Results of Operations
1997, 1996 and 1995

Volume growth in 1997 and 1996 and on-going productivity gains resulted in double-digit earnings increases during the period. The strong free cash flows that resulted were used to buy back common shares during 1997 and 1996, reducing total common shares outstanding by 11% and further enhancing earnings per share and return on common stockholders' equity. Basic earnings per share reached a new high each year during this three-year period and 1997 return on common stockholders' equity of 23% was the highest since 1955.

Earnings in 1997 were $410 million, 13% higher than the $363 million reported in 1996. Basic earnings per common share were $6.51, up 19% from $5.45 the previous year. Despite 6% volume growth, sales of $3,999 million were essentially unchanged from 1996 due to weaker currencies in Europe and Asia-Pacific and the absence of Petroleum Chemicals sales which were part of the RohMax joint venture during 1997. All business segments, except Agricultural Chemicals, and all regions contributed to the higher volume, with the European and Latin American regions maintaining strong momentum throughout the year. In addition to volume growth within consolidated operations, earnings in affiliates benefited from strong volume in RohMax and Rodel, as well as reduced losses in AtoHaas Europe.

Earnings in 1996 were $363 million, 24% higher than the $292 million reported in 1995. Basic earnings per common share were $5.45, up from $4.22 the previous year. Sales of $3,982 million were 3% higher than 1995, reflecting 6% volume growth offset by 1% lower selling prices and a 15% decline in the Japanese yen. European currencies were down slightly for the year. All regions and most businesses contributed to the higher volume. Earnings increased because of solid volume growth, which started about mid-year and continued strongly through the fourth quarter, 7% lower raw material prices, tight cost control and the turnaround of the Ion Exchange Resins business. The earnings gain was dampened by lower selling prices and losses from AtoHaas Europe.

Nineteen ninety-seven earnings include a gain of $16 million after tax, or $.26 per common share, the net result of remediation settlements with insurance carriers during the fourth quarter. Included in 1996 earnings was an after-tax gain of $.06 per common share for the sale of land and retroactive tax credits, net of asset writedowns and restructuring charges. Nineteen ninety-five earnings included a charge of $.25 for the clean-up of the Whitmoyer waste site. Without these items, year-over-year per-share earnings increases were 16%, 21% and 18% in 1997, 1996 and 1995. The repurchase of 2.6 million, 4.4 million and .5 million common shares during 1997, 1996 and 1995, respectively, contributed incrementally $.35 per share to 1997, $.18 to 1996 and an immaterial impact on 1995.

These and other factors affecting earnings are discussed in Summary by Business Group . They are summarized on a per-share basis in Analysis of Change in Basic Per-Common-Share Earnings Current Year Relative to Year Earlier.

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