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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 COMMISSION FILE NUMBER 1-3507
___________________________
ROHM AND HAAS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 23-1028370
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 INDEPENDENCE MALL WEST, PHILADELPHIA, PA 19106
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 215-592-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ------------------------------- ------------------------
Common Stock of $2.50 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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 / /.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K / /.
Aggregate market value of voting stock held by nonaffiliates of the registrant
as of February 29, 2000: $4,374,819,052
Common stock outstanding at February 29, 2000: 219,185,062 SHARES.
Documents incorporated by reference:
Part I -Annual Report to Stockholders for year ended December 31, 1999
Part II -Annual Report to Stockholders for year ended December 31, 1999
Part III -Definitive Proxy Statement to be filed with the Securities and
Exchange Commission except the Report on Executive Compensation
and Graph titled "Cumulative Total Return to Shareholders"
included therein.
Part IV -Annual Report to Stockholders for year ended December 31, 1999
PART I
ITEM 1. BUSINESS
The information indicated below appears in the 1999 Annual Report to
Stockholders (Stockholders' Report) and is incorporated by reference:
Page of
Stockholders'
Report
-------------
Business operations:
Performance Polymers..................................... 6
Chemical Specialties..................................... 12
Electronic Materials..................................... 15
Salt..................................................... 19
Industry segment information for years 1997-1999........... 50
Foreign operations for years 1997-1999..................... 51
Employees.................................................. 62
Raw Materials
The company uses a variety of commodity chemicals as raw materials in
its operations. In most cases, these raw materials are purchased from
multiple sources under long-term contracts. Many of these materials are
hydrocarbon derivatives such as propylene, acetone and styrene.
Competition
The principal market segments in which the company competes are
described in the company's Annual Report to Stockholders on pages 6 through
21. The company experiences vigorous competition in each of these segments.
The company's competitors include many large multinational chemical firms
based in Europe, Japan and the United States. In some cases, the company
competes against firms which are producers of commodity chemicals which the
company must purchase as the raw materials to make its products. The
company, however, does not believe this places it at any significant
competitive disadvantage. The company's specialty chemicals products
compete with products offered by other manufacturers on the basis of price,
product quality and specifications, and customer service. Most of the
company's specialty chemicals are sold to customers who
demand a high level of customer service and technical expertise from the
company and its sales force.
All areas in which the Salt segment operates are highly competitive.
Although the Company is a major factor in the salt industry, its market
share varies widely, depending on the geographic area and the type of
product involved. This segment uses price, quality, service, product
performance, and technical, advertising and promotional support as its
principal methods of competition.
Research and Development
The company maintains its principal research and development
laboratories at Spring House, Pennsylvania. Research and development
expenses, substantially all company sponsored, totaled $236 million, $207
million and $201 million in 1999, 1998 and 1997, respectively.
Environmental Matters
A discussion of environmental matters is incorporated herein by
reference to pages 31 and 33 of the Stockholders' Report.
ITEM 2. PROPERTIES
The company, its subsidiaries and affiliates presently operate more
than 100 manufacturing facilities in 25 countries. A list identifying
those facilities is found on page 65 of the company's Annual Report to
Stockholders which is hereby incorporated by reference. Additional
information addressing the suitability, adequacy and productive capacity of
the company's facilities is found on pages 33 and 34 of the company's
Stockholders' Report and throughout the various business discussions of the
company's industry segments found on pages 6 through 21 of the
Stockholders' Report.
ITEM 3. LEGAL PROCEEDINGS
A discussion of legal proceedings is incorporated herein by reference
to pages 57 through 59 of the Stockholders' Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The company's common stock of $2.50 par value is traded on the New York
Stock Exchange (Symbol: ROH). There were 9,462 registered common
stockholders as of December 31, 1999. The 1999 and 1998 quarterly
summaries of the high and low prices of the company's common stock and the
amounts of dividends paid on common stock are presented on pages 38 and 60
of the Stockholders' Report and are incorporated in this Form 10-K by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The company's summary of selected financial data and related notes for
the years 1995 through 1999 are incorporated in this Form 10-K by reference
to pages 62 through 64 of the Stockholders' Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of 1997 to 1999 results is
incorporated herein by reference to pages 26 through 38 of the
Stockholders' Report. These items should be read in conjunction with the
consolidated financial statements presented on pages 39 through 61 of the
Stockholders' Report.
Cautionary Statements
Any statements made by the company in its filings with the Securities
and Exchange Commission or other communications (including press releases
and analyst meetings and calls) that are not statements of historical fact
are forward-looking statements. These statements include, without
limitation, those relating to anticipated product plans, litigation and
environmental matters, currency effects, profitability, and other
commitments or goals. Forward-looking statements are subject to a number
of risks and uncertainties that could cause actual results to differ
materially from the statements made. These risks and uncertainties
include, but are not limited to, the following:
1) Currencies. Approximately half of the company's revenues are from
outside the United States, a significant portion of which are denominated
in foreign currencies. Also, significant production facilities are located
outside the United States. The company's financial results therefore can
be affected by changes in foreign currency rates. Though the company uses
certain financial instruments to mitigate these effects, it does not hedge
its foreign currency exposure in a manner that would entirely eliminate the
effects of changes in foreign exchange rates on the company's earnings,
cash flows and fair values of assets and liabilities. Accordingly,
reported revenue, net income, cash flows and fair values have been and in
the future may be affected by changes in foreign exchange rates. In
addition, because of the extensive nature of the company's foreign business
activities, financial results could be adversely affected by changes in
worldwide economic conditions, changes in trade policies or tariffs,
changes in interest rates, and political unrest.
2) Competition and Demand. The company's products are sold in a
competitive, global economy. Competitors include many large multinational
chemical firms based in Europe, Japan and the United States. These
competitors often have resources that are greater than the company's. In
addition, financial results are subject to fluctuations in demand and the
seasonal activity of certain of the company's businesses. The company also
manufactures and sells its products to customers in industries and
countries that are experiencing periods of rapid change, most notably
countries in Eastern Europe and in the Asia-Pacific region. Also, weather
conditions have historically had, and will likely continue to have in the
future, a significant impact on revenues and earnings in the company's
Agricultural Chemicals business and its Salt segment. These factors can
adversely affect demand for the company's products and therefore may have a
significant impact on financial results.
3) Supply and Capacity. From time to time certain raw materials the
company requires become limited. It is likely this will occur again in the
future. Should such limitations arise, disruptions of the company's supply
chain may lead to higher prices and/or
shortages. Also, from time to time, the company is subject to
increases in raw material prices and, from time to time, experiences
significant capacity limitations in its own manufacturing operations.
These limitations, disruptions in supply, price increases and capacity
constraints could adversely affect financial results.
4) Technology. The company has invested significant resources in
intellectual properties such as patents, trademarks, copyrights, and trade
secrets. The company relies on the protection these intellectual property
rights provide since it depends on these intellectual resources for its
financial stability and its future growth. The development and successful
implementation of new, competing technologies in the market place could
significantly impact future financial results.
5) Joint Ventures and Acquisitions. The company has entered, and in
the future may enter, into arrangements with other companies to expand
product offerings and to enhance its own capabilities. It will likely also
continue to make strategic acquisitions and divestitures. The success of
acquisitions of new technologies, companies and products, or arrangements
with third parties, is not predictable and there can be no assurance that
the company will be successful in realizing its objectives, or that
realization may not take longer than anticipated, or that there will not be
unintended adverse consequences from these actions.
6) Environmental. Risks and uncertainties related to environmental
matters are discussed on pages 31 through 33 of the Stockholders' Report
and are incorporated herein by reference.
ITEM 7A. MARKET RISK DISCUSSION
Management's discussion of market risk is incorporated herein by
reference to page 37 of the Stockholders' Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets as of December 31, 1999, and 1998, and
the related consolidated statements of earnings, stockholders' equity and
cash flows for the years ended December 31, 1999 and 1998, together with the
report of PricewaterhouseCoopers LLP dated March 7, 2000 are incorporated in
this Form 10-K by reference to pages 39 through 61 of the Stockholders'
Report. The consolidated statements of earnings, stockholders' equity and
cash flows for the year ended December 31, 1997 together with the report of
KPMG LLP dated February 23, 1998 is included in this report on page 10.
Supplementary selected quarterly financial data is incorporated in this Form
10-K by reference to pages 38 and 60 of the Stockholders' Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No reports on Form 8-K were filed during 1999 or 1998 relating to any
disagreements with accountants on accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
AND
ITEM 11. EXECUTIVE COMPENSATION
The information called for by Items 10 and 11 of this Form 10-K report
for the fiscal year ended December 31, 1999, has been omitted, except for
the information presented below, because the company will file with the
Securities and Exchange Commission a definitive Proxy Statement pursuant to
regulation 14(a) under the Securities Exchange Act of 1934.
Executive Officers
The company's executive officers along with their present position,
offices held and activities during the past five years are presented below.
All officers normally are elected annually and serve at the pleasure of the
Board of Directors. The company's non-employee directors and their
business experience during the past five years are listed in the company's
Proxy Statement.
Bradley J. Bell, 47, senior vice president and chief financial officer
since 1999; vice president, chief financial officer and treasurer from 1997
to 1998; previously vice president and treasurer of Whirlpool Corporation
from 1987 to 1997.
Pierre R. Brondeau, 42, vice president and director of the electronic
materials business group since 1999; president and chief executive officer
of Shipley Company, LLC since 1999; president and chief operating officer of
Shipley Company LLC since 1998; vice president and chief operating officer of
Shipley Company LLC since 1997; director of research, sales and marketing of
Shipley Company LLC since 1995.
Patrick R. Colau, 54, senior vice president and director of the
performance polymers business group since 1999; vice president 1995 to
1998; director of polymers and resins from 1996 to 1998; previously chief
operating officer of Shipley Company LLC from 1993 to 1995.
Nance K. Dicciani, 52, senior vice president, director of chemical
specialties business group and director of the European regions since 1999;
vice president 1993 to 1998; director for monomers and chairman of RohMax
from 1996 to 1998; previously business unit director for petroleum
chemicals from 1991 to 1996.
J. Michael Fitzpatrick, 53, director since 1999; president and chief
operating officer since 1999; vice president since 1993; chief technology
officer from 1996 to 1998; previously director of research from 1993 to
1995.
Joseph J. Forish, 47, vice president and director of human resources
since 1999; previously vice president of human resources for a unit of
Bristol-Myers Squibb Corporation from 1989 to 1999.
Rajiv L. Gupta, 54, director since 1999; chairman and chief executive
officer since 1999; vice chairman since 1999; vice president and regional
director of Asia-Pacific from 1993 to 1998.
William E. Johnston, 59, senior vice president and business group
director, salt and surface finishes since 1999; previously president and
chief operating officer of Morton International from 1995 to 1999.
Robert A. Lonergan, 54, vice president and general counsel since 1999;
previously senior vice president, general counsel and secretary of Pegasus
Gold, Inc. from 1993 to 1999.
Charles M. Tatum, 52, senior vice president and chief technology
officer since 1999; vice president from 1990 to 1998; director of plastics
additives from 1994 to 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The security ownership of certain beneficial owners and management is
incorporated in this Form 10-K by reference to the definitive Proxy
Statement to be filed with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by Item 13 is incorporated in this Form 10-K
by reference to the definitive Proxy Statement to be filed with the
Securities and Exchange Commission.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements
The consolidated financial statements of Rohm and Haas Company are
incorporated in this Form 10-K by reference to pages 39 through 61 of
the Stockholders' Report, a complete copy of which follows page xx of
this report, together with the report of PricewaterhouseCoopers LLP
dated March 7, 2000. The report of KPMG LLP dated February 23, 1998
is included on page 10 of this Form 10-K.
2. Financial Statement Schedule
The following supplementary financial information is filed in this
Form 10-K and should be read in conjunction with the financial
statements in the Stockholders' Report:
PAGE
----
Independent Accountants' Report on Financial
Statement Schedule....................................... 9
Schedule submitted:
II - Valuation and qualifying accounts for the years
1999, 1998 and 1997 ..................................... 8
The schedules not included herein are omitted because they are not
applicable or the required information is presented in the financial
statements or related notes.
3. Exhibits
Exhibit (10), Material Contracts. Agreement with J. Lawrence Wilson
and is filed as Exhibit (10) and is attached as pages 11 through 17 of
this Form 10-K.
Exhibit (12), Computation of Ratio of Earnings to Fixed Charges for
the company and subsidiaries, is attached as page 18 of this Form
10-K.
Exhibit (13), Annual Report to Stockholders, follows page 7 of this
report.
Exhibit (21), Subsidiaries of the registrant, is attached as pages 19
to 21 of this Form 10-K.
Exhibit (23), Consent of independent certified public accountants
(a) Consent of PricewaterhouseCoopers LLP, attached
as page 22 of this report
(b) Consent of KPMG LLP, attached as page 23
of this report
Exhibit (27), Financial Data Schedule
(b) On January 19, 2000 the company filed a Report on Form 8-K with the
Securities and Exchange Commission, reporting, under Item 5 of said
Report, an update of descriptions of the company's capital stock as
contained in previous public filings.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, Rohm and Haas Company has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
/s/ Bradley J. Bell
-------------------------
Bradley J. Bell
Senior Vice President and
Chief Financial Officer
March 27, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 27, 2000 by the following persons on behalf of
the registrant and in the capacities indicated.
- ------------------------------------------------------------------------------
Signature and Title Signature and Title
- ------------------------------------------------------------------------------
/s/ Rajiv L. Gupta
- ------------------------------------ -----------------------------------
Rajiv L. Gupta James A. Henderson
Director, Chairman of the Board Director
and Chief Executive Officer
/s/ Bradley J. Bell /s/ Richard L. Keyser
- ------------------------------------ -----------------------------------
Bradley J. Bell Richard L. Keyser
Senior Vice President and Director
Chief Financial Officer
/s/ William J. Avery /s/ John H. McArthur
- ------------------------------------ -----------------------------------
William J. Avery John H. McArthur
Director Director
/s/ James R. Cantalupo /s/ Jorge P. Montoya
- ------------------------------------ -----------------------------------
James R. Cantalupo Jorge P. Montoya
Director Director
/s/ J. Michael Fitzpatrick /s/ Sandra O. Moose
- ------------------------------------ -----------------------------------
J. Michael Fitzpatrick Sandra O. Moose
Director Director
/s/ Earl G. Graves /s/ Gilbert S. Omenn
- ------------------------------------ -----------------------------------
Earl G. Graves Gilbert S. Omenn
Director Director
/s/ David W. Haas /s/ Ronaldo H. Schmitz
- ------------------------------------ -----------------------------------
David W. Haas Ronaldo H. Schmitz
Director Director
/s/ Thomas W. Haas /s/ Alan Schriesheim
- ------------------------------------ -----------------------------------
Thomas W. Haas Alan Schriescheim
Director Director
/s/ Marna C. Whittington
-----------------------------------
Marna C. Whittington
Director
SCHEDULE II
ROHM AND HAAS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
---- ---- ----
(millions of dollars)
Deducted from Accounts Receivable --
Allowances for losses:
Balance at beginning of year..... $12 $15 $14
Additions charged to earnings.... 6 3 3
Acquisitions .................... 22 -- --
Charge-offs, net of recoveries... (3) (6) (2)
--- --- ---
Balance at end of year........... $37 $12 $15
=== === ===
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and
Stockholders of Rohm and Haas Company
Our audits of the consolidated financial statements referred to in our
report dated March 7, 2000 appearing in the 1999 Annual Report to
Stockholders of Rohm and Haas Company (which report and consolidated
financial statements are incorporated by reference in this Annual Report
on Form 10-K) also included an audit of the financial statement schedule
listed in Item 14(a)(2) of this Form 10-K. In our opinion, this
financial statement schedule presents fairly, in all material respects,
the information set forth therein when read in conjunction with the
related consolidated financial statements.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 7, 2000
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
of Rohm and Haas Company:
We have audited the consolidated statements of earnings, stockholders'
equity and cash flows of Rohm and Haas Company and subsidiaries for the
year ended December 31, 1997. In connection with our audit of these
consolidated financial statements, we also have audited the related
financial statement schedule as listed in item 14 (a) (2) for the year
ended December 31, 1997. These consolidated financial statements and
financial statement schedule are the responsibility of management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audit 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 misstatements. 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 audit provided a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of the operations
and cash flows of Rohm and Haas Company and subsidiaries as of December
31, 1997, in conformity with generally accepted accounting principles.
Also in our opinion, the related financial statement schedule for the
year ended December 31, 1997, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in
all material respects, the information set forth therein.
KPMG LLP
Philadelphia, Pennsylvania
February 23, 1998