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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from     to
 Commission file number 1-3507
 ROHM AND HAAS COMPANY
  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)
 215) 592-3000
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of each exchange on which registeredCommon Stock of $2.50 par value
    
    New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:
 þ o
 o þ
 þ o
 þ
  þ o o o
  o þ
 
  DOCUMENTS INCORPORATED BY REFERENCE




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Rohm and Haas Company 2007 Form 10-K
Table of Contents
 Item
    
    
    PagePART IItem 1
    
    Business
    
    
    1Item 1A
    
    Cautionary Statements and Risk Factors
    
    
    17Item 1B
    
    Unresolved Staff Comments
    
    
    19Item 2
    
    Properties
    
    
    20Item 3
    
    Legal Proceedings
    
    
    22Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    22PART IIItem 5
    
    Market for the Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    23Item 6
    
    Selected Financial Data
    
    
    26Item 7
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    27Item 7A
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    54Item 8
    
    Financial Statements and Supplementary Data
    
    
    55Item 9
    
    Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
    
    
    113Item 9A
    
    Controls and Procedures
    
    
    113Item 9B
    
    Other Information
    
    
    113PART IIIItem 10
    
    Directors, Executive Officers and Corporate Governance
    
    
    114Item 11
    
    Executive Compensation
    
    
    116Item 12
    
    Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    116Item 13
    
    Certain Relationships and Related Transactions, and
Director Independence
    
    
    116Item 14
    
    Principal Accountant Fees and Services
    
    
    116PART IVItem 15
    
    Exhibits and Financial Statement Schedules
    
    
    117SIGNATURES
    
    
    
    
    
    
    121




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PART I
 Item 1. Business
 The Company
   Net Sales (in millions)
 
 Annual Net Sales by Region ( in millions )
 
 1




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Automotive Coatings
  Our Strategic Focus
   
    
    Position Our Portfolio For Accelerated Growth by leveraging our integrated acrylic
monomer and polymer chain; accelerating investment in Display Technologies; creating or
expanding platforms that address the growing needs in food, health, water, energy, and
other areas in the developed and developing worlds; and supplementing our organic growth
with highly selective acquisitions which bring a growth platform technology or geographic
supplement to our core businesses.
    
    Build Value-Creating Business Models in Rapidly Developing Economies by tailoring
products to specific local or regional needs; finding solutions that are affordable and
meet local requirements; organizing in a manner that enables rapid decision-making;
investing in local talent; and building plant facilities that can compete effectively with
local and regional players as well as multinational players. Rapidly Developing Economies
are defined as countries within our Latin American Region, Asia Pacific Region (excluding
Japan, Australia and New Zealand) and Central, Eastern Europe (including Russia and other
former Soviet Republics) and Turkey.
    
    Innovate with a Market / Customer Focus by increasingly shifting the focus and
delivery of technology programs closer to the customer, driving to faster and more tailored
output.
    
    Operational Excellence / Continuous Improvement by maintaining flat conversion costs
over the next three years; building more capital-efficient plants in emerging markets;
continuing to optimize our global footprint; and increasing global sourcing, especially
from low-cost countries.
    
    Deploy Right Talent in Right Places by ensuring that leadership talent with the right
depth and breadth is in place to drive the profitable growth of our businesses through
shifting deployment of more key leaders to locations outside the U.S.; and continuing to
drive the nurturing and development of our global workforce.
 Cash Generation
  2




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Corporate Governance
  
    
    Ethical and legal behavior at all times;
    
    Integrity in all business interactions; and
    
    Trust by doing what we promise.
  Our Businesses
 .
 Net Sales by Business Segment (in millions)
 
 3




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ELECTRONIC MATERIALS GROUP
  Semiconductor Technologies Circuit Board Technologies, Packaging and Finishing
Technologies Semiconductor Technologies
 ELECTRONIC TECHNOLOGIES
 Net Sales (in millions)
 
 Net Sales by Business Unit (in millions)
 
 4




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Electronic Technologies
 Circuit Board Technologies
 Business
    
    Markets
    
    Products
    
    End UsesCircuit Board Technologies
    
         Electronic devices
     Communication
     Computers
     Transportation

     Recreation
    
         Enabling technology for all
aspects of the manufacture
of printed circuit boards
     Products
such as: photoresists,
solder mask, electroless and
electrolytic copper
    
         Cellular phones
     Personal
computers
     Cars
and trucks
     Electronic games
 Packaging and Finishing Technologies
 Business
    
    Markets
    
    Products
    
    End UsesPackaging and
Finishing
Technologies
    
         Electronic devices
     Connector finishing
     Semiconductor
packaging
     Surface finishing
    
         Materials and technology
for integrated circuit packaging,
connectors and industrial finishing
    
         Cellular phones
     Personal computers
     Cars and trucks
     Home appliances
     Office equipment
     Electronic games
 Semiconductor Technologies
 Business
    
    Markets
    
    Products
    
    End UsesSemiconductor 
Technologies
    
         Electronics and
communication devices
     Transportation
     Home and office goods
     Recreation
    
         Essential technology for
creating state-of-the-art
integrated circuits:photoresists,
developers, removers, anti-reflective
coatings, chemical mechanical
planarization (CMP) pads and slurries
    
         Cellular phones
     Personal computers
     Cars and trucks
     Home appliances
     Office equipment
     Electronic games
 5




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DISPLAY TECHNOLOGIES
 Net Sales (in millions)
 
 
 *
    
    Includes six months of sales from Kodak light management film
technologies and one month of sales from SKC Haas Display Films.  Display Technologies Semiconductor Technologies.
 Business
    
    Markets
    
    Products
    
    End UsesDisplay Technologies
    
         Electronics and
communication devices
    
         Films for LCD displays
     Films for plasma displays
     Process chemicals for LCD
displays
    
         Television monitors
     Computer monitors
     Electronic device
displays
 6




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SPECIALTY MATERIALS BUSINESS GROUP
      PAINT AND COATINGS MATERIALS
 Net Sales (in millions)
 
  7




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Business
    
    Markets
    
    Products
    
    End UsesPaint and Coatings
Materials
    
         Building and construction
     Home improvement
     Industrial coatings
    
         An array of versatile acrylic
emulsion polymers and other
technologies
     A range of additives, such as
thickeners, extenders and
opacifiers
    
         House paints
     Traffic paints
     Metal coatings
     Concrete
     Roof coatings
     Insulation
 8




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PACKAGING AND BUILDING MATERIALS
 Net Sales (in millions)
 
   o
    
    Formulated adhesives and adhesive polymers used in flexible packaging, tape and
label, transportation, and other applicationso
    
    Performance enhancing additives for plastics used in a broad array of
applications, especially construction materials (e.g. vinyl siding, vinyl windows,
vinyl fencing) and packagingo
    
    Processing aids for plastic productiono
    
    Specialty polymers and coatings for use in leather, textile, graphic arts,
paper, and packaging applications
 Business
    
    Markets
    
    Products
    
    End UsesPackaging and
Building Materials
    
         Packaging
     Paper
     Construction
     Durables
     Transportation
     Graphic arts
     Leather
     Textiles
    
         Packaging adhesives
     Plastic additives
     Pressure sensitive adhesives
     Specialty polymers
     Specialty coatings
     Rubber-to-metal bonding
adhesives
     Flocking agents
    
         Flexible and rigid packaging
     Vinyl construction materials (siding, windows,
fencing, decks)
     Paper and film labels and decals
     Consumer, industrial and specialty tapes
     Anti-vibration components
     PVC pipe
     Appliances and business machines
 
 9




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PRIMARY MATERIALS
 Net Sales (in millions)
 
 Internal and External Net Sales (in millions)
 
  Business
    
    Markets
    
    Products
    
    End UsesPrimary Materials
    
      Building and construction
  Personal care
  Packaging
  Household products
  Chemicals
    
      Methyl methacrylate
  Acrylic acid
  Associated esters
  Specialty monomers
  Polyacrylic acid dispersants
    
      Adhesives
  Paints and coatings
  Floor polishes
  Hair sprays
  Laundry and dishwater detergents
  Super absorbent products
 10




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PERFORMANCE MATERIALS GROUP
 Process Chemicals and Biocides Powder Coatings,
 Net Sales (in millions)
 
 Net Sales by Business Unit (in millions)
 
  Process Chemicals and Biocides .
 11




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Business
    
    Markets
    
    Products
    
    End UsesProcess Chemicals and
Biocides
    
      Paper
  Industrial and chemical
processing
  Lubricants
and
fuels
  Water processing
  Food processing
  Electronics
  Bioprocessing
  Household products
  Personal care
  Building and construction
    
      Anion and cation ion exchange
resins
  Sodium borohydride and related
technologies
  Salt-forming bases
  Adsorbents
  Antimicrobials
    
      Newspaper
  Corrosion inhibitors
  Pharmaceutical
processes
  Dyes
  Soft drinks and juices
  Ultra pure water
  Catalysis
  Electricity production
  Paints
  Wood preservation
 Powder Coatings
 Business
    
    Markets
    
    Products
    
    End UsesPowder Coatings
    
      Home and office goods
  Recreation
  Lawn and garden
  Transportation
  Building and construction
    
      Epoxy, polyester, silicone
and acrylic powder coatings
  Lamineer  a low temperature
curing coating
    
      Architectural aluminum
  Shelving
  Tables and chairs
  Office furniture
  Cabinetry
  Machinery
  Gas grills
 TM
  12




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SALT
 TM
 Net Sales (in millions)
 
  Business
    
    Markets
    
    Product
    
    End UsesSalt
    
      Consumer
    
      Salt
    
      Table salt  Food processing
    
    
    
      Home and industrial water conditioning salt  Industrial processing
    
    
    
      Ice control salt (highway de-icing and consumer)  Chemical processing
    
    
    
      Chemical/industrial processing salt  Water conditioning
    
    
    
      Industrial food processing  Agricultural
 13




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Raw Materials
    Competition and Seasonality
  Environmental
 Contingent Liabilities,
Guarantees and Commitments
 Research and Development
  
    
    EcovanceTM, which is an organic wood preservative that improves the
appearance and performance of treated lumber, and replaces heavy, metal-based biocides.
    
    InvinsaTM, a pre-harvest application of our patented 1-MCP technology for
agronomic crops, with the potential to significantly improve yields by improving heat and
drought tolerance.
    
    AvanseTM, which is a polymer technology that improves the cost-performance
balance of architectural paints, meets low VOC requirements and allows waterborne coatings
to replace solvent-based metal coatings.
    
    Display Films that improve the performance of LCD displays.
    
    Fast trackTM, which enables quicker drying road-marking paints.
    

AquasetTM, a water-based polymer replacement for formaldehyde resins,
currently used in insulation, but with the possibility for additional applications.
 14




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15




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Where Can You Find More Information About Rohm and Haas Company?
  Corporate Office:
 
 Phone Numbers:
 Main
line:  Investors line:
 Website: www.rohmhaas.com (intended to be an inactive textual reference only)
 Copies of our corporate governance policies, charters of the Board of Directors and
the Board committees and our Code of Business Conduct and Ethics can be obtained free
of charge by accessing the Governance section of our website or by writing to the
address listed below:
 Address:
  Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and amendments to those reports filed with the U.S. Securities and
Exchange Commission (SEC) can be obtained free of charge, by accessing the Investors
page on our website. Hard copies may be obtained free of charge, excluding exhibits,
by writing to the address listed below:
 Address:
 www.sec.gov (intended to be an inactive textual reference only).
 16




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Item 1A. Risk Factors
  Ø
    
    Changes in foreign currencies may adversely affect our financial results.Approximately 56% of our sales are derived from outside the United States, a significant portion
of which are denominated in foreign currencies. We have significant production facilities which
are located outside of the United States. Our financial results therefore will be affected by
changes in foreign currency rates. We use certain financial instruments to mitigate these
effects, but it is not cost effective to hedge our foreign currency exposure in a manner that would entirely
eliminate the effects of changes in foreign exchange rates on our earnings, cash flows and fair
values of assets and liabilities. Accordingly, reported sales, net earnings, cash flows and
fair values have been and in the future will be affected by changes in foreign exchange rates.Ø
    
    Changes in global economic, political and social conditions may adversely affect our
financial results.We are active participants in the markets of North America, Europe, Asia-Pacific, and Latin
America. Economic and political conditions and social unrest can cause fluctuations in demand
and volatility in the price of raw materials and other costs that can adversely affect our
financial results. Specifically, economic conditions affecting the building and construction,
electronics, packaging and paper, industrial and other, transportation, household and
personal care, water and food markets could adversely
affect our financial results.Ø
    
    As a multinational company, changes in foreign laws and regulatory requirements, export
controls or international tax treaties could adversely affect our financial results.We may have to comply with unexpected changes in foreign laws and regulatory requirements which
could negatively impact our operations and ability to manage our global resources. Export
controls or other regulatory restrictions could prevent us from shipping our products into and
from some markets. Changes in tax regulation and international tax treaties could reduce the
financial performance of our foreign operations.Ø
    
    Deliberate, malicious acts, including terrorism, could damage our facilities, disrupt our
operations or injure employees, contractors, customers or the public and adversely affect our
financial results.Intentional acts of destruction could hinder our sales or production and disrupt our supply
chain. Our facilities could be damaged or destroyed, reducing our operational production
capacity and requiring us to repair or replace our facilities at a substantial cost. Employees,
contractors and the public could suffer substantial physical injury for which we could be
liable. Governmental authorities may impose security or other requirements that could make our
operations more difficult or costly. The consequences of any such actions could adversely
affect our financial results.Ø
    
    Actions by our competitors may adversely affect our financial results.Our products are sold in a competitive, global economy. Competitors include many large
multinational chemical firms based in Europe, Asia and the United States. New competitive
products or pricing policies of our competitors can materially affect demand for and pricing of
our products.Ø
    
    Changes in demand may adversely affect our financial results.Our financial results are subject to fluctuations in demand, the effective forecasting of
customer demand, the seasonal activity of certain of our businesses and weather conditions,
particularly for the Salt segment. We also manufacture and sell our products to customers in
industries and countries that are experiencing periods of rapid change, most notably countries
in Central and Eastern Europe, Turkey, Russia, Latin America and the Asia-Pacific region. These
factors can affect demand for our products and therefore may have a significant impact on
financial results.Ø
    
    Restrictions on, and increased costs of, raw material supplies and energy may adversely
affect our financial results.We purchase large amounts of raw materials and energy for our businesses. The costs of these
materials and energy, in the aggregate, represent a substantial portion of our operating
expenses. From time to time, certain raw materials we require become limited. It is likely
this will occur again in the future. Should such limitations arise, disruptions of our supply
chain may lead to higher prices and/or shortages. Also, the costs of these raw materials and
energy vary with market conditions and may be highly volatile. While we try to increase the
 17




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prices of our products to cover increases in our costs, we may not be able to raise our prices
as quickly as the costs rise, if at all, as our customers may not accept these increases.
Ultimately, our ability to pass on increases in the cost of raw materials or energy to customers
is greatly dependent upon market conditions and raising prices could result in a loss of sales
volume. Further, increases in energy prices may increase our shipping costs. These limitations
and increased costs could adversely affect our financial results. (See additional discussion of
raw materials in Item 1.)Ø
    
    Production facilities are subject to operating risks and capacity limitations that may
adversely affect our financial condition or results of operations.We are dependent on the continued operation of our production facilities. Production facilities
are subject to hazards associated with the manufacturing, handling, storage, and transportation
of chemical materials and products, including pipeline leaks and ruptures, explosions, fires,
inclement weather and natural disasters, mechanical failure, unscheduled downtime, labor
difficulties, transportation interruptions, and environmental risks. Further, from time to
time, we may experience capacity limitations in our manufacturing operations. In addition, if
we are unable to effectively forecast our customers demand, it could affect our ability to
successfully manage operating capacity limitations. These hazards, limitations, disruptions in
supply and capacity constraints could adversely affect financial results.Ø
    
    An incident affecting the Houston ship channel area may adversely affect our financial
results.An incident affecting the Houston ship channel area could materially impact our financial
results as it could significantly affect both our operations because our largest plant is
located there; and our sources of supply, as a large portion of our petrochemical supply is from
this area.Ø
    
    Failure to develop new technology or the development and successful implementation of new,
competing technologies by our competitors could adversely affect future financial results.If we fail to develop new technology or if our competitors successfully develop and implement
new, competing technologies in the market place, our future financial results could be
significantly impacted.Ø
    
    Failure of our intellectual property protections could adversely affect future financial
results.We have invested significant resources in intellectual properties such as patents, trademarks,
copyrights and trade secrets. Since we depend on these intellectual resources for our financial
stability and future growth, we rely on the protection that these intellectual property rights
provide. With a significant portion of our operations outside the U.S., we could face
challenges in protecting our intellectual property and we may not be able to adequately protect
our trademarks and other intellectual property overseas due to uncertainty of laws and
enforcement in a number of countries relating to the protection of intellectual property rights.
A loss of intellectual property protections could enhance the ability of our competitors to
develop competitive products, thereby adversely affect our financial results.We also rely on unpatented proprietary know-how and continuing technological innovation and
other trade secrets to develop and maintain our competitive position. While it is our policy to
enter into confidentiality agreements with our employees and third parties to restrict the use
and disclosure of our trade secrets and proprietary know-how, those confidentiality agreements
may be breached. In addition, adequate remedies may not be available in the event of an
unauthorized use or disclosure of such trade secrets and know-how, and others could obtain
knowledge of such trade secrets through independent development or other access by legal means.
A breach of these trade secrets and know-how could adversely affect our financial results.Ø
    
    Failure to realize benefits from joint ventures, alliances or acquisitions could adversely
affect future financial results.We have entered, and in the future may enter, into arrangements with other companies to expand
product offerings and to enhance our own capabilities. We may continue to make strategic
acquisitions and divestitures. In certain of these ventures, we share control with third
parties and run the risk of encountering differences of opinion or having difficulty in reaching
consensus with respect to certain business issues. In addition, 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 we will be successful in realizing our objectives, or that
realization may not take longer than anticipated, or that there will not be unintended adverse
consequences from these actions. These complications and issues arising from our participation
in joint ventures, alliances and acquisitions could adversely affect our financial results.Ø
    
    Environmental costs could adversely affect our financial results.We are subject to extensive federal, state, local and foreign environmental, safety and health
laws, and regulations concerning, among other things, emissions in the air, discharges to land
and water, and the
 18




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generation, handling, treatment, and disposal of hazardous waste and other materials. We take
our environmental responsibilities very seriously, but there is a risk of environmental impact
inherent in chemical manufacturing operations. Future developments and more stringent
environmental regulations may require us to make additional unforeseen environmental
expenditures. In addition, laws and regulations require significant expenditures for
environmental protection equipment, compliance and remediation. These additional costs may
adversely affect our financial results.Ø
    
    Litigation results could adversely affect our financial results.We are subject to litigation in the normal course of business. In addition, we could become
subject to additional claims in the future. An adverse outcome of one or more of these
litigation matters, both current and those that may affect us in the future, could adversely
affect our financial results.Ø
    
    Inability to attract, develop or retain quality employees could adversely impact our
ability to achieve our objectives.We have objectives in our businesses and regions to sustain and grow the company. Continued
success in achieving the objectives of the company depends on the recruitment, development and
retention of qualified employees. Without these employees, we may not be able to achieve these
objectives.Ø
    
    Any damage to our reputation could adversely affect our financial results.Maintaining a good reputation globally is critical to selling our branded products. If we fail
to maintain high standards for product quality, safety and integrity, our reputation could be
jeopardized. Adverse publicity, whether or not valid, may reduce demand for our products or
cause production and delivery disruptions. Damage to our reputation or loss of confidence in our
products for any of these reasons could adversely affect our financial results.
 Item 1B. Unresolved Staff Comments
  19




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Item 2. Properties
  Research andManufacturing
    
    
    TechnicalCountry
    
    
    Location
    
    
    Reportable Segment
    
    
    Locations
    
    
    FacilitiesNon-U.S.
    
    
    Argentina
    
    
    Zarate
    
    
    (3,4,5)
    
    
    XAustralia
    
    
    Geelong
    
    
    (3,4,6)
    
    
    X
    
    
    XBahamas
    
    
    Inagua
    
    
    (7)
    
    
    XBrazil
    
    
    Jacarei
    
    
    (3,4,5,6)
    
    
    X
    
    
    XCanada
    
    
    Iles-De-La-Madeleine
    
    
    (7)
    
    
    XLindbergh
    
    
    (7)
    
    
    XOjibway
    
    
    (7)
    
    
    XPugwash
    
    
    (7)
    
    
    XRegina
    
    
    (7)
    
    
    XWest Hill
    
    
    (3,4)
    
    
    XWindsor
    
    
    (7)
    
    
    XChina
    
    
    Beijing
    
    
    (3,4)
    
    
    XDongGuan
    
    
    (1)
    
    
    X
    
    
    XHong Kong
    
    
    (1)
    
    
    X
    
    
    XSanshui
    
    
    (3,4,5)
    
    
    XShanghai
    
    

(1,3,4,6)
    
    
    X
    
    
    XSuzhou
    
    

(2)
    
    
    XWeihai
    
    
    (4)
    
    
    XColombia
    
    
    Barranquilla
    
    
    (3,4,5)
    
    
    XFrance
    
    
    Chauny
    
    
    (6)
    
    
    XLauterbourg
    
    

(1,3,4,6)
    
    
    XSemoy
    
    
    (4)
    
    
    XValbonne
    
    
    (3,4,6)
    
    
    
    
    
    XVillers-Saint-Paul
    
    
    (3,5,6)
    
    
    XGermany
    
    
    Arnsberg
    
    
    (6)
    
    
    X
    
    
    XFrankfurt
    
    
    (4)
    
    
    
    
    
    XIndia
    
    
    Taloja
    
    
    (3,4,5)
    
    
    X
    
    
    XChennai
    
    
    (3)
    
    
    XIndonesia
    
    
    Cilegon
    
    
    (3,4)
    
    
    XItaly
    
    
    Mozzanica
    
    
    (3,4)
    
    
    XMozzate
    
    
    (4)
    
    
    X
    
    
    XParona
    
    
    (4)
    
    
    XRomano dEzzelino
    
    
    (6)
    
    
    X
    
    
    XJapan
    
    
    Kyoto
    
    
    (1)
    
    
    XMie
    
    
    (1)
    
    
    XNagoya
    
    
    (3,4,6)
    
    
    XOhmiya
    
    
    (1)
    
    
    
    
    
    XSasakami
    
    
    (1,2)
    
    
    X
    
    
    XSoma
    
    
    (6)
    
    
    XMexico
    
    
    Apizaco
    
    
    (3,4,5,6)
    
    
    X
    
    
    XToluca
    
    
    (4)
    
    
    XNetherlands
    
    
    Delfzijl
    
    
    (6)
    
    
    XNew Zealand
    
    
    Auckland
    
    
    (3,4)
    
    
    XPhilippines
    
    
    Las Pinas
    
    
    (3,4)
    
    
    XSingapore
    
    
    Singapore
    
    
    (4)
    
    
    XSouth Africa
    
    
    New Germany
    
    
    (3,4,6)
    
    
    XSouth Korea
    
    

Cheonan
    
    

(1,2)
    
    
    X
    
    
    XSpain
    
    
    Castellón
    
    
    (6)
    
    
    X
    
    
    XTudela
    
    
    (3,4,5)
    
    
    XSweden
    
    
    Landskrona
    
    
    (3,4)
    
    
    XSwitzerland
    
    
    Littau/Lucerne
    
    
    (1)
    
    
    X
    
    
    XBuchs/Acima
    
    
    (6)
    
    
    X
    
    
    XTaiwan
    
    
    Chunan
    
    
    (1)
    
    
    X
    
    
    XMin-Hsiung
    
    
    (3,4,6)
    
    
    XTaoyuan Hsien
    
    
    (1)
    
    
    X
    
    
    XThailand
    
    
    Maptaphut
    
    
    (3,4,5,6)
    
    
    XUnited Kingdom
    
    
    Coventry
    
    
    (1)
    
    
    XDewsbury
    
    
    (3,4)
    
    
    XGrangemouth
    
    
    (4)
    
    
    XJarrow
    
    
    (6)
    
    
    X
 20




---



##### 



Research andManufacturing
    
    
    TechnicalState
    
    
    Location
    
    
    Reportable Segment
    
    
    Locations
    
    
    FacilitiesU.S.
    
    
    Arizona
    
    
    Glendale
    
    
    (7)
    
    
    XPhoenix
    
    
    (1)
    
    
    
    
    
    XCalifornia
    
    
    Davis
    
    
    (6)
    
    
    
    
    
    XHayward
    
    
    (3,4)
    
    
    XLa Mirada
    
    
    (3,4)
    
    
    XLong Beach
    
    
    (7)
    
    
    XNewark
    
    
    (7)
    
    
    XDelaware
    
    
    Newark
    
    
    (1)
    
    
    X
    
    
    XFlorida
    
    
    Cape Canaveral
    
    
    (7)
    
    
    XIllinois
    
    
    Kilbourn
    
    
    (6)
    
    
    XElston Dock
    
    
    (7)
    
    
    XElgin
    
    
    (4,7)
    
    
    
    
    
    XElk Grove
    
    
    (4)
    
    
    XKankakee
    
    
    (3,4)
    
    
    XRingwood
    
    
    (3,4)
    
    
    XIndiana
    
    
    Warsaw
    
    
    (6)
    
    
    XKansas
    
    
    Hutchinson
    
    
    (7)
    
    
    XKentucky
    
    
    Louisville
    
    
    (3,4,5)
    
    
    XLouisiana
    
    
    Weeks Island
    
    
    (6,7)
    
    
    XMassachusetts
    
    
    Marlborough
    
    
    (1)
    
    
    X
    
    
    XNorth Andover
    
    
    (1)
    
    
    X
    
    
    XWoburn
    
    
    (6)
    
    
    X
    
    
    XMichigan
    
    
    Manistee
    
    
    (7)
    
    
    XNew Jersey
    
    
    Perth Amboy
    
    
    (7)
    
    
    XNew York
    
    
    Freeport
    
    
    (1)
    
    
    X
    
    
    XRochester
    
    
    (2)
    
    
    X
    
    
    XSilver Springs
    
    
    (7)
    
    
    XNorth Carolina
    
    
    Charlotte
    
    
    (3,4)
    
    
    X
    
    
    XOhio
    
    
    Cincinnati
    
    
    (4,6)
    
    
    XFairport
    
    
    (7)
    
    
    XRittman
    
    
    (7)
    
    
    XWest Alexandria
    
    
    (4)
    
    
    X
    
    
    XPennsylvania
    
    
    Bristol
    
    
    (3,4,5,6)
    
    
    XPhiladelphia
    
    
    (6)
    
    
    XReading
    
    
    (6)
    
    
    X
    
    
    XSpring House
    
    
    (3,4,5,6)
    
    
    
    
    
    XTennessee
    
    
    Knoxville
    
    
    (3,4,5,6)
    
    
    XTexas
    
    
    Bayport
    
    
    (5,6)
    
    
    XDeer Park
    
    
    (5,6)
    
    
    X
    
    
    XLone Star
    
    
    (3,4)
    
    
    XGrand Saline
    
    
    (7)
    
    
    XUtah
    
    
    Grantsville
    
    
    (7)
    
    
    XVirginia
    
    
    Blacksburg
    
    
    (1)
    
    
    X
    
    
    XWashington
    
    
    Elma
    
    
    (6)
    
    
    X
 (1)
    
    Electronic Technologies(2)
    
    Display Technologies(3)
    
    Paint and Coatings Materials(4)
    
    Packaging and Building Materials(5)
    
    Primary Materials(6)
    
    Performance Materials Group(7)
    
    Salt, including mines and evaporation facilities
 21




---



##### 



Item 3. Legal Proceedings
  Item 4. Submission of Matters to a Vote of Security Holders
  22




---



##### 



PART II
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
  Period
    
    High
    
    Low
    
    Cash Dividend20051st Quarter
    
    $
    50.00
    
    
    $
    41.29
    
    
    $
    0.252nd Quarter
    
    
    49.23
    
    
    
    42.42
    
    
    
    0.293rd Quarter
    
    
    47.75
    
    
    
    39.47
    
    
    
    0.294th Quarter
    
    
    49.70
    
    
    
    39.78
    
    
    
    0.2920061st Quarter
    
    $
    51.56
    
    
    $
    49.96
    
    
    $
    0.292nd Quarter
    
    
    52.60
    
    
    
    45.24
    
    
    
    0.333rd Quarter
    
    
    50.56
    
    
    
    42.77
    
    
    
    0.334th Quarter
    
    
    53.86
    
    
    
    46.71
    
    
    
    0.3320071st Quarter
    
    $
    57.54
    
    
    $
    49.68
    
    
    $
    0.332nd Quarter
    
    
    55.59
    
    
    
    49.81
    
    
    
    0.373rd Quarter
    
    
    62.68
    
    
    
    52.15
    
    
    
    0.374th Quarter
    
    
    57.85
    
    
    
    47.05
    
    
    
    0.37
 Stock Price Highs and Lows
 
 23




---



##### 



Total Number of Shares
    
    Approximate Dollar ValueTotal Number
    
    Average Price
    
    Purchased as Part of
    
    of Shares that May Yet Beof Shares
    
    Paid per
    
    Publicly Announced
    
    Purchased Under the Plans orPeriod
    
    Purchased(1)
    
    Share
    
    Plans or Programs(2,3)
    
    Programs(2,3)October 1, 2007 -
October 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,000,654,218November 1, 2007 -
November 30, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,654,218December 1, 2007 -
December 31, 2007
    
    
    1,372
    
    
    
    56.96
    
    
    
    
    
    
    
    1,000,000,000Total
    
    
    1,372
    
    
    
    56.96
    
    
    
    
    
    
    $
    1,000,000,000
 Notes:
 (1)
    
    1,372 shares were purchased as a result of employee stock option exercises (stock swaps).(2)
    
    In December 2004, our Board of Directors authorized the repurchase of up to $1 billion of
our common stock through 2008, with the timing of the purchases depending on market conditions
and other priorities for cash. As of September 30, 2007, most of the $1 billion had been used
to repurchase approximately 20.2 million shares of our stock. The immaterial amount remaining
in this authorization expired as of December, 31, 2007.(3)
    
    In July 2007, our Board of Directors authorized another $2 billion towards repurchasing our
common stock through 2010. In September 2007, we entered into an agreement, pursuant to which
we purchased 16.2 million shares from a financial institution. The initial purchase price for
the shares was $1 billion in the aggregate including a brokerage fee. The average share price
for the 16.2 million shares was $61.77. The average share price will be adjusted at the end of
the agreement which is not expected to last longer than nine months based on the final volume
weighted average price of our common stock over this period. As of December 31, 2007, $1
billion of this authorization remains outstanding and will be funded from available cash, with
the timing of the purchases depending on market conditions.
 24




---



##### 



FIVE-YEAR CUMULATIVE TOTAL RETURN TO STOCKHOLDERS
 Rohm and Haas, S&P 500 Composite Index, S&P 500 Chemicals Index and
S&P 500 Specialty Chemicals Index   % Return to Shareholders, 2003 to 2007
 
 
 25




---



##### 



Item 6. Selected Financial Data
  Five-Year Summary of Selected Financial Data  (in millions, except per share, stockholders and employees)
 For the
Year Ended December 31,See notes
    
    2007(1)
    
    2006(1,4)
    
    2005(1, 2)
    
    2004(1,2)
    
    2003(2,3)Statement of Operating InformationNet sales
    
    $
    8,897
    
    
    $
    8,230
    
    
    $
    7,885
    
    
    $
    7,186
    
    
    $
    6,314Gross profit (6)
    
    
    2,467
    
    
    
    2,483
    
    
    
    2,373
    
    
    
    2,116
    
    
    
    1,882Earnings from continuing operations
before income taxes, minority interest and
cumulative effect of accounting change
    
    
    880
    
    
    
    1,042
    
    
    
    868
    
    
    
    698
    
    
    
    397Earnings from continuing operations
before cumulative effect of accounting
change
    
    
    660
    
    
    
    755
    
    
    
    616
    
    
    
    484
    
    
    
    275Discontinued operations:Income (loss)from discontinued line of
business, net of income tax
    
    
    1
    
    
    
    (4
    )
    
    
    22
    
    
    
    12
    
    
    
    13(Loss) gainon disposal of discontinued line
of business, net of income tax
    
    
    
    
    
    
    (16
    )
    
    
    (1
    )
    
    
    1
    
    
    
    Cumulative effect of accounting change, net of
income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )Net earnings
    
    $
    661
    
    
    $
    735
    
    
    $
    637
    
    
    $
    497
    
    
    $
    280As a % of Net Sales(6)Gross profit
    
    
    27.7
    %
    
    
    30.2
    %
    
    
    30.1
    %
    
    
    29.4
    %
    
    
    29.8
    %Selling and administrative expense
    
    
    12.3
    %
    
    
    12.6
    %
    
    
    12.8
    %
    
    
    13.9
    %
    
    
    13.8
    %Research and development expense
    
    
    3.3
    %
    
    
    3.5
    %
    
    
    3.3
    %
    
    
    3.5
    %
    
    
    3.6
    %Earnings from continuing operationsBasic
    
    $
    3.17
    
    
    $
    3.45
    
    
    $
    2.78
    
    
    $
    2.17
    
    
    $
    1.24Diluted
    
    
    3.12
    
    
    
    3.41
    
    
    
    2.75
    
    
    
    2.16
    
    
    
    1.24Cash dividends per common share
    
    $
    1.44
    
    
    $
    1.28
    
    
    $
    1.12
    
    
    $
    0.97
    
    
    $
    0.86Common stock price:High
    
    $
    62.68
    
    
    $
    53.86
    
    
    $
    50.00
    
    
    $
    45.41
    
    
    $
    43.05Low
    
    
    47.05
    
    
    
    42.77
    
    
    
    39.47
    
    
    
    35.90
    
    
    
    26.26Year-end close
    
    
    53.07
    
    
    
    51.12
    
    
    
    48.42
    
    
    
    44.23
    
    
    
    42.71Weighted average number of common shares
outstanding  basic
    
    
    207.8
    
    
    
    218.9
    
    
    
    221.9
    
    
    
    222.9
    
    
    
    221.5Weighted average number of common shares
outstanding  diluted
    
    
    211.0
    
    
    
    221.2
    
    
    
    223.9
    
    
    
    224.2
    
    
    
    222.4Balance Sheet Data(6)Land, buildings and equipment, gross
    
    $
    8,779
    
    
    $
    8,150
    
    
    $
    7,850
    
    
    $
    7,940
    
    
    $
    7,628Total Assets
    
    
    10,208
    
    
    
    9,553
    
    
    
    9,695
    
    
    
    10,095
    
    
    
    9,511Current portion of long-term debt
    
    
    8
    
    
    
    281
    
    
    
    11
    
    
    
    11
    
    
    
    10Other short-term borrowings
    
    
    150
    
    
    
    112
    
    
    
    110
    
    
    
    66
    
    
    
    98Long-term debt
    
    
    3,139
    
    
    
    1,688
    
    
    
    2,074
    
    
    
    2,563
    
    
    
    2,473Total Debt
    
    
    3,297
    
    
    
    2,081
    
    
    
    2,195
    
    
    
    2,640
    
    
    
    2,581Stockholders equity(4), (5)
    
    
    3,146
    
    
    
    4,031
    
    
    
    3,917
    
    
    
    3,697
    
    
    
    3,357Number of registered stockholders
    
    8,584
    
    
    
    8,957
    
    
    
    8,406
    
    
    
    8,726
    
    
    
    9,106Number of employees
    
    
    15,710
    
    
    
    15,815
    
    
    
    15,924
    
    
    
    16,067
    
    
    
    16,661
 Notes:
 (1)
    
    The results of the years ended December 31, 2004, 2005, 2006 and 2007 reflect the
consolidation of a joint venture as of January 1, 2004. This joint venture was
previously accounted for as an equity method investment in our reported results.
 26




---



##### 



(2)
    
    The results of the years ended December 31, 2003, 2004 and 2005 have been
reclassified to reflect Automotive Coatings as a discontinued operation (see Note 2
to the Consolidated Financial Statements).(3)
    
    In 2003, in accordance with SFAS No. 143, Asset Retirement Obligations, we
recorded a transition charge of $11 million ($8 million after-tax) as a cumulative
effect of accounting change.(4)
    
    As a result of the implementation of SFAS No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans, we recorded a $245 million
charge to stockholders equity (see Note 9 to the Consolidated Financial Statements)
in 2006.(5)
    
    The primary reason for the reduction in Stockholders equity in 2007 is due to a
$1 billion accelerated share repurchase (see Consolidated Statements of
Stockholders Equity and Note 22 Stockholders Equity).(6)
    
    Reclassified to conform to current year presentation.
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-looking Statements
  Ø
    
    Global Economic and Political Climate:
 
    
    Changes in foreign currency rates
    
    Changes in worldwide economic conditions
    
    Changes in trade policies or tariffs
    
    Changes in interest rates
    
    Changes in stock prices
    
    Changes in discount rates affecting the measurement of our pension and retiree medical liabilities
    
    Political unrest
    
    Possible disruption in commercial activities due to terrorist activity or armed conflict
 Ø
    
    Competition and Demand:
 
    
    Introduction of new products/technologies by competitors
    
    Changes in the pricing policies of our competitors
    
    Fluctuations in demand
    
    Ability to maintain sales volume in the event of increased selling prices
    
    Seasonal activity of certain of our businesses and weather conditions, particularly for the Salt segment
 Ø
    
    Raw Material Supplies and Energy:
 
    
    Limited resources for raw materials, potential for shortage
    
    Volatility in raw material and energy prices
    
    Ability to obtain increases in selling prices to offset increases in raw material and energy costs
 Ø
    
    Capacity Limitations:
 
    
    Capacity limitations in our manufacturing operations
    
    Inefficiencies in the running of our manufacturing facilities
    
    An incident affecting the Houston ship channel area, as it could significantly
affect both our operations and our sources of supply
    
    Disruptions in supply and capacity constraints
 27




---



##### 



Ø
    
    Intellectual Property and Other Technology Issues:
 
    
    Ability to protect such intellectual properties such as patents, trademarks,
copyrights and trade secrets, especially in regions where intellectual property rights
are not as strong as in the U.S.
    
    Changes in customer requirements
    
    Ability to develop new technology
    
    Acceptance of new products/technologies in the marketplace
 Ø
    
    Joint Ventures, Acquisitions, and other Alliances:
 
    
    Ability to realize expected benefits from joint ventures, acquisitions or alliances
 Ø
    
    Environmental Costs and Litigation Results:
 
    
    Future developments and new environmental regulations
    
    Litigation outcomes
 Ø
    
    Talent:
 
    
    Ability to attract, develop or retain quality employees
 Ø
    
    Other risks and uncertainties detailed in Item 1A. Risk Factors or in our filings with the SEC
   2007  A Year in Review
  
    
    The continued growth in our core businesses of the Electronic Materials Group
and Paint and Coatings Materials;
    
    The overall acceleration of growth in the Rapidly Developing Economies;
    
    The investment in new facilities to expand our global research, technical
service and manufacturing footprint; and,
    
    The balanced deployment of cash for investment in growth initiatives,
double-digit dividend increase, and stock repurchases.
  28




---



##### 



Critical Accounting Estimates
  
    
    the estimate is complex in nature or requires a high degree of judgment, and
    
    the use of different estimates and assumptions could have a material impact on
the Consolidated Financial Statements.
  Ø
    
    Litigation and Environmental Reserves
     29




---



##### 



Ø
    
    Income Taxes
      Ø
    
    Restructuring
  Ø
    
    Long-Lived Assets
  30




---



##### 




    
    Estimated future cash flows
  
    
    Discount rate
  2007
    
    2006Risk free rate of return
    
    
    5.1
    %
    
    
    5.3
    %Cost of debt
    
    
    6.7
    %
    
    
    7.6
    %Market risk premium
    
    
    4.0
    %
    
    
    4.0
    %
    Ø
    
    Pension and Other Employee Benefits
  31




---



##### 



Weighted-average assumptionsused to determine benefitobligation for years endedDecember 31,
    
    2007
    
    2006U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.Discount rate
    
    
    6.21
    %
    
    
    5.66
    %
    
    
    5.90
    %
    
    
    5.09
    %Rate of compensation increase
    
    
    4.00
    %
    
    
    4.24
    %
    
    
    4.00
    %
    
    
    3.91
    %
 Weighted-average assumptionsused to determine net pensionexpense for years endedDecember 31,
    
    2007
    
    2006
    
    2005U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.Discount rate
    
    
    5.90
    %
    
    
    5.05
    %
    
    
    5.70
    %
    
    
    4.77
    %
    
    
    5.80
    %
    
    
    5.49
    %Estimated return on plan assets
    
    
    8.50
    %
    
    
    6.72
    %
    
    
    8.50
    %
    
    
    6.97
    %
    
    
    8.50
    %
    
    
    7.37
    %Rate of compensation increase
    
    
    4.00
    %
    
    
    3.91
    %
    
    
    4.00
    %
    
    
    3.88
    %
    
    
    4.00
    %
    
    
    4.14
    %
 32




---



##### 



CombinedWeighted-Average Discount
    
    
    Estimated Return on
    
    
    Increase/(Decrease)Rate
    
    
    Plan Assets
    
    
    Pension Expense(in millions)
    
    U.S.
    
    
    Non-U.S.
    
    
    U.S.
    
    
    Non-U.S.
    
    
    U.S.
    
    
    Non-U.S.100 basis point increase
    
    $
    (22
    )
    
    $
    (10
    )
    
    $
    (17
    )
    
    $
    (7
    )
    
    $
    (39
    )
    
    $
    (17
    )100 basis point decrease
    
    
    33
    
    
    
    11
    
    
    
    17
    
    
    
    7
    
    
    
    50
    
    
    
    18
  Weighted-Average DiscountRate(in millions)
    
    U.S.
    
    
    Non-U.S.100 basis point increase
    
    $
    1
    
    
    $
    (1
    )100 basis point decrease
    
    
    (1
    )
    
    
    1
 Ø
    
    Share-Based Compensation
 Share-Based Payments.
 33




---



##### 



Reportable Segments at December 31, 2007
  Net SalesNorth
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Segment(in millions)
    
    America
    
    
    Europe
    
    
    Asia-Pacific
    
    
    Latin America
    
    
    Eliminations
    
    
    TotalElectronic Technologies2007
    
    $
    407
    
    
    $
    230
    
    
    $
    1,029
    
    
    $
    
    
    
    $
    
    
    
    $
    1,6662006
    
    
    436
    
    
    
    226
    
    
    
    889
    
    
    
    
    
    
    
    
    
    
    
    1,5512005
    
    
    371
    
    
    
    206
    
    
    
    742
    
    
    
    
    
    
    
    
    
    
    
    1,319Display Technologies2007
    
    $
    1
    
    
    $
    
    
    
    $
    44
    
    
    $
    
    
    
    $
    
    
    
    $
    452006
    
    
    1
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    132005
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    13Electronic Materials Group2007
    
    $
    408
    
    
    $
    230
    
    
    $
    1,073
    
    
    $
    
    
    
    $
    
    
    
    $
    1,7112006
    
    
    437
    
    
    
    226
    
    
    
    901
    
    
    
    
    
    
    
    
    
    
    
    1,5642005
    
    
    371
    
    
    
    206
    
    
    
    755
    
    
    
    
    
    
    
    
    
    
    
    1,332Paint and Coatings
Materials2007
    
    $
    1,258
    
    
    $
    396
    
    
    $
    326
    
    
    $
    140
    
    
    $
    
    
    
    $
    2,1202006
    
    
    1,324
    
    
    
    355
    
    
    
    252
    
    
    
    119
    
    
    
    
    
    
    
    2,0502005(1)
    
    
    1,224
    
    
    
    332
    
    
    
    233
    
    
    
    99
    
    
    
    
    
    
    
    1,888Packaging and Building
Materials2007
    
    $
    701
    
    
    $
    681
    
    
    $
    320
    
    
    $
    124
    
    
    $
    
    
    
    $
    1,8262006
    
    
    733
    
    
    
    649
    
    
    
    282
    
    
    
    112
    
    
    
    
    
    
    
    1,7762005
    
    
    739
    
    
    
    664
    
    
    
    258
    
    
    
    105
    
    
    
    
    
    
    
    1,766Primary Materials2007
    
    $
    460
    
    
    $
    407
    
    
    $
    45
    
    
    $
    63
    
    
    $
    1,103
    
    
    $
    2,0782006
    
    
    456
    
    
    
    327
    
    
    
    40
    
    
    
    54
    
    
    
    1,102
    
    
    
    1,9792005
    
    
    484
    
    
    
    322
    
    
    
    39
    
    
    
    58
    
    
    
    1,001
    
    
    
    1,904Segment Eliminations2007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (1,103
    )
    
    $
    (1,103
    )2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,102
    )
    
    
    (1,102
    )2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,001
    )
    
    
    (1,001
    )Specialty Materials Group2007
    
    $
    2,419
    
    
    $
    1,484
    
    
    $
    691
    
    
    $
    327
    
    
    $
    
    
    
    $
    4,9212006
    
    
    2,513
    
    
    
    1,331
    
    
    
    574
    
    
    
    285
    
    
    
    
    
    
    
    4,7032005(1)
    
    
    2,447
    
    
    
    1,318
    
    
    
    530
    
    
    
    262
    
    
    
    
    
    
    
    4,557Performance Materials
Group2007
    
    $
    410
    
    
    $
    527
    
    
    $
    209
    
    
    $
    59
    
    
    $
    
    
    
    $
    1,2052006
    
    
    420
    
    
    
    473
    
    
    
    184
    
    
    
    57
    
    
    
    
    
    
    
    1,1342005
    
    
    391
    
    
    
    464
    
    
    
    170
    
    
    
    46
    
    
    
    
    
    
    
    1,071Salt2007
    
    $
    1,060
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,0602006
    
    
    829
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8292005
    
    
    925
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    925Total2007
    
    $
    4,297
    
    
    $
    2,241
    
    
    $
    1,973
    
    
    $
    386
    
    
    $
    
    
    
    $
    8,8972006
    
    
    4,199
    
    
    
    2,030
    
    
    
    1,659
    
    
    
    342
    
    
    
    
    
    
    
    8,2302005(1)
    
    
    4,134
    
    
    
    1,988
    
    
    
    1,455
    
    
    
    308
    
    
    
    
    
    
    
    7,885
 34




---



##### 



(in millions)
    
    2007
    
    
    2006
    
    
    2005(1)Net Earnings from Continuing OperationsElectronic Technologies
    
    $
    299
    
    
    $
    242
    
    
    $
    146Display Technologies
    
    
    (17
    )
    
    
    1
    
    
    
    3Electronic Materials Group
    
    $
    282
    
    
    $
    243
    
    
    $
    149Paint and Coatings Materials
    
    
    246
    
    
    
    258
    
    
    
    250Packaging and Building Materials
    
    
    123
    
    
    
    136
    
    
    
    119Primary Materials
    
    
    82
    
    
    
    158
    
    
    
    163Specialty Materials Group
    
    $
    451
    
    
    $
    552
    
    
    $
    532Performance Materials Group
    
    
    100
    
    
    
    77
    
    
    
    54Salt
    
    
    87
    
    
    
    40
    
    
    
    57Corporate
    
    
    (260
    )
    
    
    (157
    )
    
    
    (176
    )Total
    
    $
    660
    
    
    $
    755
    
    
    $
    616
 Note:
 (1)
    
    The results for the year ended December 31, 2005 have been reclassified
to reflect Automotive Coatings as a discontinued operation (see Note 2 to the
Consolidated Financial Statements).
 Consolidated Results of Operations for the Years Ended December 31, 2005 through December 31, 2007
 Net Sales and Gross Profits
  .
 2007 from 2006
    
    2006 from 2005Sales Change
    
    %
    
    %Demand/Volume
    
    
    4
    
    
    
    3Currency
    
    
    3
    
    
    
    (1
    )Selling price
    
    
    1
    
    
    
    2Total Change
    
    
    8
    %
    
    
    4
    %
 (in millions)
    
    2007
    
    
    2006
    
    
    2005Gross profit
    
    $
    2,467
    
    
    $
    2,483
    
    
    $
    2,373As a percentage of sales
    
    
    27.7
    %
    
    
    30.2
    %
    
    
    30.1
    %
  35




---



##### 



Selling and Administrative Expense
 (in millions)
    
    2007
    
    
    2006
    
    
    2005Selling and administrative expense
    
    $
    1,091
    
    
    $
    1,041
    
    
    $
    1,008As a percentage of sales
    
    
    12.3
    %
    
    
    12.7
    %
    
    
    12.8
    %
    Research and Development Expense
 (in millions)
    
    2007
    
    
    2006
    
    
    2005Research and development expense
    
    $
    296
    
    
    $
    286
    
    
    $
    262As a percentage of sales
    
    
    3.3
    %
    
    
    3.5
    %
    
    
    3.3
    %
   Interest Expense
   36




---



##### 



Amortization of Finite-lived Intangible Assets
 ®
  Restructuring and Asset Impairments
 (in millions)
    
    2007
    
    
    2006
    
    
    2005Severance and employee benefits (net)
    
    $
    10
    
    
    $
    23
    
    
    $
    19Asset impairments, net of gains on sales
    
    
    18
    
    
    
    2
    
    
    
    79Other, including contract lease termination penalties
    
    
    
    
    
    
    2
    
    
    
    Amount charged to earnings
    
    $
    28
    
    
    $
    27
    
    
    $
    98
 Restructuring and Asset Impairments by Business Segment
 (in millions)Business Segment
    
    2007
    
    
    2006
    
    
    2005Electronic Technologies
    
    $
    (2
    )
    
    $
    (1
    )
    
    $
    31Display Technologies
    
    
    4
    
    
    
    
    
    
    
    Electronic Materials Group
    
    $
    2
    
    
    $
    (1
    )
    
    $
    31Paint and Coatings Materials
    
    
    1
    
    
    
    4
    
    
    
    Packaging and Building Materials
    
    
    2
    
    
    
    5
    
    
    
    54Primary Materials
    
    
    
    
    
    
    2
    
    
    
    Specialty Materials Group
    
    $
    3
    
    
    $
    11
    
    
    $
    54Performance Materials Group
    
    
    9
    
    
    
    8
    
    
    
    20Salt
    
    
    
    
    
    
    5
    
    
    
    Corporate
    
    
    14
    
    
    
    4
    
    
    
    (7
    )Total
    
    $
    28
    
    
    $
    27
    
    
    $
    98
 Severance and Employee Benefits
   37




---



##### 



Asset Impairments
    Pension Judgment
  Loss on Early Extinguishment of Debt
  Share of Affiliate Earnings, net
   38




---



##### 



Other Income, net
    Income Taxes
   Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109.
   Results of Operations for the Years Ended December 31, 2005 through December 31, 2007
- By Business Segment
 ELECTRONIC MATERIALS GROUP
   39




---



##### 



ELECTRONIC TECHNOLOGIES
 Semiconductor Technologies Circuit Board Technologies Packaging and Finishing
Technologies
  Semiconductor Technologies Circuit
Board Technologies Packaging and Finishing Technologies
  DISPLAY TECHNOLOGIES
 Semiconductor Technologies
    40




---



##### 



SPECIALTY MATERIALS GROUP
    PAINT AND COATINGS MATERIALS
     PACKAGING AND BUILDING MATERIALS
   41




---



##### 



PRIMARY MATERIALS
 Year Ended December 31,(in millions)
    
    2007
    
    2006
    
    2005Total Sales
    
    $
    2,078
    
    
    $
    1,979
    
    
    $
    1,904Elimination of Inter-segment Sales
    
    
    (1,103
    )
    
    
    (1,102
    )
    
    
    (1,001
    )Third Party Sales
    
    $
    975
    
    
    $
    877
    
    
    $
    903
 Paint and Coatings Materials Packaging and Building Materials
     PERFORMANCE MATERIALS GROUP
  42




---



##### 



Process Chemicals and Biocides Powder Coatings AgroFresh, Advanced
Materials Digital Imaging, AgroFresh
 Digital
Imaging Powder Coatings
 Process Chemicals and Biocides Powder Coatings
  SALT
     43




---



##### 



CORPORATE
   LIQUIDITY AND CAPITAL RESOURCES
 Overview
    
    
    Reinvesting in core businesses to drive profitable growth through our capital
expenditure program;
    
    Investing in new platforms that address the growing needs in water, energy, hygiene,
food, and other areas in the developed and developing worlds;
    
    Supplementing our organic growth with highly selective acquisitions which bring a
growth platform technology or geographic supplement to our core businesses;
    
    Continuing to pay higher cash dividends to our stockholders (dividend payouts have
increased at an average 10.6% compound annual growth rate since 1978); and
    
    Repurchasing shares to improve overall returns to our stockholders.
 44




---



##### 



Year EndedDecember 31,(in millions)
    
    2007
    
    
    2006Cash provided by operating activities
    
    $
    963
    
    
    $
    840Issuance of long-term debt
    
    
    1,394
    
    
    
    23Stock repurchases
    
    
    (1,462
    )
    
    
    (264
    )Stock option exercise proceeds
    
    
    46
    
    
    
    74Repayments of long-term debt
    
    
    (441
    )
    
    
    (182
    )Capital expenditures
    
    
    (417
    )
    
    
    (404
    )Acquisitions
    
    
    (117
    )
    
    
    (46
    )Dividends
    
    
    (303
    )
    
    
    (283
    )
  Cash Provided by Operating Activities
   Pension Plan and Postretirement Benefit Plan Funding and Liability
    45




---



##### 



Capital Expenditures
  Ø
    
    2007(1)
    
    Construction of new Paint and Coatings plants in Mexico, India, and China;(2)
    
    Environmental regulation compliance projects at Manistee and Silver Springs;(3)
    
    Technology infrastructure enhancements; and(4)
    
    Construction of new Packaging and Building Materials plant in Turkey.Ø
    
    2006(1)
    
    Completion of the new research and development center in Shanghai, China;(2)
    
    Opening of the new CMP Research and Manufacturing Center in Taiwan;(3)
    
    A project in our Louisville, Kentucky Plant to meet new environmental requirements;(4)
    
    Expansions in our Qingpu, China and Weeks Island, Louisiana Plants to increase capacity; and(5)
    
    Construction of new manufacturing facilities in Queratero, Mexico and Chennai, India.Ø
    
    2005(1)
    
    Construction of a new research and development center in Shanghai, China which was completed in
2006;(2)
    
    Capacity initiatives within the North American emulsion manufacturing locations;(3)
    
    Process control systems at our Knoxville, Tennessee facility; and(4)
    
    Volatile organic compound reduction and quality/capacity improvements at our Chauny, France
facility.
 46




---



##### 



(in millions)
    
    2007
    
    
    2006
    
    
    2005Cost savings and infrastructure
    
    $
    276
    
    
    $
    263
    
    
    $
    248Capacity additions and new products
    
    
    102
    
    
    
    65
    
    
    
    61Research facilities and equipment
    
    
    27
    
    
    
    65
    
    
    
    15Capitalized interest cost
    
    
    12
    
    
    
    11
    
    
    
    9Total
    
    $
    417
    
    
    $
    404
    
    
    $
    333
  Dividends
  Dividend Paid
    
    AmountYear
    
    (Per common share)
    
    (In millions)2005
    
    $
    1.12
    
    
    $
    2502006
    
    $
    1.28
    
    
    $
    2832007
    
    $
    1.44
    
    
    $
    303
 (LINE GRAPH)
 47




---



##### 



Share Repurchase Program
   Liquidity and Debt
  December 31,
    
    
    December 31,(in millions)
    
    2007
    
    
    2006Short-term obligations
    
    $
    158
    
    
    $
    393Long-term debt
    
    
    3,139
    
    
    
    1,688Total debt
    
    $
    3,297
    
    
    $
    2,081Cash and cash equivalents
    
    $
    265
    
    
    $
    593Restricted cash
    
    
    3
    
    
    
    3Total
    
    $
    268
    
    
    $
    596
 Debt
   
  Use of Derivative Instruments to Manage Market Risk
   48




---



##### 



Contractual Obligations
  (in millions)
    
    
    
    
    
    Payments due by periodContractual obligations
    
    Total
    
    
    Within 1 year
    
    
    2-3 years
    
    
    4-5 years
    
    
    Over 5 yearsOperating Activities:Operating leases
    
    $
    209
    
    
    $
    68
    
    
    $
    89
    
    
    $
    52
    
    
    $
    Interest on long-term debt
    
    
    2,540
    
    
    
    180
    
    
    
    359
    
    
    
    359
    
    
    
    1,642Raw material purchase obligations(1,2)
    
    
    1,119
    
    
    
    725
    
    
    
    222
    
    
    
    92
    
    
    
    80Purchase obligations, other (1,2)
    
    
    323
    
    
    
    116
    
    
    
    113
    
    
    
    94
    
    
    
    Pension and other employee benefit funding
(3)
    
    
    624
    
    
    
    79
    
    
    
    159
    
    
    
    161
    
    
    
    225FIN 48 liabilities(5)Deferred revenue
    
    
    41
    
    
    
    8
    
    
    
    14
    
    
    
    12
    
    
    
    7Financing Activities:Long-term debt, including current portion
    
    
    3,147
    
    
    
    8
    
    
    
    
    
    
    
    439
    
    
    
    2,700Investing Activities:Construction commitments
    
    
    74
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    Other Activities:ESOP loan guarantees
    
    
    104
    
    
    
    14
    
    
    
    26
    
    
    
    22
    
    
    
    42Interest on ESOP loan guarantees
    
    
    140
    
    
    
    6
    
    
    
    14
    
    
    
    18
    
    
    
    102Total contractual cash obligations(4)
    
    $
    8,321
    
    
    $
    1,278
    
    
    $
    996
    
    
    $
    1,249
    
    
    $
    4,798
 Notes :
 (1)
    
    For our requirements contracts, we have assumed that our existing business segments will
require materials and services generally consistent with prior years. The amount of the
obligation is based upon either projected requirements or historical spend. Our purchase
obligations include raw materials, indirect materials, traffic and logistics, utilities and
energy, information technology and communications contracts.(2)
    
    These obligations include evergreen contracts that renew automatically until specifically
cancelled by either party. We have assumed that our evergreen contracts will continue
through 2008.(3)
    
    Qualified pension plan contributions depend upon changes
in assumptions used to calculate plan funding levels, the actual
return on plan assets, changes in employee groups covered by the
plans, and any legislative or regulatory changes affecting plan
funding requirements; therefore we have only forecasted funding
requirements for 5 years due to the fact that significant
assumptions are required. As such, the funding requirements disclosed
are subject to change. The non-qualified plan and other employee benefits reflect
expected future benefit payments, which are forecasted out through 2016. See Note 9 to our
Consolidated Financial Statements.(4)
    
    In July 2007, our Board of Directors authorized the repurchase of up to another $2
billion of our common stock, the first $1 billion of which was purchased in September 2007
and financed with debt and the remainder of the share repurchases will be funded from
available cash through 2010. See Note 22 for additional information.(5)
    
    On January 1, 2007, we adopted the provisions of FIN 48. See Note 7 Income Taxes. As of
December 31, 2007, we had approximately $117 million of tax liabilities, including interest
and penalties, related to uncertain tax positions. Because of the high degree of uncertainty
regarding the timing of future cash outflows associated with these liabilities, we are
unable to estimate the years in which settlement will occur with the respective taxing
authorities.
 Trading
Activities
  Unconsolidated Entities
  Environmental Matters and Litigation
  49




---



##### 



Accruals
  (in millions)
    
    BalanceDecember 31, 2005
    
    $
    147Amounts charged to earnings
    
    
    25Amounts spent
    
    
    (31
    )December 31, 2006
    
    $
    141Amounts charged to earnings
    
    
    37Amounts spent
    
    
    (28
    )December 31, 2007
    
    $
    150
 Wood-Ridge/Berrys Creek
   50




---



##### 



Other Environmental Expenditures
    Climate Change
 Massachusetts v. EPA 2
  2 2 2 2
 51




---



##### 



Litigation
   Acquisitions and Divestitures
  Working Capital
   (millions)
    
    2007
    
    
    2006InventoriesYear-end balance
    
    $
    1,024
    
    
    $
    984Annual turnover
    
    
    6.4x
    
    
    
    6.5xDays cost of sales in ending inventory
    
    
    54
    
    
    
    62Customer receivables, netYear-end balance
    
    $
    1,610
    
    
    $
    1,316Annual turnover
    
    
    6.0x
    
    
    
    6.2xDays sales outstanding
    
    
    60
    
    
    
    58
 Notes:
 
    
    Days sales outstanding were calculated by dividing ending net customer receivables by
daily sales for the fourth quarter.
    
    Days cost of sales in ending inventory was calculated by dividing ending inventory by
daily cost of sales for the fourth quarter.
    
    For customer receivables, annual turnover figures are calculated by dividing annual sales
by the average customer receivables balance.
    
    For inventories, annual turnover figures are calculated by dividing cost of goods sold by
the average inventory balance.
 Asset Turnover
 52




---



##### 



ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT YET ADOPTED
 Non-controlling Interests
 Non-controlling Interests in Consolidated Financial
Statements
 Business Combinations
  Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards
 Accounting for Income
Tax Benefits of Dividends on Share-Based Payment Awards,
 Fair Value Option for Financial Assets and Financial Liabilities   The Fair Value Option for Financial Assets and
Financial Liabilities,
 Fair Value Measurements
 Fair
Value Measurements,
 53




---



##### 



Item 7A: Quantitative and Qualitative Disclosures about Market Risk
     Foreign Exchange Rate Risk
   54




---



##### 



Interest Rate Risk
  Commodity Price Risk
  Item 8: Financial Statements and Supplementary Data
 PageManagements Report on Internal Control Over Financial Reporting
    
    
    56Report of Independent Registered Public Accounting Firm
    
    
    57Consolidated Financial Statements:Consolidated Statements of Operations for the years ended December 31, 2007, 2006, and 2005
    
    
    58Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006, and 2005
    
    
    59Consolidated Balance Sheets as of December 31, 2007 and 2006
    
    
    60Consolidated Statements of Stockholders Equity for the years ended December 31, 2007,
2006, and 2005
    
    
    61Notes to Consolidated Financial Statements
    
    
    62
 55




---



##### 



Managements Report on Internal Control Over Financial Reporting
     /s/ Raj L. Gupta
    
    /s/ Jacques M. CroisetiereRaj L. Gupta
    
    Jacques M. CroisetiereChairman, President and Chief Executive Officer
    
    Executive Vice-President and Chief Financial Officer
  56




---



##### 



Report of Independent Registered Public Accounting Firm
  Internal Control  Integrated Framework Managements Report on Internal Control Over Financial Reporting
    
 57




---



##### 



Rohm and Haas Company and Subsidiaries
Consolidated Statements of Operations
 For the years ended December 31,
    
    2007
    
    
    2006
    
    
    2005(in millions, except per share amounts)Net sales
    
    $
    8,897
    
    
    $
    8,230
    
    
    $
    7,885Cost of goods sold
    
    
    6,430
    
    
    
    5,747
    
    
    
    5,512Gross profit
    
    
    2,467
    
    
    
    2,483
    
    
    
    2,373Selling and administrative expense
    
    
    1,091
    
    
    
    1,041
    
    
    
    1,008Research and development expense
    
    
    296
    
    
    
    286
    
    
    
    262Interest expense
    
    
    120
    
    
    
    94
    
    
    
    117Amortization of intangibles
    
    
    57
    
    
    
    56
    
    
    
    55Restructuring and asset impairments
    
    
    28
    
    
    
    27
    
    
    
    98Pension judgment
    
    
    65
    
    
    
    
    
    
    
    Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    17Share of affiliate earnings, net
    
    
    22
    
    
    
    10
    
    
    
    9Other (income), net
    
    
    (48
    )
    
    
    (53
    )
    
    
    (43
    )Earnings from continuing
operations before income taxes,
and minority interest
    
    
    880
    
    
    
    1,042
    
    
    
    868Income taxes
    
    
    206
    
    
    
    274
    
    
    
    242Minority interest
    
    
    14
    
    
    
    13
    
    
    
    10Earnings from continuing
operations
    
    
    660
    
    
    
    755
    
    
    
    616Discontinued operations:Net earnings (loss) of discontinued
lines of business, net of income
tax
(benefit) expense of $(2), $14, and $(16) in 2007, 2006 and
2005, respectively
    
    
    1
    
    
    
    (20
    )
    
    
    21Net earnings
    
    
    661
    
    
    
    735
    
    
    
    637Basic earnings per share (in dollars):From continuing operations
    
    $
    3.17
    
    
    $
    3.45
    
    
    $
    2.78Income (loss) from discontinued
operation
    
    
    0.01
    
    
    
    (0.09
    )
    
    
    0.09Net earnings per share
    
    $
    3.18
    
    
    $
    3.36
    
    
    $
    2.87Diluted earnings per share (in
dollars):From continuing operations
    
    $
    3.12
    
    
    $
    3.41
    
    
    $
    2.75Income (loss) from discontinued
operation
    
    
    0.01
    
    
    
    (0.09
    )
    
    
    0.10Net earnings per share
    
    $
    3.13
    
    
    $
    3.32
    
    
    $
    2.85Weighted average common shares
outstanding  basic
    
    
    207.8
    
    
    
    218.9
    
    
    
    221.9Weighted average common shares
outstanding  diluted
    
    
    211.0
    
    
    
    221.2
    
    
    
    223.9
  58




---



##### 



Rohm and Haas Company and Subsidiaries
Consolidated Statements of Cash Flows
 For
the years ended December 31,
    
    2007
    
    
    2006
    
    
    2005(in millions)Cash Flows from Operating ActivitiesNet earnings
    
    $
    661
    
    
    $
    735
    
    
    $
    637Adjustments to reconcile net earnings to net cash provided by operating activities:(Gain) loss on disposal of business, net of income taxes
    
    
    (1
    )
    
    
    16
    
    
    
    1Loss (gain) on sale of assets
    
    
    3
    
    
    
    7
    
    
    
    (12
    )Provision for allowance for doubtful accounts
    
    
    5
    
    
    
    6
    
    
    
    11Provision for LIFO reserve
    
    
    43
    
    
    
    7
    
    
    
    26Benefit from deferred taxes
    
    
    (75
    )
    
    
    (37
    )
    
    
    (66
    )Asset impairments
    
    
    18
    
    
    
    2
    
    
    
    79Depreciation
    
    
    412
    
    
    
    407
    
    
    
    422Amortization of finite-lived intangibles
    
    
    57
    
    
    
    58
    
    
    
    59Pension judgment
    
    
    65
    
    
    
    
    
    
    
    Share-based compensation
    
    
    49
    
    
    
    48
    
    
    
    50Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    17Premium paid on debt retirement
    
    
    
    
    
    
    (6
    )
    
    
    (46
    )Changes in assets and liabilitiesAccounts receivable
    
    
    (266
    )
    
    
    (30
    )
    
    
    (123
    )Inventories
    
    
    18
    
    
    
    (161
    )
    
    
    (55
    )Prepaid expenses and other current assets
    
    
    (36
    )
    
    
    3
    
    
    
    8Accounts payable and accrued liabilities
    
    
    22
    
    
    
    (12
    )
    
    
    4Federal, foreign and other income taxes payable
    
    
    23
    
    
    
    (96
    )
    
    
    89Payments to fund US pension plans
    
    
    
    
    
    
    (137
    )
    
    
    (125
    )Other, net
    
    
    (35
    )
    
    
    30
    
    
    
    (29
    )Net cash provided by operating activities
    
    
    963
    
    
    
    840
    
    
    
    947Cash Flows from Investing ActivitiesAcquisitions of businesses affiliates and intangibles, net of cash received
    
    
    (117
    )
    
    
    (46
    )
    
    
    (20
    )Proceeds from disposal of business, net
    
    
    15
    
    
    
    256
    
    
    
    Decrease in restricted cash
    
    
    
    
    
    
    1
    
    
    
    45Proceeds from the sale of land, buildings and equipment
    
    
    17
    
    
    
    12
    
    
    
    24Capital expenditures for land, buildings and equipment
    
    
    (417
    )
    
    
    (404
    )
    
    
    (333
    )(Payments) proceeds to settle derivative contracts
    
    
    (67
    )
    
    
    (22
    )
    
    
    31Net cash used by investing activities
    
    
    (569
    )
    
    
    (203
    )
    
    
    (253
    )Cash Flows from Financing ActivitiesProceeds from issuance of long-term debt
    
    
    1,394
    
    
    
    23
    
    
    
    70Repayments of long-term debt
    
    
    (441
    )
    
    
    (182
    )
    
    
    (411
    )Purchase of common stock
    
    
    (1,462
    )
    
    
    (264
    )
    
    
    (273
    )Tax benefit on stock options
    
    
    8
    
    
    
    8
    
    
    
    Proceeds from exercise of stock options
    
    
    46
    
    
    
    74
    
    
    
    82Net change in short-term borrowings
    
    
    (86
    )
    
    
    (50
    )
    
    
    90Payment of dividends
    
    
    (303
    )
    
    
    (283
    )
    
    
    (250
    )Net cash used by financing activities
    
    
    (844
    )
    
    
    (674
    )
    
    
    (692
    )Net (decrease) increase in cash and cash equivalents
    
    
    (450
    )
    
    
    (37
    )
    
    
    2Effect of exchange rate changes on cash and cash equivalents
    
    
    122
    
    
    
    64
    
    
    
    (61
    )Cash and cash equivalents at the beginning of the year
    
    
    593
    
    
    
    566
    
    
    
    625Cash and cash equivalents at the end of the year
    
    $
    265
    
    
    $
    593
    
    
    $
    566Supplemental Cash Flow InformationCash paid during the year for:Interest, net of amounts capitalized
    
    $
    117
    
    
    $
    109
    
    
    $
    147Income taxes, net of refunds received
    
    
    230
    
    
    
    381
    
    
    
    251
  59




---



##### 



Rohm and Haas Company and Subsidiaries
Consolidated Balance Sheets
 December 31,
    
    2007
    
    
    2006(in millions, except share data)AssetsCash and cash equivalents
    
    $
    265
    
    
    $
    593Restricted cash
    
    
    3
    
    
    
    3Receivables, net
    
    
    1,977
    
    
    
    1,570Inventories
    
    
    1,024
    
    
    
    984Prepaid expenses and other current assets
    
    
    258
    
    
    
    254Current assets of discontinued operations
    
    
    
    
    
    
    7Total current assets
    
    
    3,527
    
    
    
    3,411Land, buildings and equipment, net of accumulated
depreciation
    
    
    2,871
    
    
    
    2,669Investments in and advances to affiliates
    
    
    195
    
    
    
    112Goodwill, net of accumulated amortization
    
    
    1,668
    
    
    
    1,541Other intangible assets, net of accumulated amortization
    
    
    1,492
    
    
    
    1,487Other assets
    
    
    455
    
    
    
    324Other assets of discontinued operations
    
    
    
    
    
    
    9Total Assets
    
    $
    10,208
    
    
    $
    9,553Liabilities and Stockholders EquityLiabilities:Short-term obligations
    
    $
    158
    
    
    $
    393Trade and other payables
    
    
    806
    
    
    
    684Accrued liabilities
    
    
    889
    
    
    
    816Income taxes payable
    
    
    17
    
    
    
    93Current liabilities of discontinued operations
    
    
    
    
    
    
    2Total current liabilities
    
    
    1,870
    
    
    
    1,988Long-term debt
    
    
    3,139
    
    
    
    1,688Employee benefits
    
    
    760
    
    
    
    735Deferred income taxes
    
    
    766
    
    
    
    754Other liabilities
    
    
    312
    
    
    
    230Other liabilities of discontinued operations
    
    
    
    
    
    
    5Total Liabilities
    
    
    6,847
    
    
    
    5,400Minority Interest
    
    
    215
    
    
    
    122Commitments and contingenciesStockholders Equity:Preferred stock; par value  $1.00; authorized -
25,000,000 shares;
issued  no shares
    
    
    
    
    
    
    Common stock; par value  $2.50; authorized - 400,000,000
shares;
issued - 242,078,349 shares
    
    
    605
    
    
    
    605Additional paid-in capital
    
    
    2,147
    
    
    
    2,214Retained earnings
    
    
    2,569
    
    
    
    2,2185,321
    
    
    
    5,037Treasury stock at cost (2007 - 46,227,211 shares;
2006 - 23,239,920 shares)
    
    
    (1,918
    )
    
    
    (608
    )ESOP shares (2007 - 7,995,877 shares; 2006 - 8,585,684
shares)
    
    
    (75
    )
    
    
    (82
    )Accumulated other comprehensive loss
    
    
    (182
    )
    
    
    (316
    )Total Stockholders Equity
    
    
    3,146
    
    
    
    4,031Total Liabilities and
Stockholders Equity
    
    $
    10,208
    
    
    $
    9,553
  60




---



##### 



Rohm and Haas Company and Subsidiaries
Consolidated Statements of Stockholders Equity
  Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number ofShares of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares of
    
    
    
    
    
    
    
    
    
    
    AccumulatedCommon
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Treasury
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Total
    
    
    
    TotalStock
    
    
    Common
    
    
    Paid-in
    
    
    Retained
    
    
    Stock
    
    
    Treasury
    
    
    
    
    
    
    Comprehensive
    
    
    Stockholders
    
    
    
    Comprehensive(in millions, except share amounts in thousands)
    
    Outstanding
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Outstanding
    
    
    Stock
    
    
    ESOP
    
    
    Income (Loss)
    
    
    Equity
    
    
    
    Income2005Balance January 1, 2005
    
    
    225,261
    
    
    $
    605
    
    
    $
    2,062
    
    
    $
    1,370
    
    
    
    16,818
    
    
    $
    (166
    )
    
    $
    (94
    )
    
    $
    (80
    )
    
    $
    3,697Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    637
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    637
    
    
    
    $
    637Current period changes in fair value, net of taxes of ($4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    7
    
    
    
    
    7Reclassification to earnings, net of taxes of ($1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    
    2Cumulative translation adjustment, net of taxes of $5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    (13
    )
    
    
    
    (13
    )Change in minimum pension liability, net of taxes of $1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )
    
    
    
    (21
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    612Repurchase of common stock
    
    
    (5,974
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,974
    
    
    
    (273
    )
    
    
    
    
    
    
    
    
    
    
    (273
    )Common stock issued:Stock-based compensation
    
    
    2,676
    
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    (2,676
    )
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    120ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Tax benefit on ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Common dividends ($1.12 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (250
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (250
    )Balance December 31, 2005
    
    
    221,963
    
    
    $
    605
    
    
    $
    2,152
    
    
    $
    1,762
    
    
    
    20,116
    
    
    $
    (409
    )
    
    $
    (88
    )
    
    $
    (105
    )
    
    $
    3,9172006Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    735
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    735
    
    
    
    $
    735Current period changes in fair value, net of taxes of ($5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    10
    
    
    
    
    10Reclassification to earnings, net of taxes of $6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )
    
    
    (11
    )
    
    
    
    (11
    )Cumulative translation adjustment, net of taxes of $8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    
    (2
    )Change in minimum pension liability, net of taxes of ($11)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    35
    
    
    
    
    35Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    767Adjustment to initially apply FASB Statement No. 158, net
of tax of $127
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (243
    )
    
    
    (243
    )Repurchase of common stock
    
    
    (5,697
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,697
    
    
    
    (264
    )
    
    
    
    
    
    
    
    
    
    
    (264
    )Common stock issued:Stock-based compensation
    
    
    2,573
    
    
    
    
    
    
    
    62
    
    
    
    
    
    
    
    (2,573
    )
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    127ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Tax benefit on ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Common dividends ($1.28 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (283
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (283
    )Balance December 31, 2006
    
    
    218,839
    
    
    $
    605
    
    
    $
    2,214
    
    
    $
    2,218
    
    
    
    23,240
    
    
    $
    (608
    )
    
    $
    (82
    )
    
    $
    (316
    )
    
    $
    4,0312007Cumulative Transition Adjustment for FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    661
    
    
    
    $
    661Current
period changes in fair value, net of taxes of $1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    
    1Reclassification
to earnings, net of taxes of $(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )
    
    
    
    (5
    )Cumulative translation adjustment, net of taxes of $(21)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    17
    
    
    
    
    17Prior service credit, net, from pension plan amendments
arising during period, net of taxes of $18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    41
    
    
    
    
    41Net
actuarial gain on pension and postretirement plans arising
during period, net of  taxes of $28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62
    
    
    
    62
    
    
    
    
    62Amortization of net actuarial loss for pension
and postretirement plans, net of taxes of $8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    18
    
    
    
    
    18Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    795Repurchase of common stock
    
    
    (24,747
    )
    
    
    
    
    
    
    (99
    )
    
    
    
    
    
    
    24,747
    
    
    
    (1,363
    )
    
    
    
    
    
    
    
    
    
    
    (1,462
    )Common stock issued:Stock-based compensation
    
    
    1,760
    
    
    
    
    
    
    
    32
    
    
    
    
    
    
    
    (1,760
    )
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    85ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7Tax benefit on ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Common dividends ($1.44 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (303
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (303
    )Balance December 31, 2007
    
    
    195,852
    
    
    $
    605
    
    
    $
    2,147
    
    
    $
    2,569
    
    
    
    46,227
    
    
    $
    (1,918
    )
    
    $
    (75
    )
    
    $
    (182
    )
    
    $
    3,146
  61




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1: Organization and Summary of Significant Accounting Policies
 Nature of Business
  Use of Estimates
  Reclassifications
  Principles of Consolidation
 Consolidation of Variable Interest Entities
      62




---



##### 



Foreign Currency Translation
    Cost of Goods Sold
  Revenue Recognition
    Accounts Receivable and Allowance for Doubtful Accounts
  Earnings Per Share
  Cash and Cash Equivalents
  63




---



##### 



Inventories
  Land, Buildings and Equipment, and Accumulated Depreciation
  Capitalized Software
 Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use.
 Goodwill and Indefinite-Lived Intangible Assets
  Goodwill and Other
Intangible Assets
  Impairment of Long-Lived Assets
   64




---



##### 



Research and Development
  Litigation and Environmental Contingencies and Reserves
    65




---



##### 



Income Taxes
   Retirement Benefits
  Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans
 Treasury Stock
  Share-Based Compensation
 Accounting for Stock Issued to Employees
 Accounting for Stock-Based Compensation.
 66




---



##### 



Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation  Transition and Disclosure,
 Accounting for Derivative Instruments and Hedging Activities
 Accounting
for Derivative Instruments and Hedging Activities,
      Note 2: Acquisitions and Dispositions of Assets
 2007
  67




---



##### 



,
  November 30,(in millions)
    
    2007Current assets, including cash acquired of $2 million
    
    $
    288Land, buildings and equipment, net
    
    
    74Goodwill
    
    
    95Intangible assets
    
    
    22In-process research and development
    
    
    1Deferred tax benefits
    
    
    11Other
    
    
    2Total assets acquired
    
    $
    493Current liabilities
    
    $
    194Deferred tax liabilities
    
    
    11Other long-term liabilities
    
    
    11Other liabilities
    
    
    22Total liabilities acquired
    
    $
    216Minority interest acquired
    
    $
    81
 68




---



##### 



(in millions, except per share amounts)
    
    2007
    
    2006Net sales
    
    $
    215
    
    
    $
    207Net (loss)
earnings
    
    
    (6
    )
    
    
    3Earnings per share Basic
    
    
    (0.03
    )
    
    
    0.01Diluted
    
    $
    (0.03
    )
    
    $
    0.01
  2006
 Automotive Coatings Automotive Coatings
 Recognition of Deferred Tax Assets for a Parent Companys
Excess Tax Basis in the Stock of a Subsidiary That is Accounted for as a Discontinued Operation,
 Accounting for the Impairment or Disposal of Long-Lived Assets,
 Automotive Coatings
 Automotive Coatings
 (in millions)
    
    2007
    
    
    2006
    
    
    2005Net sales from discontinued operation
    
    $
    14
    
    
    $
    78
    
    
    $
    109(Loss) earnings from discontinued line of business
    
    
    (1
    )
    
    
    (6
    )
    
    
    5Income tax benefit (provision)
    
    
    2
    
    
    
    (20
    )
    
    
    17Net earnings (loss) from discontinued operation
    
    $
    1
    
    
    $
    (26
    )
    
    $
    22
 69




---



##### 



Automotive Coatings
 (in millions)
    
    2006Current assets of discontinued operation
    
    $
    7Land, buildings and equipment, net
    
    
    3Investments in and advances to affiliates
    
    
    Goodwill
    
    
    4Intangible assets
    
    
    1Other
    
    
    1Other assets of discontinued operation
    
    
    9Total assets of discontinued operation
    
    $
    16Current liabilities of discontinued operation
    
    $
    2Deferred tax liabilities
    
    
    2Other long-term liabilities
    
    
    3Other liabilities of discontinued operation
    
    
    5Total liabilities of discontinued operation
    
    $
    7
  ®
 2005
  Note 3: Provision for Restructuring and Asset Impairments
 Employers Accounting for Postemployment Benefits. Accounting for the
Impairment or Disposal of Long-lived Assets.
 70




---



##### 



Restructuring and Asset Impairments
 (in millions)
    
    2007
    
    
    2006
    
    
    2005Severance and employee benefits (net)
    
    $
    10
    
    
    $
    23
    
    
    $
    19Asset impairments, net of gains on sales
    
    
    18
    
    
    
    2
    
    
    
    79Other, including contract lease termination penalties
    
    
    
    
    
    
    2
    
    
    
    Amount charged to earnings
    
    $
    28
    
    
    $
    27
    
    
    $
    98
 Restructuring by Initiative
 Severance Employee Benefits
    
    
    Headcount(in millions, except headcount)
    
    2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Initial ChargeElectronic Technologies
    
    $
    3
    
    
    $
    1
    
    
    $
    12
    
    
    
    51
    
    
    
    9
    
    
    
    194Display Technologies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Electronic Materials Group
    
    $
    3
    
    
    $
    1
    
    
    $
    12
    
    
    
    51
    
    
    
    9
    
    
    
    194Paint and Coatings Materials
    
    
    2
    
    
    
    6
    
    
    
    2
    
    
    
    15
    
    
    
    75
    
    
    
    19Packaging and Building Materials
    
    
    1
    
    
    
    1
    
    
    
    8
    
    
    
    14
    
    
    
    18
    
    
    
    100Primary Materials
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    Specialty Materials Group
    
    $
    3
    
    
    $
    9
    
    
    $
    10
    
    
    
    29
    
    
    
    110
    
    
    
    119Performance Materials Group
    
    
    7
    
    
    
    6
    
    
    
    9
    
    
    
    82
    
    
    
    37
    
    
    
    220Salt
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    9
    
    
    
    114
    
    
    
    Corporate
    
    
    2
    
    
    
    5
    
    
    
    5
    
    
    
    30
    
    
    
    59
    
    
    
    57Total
    
    $
    15
    
    
    $
    26
    
    
    $
    36
    
    
    
    201
    
    
    
    329
    
    
    
    590Activity during 2005
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (88
    )Changes in estimate
    
    
    
    
    
    
    
    
    
    
    

    
    
    
 
    
    
    
    
    
    
    
    (4
    )December 31, 2005 ending balance
    
    
    
    
    
    
    
    
    
    $
    33
    
    
    
    
    
    
    
    
    
    
    
    498Activity during 2006
    
    
    
    
    
    
    (3
    )
    
    
    (19
    )
    
    
    
    
    
    
    (68
    )
    
    
    (382
    )Changes in estimate
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (33
    )December 31, 2006 ending balance
    
    
    
    
    
    $
    22
    
    
    $
    13
    
    
    
    
    
    
    
    261
    
    
    
    83Activity during 2007
    
    
    (4
    )
    
    
    (17
    )
    
    
    (9
    )
    
    
    (72
    )
    
    
    (182
    )
    
    
    (65
    )Changes in estimate
    
    
    
    
    
    
    (3
    )
    
    
    (2
    )
    
    
    (9
    )
    
    
    (47
    )
    
    
    (13
    )Balance at December 31, 2007
    
    $
    11
    
    
    $
    2
    
    
    $
    2
    
    
    
    120
    
    
    
    32
    
    
    
    5
  2007 Initiatives
   71




---



##### 



2006 Initiatives
    2005 Initiatives
     Prior
Years Initiatives
   72




---



##### 



Asset Impairments
 2007 Impairments
  2006 Impairments
   2005 Impairments
  Note 4: Other Income, Net
  (in millions)
    
    2007
    
    
    2006
    
    
    2005Royalty income
    
    $
    4
    
    
    $
    4
    
    
    $
    3Foreign exchange gains and related hedging
    
    
    5
    
    
    
    (16
    )
    
    
    (8
    )Interest income
    
    
    18
    
    
    
    27
    
    
    
    17Sales of real estate
    
    
    3
    
    
    
    3
    
    
    
    12Investment gains (losses)
    
    
    
    
    
    
    4
    
    
    
    2Other, net
    
    
    18
    
    
    
    31
    
    
    
    17Total
    
    $
    48
    
    
    $
    53
    
    
    $
    43
 73




---



##### 



Note 5: Financial Instruments
  Currency Hedges
  (1)
    
    To preserve the U.S. dollar values of anticipated non-U.S. dollar cash flows
and earnings, primarily with respect to transactions forecast to occur within a
one-year period;(2)
    
    To prevent changes in the values of assets and liabilities denominated in
currencies other than the legal entitys functional currency which may create undue
earnings volatility (we refer to this hedging activity as asset and liability
hedging); and(3)
    
    To hedge the dollar values of our net investments in operations outside the
U.S.
  Hedges entered to preserve the U.S. dollar values of anticipated non-U.S. dollar cash flows and
earnings
   Asset and liability hedging
  74




---



##### 



Net investment hedging
    Cumulative
    
    ForeignChange of
    
    CurrencyValue of Hedges
    
    Translation
    
    Cumulative(in millions)
    
    of Net
    
    Impact on Net
    
    TranslationGains/(Losses)
    
    Investment
    
    Investment
    
    AdjustmentBalance as of December 31, 2005
    
    $
    (66
    )
    
    $
    78
    
    
    $
    12Changes in fair value
    
    
    (68
    )
    
    
    66
    
    
    
    (2
    )Balance as of December 31, 2006
    
    $
    (134
    )
    
    $
    144
    
    
    $
    10Changes in fair value
    
    
    (94
    )
    
    
    111
    
    
    
    17Balance as of December 31, 2007
    
    $
    (228
    )
    
    $
    255
    
    
    $
    27
  Commodity Hedges
   75




---



##### 



Interest Rate Hedges
        76




---



##### 



Hedge Designation(in millions)
    
    Fair Value
    
    Cash Flow
    
    Net Investment
    
    OtherDerivatives-net asset/(liability):Currency hedges
    
    $
    
    
    
    $
    5
    
    
    $
    
    
    
    $
    (21
    )Long-term
investments in foreign subsidiaries (net
investments)
    
    
    
    
    
    
    
    
    
    
    (25
    )
    
    
    Commodity hedges
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    Interest rate hedges
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    Total derivatives
    
    
    7
    
    
    
    6
    (a)
    
    
    (25
    )(b)
    
    
    (21
    )(c)Debt:Long-term
investments in foreign subsidiaries (net
investments)
    
    
    
    
    
    
    
    
    
    
    (649
    )(d)
    
    
    Total
    
    $
    7
    
    
    $
    6
    
    
    $
    (674
    )
    
    $
    (21
    )
 
 (a)
    
    Comprises assets of $7 million and liabilities of $1 million.(b)
    
    Comprises assets of $8 million and liabilities of $33 million.(c)
    
    Comprises assets of $12 million and liabilities of $33 million.(d)
    
    Represents fair value of foreign denominated debt issuances formally designated as a hedge of
net investment. Note 6: Fair Values and Carrying Amounts of Financial Instruments
  Ø
    
    Cash and cash equivalents, restricted cash, accounts receivable, accounts payable and notes payable  the carrying
amount approximates fair value due to the short maturity of these instruments.Ø
    
    Short- and long-term debt  quoted market prices for the same or similar issues at current rates offered to us for
debt with the same or similar remaining maturities and terms.Ø
    
    Interest rate swap agreements  market prices of the same or similar agreements quoted as of the balance sheet date.Ø
    
    Foreign currency option contracts  Black-Scholes calculation using market data as of the balance sheet date.Ø
    
    Foreign currency forward and swap agreements  application of market data as of the balance sheet date to contract
terms.Ø
    
    Commodity swap, option and collar contracts  counter-party quotes as of the balance sheet date.
  77




---



##### 



Asset/(Liability)
 2007
    
    2006Carrying
    
    
    
    
    
    Carrying(in millions)
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair ValueShort-term debt
    
    $
    (158
    )
    
    $
    (158
    )
    
    $
    (393
    )
    
    $
    (393
    )Long-term debt
    
    
    (3,186
    )
    
    
    (3,356
    )
    
    
    (1,899
    )
    
    
    (2,128
    )Interest rate swap agreements
    
    
    7
    
    
    
    7
    
    
    
    
    
    
    
    Interest rate lock agreements
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    11Foreign currency options
    
    
    3
    
    
    
    3
    
    
    
    2
    
    
    
    2Foreign
exchange forward and swap contracts
    
    
    (44
    )
    
    
    (44
    )
    
    
    (26
    )
    
    
    (26
    )Natural gas swap agreements
    
    
    1
    
    
    
    1
    
    
    
    (2
    )
    
    
    (2
    )
 Note 7: Income Taxes
  (in millions)
    
    2007
    
    2006
    
    2005United StatesParent and Subsidiaries
    
    $
    486
    
    
    $
    688
    
    
    $
    520Affiliates
    
    
    11
    
    
    
    
    
    
    
    (2
    )ForeignSubsidiaries
    
    
    372
    
    
    
    344
    
    
    
    340Affiliates
    
    
    11
    
    
    
    10
    
    
    
    10Earnings from continuing
operations before income taxes and
minority interest
    
    $
    880
    
    
    $
    1,042
    
    
    $
    868
  (in millions)
    
    2007
    
    
    2006
    
    
    2005Income taxes on U.S. earningsFederalCurrent
    
    $
    137
    
    
    $
    208
    
    
    $
    172Deferred
    
    
    3
    
    
    
    (18
    )
    
    
    (47
    )State and other
    
    
    8
    
    
    
    8
    
    
    
    9Total taxes on U.S. earnings
    
    
    148
    
    
    
    198
    
    
    
    134Taxes on foreign earningsCurrent
    
    
    134
    
    
    
    99
    
    
    
    127Deferred
    
    
    (76
    )
    
    
    (23
    )
    
    
    (19
    )Total taxes on foreign earnings
    
    
    58
    
    
    
    76
    
    
    
    108Total Income Taxes
    
    $
    206
    
    
    $
    274
    
    
    $
    242
  (in millions)
    
    2007
    
    
    2006
    
    
    2005Discontinued lines of business
    
    $
    (2
    )
    
    $
    14
    
    
    $
    (16
    )
 78




---



##### 



(in millions)
    
    2007
    
    2006Deferred tax assets related to:Compensation and benefit programs
    
    $
    262
    
    
    $
    256Pension programs
    
    
    30
    
    
    
    45Asset impairments and restructuring reserves
    
    
    7
    
    
    
    15Accruals for waste disposal site remediation
    
    
    37
    
    
    
    28All other
    
    
    89
    
    
    
    80Total deferred tax assets
    
    
    425
    
    
    
    424Deferred tax liabilities related to:Intangible assets
    
    
    525
    
    
    
    504Depreciation and amortization
    
    
    363
    
    
    
    383Cumulative translation adjustment
    
    
    31
    
    
    
    32All other
    
    
    56
    
    
    
    62Total deferred tax liabilities
    
    
    975
    
    
    
    981Net deferred tax liability
    
    $
    550
    
    
    $
    557
   (in millions)
    
    2007
    
    
    2006Prepaid expenses and other current assets
    
    $
    136
    
    
    $
    149Other assets
    
    
    83
    
    
    
    52Accrued liabilities
    
    
    3
    
    
    
    4Deferred income taxes
    
    
    766
    
    
    
    754Net deferred tax liability
    
    $
    550
    
    
    $
    557
  2007
    
    
    2006
    
    
    2005%
    
    
    %
    
    
    %Statutory tax rate
    
    
    35.0
    
    
    
    35.0
    
    
    
    35.0U.S. business credits
    
    
    (2.5
    )
    
    
    (2.7
    )
    
    
    (2.3
    )Foreign, including credits
    
    
    (9.5
    )
    
    
    (5.4
    )
    
    
    (2.1
    )Change in tax contingencies
    
    
    
    
    
    
    0.3
    
    
    
    (3.0
    )Other, net
    
    
    0.4
    
    
    
    (0.9
    )
    
    
    0.3Effective tax rate
    
    
    23.4
    
    
    
    26.3
    
    
    
    27.9
  79




---



##### 



(in millions)
    
    2007Balance at January 1, 2007
    
    $
    75Additions based on tax positions related to the current year
    
    
    17Additions for positions of prior years
    
    
    18Reductions for tax positions of prior years
    
    
    (11
    )Settlements
    
    
    (5
    )Translation impacts
    
    
    3Balance at December 31, 2007
    
    $
    97
    Major Jurisdictions
    
    Open YearsCanada
    
    1999 through 2001, 2003 through 2007China
    
    2000 through 2007France
    
    2004 through 2007Germany
    
    2004 through 2007Italy
    
    2003 through 2007Japan
    
    2000 through 2007Korea
    
    2002 through 2007Switzerland
    
    2005 through 2007Taiwan
    
    2002 through 2007United Kingdom
    
    2003 through 2007United States
    
    2004 through 2007
  80




---



##### 



NOTE 8: Segment Information
 Semiconductor Technologies Circuit Board Technologies, Packaging and Finishing Technologies Semiconductor Technologies
  Ø
    
    Electronic TechnologiesThe group of businesses provides cutting-edge technology for use in telecommunications, consumer
electronics and household appliances. It is comprised of three aggregated businesses: Circuit
Board Technologies, Packaging and Finishing Technologies, and Semiconductor Technologies. The
Circuit Board Technologiesbusiness develops and delivers the technology, materials and
fabrication services for increasingly powerful, high-density circuit boards in computers, cell
phones, automobiles and many other electronic devices. Our Packaging and Finishing Technologies
business develops and delivers innovative materials and processes that boost the performance of
a diverse range of electronic, optoelectronic and industrial packaging and finishing
applications. The Semiconductor Technologiesbusiness develops and supplies integrated products
and technologies on a global basis enabling our customers to drive leading-edge semiconductor
design to boost performance of semiconductor devices powered by smaller and faster chips. This
business also develops and delivers materials used for chemical mechanical planarization, the
process used to create the flawless surfaces required to allow manufacturers to make faster and
more powerful integrated circuits and electronic substrates.Ø
    
    Display TechnologiesThis business develops, manufactures and markets materials used in the production of electronic
displays. This business includes our joint venture with SKC Co. Ltd. of South Korea, SKC Haas
Display Films, which develops, manufactures, and markets advanced specialty films and materials
used in LCD and plasma displays. These include light diffuser films, micro lens films, optical
protection films, release protection films, reflectors, technology for touch panels, Plasma
Display Panel filters, and process chemicals used to manufacture LCD color filters. This
business also includes the leading-edge light management film technology acquired from Eastman
Kodak in 2007, as well as process chemicals used in LCD production originally developed by Rohm
and Haas.Ø
    
    Paint and Coatings MaterialsThis business produces acrylic emulsions and additives that are used primarily to make
decorative and industrial coatings. Its products are critical components used in the
manufacture of architectural paints used by do-it-yourself consumers and professional
contractors. Paint and Coatings Materials products are also used in the production of
industrial coatings (for use on wood and metal, and in traffic paint); in construction
applications (for use in roofing materials, insulation, and cement modification); and floor care
products.Ø
    
    Packaging and Building MaterialsThis business offers a broad range of polymers; additives; and formulated value-added products
(which utilize a broad range of chemistries and technologies, including our world-class acrylic
technology). Its products are used in a wide range of markets, including: packaging and paper,
building and construction, durables and transportation, and other industrial markets. Product
lines include: additives for the manufacture of plastic and vinyl products,
 81




---



##### 



packaging, pressure sensitive, construction, and transportation adhesives, as well as polymers
and additives used in textile, graphic arts, nonwoven, paper and leather applications.
 Ø
    
    Primary MaterialsThis business produces methyl methacrylate, acrylic acid and associated esters as well as
specialty monomer products which are building blocks used in our downstream polymer businesses
and which are also sold externally. Internal consumption of Primary Materials products is
principally in the Paint and Coatings Materials and Packaging and Building Materials businesses.
Primary Materials also provides polyacrylic acid (PAA) dispersants, opacifiers and rheology
modifiers/thickeners to the global household and industrial markets.Ø
    
    Performance Materials GroupThis business group includes our other businesses that facilitate the use of technologies to
meet growing societal needs in the areas of water, food, personal care and energy. It is
comprised of the operating results of Process Chemicals and Biocides, Powder Coatings, and other
smaller business units. Its products include: ion exchange resins, sodium borohydride,
biocides, polymers and additives used in personal care applications and other niche
technologies.Ø
    
    SaltThe Salt business houses the Morton Salt name including the well known image of the Morton Salt
Umbrella Girl and the familiar slogan, when it rains it pours. This business also encompasses
the leading table salt brand in Canada, Windsor Salt. Salts product offerings extend well
beyond the consumer market to include salts used for food processing, agriculture, water
conditioning, highway ice control and industrial processing applications.The table below presents net sales by business segment. Segment eliminations are presented for
intercompany sales between the reportable segments within the Specialty Materials Group.
 (in millions)
    
    2007
    
    2006
    
    2005Electronic Technologies
    
    $
    1,666
    
    
    $
    1,551
    
    
    $
    1,319Display Technologies
    
    
    45
    
    
    
    13
    
    
    
    13Electronic Materials Group
    
    $
    1,711
    
    
    $
    1,564
    
    
    $
    1,332Paint and Coatings Materials
    
    
    2,120
    
    
    
    2,050
    
    
    
    1,888Packaging and Building Materials
    
    
    1,826
    
    
    
    1,776
    
    
    
    1,766Primary Materials
    
    
    2,078
    
    
    
    1,979
    
    
    
    1,904Elimination of Inter-segment Sales
    
    
    (1,103
    )
    
    
    (1,102
    )
    
    
    (1,001
    )Specialty Materials Group
    
    $
    4,921
    
    
    $
    4,703
    
    
    $
    4,557Performance Materials Group
    
    
    1,205
    
    
    
    1,134
    
    
    
    1,071Salt
    
    
    1,060
    
    
    
    829
    
    
    
    925Total
    
    $
    8,897
    
    
    $
    8,230
    
    
    $
    7,885
 The tables below present summarized financial information about our reportable segments:
 Earnings(loss) from
    
    Share of2007
    
    continuing
    
    affiliate
    
    
    
    
    
    
    
    
    
    Segment
    
    Capital(in millions)
    
    operations (1)
    
    earnings, net
    
    Depreciation
    
    Amortization
    
    assets
    
    additionsElectronic Technologies
    
    $
    299
    
    
    $
    10
    
    
    $
    59
    
    
    $
    17
    
    
    $
    1,688
    
    
    $
    82Display Technologies
    
    
    (17
    )
    
    
    
    
    
    
    2
    
    
    
    1
    
    
    
    376
    
    
    
    18Electronic Materials Group
    
    $
    282
    
    
    $
    10
    
    
    $
    61
    
    
    $
    18
    
    
    $
    2,064
    
    
    $
    100Paint and Coatings Materials
    
    
    246
    
    
    
    
    
    
    
    58
    
    
    
    1
    
    
    
    930
    
    
    
    95Packaging
and Building Materials
    
    
    123
    
    
    
    1
    
    
    
    59
    
    
    
    10
    
    
    
    1,667
    
    
    
    34Primary Materials
    
    
    82
    
    
    
    
    
    
    
    82
    
    
    
    
    
    
    
    1,030
    
    
    
    74Specialty Materials Group
    
    $
    451
    
    
    $
    1
    
    
    $
    199
    
    
    $
    11
    
    
    $
    3,627
    
    
    $
    203Performance Materials Group
    
    
    100
    
    
    
    11
    
    
    
    50
    
    
    
    19
    
    
    
    1,463
    
    
    
    34Salt
    
    
    87
    
    
    
    
    
    
    
    81
    
    
    
    8
    
    
    
    1,691
    
    
    
    58Corporate
    
    
    (260
    )
    
    
    
    
    
    
    21
    
    
    
    1
    
    
    
    1,363
    
    
    
    59Total
    
    $
    660
    
    
    $
    22
    
    
    
    412
    
    
    $
    57
    
    
    $
    10,208
    
    
    $
    454
 82




---



##### 



Earnings(loss) from
    
    Share of2006
    
    continuing
    
    affiliate
    
    
    
    
    
    
    
    
    
    Segment
    
    Capital(in millions)
    
    operations (1)
    
    earnings, net
    
    Depreciation
    
    Amortization
    
    assets
    
    additionsElectronic Technologies
    
    $
    242
    
    
    
    9
    
    
    
    56
    
    
    
    17
    
    
    
    1,616
    
    
    
    82Display Technologies
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    Electronic Materials Group
    
    $
    243
    
    
    $
    9
    
    
    $
    56
    
    
    $
    17
    
    
    $
    1,627
    
    
    $
    82Paint and Coatings Materials
    
    
    258
    
    
    
    
    
    
    
    55
    
    
    
    1
    
    
    
    848
    
    
    
    70Packaging
and Building Materials
    
    
    136
    
    
    
    1
    
    
    
    57
    
    
    
    9
    
    
    
    1,667
    
    
    
    28Primary Materials
    
    
    158
    
    
    
    
    
    
    
    87
    
    
    
    1
    
    
    
    976
    
    
    
    69Specialty Materials Group
    
    $
    552
    
    
    $
    1
    
    
    $
    199
    
    
    $
    11
    
    
    $
    3,491
    
    
    $
    167Performance Materials Group
    
    
    77
    
    
    
    
    
    
    
    50
    
    
    
    20
    
    
    
    1,395
    
    
    
    41Salt
    
    
    40
    
    
    
    
    
    
    
    77
    
    
    
    7
    
    
    
    1,607
    
    
    
    48Corporate
    
    
    (157
    )
    
    
    
    
    
    
    21
    
    
    
    1
    
    
    
    1,417
    
    
    
    66Total
    
    $
    755
    
    
    $
    10
    
    
    
    403
    
    
    $
    56
    
    
    $
    9,537
    
    
    $
    404
 Earnings(loss) from
    
    Share of2005
    
    continuing
    
    affiliate
    
    
    
    
    
    
    
    
    
    Segment
    
    Capital(in millions)
    
    operations (1)
    
    earnings, net
    
    Depreciation
    
    Amortization
    
    assets
    
    additionsElectronic Technologies
    
    $
    146
    
    
    $
    8
    
    
    $
    57
    
    
    $
    17
    
    
    $
    1,557
    
    
    $
    62Display Technologies
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    Electronic Materials Group
    
    $
    149
    
    
    $
    8
    
    
    $
    57
    
    
    $
    17
    
    
    $
    1,566
    
    
    $
    62Paint and Coatings Materials
    
    
    250
    
    
    
    
    
    
    
    56
    
    
    
    1
    
    
    
    808
    
    
    
    52Packaging
and Building Materials
    
    
    119
    
    
    
    1
    
    
    
    59
    
    
    
    10
    
    
    
    1,628
    
    
    
    25Primary Materials
    
    
    163
    
    
    
    
    
    
    
    92
    
    
    
    1
    
    
    
    915
    
    
    
    76Specialty Materials Group
    
    $
    532
    
    
    $
    1
    
    
    $
    207
    
    
    $
    12
    
    
    $
    3,351
    
    
    $
    153Performance Materials Group
    
    
    54
    
    
    
    
    
    
    
    51
    
    
    
    17
    
    
    
    1,303
    
    
    
    30Salt
    
    
    57
    
    
    
    
    
    
    
    72
    
    
    
    7
    
    
    
    1,641
    
    
    
    40Corporate(2)
    
    
    (176
    )
    
    
    
    
    
    
    28
    
    
    
    2
    
    
    
    1,510
    
    
    
    45Total
    
    $
    616
    
    
    $
    9
    
    
    
    415
    
    
    $
    55
    
    
    $
    9,371
    
    
    $
    330
 Notes:
 (1)
    
    Earnings from continuing operations were taxed using our
overall consolidated effective
tax rate.(2)
    
    Corporate includes items such as corporate governance
costs, interest income and
expense, environmental remediation expense, insurance recoveries, exploratory research and
development expense, balance sheet currency translation gains and losses, any unallocated
portion of shared services and certain discrete period tax items.
  Asia-European
    
    Pacific(in millions)
    
    U.S.
    
    Region
    
    Region
    
    Other
    
    Total2007Net sales
    
    $
    3,893
    
    
    $
    2,241
    
    
    $
    1,973
    
    
    $
    790
    
    
    $
    8,897Long-lived assets
    
    
    1,644
    
    
    
    427
    
    
    
    547
    
    
    
    253
    
    
    
    2,8712006Net sales
    
    $
    3,845
    
    
    $
    2,030
    
    
    $
    1,659
    
    
    $
    696
    
    
    $
    8,230Long-lived assets
    
    
    1,639
    
    
    
    415
    
    
    
    384
    
    
    
    231
    
    
    
    2,6692005Net sales(1)
    
    $
    3,763
    
    
    $
    1,988
    
    
    $
    1,455
    
    
    $
    679
    
    
    $
    7,885Long-lived assets
    
    
    1,680
    
    
    
    417
    
    
    
    301
    
    
    
    244
    
    
    
    2,642
 Notes:
 (1)
    
    Certain prior year reclassifications have been made to conform to current year
presentations.
 83




---



##### 



Note 9: Retirement Benefits
      Qualified Pension Plans
  2007
    
    2006
    
    2005(in millions)
    
    U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.Components of net periodic pension expense:Service cost
    
    $
    59
    
    
    $
    22
    
    
    $
    57
    
    
    $
    20
    
    
    $
    56
    
    
    $
    19Interest cost
    
    
    95
    
    
    
    39
    
    
    
    95
    
    
    
    34
    
    
    
    92
    
    
    
    32Expected return on plan assets
    
    
    (142
    )
    
    
    (45
    )
    
    
    (122
    )
    
    
    (39
    )
    
    
    (113
    )
    
    
    (35
    )Amortization of net gain existing at
adoption of SFAS No. 87
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )Unrecognized prior service cost
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    1Unrecognized net actuarial loss
    
    
    11
    
    
    
    9
    
    
    
    28
    
    
    
    10
    
    
    
    25
    
    
    
    6Pension judgment
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net settlement and curtailment (gain) loss
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Net periodic pension expense
    
    $
    90
    
    
    $
    24
    
    
    $
    60
    
    
    $
    25
    
    
    $
    62
    
    
    $
    23
 84




---



##### 



Weighted-average assumptionsused to determine netperiodic pension expense for
    
    2007
    
    2006
    
    2005the period January 1, - December 31,
    
    U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.Discount rate
    
    
    5.90
    %
    
    
    5.05
    %
    
    
    5.70
    %
    
    
    4.77
    %
    
    
    5.80
    %
    
    
    5.49
    %Expected return on plan assets
    
    
    8.50
    %
    
    
    6.72
    %
    
    
    8.50
    %
    
    
    6.97
    %
    
    
    8.50
    %
    
    
    7.37
    %Rate of compensation increase
    
    
    4.00
    %
    
    
    3.91
    %
    
    
    4.00
    %
    
    
    3.88
    %
    
    
    4.00
    %
    
    
    4.14
    %
    Weighted-average assumptionsused to determine theprojected benefit obligation
    
    2007
    
    2006for years ended December 31,
    
    U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.Discount rate
    
    
    6.21
    %
    
    
    5.66
    %
    
    
    5.90
    %
    
    
    5.09
    %Rate of compensation increase
    
    
    4.00
    %
    
    
    4.24
    %
    
    
    4.00
    %
    
    
    3.91
    %
 85




---



##### 



2007
    
    2006U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.Change in pension benefit obligation:Pension benefit obligation at beginning of year
    
    $
    1,683
    
    
    $
    745
    
    
    $
    1,749
    
    
    $
    665Service cost, excluding expenses
    
    
    59
    
    
    
    22
    
    
    
    57
    
    
    
    20Interest cost
    
    
    95
    
    
    
    39
    
    
    
    95
    
    
    
    34Participant contributions
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    4Plan amendments
    
    
    (53
    )
    
    
    (1
    )
    
    
    
    
    
    
    (5
    )Actuarial gain
    
    
    (100
    )
    
    
    (15
    )
    
    
    (66
    )
    
    
    (29
    )Benefits paid
    
    
    (105
    )
    
    
    (34
    )
    
    
    (152
    )
    
    
    (26
    )Acquisitions and plan transfers
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    26Curtailments
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (1
    )Settlements
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    Pension judgment
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    57Pension benefit obligation at end of year
    
    $
    1,644
    
    
    $
    849
    
    
    $
    1,683
    
    
    $
    745Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    1,787
    
    
    $
    667
    
    
    $
    1,586
    
    
    $
    511Actual return on plan assets
    
    
    125
    
    
    
    15
    
    
    
    216
    
    
    
    57Employer contribution
    
    
    
    
    
    
    30
    
    
    
    137
    
    
    
    57Participant contributions
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    4Acquisitions and plan transfers
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    20Settlements
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    Benefits paid
    
    
    (105
    )
    
    
    (34
    )
    
    
    (152
    )
    
    
    (26
    )Foreign currency translation adjustment
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    44Fair value of plan assets at end of year
    
    $
    1,807
    
    
    $
    751
    
    
    $
    1,787
    
    
    $
    667Funded status at end of year
    
    $
    163
    
    
    $
    (98
    )
    
    $
    104
    
    
    $
    (78
    )Amounts recognized in the consolidated balance sheets:Other assets
    
    $
    163
    
    
    $
    20
    
    
    $
    104
    
    
    $
    27Accrued liabilities
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Employee benefits
    
    
    
    
    
    
    (117
    )
    
    
    
    
    
    
    (104
    )Net amounts recognized
    
    $
    163
    
    
    $
    (98
    )
    
    $
    104
    
    
    $
    (78
    )
  2007(in millions)
    
    U.S.
    
    Non-U.S.Other changes in plan assets and benefit obligation
recognized in Accumulated other comprehensive lossNet actuarial (gain) loss
    
    $
    (83
    )
    
    $
    21Recognized actuarial loss
    
    
    (11
    )
    
    
    (8
    )Prior service credit
    
    
    (53
    )
    
    
    (1
    )Recognized prior service cost (credit)
    
    
    (2
    )
    
    
    Total recognized in Accumulated other comprehensive
loss, before tax
    
    $
    (149
    )
    
    $
    12
 Automotive Coatings
 86




---



##### 



2007(in millions)
    
    U.S.
    
    Non-U.S.Amounts recognized in accumulated other comprehensive
lossNet actuarial loss
    
    $
    162
    
    
    $
    154Prior service credit
    
    
    (44
    )
    
    
    (2
    )$
    118
    
    
    $
    152
  Pension(in millions)
    
    U.S.
    
    Non-U.S.Net actuarial loss
    
    $
    1
    
    
    $
    7Prior service credit
    
    
    (4
    )
    
    
    $
    (3
    )
    
    $
    7
  Percentage of Plan AssetsTargeted %
    
    Actual %
    
    Targeted %
    
    Actual %2007
    
    2007
    
    2006
    
    2006Asset Category
    
    U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.Equity securities
    
    
    61
    
    
    
    49
    
    
    
    61
    
    
    
    49
    
    
    
    61
    
    
    
    49
    
    
    
    62
    
    
    
    49Debt securities
    
    
    21
    
    
    
    36
    
    
    
    21
    
    
    
    35
    
    
    
    21
    
    
    
    36
    
    
    
    20
    
    
    
    36Insurance contracts
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8Real estate
    
    
    7
    
    
    
    5
    
    
    
    7
    
    
    
    5
    
    
    
    7
    
    
    
    5
    
    
    
    7
    
    
    
    6Hedge funds
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    4
    
    
    
    Other
    
    
    6
    
    
    
    2
    
    
    
    6
    
    
    
    2
    
    
    
    6
    
    
    
    2
    
    
    
    7
    
    
    
    1Total
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100
 87




---



##### 



(in millions)
    
    U.S.
    
    Non-U.S.2008
    
    $
    106
    
    
    $
    312009
    
    
    103
    
    
    
    352010
    
    
    114
    
    
    
    382011
    
    
    114
    
    
    
    422012
    
    
    126
    
    
    
    442013-2017
    
    
    723
    
    
    
    260
     2007
    
    2006(in millions)
    
    U.S.
    
    Non-U.S.
    
    U.S.
    
    Non-U.S.Plans for which accumulated
benefit obligation exceeds
assets:Projected benefit obligation
    
    $
    
    
    
    $
    529
    
    
    $
    
    
    
    $
    (480
    )Accumulated benefit obligation
    
    
    
    
    
    
    478
    
    
    
    
    
    
    
    (447
    )Fair value of plan assets
    
    
    
    
    
    
    413
    
    
    
    
    
    
    
    379
 88




---



##### 



Non-Qualified Pension Plans
  (in millions)
    
    2007
    
    
    2006
    
    
    2005Components of net periodic pension expense:Service cost
    
    $
    3
    
    
    $
    2
    
    
    $
    2Interest cost
    
    
    9
    
    
    
    9
    
    
    
    9Unrecognized prior service cost
    
    
    
    
    
    
    1
    
    
    
    1Other amortization, net
    
    
    3
    
    
    
    4
    
    
    
    4Net periodic pension expense
    
    $
    15
    
    
    $
    16
    
    
    $
    16
  Weighted-average assumptions used to determinenet expense for the period January 1, - December 31,
    
    2007
    
    2006
    
    2005Discount rate
    
    
    5.90
    %
    
    
    5.70
    %
    
    
    5.80
    %Rate of compensation increase
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    4.00
    %
  Weighted-average assumptions used to determine benefitobligation for years ended December 31,
    
    2007
    
    2006Discount rate
    
    
    6.20
    %
    
    
    5.90
    %Rate of compensation increase
    
    
    4.00
    %
    
    
    4.00
    %
  (in millions)
    
    2007
    
    
    2006Change in pension benefit obligation:Pension benefit obligation at beginning of year
    
    $
    155
    
    
    $
    156Service cost, excluding expenses
    
    
    3
    
    
    
    2Interest cost
    
    
    9
    
    
    
    9Amendments
    
    
    (1
    )
    
    
    Actuarial gain
    
    
    (3
    )
    
    
    (1
    )Benefits paid
    
    
    (12
    )
    
    
    (11
    )Pension benefit obligation at end of year
    
    $
    151
    
    
    $
    155Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    
    
    
    $
    Employer contribution
    
    
    12
    
    
    
    11Benefits paid
    
    
    (12
    )
    
    
    (11
    )Fair value of plan assets at end of year
    
    $
    
    
    
    $
    Funded status at end of year
    
    $
    (151
    )
    
    $
    (155
    )Amounts recognized in the consolidated balance
sheets:Accrued liabilities
    
    $
    (11
    )
    
    $
    (10
    )Employee benefits
    
    
    (140
    )
    
    
    (145
    )Net amounts recognized
    
    $
    (151
    )
    
    $
    (155
    )
 89




---



##### 



(in millions)
    
    2007Other changes in plan assets and benefit obligation recognized in
Accumulated other comprehensive lossNet actuarial gain
    
    $
    (3
    )Recognized actuarial loss
    
    
    (4
    )Prior service credit
    
    
    (1
    )Total recognized in Accumulated other comprehensive loss, before tax
    
    $
    (8
    )
    (in millions)
    
    Total2008
    
    $
    122009
    
    
    112010
    
    
    112011
    
    
    112012
    
    
    122013-2017
    
    
    60
   Other Postretirement Benefits
  (in millions)
    
    2007
    
    2006
    
    2005Components of net periodic postretirement cost:Service cost
    
    $
    5
    
    
    $
    5
    
    
    $
    5Interest cost
    
    
    26
    
    
    
    25
    
    
    
    26Expected Return on Plan Assets
    
    
    (2
    )
    
    
    (1
    )
    
    
    Net amortization
    
    
    
    
    
    
    
    
    
    
    (1
    )Net periodic postretirement cost
    
    $
    29
    
    
    $
    29
    
    
    $
    30
 90




---



##### 



2007
    
    2006
    
    2005Weighted-average discount rate for annual expense:
    
    
    5.90
    %
    
    
    5.60
    %
    
    
    5.60
    %
   (in millions)
    
    2007
    
    
    2006Change in postretirement benefit obligation:Benefit obligation at beginning of year
    
    $
    458
    
    
    $
    486Service cost
    
    
    5
    
    
    
    5Interest cost
    
    
    26
    
    
    
    25Contributions
    
    
    15
    
    
    
    17Actuarial gain
    
    
    (18
    )
    
    
    (20
    )Medicare Part D payments received
    
    
    3
    
    
    
    Benefits paid
    
    
    (60
    )
    
    
    (56
    )Foreign currency translation adjustment
    
    
    12
    
    
    
    1Benefit obligation at end of year
    
    $
    441
    
    
    $
    458Change in plan assets:Fair value of plan assets at beginning of year
    
    
    25
    
    
    
    12Actual return on plan assets
    
    
    3
    
    
    
    1Employer contribution
    
    
    42
    
    
    
    51Participant contributions
    
    
    15
    
    
    
    17Benefits paid (net of Medicare Part D subsidy)
    
    
    (57
    )
    
    
    (56
    )Fair value of plan assets at end of year
    
    $
    28
    
    
    $
    25Funded status at end of year
    
    $
    (413
    )
    
    $
    (433
    )Amounts recognized in the consolidated
balance sheets:Accrued liabilities
    
    $
    (11
    )
    
    
    (39
    )Employee benefits
    
    
    (402
    )
    
    
    (394
    )Net amounts recognized
    
    $
    (413
    )
    
    $
    (433
    )
   (in millions)
    
    2007Other changes in plan assets and benefit obligation recognized in
Accumulated other comprehensive lossNet actuarial gain
    
    $
    (18
    )Recognized actuarial loss
    
    
    (2
    )Recognized prior service credit
    
    
    2Total recognized in Accumulated other comprehensive loss, before tax
    
    $
    (18
    )
 91




---



##### 



(in millions)
    
    2007Amounts recognized in
Accumulated other
comprehensive loss:Net actuarial loss
    
    $
    20Prior service credit
    
    
    (7
    )$
    13
   2007
    
    2006
    
    2005Weighted-average discount rate for year-end APBO:
    
    
    6.10
    %
    
    
    5.90
    %
    
    
    5.60
    %
    EstimatedBenefit payments
    
    amount ofbefore Medicare
    
    Medicare Part D
    
    Net benefit(in millions)
    
    Part D subsidy
    
    subsidy
    
    payments2008
    
    $
    43
    
    
    $
    4
    
    
    $
    392009
    
    
    43
    
    
    
    4
    
    
    
    392010
    
    
    43
    
    
    
    4
    
    
    
    392011
    
    
    42
    
    
    
    4
    
    
    
    382012
    
    
    41
    
    
    
    4
    
    
    
    372013-2017
    
    
    189
    
    
    
    23
    
    
    
    166
  Note 10: Employee Benefits
 (in millions)
    
    2007
    
    2006Postretirement health care and life insurance benefits
    
    $
    402
    
    
    $
    394Unfunded supplemental pension plan
    
    
    140
    
    
    
    145Long-term disability benefit costs
    
    
    43
    
    
    
    42Foreign pension liabilities
    
    
    117
    
    
    
    104Other
    
    
    58
    
    
    
    50Total
    
    $
    760
    
    
    $
    735
  92




---



##### 



Note 11: Restricted Cash
  Note 12: Receivables, net
 (in millions)
    
    2007
    
    2006Customers
    
    $
    1,610
    
    
    $
    1,356Value added tax
    
    
    261
    
    
    
    126Affiliates
    
    
    24
    
    
    
    18Employees
    
    
    7
    
    
    
    12Other
    
    
    111
    
    
    
    98Receivables,
gross
    
    
    2,013
    
    
    
    1,610Less: allowance for doubtful accounts
    
    
    36
    
    
    
    40Total
    
    $
    1,977
    
    
    $
    1,570
  Note 13: Inventories
  (in millions)
    
    2007
    
    2006Finished products
    
    $
    479
    
    
    $
    517Work in process
    
    
    345
    
    
    
    301Raw materials
    
    
    151
    
    
    
    121Supplies
    
    
    49
    
    
    
    45Total
    
    $
    1,024
    
    
    $
    984
  Note 14: Prepaid Expenses and Other Current Assets
 (in millions)
    
    2007
    
    2006Deferred tax assets
    
    $
    136
    
    
    $
    149Prepaid expenses
    
    
    78
    
    
    
    67Fair market
value of interest rate lock (see Note 6)
    
    
    
    
    
    
    11Other current assets
    
    
    44
    
    
    
    27Total
    
    $
    258
    
    
    $
    254
 93




---



##### 



Note 15: Land, Buildings and Equipment, net
 Estimated(in millions)
    
    2007
    
    2006
    
    LifeLand
    
    $
    146
    
    
    $
    142Buildings and improvements
    
    
    1,855
    
    
    
    1,729
    
    
    
    10-50Machinery and equipment
    
    
    6,155
    
    
    
    5,721
    
    
    
    3-20Capitalized interest
    
    
    352
    
    
    
    340
    
    
    
    11Construction in progress
    
    
    271
    
    
    
    218Land, buildings, and
equipment, gross
    
    
    8,779
    
    
    
    8,150Less: Accumulated depreciation
    
    
    5,908
    
    
    
    5,481Total
    
    $
    2,871
    
    
    $
    2,669
   Note 16: Goodwill and Other Intangible Assets, net
 Goodwill
  PackagingElectronic
    
    Paint and
    
    and
    
    
    
    
    
    Specialty
    
    Performance2007
    
    Electronic
    
    Display
    
    Materials
    
    Coatings
    
    Building
    
    Primary
    
    Materials
    
    Materials(in millions)
    
    Technologies
    
    Technologies
    
    Group
    
    Materials
    
    Materials
    
    Materials
    
    Group
    
    Group
    
    Salt
    
    TotalBalance as of
January 1,
2006(1)
    
    $
    362
    
    
    $
    
    
    
    $
    362
    
    
    $
    62
    
    
    $
    517
    
    
    $
    29
    
    
    $
    608
    
    
    $
    227
    
    
    $
    328
    
    
    $
    1,525Goodwill related to
acquisitions(2)
    
    
    8
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    14Opening balance 
sheet adjustments
(3)
    
    
    (2
    )
    
    
    
    
    (2
    )
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    8
    
    
    
    (5
    )
    
    
    2Balance as of
December 31, 2006
    
    $
    368
    
    
    $
    
    
    
    $
    368
    
    
    $
    63
    
    
    $
    517
    
    
    $
    29
    
    
    $
    609
    
    
    $
    241
    
    
    $
    323
    
    
    $
    1,541Goodwill related to
acquisitions
(2)
    
    
    6
    
    
    
    95
    
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101Currency effects
and other
(4)(5)
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    3
    
    
    
    10
    
    
    
    
    
    
    
    13
    
    
    
    10
    
    
    
    4
    
    
    
    26Balance as of
December 31, 2007
    
    $
    374
    
    
    $
    94
    
    
    $
    468
    
    
    $
    66
    
    
    $
    527
    
    
    $
    29
    
    
    $
    622
    
    
    $
    251
    
    
    $
    327
    
    
    $
    1,668
 Notes:
 (1)
    
    Certain prior year balances have been reclassified to conform to the current year
presentation.(2)
    
    Goodwill related to acquisitions is due to the following: $6 million and $8 million,
respectively, Electronic Technologies  buyback of additional shares of CMPT; $95 million,
Display Technologies acquisition of our controlling interest in SKC Haas Display Film Co.
Ltd.; and $6 million, Performance Materials  related to the 2006 acquisition of
Floralife®, Inc.(3)
    
    Primarily relates to adjustments to opening balance sheet liabilities due to the
favorable resolution of tax audits resulting in the reduction of opening balance sheet tax
reserves and valuation allowances.(4)
    
    Certain goodwill amounts are denominated in foreign currencies and are translated using
the appropriate U.S. dollar exchange rate.(5)
    
    Goodwill related to divestitures is due to the following: $4 million-Performance
Materials-related to the 2007 sale of Floralife®, Inc.
 94




---



##### 



Intangible Assets
  Gross Asset Value
 Finite Lived
    
    Indefinite LivedPatents,Developed
    
    Customer
    
    
    
    
    
    Licenses &(in millions)
    
    Technology
    
    Lists
    
    Tradename
    
    Other
    
    Strategic
    
    Tradename
    
    TotalBalance as of
January 1, 2006
    
    $
    383
    
    
    $
    865
    
    
    $
    138
    
    
    $
    160
    
    
    $
    75
    
    
    $
    328
    
    
    $
    1,949Currency(1)
    
    
    6
    
    
    
    13
    
    
    
    3
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    21Acquisitions(2)
    
    
    9
    
    
    
    3
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    1
    
    
    
    26Balance as of
December 31, 2006
    
    $
    398
    
    
    $
    881
    
    
    $
    141
    
    
    $
    172
    
    
    $
    75
    
    
    $
    329
    
    
    $
    1,996Currency(1)
    
    
    8
    
    
    
    26
    
    
    
    3
    
    
    
    
    
    
    
    9
    
    
    
    7
    
    
    
    53Acquisitions(2)
    
    
    14
    
    
    
    16
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    31Divestures(3)
    
    
    (2
    )
    
    
    (12
    )
    
    
    (2
    )
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    (18
    )Balance as of December
31, 2007
    
    $
    418
    
    
    
    911
    
    
    
    142
    
    
    
    172
    
    
    
    84
    
    
    
    335
    
    
    
    2,062
 Accumulated Amortization
 Finite Lived
    
    Indefinite LivedPatents,Developed
    
    Customer
    
    
    
    
    
    Licenses &(in millions)
    
    Technology
    
    Lists
    
    Tradename
    
    Other
    
    Strategic
    
    Tradename
    
    TotalBalance as of
January 1, 2006
    
    $
    (149
    )
    
    $
    (144
    )
    
    $
    (28
    )
    
    $
    (99
    )
    
    $
    (5
    )
    
    $
    (21
    )
    
    $
    (446
    )Additions
    
    
    (24
    )
    
    
    (23
    )
    
    
    (4
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (56
    )Currency(1)
    
    
    (3
    )
    
    
    (3
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )Balance as of
December 31, 2006
    
    $
    (176
    )
    
    $
    (170
    )
    
    $
    (33
    )
    
    $
    (104
    )
    
    $
    (5
    )
    
    $
    (21
    )
    
    $
    (509
    )Additions
    
    
    (25
    )
    
    
    (19
    )
    
    
    (7
    )
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    (57
    )Currency(1)
    
    
    (3
    )
    
    
    (7
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )Divestures(3)
    
    
    1
    
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7Balance as of
December 31, 2007
    
    $
    (203
    )
    
    
    (193
    )
    
    
    (38
    )
    
    
    (110
    )
    
    
    (5
    )
    
    
    (21
    )
    
    
    (570
    )Net Book Value
    
    $
    215
    
    
    
    718
    
    
    
    104
    
    
    
    62
    
    
    
    79
    
    
    
    314
    
    
    
    1,492
 Notes:
 (1)
    
    Certain intangible assets are denominated in foreign currencies and are translated
using the appropriate U.S. dollar exchange rate.(2)
    
    Finite-lived intangible assets increased by $9 million as a result of our acquisitions
of the Kodak light management films technology business in June of
2007 and $22 million as
a result of the acquisition of our controlling interest in SKC Haas Display Film Co. Ltd.
See Note 2 for further discussion of these acquisitions.(3)
    
    Divestitures relate to the sale of a Digital Imaging business line in the Paint and
Coatings Materials segment and Floralife®assets in the Performance Materials
segment.
 95




---



##### 



Annual SFAS No. 142 Impairment Review  Goodwill and Other Intangible Assets,
 SFAS No. 144 Impairment Review  Accounting for the Impairment or Disposal of Long-Lived Assets.
 Note 17: Other Assets
 (in millions)
    
    2007
    
    2006Prepaid pension cost (see Note 9)
    
    $
    183
    
    
    $
    131Rabbi trust assets (see Note 9)
    
    
    76
    
    
    
    71Insurance receivables
    
    
    28
    
    
    
    28Deferred tax assets (see Note 7)
    
    
    83
    
    
    
    52Other employee benefit assets
    
    
    17
    
    
    
    16Fair market
value of interest rate swaps (see Note 6)
    
    
    7
    
    
    
    Lease deposits
    
    
    34
    
    
    
    Other non-current assets
    
    
    27
    
    
    
    26Total
    
    $
    455
    
    
    $
    324
 Note 18: Borrowings
 Short-Term Obligations
 (in millions)
    
    2007
    
    2006Other short-term borrowings
    
    $
    150
    
    
    $
    112Current portion of long-term debt
    
    
    8
    
    
    
    281Total
    
    $
    158
    
    
    $
    393
    96




---



##### 



Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities.
 Long-Term Debt and Other Financing Arrangements
  (in millions)
    
    Currency
    
    Maturities
    
    2007
    
    20066.0% notes
    
    Euro
    
    
    2007
    
    
    
    
    
    
    
    211TIBOR(1) plus 0.45% notes
    
    Japanese Yen
    
    
    2007
    
    
    
    
    
    
    
    59TIBOR(1) plus 0.45% notes
    
    Japanese Yen
    
    
    2009
    
    
    
    
    
    
    
    231.57% notes
    
    Japanese Yen
    
    
    2012
    
    
    
    24
    
    
    
    1.54% notes
    
    Japanese Yen
    
    
    2012
    
    
    
    62
    
    
    
    8.74% notes
    
    U.S. Dollar
    
    
    2012
    
    
    
    
    
    
    
    193.50% notes
    
    Euro
    
    
    2012
    
    
    
    353
    
    
    
    3195.60% notes
    
    U.S. Dollar
    
    
    2013
    
    
    
    250
    
    
    
    4.50% notes
    
    Euro
    
    
    2014
    
    
    
    257
    
    
    
    6.00% notes
    
    U.S. Dollar
    
    
    2017
    
    
    
    850
    
    
    
    9.25% debentures
    
    U.S. Dollar
    
    
    2020
    
    
    
    145
    
    
    
    1459.80% debentures
    
    U.S. Dollar
    
    
    2020
    
    
    
    84
    
    
    
    917.85% notes
    
    U.S. Dollar
    
    
    2029
    
    
    
    882
    
    
    
    8823.50% notes
    
    Japanese Yen
    
    
    2032
    
    
    
    177
    
    
    
    167Fair market value adjustments
    
    
    
    
    
    
    
    
    22
    
    
    
    20Other
    
    
    
    
    
    
    
    
    41
    
    
    
    333,147
    
    
    
    1,969Less:current portion
    
    
    
    
    
    
    
    
    8
    
    
    
    281Total
    
    
    
    
    
    
    
    $
    3,139
    
    
    $
    1,688
 Note:
 (1) Six-month Tokyo Interbank Offered Rate (TIBOR)
    97




---



##### 



 
         98




---



##### 



Note 19: Accrued Liabilities
 (in millions)
    
    2007
    
    2006Salaries and wages
    
    $
    181
    
    
    $
    208Interest
    
    
    65
    
    
    
    52Sales incentive programs and other selling accruals
    
    
    57
    
    
    
    69Taxes, other than income taxes
    
    
    158
    
    
    
    107Employee benefits
    
    
    70
    
    
    
    93Derivative instruments
    
    
    67
    
    
    
    41Reserve for restructuring (see Note 3)
    
    
    15
    
    
    
    37Deferred revenue on supply contracts
    
    
    8
    
    
    
    10Insurance and legal
    
    
    6
    
    
    
    4Deferred tax liabilities
    
    
    3
    
    
    
    4Capital Spending
    
    
    37
    
    
    
    35Marketing and sales promotion
    
    
    16
    
    
    
    14Reserve for environmental remediation (see Note 26)
    
    
    48
    
    
    
    40Other
    
    
    158
    
    
    
    102Total
    
    $
    889
    
    
    $
    816
 Note 20: Other Liabilities
 (in millions)
    
    2007
    
    2006Reserves for environmental remediation (see Note 26)
    
    $
    102
    
    
    $
    101Deferred revenue on supply contracts
    
    
    36
    
    
    
    34Legal contingencies
    
    
    40
    
    
    
    42Asset retirement obligations
    
    
    19
    
    
    
    15Taxes
    
    
    83
    
    
    
    Other
    
    
    32
    
    
    
    38Total
    
    $
    312
    
    
    $
    230
  Asset Retirement(in millions)
    
    ObligationsBalance as of January 1, 2005
    
    $
    14Liabilities settled
    
    
    Accretion expense
    
    
    1Currency effects
    
    
    Revisions in estimated cash flows
    
    
    (1
    )Balance as of December 31, 2005
    
    $
    14Liabilities settled
    
    
    (1
    )Accretion expense
    
    
    1Currency effects
    
    
    1Revisions in estimated cash flows
    
    
    Balance as of December 31, 2006
    
    $
    15Additions
    
    
    1Liabilities settled
    
    
    Accretion expense
    
    
    1Currency effects
    
    
    2Revisions in estimated cash flows
    
    
    Balance as of December 31, 2007
    
    $
    19
 99




---



##### 



Note 21: Earnings Per Share
  2007
    
    2006
    
    2005(in millions, except per share amounts)
    
    Diluted
    
    Basic
    
    Diluted
    
    Basic
    
    Diluted
    
    BasicConsolidatedEarnings from continuing operations
    
    $
    660
    
    
    $
    660
    
    
    $
    755
    
    
    $
    755
    
    
    $
    616
    
    
    $
    616Earnings (loss) from discontinued operation
    
    
    1
    
    
    
    1
    
    
    
    (20
    )
    
    
    (20
    )
    
    
    21
    
    
    
    21Net earnings
    
    $
    661
    
    
    $
    661
    
    
    $
    735
    
    
    $
    735
    
    
    $
    637
    
    
    $
    637Average Equivalent SharesCommon stock outstanding
    
    
    207.8
    
    
    
    207.8
    
    
    
    218.9
    
    
    
    218.9
    
    
    
    221.9
    
    
    
    221.9Employee compensation-related shares,
including stock options(1)
    
    
    3.2
    
    
    
    
    
    
    
    2.3
    
    
    
    
    
    
    
    2.0
    
    
    
    Total average equivalent shares
    
    
    211.0
    
    
    
    207.8
    
    
    
    221.2
    
    
    
    218.9
    
    
    
    223.9
    
    
    
    221.9Per-Share AmountsEarnings from continuing operations
    
    $
    3.12
    
    
    $
    3.17
    
    
    $
    3.41
    
    
    $
    3.45
    
    
    $
    2.75
    
    
    $
    2.78Earnings (loss) from discontinued operation
    
    
    0.01
    
    
    
    0.01
    
    
    
    (0.09
    )
    
    
    (0.09
    )
    
    
    0.10
    
    
    
    0.09Net earnings per share
    
    $
    3.13
    
    
    $
    3.18
    
    
    $
    3.32
    
    
    $
    3.36
    
    
    $
    2.85
    
    
    $
    2.87
 Note:
 (1)
    
    There were approximately zero shares, 0.7 million shares and 0.7
million shares in 2007, 2006 and 2005, respectively, attributable to stock
options that were excluded from the calculation of diluted earnings per
share as the exercise price of the stock options was greater than the
average market price.
 Note 22: Stockholders Equity
 Accounting Practices for Certain Employee Stock Ownership Plans Employers Accounting for Employee Stock Ownership Plans.
  100




---



##### 



Stockholders Rights Plan
  Share Repurchase Program
   101




---



##### 



Note 23: Share-Based Compensation Plans
  1999 Stock Plan
  Non-Employee Directors Stock Plans of 1997 and 2005
 American Jobs Creation Act of 2004,
 Rohm and Haas Company Non-Qualified Savings Plan
 American Jobs Creation
Act of 2004
 Share-Based Compensation Overview
    Share-Based Payment. Accounting for Stock-Based Compensation,
 102




---



##### 




    
    Forfeiture rate  SFAS No. 123R requires the recognition of expense only for awards that
will eventually vest. The provision requires pre-vesting forfeitures to be estimated at the
time of grant and modified, if necessary, if actual forfeitures differ from estimated
forfeitures. Our forfeiture rates were based upon historical share-based compensation
cancellations through December 31, 2006. The estimated forfeiture rates resulted in an
immaterial adjustment to current unvested awards.
    
    Tax benefits  SFAS No. 123R requires tax benefits resulting from share-based compensation
in excess of compensation cost recognized to be classified as financing cash flows in the
Consolidated Statements of Cash Flows. Prior to the adoption of SFAS No. 123R, tax benefits
resulting from share-based compensation were classified as operating cash flows.
    
    Tax windfall pool  SFAS No. 123R requires companies to calculate a cumulative pool of tax
windfalls, offset by tax shortfalls, using historical data from the original implementation
date of SFAS No. 123. We have calculated a tax windfall pool as
of December 31, 2007; therefore, any future tax shortfalls related to share-based compensation
should be charged against additional paid-in capital up to the amount of our windfall pool.
 Stock Options
   Weighted-AverageWeighted-
    
    Remaining
    
    AggregateShares
    
    Average
    
    Contractual
    
    Intrinsic(000s)
    
    Exercise Price
    
    Term
    
    Value (000s)Outstanding at January 1, 2005
    
    
    10,231
    
    
    $
    35.30Granted
    
    
    705
    
    
    
    48.60Forfeited
    
    
    (108
    )
    
    
    40.03Exercised
    
    
    (2,404
    )
    
    
    33.99Outstanding at December 31,
2005
    
    
    8,424
    
    
    
    36.73Granted
    
    
    791
    
    
    
    50.37Forfeited
    
    
    (97
    )
    
    
    47.65Exercised
    
    
    (2,205
    )
    
    
    34.16Outstanding at December 31,
2006
    
    
    6,913
    
    
    
    38.96Granted
    
    
    448
    
    
    
    52.72Forfeited
    
    
    (33
    )
    
    
    44.60Exercised
    
    
    (1,283
    )
    
    
    35.74
    
    
    
    
    
    
    $
    24,442Outstanding at December 31,
2007
    
    
    6,045
    
    
    
    40.63
    
    
    
    5.05
    
    
    $
    244,301Options exercisable at
December 31, 2007
    
    
    4,942
    
    
    $
    38.31
    
    
    
    4.32
    
    
    $
    189,329
  103




---



##### 



2007
    
    2006
    
    2005Volatility
    
    
    22.10
    
    
    
    28.83
    
    
    
    30.47Risk-free interest rate
    
    
    4.47
    %
    
    
    4.67
    %
    
    
    4.08
    %Dividend yield
    
    
    3.50
    %
    
    
    3.26
    %
    
    
    1.83
    %Expected life (in years)
    
    
    6
    
    
    
    6
    
    
    
    5
 
    
    The volatility rate is based upon the historical stock price over the expected life of the
option.
    
    The risk-free interest rate assumption is based upon observed interest rates appropriate
for the expected life of the option.
    
    The dividend yield rate was based upon historical information as well as estimated future
dividend payouts.
    
    The expected life is based upon the simplified method, which is defined in Staff
Accounting Bulletin No. 107.
 Restricted Stock
  Weighted-
    
    
    AggregateAverage Fair
    
    
    IntrinsicShares (000s)
    
    
    Value Per Share
    
    
    Value (000s)Nonvested at January 1, 2005
    
    
    1,954
    
    
    $
    33.52Granted
    
    
    555
    
    
    
    47.82Forfeited
    
    
    (92
    )
    
    
    47.82Vested
    
    
    (218
    )
    
    
    27.47Nonvested at December 31, 2005
    
    
    2,199
    
    
    
    37.25Granted
    
    
    614
    
    
    
    50.16Forfeited
    
    
    (130
    )
    
    
    40.24Vested
    
    
    (133
    )
    
    
    36.82Nonvested at December 31, 2006
    
    
    2,550
    
    
    
    40.23Granted
    
    
    692
    
    
    
    52.73Forfeited
    
    
    (148
    )
    
    
    43.05Vested
    
    
    (166
    )
    
    
    39.50
    
    
    $
    8,779Nonvested at December 31, 2007
    
    
    2,928
    
    
    $
    43.14
  104




---



##### 



Long-term Performance Share Plan (LTPSP)
   Note 24: Accumulated Other Comprehensive Loss
  (in millions)
    
    2007
    
    
    2006
    
    
    2005Cumulative translation adjustments
    
    $
    27
    
    
    $
    10
    
    
    $
    12Minimum pension liability adjustments
    
    
    
    
    
    
    
    
    
    
    (122
    )Unrecognized losses and prior service cost,
net, on pension and postretirement
obligations
    
    
    (209
    )
    
    
    (330
    )
    
    
    Net gain (loss) on derivative instruments
    
    
    
    
    
    
    4
    
    
    
    5Accumulated other comprehensive loss
    
    $
    (182
    )
    
    $
    (316
    )
    
    $
    (105
    )
 Note 25: Leases
   FutureMinimum Lease(in millions)
    
    Payments2008
    
    $
    682009
    
    
    492010
    
    
    402011
    
    
    292012
    
    
    23
 Note 26: Contingent Liabilities, Guarantees and Commitments
   105




---



##### 



Ø Remediation Reserves and Reasonably Possible Amounts
  (in millions)
    
    BalanceDecember 31, 2005
    
    $
    147Amounts charged to earnings
    
    
    25Amounts spent
    
    
    (31
    )December 31, 2006
    
    $
    141Amounts charged to earnings
    
    
    37Amounts spent
    
    
    (28
    )December 31, 2007
    
    $
    150
     Ø Wood-Ridge/Berrys Creek
   106




---



##### 



Ø Moss Point
   Ø Paterson
  Ø Martin Aaron Superfund Site
  Ø Groundwater Treatment and Monitoring
  Ø Manufacturing Sites
  107




---



##### 



Insurance Litigation
  Self-Insurance
  Other Litigation
      108




---



##### 



109




---



##### 



Indemnifications
  Note 27: New Accounting Pronouncements
 Non-controlling Interests
 Non-controlling Interests in Consolidated Financial Statements
 110




---



##### 



Business Combinations
  Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards
 Accounting for Income
Tax Benefits of Dividends on Share-Based Payment Awards,
 Fair Value Option for Financial Assets and Financial Liabilities
 The Fair Value Option for Financial Assets and
Financial Liabilities,
 Accounting for Planned Major Maintenance Activities
 AUG AIR-1 Elements of Financial
Statements,
 Fair Value Measurements
 Fair Value
Measurements,
 111




---



##### 



Accounting for Uncertainty in Income Taxes
 Accounting for Uncertainty in Income Taxes. Accounting for Income Taxes.
 Note 28: Summarized Quarterly Data (unaudited)
 (in millions, except per
    
    First Quarter
    
    
    Second Quarter
    
    
    Third Quarter
    
    
    Fourth Quartershare amounts)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    2,160
    
    
    $
    2,058
    
    
    $
    2,190
    
    
    $
    2,081
    
    
    $
    2,204
    
    
    $
    2,065
    
    
    $
    2,343
    
    
    $
    2,026Gross profit
    
    
    609
    
    
    
    645
    
    
    
    604
    
    
    
    631
    
    
    
    614
    
    
    
    604
    
    
    
    640
    
    
    
    603Provision for
restructuring and
asset impairments
    
    
    (1
    )
    
    
    4
    
    
    
    11
    
    
    
    
    
    
    
    18
    
    
    
    6
    
    
    
    
    
    
    
    17Pension judgment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    Net earnings from
continuing
operations
    
    
    190
    
    
    
    207
    
    
    
    161
    
    
    
    192
    
    
    
    129
    
    
    
    189
    
    
    
    180
    
    
    
    167Net earnings
    
    
    192
    
    
    
    207
    
    
    
    160
    
    
    
    166
    
    
    
    129
    
    
    
    186
    
    
    
    180
    
    
    
    176Basic earnings per
share, in dollars:From continuing
operations
    
    
    0.87
    
    
    
    0.94
    
    
    
    0.76
    
    
    
    0.88
    
    
    
    0.62
    
    
    
    0.87
    
    
    
    0.93
    
    
    
    0.77Net earnings
    
    
    0.88
    
    
    
    0.94
    
    
    
    0.75
    
    
    
    0.75
    
    
    
    0.62
    
    
    
    0.86
    
    
    
    0.93
    
    
    
    0.81Diluted earnings
per share, in
dollars:From continuing
operations
    
    
    0.86
    
    
    
    0.93
    
    
    
    0.75
    
    
    
    0.87
    
    
    
    0.61
    
    
    
    0.86
    
    
    
    0.91
    
    
    
    0.76Net earnings per
share
    
    
    0.87
    
    
    
    0.93
    
    
    
    0.74
    
    
    
    0.75
    
    
    
    0.61
    
    
    
    0.85
    
    
    
    0.91
    
    
    
    0.80
 Note 29: Subsequent Events
    112




---



##### 



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  Item 9A. Controls and Procedures
 a)
    
    Conclusion Regarding the Effectiveness of Disclosure Controls and ProceduresUnder the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our
principal executive officer and our principal financial officer concluded that our disclosure
controls and procedures were effective as of the end of the period covered by this annual
report. During 2007, our principal executive officer and our principal financial officer have
signed their certifications as required by the Sarbanes-Oxley Act of 2002. In 2007, our CEO also
certified, without qualification, to the New York Stock Exchange (NYSE) that he was not aware of
any violation by the Company of NYSE corporate governance standards.b)
    
    Managements Report on Internal Control Over Financial ReportingOur managements report on Internal Control Over Financial Reporting is set forth in Item 8 and
incorporated herein by reference.The Companys independent registered public accounting firm, PricewaterhouseCoopers LLP, has
issued an attestation report on the Companys internal controls over financial reporting, which
is included in this Annual Report on Form 10-K.c)
    
    Changes in Internal Controls Over Financial ReportingIn July 2007, we completed the implementation of the redesign of our European operations
financial reporting structure in support of the Companys 2010 Vision. This initiative
realigned reporting entities and related internal controls within our European footprint. We
performed appropriate testing of these changes to ensure effectiveness of internal controls as
they relate to the reliability and accuracy of financial reporting data and no significant
issues were noted.
 Item 9B. Other Information
  113




---



##### 



PART III
 Item 10. Directors and Executive Officers of the Registrant
  DIRECTORS
 William J. Avery
 Raj L. Gupta
 David W. Haas
 Thomas W. Haas
 Richard L. Keyser
 Rick J. Mills
 Sandra O. Moose
 Gilbert S. Omenn
 Gary L. Rogers
 Ronaldo H. Schmitz
 114




---



##### 



George M. Whitesides
 Marna C. Whittington
 Committees
 
 EXECUTIVE OFFICERS
  Alan E.
Barton
 Pierre
R. Brondeau
 Jacques
M. Croisetiere
 Raj L. Gupta
 Robert
A. Lonergan
 Richard
R. Lovely
 Anne M.
Wilms
 115




---



##### 



Item 11. Executive Compensation
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  Equity Compensation Plan Information (1)
  Number of securitiesremaining available forNumber of securities to be
    
    
    
    
    
    
    future issuance under equityissued upon exercise of
    
    
    Weighted-average exercise
    
    
    compensation plansoutstanding options,
    
    
    price of outstanding options,
    
    
    (excluding securities reflectedPlan category
    
    warrants and rights
    
    
    warrants and rights
    
    

in
column
(a))(2,3,4)(in thousands)
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    9,242

    
    
    $27.37

    
    
    14,069
    (3)Equity
compensation plans not approved by security holders
    
    183
    
    
    
    
    
    
    
    31
    (4)Total
    
    9,425

    
    
    $27.37

    
    
    14,100
 Note:
 (1)
    
    Refer to Note 23 to the Consolidated Financial Statements for a description of the plans.(2)
    
    Excludes shares that will be issued pursuant to the Companys matching contributions
under the Non-Qualified Savings Plan.(3)
    
    Includes shares available for issuance under the 2004 Amended and Restated Stock Plan and
the 2005 Non-Employee Directors Stock Plan.(4)
    
    Includes shares available for issuance under the 1997 Non-Employee Directors Stock Plan.
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  Item 14. Principal Accountant Fees and Services
  116




---



##### 



PART IV
 Item 15. Exhibits and Financial Statement Schedule
  1.
    
    All Financial Statements:Managements Report on Internal Control Over Financial ReportingReport of Independent Registered Public Accounting FirmConsolidated Statements of Operations for the years ended December 31, 2007, 2006 and
2005Consolidated Balance Sheets as of December 31, 2007 and 2006Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and
2005Consolidated Statements of Stockholders Equity for the years ended December 31,
2007, 2006 and 2005Notes to Consolidated Financial Statements2.
    
    Financial Statements ScheduleThe following supplementary financial information is filed in this Form 10-K:
 Financial Statement Schedule
    
    Page #§       II  Valuation and qualifying accounts for the years
2007, 2006 and 2005
    
    122
 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.
  EXHIBITNUMBER
    
    DESCRIPTION3.01
    
    Certificate of Incorporation of Rohm and Haas Company (incorporated
by reference to Exhibit 3 to Rohm and Haas Companys report on Form
10-K/A filed March 29, 2001 (the 2000 10-K/A)).3.02
    
    Bylaws of Rohm and Haas Company (incorporated by reference to
Exhibit 3 to Rohm and Haas Companys report on Form 10-Q filed May
5, 2002).4.01
    
    Description of Rohm and Haas Common Stock (incorporated by
reference to Item 5 of Rohm and Haas Companys report on Form 10-Q
filed September 30, 1996).4.02
    
    Indenture, dated as of June 1, 1990, between Morton International,
Inc. and Continental Bank, National Association, as Trustee
(incorporated by reference to Exhibit 4(c) to Morton International,
Inc.s Registration Statement on Form S-1 filed May 9, 1990).4.03
    
    Indenture, dated as of May 1, 1992, between Rohm and Haas Company
and Wachovia Bank, N.A., successor in interest to CoreStates Bank,
N.A. (formerly, The Philadelphia National Bank), as Trustee
(incorporated by reference to Exhibit 4 to Rohm and Haas Companys
report on Form 10-K filed March 29, 1993).4.04
    
    First Supplemental Indenture, dated as of April 28, 1997, among
Morton International, Inc., New Morton International, Inc., and
First Trust, National Association, as Trustee (incorporated by
reference to Exhibit 10.01 to New Morton International, Inc.s
Current Report on Form 8-K dated May 2, 1997).
 117




---



##### 



EXHIBITNUMBER
    
    DESCRIPTION4.05
    
    Indenture, dated as of July 1, 1999, between Rohm and Haas Company
and Chase Manhattan Trust Company, National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to Rohm and Haas
Companys Registration Statement on Form S-4 filed July 30, 1999).4.06
    
    Rights Agreement, dated as of October 26, 2000, between Rohm and
Haas Company and EquiServe Trust Company, N.A., as Rights Agent
(incorporated by reference to Exhibit 4 to Rohm and Haas Companys
Registration Statement on Form 8-A dated October 26, 2000).4.07
    
    Certificate of Designation of Series A Junior Participating
Preferred Stock of Rohm and Haas Company dated October 31, 2000
(incorporated by reference to Exhibit 4 to the 2000 10-K/A).4.08
    
    Fiscal Agency Agreement, dated September 19, 2005, (incorporated by
reference to Exhibit 4.1 to Rohm and Haas Companys current report
on Form 8-K dated September 22, 2005).4.09
    
    Indenture, dated as of September
2007, between Rohm and Haas Company and The Bank of New
York, as Trustee (incorporated by reference to Exhibit 4.1 to Rohm and Haas Company Registration Statement on Form S-3
filed September 5, 2007).4.10
    
    Note Purchase Agreement, dated
March 9, 2007, between Rohm and Haas Company and
 Great West Life and Annuity
et al (incorporated by reference to Exhibit 4.1 to Rohm and Haas
Company Form 8-K filed March 14, 2007).10.01*
    
    1997 Non-Employee Directors Stock Plan (incorporated by reference
to Exhibit 10.2 to Rohm and Haas Companys report on Form 10-K
filed March 21, 1997).10.02*
    
    Amended and Restated Rohm and Haas
Stock Plan (incorporated by reference to Appendix C to Rohm and Haas Companys Definitive Proxy
Statement on Schedule 14A filed March 26, 2001).10.03*
    
    2004 Amended and Restated Stock Plan (incorporated by reference to
Appendix D to Rohm and Haas Companys Definitive Proxy Statement on
Schedule 14A filed March 19, 2004).10.04*
    
    Form of Continuity Agreement, dated as of July 1, 2001, between
Rohm and Haas Company and key executives (incorporated by reference
to Exhibit 10 to Rohm and Haas Companys report on Form 10-Q filed
August 14, 2001).10.05*
    
    Rohm and Haas Company Non-Qualified Savings Plan, as Amended and
Restated effective January 1, 2003 (incorporated by reference to
Exhibit 10.04 to Rohm and Haas Companys report on Form 10-K filed
March 8, 2004).10.06*
    
    2004 Rohm and Haas Company Annual Incentive Plan (incorporated by
reference to Appendix B to Rohm and Haas Companys Definitive Proxy
Statement on Schedule 14A filed March 19, 2004).10.07*
    
    2004 Rohm and Haas Company Long-Term Performance Plan (incorporated
by reference to Appendix C to Rohm and Haas Companys Definitive
Proxy Statement on Schedule 14A filed March 19, 2004).10.08
    
    Five-year Credit Agreement (incorporated by reference from Exhibit
10.1 to Rohm and Haas Companys Current Report on Form 8-K dated
December 21, 2005).10.09
    
    Amendment to the Five-year Credit Agreement (incorporated by
reference to Exhibit 10.1 of Rohm and Haas Companys Form 8-K filed
December 19, 2006).10.10*
    
    2005 Rohm and Haas Company Non-Employee Directors Stock Plan
(incorporated by reference to Exhibit 10.1 of Rohm and Haas
Companys Form 8-K filed May 11, 2005).10.11*
    
    2005 Rohm and Haas Company Non-Qualified Savings Plan (incorporated
by reference to Exhibit 10.2 of Rohm and Haas Companys Form 8-K
filed May 11, 2005).
 118




---



##### 



EXHIBITNUMBER
    
    DESCRIPTION12.01
    
    Statements regarding Computation of Ratios of Rohm and Haas Company.14.00
    
    Rohm and Haas Company Code of Business Conduct and Ethics
(incorporated by reference to Companys website) www.rohmhaas.com
(intended to be an inactive textual reference only).21.01
    
    Subsidiaries of Rohm and Haas Company.23.01
    
    Consent of PricewaterhouseCoopers LLP.31.01
    
    Certification Pursuant to Rule 13a-14(a)/15d-14(a).31.02
    
    Certification Pursuant to Rule 13a-14(a)/15d-14(a).32
    
    Certification furnished pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 *
    
    Management contract or compensatory plan or arrangement filed pursuant to Item 601(b) (10)
(iii) of Regulation S-K.
 119




---



##### 



STOCKHOLDER INFORMATION
 Stock Exchange Listing
 Transfer Agent and Registrar
 
 Annual Meeting of Stockholders  Chemical Heritage Foundation, 315 Chestnut Street, Philadelphia, PA 19106.
 Independent Registered Public Accountants
 120




---



##### 



SIGNATURES
  /s/ Jacques M. CroisetiereJacques M. CroisetiereExecutive Vice President and Chief Financial Officer
   /s/
Raj L. Gupta
    
    /s/ Sandra O. MooseRaj L. Gupta
    
    Sandra O. MooseDirector, Chairman, President and
    
    DirectorChief Executive Officer/s/ 
William J. Avery
    
    /s/  Gilbert S. OmennWilliam J. Avery
    
    Gilbert S. OmennDirector
    
    Director/s/ 
David W. Haas
    
    /s/  Gary L. RogersDavid W. Haas
    
    Gary L. RogersDirector
    
    Director/s/ Thomas
W. Haas
    
    /s/  Ronaldo H.
SchmitzThomas W. Haas
    
    Ronaldo H. SchmitzDirector
    
    Director/s/ Richard
L. Keyser
    
    /s/ George M.
WhitesidesRichard L. Keyser
    
    George M. WhitesidesDirector
    
    Director/s/ Rick
J. Mills
    
    /s/ Marna C.
WhittingtonRick J. Mills
    
    Marna C. WhittingtonDirector
    
    Director
 121




---



##### 



SCHEDULE II
   Bad Debts:
 Year Ended December 31,(in millions)
    
    2007
    
    
    2006
    
    
    2005Deducted from Accounts Receivable 
Allowances for losses:Balance at beginning of year
    
    $
    40
    
    
    $
    43
    
    
    $
    49Additions charged to earnings
    
    
    5
    
    
    
    6
    
    
    
    8Charge-offs, net of recoveries
    
    
    (11
    )
    
    
    (11
    )
    
    
    (12
    )Currency impact
    
    
    2
    
    
    
    2
    
    
    
    (2
    )Balance at end of year
    
    $
    36
    
    
    $
    40
    
    
    $
    43
 LIFO Reserve:
 Year Ended December 31,(in millions)
    
    2007
    
    
    2006
    
    
    2005Deducted from Inventories 
Allowances for reserves:Balance at beginning of year
    
    $
    127
    
    
    $
    120
    
    
    $
    94Additions charged to earnings
    
    
    43
    
    
    
    7
    
    
    
    26Balance at end of year
    
    $
    170
    
    
    $
    127
    
    
    $
    120
 122