other insurance carriers
and the facts as currently understood by the company. Based upon all of
these factors, amounts collected and the opinion of counsel, the company
has concluded that the recorded amount of insurance coverage is probable
of recovery.
In addition to accrued environmental liabilities, the company has
reasonably possible loss contingencies related to environmental matters
of approximately $70 million at December 31, 1995. Further, the company
knows that additional future environmental remediation may be required,
but these loss contingencies are not reasonably estimable at this time.
These matters involve significant unresolved issues, including the
number of parties found liable at each site and their ability to pay,
the outcome of negotiations with regulatory authorities, the alternative
methods of remediation and the range of cost associated with those
alternatives. The company believes that these matters, when ultimately
resolved, which may be over an extended period of time, will not have a
material adverse effect on the consolidated financial position or
consolidated cash flows of the company, but could have a material
adverse effect on consolidated results of operations in any given year.
In 1995, a lawsuit was filed against the company and other defendants,
seeking class action certification for property damage, personal injury
and medical monitoring allegedly related to contamination of the Lipari
landfill, nearby streams and Lake Alcyon in Pitman, New Jersey. The
company believes it has substantial defenses to this lawsuit; it is too
early to determine what financial impact, if any, it may have.
Capital spending for new environmental protection equipment was $32
million in 1995. Spending for 1996 and 1997 is expected to be
approximately $39 million and $27 million, respectively. Capital
expenditures in this category include projects whose primary purpose is
pollution control and safety, as well as environmental aspects of
projects in other categories on page 29 which are intended primarily to
improve operations or increase plant efficiency. The company expects
future capital spending for environmental protection equipment to be
consistent with prior-year spending patterns. Capital spending does not
include the cost of environmental remediation of waste disposal sites.
Cash expenditures for waste disposal site remediation were $51 million
in 1995, $46 million in 1994 and $21 million in 1993. The expenditures
for remediation are charged against accrued remediation reserves. The
cost of operating and maintaining environmental facilities was $96
million, $107 million and $105 million in 1995, 1994 and 1993,
respectively, and was charged against current-year earnings.
DIVIDENDS Total common stock dividends paid in 1995 were $1.56 per
share, compared to $1.44 per share in 1994, and $1.36 per share in 1993.
The company's common stock dividend payout is targeted at 35% of
earnings. Common stock dividends have been paid each year since 1927.
The common stock dividend payout has increased annually every year since
1977. Total preferred dividends paid were $2.75 per share in 1995, 1994
and 1993.
ID: GRAPHIC -- LINE CHART
28
ADDITIONS TO LAND, BUILDINGS AND EQUIPMENT Fixed asset additions in 1995
totaled $417 million, up $78 million from last year's spending level.
Spending in 1995 included capacity expansion for acrylic acid and butyl
acrylate ester at Houston, Texas, a new biocides production facility at
Bayport, Texas and emulsion facility expansions at Houston, Texas and
Lauterbourg, France. The company has budgeted capital expenditures in
1996 of approximately $375 million. Spending for environmental
protection equipment, which is included in several of the categories on
the chart shown below, was $32 million in 1995, $31 million in 1994 and
$55 million in 1993.
Expenditures for the past three years, categorized by primary purpose of
project, were:
- ------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993
- ------------------------------------------------------------------
Environmental, cost savings
and infrastructure $185 $158 $202
Capacity additions and new products 198 139 144
Research facilities and equipment 16 28 17
Capitalized interest cost 18 14 19
-------------------------
Total $417 $339 $382
- ------------------------------------------------------------------
ACQUISITIONS AND DIVESTITURES On July 31, 1995, the company sold its
Plaskon Electronic Materials subsidiary. Plaskon manufactures molding
compounds used to encapsulate semiconductors. The sale did not have a
material effect on the company's results.
On June 29, 1994, the company acquired from Monsanto Company its
worldwide pyridine herbicide business and a new fungicide for $51
million. The purchase price will be paid in equal installments over a
four-year period and has been recorded as current and long-term debt.
The assets acquired included a manufacturing facility, inventory and
patents.
During 1994, the company sold the styrene butadiene latex business which
included a plant at Mallard Creek, North Carolina and a small emulsion
plant located in Lemont, Illinois. These transactions were not material
to the company's financial results.
In the second quarter of 1993, the company entered into a joint venture
with Beijing Chemicals Industry Corporation to manufacture and sell
acrylic emulsions and related products in the People's Republic of
China. The joint venture superseded a cooperative marketing venture
that had been in place since 1988. Rohm and Haas contributed $6 million
to the venture for a 60% ownership interest in the new firm. The
venture is not expected to have a material effect on the company's
financial results.
On May 6, 1993, the company completed the sale of its subsidiary,
Supelco, Inc., to Sigma-Aldrich Corporation. The sale resulted in an
after-tax gain of $11 million. Supelco manufactures chromatographic
supplies.
On December 13, 1993, the company acquired the remaining 33% ownership
of Japan Acrylic Chemical Company Ltd. (Jacryl) from Toagosei Chemical
and Sanyo Trading Co., Ltd. for $5 million. In 1992, the company had
increased its ownership from 47.5% to 67% through the purchase of
178,000 shares from Toagosei Chemical for $4 million. Jacryl
manufactures and sells acrylic emulsions used to make paints, paper
coatings, textile finishes, adhesives and oil additives used in motor
and gear oils and hydraulic fluids. Jacryl's operating results,
previously recorded using the equity method, have been fully
consolidated since June 29, 1992.
ID: GRAPHIC -- LINE CHART
29
STOCK REPURCHASES On December 4, 1995, the Board of Directors authorized
the purchase of approximately 3.5 million shares of common stock on the
open market over two years beginning in 1996. During 1995, the company
repurchased 515,138 shares of its common stock at a total cost of $29
million, compared to 123,345 shares in 1994 at a cost of $7 million.
WORKING CAPITAL (the excess of current assets over current liabilities)
was $593 million at year-end 1995, up $85 million from 1994. Accounts
receivable from customers increased $39 million due to sales growth.
Inventory increased $17 million due to building monomer inventories for
growth in 1996. Days cost of sales in ending inventory was 72 days,
down from 78 days at the end of 1994. Details about two major
components of working capital at the end of 1995 and 1994 follow:
- ------------------------------------------------------------------
(Millions of dollars) 1995 1994
- ------------------------------------------------------------------
INVENTORIES
Year-end balance $504 $487
Annual turnover 5.1X 4.7x
CUSTOMER RECEIVABLES
Year-end balance $661 $622
Annual turnover 5.9X 5.7x
- ------------------------------------------------------------------
NET FIXED ASSETS Investment in net fixed assets is summarized below.
- ------------------------------------------------------------------
(Millions of dollars) 1995 1994
- ------------------------------------------------------------------
Year-end balance $2,048 $1,960
Annual turnover 1.9X 1.8x
- ------------------------------------------------------------------
These annual turnover figures were calculated by dividing annual sales
(for customer receivables and net fixed assets) or cost of goods sold
(for inventories) by the year-end balance. Days cost of sales in ending
inventory was calculated by dividing ending inventory by daily cost of
sales.
The graph below presents the trend of receivables, inventories and net
fixed assets as a percent of sales.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." This statement requires that
long-lived assets be reviewed for impairment whenever events indicate
that the carrying amount of an asset may not be recoverable. The
company does not expect the adoption of this accounting standard in 1996
to have a material impact on the company's financial position or results
of operations.
In October 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock- Based Compensation," which is
effective beginning in 1996. This statement encourages the fair value
based method of accounting for stock options and similar equity
instruments granted to employees. This method requires that the fair
value of equity instruments granted to employees be recorded as
compensation expense. However, the statement allows companies to
continue to use the intrinsic value based method, which in most cases,
does not result in a charge to earnings. For 1995, the fair value based
method would result in an immaterial charge to earnings and the company
does not expect to change its method of accounting for stock options.
However, the company will adopt the disclosure requirements in 1996.
ID: GRAPHIC -- LINE CHART
30
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
First quarter 1995 earnings were $79 million, up 18% from the first
quarter of 1994. Sales of $985 million were 15% higher than reported in
the prior-year period. The 1995 results were reduced by a $17 million
after-tax charge for additional potential liability related to the
cleanup of the Whitmoyer waste site. Without this charge, earnings
would have been up 43%. Earnings increased as a result of volume
growth, a higher-priced product mix, higher selling prices, stronger
currencies in Europe and Japan and productivity improvements in
manufacturing, selling, administrative and research operations.
Earnings were hurt by 31% higher raw material prices.
Earnings in the second quarter of 1995 were $87 million, down 8% from
the prior-year period. Sales of $1,042 million were an all-time
quarterly high, up 10% from last year. Though volume was down, sales
were higher due to a higher-priced product mix, 3% higher selling prices
and a boost from 13% stronger European currencies and a 22% stronger
Japanese yen. Higher raw material prices, which increased 27% over the
prior-year period, a slowdown in the U.S. economy, higher manufacturing
costs and costs associated with a fire in one of the acrylic acid units
at the Houston plant resulted in lower earnings.
Third quarter 1995 earnings were $59 million, up 7% from last year's
earnings of $55 million. Net sales of $942 million were up 8% from last
year's results. Volume decreased 4%, due to slowing economies around
the world and the impact of divested businesses. Sales increased as a
result of 4% higher selling prices, a higher-priced product mix, 7%
stronger European currencies and a 10% stronger Japanese yen. Raw
material prices were 24% higher than the prior-year period.
Fourth quarter 1995 earnings were $67 million, up 43% from the 1994
period. Sales of $915 million were 6% greater than the prior-year
period and volume increased 1%, excluding the effect of divested
businesses, reflecting 4% higher selling prices, a higher-priced product
mix and stronger currencies in Europe. Raw material prices were 1%
higher than the prior-year period.
ID: GRAPHIC -- HIGH/LOW CHART
31
1995 QUARTERLY RESULTS
- ------------------------------------------------------------------------------
1st 2nd 3rd 4th YEAR
(Millions of dollars) Quarter Quarter Quarter Quarter 1995
- ------------------------------------------------------------------------------
Net sales $ 985 $1,042 $ 942 $ 915 $3,884
Gross profit 357 341 308 327 1,333
Net earnings 79 87 59 67 292
- ------------------------------------------------------------------------------
Net earnings per common
share, in dollars $1.14 $ 1.26 $ .85 $ .98 $ 4.22
- ------------------------------------------------------------------------------
Cash dividends per common
share, in dollars $ .37 $ .37 $ .41 $ .41 $ 1.56
- ------------------------------------------------------------------------------
Percentage change from
prior year
Net sales 15 % 10 % 8 % 6 % 10 %
Physical volume 5 (3) (4) (4) (2)
- ------------------------------------------------------------------------------
Net earnings 18 % (8)% 7 % 43 % 11 %
- ------------------------------------------------------------------------------
Net earnings per common share 19 % (8)% 9 % 44 % 11 %
- ------------------------------------------------------------------------------
1994 QUARTERLY RESULTS
- ------------------------------------------------------------------------------
1st 2nd 3rd 4th Year
(Millions of dollars) Quarter Quarter Quarter Quarter 1994
- ------------------------------------------------------------------------------
Net sales $ 856 $ 944 $ 874 $ 860 $3,534
Gross profit 317 351 298 301 1,267
Net earnings 67 95 55 47 264
- ------------------------------------------------------------------------------
Net earnings per common
share, in dollars $ .96 $1.37 $ .78 $ .68 $ 3.79
- ------------------------------------------------------------------------------
Cash dividends per common
share, in dollars $ .35 $ .35 $ .37 $ .37 $ 1.44
- ------------------------------------------------------------------------------
Percentage change from
prior year
Net sales 4 % 7 % 9 % 13 % 8 %
Physical volume 8 9 6 9 8
- ------------------------------------------------------------------------------
Net earnings 16 % 51 % -- % 81 % 110 %
- ------------------------------------------------------------------------------
Net earnings per common share 16 % 52 % -- % 94 % 118 %
- ------------------------------------------------------------------------------
1993 QUARTERLY RESULTS
- ------------------------------------------------------------------------------
1st 2nd 3rd 4th Year
(Millions of dollars) Quarter Quarter Quarter Quarter 1993
- ------------------------------------------------------------------------------
Net sales $ 826 $ 884 $ 799 $ 760 $3,269
Gross profit 300 312 235 248 1,095
Earnings (loss) before
cumulative effect of
accounting change 58 63 (21) 26 126
Net earnings (loss) 39 63 (21) 26 107
- ------------------------------------------------------------------------------
Per common share, in dollars:
Earnings (loss) before
cumulative effect of
accounting change $ .83 $ .90 $(.34) $ .35 $ 1.74
Net earnings (loss) .55 .90 (.34) .35 1.46
- ------------------------------------------------------------------------------
Cash dividends per common
share, in dollars $ .33 $ .33 $ .35 $ .35 $ 1.36
- ------------------------------------------------------------------------------
Percentage change from
prior year
Net sales 16 % 13 % (1)% 1 % 7 %
Physical volume 22 15 7 6 12
- ------------------------------------------------------------------------------
Earnings (loss) before
cumulative effect of
accounting change 2 % (15)% -- % -- % (28)%
Net earnings (loss) -- (15) -- -- --
- ------------------------------------------------------------------------------
Earnings (loss) per common
share before cumulative
effect of accounting change (3)% (20)% -- % -- % (31)%
Net earnings (loss) per
common share -- (20) -- -- --
- ------------------------------------------------------------------------------
32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The consolidated financial statements
include the accounts of the company and its subsidiaries engaged in
manufacturing operations. Investments in unconsolidated subsidiaries,
which are involved mainly in selling operations outside of the United
States, are carried at cost and are insignificant in total. Investments
in affiliates (20-50%-owned) are recorded at cost plus equity in their
undistributed earnings since acquisition. Intercompany accounts,
transactions and unrealized profits and losses on transactions within
the consolidated group and with significant affiliates are eliminated in
consolidation.
USE OF ESTIMATES The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
TRANSLATION PROCEDURES Foreign currency accounts are translated into
U.S. dollars under the provisions of SFAS No. 52, with the U.S. dollar
as the functional currency for the majority of international operations.
Under this standard: (1) land, buildings and equipment and related
depreciation, inventories and cost of goods sold, goodwill and
intangibles and related amortization and minority interest are
translated at historical rates of exchange; (2) all other assets and
liabilities are translated at current rates of exchange, and (3) monthly
income, costs and expenses other than depreciation, amortization of
goodwill and intangibles and cost of goods sold are translated at
current rates of exchange. Translation gains and losses of those
operations that use local currencies as the functional currency are
included as a separate component of stockholders' equity. Foreign
exchange adjustments, including recognition of unperformed foreign
exchange contracts which are not intended to hedge an identifiable
foreign currency commitment, are charged or credited to income based on
current exchange rates.
ENVIRONMENTAL ACCOUNTING Accruals for environmental remediation are
recorded when it is probable a liability has been incurred and costs are
reasonably estimable. The estimated liabilities are recorded at
undiscounted amounts. The cost of operating and maintaining
environmental control facilities are charged to expense. Expenditures
which mitigate or prevent contamination from future operations are
capitalized and depreciated under normal depreciation policies.
CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash, time
deposits and readily marketable securities with original maturities of
three months or less.
INVENTORIES are stated at the lower of cost or market. Cost is
primarily determined under the last-in, first-out (LIFO) method.
LAND, BUILDINGS AND EQUIPMENT AND RELATED DEPRECIATION Land, buildings
and equipment are carried at cost. Assets are depreciated over their
estimated useful lives on the straight-line and accelerated methods.
Maintenance and repairs are charged to earnings; replacements and
betterments are capitalized. The cost and related accumulated
depreciation of buildings and equipment are removed from the accounts
upon retirement or other disposition; any resulting profit or loss is
reflected in earnings.
INTANGIBLE ASSETS The company amortizes identifiable intangible assets
such as patents and trademarks on the straight-line basis over their
estimated useful lives. Goodwill is amortized on the straight-line
basis over periods not greater than 40 years.
INCOME TAXES The company uses the asset and liability method of
accounting for income taxes. Under this method, deferred tax assets and
liabilities are recognized for the estimated future consequences of
temporary differences between the financial statement carrying value of
assets and liabilities and their values as measured by tax laws.
33
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED EARNINGS
Years ended December 31, 1995, 1994 and 1993
------------------------------------------------------------------------------------------
(Millions of dollars, except per-share amounts) 1995 1994 1993
------------------------------------------------------------------------------------------
CURRENT EARNINGS
------------------------------------------------------------------------------------------
Net sales $3,884 $3,534 $3,269
NOTE 10 Cost of goods sold 2,551 2,267 2,174
------------------------------
Gross profit 1,333 1,267 1,095
Selling and administrative expense 616 591 590
Research and development expense 194 201 205
NOTE 12 Interest expense 39 46 41
NOTE 2 Share of affiliate net earnings (losses) 5 2 (6)
NOTE 3 Other expense, net 48 24 59
------------------------------
Earnings before income taxes 441 407 194
NOTE 5 Income taxes 149 143 68
------------------------------
Earnings before cumulative effect of accounting change 292 264 126
NOTE 8 Cumulative effect of accounting change, net of income taxes -- -- (19)
------------------------------
NET EARNINGS $ 292 $ 264 $ 107
------------------------------------------------------------------------------------------
NET EARNINGS $ 292 $ 264 $ 107
NOTE 18 Less preferred stock dividends 7 7 8
------------------------------
NET EARNINGS APPLICABLE TO COMMON SHAREHOLDERS $ 285 $ 257 $ 99
PER COMMON SHARE:
Before cumulative effect of accounting change $ 4.22 $ 3.79 $ 1.74
Cumulative effect of accounting change -- -- (.28)
------------------------------
Net earnings $ 4.22 $ 3.79 $ 1.46
------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (000'S) 67,522 67,707 67,619
------------------------------------------------------------------------------------------
See accompanying summary of significant accounting policies
(page 33) and notes to consolidated financial statements
(pages 38-48).
34
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
- ------------------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 292 $ 264 $ 107
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Cumulative effect of accounting change,
net of income taxes -- -- 19
Depreciation 242 231 226
Deferred income taxes 27 (2) 9
Accounts receivable (77) 75 (63)
Inventories (25) (93) 34
Accounts payable 26 67 (5)
Federal, foreign and other income taxes (3) 73 (56)
Gain on disposition of facilities and
investments, net -- -- (24)
Provision for writedown of plant assets -- -- 48
Other working capital changes, net (25) 35 30
Other, net 56 24 33
-------------------------------
Net cash provided by operating
activities 513 524 358
- ------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and equipment (417) (339) (382)
Proceeds from sale of facilities
and investments 49 3 58
Collection of notes receivable -- -- 34
-------------------------------
Net cash used by investing activities (368) (336) (290)
- ------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchases of treasury shares (29) (7) --
Proceeds from issuance of long-term debt 32 38 105
Repayments of long-term debt (126) (19) (156)
Net change in short-term borrowings 2 (21) 25
Payment of dividends (109) (102) (97)
Other, net 2 14 (1)
-------------------------------
Net cash used by financing activities (228) (97) (124)
- ------------------------------------------------------------------------------
Effect of exchange rate changes on cash (1) 1 --
-------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (84) $ 92 $(56)
- ------------------------------------------------------------------------------
See accompanying summary of significant accounting policies (page 33) and
notes to consolidated financial statements (pages 38-48).
35
Rohm and Haas Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
--------------------------------------------------------------------
(Millions of dollars) 1995 1994
--------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $ 43 $ 127
NOTE 9 Accounts receivable, net 756 679
NOTE 10 Inventories 504 487
NOTE 11 Prepaid expenses and other assets 118 147
------------------
Total current assets 1,421 1,440
--------------------------------------------------------------------
NOTE 2 INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED
SUBSIDIARIES AND AFFILIATES 108 90
NOTE 12 LAND, BUILDINGS AND EQUIPMENT, NET 2,048 1,960
NOTE 13 OTHER ASSETS, NET 339 371
------------------
$3,916 $3,861
--------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------
CURRENT LIABILITIES
NOTE 14 Notes payable $ 90 $ 157
NOTE 16 Accounts payable and accrued liabilities 666 699
Federal, foreign and other income taxes 72 76
------------------
Total current liabilities 828 932
--------------------------------------------------------------------
NOTE 15 LONG-TERM DEBT 606 629
NOTE 5 DEFERRED INCOME TAXES 94 92
NOTE 8 EMPLOYEE BENEFITS 394 377
NOTE 17 OTHER LIABILITIES 144 150
MINORITY INTEREST 69 61
--------------------------------------------------------------------
NOTE 18 STOCKHOLDERS' EQUITY
$2.75 cumulative convertible preferred stock;
authorized -- 2,846,061 shares; issued -- 1995:
2,656,153 shares; 1994: 2,676,515 shares 133 134
Common stock; par value -- $2.50; authorized --
100,000,000 shares; issued -- 78,652,380 shares 197 197
Additional paid-in capital 150 151
Retained earnings 1,789 1,606
------------------
2,269 2,088
Less: Treasury stock (1995 -- 11,327,357 shares;
1994 -- 10,960,614 shares) 344 323
Less: ESOP shares 151 156
Other equity adjustments 7 11
------------------
Total stockholders' equity 1,781 1,620
------------------
$3,916 $3,861
--------------------------------------------------------------------
See accompanying summary of significant accounting policies
(page 33) and notes to consolidated financial statements
(pages 38-48).
36
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993
--------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993
--------------------------------------------------------------------
NOTE 18 PREFERRED STOCK
--------------------------------------------------------------------
Balance, beginning of year $ 134 $ 136 $ 136
Conversion of shares to common stock (1) (2) --
-----------------------------
Balance, end of year $ 133 $ 134 $ 136
-----------------------------
COMMON STOCK
--------------------------------------------------------------------
Balance, beginning and end of year $ 197 $ 197 $ 197
-----------------------------
ADDITIONAL PAID-IN CAPITAL
--------------------------------------------------------------------
Balance, beginning of year $ 151 $ 150 $ 149
Shares issued to employees
under bonus plan (1) 1 1
-----------------------------
Balance, end of year $ 150 $ 151 $ 150
-----------------------------
NOTE 15 RETAINED EARNINGS
--------------------------------------------------------------------
Balance, beginning of year $1,606 $1,444 $1,434
Net earnings 292 264 107
Common stock dividends paid ($1.56,
$1.44 and $1.36 per share in 1995,
1994 and 1993, respectively), net
of tax benefit of $3 million in
1995, 1994 and 1993 related to
the ESOP (102) (95) (89)
Preferred stock dividends ($2.75 per
share in 1995, 1994 and 1993) (7) (7) (8)
-----------------------------
Balance, end of year $1,789 $1,606 $1,444
-----------------------------
NOTE 18 TREASURY STOCK, AT COST
--------------------------------------------------------------------
Balance, beginning of year $ 323 $ 323 $ 328
Shares issued to employees under
bonus plan (7) (6) (2)
Purchases 29 7 --
Shares issued for conversion of
preferred stock (1) (1) --
Adjustment to cost of previously
acquired shares -- -- (3)
-----------------------------
Balance, end of year $ 344 $ 323 $ 323
-----------------------------
OTHER EQUITY ADJUSTMENTS
--------------------------------------------------------------------
Balance, beginning of year $ 11 $ -- $ 9
Foreign currency translation (2) 17 (3)
Pension adjustment (2) (6) (6)
-----------------------------
Balance, end of year $ 7 $ 11 $ --
- ------------------------------------------------------------------------------
See accompanying summary of significant accounting policies (page 33)
and notes to consolidated financial statements (pages 38-48).
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ACQUISITIONS AND DISPOSITIONS OF ASSETS
On July 31, 1995, the company sold its Plaskon Electronic Materials
subsidiary to Amoco Corporation. Plaskon manufactured molding compounds
used to encapsulate semiconductors. The sale did not have a material
effect on the company's results.
On June 29, 1994, the company acquired from Monsanto Company its
worldwide pyridine herbicide business and a new fungicide for $51
million. The purchase price will be paid in equal installments over a
four-year period and has been recorded as current and long-term debt.
The assets acquired include a manufacturing facility, inventory and
patents.
During 1994, the company sold the styrene butadiene latex business which
included a plant at Mallard Creek, North Carolina and a small emulsion
plant located in Lemont, Illinois. These transactions were not material
to the company's financial results.
In the second quarter of 1993, the company entered into a joint venture
with Beijing Chemicals Industry Corporation to manufacture and sell
acrylic emulsions and related products in the People's Republic of
China. The joint venture superseded a cooperative marketing venture
that had been in place since 1988. Rohm and Haas contributed $6 million
to the venture for a 60% ownership interest in the new firm. The
venture is not expected to have a material effect on the company's
financial results.
On May 6, 1993, the company completed the sale of its Separations
Technologies subsidiary, Supelco, Inc., to Sigma-Aldrich Corporation at
an after-tax gain of $11 million.
On December 13, 1993, the company acquired the remaining 33% ownership
of Japan Acrylic Chemical Company Ltd. (Jacryl) from Toagosei Chemical
and Sanyo Trading Co., Ltd. for $5 million. In 1992, the company had
increased its ownership from 47.5% to 67% through the purchase of
178,000 shares from Toagosei Chemical for $4 million. Jacryl
manufactures and sells acrylic emulsions used to make paints, paper
coatings, textile finishes, adhesives and oil additives used in motor
and gear oils and hydraulic fluids. Jacryl's operating results,
previously recorded using the equity method, have been fully
consolidated since June 29, 1992.
NOTE 2: INVESTMENTS
The company's investments in its affiliates (20-50%-owned) totaled $60
million and $52 million at December 31, 1995, and 1994, respectively.
The company's equity in the net assets of the affiliates exceeded the
amount of investments in affiliates by about $13 million and $19 million
at December 31, 1995, and 1994, respectively, primarily due to
investments in the AtoHaas affiliates. Consolidated retained earnings
include accumulated affiliate losses of $6 million and $19 million at
December 31, 1995 and 1994, respectively.
NOTE 3: OTHER EXPENSE, NET
- ------------------------------------------------------------------------------
(Millions of dollars) 1995 1994* 1993*
- ------------------------------------------------------------------------------
Interest income $ (7) $ (7) $ (6)
Royalty expense (income), net 2 (2) (9)
Foreign exchange losses (gains), net (4) 8 13
Minority interest 8 2 --
Asset dispositions (4) 6 1
Voluntary early retirement incentives,
severance, litigation settlements
and certain waste disposal site
cleanup costs 46 17 49
Other, net 7 -- 11
--------------------------
Total $ 48 $ 24 $ 59
- ------------------------------------------------------------------------------
*Restated to conform to current-year presentation.
NOTE 4: FINANCIAL INSTRUMENTS
The company's consolidated results of operations are affected by changes
in interest rates and foreign exchange rates. Non-leveraged derivative
financial instruments are utilized to reduce the impact of the
volatility of changes in interest and exchange rates on the company's
earnings. The company only purchases financial instruments to offset
specific, known exposures. Credit risk associated with these derivative
financial instruments is mitigated by only using major financial
institutions with strong credit ratings as counterparties. The company
also limits the amount of derivative financial instruments it enters
into with each counterparty.
The company enters into interest rate swaps and options to manage its
exposure to changes in interest rates. At December 31, 1995, and 1994,
there were interest rate swaps outstanding, with maturities through
1997, with total notional amounts of $150 million and $225 million,
respectively. The net swap position at December 31, 1995, converted $50
million of fixed-rate debt to floating-rate debt. At year-end 1994, the
net position converted $25 million of floating-rate debt to fixed-rate
debt. The differential between the fixed and floating rate amounts was
accrued as an adjustment to interest expense. At December 31, 1994, the
company had outstanding an interest rate option, expiring in 1997,
hedging $75 million of the company's fixed rate debt. During 1995, the
company closed-out half of this option at a gain of $1 million. At
December 31, 1995, $38 million remained outstanding under this option.
38
Forward and option contracts are used to reduce foreign exchange rate
risk. Forward contracts are used to reduce the exchange rate risk of
certain foreign currency transactions. These agreements require the
exchange of a foreign currency for U.S. dollars at a fixed rate at a
future date. The carrying amounts of foreign currency forward contracts
were adjusted at each balance sheet date for changes in exchange rates.
At December 31, 1995, and 1994, there were contracts maturing within
twelve months and three months, respectively, to sell $30 million and
$52 million, respectively, of various foreign currencies. Option
contracts are used to hedge probable anticipated sales by certain
foreign subsidiaries. Gains and losses on these contracts are deferred
and included in income in the same period as the related sales, except
for subsidiaries who use their local currency as their functional
currency. Those contracts are marked to market at each balance sheet
date. At December 31, 1995, and 1994, the company had purchased
currency options to exchange various foreign currencies for U.S. dollars
totaling $158 million and $83 million, respectively. The contracts
outstanding at December 31, 1995, mature within fifteen months and those
outstanding at December 31, 1994, matured within eighteen months. At
the end of both years, net deferred unrealized gains and losses were
immaterial.
The fair value of financial instruments were estimated based on the
following methods and assumptions:
Cash and cash equivalents, accounts receivable, accounts payable and notes
payable -- the carrying amount approximates fair value due to the short
maturity of these instruments.
Long-term debt -- the fair value is based on quoted market prices for the
same or similar issues or the current rates offered to the company or its
subsidiaries for debt with the same remaining maturities and terms.
Foreign currency forward contracts -- the carrying value approximates fair
value because these contracts are adjusted to their market value at the
balance sheet date.
Foreign currency option contracts and interest rate swaps and option --
the fair value is the amount the company would receive or pay to terminate
the contracts based on quotes from brokers.
The carrying value and fair value of financial instruments at December
31, 1995, and 1994 are as follows:
- --------------------------------------------------------------------
1995 1994
-------------------------------------
Carrying Fair Carrying Fair
(Millions of dollars) Amount Value Amount Value
- --------------------------------------------------------------------
Asset (Liability)
Long-term debt $(606) $(701) $(629) $(645)
Foreign currency
forwards -- -- (2) (2)
Foreign currency options 5 5 3 3
Interest rate swaps and
option -- 1 -- 2
- --------------------------------------------------------------------
NOTE 5: INCOME TAXES
Earnings before income taxes earned within or outside the United States
are shown below:
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------
Domestic
Parent and subsidiaries $266 $216 $ 43
Foreign
Subsidiaries 170 189 157
Affiliates 5 2 (6)
--------------------------
Earnings before income taxes $441 $407 $194
- --------------------------------------------------------------------
The provision for income taxes is composed of:
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------
Taxes on domestic earnings
Federal
Current $ 41 $ 49 $ 14
Deferred 40 23 (6)
--------------------------
81 72 8
--------------------------
State and other
Current 7 4 1
--------------------------
Total taxes on domestic earnings 88 76 9
- --------------------------------------------------------------------
Taxes on foreign earnings
Current 73 72 68
Deferred (12) (5) (9)
--------------------------
Total taxes on foreign earnings 61 67 59
- --------------------------------------------------------------------
Total income taxes $149 $143 $ 68
- --------------------------------------------------------------------
Cash payments of income taxes were $111 million, $93 million and $124 million
in 1995, 1994 and 1993, respectively.
39
NOTE 5: INCOME TAXES (CONTINUED)
Deferred income taxes reflect temporary differences between the valuation of
assets and liabilities for financial and tax reporting. Details at December
31, 1995, and 1994 were:
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Deferred tax assets related to:
Compensation and benefit programs $191 $181
Alternative minimum tax credit carryforward 34 41
Research and foreign tax credit carryforwards 2 19
Accruals for waste disposal site remediation 27 30
Accruals for plant downsizing and writedowns 16 28
Inventories 36 27
All other 24 32
Valuation allowance (7) (8)
---------------
Total deferred tax assets $323 $350
---------------
Deferred tax liabilities related to:
Tax depreciation in excess of book depreciation $259 $269
Pension 62 58
All other 13 7
---------------
Total deferred tax liabilities $334 $334
---------------
Net deferred tax asset (liability) $(11) $ 16
- --------------------------------------------------------------------
Deferred taxes, which are classified into a net current and non-current
balance by tax jurisdiction, are presented in the balance sheet as follows:
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Prepaid expenses and other assets $ 74 $ 95
Other assets, net 9 19
Accounts payable and accrued liabilities -- (6)
Non-current deferred income taxes (94) (92)
---------------
Net deferred tax asset (liability) $(11) $ 16
- --------------------------------------------------------------------
The valuation allowance was reduced by $1 million in 1995 and $3 million in
1994 due to usage of tax credit carryforwards.
The effective tax rate on income differs from the U.S. statutory tax rate due
to the following:
- --------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------
Statutory tax rate 35.0% 35.0% 35.0%
Research and other U.S. tax credits (0.9) (0.9) (3.1)
Asset dispositions (0.3) -- 1.0
Effect of non-taxable currency items (0.7) (0.7) 1.1
Taxes on foreign earnings and tax
adjustments of foreign subsidiaries 0.2 1.2 1.3
Other, net 0.5 0.5 (0.2)
--------------------------
Effective tax rate 33.8% 35.1% 35.1%
- --------------------------------------------------------------------
At December 31, 1995, the company had research tax credit carryforwards of $2
million available to reduce future U.S. income tax payments through 2010 and
alternative minimum tax credit carryforwards of $34 million which are
available to reduce future U.S. regular income tax payments over an indefinite
period. In addition, the company has net operating loss carryforwards of $1
million available to offset future U.S. taxable income through 2005 and $15
million to offset future foreign taxable income through 2004.
Provision for U.S. income taxes, after applying statutory tax credits, was
made on the unremitted earnings of foreign subsidiaries and affiliates which
have not been reinvested abroad indefinitely. Unremitted earnings, after
provision for applicable foreign income taxes, were approximately $346 million
at December 31, 1995. If the foreign subsidiary and affiliate earnings were
remitted as dividends, the amount of additional U.S. income taxes, after
applying statutory tax adjustments, would not be material.
NOTE 6: INDUSTRY SEGMENT REPORTING AND
INFORMATION ABOUT FOREIGN OPERATIONS
Rohm and Haas Company is a multinational manufacturer of specialty chemicals.
The company's principal lines of business, listed in order of their relative
size based on sales, are Polymers, Resins and Monomers (PRM); Performance
Chemicals; Plastics, and Agricultural Chemicals. PRM and Plastics major
markets are in North America and Europe. Performance Chemicals products are
sold mainly in North America, Europe and Asia- Pacific. These three
businesses sell their products to other manufacturers who produce end products
sold to consumers and other industrial concerns. Agricultural Chemicals is
the most global of the company's businesses, with sales occurring almost
evenly throughout the four regions. These products are sold to growers of
high-value specialty agricultural crops.
40
In accordance with the provisions of SFAS No. 14, the tables below present
information for the years 1993-1995 related to the company's results in the
four industry segments described above. The company defines the industry
segment for each product shipment (including intermediates) by the customer's
use of the product shipped. Therefore, no inter-segment sales or eliminations
are shown. In computing each segment's identifiable assets, production
facilities that are shared by more than one segment are allocated to each
segment on an annual utilization basis.
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------
Sales to customers
Polymers, Resins and Monomers $1,797 $1,654 $1,519
Performance Chemicals 896 806 762
Plastics 693 635 579
Agricultural Chemicals 498 439 409
----------------------------
Total $3,884 $3,534 $3,269
- --------------------------------------------------------------------
Operating profit
Polymers, Resins and Monomers $ 254 $ 268 $ 153
Performance Chemicals 100 58 34
Plastics 99 95 16
Agricultural Chemicals 87 66 64
----------------------------
Total $ 540 $ 487 $ 267
- --------------------------------------------------------------------
Share of affiliates net earnings
(losses)
Polymers, Resins and Monomers $ 2 $ 2 $ 1
Plastics 3 -- (7)
----------------------------
Total $ 5 $ 2 $ (6)
- --------------------------------------------------------------------
Identifiable assets at year end
Polymers, Resins and Monomers $1,634 $1,525 $1,400
Performance Chemicals 960 1,004 970
Plastics 593 552 517
Agricultural Chemicals 391 380 313
----------------------------
Total $3,578 $3,461 $3,200
- --------------------------------------------------------------------
Investment in affiliates
Polymers, Resins and Monomers $ 7 $ 6 $ 6
Plastics 53 46 56
----------------------------
Total $ 60 $ 52 $ 62
- --------------------------------------------------------------------
Depreciation expense
Polymers, Resins and Monomers $ 113 $ 102 $ 101
Performance Chemicals 48 56 52
Plastics 47 44 44
Agricultural Chemicals 21 17 17
Corporate 13 12 12
----------------------------
Total $ 242 $ 231 $ 226
- --------------------------------------------------------------------
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------
Capital additions
Polymers, Resins and Monomers $ 204 $ 176 $ 137
Performance Chemicals 90 60 165
Plastics 70 53 38
Agricultural Chemicals 35 36 23
Corporate 18 14 19
----------------------------
Total $ 417 $ 339 $ 382
- --------------------------------------------------------------------
In addition, the tables below provide information pertaining to the company's
operations in different geographic areas, in accordance with SFAS No. 14.
Transfers between geographic areas are accounted for at market prices.
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------
Sales to customers
United States $2,168 $2,037 $1,901
Canada 112 107 101
Europe 952 808 719
Asia-Pacific 483 421 387
Latin America 169 161 161
----------------------------
Total $3,884 $3,534 $3,269
- --------------------------------------------------------------------
Transfers between geographic areas
United States $ 337 $ 269 $ 292
Canada 47 35 26
Europe 116 180 187
Asia-Pacific 13 4 1
Latin America 26 26 9
Adjustments and eliminations (539) (514) (515)
----------------------------
Total $ -- $ -- $ --
- --------------------------------------------------------------------
Total sales
United States $2,505 $2,306 $2,193
Canada 159 142 127
Europe 1,068 988 906
Asia-Pacific 496 425 388
Latin America 195 187 170
Adjustments and eliminations (539) (514) (515)
----------------------------
Total $3,884 $3,534 $3,269
- --------------------------------------------------------------------
Operating profit (loss)
United States $ 401 $ 337 $ 164
Canada 15 6 3
Europe 115 143 121
Asia-Pacific 14 (3) (3)
Latin America 3 (3) (3)
Adjustments and eliminations (8) 7 (15)
----------------------------
Total $ 540 $ 487 $ 267
- --------------------------------------------------------------------
41
NOTE 6: INDUSTRY SEGMENT REPORTING AND
INFORMATION ABOUT FOREIGN OPERATIONS (CONTINUED)
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------
Identifiable assets at year end
United States $2,393 $2,285 $2,122
Canada 52 54 53
Europe 731 681 641
Asia-Pacific 468 469 445
Latin America 133 119 110
Adjustments and eliminations (199) (147) (171)
----------------------------
Total $3,578 $3,461 $3,200
- --------------------------------------------------------------------
United States export sales to customers were $206 million in 1995, $188
million in 1994 and $158 million in 1993.
Total operating profit and total identifiable assets for both the segment and
geographic results are reconciled below to consolidated earnings before income
taxes and consolidated total assets. General corporate income (expense)
represents interest income earned by general corporate assets, offset by the
portion of total expenses incurred at corporate headquarters that do not
relate directly to the operations of any geographic area or industry segment.
General corporate assets primarily include cash and cash equivalents, advances
to unconsolidated subsidiaries and affiliates and capitalized interest.
Corporate capital additions include capitalized interest cost. The
reconciliation of operating profits and identifiable assets to consolidated
totals is as follows:
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------
Total operating profit $ 540 $ 487 $ 267
Interest expense (39) (46) (41)
General corporate expense (65) (36) (26)
Share of affiliate net earnings (losses) 5 2 (6)
----------------------------
Earnings before income taxes $ 441 $ 407 $ 194
- --------------------------------------------------------------------
Identifiable assets at year end $3,578 $3,461 $3,200
General corporate assets 278 348 262
Investment in affiliates 60 52 62
----------------------------
Total assets at year end $3,916 $3,861 $3,524
- --------------------------------------------------------------------
The data presented above differ in certain ways from the company's results by
business group and customer location presented on page 23. The customer
location data on page 23 reflect the company's major marketing profit centers
relative to customer location, while the above data are categorized by the
geographic location from which the goods were shipped. Charges in 1993
associated with the Lipari lake and marsh remediation are included in
Corporate for management purposes, but are allocated among businesses for
purposes of this footnote. The charge in 1995 related to the Whitmoyer waste
site was included in Corporate for management purposes and for this footnote
since it was related to a previously discontinued business. Other differences
include the manner of directly assigning or allocating certain parts of
administrative expense, research expense, interest income and expense, other
income and expense and equity in affiliates. In addition, the earnings data
on page 23 are on an after-tax basis.
NOTE 7: PENSION PLANS
The company has noncontributory pension plans which provide defined benefits
to domestic and non-U.S. employees meeting age and length of service
requirements. The following disclosures include amounts for both the U.S. and
significant foreign pension plans. Pension cost determined in accordance with
plan provisions is presented below:
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------
Pension cost $ (13) $ (14) $ (14)
Pension benefit payments 68 77 41
- --------------------------------------------------------------------
The negative pension cost primarily reflects recognition of favorable
investment experience as stipulated by SFAS No. 87. The pension benefit
payments in 1995 and 1994 included payments related to voluntary early
retirement incentives and a severance benefit program.
Pension cost includes the following components:
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------
Service cost -- benefits
earned during the year $ 32 $ 36 $ 30
Interest cost on projected
benefit obligation 57 56 55
Return on plan assets
-- actual $(253) $ 9 $(194)
-- less deferred 163 (103) 109
----- ---- -----
(90) (94) (85)
Other amortization, net (1) -- (2)
Amortization of net gain
existing at adoption of
SFAS No. 87 (11) (12) (12)
---- ---- ----
Net pension cost $(13) $(14) $(14)
- --------------------------------------------------------------------
The early retirement and severance benefit programs resulted in a pre-tax gain
of $1 million in 1995 and 1994, as settlement gains from retirees electing
lump-sum distributions exceeded the cost of the special termination benefits.
42
The funded status of these plans at year end was as follows:
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Actuarial present value of plan benefits
Vested $ 625 $ 559
Nonvested -- --
----------------
Accumulated benefit obligation 625 559
Effect of projected future
compensation increase 237 170
----------------
Projected benefit obligation 862 729
Plan assets at market value 1,236 1,067
----------------
Plan assets in excess of projected
benefit obligation 374 338
Unrecognized net gain existing at
adoption of SFAS No. 87 (67) (81)
Other unrecognized net gain (177) (131)
----------------
Prepaid pension cost $ 130 $ 126
- --------------------------------------------------------------------
Net assets of the pension trusts, which primarily consist of common stocks and
debt securities, were measured at market value. For U.S. plans, the assumed
long-term rate of return on trust assets was 8.5% in 1995 and 1994. Pension
benefit obligations were determined from actuarial valuations using an assumed
discount rate of 7% at December 31, 1995, and 8% at December 31, 1994, and an
assumed long-term rate of compensation increase of 5% in 1995 and 1994.
Non-U.S. plans assumed an average rate of return on trust assets of 9.2% in
1995 and 1994, an average discount rate for pension benefit obligations of
8.5% in 1995 and 8.9% in 1994, and an average long- term rate of compensation
increase of 6.4% in 1995 and 6.3% in 1994. The company transferred excess
pension plan assets of $12 million in 1995 and 1994 to fund retiree medical
expenses as allowed by U.S. tax regulations.
The company has a noncontributory, unfunded pension plan which provides
supplemental defined benefits to U.S. employees whose benefits under the
qualified pension plan are limited by the Employee Retirement Security Act of
1974 and the Internal Revenue Code. These employees must meet age and length
of service requirements. Pension cost determined in accordance with plan
provisions was $6 million in 1995 and 1994, and $5 million in 1993. Pension
benefit payments for this plan were $3 million in 1995 and 1994 and $2 million
in 1993.
In 1995, the company established a nonqualified trust, referred to as a
"rabbi" trust, to fund benefit payments under this pension plan. Trust assets
are subject to creditor claims under certain conditions and are not the
property of employees. Therefore, they are accounted for as corporate assets
and are classified as other non- current assets. Assets held in trust at
December 31, 1995, totaled $11 million.
The status of this plan at year end was as follows:
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Actuarial present value of plan benefits
Vested $ 51 $ 44
Nonvested -- --
----------------
Accumulated benefit obligation 51 44
Effect of projected future compensation increase 1 2
----------------
Projected benefit obligation 52 46
Unrecognized net loss existing at
adoption of SFAS No. 87 (1) (2)
Other unrecognized loss (22) (20)
Adjusted minimum liability 22 20
----------------
Accrued pension benefit obligation $ 51 $ 44
- --------------------------------------------------------------------
Pension benefit obligations were determined from actuarial valuations using an
assumed discount rate of 7% at December 31, 1995, and 8% at December 31, 1994,
and an assumed long-term rate of compensation increase of 5% in 1995 and 1994.
NOTE 8: EMPLOYEE BENEFITS
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Postretirement health care and life
insurance benefits $310 $300
Postemployment benefits 17 20
Unfunded executive pension plan (see Note 7) 48 41
Unfunded foreign pension liabilities 19 16
---------------
Total $394 $377
- --------------------------------------------------------------------
Effective January 1, 1993, the company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." This accounting standard requires
the recognition of the liability for future costs of compensation and benefits
which will be paid to employees who are on disability leave.
The company provides health care and life insurance benefits for substantially
all of its domestic retired employees, for which the company is self-insured.
In general, employees who have at least 15 years of service and are 55 years
of age are eligible for continuing health and life insurance coverage.
Retirees contribute toward the cost of such coverage.
43
NOTE 8: EMPLOYEE BENEFITS (CONTINUED)
The status of the plans at year end was as follows:
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Accumulated postretirement benefit obligation
Retirees $174 $182
Fully eligible active plan participants 93 76
Other active plan participants 56 69
---------------
Total accumulated postretirement benefit obligation $323 $327
Unrecognized prior service cost 10 (1)
Unrecognized losses (7) (9)
---------------
Total accrued postretirement benefit
obligation $326 $317
- --------------------------------------------------------------------
The accrued postretirement benefit obligation is recorded in "accrued
liabilities" (current) and "employee benefits" (non-current).
Net periodic postretirement benefit cost includes the following components:
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Service cost of benefits earned $ 4 $ 6
Interest cost on accumulated postretirement
benefit obligation 22 24
Net amortization (1) 2
--------------
Net periodic postretirement benefit cost $25 $32
- --------------------------------------------------------------------
The calculation of the accumulated postretirement benefit obligation assumes a
10% annual rate of increase in the health care cost trend rate. The company's
plan limits its cost for health care coverage to an increase of 10% or less
each year, subject ultimately to a maximum cost equal to double the 1992 cost
level. The maximum cost level is expected to be reached in the year 2005.
Increases in retiree health care costs in excess of these limits will be
assumed by retirees.
A one percentage point increase in the annual health care cost trend rate
would increase the accumulated postretirement benefit obligation by
approximately $5 million, with an immaterial effect on annual postretirement
benefit cost. The weighted average discount rate used to estimate the
accumulated postretirement benefit obligation was 7% at December 31, 1995, and
8% at December 31, 1994.
NOTE 9: ACCOUNTS RECEIVABLE, NET
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Customers $661 $622
Unconsolidated subsidiaries and affiliates 25 23
Employees 7 4
Probable insurance recoveries for
environmental remediation 24 --
Other 51 41
---------------
768 690
Less allowance for losses 12 11
---------------
Total $756 $679
- --------------------------------------------------------------------
NOTE 10: INVENTORIES
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Finished products and work in process $377 $378
Raw materials 61 52
Supplies 66 57
---------------
Total $504 $487
- --------------------------------------------------------------------
Beginning inventories used in determining 1995 and 1994 cost of goods sold
were $487 million and $394 million, respectively. Inventories amounting to
$449 million and $417 million were valued using the LIFO method at December
31, 1995, and 1994, respectively. The excess of current cost over the stated
amount for inventories valued under the LIFO method approximated $153 million
and $131 million at December 31, 1995, and 1994, respectively. Liquidation of
prior years' LIFO inventory layers in 1995 and 1994 did not materially affect
cost of goods sold in either year.
NOTE 11: PREPAID EXPENSES AND OTHER ASSETS
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Prepaid expenses $ 35 $ 41
Deferred tax benefits 74 95
Notes receivable 2 2
Other current assets 7 9
---------------
Total $118 $147
- --------------------------------------------------------------------
44
NOTE 12: LAND, BUILDINGS AND EQUIPMENT, NET
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Land $ 53 $ 53
Buildings and improvements 741 710
Machinery and equipment 2,917 2,773
Capitalized interest cost 194 176
Construction 253 257
-----------------
4,158 3,969
Less accumulated depreciation 2,110 2,009
-----------------
Total $2,048 $1,960
- --------------------------------------------------------------------
The principal lives (in years) used in determining depreciation rates of
various assets are: buildings and improvements (10-50); machinery and
equipment (5-20); automobiles, trucks and tank cars (3-10); furniture and
fixtures, laboratory equipment and other assets (5-10).
Gross book values of assets depreciated by accelerated methods totaled $1,176
million and $1,258 million at December 31, 1995, and 1994, respectively.
Assets depreciated by the straight-line method totaled $2,676 million and
$2,401 million at December 31, 1995, and 1994, respectively.
In 1995, 1994 and 1993 respectively, interest costs of $18 million, $14
million and $19 million were capitalized and added to the gross book value of
land, buildings and equipment. Amortization of such capitalized costs
included in depreciation expense was $13 million in 1995 and $12 million in
1994 and 1993.
NOTE 13: OTHER ASSETS, NET
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Prepaid pension costs $130 $126
Goodwill 100 101
Patents, trademarks, etc. 53 52
Probable insurance recoveries for
environmental remediation 48 72
Deferred tax benefits 9 19
Other noncurrent assets 35 29
---------------
375 399
Less accumulated amortization of intangible assets 36 28
---------------
Total $339 $371
- --------------------------------------------------------------------
NOTE 14: NOTES PAYABLE
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Short-term borrowings $ 51 $ 49
Current portion of long-term debt 39 108
---------------
Total $ 90 $157
- --------------------------------------------------------------------
The majority of short-term borrowings represent bank debt owed by foreign
subsidiaries. The weighted-average interest rate of short-term borrowings was
5.0% and 4.9% at December 31, 1995 and 1994, respectively.
The large decrease in current portion of long-term debt is due to the
repayment of the company's 9.625% notes due 1998 which were called in November
1994 and repaid at par plus accrued interest in January 1995.
NOTE 15: LONG-TERM DEBT
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
9.80% notes due 2020 $150 $150
9.875% notes due 2000 100 100
9.375% debentures due 2019
(callable 1999 at 104.7%) 100 100
9.50% notes due 2021
(callable 2002 at 104.8%) 75 75
3.85%-5.98% notes (yen denominated)
due 1997 to 2008 63 88
6.60% obligation due through 2012
(callable 1997 at 102.6%) 51 52
5.67% notes due 1998 30 30
6.92% note due annually through 1997 11 22
7.81%-8.27% notes due through 1998 10 --
11.75% note (sterling denominated) due
annually to 1997 1 3
Other 15 9
---------------
Total $606 $629
- --------------------------------------------------------------------
The company has revolving credit agreements totaling $250 million which expire
in 1999. These agreements, which carry various interest rates and fees, are
available to support commercial paper borrowings. Several permit foreign
subsidiaries to borrow local currencies and Eurocurrencies. At December 31,
1995, $17 million was outstanding under these agreements.
The various loan agreements contain certain restrictions with respect to
tangible net worth and maintenance of working capital. There are no
restrictions on the payment of dividends.
Total cash used for the payment of interest expense, net of amounts
capitalized, was $42 million, $45 million and $46 million in 1995, 1994 and
1993, respectively.
Long-term debt maturing in the next five years is:
- -------------------------------------------------------
(Millions of dollars)
- -------------------------------------------------------
1996 $ 39 1999 $ 6
1997 32 2000 104
1998 57
- -------------------------------------------------------
45
NOTE 16: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994*
- --------------------------------------------------------------------
Trade payables $313 $288
Payables due to unconsolidated
subsidiaries and affiliates 20 12
Salaries and wages 71 69
Social Security and other taxes 29 25
Interest 13 16
Employee benefits 24 25
Reserves for environmental remediation 54 76
Reserves for plant shutdowns 8 32
Sales incentive programs 34 32
Other 100 124
--------------
Total $666 $699
- --------------------------------------------------------------------
*Restated to conform to current-year presentation
NOTE 17: OTHER LIABILITIES
- --------------------------------------------------------------------
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------
Reserves for environmental remediation $116 $100
Reserves for plant shutdowns 11 28
Other 17 22
---------------
Total $144 $150
- --------------------------------------------------------------------
NOTE 18: STOCKHOLDERS' EQUITY
The company has the authorization to issue up to 25 million shares of
preferred stock. The outstanding preferred stock was issued in connection
with the acquisition of Shipley Company in 1992. The company may issue up to
an additional 124,535 of these preferred shares for the exercise of
outstanding Shipley stock options. This preferred stock pays an annual
cumulative dividend of $2.75 per share. It has antidilution protection
against stock splits, stock dividends and certain issuances of additional
securities and extraordinary dividends. This preferred stock is convertible
at any time at the holder's option into Rohm and Haas common stock at the rate
of .7812 shares of common stock for each share of preferred stock. Holders of
the preferred stock are entitled to one vote per share. The company has the
option to redeem the preferred stock on or after June 12, 1999, at a fixed
redemption price of $50.62, payable in Rohm and Haas common stock. The
redemption price reduces each year to a final price of $50 on or after June
12, 2002.
Dividends paid on ESOP shares, used as a source of funds for meeting the ESOP
financing obligation, were $10 million in 1995 and $9 million in 1994. These
dividends were recorded net of the related U.S. tax benefit. The number of
ESOP shares not allocated to plan members at December 31, 1995, and 1994 were
5.1 million and 5.3 million, respectively.
The company recorded compensation expense of $5 million in 1995, $7 million in
1994 and $6 million in 1993 for ESOP shares allocated to plan members. The
company expects to record annual compensation expense at approximately this
level over the next 25 years as the remaining $151 million of ESOP shares are
allocated. The allocation of shares from the ESOP is expected to fund a
substantial portion of the company's future obligation to match employees
savings plan contributions as the market price of Rohm and Haas stock
appreciates.
Purchases of treasury stock in 1995 totaled 515,138 shares, compared with
123,345 and 6,975 shares in 1994 and 1993, respectively. On December 4, 1995,
the Board of Directors authorized the purchase of approximately 3.5 million
shares of common stock on the open market over two years beginning in 1996.
NOTE 19: STOCK OPTION PLAN
The company has granted stock options to key employees under its Stock Option
Plans of 1975, 1984 and 1992. Options granted pursuant to the plans are
priced at the fair market value of the common stock on the date of the grant.
The status of the company's stock options is presented below:
- --------------------------------------------------------------------
Shares Per-share
(Thousands) Outstanding Price
- --------------------------------------------------------------------
Balance at December 31, 1993 763 $20.79-$54.63
Granted 101 58.75- 62.44
Exercised 115 20.79- 54.19
Balance at December 31, 1994 749 25.02- 62.44
Granted 139 55.50- 56.25
Exercised 111 25.02- 54.19
Balance at December 31, 1995 777 32.50- 62.44
- --------------------------------------------------------------------
Exercisable stock options were 638,000, 648,000 and 659,000 at year-end 1995,
1994 and 1993, respectively. At December 31, 1995, 2,154,000 shares remain
available for grant under the Stock Option Plan of 1992.
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock- Based Compensation," which is effective beginning
in 1996. This statement encourages the fair value based method of accounting
for stock options and similar equity instruments granted to employees. This
method requires that the fair value of equity instruments granted to employees
be recorded as compensation expense. However, the statement allows companies
to continue to use the intrinsic value based method, which in most cases, does
not result in a charge to earnings. For 1995, the fair value based method
would result in an immaterial charge to earnings and the company does not
expect to change its method of accounting for stock options. However, the
company will adopt the disclosure requirements in 1996.
46
NOTE 20: LEASE AND RENTAL COMMITMENTS
The company leases certain properties and equipment used in its operations,
primarily under operating leases. Under most operating lease agreements, the
company pays a minimum rental, plus contingent rental, based on equipment
usage and escalation factors. The net rental expense for such property was
$81 million for 1995, $63 million in 1994 and $52 million in 1993.
The company is committed under the terms of non-cancellable operating leases
for future rentals as follows:
- ------------------------------------------------------
(Millions of dollars)
- ------------------------------------------------------
1996 $24 2000 $ 4
1997 16 2001-2005 18
1998 10 After 2005 64
1999 6
- ------------------------------------------------------
Leases that meet the criteria for capitalization set forth in SFAS No. 13 have
been classified and accounted for as capital leases. Land, buildings and
equipment, net, includes $3 million at the end of 1995 and 1994, for assets
recorded under capitalized leases. The related obligations for these leases,
which totaled $2 million at the end of 1995 and 1994, are included in notes
payable and long-term debt.
NOTE 21: CONTINGENT LIABILITIES, GUARANTEES AND
COMMITMENTS
(a) Environmental
There is an inherent risk of environmental damage in chemical manufacturing
operations. The company's environmental policies and practices are designed
to ensure compliance with existing laws and regulations and to minimize the
possibility of significant environmental damage. These laws and regulations
require the company to make significant expenditures for remediation, capital
improvements and operating environmental protection equipment. Future
developments and even more stringent environmental regulations may require the
company to make additional unforeseen environmental expenditures. The
company's major competitors are confronted by substantially similar
environmental risks and regulations.
The company is a party in various government enforcement and private actions
associated with former waste disposal sites, many of which are on the U.S.
Environmental Protection Agency's (EPA) Superfund priority list. The company
also is involved in corrective actions at some of its manufacturing
facilities. Accruals for expected future remediation costs are in accordance
with the provisions of SFAS No. 5, "Accounting For Contingencies," which
requires an accrual to be recorded when it is probable a liability has been
incurred and costs are reasonably estimable. The company considers a broad
range of information when determining the amount of the accrual, including
available facts about the waste site, existing and proposed remediation
technology and the range of costs of applying those technologies, prior
experience, government proposals for this or similar sites, the liability of
other parties, the ability of other principally responsible parties to pay
costs apportioned to them and current laws and regulations. These accruals
are updated quarterly as additional technical and legal information becomes
available. Major sites for which reserves have been provided are: the
non-company-owned Lipari and Woodland sites in New Jersey and Whitmoyer in
Pennsylvania, and company-owned sites in Bristol and Philadelphia,
Pennsylvania and in Houston, Texas. In addition, the company has provided for
future costs at approximately 80 other sites where it has been identified as
potentially responsible for cleanup costs and, in some cases, damages for
alleged personal injury or property damage.
The amounts charged to earnings before tax for environmental remediation were
$45 million, $31 million and $57 million in 1995, 1994 and 1993, respectively.
The charge in 1995 included $26 million for additional potential liability
related to the cleanup of the Whitmoyer waste site as a result of an adverse
court ruling, which the company is appealing. The 1994 charge included $14
million related to the company-owned Bristol site. The charge in 1993
included $50 million for remediation of lake and marsh property near the
Lipari landfill. The reserves for remediation were $170 million and $176
million at December 31, 1995, and 1994, respectively, and are recorded as
"other liabilities" (current and long-term). Probable insurance recoveries
were $72 million at December 31, 1995, and 1994. In 1995 and early 1996, the
company reached agreements with certain insurance carriers regarding the
company's claims for environmental remediation costs and related legal
expenses. Accordingly, $24 million of probable insurance recoveries were
classified as accounts receivable at December 31, 1995, and were collected in
early 1996. Other insurance carriers have denied coverage in most cases and
the company has initiated legal action in New Jersey and Pennsylvania. In
estimating probable insurance recovery amounts, the company has considered
various factors, including the terms of the insurance policies which are
applicable to each site, policy limits, the law which is likely to be applied
in the jurisdiction, collections from other insurance carriers and the facts
as currently understood by the company. Based upon all of these factors,
amounts collected and the opinion of counsel, the company has concluded that
the recorded amount of insurance coverage is probable of recovery.
In addition to accrued environmental liabilities, the company has reasonably
possible loss contingencies related to environmental matters of approximately
$70 million at December 31, 1995. Further, the company knows that
47
NOTE 21: CONTINGENT LIABILITIES, GUARANTEES AND
COMMITMENTS (CONTINUED)
additional future environmental remediation may be required, but these loss
contingencies are not reasonably estimable at this time. These matters
involve significant unresolved issues, including the number of parties found
liable at each site and their ability to pay, the outcome of negotiations with
regulatory authorities, the alternative methods of remediation and the range
of cost associated with those alternatives. The company believes that these
matters, when ultimately resolved, which may be over an extended period of
time, will not have a material adverse effect on the consolidated financial
position or consolidated cash flows of the company, but could have a material
adverse effect on consolidated results of operations in any given year.
In 1995, a lawsuit was filed against the company and other defendants, seeking
class action certification for property damage, personal injury and medical
monitoring allegedly related to contamination of the Lipari landfill, nearby
streams and Lake Alcyon in Pitman, New Jersey. The company believes it has
substantial defenses to this lawsuit; it is too early to determine what
financial impact, if any, it may have.
Capital spending for new environmental protection equipment was $32 million in
1995. Spending for 1996 and 1997 is expected to be approximately $39 million
and $27 million, respectively. Capital expenditures in this category include
projects whose primary purpose is pollution control and safety, as well as
environmental aspects of projects which are intended primarily to improve
operations or increase plant efficiency. The company expects future capital
spending for environmental protection equipment to be consistent with
prior-year spending patterns. Capital spending does not include the cost of
environmental remediation of waste disposal sites.
Cash expenditures for waste disposal site remediation were $51 million in
1995, $46 million in 1994 and $21 million in 1993. The expenditures for
remediation are charged against accrued remediation reserves. The cost of
operating and maintaining environmental facilities was $96 million, $107
million and $105 million in 1995, 1994 and 1993, respectively, and was charged
against current-year earnings.
(b) Other
The company and its subsidiaries are parties to litigation arising out of the
ordinary conduct of its business. Recognizing the amounts reserved for such
items and the uncertainty of the ultimate outcome, it is the company's opinion
that the resolution of all pending lawsuits and claims will not have a
material adverse effect, individually or in the aggregate, upon the results of
operations and the consolidated financial position of the company.
In the ordinary course of business, the company has entered into certain
purchase commitments, has guaranteed certain loans (with recourse to the
issuer), and has made certain financial guarantees, primarily for the benefit
of its non-U.S. and unconsolidated subsidiaries and affiliates. It is
believed that these commitments and any liabilities which may result from
these guarantees will not have a material adverse effect upon the consolidated
financial position of the company.
Additions to land, buildings and equipment are scheduled at approximately $375
million for 1996. At December 31, 1995, construction commitments totaled
approximately $57 million.
48
REPORT ON FINANCIAL STATEMENTS
The financial statements of Rohm and Haas Company and subsidiaries were
prepared by the company in accordance with generally accepted accounting
principles. The financial statements necessarily include some amounts
that are based on the best estimates and judgments of the company. The
financial information in this annual report is consistent with that in
the financial statements.
The company maintains accounting systems and internal accounting
controls designed to provide reasonable assurance that assets are
safeguarded, transactions are executed in accordance with the company's
authorization and transactions are properly recorded. The accounting
systems and internal accounting controls are supported by written
policies and procedures, by the selection and training of qualified
personnel and by an internal audit program. In addition, the company's
code of business conduct requires employees to discharge their
responsibilities in conformity with the law and with a high standard of
business conduct.
The company's financial statements have been audited by KPMG Peat
Marwick LLP, independent auditors, as stated in their report below.
Their audit was conducted in accordance with generally accepted auditing
standards and included a review of internal accounting controls to the
extent considered necessary to determine the audit procedures required
to support their opinion.
The audit committee of the board of directors, composed entirely of
non-employee directors, recommends to the board of directors the
selection of the company's independent auditors, approves their fees and
considers the scope of their audits, audit results, the adequacy of the
company's internal accounting control systems and compliance with the
company's code of business conduct.
/s/ J. LAWRENCE WILSON /s/ FRED W. SHAFFER
J. LAWRENCE WILSON FRED W. SHAFFER
Chairman of the Board Vice President and
and Chief Executive Officer Chief Financial Officer
- -----------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders KPMG PEAT MARWICK LLP
1600 Market Street
Rohm and Haas Company: Philadelphia, Pennsylvania 19103
We have audited the accompanying consolidated balance sheets of Rohm and
Haas Company and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of earnings, stockholders' equity and
cash flows for each of the years in the three-year period ended December
31, 1995. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Rohm
and Haas Company and subsidiaries at December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements, the
company adopted the provisions of Financial Accounting Standards Board
Statement No. 112, "Accounting for Postemployment Benefits" in 1993.
/s/ KPMG Peat Marwick LLP
February 19, 1996
49
Rohm and Haas Company and Subsidiaries
ELEVEN-YEAR SUMMARY OF SELECTED FINANCIAL DATA
(Millions of dollars, except
per-share amounts) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
- --------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
Net sales $ 3,884 $ 3,534 $ 3,269 $ 3,063 $ 2,763 $ 2,824 $ 2,661 $ 2,535 $ 2,203 $ 2,067 $ 2,051
Cost of goods sold 2,551 2,267 2,174 2,014 1,861 1,894 1,820 1,646 1,430 1,346 1,400
----------------------------------------------------------------------------------------------------
Gross profit 1,333 1,267 1,095 1,049 902 930 841 889 773 721 651
Selling and administrative
expense 616 591 590 549 470 454 401 381 335 320 300
Research and development
expense 194 201 205 199 183 178 175 156 142 133 124
Interest expense 39 46 41 53 48 37 39 32 31 36 51
Other expense (income), net 43 22 65 (13) (39) (52) (25) (26) (38) 13 (51)
----------------------------------------------------------------------------------------------------
Earnings before income taxes 441 407 194 261 240 313 251 346 303 219 227
Income taxes 149 143 68 87 77 106 75 116 108 81 86
----------------------------------------------------------------------------------------------------
EARNINGS BEFORE CUMULATIVE
EFFECT OF ACCOUNTING
CHANGES $ 292 $ 264 $ 126 $ 174 $ 163 $ 207 $ 176 $ 230 $ 195 $ 138 $ 141
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES -- -- (19) (179) -- -- -- -- -- -- --
NET EARNINGS (LOSS) $ 292 $ 264 $ 107 $ (5) $ 163 $ 207 $ 176 $ 230 $ 195 $ 138 $ 141
- --------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS)
APPLICABLE TO COMMON
SHAREHOLDERS $ 285 $ 257 $ 99 $ (11) $ 157 $ 207 $ 176 $ 230 $ 195 $ 138 $ 141
- --------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS PER COMMON
SHARE BEFORE CUMULATIVE
EFFECT OF ACCOUNTING
CHANGES $ 4.22 $ 3.79 $ 1.74 $ 2.53 $ 2.45 $ 3.10 $ 2.65 $ 3.46 $ 2.85 $ 2.01 $ 2.01
- --------------------------------------------------------------------------------------------------------------------------------
CASH DIVIDENDS PER
COMMON SHARE $ 1.56 $ 1.44 $ 1.36 $ 1.28 $ 1.24 $ 1.22 $ 1.16 $ 1.02 $ .86 $ .78 $ .70
- --------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION--YEAR END
- --------------------------------------------------------------------------------------------------------------------------------
Working capital $ 593 $ 508 $ 499 $ 533 $ 606 $ 424 $ 434 $ 485 $ 486 $ 507 $ 480
Gross fixed assets 4,158 3,969 3,696 3,470 3,015 2,770 2,396 2,062 1,754 1,627 1,503
Total assets 3,916 3,861 3,524 3,517 2,897 2,702 2,455 2,242 1,954 1,842 1,734
Long-term debt 606 629 690 699 718 598 359 288 258 278 245
Stockholders' equity 1,781 1,620 1,441 1,428 1,235 1,137 1,311 1,207 1,053 1,002 936
FINANCIAL RATIOS
- --------------------------------------------------------------------------------------------------------------------------------
As a percent of sales
Gross profit 34.3% 35.9% 33.5% 34.2% 32.6% 32.9% 31.6% 35.1% 35.1% 34.9% 31.7%
Selling, administrative
and research expense 20.9 22.4 24.3 24.4 23.6 22.4 21.6 21.2 21.7 21.9 20.7
Earnings before cumulative
effect of accounting
changes 7.5 7.5 3.9 5.7 5.9 7.3 6.6 9.1 8.9 6.7 6.9
Debt-to-equity ratio at
year end* 36.0% 44.3% 48.2% 50.1% 50.0% 48.0% 40.5% 37.6% 34.7% 38.7% 44.3%
Return on common
stockholders' equity*+ 16.6% 16.5% 8.1% 11.4% 11.2% 15.2% 14.0% 20.4% 19.0% 14.3% 14.9%
Ten-year compound growth rate
Sales 6.6% 5.6% 5.7% 5.3% 3.9% 5.1% 5.3% 7.3% 7.0% 7.4% 8.7%
Earnings per common share
before cumulative effect
of accounting changes 7.7 5.4 (0.9) 8.6 7.4 9.9 7.1 17.0 19.0 13.4 17.5
Cash dividends per
common share 8.3 9.1 10.5 10.5 11.2 13.0 14.9 16.1 15.1 14.0 12.6
GENERAL
- --------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR
Volume of shipments,
millions of units 4,473 4,549 4,214 3,750 3,267 3,336 3,259 3,143 2,808 2,619 2,735
Additions to land,
buildings and
equipment $ 417 $ 339 $ 382 $ 283 $ 265 $ 412 $ 385 $ 338 $ 222 $ 179 $ 159
Depreciation 242 231 226 203 183 159 150 128 112 103 101
Cash dividends 109 102 97 88 80 79 77 67 59 54 49
Wages and salaries $ 625 $ 632 $ 616 $ 589 $ 540 $ 520 $ 481 $ 457 $ 420 $ 390 $ 367
Common stock price
High $64-7/8 $68-1/2 $62 $59-5/8 $48-1/2 $37 $37-1/2 $37-1/2 $53-1/4 $38-3/4 $26-1/2
Low 49-1/2 53-1/4 47-1/4 42-3/4 32-3/4 24-1/4 31 28 24 23-7/8 18-1/2
Year-end close 64-3/8 57-1/8 59-1/2 53-1/2 43-1/2 34-7/8 34-3/4 34-3/8 31-5/8 34-7/8 25-1/2
Average number of
shares outstanding
in thousands 67,522 67,707 67,619 66,396 64,103 66,218 66,593 66,561 68,578 68,963 70,416
AT YEAR END
Number of registered
common stockholders 4,721 4,907 5,120 5,653 5,796 6,088 5,816 5,695 5,864 5,540 5,492
Number of employees 11,670 12,211 12,985 13,619 12,872 12,920 13,040 12,444 12,021 11,972 11,840
- --------------------------------------------------------------------------------------------------------------------------------
*Excluding ESOP adjustment and including common stock that was to be
purchased in 1995
+Earnings excluding cumulative effect of accounting changes
See accompanying notes on page 52.
See 1995, 1994 and 1993 results in Management Discussion and Analysis on
pages 22 to 30.
50 - 51
NOTES
A. Results in 1995 were reduced by a charge of 25 cents per common share
for additional potential liability related to the cleanup of the
Whitmoyer waste site in Myerstown, Pennsylvania.
B. Earnings in 1993 included charges of 47 cents per common share for
remediation of property near the Lipari landfill, 24 cents per common
share for cancelling construction of a plastics manufacturing facility
in England and 27 cents per common share for the writedown of the
imidized plastics production line in Kentucky. Results also included a
gain of 16 cents per common share for the sale of Supelco, Inc.
C. Effective January 1, 1993, the company adopted a new accounting
standard for postemployment benefits. The cumulative effect of the
change as of the adoption date was a charge of 28 cents per common
share. The impact on 1993 earnings was an after-tax charge of 1 cent
per common share.
D. Results in 1992 included a 56 cents-per-common-share charge for the
estimated costs of downsizing a manufacturing site in Philadelphia.
E. Effective January 1, 1992, the company adopted new accounting
standards for postretirement benefits and income taxes. The cumulative
effect of these accounting changes as of the adoption date was a charge
of $2.69 per common share. The impact on 1992 results was an after-tax
charge of 11 cents per common share.
F. Earnings in 1991 included a gain of 36 cents per share on the sales
of land and securities and a 50 cents-per- share charge for certain
accruals for waste disposal site cleanup costs.
52
SHAREHOLDER INFORMATION
ROHM AND HAAS COMPANY
1996 ANNUAL MEETING
The 1996 Annual Meeting of Stockholders will be held at WHYY Studios,
Independence Mall West, 150 N. Sixth Street, Philadelphia, Pennsylvania,
at 10:30 a.m. on Monday, May 6th. Formal notice of the meeting, the
proxy statement and form of proxy will be mailed on March 22, 1996.
FORM 10-K REPORT
A copy of the company's annual report to the Securities and Exchange
Commission on Form 10-K will be provided upon request to the Public
Relations Department:
Rohm and Haas Company
100 Independence Mall West
Philadelphia, Pennsylvania 19106-2399
(215) 592-3045
Financial information about Rohm and Haas also
can be found on the company's web site:
http://www.rohmhaas.com/.
STOCK EXCHANGE LISTING
Rohm and Haas Company stock trades on the New York Stock Exchange under
the ROH symbol.
STOCK TRANSFER AGENT AND REGISTRAR
Wachovia Bank of North Carolina, N.A.
Corporate Trust Department
P.O. Box 3001
Winston-Salem, North Carolina 27102
1-800-633-4236
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1600 Market Street
Philadelphia, Pennsylvania 19103
(215) 299-3100
53
BOARD OF DIRECTORS
ID: PHOTO GEORGE B. BEITZEL
Retired Senior Vice President and Director, International
Business Machines Corporation
Mr. Beitzel, 67, has been a director since 1983.
Committees: 1, 5 (Chairman), 6, 7
ID: PHOTO DANIEL B. BURKE
Director and Retired Chief Executive Officer and President,
Capital Cities/ABC, Inc.
Mr. Burke, 67, has been a director since 1986.
Committees: 2, 4 (Chairman), 6, 7
ID: PHOTO EARL G. GRAVES
Chairman and Chief Executive Officer, Earl G. Graves, Ltd.;
Chairman and Chief Executive Officer of Pepsi-Cola of
Washington, D.C.; Publisher and Editor of Black Enterprise
Magazine
Mr. Graves, 61, has been a director since 1984.
Committees: 2, 4, 6, 7 (Chairman)
ID: PHOTO JAMES A. HENDERSON
Chairman, Chief Executive Officer and Director, Cummins
Engine Company, Inc.
Mr. Henderson, 61, has been a director since 1989.
Committees 1, 5, 6, 7
ID: PHOTO JOHN H. MCARTHUR
Retired Dean, Harvard Business School
Dr. McArthur, 61, has been a director since 1977.
Committees: 1 (Chairman), 5, 6, 7
ID: PHOTO PAUL F. MILLER, JR.
Partner in Miller Associates, and Limited Partner in
Miller, Anderson & Sherrerd, investment managers
Mr. Miller, 68, has been a director since 1969.
Committees: 1, 3, 5, 6 (Chairman), 7
ID: PHOTO SANDRA O. MOOSE
Senior Vice President and Director,
The Boston Consulting Group, Inc.
Dr. Moose, 54, has been a director since 1981.
Committees: 2 (Chairman), 3, 4, 6, 7
ID: PHOTO JOHN P. MULRONEY
President and Chief Operating Officer,
Rohm and Haas Company
Mr. Mulroney, 60, has been a director since 1982.
Committees: 2, 3, 7
BOARD COMMITTEES: 1. Audit 2. Corporate Responsibility 3. Executive
4. Executive Compensation 5. Finance 6. Nominating 7. Strategic Planning
54
ID: PHOTO GILBERT S. OMENN
Dean, School of Public Health
and Community Medicine,
University of Washington, Seattle
Dr. Omenn, 54, has been a director since 1987.
Committees: 1, 5, 6, 7
ID: PHOTO RONALDO H. SCHMITZ
Member of the Board of Managing Directors of Deutsche
Bank, AG
Dr. Schmitz, 57, has been a director since 1992.
Committees: 1, 5, 6, 7
ID: PHOTO ALAN SCHRIESHEIM
Chief Executive Officer and Director,
Argonne National Laboratory
Dr. Schriesheim, 66, has been a director since 1989.
Committees: 2, 4, 6, 7
ID: PHOTO MARNA C. WHITTINGTON
Partner, Miller, Anderson & Sherrerd
Dr. Whittington, 48, has been a director since 1989.
Committees: 1, 3, 5, 6, 7
ID: PHOTO J. LAWRENCE WILSON
Chairman of the Board and
Chief Executive Officer,
Rohm and Haas Company
Mr. Wilson, 60, has been a director since 1977.
Committees: 3 (Chairman), 7
----------------------------------------------------------
ID: PHOTO ROBERT E. NAYLOR, JR.
Served as Group Vice President and Regional Director for
North America, Rohm and Haas Company, until his retirement
at the end of the year. He was a director from 1986
to 1995.
----------------------------------------------------------
CHAIRMAN'S
COMMITTEE:
J. LAWRENCE WILSON
Chairman and CEO
JOHN P. MULRONEY
President and COO
J. MICHAEL FITZPATRICK
Vice President
Chief Technology Officer
RAJIV L. GUPTA
Vice President
CHARLES M. TATUM
Vice President
BASIL A. VASSILIOU
Vice President
OTHER OFFICERS:
PAUL J. BADUINI
Vice President
ALBERT H. CAESAR
Vice President
PATRICK R. COLAU
Vice President
A. WAYNE CARNEY
Vice President
NANCE K. DICCIANI
Vice President
ROBERT M. DOWNING
Vice President
DAVID T. ESPENSHADE
Vice President
J. GARY FISCHETTE
Vice President
MARISA L. GUERIN
Vice President
ENRIQUE F. MARTINEZ
Vice President
HOWARD C. LEVY
Vice President
PHILIP G. LEWIS
Vice President
FRED W. SHAFFER
Vice President
Chief Financial Officer
RICHARD C. SHIPLEY
Vice President
WILLIAM H. STAAS
Vice President
DAVID A. STITELY
Vice President
Chief Information Officer
JOHN F. TALUCCI
Vice President
ROBERT P. VOGEL
Vice President
General Counsel
WILLIAM C. ANDREWS
Controller
GAIL P. GRANOFF
Secretary
ANGUS F. SMITH
Treasurer
STANLEY J. HARMER
Assistant Secretary
55
ROHM AND HAAS COMPANY LOCATIONS
CORPORATE HEADQUARTERS
ROHM AND HAAS COMPANY
100 Independence Mall West
Philadelphia, Pennsylvania 19106-2399
(215) 592-3000
(Delaware Corporation)
UNITED STATES SUBSIDIARIES
ATOHAAS MEXICO INC.
Wilmington, Delaware
(51% owned)
ATOHAAS AMERICAS INC.
Philadelphia, Pennsylvania
(51% owned)
ATOHAAS DELAWARE INC.
Wilmington, Delaware
ATOHAAS FOREIGN SALES CORPORATION
St. Thomas,
U.S. Virgin Islands
POLYTRIBO, INC.
Bristol, Pennsylvania
(60% owned)
ROHM AND HAAS CAPITAL CORPORATION
Wilmington, Delaware
ROHM AND HAAS CHINA, INC.
Wilmington, Delaware
ROHM AND HAAS CREDIT CORPORATION
Wilmington, Delaware
ROHM AND HAAS EQUITY CORPORATION
Wilmington, Delaware
ROHM AND HAAS FINANCE COMPANY
Wilmington, Delaware
ROHM AND HAAS FOREIGN SALES CORPORATION
St. Thomas,
U.S. Virgin Islands
ROHM AND HAAS LATIN AMERICA, INC.
Wilmington, Delaware
ROHM AND HAAS PERFORMANCE PLASTICS INC.
Wilmington, Delaware
ROHM AND HAAS TEXAS INCORPORATED
Houston, Texas
SHIPLEY COMPANY L.L.C.
Marlboro, Massachusetts
XAMAK INC.
Wilmington, Delaware
SUBSIDIARIES OUTSIDE THE UNITED STATES
ATOHAAS CANADA INC.
West Hill, Canada
(51% owned)
BEIJING EASTERN ROHM AND HAAS COMPANY, LIMITED
Beijing, China
(60% owned)
JAPAN ACRYLIC CHEMICAL COMPANY, LTD.
Tokyo, Japan
P.T. ROHM AND HAAS COMPANY INDONESIA
Jakarta, Indonesia
MAQUILADORA GENERAL DE MATAMOROS, S.A. DE C.V.
Matamoros, Mexico
(51% owned)
ROHM AND HAAS AUSTRALIA PTY. LTD.
Melbourne, Australia
ROHM AND HAAS (BERMUDA), LTD.
Hamilton, Bermuda
ROHM AND HAAS BRASIL LTDA.
Sao Paulo, Brazil
ROHM AND HAAS CANADA INC.
West Hill, Canada
ROHM AND HAAS CHEMICAL
(THAILAND) LTD.
Bangkok, Thailand
ROHM AND HAAS COLOMBIA S.A.
Bogota, Colombia
ROHM AND HAAS DEUTSCHLAND GMBH
Frankfurt, Germany
ROHM AND HAAS ESPANA S.A.
Barcelona, Spain
ROHM AND HAAS FRANCE S.A.
Paris, France
ROHM AND HAAS HOLDINGS LTD.
Hamilton, Bermuda
ROHM AND HAAS ITALIA S.r.l.
Milan, Italy
ROHM AND HAAS JAPAN K.K.
Tokyo, Japan
ROHM AND HAAS MEXICO S.A. DE C.V.
Mexico City, Mexico
ROHM AND HAAS NEW ZEALAND LIMITED
Auckland, New Zealand
ROHM AND HAAS NORDISKA AB
Landskrona, Sweden
ROHM AND HAAS PHILIPPINES, INC.
Manila, Philippines
ROHM AND HAAS (SCOTLAND) LIMITED
Grangemouth, Scotland
(75% owned)
ROHM AND HAAS SINGAPORE (PTE.) LTD.
Singapore
ROHM AND HAAS SLOVENIA
Ljubljana, Slovenia
(51% owned)
ROHM AND HAAS TAIWAN INC.
Taipei, Taiwan
ROHM AND HAAS (UK) LIMITED
Croydon, England
SHIPLEY EUROPE LIMITED
Coventry, England
SHIPLEY FAR EAST LIMITED
Tokyo, Japan
AFFILIATES
ATOHAAS B.V.
Haarlem, The Netherlands
(50% owned)
ATOHAAS EUROPE S.C.A.
Paris, France
(49% owned)
ATOHAAS HOLDING C.V.
Haarlem, The Netherlands
(50% owned)
ATOHAAS PACIFIC B.V.
Haarlem, The Netherlands
(50% owned)
ATOHAAS TECHNOLOGIES B.V.
Haarlem, The Netherlands
(50% owned)
KUREHA CHEMICALS (SINGAPORE) PTE. LTD.
Singapore, Singapore
(25% owned)
NORSOHAAS S.A.
Villers-Saint-Paul, France
(50% owned)
TOSOHAAS
Montgomeryville, Pennsylvania
(50% owned)
MANUFACTURING LOCATIONS
AUSTRALIA: Geelong
BRAZIL: Jacarei
CANADA: Morrisburg;
West Hill
CHINA: Beijing
COLOMBIA: Barranquilla
ENGLAND: Coventry; Jarrow
FRANCE: Bernouville;
Chauny; Lauterbourg;
Saint Avold;
Villers-Saint-Paul
GERMANY: Stuttgart
ITALY: Mozzanica; Rho
JAPAN: Nagoya; Sasagami;
Soma
MEXICO: Apizaco;
Matamoros
THE NETHERLANDS:
Leeuwarden
NEW ZEALAND: Auckland
PHILIPPINES: Las Pinas
SCOTLAND: Grangemouth
SINGAPORE: Singapore
SLOVENIA: Ljubljana
SPAIN: Tudela
SWEDEN: Landskrona
TAIWAN: Min-Hsiung
UNITED STATES:
California--Hayward;
LaMirada
Connecticut--Kensington
Illinois--Chicago Heights;
Kankakee
Kentucky--Louisville
Massachusetts--Marlboro
North Carolina--Charlotte
Pennsylvania--Bristol;
Montgomeryville;
Philadelphia
Tennessee--Knoxville
Texas--Bayport; Houston
56
RESEARCH LABORATORIES
CORPORATE RESEARCH HEADQUARTERS
Spring House, Pennsylvania
Bristol, Pennsylvania
OTHER RESEARCH AND TECHNICAL FACILITIES
Campinas, Brazil
Charlotte, North Carolina
Chauny, France
Geelong, Australia
Himeji, Japan
Houston, Texas
Marlboro, Massachusetts
Newtown, Pennsylvania
Sasagami, Japan
Singapore, Singapore
Valbonne, France
Waller County, Texas
Washimiya, Japan
SALES
OFFICES
In major cities of the world.
The company owns a number of other domestic and foreign subsidiaries
which are involved primarily in sales activities. These subsidiaries,
either singly or in the aggregate, are not significant. These accounts
are not included in the consolidated financial statements.
COMPANY INFORMATION
Internet World Wide Web users can access information about Rohm and Haas
and its products at the following Web address: http://www.rohmhaas.com/.
General information brochures about Rohm and Haas Company and about its
safety, health and environmental policies also are available upon
request to the Public Relations Department, Rohm and Haas Company, 100
Independence Mall West, Philadelphia, Pennsylvania, 19106-2399, (215)
592-3045.
TRADEMARKS
Compete, Confirm, Dimension, Dithane, Eagle, Enable, Fore, Goal, Indar,
Implex, Kathon, Kerb, Mimic, Nova, Paraloid, Plexiglas, Primene, Rally,
Rhoplex, Ropaque, Sea-Nine, Stam, Tuffak and Visor are trademarks of
Rohm and Haas Company.
Microposit is a trademark of the Shipley Company.
Responsible Care is a trademark of the
Chemical Manufacturers Association.
[LOGO] RESPONSIBLE CARE(r)
A PUBLIC COMMITMENT
Rohm and Haas is a Responsible Care(r) Company
[LOGO] Printed on recycled paper
[LOGO]
ROHM AND HAAS
PHILADELPHIA, PA 19106-2399
APPENDIX TO ANNUAL REPORT TO STOCKHOLDERS
(Pursuant to Part 232.304(a) of Regulation S-T)
GRAPHIC DESCRIPTION/CROSS REFERENCE
- ------- ---------------------------
Cover Three photographs of end uses of Rohm and Haas products,
including fresh fruit and vegetables, swimming pool water
and an automobile with recreational equipment under the
title, "Because People Need Shelter and Food, Because People
Like to Play, Because People Want to Travel"
Page 1 Pie charts
Sales by Business Group
-----------------------
Polymers, Resins and Monomers $1,797 million
Performance Chemicals 896 million
Plastics 693 million
Agricultural Chemicals 498 million
Sales by Customer Location
--------------------------
North America $2,074 million
Europe 976 million
Asia-Pacific 597 million
Latin America 237 million
Page 5 Bar Charts for Rohm and Haas Company of:
Volume
------
1991 3,267 million units
1992 3,750 million units
1993 4,214 million units
1994 4,549 million units
1995 4,473 million units
Sales
-----
1991 $2,763 million
1992 $3,063 million
1993 $3,269 million
1994 $3,534 million
1995 $3,884 million
Earnings, before cumulative effect of accounting change
--------
1991 $163 million
1992 $174 million
1993 $126 million
1994 $264 million
1995 $292 million
Page 8 Photograph of a train and an automobile with bikes and
other recreational equipment with the title "Because People
Travel..."
Inset photographs of an automobile taillight, a speedometer
and road marked with traffic paints
Page 9 Bar Charts for Polymers, Resins and Monomers Business Group of:
Volume
------
1991 2,283 million units
1992 2,674 million units
1993 3,050 million units
1994 3,324 million units
1995 3,263 million units
Sales
-----
1991 $1,290 million
1992 $1,425 million
1993 $1,519 million
1994 $1,654 million
1995 $1,797 million
Earnings, before cumulative effect of accounting change
--------
1991 $116 million
1992 $124 million
1993 $120 million
1994 $167 million
1995 $162 million
Page 10 Photograph of the Golden Gate Bridge
Inset photographs of a manufacturing plant and a roof being
coated with acrylic roof mastics
Page 11 Photograph of a woman riding a bicycle and a golf bag
filled with golf clubs and a soccer ball, baseball and
football with the title "Because People Like to Play..."
Page 12 Photograph of a man swimming
Inset photograph of a man working in a laboratory
Page 13 Inset photographs of a circuit board and the
inside of a manufacturing plant
Bar Charts for Performance Chemicals Business Group of:
Volume
------
1991 324 million units
1992 377 million units
1993 399 million units
1994 399 million units
1995 415 million units
Sales
-----
1991 $566 million
1992 $682 million
1993 $762 million
1994 $806 million
1995 $896 million
Earnings, before cumulative effect of accounting change
--------
1991 $ 43 million
1992 $ 19 million
1993 $ 29 million
1994 $ 38 million
1995 $ 65 million
Page 14 Photograph of a soccer game
Inset photographs of a bottle of laundry detergent, fabric
softener and a manufacturing production line
Page 15 Photograph of plastic molding resins
Bar Charts for Plastics Business Group of:
Volume
------
1991 495 million units
1992 533 million units
1993 580 million units
1994 638 million units
1995 605 million units
Sales
-----
1991 $546 million
1992 $573 million
1993 $579 million
1994 $635 million
1995 $693 million
Earnings, before cumulative effect of accounting change
--------
1991 $ 8 million
1992 $38 million
1993 $(2) million
1994 $58 million
1995 $63 million
Page 16 Photograph of two people in a house under construction
with the title "Because People Need Shelter and Food..."
Inset photograph of tubes of caulk
Page 17 Inset photographs of employees Debbie Zimmer and Walt
Gozdan at the Paint Quality Institute, PVC piping, fresh
vegetables at a market place and agricultural workers in a
field
Page 18 Photograph of shoppers in the produce department at a
supermarket
Inset photograph of a scientist checking plants in a
laboratory
Bar charts for the Agricultural Chemicals Business Group
Volume
------
1991 165 millions of units
1992 166 millions of units
1993 185 millions of units
1994 188 millions of units
1995 188 millions of units
Sales
-----
1991 $361 million
1992 $383 million
1993 $409 million
1994 $439 million
1995 $498 million
Earnings, before cumulative effect of accounting changes
--------
1991 $33 million
1992 $25 million
1993 $39 million
1994 $40 million
1995 $51 million
Page 19 Inset photographs of a container of Confirm insecticide,
Adam Hsu and Hal Aller, inventors of Confirm insecticide,
and Governor Christie Whitman (NJ) and a child returning
a turtle to Lake Alcyon
Page 20 Bar chart of Rohm and Haas occupational injury and illness
average rate worldwide vs. U.S. chemical industry.
Cases per 200,000 hours worked:
Rohm and Haas U.S. chemical
worldwide average industry average
----------------- ----------------
1991 5.3 3.1
1992 4.3 3.1
1993 3.7 2.9
1994 2.5 2.8
1995 1.8 2.6
Inset photograph of Yukisato Kurokawa, N.K. Suzuki and Kunio
Takase at the Japan Research Center
Photograph of children in KidSafe program in Louisville,
Kentucky which is sponsored by Rohm and Haas
Page 24 Line Chart of Gross Profit, Selling, Administrative and
Research Expense (SAR) and Operating Earnings (earnings
excluding after-tax interest expense) as a percent of sales:
Year Gross Profit SAR Operating Earnings
---- ------------ --- ------------------
1985 31.7% 20.7% 6.7%
1986 34.9 21.9 7.5
1987 35.1 21.7 9.3
1988 35.1 21.2 9.6
1989 31.6 21.6 7.1
1990 32.9 22.4 8.3
1991 32.6 23.6 7.1
1992 34.2 24.4 6.8
1993 33.5 24.3 4.7
1994 35.9 22.4 8.4
1995 34.3 20.9 8.2
Page 25 Line Chart of Sales and Volume Indices
1985 = 100
Year Sales Dollars Physical Volume
---- ------------- ---------------
1985 100 100
1986 101 96
1987 107 103
1988 124 115
1989 130 119
1990 138 122
1991 135 119
1992 149 137
1993 159 154
1994 172 166
1995 189 164
Line Chart of Raw Material Cost Index
1985 = 100
Year Index Percentage Change
---- ----- -----------------
1985 100 (5)
1986 92 (8)
1987 97 5
1988 110 13
1989 113 3
1990 114 0
1991 114 0
1992 104 (9)
1993 101 (3)
1994 105 4
1995 126 21
Page 26 Line Chart of Selling Price Index
1985 = 100
Year Index Percentage Change
---- ----- -----------------
1985 100 0
1986 102 3
1987 106 3
1988 111 5
1989 113 1
1990 116 3
1991 118 2
1992 117 (1)
1993 113 (4)
1994 113 0
1995 119 6
Line Chart of Return on Investment
Year Stockholders' Equity Net Assets
---- -------------------- ----------
1985 14.9% 10.0%
1986 14.3 8.7
1987 19.0 11.0
1988 20.4 11.2
1989 14.0 8.3
1990 15.2 8.6
1991 11.2 6.8
1992 11.4 6.1
1993 8.1 4.3
1994 16.5 7.6
1995 16.6 8.1
Page 27 Stacked Bar Chart of Cash Flow
Provided by operations
----------------------
1991 $357 million
1992 401 million
1993 358 million
1994 524 million
1995 513 million
Treasury Stock Purchases
------------------------
1991 $ 1 million
1992 1 million
1993 0 million
1994 7 million
1995 29 million
Capital Additions & Acquisitions Net of Divestitures
----------------------------------------------------
1991 $208 million
1992 447 million
1993 290 million
1994 336 million
1995 368 million
Dividends
---------
1991 $ 80 million
1992 88 million
1993 97 million
1994 102 million
1995 109 million
Line Chart of Environmental Expenses and Capital Spending
Operating and Maintaining Environmental Facilities
--------------------------------------------------
1987 $ 54 million
1988 66 million
1989 77 million
1990 82 million
1991 92 million
1992 108 million
1993 105 million
1994 107 million
1995 96 million
Capital Spending for New Environmental Protection Equipment
-----------------------------------------------------------
1987 $17 million
1988 34 million
1989 50 million
1990 54 million
1991 48 million
1992 55 million
1993 55 million
1994 31 million
1995 32 million
Waste Site Remediation Accruals
-------------------------------
1987 $12 million
1988 5 million
1989 12 million
1990 46 million
1991 49 million
1992 23 million
1993 57 million
1994 31 million
1995 45 million
Page 28 Line Chart of Earnings and Common Dividends
Dollars per Share
Year Earnings Common Dividends
---- -------- ----------------
1985 $2.01 $.70
1986 2.01 .78
1987 2.85 .86
1988 3.46 1.02
1989 2.65 1.16
1990 3.10 1.22
1991 2.45 1.24
1992 2.53 1.28
1993 1.74 1.36
1994 3.79 1.44
1995 4.22 1.56
Page 29 Line Chart of Capital Additions and Depreciation
Year Additions Depreciation
---- --------- ------------
1985 $159 million $101 million
1986 179 million 103 million
1987 222 million 112 million
1988 338 million 128 million
1989 385 million 150 million
1990 412 million 159 million
1991 265 million 183 million
1992 283 million 203 million
1993 382 million 226 million
1994 339 million 231 million
1995 417 million 242 million
Page 30 Line Chart of Assets as a Percent of Sales
Year Fixed Assets Inventories Receivables
---- ------------ ----------- -----------
1985 28.3% 16.5% 15.3%
1986 31.3 14.9 15.4
1987 33.2 14.0 16.1
1988 36.9 13.4 15.5
1989 43.1 13.0 15.8
1990 49.2 13.7 16.2
1991 53.2 12.4 17.1
1992 57.7 14.3 17.9
1993 57.2 12.1 18.5
1994 55.5 13.8 19.2
1995 52.7 13.0 19.5
Page 31 High-Low Chart of Quarterly Stock Prices in Dollars
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1993
----
High 61 1/4 62 55 1/2 59 1/2
Low 52 5/8 52 7/8 49 1/2 47 1/4
Close 53 5/8 53 5/8 50 3/8 59 1/2
1994
----
High 60 64 1/2 68 1/2 61 3/8
Low 53 1/2 53 1/4 54 3/8 54 1/8
Close 54 5/8 62 1/4 57 1/8 57 1/8
1995
----
High 59 1/4 62 61 7/8 64 7/8
Low 52 49 1/2 54 3/4 54 1/4
Close 59 54 7/8 60 3/8 64 3/8