Document 2R697mGmV2XpYGwYJ7z9jVo67

GL038519 BOARD OF DIRECTORS DWIGHT P. JOYCE ALEXANDER D. DUNCAN B. W. MAXEY JOHN H. WEEKS ROBERT D. HORNER WILLIAM G, PHILLIPS GEORGE M. HALSEY GEORGE S. WARNER WILLIAM P. SMITH PAUL W. NEIDHARDT RICHARD H. TURK, SR. WILLIAM A. BITTENBENDER CORPORATE OFFICERS Dwight P. Joyce, Chairman of the Board and President B. W. Maxey, Vice Chairman of the Board and Vice President-Finance Alexander D. Duncan, Vice President, International Group George M. Halsey, Vice President, Chemicals Group John H. Weeks, Vice President-Personnel George S. Warner, Vice President-Operations, Chemicals Group Paul W. Neidhardt, Vice President, Coatings and Resins Group Richard H. Turk, Sr., Vice President, Pemoo Division William G. Phillips, Vice President-Planning and Treasurer Robert D. Homer, Secretary and General Counsel Donald E. Erskine, Controller CORPORATE DATA Executive Offices 900 Union Commerce Building Cleveland, Ohio Thistee--Sinking Fund Debentures First National City Bank of New York New York, New York Transfer Agent--Preferred Stock The Glidden Company 900 Union Commerce Building Cleveland, Ohio Transfer Agents--Common Stock . Chemical Bank New York Trust Company New York, New York The Cleveland Thist Company Cleveland, Ohio i Registrars--Common Stock 1 The Chase Manhattan Bank ) New York, New York Central National Bank of Cleveland Cleveland, Ohio The debentures and common stock of the Company are listed on the New York Stock Exchange and the common stock has trading privileges on other major stock exchanges. The annual meeting of stockholders will be held on Thursday, December 13, 1962, at ten o'clock in the morning, in the Euclid Ballroom of the Hotel Statler-Hilton, Cleveland, Ohio. GLD38520 THE GLIDDEN COM PANV Aftrt/ /%-/ FINANCIAL HIGHLIGHTS 1962 1961 Net sales...................................................... Income before taxes...................................... Net income ................................................. Per common share................................. Dividends on common stock...................... Per share................................................. Depreciation, depletion and amortization Expenditures for plant and equipment. . Working capital........................................... Current ratio........................................... Shareholders' equity........................... . Per common share................................. Number of shareholders Preferred ................................................. Common ................................................. Number of employees................................. $237,882,381 $ 14,024,705 $ 6,689,705 $2.72 $ 4,650,214 $2.00 $ 6,099,337 $ 11,755,093 $ 67,970,025 4.60 to 1 $102,960,909 $40.31 121 21,043 7,115 $206,702,216 $ 12,606,983 $ 6,416,983 $2.78 $ 4,621,743 $2.00 $ 7,440,940 $ 7,823,199 $ 68,061,010 5.43 to 1 $ 94,665,592 $40.96 20,873 6,372 Change + 15% +11% + 4% - 2% -- -18% +50% -- + 9% -- +12% CONTENTS Report from Chairman and President... 2 Consolidated Income Statements .... 14 Operating Results....................................... 4 Source and Application of Funds .... 15 A Ten-Year Comparison..............................10 Notes to Financial Statements.....................15 Consolidated Balance Sheets.........................12 Accountants' Report................................... 16 Directors, Officers, Plants and Corporate Data . . Inside Front and Back Covers GL038521 1 THE GLIDDEN COMPANY ^ I /^ REPORT FROM THE CHAIRMAN ANO PRESIDENT Sales of The Glidden Company were $237,882,381 in fiscal 1962, compared with sales of $206,702,216 in fiscal 1961. All of the company's operating groups contributed to this gain. Net income amounted to $6,689,705 for the year, compared with $6,416,983 for 1961. Profits of the Chemicals and Foods Groups increased, but profits of the Coatings and Resins Group were below those of the previous year. The year's operating results, including the effects of consolidating Glidden sub sidiaries outside the United States and Canada, are explained in other sections of this report. Because of the leveling off of the economy, results for all three of the domestic operating groups were below our earlier expectations. Many American companies, including ours, are faced with the same economic problem--excess plant capacities and a sluggish growth in demand for industrial and consumer goods. This has led to more intense competition in product develop ment, prices and customer services, resulting in lower profit margins for many manufacturers. We are coping with this basic problem in sev eral ways. First, we are continuing to invest money in new equipment and modem manufac turing and warehousing facilities so that we can operate as efficiently as possible. A major ex ample is the new coatings plant at Carrollton, Tex., which was formally opened in January. This plant, utilizing the most efficient production techniques, serves the important Southwestern market at minimum shipping and other distribu tion costs. Second, we are producing more of our own raw materials. For many years, we have made many paint pigments, colors and other ingredients where we could do so most economically. During the past year, we began to manufacture latex for use in paints, and to mine ilmenite ore for use in the manufacture of titanium dioxide. This will permit us to make better products, improve our manufacturing methods and reduce raw material inventories. Third, we are placing more emphasis on prod uct development and acquisitions to make the most efficient use of our production facilities and distribution systems, and to take advantage of new markets. One result of our acquisition pro gram is the merger of Pemco Corporation into The Glidden Company, which gives us an im portant position in the field of inorganic coating materials. Another example is the purchase of the assets and business of Olney & Carpenter, Inc., a specialty grocery products manufacturer and an excellent addition to the Foods Group. At the same time, we have been investing increasing amounts of money in research and new product development, and in technical service. In the past four years, expenditures for these purposes have been doubled, and in 1962 alone amounted to $5.1 million, an increase of $1.3 million over the previous fiscal year. We have also strengthened our market research efforts to determine the products and markets which offer the greatest profit potential GLD38522 Fourth, we are increasing our interests in for eign markets. With the growing importance of the International Group, which includes all interests outside the United States and Canada, we are reflecting its operations in our financial state ments for the first time. Last year, these opera tions contributed approximately $1 million in pre-tax profit. In August, we announced plans to build a wholly owned plant in Western Europe to produce porcelain enamel and ceramic frits, and we are seeking additional entries into Europe. We also acquired a 25 per cent interest in a Japanese paint company. In solving the problems which face us, we have several factors in our favor. One is that we have now completed our program of disposing of those operations which were low profit producers or which did not fit into our long range plans. An other is the company's excellent financial condi tion. We have the money to invest in efforts to create growth opportunities. Most important, we are a better company from a personnel stand point. Wc have good, aggressive young men at all levels of corporate management. Dr. William A. Bittenbender, Corporate Director of Research, was elected a Director to fill the vacancy created by the death of Mr. Harvey L. Slaughter. During the year, the Board of Directors elected Mr. William G. Phillips, Treasurer of the company, to the newly created position of Vice President-Planning. He continues to serve as Treasurer. This election is a recognition of the continuing and growing importance of the growth planning effort, which I have discussed with you previously. The Board also elected Mr. B. W. Maxey to the position of Vice Chairman of the Board of Directors. Mr. Maxey continues to serve as Vice President-Finance. The coming year looks like a good one-- though not outstanding. The economy is con tinuing to move sideways with no strong indica tions of significant change in either direction. We are exercising rigid expense controls in all segments of the business, but we do not intend to reduce or eliminate expenditures which are designed to contribute to long range profit growth. We are following the policy of sacrificing a dollar's worth of profit today if that dollar well spent leads to greater profits in the future. Sincerely, November 12, 1962 GLD38523 3 V THE GlIDOEN COMPANY ^f SS/t/t/ /'iprr/ /V^>_v OPERATING RESULTS FOR THE GLIODEN COMPANY IN 1962 The Glidden Company is composed of four major operating groups: Coatings and Resins Group, which manufac tures paints, other coatings, resins and plastic products for a variety of industrial and consumer applications. Foods Group, which processes a broad range of edible oils and grocery products, principally under the Durkee Famous Foods trade name. Chemicals Group, which manufactures pig ments, colors, inorganic coating materials, metal powders and various specialty organic chemicals. International Group, which is responsible for Glidden's interests outside the United States and Canada. Subsidiaries in this Group are being consolidated in our financial statements for the first time. Following is the percentage of consolidated sales and profit for each operating group in 1962, along with the portion of the total assets em ployed to produce the sales and profit: Coatings and Resins Foods Chemicals International % Sales 40 41 17 2 % Profit % Assets 30 36 28 24 36 35 65 Sales by operating groups for fiscal 1962 compared with fiscal 1961 were: 1962 Coatings and Resins $95,232,340 % 1961 Increase $91367,016 4% Foods $98,584,155 $88,024,008 12% Chemicals $40,076320 $27311.192 47% International $ 3,989,066 (not reported) - Total $237,882,381 $206,702,216 As these figures show, the Coatings and Resins, Foods, and Chemicals Groups had significant sales increases over the previous fiscal year. These increases were achieved through more intensive sales effort, the introduction of new products and the addition of sales of acquired companies. Included in the Chemicals Group are Pemco Division sales of $8,757,162 for 1962. NET INCOME IN 1962-Consolidated net income in 1962 was $6,689,705, compared with reported SALES IN 1962--Consolidated sales amounted to $237,882,381 in 1962, including $3,989,066 from the International Group. This compares with reported sales of $206,702,216 for the previous 4 fiscal year. GL 038524 OI.IDDEN'S MODKI1N. NHW COATINGS PLANT AT CARIiOI.l.TON, TF.X,. WHICH WAS FORMALLY OPENED IN JANUARY, 1962 ii.mi'm i k o k i: .\w.\ns h`i:n.\i\i; rut truss AT III! AltKIAN .UlYIT. ttilllKS IN U.M.TIMltUI'. Ml) net income of $6,416,983 for fiscal 1961. Net income per common share was $2.72, includ ing an extraordinary charge of $.12 per share for Canadian devaluation. Net income for 1962 includes the Pemco Division. After provision for preferred dividends, this division's contribution to earnings was equal to $.08 a share. In fiscal 1961, net income per share was $2.78, which in cluded a non-recurring gain of $.31 a share from sale of the company's soybean processing and grain storage facilities. The 1961 results do not include the Pemco Division or the International Group. Net income by quarters was: Quarter Ended 1962 1961 Per Per Amount Common Amount Common (000) Share (000) Share November 30 $1,392 February 28 1,012 May 31 1,761 August 31 2,525 $ .69 .38 .71 1.04 $1,077 686 1,623 3,031 $ .47 .29 .71 1.31 DIVIDENDS--Dividends on common stock totaled $4,650,214, based upon the regular $2.00 an nual rate. Last year, 73 per cent of net income available for common was distributed to com mon shareholders as dividends. Dividends de clared on the $2,125 preferred stock amounted to $317,667. During the 1962 calendar year, the following quarterly dividend payments on common stock were made: Record Date December8 March 9 June 8 September 7 Date Paid January 2 April 2 July 2 October 1 Amount Per Share $.50 .50 .50 .50 CAPITAL EXPENDITURES-Capital expenditures for fiscal 1962 amounted to $11.8 million, up $4 million from the previous year. We are continuing to invest capital where needed to pro duce new products and reduce operating costs. Here is how capital was invested in the domestic operating groups during fiscal 1962: Coatings and Resins.............................. 24% Foods . ... .............. 39% Chemicals .................................. 37% In the Coatings and Resins Group last year, we put into production a modem new plant at Carrollton, Tex., and made major improvements at coatings plants in Chicago, 111.; Atlanta, Ga.; St. Louis, Mo.; and Toronto, Ont. In the Foods Group, we constructed a new warehouse adjacent to the refinery at Louisville, Ky., which will improve operating efficiency and provide for future growth. In Chicago, we com pleted construction of a new addition to the edible oil refinery designed to process new types of vegetable oil products. Cost of the plant and equipment of Olney & Carpenter, Inc., is also included in the company's capital expenditures for 1962. GLD38525 5 THE GLIDDEN COMPANY S/fa,//%? In the Chemicals Group, we are putting into operation a new ilmenite mine at Lakehurst, N. J. Ilmenite is the ore from which titanium dioxide COATINGS AND RESINS GROUP-Improved Spred Satin, made with Glidden latex, is easier to apply, cures faster and reduces light reflection. is manufactured. We are completing a major expansion of the research and laboratory facili ties at the Adrian Joyce Works at Baltimore, Md. New Spred House Paint Tint Base, which provides a wide range of modem colors when tinted with Dramatone colors. The Spred House Capital expenditures for fiscal 1963 will range from $8 million to $10 million for expansion and Paint system, now in its third year, is enjoying excellent reception among homeowners. modernization of domestic and international facilities. Recent improvements in water reducible resins have made possible a wide variety of functional NEW AND IMPROVED PRODUCTS-Last year, we developed a number of new products and made improvements in many existing ones. Here is a brief summary: water reducible coatings for finishing wood and metal products. We have had particular success in new coatings for the automotive industry. Better polyester coating resins for specialized applications on reinforced plastics. Improved mill-applied wood primerB for a f! :' wide variety of wood, plywood; and composition boards for use on exterior riding and other wood building products. A number of improved coil and strip coatings for use on a variety of metal products, including building panels, roof decks, riding and other exterior surfaces. Improved fiber glass reinforced paneling and new glazing panes for structural and decorative purposes. NEW TYPES OF VEGETABLE OILS ARE BEING PROCESSED AT THIS NEW ADDITION TO THE DURKEE REFINERY IN CHICAGO. ILL. FOOD GROUPS--Kaomel, a new confectioner's coating which is compatible with cocoa butter. This is one of the products from our new edible oil refinery in Chicago and is now undergoing ex tensive Arid trials for use in chocolate coatings, candies, biscuits, crackers and other confections. Betr Icing, a new vegetable oil base product for lighter cake icings and cream fillings. GLD38526 I " ! \ Ul'SI'.AKCH IMM'IMil-'i AT COATINGS \Nli KI-XINS KKSKAKCH Cr.N I Kli IN (XKVKI.ANIl. !.. t o iik v ix o p imp k o v k ii p o i.y i:s t i:k h k s in s . Sunrise Margarine, an improved baker's margarine for use in warmer climates during the summer. A group of four safflower oil shortenings for use when a shortening or oil with a low polysaiurate count is desired. Several of our custom ers are market-testing a margarine using Durkee safflower oil, and we expect greater use of this oil in 1963. Kex "500," a new high stability, rancidityresistant oil for a number of specialized industrial uses. Mel-Fry, a new fluid shortening especially designed for deep-fat frying. A new line of convenience sauce mixes, which is now being market-tested in several cities. CHEMICALS GROUP--Improved grades of titanium dioxide for use in the production of porcelain enamel frits, floor tile, rubber products, latex paints and paper coatings. New grades of frit for use on steel bathtubs, sinks, appliances and for other industrial applications. Improved ceramic frits for low temperature red glazes. New iron and other metal powders for various specialized uses. MARKETING AND DISTRIBUTION-During the year, Glidden continued its aggressive marketing efforts through advertising, intensified sales efforts, and by enlarging and strengthening distribution systems. Advertising expenditures amounted to $5,710,852 for all domestic operating groups. compared with $4,985,689 for the previous year. In the Coatings and Resins Group, 34 new paint branches were opened and 14 were closed, for a net increase of 20 outlets during the year. ACQUISITIONS--'Hie largest single acquisition in fiscal 1962 was the merger into Glidden of Pemco Corporation of Baltimore, one of the. country's leading producers of porcelain enamel and ceramic frits, and inorganic colors. This organization is now known as the Pemco Divi sion of Glidden's Chemicals Group. In the fourth quarter, Glidden purchased for cash the assets and business of Olney & Carpen ter, Inc., makers of specialty grocery products. CONTINUOUSI.Y IMPROVING COATINGSa cm mu o iu k c t iv k or p a in t k k s r a r c h GLD38527 7 II.MKNITF. OUK IS HXTHACTKl) KKOM SANI1 AT T ill-'. NKW l.AKKHUHST. N. J.. MINK. with plants at Wolcott and Eden, N. Y. Leading products of the firm are O & C canned French fried onions, canned potato sticks, canned boiled onions, frozen French fried potatoes and other canned and frozen foods. Products will continue to be distributed under the 0 & C brand labels. This operation, with annual sales in excess of $5 million, fits well into Glidden's program for expanding the Grocery Products Division of the Foods Group. During the year, Glidden purchased facilities for production of stainless steel powders, which helps fill out the company's line of metal powders. OVERSEAS ACTIVITIES--In the closing days of the 1962 fiscal year, Glidden announced its inten tion to construct a plant in Western Europe for production of porcelain enamel and ceramic frits. The plant will be located in Belgium to serve industries in the Common Market and else where in Europe. Total investment is expected to reach $3 million. It is Glidden's intention to expand the activi ties of the Pemco Division in many world markets. The decision to construct a plant in the European Common Market was made par ticularly attractive by the fact that the Western European economy has grown significantly in recent years. Glidden believes that the economy there will continue to expand, and will offer even greater markets for the company's prod ucts. At this time, we are actively seeking addi tional entries into Western Europe for various product lines. On the other side of the world, the company has acquired a 25 per cent interest in Sekisan Kako Kabushiki Kaisha, one of the leading paint companies in Japan. Sekisan owns two paint plants-one at Osaka and a new fadlity recently put in operation at Odawara. Glidden has also acquired an interest in two small companies which distribute products to the building trade in Puerto Rico. In fiscal 1961, Glidden acquired a one-third interest in Hermann Wulfing Wings-Lackfabrik, one of the leading paint companies in West Germany. This investment has been profitable from the beginning and offers excellent potential for growth. WAGES ANO SALARIES-Total wages, salaries and employee benefits amounted to $46,053,835 in 1962 and were 19.4 per cent of sales. The com parable figures for fiscal 1961 were $41,798,041 and 20.2 per cent INVENTORIES--Inventories at August 31 totaled $48,621,870, compared with $41,602,106 at the end of the 1961 fiscal year. Most of this increase is accounted for by the Pemco and Olney & Carpenter acquisitions during the year. Larger crude vegetable oil stocks were also a factor. DEPRECIATION--Charges against income for de predation and depletion amounted to $6,099,337 in 1962, compared with $7,440,940 for fiscal 1961. The 1961 figure indudes charges of $1,974,260 for depreciation and amortization of the com pany's grain storage and soybean processing fadUties which have been sold. This accounts for the decline in total depreciation charges during the past year. During 1962, the United States Treasury Department announced procedures which permit GLD38528 THE GLIDDEN COMPANY f/***/ Sfa//%? the company to depreciate its property for in come tax purposes over a substantially shorter period of time than had previously been allowed. These new rates have not been used in computing the above depreciation of $6,099,337 charged against income in 1962. They will, however, be used for tax purposes, and an additional $2,341,011 will be deducted for depreciation on our 1962 federal income tax return. Provision has been made for the taxes which have been deferred as a result of taking additional depreciation for tax purposes, so that reported net income for the year has not been affected. By taking these additional depreciation charges for tax purposes, the company's financial position will be materially strengthened because we are reducing our current tax liability and postponing its payment to future years. This means that we will have an additional $1.2 million cash available for investment today. TAXES--Taxes on income totaled $7,335,000 equal to $3.15 per common share. Of this amount, $6,118,000 represents taxes currently payable, and $1,217,000 represents taxes for which payment has been deferred to future years. Real estate, personal property, franchise and similar taxes amounted to $2,943,057. LITIGATION--On June 14, 1962, Glidden and nine other vegetable oil processors were indicted by a federal grand jury in Los Angeles, Calif., on charges of stabilizing prices and restricting competition in the sale of shortening and salad oil for industrial purposes in ten western states. Two executives of our Edible Oil Products Divi sion, together with individual defendants em ployed by other processors, were also indicted. All of the corporate and individual defendants involved have entered pleas of "not guilty." The Western market for these products is extremely competitive, as it is in all other parts of the country. Glidden's policy !b to compete independ ently and vigorously for this business. We have no reason to believe that either our company or any of its employees has violated the antitrust laws and are confident that the ultimate decision with respect to these charges will be in our favor. In March, 1962, the U. S. Supreme Court, after denying review on the labor issues in the case of Zdanok v. Glidden, in effect upheld, by a con stitutional interpretation, a Circuit Court of Appeals' decision against the company. This was the decision upholding allegations of five former Glidden employees that they had been denied seniority rights under their union con tract when the company closed its coconut and condiment plant at Elmhurst, Long Island, N.Y., and established new operations at Bethlehem, Pa. Later, the Supreme Court and another Cir cuit Court of Appeals issued decisions which we believed conflicted with the Circuit Court's deci sion in the Zdanok case. The Supreme Court last month ruled against the company on a mo tion to reconsider its October, 1961, decision not to review (thereby upholding) the Circuit Court's split decision. This case, along with a similar proceeding involving 154 other former employees, will now go to the U. S. District Court where damages, if any, due each of the former employees involved will be determined. It is the opinion of counsel that the company's potential financial liability in these cases is not material. GL038529 ATEN YEAR COMPARISON (All dollar amounts are expressed in thousands, except figures given on a per share basis) 19620> ' INCOME Net sales . .................... ............................................................ Cost of products sold....................................................................... Selling and administrative expenses ......................................... Income from operations.................................................................. Income before taxes....................................................................... Thxes on income......................... ................................. Net income...................................................................................... 50,877 Dividends on preferred shares ................................................... Dividends on common shares........................................................ Earnings reinvested....................................................................... Depreciation, depletion and amortization............................... 4,650 6,090 FINANCIAL POSITION Working capital............................................................................ Property, plant and equipment -- net......................................... Tbtal assets...................................................................................... $ 67,970 61,261 151340 Long-term debt................................................................................. Shareholders' equity....................................................................... 80,000 102,961 PER COMMON SHARE Net sales........................................................................................... Net income...................................................................................... Depreciation, depletion and amortization............................... . $ 93.15 2.72 2.62 Dividends........................................................................................... Shareholders' equity......................................................... Price of Glidden common shares<2> -- High......................... -- Low......................... OTHER STATISTICS 2.00 40.31 45.50 35.12 Expenditures for property, plant and equipment.................... % net income to shareholders' equity......................................... % common dividends to net income available for common . . Ratio of current assets to current liabilities............................... $ 11,755 6.6% 73.4% 4.60 Preferred shares outstanding ................................................... Common shares outstanding........................................................ Number of shareholders -- Preferred......................................... -- Common......................................... Number of employees.................................................................. . 198,900 2329.872 121 21,043 7,116 PRO FORMA (excluding operations ol Chemurgy Division for the fiscal yean 1953--JOSS) Net sales........................................................................................... Income from operations.................................................................. Income before taxes....................................................................... Net income...................................................................................... . $ 237,882 14,187 14,025 6,690 (1) Includes International Group and Pemeo Division (2) Calendar years, except 1962 which is to October 15. 1962 1961 $ 206,702 150,173 43,850 12,543 12,607 6,190 6,417 4,622 1,795 7,441 3 68,061 54,691 140,039 30,000 94,666 $ 39.43 2.78 3.22 2.00 40.96 47.00 35.75 3 7323 6.8% 72.0% 5.43 2311,245 20,873 6,372 3 206,702 12,548 12,607 6,417 1960 3 197,491 142,809 40.6H 14,06 13,63; 6,948 6,69( V 4,621 2,069 6,960 3 59,722 62,106 138,034 30,000 92,847 3 85.47 2.90 3.01 2.00 40.18 45.63 34.75 3 8,764 7.2% 69.1% 4.93 2310,590 20,969 6,151 3 197,491 14,066 13,638 6,690 GLD38530 THE GlIODEN COMPANY 4W/ /^>/ /W 12 Months - August 31 1959 1958 1957 1956 10 Months August 31 1955 12 Months - October 31 1954 1953 $ 195,764 142,535 36,803 16,426 15,926 8,292 7,634 4,610 3,024 6,579 $ 58,248 60,907 137,552 30,000 90,679 S 84.82 3.31 2.85 2.00 39.29 50.25 41.88 $ 7,607 8.4% 60.4% 4.45 2,307,850 20,993 6,023 ; 195,764 16,426 15,926 7,634 $ 217,353 168,979 34,149 14,225 12,350 6,287 6,063 4,596 1,467 5,838 $ 225,537 176,874 32,995 15.668 15,387 8,123 7,264 4,594 2,670 5,046 $ 52,572 59,992 133,240 26,000 87,304 $ 53,100 59,517 140,370 27,500 85,837 $ 94.58 2.64 2.54 2.00 37.99 47.00 28.00 9,214 6.9% 75.8% 3.64 2,298,170 22,405 6,353 $ 98.14 3.16 2.20 2.00 37.35 37.50 29.50 $ 12,465 8.5% 63.2% 2.96 2,298,170 21,686 6,455 $ 185,380 11,923 10,294 5,076 3 190,424 13,590 13,590 6,402 $ 226,290 177,538 31,974 16,778 16,451 8,304 8,147 4,592 3,555 2,870 $ 35,696 53,414 118,738 7,500 83,091 $ 98.56 3.65 1.25 2.00 36.19 41.12 34.50 $ 16,637 9.8% 56.4% 2.27 2,295,990 20,758 6,387 3 190,483 13,956 14,252 7,091 $ 180,525 142,047 24,047 14,431 14,325 7,212 7,113 4,589 2,524 2,235 $ 209,084 167,845 27,701 13,538 14,235 7,142 7,093 4.582 2,511 2,333 $ 47,156 39,993 106,762 9,000 79,513 $ 51,226 84,493 102,670 10,500 76,923 $ 78.65 3.10 .97 2.00 34.64 44.50 36.12 8,155 8.9% 64.5% 3.58 2,295,350 20,019 6,397 $ 91.16 3.09 1.02 2.00 33.54 42.50 28.75 3 4,021 9.2% 64.6% 4.36 2,293,455 19,174 6,198 3 151,752 12,706 13,102 6,526 $ 169,823 11,362 12,271 6,150 $ 211,758 170,492 26,739 14,527 14,834 7,725 7,109 4,578 2,531 2,185 3 46,005 33,234 102,750 7,000 74,324 $ 92.44 3.10 .95 !oo 32.44 38.12 27.88 $ 4,150 9.6% 64.4% 3.15 2,290,794 18,726 6,120 3 170,717 12,414 12,907 6,184 GLD38531 CONSOLIDATED BALANCE SHEETS THE GLIDDEN COMPANY an d s u bs id iar ies August 31.1SS2 uni August 31.13ft ASSETS CURRENT ASSETS Cash...................................................................... Short-term securities -- at cost...................... Tirade accounts receivable, less allowances of $502,720 (1961 -$419,879)...................... Inventories--generally at the lower of accumu- lated-average cost or replacement market: Raw materials and work in process . . Finished products...................................... Amount receivable from sale of Chemurgy properties...................................... Other current accounts and investments . . Prepaid expenses................................................ To t a l Cu r r e n t As s e t s 1962 $ 9,957,068 1,989,993 24,066,793 $ 21,043,890 27,577,980 $ 48,621,870 -01,432,680 780,947 $ 86,849,351 1961 $ 8,076,305 1,991,447 21,836,602 $ 18,982,647 22,619,459 $ 41,602,106 8,500,000 932,380 496,056 $ 83,434,896 PROPERTY, PLANT. AND EQUIPMENT Land and mineral deposits -- at cost .... $ 5,487,499 Buildings --at cost........................................... Machinery and other equipment -- at cost . . 29,868,259 66,832,306 $102,188,064 Less accumulated depreciation and depletion 40,926,681 To t a l Pr o p e r t y , Pl a n t , a n d Eq u ip me n t -- Ne t $ 61,261,383 $ 5,109,153 26,177,778 57,328,330 $ 88,615,261 33,924,289 $ 54,690,972 OTHER ASSETS AND DEFERRED CHARGES 3,729,501 $151,840,235 1,913,610 $140,039,478 GL038532 THE GlIDDEN COMPANY f//ys,/ /'S6J LIABILITIES AMD SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable................................................. Accrued taxes, interest, and other expenses . Note payable by subsidiary to bank .... Dividend payable................................................. Income taxes -- estimated................................. To t a l Cu r r e n t Lia b il it ie s 1962 $ 9,401,826 2,170,787 900,000 1,164,936 5,241,777 $ 18,879,326 4%% SINKING FUND DEBENTURES --payable $1,500,000 annually 1964-1983 . . $ 30,000,000 SHAREHOLDERS' EQUITY - Notes B, C, D, and E Cumulative Preferred Stock without par value: Authorized -- 500,000 shares, of which 199,840 have been designated as $2,125 series Outstanding -- 198,900 shares, at stated value of $25 a share .... $ 4,972,500 Common Stock -- par value $10 per share: Authorized -- 3,500,000 shares (1961 -3,000,000) Reserved for conversion and options -- 376,888 shares (1961 - 174,845) Outstanding -- 2,329,872 shares (1961 -2,311,245)...................................... 23,298,720 Additional capital paid in................................. 11,081,262 Earnings retained for use in the business . . 63,608,427 To t a l Sh a r e h o l d e r s ' Eq u it y $102,960,909 $151,840,235 1961 $ 7,647,668 1,846,155 -0- 1,155,633 4,724,430 $ 15,373,886 $ 30,000,000 $ -0- 23,112,450 10,204,144 61,348,998 $ 94,665,592 $140,039,478 See notes to financial statements. GLD38533 CONSOLIDATED STATEMENTS OF INCOME AND EARNINGS RETAINED FOR USE IN THE BUSINESS THE GUDDEN COMPANY an d s u bs id iar ies Yens nisi August 31.1962.ssdAugust 3f, 1961 INCOME Net sales...................................................................... Operating costs: Cost of products sold ......... Selling and administrative expenses .... In c o me Fr o m Op e r a t io n s Other income and (deductions): Foreign technical service fees........................... Income from foreign associates...................... Canadian exchange adjustment...................... Interest on long-term debt................................ Gain on final disposal of Chemurgy properties Other items - net................................................ In c o me Be f o r e In c o me Ta x e s Provision for income taxes (including $1,217,000 deferred in 1962)........................... Ne t In c o me Provision for depreciation and depletion was $6,099,337 (1961--$5,466,680, excluding depreciation of Chemurgy properties) 1962 $237,882,381 $172,818,579 50,876,936 $223,695,515 $ 14,186,866 $ 679,370 268,600 (286,041) (1,425,000) -0600,910 $ (162,161) $ 14,024,705 7,335,000 $ 6,689,705 EARNINGS RETAINED FOR USE IN THE BUSINESS Balance at beginning of year................................. Retained earnings at September 1, 1961 of subsidiaries taken into consolidation as of that date................................................................ Net income................................................................ Cash dividends declared: Preferred Stock -- $1.59375 per share . . . Common Stock -- $2.00 per share .... Balance at end of year........................................... $ 61,348,998 537,605 6,689,705 $ 68,576,308 $ 317,667 4,650,214 $ 4,967,881 $ 63,608,427 1961 $206,702,216 $150,172,507 43,981,322 $194,153,829 $ 12,548,387 $ 181,723 -0-0- (1,425,000) 1,108,672 193,201 $ 58,596 $ 12,606,983 6,190,000 $ 6,416,983 $ 59,553,758 -06,416,983 $ 65,970,741 $ -04,621,743 $ 4,621,743 $ 61,348,998 See notes to financial statements. GLD3853A j 1 \ SUMMARY OF SOURCE AND APPLICATION OF FUNDS THE GLIDDEN COMPANY an d s u bs id iar ies years ended August 31.1962, and August 31.1961 THE GlIDDEN COMPANY '' W/ A>w/ /'M>J SOURCE OF FUNDS From operations: Net income........................................................... Charges which did not involve current expenditures: Provision for depreciation and depletion Provision for deferred income taxes -- added to accumulated depreciation To t a l Fr o m Op e r a t io n s Net current assets acquired from Pemco Corporation for Preferred Stock . . Sale of Common Stock under option plans (1962 -- 17,570 shares; 1961 -- 655 shares) . Sale of Chcmurgy properties (reduced by gain recognized in determination of net income shown above)...................................................... Decrease (increase) in working capital .... APPLICATION OF FUNDS Dividends declared................................................. Expenditures for property, plant, and equipment Additional investments in and advances to associated companies, including consolidation of net current liabilities of foreign subsidiaries taken into consolidation as of September 1,1961 Other applications -- net...................................... 1962 $ 6,689,705 6,099,337 1,217,000 $14,006,042 3,381,562 629,793 -090,985 $18,108,382 $ 4,967,881 11,755,093 894,884 490,524 $18,108,382 1961 $ 6,416,983 7,440,940 -0- $13,857,923 -023,610 7,642,068 (8,339,076) $13,184,525 $ 4,621,743 7,823,199 400,000 339,583 $13,184,525 NOTES TO FINANCIAL STATEMENTS Year ended August 31.1962 Note A - All subsidiaries have been included in the consolidated financial statements for the year ended August 31, 1962, including certain foreign subsid iaries not theretofore consolidated. Had such sub sidiaries been included for the year ended August 31, 1961, consolidated net income for that year would have been $149,871 greater than the amount reported. The accounts of the foreign subsidiaries have been converted at rates of exchange prevailing during the year except for the property, plant, and equipment accounts of the Canadian subsidiary, which are in cluded on a dollar-for-dollar basis. GLD38535 15 THE G1I0DEN COMPANY 4W/ NOTES TO FINANCIAL STATEMENTS-Continued In November, 1961, the Company acquired the net assets of Pemco Corporation in exchange for 199,840 shares of $2,125 Cumulative Preferred Stock. The acquisition has been treated for accounting purposes as a pooling of interests and, accordingly, the consolidated financial statements for the year ended August 31, 1962, include the operations of Pemco for the entire year. The consolidated finan cial statements for the year ended August 31, 1961, are presented herewith as previously published and do not include the accounts of Pemco; net sales and not income of Pemco for that year amounted to $8,256,134 and $485,804 respectively. Note B -- The $2,125 Cumulative Preferred Stock is convertible at any time into Common Stock at an exchange rate of 1 % shares of common for each share of preferred and is redeemable at prices ranging from $55 a share in 1966 to $51 a share in 1981 and there after. At August 31,1962 there were 223,763 common shares reserved for conversion. Note C -- At the beginning of the year, options were outstanding for 103,545 shares of Common Stock pursuant to restricted stock option plans for key personnel. During the year, options for 47,800 shares were granted, options for 17,570 shares were ex ercised, and options for 4,150 shares were cancelled. At August 31, 1962, options for 129,625 shares were outstanding and 23,500 shares were available for the granting of future options. Note D -- The increase in additional capital paid in during the year arose principally from the issuance of $2,125 Cumulative Preferred Stock in the acquisi tion of the net assets of Pemco and the sale of Common Stock pursuant to stock options. Note E -- The indenture relating to the Company's 4%% Sinking Fund Debentures includes, among other things, a covenant restricting the payment of dividends after August 31, 1962, to approximately $19,000,000 plus consolidated net income earned after that date. Note F -- The Company and a consolidated subsid iary maintain and absorb all costs of employee retirement plans that provide benefits to eligible employees in proportion to the employees' basic earnings during stipulated periods of service and subject to certain maximurns. At August 31, 1962, the unfunded liability for past service costs under the plans was estimated to be $3,900,000, and the annual current service cost (which does not include funding of the past service cost) was estimated to be $1,200,000. Note G -- Reference is made to the Operating Results section of this annual report with respect to litigation. ACCOUNTANTS' REPORT Shareholders and Board of Directors The Glidden Company Cleveland, Ohio We have examined the consolidated financial statements of The Glidden Company and its subsidiaries for the year ended August 31,1962. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. We made a similar examination of the financial statements for the preceding year. In our opinion, the accompanying balance sheet, statements of income and earnings retained for use in the business, and summary of source and application of funds present fairly the consolidated financial position of The Glidden Company and its subsidiaries at August 31, 1962, and the consolidated results of their operations for the year then ended, in conformity with generally accepted accounting principles which, except for the change in consolidation policy explained in Note A, in which we concur, have been applied on a basis consistent with that of the preceding year. Cleveland, Ohio 16 October 11,1962 GL038536 COATINGS AND RESINS GROUP Paul W. Neidhardt, Vice President Regional Vice Presidents Thomas N. Armel, Chicago, 111. James L. Beauchamp, Atlanta, Ga, Robert B. Simpson, Cleveland, 0. Herman F. Winger, Reading, Pa. Coatings and Resins Plants Atlanta, Ga. Carrollton, Tex. Chicago, 111. (2) Cleveland, O. Los Angeles, Calif. Minneapolis, Minn. Montreal, Que. New Orleans, La. Portland, Ore. Reading, Pa. St. Louis, Mo. San Francisco, Calif. Toronto, Ont. Architectural Products Pilot Plants Marietta, Ga. Sarasota, Fla. INTERNATIONAL GROUP Alexander D. Duncan, Vice President Frank J Kelley, General Manager Financial Interests In: West Germany Norway Mexico Panama Ecuador Guatemala Japan Puerto Rico Costa Rica ensees In: Australia West Indies Chile Colombia Guatemala Peru Denmark Norway Sweden Ecuador Finland France Germany Iceland Japan The Netherlands Spain United Kingdom South Africa New Zealand FOODS GROUP George F. Atkinson, Vice President, Edible Oil Products Division Paul D. Hursh, Vice President, Grocery Products Division Norman L. Waggoner, Assistant Vice President, Grocery Products Division Plants Berkeley, Calif. Bethlehem, Pa. Chicago, III. (2) Eden, N. Y. Louisville, Ky. Wolcott, N. Y. CHEMICALS GROUP George M. Halsey, Vice President George S. Warner, Vice President-Operations Richard H. Turk, Sr., Vice President, Pemco Vice Presidents--Pemco Division Herbert Turk, Sr--Administration Karl Turk, Jr.--Operations Plants Baltimore, Md. (3) Hammond, Ind. Jacksonville, Fla. Johnsonburg, Pa. Johnstown, Pa. Port St. Joe, Fla. CORPORATE HEADQUARTERS OFFICIALS Robert R. Augsburger, Director of Financial Relations William A. Bittenbender, Corporate Director of Research R. E. Dorfmeyer, Assistant TVeasurer and Director of Acquisitions R. K. Dutton, Assistant Secretary and General Attorney M. D. Higbee, Assistant Controller Robert L. Lozon, Vice President-Purchases and Tade Relations Bryce I. MacDonald, Director of Engineering R. W. Patterson, Assistant Treasurer M. W. Peters, Assistant Treasurer E. D. Pittman, Director of Public Relations G. W. Reid, Assistant Secretary J. P. White, Assistant Secretary GLD38537 8.' : THE GUDDEN COMPANY GL038538