UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 1999 COMMISSION FILE NUMBER 1-3507
R O H M A N D H A A S C O M P A N Y
(Exact name of registrant as specified in its charter)
DELAWARE 23-1028370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 INDEPENDENCE MALL WEST, PHILADELPHIA, PENNSYLVANIA 19106
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 592-3000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Common stock outstanding at April 23, 1999: 168,160,652 SHARES
ROHM AND HAAS COMPANY AND SUBSIDIARIES
FORM 10-Q - INDEX
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
- Statements of Consolidated Earnings for the three months
ended March 31, 1999 and 1998 3
- Statements of Consolidated Cash Flows for the three months
ended March 31, 1999 and 1998 4
- Consolidated Balance Sheets as of March 31, 1999 and 1998 5
- Notes to Consolidated Financial Statements 6 - 7
Item 2. - Management Discussion and Analysis of Financial Condition
and Results of Operations 8 - 14
Item 3. - Market Risk Discussion
Management's discussion of market risk is incorporated herein by
reference to Item 7a of the Form 10-K for the year ended December 31, 1998,
filed with the Securities and Exchange Commission on February 26, 1999.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
A discussion of legal proceedings is incorporated herein by reference
to Part I, Item 1, page 6 included herein.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit (12) - Computation of Ratio of Earnings to Fixed Charges for
the company and subsidiaries.
Exhibit (27) - Financial Data Schedules
(b) The following reports on Form 8-K were filed during the quarter
ended March 31, 1999:
- On January 26, 1999, under Item 2: Announcement of the
completion of the tender offer and acquisition by Rohm and Haas
of all of the outstanding shares of LeaRonal, Inc.
- On February 2, 1999, under Item 5: Announcement of agreement
of merger between Rohm and Haas Company and Morton, International.
Page 2
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED EARNINGS (Subject to Year-end Audit)
- -----------------------------------------------------------------------------
Quarter Ended
March 31,
1999 1998
----- -----
(Millions of dollars)
CURRENT EARNINGS
Net sales $ 940 $ 937
Cost of goods sold 558 564
- --------------------------------------------------------------------------
Gross profit 382 373
Selling and administrative expense 163 150
Research and development expense 47 52
Interest expense 11 10
Share of affiliate net (losses) earnings (7) 2
Other income, net 22 3
- --------------------------------------------------------------------------
Earnings before income taxes 176 166
Income taxes 66 57
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NET EARNINGS $ 110 $ 109
Less preferred stock dividends 1 2
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NET EARNINGS APPLICABLE TO COMMON SHAREHOLDERS $ 109 $ 107
- --------------------------------------------------------------------------
NET EARNINGS PER COMMON SHARE: (in dollars)
- Basic $ .65 $ .59
- Diluted .64 .58
Common dividends $ .18 $ .17
Weighted average common shares outstanding (millions):
- Basic 167.7 182.3
- Diluted 171.4 189.0
See notes to consolidated financial statements.
Page 3
Rohm and Haas Company and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS (Subject to Year-end Audit)
- -----------------------------------------------------------------------------
Quarter Ended
March 31,
1999 1998
----- -----
(Millions of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 110 $ 109
Adjustments to reconcile net earnings
to cash provided by operating activities
Depreciation 69 69
Changes in current assets and liabilities, net of
acquisitions and divestitures:
Deferred income taxes (26) (8)
Accounts receivable (62) (110)
Inventories (20) (37)
Accounts payable and accrued liabilities (81) (54)
Income taxes payable 76 42
Other, net (16) 24
-------- --------
Net cash provided by operating activities 50 35
- --------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses and dividends from
(investment in) affiliates, net of cash acquired (452) 9
Additions to land, buildings and equipment (38) (34)
-------- --------
Net cash used by investing activities (490) (25)
- --------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 427 4
Purchases of treasury stock (1) (27)
Repayments of long-term debt - (34)
Net change in short-term borrowings 95 67
Payment of dividends (30) (31)
Other, net (6) (4)
-------- --------
Net cash provided (used) by financing activities 485 (25)
- --------------------------------------------------------------------------
Effect of exchange rate changes on cash - -
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 45 $ (15)
- --------------------------------------------------------------------------
See notes to consolidated financial statements.
Page 4
Rohm and Haas Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS (Subject to Year-end Audit)
- -----------------------------------------------------------------------------
MARCH 31, December 31, March 31,
1999 1998 1998
----------------------------------
ASSETS (Millions of dollars)
----------------------------------
Current assets:
Cash and cash equivalents $ 61 $ 16 $ 25
Receivables, net 820 711 827
Inventories (note f) 476 427 469
Prepaid expenses and other assets 151 133 226
- -------------------------------------------------------------------------------
Total current assets 1,508 1,287 1,547
- -------------------------------------------------------------------------------
Land, buildings and equipment 4,570 4,471 4,397
Less accumulated depreciation 2,642 2,563 2,468
- -------------------------------------------------------------------------------
Net land, buildings and equipment 1,928 1,908 1,929
- -------------------------------------------------------------------------------
Goodwill, net of amortization 288 70 90
Other assets 638 383 342
- -------------------------------------------------------------------------------
$ 4,362 $ 3,648 $ 3,908
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 270 $ 172 $ 134
Accounts payable and accrued liabilities 616 653 594
Accrued income taxes payable 133 50 125
- -------------------------------------------------------------------------------
Total current liabilities 1,019 875 853
- -------------------------------------------------------------------------------
Long-term debt 834 409 514
Employee benefits payable 428 432 413
Other liabilities 411 352 247
Minority interest 28 19 19
Commitments and contingencies
Stockholders' equity:
$2.75 Cumulative convertible preferred
stock (note h) 65 73 123
Common stock: shares issued - 196,957,140 492 492 590
Additional paid-in capital 145 139 129
Retained earnings 1,364 1,284 2,011
- -------------------------------------------------------------------------------
2,066 1,988 2,853
Less: Treasury stock (note i) 281 286 837
Less: ESOP shares 130 132 136
Accumulated other comprehensive income (13) (9) (18)
- -------------------------------------------------------------------------------
Total stockholders' equity 1,642 1,561 1,862
- -------------------------------------------------------------------------------
$ 4,362 $ 3,648 $ 3,908
- -------------------------------------------------------------------------------
See notes to consolidated financial statements
Page 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------------------------------------
(a) These interim financial statements are unaudited, but, in the opinion
of management, all adjustments, which are of a normal recurring
nature, have been made to present fairly the company's financial
position, results of operations and cash flows. Certain prior year
amounts in the Statements of Cash Flows have been restated to conform
to current year presentation. These financial statements should be
read in conjunction with the financial statements, accounting policies
and the notes included in the company's annual report for the year
ended December 31, 1998.
(b) The company is a party in various government enforcement and private
actions associated with former waste disposal sites. The company is
also involved in potential remediations at some of its manufacturing
facilities. At March 31, 1999, the reserves for remediation were $132
million, compared to $131 million at December 31, 1998. The company
is in the midst of lawsuits over insurance coverage for environmental
liabilities. It is the company's practice to reflect environmental
insurance recoveries in the results of operations for the quarter in
which litigation is resolved through settlement or other appropriate
legal process. Recoveries typically determine coverage for both past
and future environmental spending. In the first quarter of 1999 and
1998 $5 million was charged to earnings before tax for environmental
remediation. In the 1999 period the company recorded income before
tax of $20 million for remediation related insurance recoveries. The
1999 and 1998 charges include the aggregation of several small
environmental accruals.
In addition to accrued environmental liabilities, the company has
reasonably possible loss contingencies relating to environmental
matters of approximately $65 million. The company has also identified
other sites, including its larger manufacturing facilities in the
United States, where future environmental remediation expenditures may
be required, but these expenditures are not reasonably estimable at
this time. The company believes that these matters, when ultimately
resolved, which may be over the next decade, will not have a material
adverse effect on the consolidated financial position of the company,
but could have a material adverse effect on consolidated results of
operations in any given year.
(c) The company and its subsidiaries are parties to litigation arising out
of the ordinary conduct of its business. Recognizing the amounts
reserved for such items and the uncertainty of the outcome, it is the
company's opinion that the resolution of all pending lawsuits and
claims will not have a material adverse effect, individually or in the
aggregate, upon the results of operations and the consolidated
financial position of the company. The company had been the subject
of an investigation by U.S. Customs into the labeling of some
products imported into the U.S. from some of the company's non-U.S.
locations. In the first quarter of 1999 the company reached a
tentative settlement and agreed to pay $3 million subject to further
government approval. This non-tax deductible tentative settlement was
charged to income in the quarter. In 1998, subsequent to the sale of
the AtoHaas joint venture, the buyer asserted a claim against the
company related to the value of certain joint venture assets. The
assessment of this claim is ongoing and the potential amount involved
and its impact on results of operations and financial position, if
any, cannot be reasonably estimated at this time.
(d) In the third quarter of 1998, the board of directors declared a
three-for-one split of the company's common stock. The stock split
was effected in the form of a 200 percent common stock dividend paid
on September 1, 1998 to stockholders of record on August 7, 1998. The
par value of the common stock remained $2.50 per share. Also during
the third quarter of 1998, the company retired 39 million treasury
shares. As a result of these transactions, the company reclassified
$296 million from retained earnings to common stock. This amount
represents the total par value of new shares issued. Amounts per
share, numbers of common shares and capital accounts have been
restated to give retroactive effect to the stock split.
(e) In late January 1999 the company acquired all of the outstanding shares
of LeaRonal, Inc. (LeaRonal) for approximately $460 million. LeaRonal
develops and manufactures specialty chemical processes used in the
manufacture of printed circuit boards, semiconductor packaging and for
electronic connector plating and also provides processes for metal-
finishing applications. The acquisition was accounted for using the
purchase method and was financed primarily through commercial paper which
has been classified as long-term debt. The financial statements reflect
the preliminary allocation of the purchase price based on estimated
fair values at the date of acquisition, pending final determination of
certain acquired assets and liabilities. The preliminary allocation as
of March 31, 1999, has resulted in acquired goodwill of approximately
$200 million, which is being amortized on a straight-line basis over
40 years. Plans are currently in development to integrate the operations
of the combining companies, which may result in certain costs, including
severance and asset write-offs. Some of these costs, once determinable,
could result in an increase in goodwill. The results of LeaRonal have
been included in the consolidated financial statements since the
acquisition date.
Page 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- -----------------------------------------------------------------------------
(f) Inventories consist of:
(Millions of dollars) MAR. 31, Dec. 31, Mar. 31,
1999 1998 1998
-------- -------- --------
Finished products and
work in process $ 365 $ 330 $ 359
Raw materials & supplies 111 97 110
---- ---- ----
Total inventories $ 476 $ 427 $ 469
---- ---- ----
(g) The components of comprehensive income are as follows (millions of
dollars):
Quarter Ended
March 31,
----------------
1999 1998
----- -----
Net earnings $110 $109
Other comprehensive income, net of tax:
Foreign currency translation adjustment (4) (4)
----- -----
Comprehensive income $106 $105
----- -----
(h) The number of preferred shares issued and outstanding were:
March 31, 1999 1,288,578
December 31, 1998 1,457,956
March 31, 1998 2,465,614
(i) The number of common treasury shares were:
March 31, 1999 28,855,363
December 31, 1998 29,369,853
March 31, 1998 53,867,427
Page 7
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FIRST QUARTER 1999 VERSUS FIRST QUARTER 1998
Earnings for the first quarter of 1999 increased 1% to $110 million from
$109 million in the first quarter of 1998. Diluted earnings per common
share increased 10% to $.64 compared to $.58 in the 1998 period. First quarter
1999 results reflect several one-time items that resulted in an after-tax
gain of $6 million, or $.03 per common share. This gain included a
favorable settlement with insurance carriers over certain environmental
remediation matters, as well as the company's share of losses primarily
caused by restructuring charges for a North American manufacturing facility
owned by the company's 48%-owned Rodel Inc. affiliate. Net earnings
decreased 5%, excluding non-recurring items, primarily in the North
American region as a result of lower selling prices partially offset by
lower raw material costs and higher volume. Earnings per share increased,
reflecting the impact of the company's stock repurchase program.
Performance Polymers earnings were $86 million, up 8% compared to the prior
year period. Sales were down 4% to $586 million from $611 million in 1998.
Volume was up 2% compared to the first quarter of 1998. The sales decrease
on higher volume is a result of lower selling prices, partially offset by
favorable currencies in Europe and Japan. Volume gains were driven by the
Coatings business in all regions and by Formulation Chemicals, particularly
in Latin America. Monomers volume was down in the quarter despite strong
external sales to producers of superabsorbent polymers and sales to new
customers. These increases were largely offset by the absence of 1999 spot
sales of certain methacrylate products recorded in the first quarter of
1998. The decrease in Performance Polymers sales was caused by a number of
factors, including lower selling prices and competitive pressure in the
paper and tape markets served by the Specialty Polymers business. Earnings
increased, however, as a result of lower raw material prices, smooth plant
operations and control of business selling and administration costs.
Chemical Specialties earnings of $29 million for the first quarter of 1999
were down 9% versus the prior-year period. Sales increased to $233 million
from $226 million in the first quarter of 1998. This increase was
primarily a result of strong volume in the Agricultural Chemicals business,
particularly in North America and in Asia-Pacific, where sales in Korea and
Indonesia showed strong recovery. Ion Exchange sales were down for the
quarter bringing the Chemical Specialties segment sales increase to 3%.
Earnings in the segment decreased despite a strong performance in
Agricultural Chemicals primarily because of unfavorable results in the Ion
Exchange business, primarily from lower volume. The segment also was
affected by unfavorable earnings in the Biocides and Primenes businesses,
particularly in Europe.
Page 8
Electronic Materials earnings of $5 million were down significantly from
earnings of $13 million in the 1998 period. Earnings in 1999 include a
one-time restructuring charge primarily for a North American manufacturing
facility owned by the Rodel affiliate. This charge is reflected in the
first quarter of 1999 affiliate losses of $7 million, compared to earnings
of $2 million in 1998. Excluding the one-time charge, earnings in the
segment were $12 million, down $1 million versus the first quarter of 1998.
Sales of $121 million increased 21% from the 1998 period. Included in the
first quarter of 1999 were sales of $19 million from LeaRonal, which was
acquired in January 1999 (see below discussion under "Liquidity, Capital
Resources and Other Financial Data"). Sales excluding LeaRonal, were up
2%. The decrease in earnings, excluding the non-recurring item, was a
result of essentially flat results at Shipley versus the first quarter of
1998 and lower earnings at Rodel.
Corporate expenses totaled $10 million in 1999, compared to $16 million in
last year's first quarter. The first quarter of 1999 includes an after-tax
gain of $13 million resulting from a favorable settlement with insurance
carriers over certain environmental remediation matters. Corporate
expenses, excluding this gain, increased as a result of higher
administrative costs due to a number of factors, including consultant fees
associated with the company's on-going study of its selling and
administrative infrastructure, and the tentative settlement of an
outstanding U.S. Customs matter (see "Notes to Condensed Consolidated
Financial Statements").
Sales for the quarter were essentially flat versus the first quarter of
1998. The first quarter gross profit margin of 41% was up from 40% in the
prior-year period, driven by higher production volume, smooth plant
operations and lower raw material costs. Selling prices were down 4% while
currency fluctuations were favorable.
Selling, administrative and research expenses increased 4% for the quarter
versus the 1998 period reflecting the net effect of higher administrative
expense and lower expenses for research and development. Preliminary
recommendations from the company's study of its selling and administrative
infrastructure have been made and the company is working to finalize plans
which it hopes will lead to approximately $75 million in annualized
savings. These savings are expected to result from work re-design, staff
reductions and other cost saving measures.
Interest expense of $11 million increased versus the prior year period
because of higher average debt resulting from the LeaRonal acquisition.
The effective tax rate for the first quarter of 1999 was almost 38%, up
from 34% for the first quarter of 1998. The 1999 rate results in part from
the effect of affiliate losses, which are recorded on an after-tax basis.
LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA
On January 31, 1999, the company and Morton International, Inc. (Morton)
approved a merger agreement under which the company will acquire Morton in
a cash and stock transaction valued at $4.9 billion, including the
assumption of approximately $270 million of debt. On February 5, 1999 the
company commenced a tender offer to purchase up to 80,916,766 shares of
Morton common stock for $37.125 in cash. These shares represented 67% of
outstanding shares on
Page 9
January 31, 1999. The offer expired and was withdrawn by the company on
April 23, 1999 after fewer than the minimum required number of shares were
tendered. A majority of Morton shareholders preferred instead to choose a
combination of cash and Rohm and Haas stock under an alternative one-step
transaction provided for in the merger agreement. Under this approach,
Morton shareholders will receive for each Morton share approximately $24.87
in cash and not less than approximately 0.359 nor more than 0.439 shares of
company stock, depending on the average closing price for company stock for
the twenty trading days ending on the second trading day prior to the
merger. The one-step merger is conditioned upon approval by Morton and
Rohm and Haas shareholders and is expected to be completed by the end of
June 1999.
In late January 1999 the company acquired all of the outstanding shares of
LeaRonal, Inc. (LeaRonal) for approximately $460 million. LeaRonal
develops and manufactures specialty chemical processes used in the
manufacture of printed circuit boards, semiconductor packaging and for
electronic connector plating and also provides processes for
metal-finishing applications. The acquisition, financed primarily through
commercial paper, was accounted for using the purchase method. The
financial statements reflect the preliminary allocation of the purchase
price based on estimated fair values at the date of acquisition, pending
final determination of certain acquired assets and liabilities. The
preliminary allocation as of March 31, 1999, has resulted in acquired
goodwill of approximately $200 million, which is being amortized on a
straight-line basis over 40 years. Plans are currently in development to
integrate the operations of the combining companies, which may result in
certain costs, including severance and asset write-offs. Some of these
costs, once determinable, could result in an increase in goodwill. The
results of LeaRonal have been included in the consolidated financial
statements since the acquisition date.
Also in 1999 the company purchased an additional 15% interest in its Rodel
affiliate, bringing its total interest to 48%. These investments, begun in
1997, total approximately $149 million. The Rodel investment is accounted
for on the equity method with the company's share of earnings reported as
equity in affiliates.
Net cash in-flows during the first quarter of 1999 included these
transactions and resulted in a $45 million increase in cash and cash
equivalents versus year-end 1998. Free cash flows for the first quarter of
1999 versus the prior-year period were as follows:
Quarter Ended
March 31,
------------------------
1999 1998
------------------------
Cash provided by operating activities $ 50 $ 35
Capital additions (38) (34)
Dividends (30) (31)
------------------------
Free cash flow $(18) $(30)
------------------------
Free cash outflows reflect seasonality and are not indicative of full year
free cash flows. Fixed asset additions during the first quarter of 1999
included acrylics expansion in Texas and for the Coatings business
Page 10
in Kentucky. Spending on emulsions plants in both Spain and China and
additional investment in the Agricultural Chemicals business was also
included. Spending for the full year, excluding additions related to
acquired companies, is expected to be approximately $250 million.
The debt ratio was 37% at the end of the quarter, compared with 25% at
year-end 1998. (The debt ratio is total debt, net of cash, divided by the
sum of net debt, minority interest, shareholders equity and ESOP shares.)
In 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes a new model for the
accounting and reporting of derivative and hedging transactions. The
statement amends a number of existing standards and is effective for fiscal
years beginning after June 15, 1999. The company expects to adopt this
standard as required in fiscal year 2000 and, because of continual
business-driven changes to its derivatives and hedging programs, has not
fully assessed its potential impact on its financial position or results of
operations.
During 1996 management initiated an enterprise-wide program to prepare the
company's computer systems and applications for the year 2000, and, in
1997, began assessing supply chain and customer implications. All of the
company's centralized computer systems have been inventoried and assessed
to determine their Year 2000 readiness. Remediation of all systems was
originally scheduled for completion by year end 1998. Remediation of
critical computer applications supporting business processes is complete,
with the exception of a few lower priority applications that are expected
to be remediated by the end of May 1999. Testing and re-integration of
all remediated systems is expected to be completed by June 1999 as
originally planned. Assessment and most remediation of key process control
and other plant floor systems at each facility is complete, or will be
complete by June 1999. Some remaining remediation of low risk systems has
been scheduled into the third quarter of 1999 in order to minimize
production disruptions. In addition to these internal systems and
processes, the company has placed a high priority on continuing to assess
and update the status of its critical suppliers and business partners, such
as warehouses, toll manufacturers, distributors and transportation
services.
The company expects all of its internal remediation and testing to be
completed as stated above; however, despite its best efforts, business may
be interrupted with potentially material impact on its financial position
or results of operations if any of the following occur: external supply of
raw materials or utilities is delayed or unavailable for an extended period,
particularly in developing countries; manufacturing systems fail; or
central corporate computer systems fail. To limit the effects of these
potential failures, the company has completed corporate contingency
planning guidelines and each business unit, staff function and plant site
is preparing contingency plans for potential disruptions of critical
systems or processes. Examples of contingency plans include a "freezing"
of modifications to computer systems, ensuring availability of additional
information technology personnel during the critical time period,
backing-up systems at off-site facilities, making alternate raw material
supply arrangements, and preparing for temporary shut-downs of certain
plants and facilities. In addition, the company has standard operating
procedures in place for a safe and orderly shut-down of systems and
facilities should this be necessary.
Page 11
A significant proportion of the costs associated with the year 2000 effort
represent the redeployment of existing information technology resources.
In addition, consulting and other expenses related to software application
and facilities enhancements necessary to prepare the systems for the year
2000 will be incurred. Approximately three quarters of these costs, which
are expected to total $17 million, have been incurred and charged to
expense through March 31, 1999.
This discussion contains forward-looking statements based, in part, on
assumptions such as the following: that the manufacturers of the company's
computer systems and software have correctly represented the year 2000
status of their products; that the company's suppliers and customers will
meet their stated year 2000 compliance obligations; and that the company's
own investigation, remediation, testing and systems implementations are
successful. The year 2000 discussions and other forward-looking
statements made in this report are based on current expectations and are
subject to the risks and uncertainties discussed here as well as those
detailed in the "Cautionary Statements" section of the 1998 Form 10-K filed
with the Securities and Exchange Commission on February 26, 1999.
Page 12
Rohm and Haas Company and Subsidiaries
SALES BY BUSINESS SEGMENT AND CUSTOMER LOCATION (Millions of dollars)
- -------------------------------------------------------------------------------
FIRST QUARTER 1999 AND 1998
- -------------------------------------------------------------------------------
Performance Chemical Electronic
Polymers Specialties Materials Total
-------------- --------------- --------------- --------------
1999 1998 1999 1998 1999 1998 1999 1998
-------------- --------------- --------------- --------------
North America $ 366 $ 382 $ 82 $ 83 $ 55 $ 46 $ 503 $ 511
Europe 146 155 79 81 29 24 254 260
Asia-Pacific 46 46 48 33 37 30 131 109
Latin America 28 28 24 29 - - 52 57
-------------- --------------- --------------- --------------
Total $ 586 $ 611 $ 233 $ 226 $ 121 $ 100 $ 940 $ 937
-------------- --------------- --------------- --------------
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Page 13
ROHM AND HAAS COMPANY AND SUBSIDIARIES
- -------------------------------------------------------------------------------
NET EARNINGS BY BUSINESS GROUP AND CUSTOMER LOCATION
Quarter Ended
March 31,
-----------------------
1999 1998
-----------------------
(Millions of dollars)
-----------------------
BUSINESS GROUP
Performance Polymers $ 86 $ 80
Chemical Specialties 29 32
Electronic Materials 5 13
Corporate (10) (16)
- -------------------------------------------------------------------
Total $ 110 $ 109
- -------------------------------------------------------------------
CUSTOMER LOCATION
North America $ 70 $ 83
Europe 29 31
Asia-Pacific 13 6
Latin America 8 5
Corporate (10) (16)
- -------------------------------------------------------------------
Total $ 110 $ 109
- -------------------------------------------------------------------
In the first quarter of 1999, corporate includes a gain on remediation
related insurance recoveries. Also in corporate are non-operating items
such as interest income and expense, corporate governance costs and
corporate exploratory research.
ANALYSIS OF CHANGE IN BASIC PER-SHARE EARNINGS
CURRENT PERIOD RELATIVE TO YEAR-EARLIER PERIOD
$/Share
(after-tax)
-----------
GROSS PROFIT
Selling prices $ (.16)
Physical volume and product mix .10
Raw material costs .13
Other manufacturing costs (.05)
Currency effect on gross profit .02
- --------------------------------------------------------------------
Increase in gross profit .04
- ---------------------------------------------------------------------
OTHER CAUSES
Selling, administrative and research expenses* (.03)
Interest expense -
Remediation related insurance recoveries .07
Share of affiliate earnings (.05)
Reduction in outstanding shares of common stock .05
Other (.02)
- --------------------------------------------------------------------
Increase from other causes .02
- --------------------------------------------------------------------
Increase in basic per-share earnings $ .06
- --------------------------------------------------------------------
* Amounts shown are on a U.S. dollar basis and include the impact of
currency movements compared to the prior-year period.
- ---------------------------------------------------------------------
Page 14
EXHIBIT INDEX
(Pursuant to Part 232.102(d) of Regulation S-T)
Exhibit
No. Description
- ------- -----------------------------------------------------------
(12) Computation of Ratio of Earnings to Fixed Charges
(27) Financial Data Schedules