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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, 1997 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 March 6, 1998: $3,990,208,069
Common stock outstanding at March 6, 1998: 60,652,392 SHARES.
Documents incorporated by reference:
Part I --Annual Report to Stockholders for year ended December 31, 1997
Part II --Annual Report to Stockholders for year ended December 31, 1997
Part III --Definitive Proxy Statement to be filed with the Securities
and Exchange Commission on or about March 27, 1998, except
the Report on Executive Compensation and Graph titled
"Cumulative Total Return to Shareholders" on pages 13
through 15.
Part IV --Annual Report to Stockholders for year ended December 31, 1997
==============================================================================
PART I
ITEM 1. BUSINESS
The information indicated below appears in the 1997 Annual Report to
Stockholders (Stockholders' Report) and is incorporated by reference:
Page of
Stockholders'
Report
------------
Business operations:
Polymers, Resins and Monomers ........................... 6
Performance Chemicals.................................... 11
Plastics................................................. 15
Agricultural Chemicals................................... 17
Industry segment information for years 1995-97............. 43
Foreign operations for years 1995-97....................... 43
Employees.................................................. 54
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. Most 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
17. 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 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
products are specialty chemicals which are sold to customers who demand a
high level of customer service and technical expertise from the company and
its sales force.
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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 $201,000,000,
$187,000,000 and $194,000,000 in 1997, 1996 and 1995, respectively.
Approximately 15% of the company's employees were engaged in research and
development activities in 1997, 1996 and 1995.
Environmental Matters
A discussion of environmental matters is incorporated herein by
reference to pages 27 and 28 of the Stockholders' Report.
ITEM 2. PROPERTIES
The company, its subsidiaries and affiliates presently operate 48
manufacturing facilities in 22 countries. A list identifying those
facilities is found on page 60 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 28 and 29 of the company's
Stockholders' Report and throughout the various business discussions of the
company's industry segments found on pages 6 through 17 of the
Stockholders' Report.
ITEM 3. LEGAL PROCEEDINGS
A discussion of legal proceedings is incorporated herein by reference
to pages 51 and 52 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 1997.
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 4,357 registered common
stockholders as of March 6, 1998. The 1997 and 1996 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 33 and 34 of the
Stockholders' Report and are incorporated in this Form 10-K by reference.
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ITEM 6. SELECTED FINANCIAL DATA
The company's summary of selected financial data and related notes for
the years 1993 through 1997 are incorporated in this Form 10-K by reference
to pages 54 through 56 of the Stockholders' Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of 1995 to 1997 results is
incorporated herein by reference to pages 22 through 31 of the
Stockholders' Report. These items should be read in conjunction with the
consolidated financial statements presented on pages 35 through 53 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 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. These factors can
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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 27 and 28 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 32 of the Stockholders' Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets as of December 31, 1997, and 1996, and
the related consolidated statements of earnings, stockholders' equity and
cash flows for the years ended December 31, 1997, 1996, and 1995, together
with the report of KPMG Peat Marwick LLP dated February 23, 1998 are
incorporated in this Form 10-K by reference to pages 35 through 53 of the
Stockholders' Report. Supplementary selected quarterly financial data is
incorporated in this Form 10-K by reference to pages 33 and 34 of the
Stockholders' Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No reports on Form 8-K were filed during 1997 or 1996 relating to any
disagreements with accountants on accounting and financial disclosure.
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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, 1997, has been omitted, except for
the information presented below, because the company on or about March 27,
1998, 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.
William C. Andrews, 52, vice president since 1997; corporate controller
since 1995; previously assistant controller from 1992 to 1995 and director
of finance and customer service for the European region from 1989 to 1994.
Thomas L. Archibald, 48, vice president since 1997; director of
engineering and manufacturing; previously plant manager for the Louisville,
Kentucky plant from 1990 to 1996.
Paul J. Baduini, 50, vice president since 1993; business unit director
for ion exchange resins since 1992.
Bradley J. Bell, 45, vice president since 1997; chief financial officer
and treasurer since 1997; previously vice president and treasurer of
Whirlpool Corporation from 1987 to 1997.
Albert H. Caesar, 60, vice president since 1993; business unit director
and president of AtoHaas Americas Inc. since 1992.
A. Wayne Carney, 49, vice president since 1995; business unit director
for formulation chemicals since 1990.
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Patrick R. Colau, 52, vice president since 1995; business unit director
for polymers and resins since 1996; previously chief operating officer from
1994 to 1995 and chief executive officer from 1992 to 1994 of Shipley
Company.
Nance K. Dicciani, 50, vice president since 1993; business unit
director for monomers and chairman of RohMax since 1996; previously
business unit director for petroleum chemicals from 1991 to 1996.
David T. Espenshade, 59, vice president since 1993; director of
materials management since 1990.
Carlos Estevez, 55, vice president since 1996; regional director for
Latin America since 1996; previously business director for agricultural
chemicals in Latin America from 1994 to 1996 and general manager of Rohm
and Haas Brazil and Southern Cone countries from 1992 to 1996.
J. Michael Fitzpatrick, 51, vice president since 1993; chief technology
officer since 1996; previously director of research since 1993 and general
manager of Rohm and Haas (UK) Limited and European regional business
director for polymers and resins from 1990 to 1993.
Marisa L. Guerin, 45, vice president since 1994; director of human
resources since 1994; previously manager of training and development from
1991 to 1994 .
Rajiv L. Gupta, 52, vice president since 1993; regional director of
Asia-Pacific since 1993; previously business unit director for plastics
additives from 1989 to 1993.
Howard C. Levy, 54, vice president since 1993; business unit director
for biocides since 1989.
Philip G. Lewis, 47, vice president since 1993; director of safety,
health and environmental affairs and product integrity since 1993;
previously director of safety, health and environmental affairs from 1989
to 1993 and corporate medical director from 1987 to 1993.
John P. Mulroney, 62, director since 1982; president and chief
operating officer since 1986; director of Teradyne Inc. and Aluminum
Company of America.
Richard C. Shipley, 52, vice president since 1996; president of
Shipley Company L.L.C. since 1985.
William H. Staas, 54, vice president since 1993; director of research
since 1996; previously business unit director for monomers from 1990 to
1996.
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David A. Stitely, 58, vice president since 1995; director of
information technology and chief information officer since 1990.
John F. Talucci, 58, vice president and business unit director for
agricultural chemicals since 1989.
Charles M. Tatum, 50, vice president since 1990; business unit director
of plastics additives since 1993; previously director of research from 1989
to 1993.
Basil A. Vassiliou, 63, vice president since 1986; regional director of
Europe since 1985; business group executive for plastics since 1991.
Robert P. Vogel, 53, vice president since 1994; general counsel
responsible for legal, tax and regulatory matters since 1994; previously
associate general counsel, regulatory counsel and director of safety,
health and environment and product integrity from 1991 to 1993.
J. Lawrence Wilson, 62, director since 1977; chairman of the board and
chief executive officer since 1988; director of The Vanguard Group of
Investment Companies, Cummins Engine Company, Inc. and Mead Corporation
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 pages 17 through 18 of the
definitive Proxy Statement to be filed with the Securities and Exchange
Commission on or about March 27, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by Item 13 is incorporated in this Form 10-K
by reference to page 9 of the definitive Proxy Statement to be filed with
the Securities and Exchange Commission on or about March 27, 1998.
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 35 through
53 of the Stockholders' Report, a complete copy of which follows page
7 of this report, together with the report of KPMG Peat Marwick LLP
dated February 23, 1998.
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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 Auditors' Report on Financial
Statement Schedule..................................... 7
Schedule submitted:
II - Valuation and qualifying accounts for the years
1997, 1996 and 1995 ................................... 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. The Rohm and Haas Company Non-
Qualified Savings Plan is filed as Exhibit (10) and is attached as
pages 9 through 16 of this Form 10-K.
Exhibit (12), Computation of Ratio of Earnings to Fixed Charges
for the company and subsidiaries, is attached as page 17 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 18 and 19 of this Form 10-K.
Exhibit (23), Consent of independent certified public
accountants, is attached as page 20 of this Form 10-K.
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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
Vice President, Chief Financial
Officer and Treasurer
March 23, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 23, 1998 by the following persons on behalf of
the registrant and in the capacities indicated.
- ------------------------------------------------------------------------------
Signature and Title Signature and Title
- ------------------------------------------------------------------------------
/s/ J. Lawrence Wilson /s/ Paul F. Miller, Jr.
- ----------------------------------- -----------------------------------
J. Lawrence Wilson Paul F. Miller, Jr.
Director, Chairman of the Board and Director
Chief Executive Officer
/s/ Bradley J. Bell /s/ Jorge P. Montoya
- ----------------------------------- -----------------------------------
Bradley J. Bell Jorge P. Montoya
Vice President, Chief Financial Director
Officer and Treasurer
/s/ William J. Avery /s/ Sandra O. Moose
- ----------------------------------- -----------------------------------
William J. Avery Sandra O. Moose
Director Director
/s/ George B. Beitzel /s/ John P. Mulroney
- ----------------------------------- -----------------------------------
George B. Beitzel John P. Mulroney
Director Director
/s/ Daniel B. Burke /s/ Gilbert S. Omenn
- ----------------------------------- -----------------------------------
Daniel B. Burke Gilbert S. Omenn
Director Director
/s/ Earl G. Graves /s/ Ronaldo H. Schmitz
- ----------------------------------- -----------------------------------
Earl G. Graves Ronaldo H. Schmitz
Director Director
/s/ James A. Henderson /s/ Alan Schriesheim
- ----------------------------------- -----------------------------------
James A. Henderson Alan Schriesheim
Director Director
/s/ John H. McArthur /s/ Marna C. Whittington
- ----------------------------------- -----------------------------------
John H. McArthur Marna C. Whittington
Director Director
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Rohm and Haas Company:
Under date of February 23, 1998, we reported on the consolidated
balance sheets of Rohm and Haas Company and subsidiaries as of December 31,
1997 and 1996, 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, 1997, which are included in the 1997 Annual
Report to Stockholders. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report on Form
10-K for the year 1997. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedule as listed in Item 14 of
the Form 10-K for the year 1997 under the heading "Financial Statement
Schedule." This financial statement schedule is the responsibility of the
company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Philadelphia, PA
February 23, 1998
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SCHEDULE II
ROHM AND HAAS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
---- ---- ----
(millions of dollars)
Deducted from Accounts Receivable --
Allowances for losses:
Balance at beginning of year..... $14 $12 $11
Additions charged to earnings.... 3 4 4
Charge-offs, net of recoveries... (2) (2) (3)
--- --- ---
Balance at end of year........... $15 $14 $12
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