Document 37kY0RZ4e8M0kY0w5LEJZgpO6

i HOES FOR ANNUAL MEETING December 12, 19^3 N 2264 TABLE OF CONTENTS Notes for Annual Meeting December 12, 1$63 I. Balance Sheet Review A. Cash and Banking B. Short-Term Securities C. Accounts and Notes Receivable - Trade D. Inventories E. Other Current Accounts and Investments F. Prepaid Insurance and Other Expenses G. Property H. Deferred Charges and Other Assets I. Short and Long Term Financing J. Contingent Liability K. Stock and Stockholders II. Operating Statement A. Gross Profit B. Selling and Administrative Expense C,, Other Income - Published P & L D. Depreciation E. Fixed Charges F. Advertising Expense G. Research and Development H. Average Assets and Profit Return I. Miscellaneous J. Outside Consultant Fees K. Taxes L. Comparative Operating Profit Schedules III. Cash Use and Projection A. Application of Funds B. Five-Year Forecast - Cash Basis IV. Employee Benefits A. Pension Plans B. Bonus Plan C. Stock Options D. Wage and Salary Ratios E. Salaries F. Other Benefits V. Acquisitions, Dispositions and Capital Expenditures A. Acquisitions B. Dispositions and Shutdowns C. Mining Activity D. Major Capital Expenditures E. Extraneous Expenses VI. Other Major Functions and Items A. Donations B. Audit 0. Insurance D. Foreign Business E. Miscellaneous Page 1 1 2 3 5 6 6 6 7 8 9 li li 12 13 13 13 13 14 14 14 15 l 18 19 20 22 23 25 25 25 26 26 27 27 29 30 31 31 3^ 42 GLD003626 MOTES FOR Ain-IUAL NRETIMG December 12, 1963 Balance Sheet Review A.Cash and Banking The Glidden Company maintains the following bank relationships: Glidden Ltd. Int'l. Major Accounts and Credit Line Banks 25 3 5 Other Bank Relationships 152 i 7 Total 177 4 12 Total Kuraber of Bank Accounts 226 9 25 Cash is collected at 207 collection points in the U.S. and Canada, and i.3 deposited in local bank accounts, lu addition, 24 post office lock boxes are operated under arrangements with banks for servicing and de positing of funds received. Funds are then moved by depository trans fer check and bank wire to 27 regional collection centers and are under the control of the Headquarters' 3anking Department. Invoices are paid by a central Accounts Payable Department and Division Accounts Payable Department which maintain working fund accounts. Funds are transferred to working fund accounts periodically by the Headquarters' Banking Department, using bank wire and check transfers. Accounts pay able is in process of being regionalized with computer centers at Cleveland, Chicago and Millbrae, California. It iB anticipated that such regionaliza tion will reduce the number and size of various Division Working Funds required. Freight Payment Plans are used at three banks. Might depository arrange ments are in effect where beneficial. B. Short-Term Securities At August 31, 1963, we reflected $5,964,509.00 of short-term securities at cost on the Balance Sheet. These consisted of the following: U. S. Treasury Bills Commercial Paper Telephone Company of Mexico Stock (GICA) $2,973,345.00 2,990,764.00 400.00 $5,964,509.00 GLD003627 alanca Sheet Review g. Short-Tern Securities ~ continued All of these securities had maturities of less than one year and were, in general, placed to mature caacidentally with Dividend, interest and Tax payments. Tha Telephone Company of Mexico was required to be pur chased in order to secure telephones for General paint Company de Mexico. During the year, our average short-term portfoloio was $3,151,659.00. The average after-tax interest income was 1.52% (3.17% equivalent before tax). Our liquid position at fiscal year end enabled us to invest heavily and take advantage of favorable short-term money market rates which began to rise significantly at mid-summer. C. Accounts and Motes Receivable - Trade (000 omitted) 3/31/63 8/31/62 8/31/61 8/31/60 Accounts Receivable Notes Receivable Total $24,835 $23,884 $21,933 406 685 323 $25,241* $24,569* $22,256 $18 ,919 374 $19,293 Reserve for Bad Debts and Allowances Net per Annual Report $ 510 $ 502 $ 419 565 $24,731 $24,066 $21,836 $18 ,728 %3ad Debt Reserve to Receivables 2.1% 2.1% 1.9% 2.9% Past Due Receivables: Dollar Amount % of Gross Receivables $ 2,465 $ 2,492 $ 2,114 $ 1 ,864 9.8% 10.1% 9.5% 9.7% Receivables Charged Off $ 527** $ 367 $ 407 $ 271 Recoveries Against Receivables Charged Off Net Bad Debt Loss $ 160** $ 124 $ 91 _ 110 $ 366** $ 243 $ 316 $ 161 Bad Debt Loss as % of Sales: 1963 1962 1961 I960 1959 1958 .16% .10% .15% .08% .06% .06% * Includes $1,207 International Receivables in 1962 and $1,530 in 1963. ** Includes International chargeoffs $33, recoveries $6, net loss $27. GLD003628 CTSS FOR ANNUAL MEETING -3 . Balance Sheet Review C. Accour.t3 and Notes Receivable ~ Trade (000 omitted) - continued Accounts receivable turnover ftfr entire company approximately 38 days. This compares to 37 days in 1362 and 39 days in 1961. Slightly slower turnover reflects the generally slower collection of receivables by all business. National median approximately 35 days for manufacturers com pared to 34 days in 1962. Net bad debt losses of $366,000 represent an increase of $123,000 or 50% over the prior year on a sales increase of $3,000,000. However, this for the first time includes International losses which were $27,000. In 1961, we had net losses of $316,'QOO on sales of $206,000,000 or $34,000,000 less sales than the current year. Dun and Bradstrest reports failure liabilities for all business continued at historical peaks during the year, exceeding previous records set in 1962. In addition to general business conditions, trend of company to sales through branches influences our bad debt losses and turnover of receiv ables. Instead of dealing with a smaller number of larger firms per forming a distribution function, we now deal directly with wide range of accounts formerly serviced by distributors, and this tends to lead to increased losses and slower turnover. Additionally, we are aggressively expanding our 3ale activities in the painter-maintenance field where re ceivables are inherently slower turning as most contractors, through longestablished trade practice, pay suppliers from the final job settlement. Secondly, branch credit functions are performed by less competent and well qualified personnel than those employed in regional offices, and this has had similar effects. A percentage breakdown of total receivables by major division is as follows 1963' 1962 1961 1960 Coatings & Resins Foods Chemicals International Private Ledger 597. 197. 167. 67. Nominal 1007. 60% 19% 177. 4% jfesfcoal 1007. 63% 24% 137. temipai 1007. 64% 237. 127. -15 100% D. inventories Published total inventory increased $3,827, 000 over Fiscal 1962. Changes by Group were as follows in thousands: August Increase 1963 1962 (Decrease) Coatings and Resins Foods Chemicals $18,767 20,305 12,941 $19,205 16,433 12,726 $ (438) 3,872 215 6LD003629 Balance Sheet Review D. Inventories (Continued) August 1963 1952 Increase (Decrease) Development International LIFO Reserve Canadian Devaluation $ 87 $ 131 762 637 $52,862 $49,132 (254) (330) (159) (180) $52,449 $48)822 $ (44) 125 $ 3,730 76 21 $' 3,827 The principal factors contributing to these increases (decreases) by Group were: Coatings and Resins - The total decrease of $4-38,000 consisted of decreases of $215,000 in raw materials and $223,000 in finished stock- The raw materials decrease reflects an im provement in our purchasing and control techniques. The reduction of finished stocks was attributed to improved coordination between the production and sales department keeping inventory investment in line with current needs. Foods - Inventories in the Foods Group have increased $3,872,000 over last year. The major portion of this increase, or $3,368,000, was attributed to Durkee Trading. The re mainder of the increase was reflected in moderately higher levels of both raw materials and finished stocks at most of the Divisions. Chemicals - The Chemicals Group inventory was $215,000 higher than a year ago. Raw material stocks at Adrian Joyce have been reduced $597,000 chiefly due to the availability of Lakehurst Ore. However, this decrease was more than offset by a $1,298,000 increase in finished stocks at this location resulting from higher operating requirements and the maintaining of more grades of TiC^ for competitive purpose. Stocks at Hammond have been reduced $246,000 due to the use of the new fluo-solids process. International - The reported increase over last year was $125,000. This increase was primarily the result of increased operating requirements at all of the overseas units. LIFO Reserve - Lower price levels in various Foods Group oil stocks resulted in a decrease of $76,000 in the LIFO Reserve. GLD003630 - 5- NOTES FOR ANNUAL MEETING I. Balance Sheet Review D. Inventories (Continued) Turnover - Published Net Sales to year-end net inventory: 1963 1962 1961 i960 - 4.59 to 1 4.89 to 1 4.97 to 1 4.86 to 1 Control over the inventory investment is achieved through the joint efforts of management and operating personnel. The Coatings and Resins Group semi-annually establishes monthly mone tary inventory goal levels by Regions. These goals are reviewed monthly by a Headquarters' Inventory Committee and necessary action is promptly initiated to correct any out-of-line occurrences. The goals for both raw materials and finished stock are established only after careful study and consultation with Regional management, and it is the responsi bility of Regional management to allocate by operating unit and by product within its goal. Each month, inventory performance is compared to goal with explanations of variances determined and any necessary correction ac tion taken. Inventory control in the Foods Group is established through the joint efforts of Headquarters and Division management. An important aspect is the daily control exercised over raw materials based upon the market quotations of edible oils and condiment raw materials. The Durkee Trading Office projects market conditions as they relate to raw material require ments and communicates with Headquarters and Division management. Market conditions of spices and other materials are also projected into require ments on a daily basis. Control of inventories in the Chemicals Group is maintained by the respective Division managers who determine their inventory needs on the basis of individual market sources and operating requirements. The individual managers of the various International operations overseas, subject to the review and coordination of International Group management, determine necessary inventory levels through anticipation of planned sales levels with recognition of the problems caused by their overseas supply situations. S. Other Current Accounts and Investments Detail at August 31 was1 Margin Advances (Durkee) Material Deposits (Chemicals) Creditors' Debit Balances Hellenic Lines 1963 $ 344,635 3,865 1962 $ 254,893 79,539 74,511 302,678 GL Do 03631 NOTES FOR ANNUAL MEETING -6- I. Balance Sheet Review E. Other Current Accounts and Investments - continued 1963 1962 Installment Sales Wood & Selick Coconut Co. (Bethlehem) Billiton (G.I.C.A.) Treasurer of U.S. Pincasa - Guatemala & Costa Rica Shedd-Eartush Payments (Berkeley) Misc. Notes and Accounts $ 11,071 36,1*02 31,753 100,676 423 491,61*0 $1,020,465 $ 20,323 39,181 182,889 13,065 465,601 $1,432,680 7. Prepaid Insurance and Other Expenses Detail at August 31 was: 1963 1962 Prepaid Insurance Prepaid Taxes Prepaid Royalties Other Prepaids $ 294,119 11*6,838 15,000 51,022 a 506,979 $ 523,575 169,652 31,9^ 5^780 $ 780,947 G, Property For schedule of major capital expenditures and 1964 forecast, see pages 27 Depreciation is covered on page 13- Insurable value of all buildings, machinery and equipment is $113,000,000 Rental obligations for buildings occupied by company units are covered on page 3. H. Other Assets and Deferred Charges Detail at August 31 was: 1963 1962 Prepaid Bond Discount and Expense $ 621,415 Investments - Chicago Board of Trade A/S Fjord-Plast - Norway 34,701 - Industrias Glidden de Puerto Rico - International Subsidiaries (detail P39) 2,520,508 Miscellaneous Deferred Research and Engineering Costs 9 570,960 Employee Inans Loan to Pincasa - Guatemala 115,385 65,000 Trans-Caribe Supply Co., Reliable Water Heater Company 661,422 Patents and Patent Rights 303,504 Misc. Notes and Accts. Receivable $4,985,860 $ 652,231 3^,701 1*7,595 1,000 1,294,387 107 485,649 92,208 125,000 500,000 325,992 170,631 $3,729,501 GL DO 03 63 2 NOTES FOR ANNUAL MEETING I, 3alance Sheet Review I. Short and Long-Term Financing -7- 1. Short-Term Borrowing and Bank Lines of Credit Fiscal 1963 FiBcal 1962 Average Short-Term Borrowing Maximum Short-Term Borrowing Amount Date $ 765,753 3,000,000 Z/k-k/2k -0-0- Minimum Short-Term Borrowing Amount Date Year-End Balance Average Interest Rate Paid Date of Pay-Off of Last Short- Term Borrowing -09/l-2/l8j 6/20-8/31 -0- 4.5* -0- -0-0- 6/20/63 -0- At August 31, 1963, we maintained a line of credit of $12,000,000 for Glidden (plus $1,000,000 for International). Hiese were carried at major bank3 across the country as follows: Bank City and State Amount The Citizens & Southern National Bank Union Trust Company of Maryland Continental Illinois National. Bank & Trust Company of Chicago The First National Bank of Chicago The Cleveland Trust Company The National City Bank of Cleveland Society National Bank of Cleveland Republic National Bank of Dallas Bank of America, N. T. & S. A. The Louisville Trust Company The Chase Manhattan Bank Chemical Bank New York Trust Company First National City Bank of Hew York The Boatmen's National Bank of St. Louis Mercantile Trust Company United California Bank Union Commerce Bank * International Atlanta, Georgia Baltimore, Maryland Chicago, Illinois Chicago, Illinois Cleveland, Ohio Cleveland, Ohio Cleveland, Ohio Dallas, Texas Los Angeles, Calif. Louisville, Kentucky New York, New York New York, New York New York, New York St. Louis, Missouri St. Louis, Missouri San Francisco, Calif. Cleveland, Ohio $ 500,000 500,000 1,000,000 1,000,000 500,000 1,000,000 500,000 500,000 500,000 500,000 1,500,000 11,000,000 1,500,000 500,000 500,000 500,000 1,000,000* Our present credit lines of $12,000,000 (plus $1,000,000 for Inter national) will be renewed in fiscal 196k at $12,000,000 (plus $1,000,000 for International). However, it is not now anticipated that any short-term borrowing will be required in this fiscal year. g l d o 03633 NOTES FOR ANNUAL MEETING -8- I. Balance Sheet Review I. Short and Long-Term Financing - continued 2. Debenture Issue The entire indebtedness of The Glidden Company (excluding normal accounts payable, interest and taxes) is represented by the $30,000,000 of 4-3/4$ sinking fund debentures dated November 1, 1958, and due on November I, 1983 The indenture provides for a sinking fund commencing November 1, 1964, to retire $1,500,000 of debentures annually and 100$ by maturity. The debentures were offered publicly on October 28, 1958, at 99, and the effective interest cost is 4.98$ based on the net proceeds after all expenses. Annual Interest Cost Year Month Interest a 4-3/4$ Amortization of Discount and Exoense $1,425,000 30,816 $118,750 2,568 $121,318 Since January 1, 1963, market price of debentures has varied from a high of 103 3/8 to a low of 101 l/2. Market price as 101 l/2 on 8/31/63 and was on December 11, 1963. J. Contingent Liability Federal income tax returns have been examined through 1958 and final settlement made. The use of the new "Guide Line" lives of fixed assets in computing our tax depreciation resulted in an excess of $2,193,373 over book depreciation. Provision for the tax on this difference amount ing to $1,140,554 was made in 1963* No problem in government contracts through renegotiation or otherwise. The detail of major real estate lease commitments at August 31, 1962 is (CONFIDENTIAL - DO NOT RELEASE): Total Fiscal Paint Branches Contract 1964 Active Pending $5,875,^17 327,375 $1,355,191 22,520 $6,202,792 $1,377,711 Bethlehem Plant Cleveland Executive Offices Miscellaneous Facilities 939,375 1,813,675 801,717 $9,75-7,559 67,500 217,640 190,065 $1,852,316 In 1963 a reserve of $90,000 was provided for contingent liability of pending litigation. GLD00363A NOTES FOR ANNUAL MEETING 9- I. Balance Sheet Review K. Stock and Stockholders 1. Common Stock (2,332.A85 shares o/s at 8/31/63) Preferred stock (197,270 shares, cumulative $2,125 per share) The Company's common stock is listed on the New York Stock Exchange and has unlisted trading privileges on the Midwest, Pacific Coast and Fniladelphia-Baltimore Stock Exchange. The Preferred Stock is not listed. From January 1, 1963 through November 12, 1963, the price of the Company's stock ranged between a high of Mi-5/8 and a low of 36-1/8, (See Annual Rex>ort, Pages 10-11, for prior years). During this same period, an average of 932 shares were traded each day on the New York Stock Exchange. The closing price of Glidden Common Stock on December 11, 1963, was 2. Other Comments on Stock: a. We have no treasury stock. b. The $2,125 cumulative preferred stock was issued incident to the agreement of merger of Pemeo Corporation into The Glidderi Company. (1) Holders of the shares are entitled to dividends of $2,125 per annum payable quarterly on the first days of February, May, August and November. (2) Holders have no voting rights, except under certain conditions. (See Paragraph 8, Page k, Special Meeting Proxy Statement.) (3) The stock is not redeemable prior to August 31j 19^6, and is thereafter redeemable at the following prices: $55-00 per share prior to 9/1/71 53.00 per share prior to 9/l/?6 52.00 per share prior to 9/1/81 51.CO after 9/l/8l (4) Entitled to $50.00 per share plus unpaid cumulative dividend in case of an involuntary liquidation and to redemption price current at the time of the dis tribution or payment date in case of voluntary liquida tion. (5) The Company is obligated to set aside on or before November 15 of each year out of the earnings of the GL DO 03 63 5 10 NOTES FOR ANNUAL MEETING I. Balance Sheet Review K. Stock and Stockholders - Continued previous fiscal year the cm of $200,000 to he used to purchase the $2,125 preferred stock if end to the extent obtainable at a price not exceeding $5 00 per share. Any oonieB remaining at December 31 are released and repaid to the general funds of the Com pany. During the period of November 15 to December 31, 1962, 1630 preferred shares were bought in at an average cost of $49.99 per share. 6. Each share is convertible into comnon stock of the Company at the conversion ratio of 1.125 shares of common for each share of preferred. 7. Holders of cumulative preferred stock have no pre emptive rights in any stock or securities convertible into stock. c. Stock dividends are always under consideration, but we have no plans now for such. It is felt that stock dividends only spread earnings and value over a larger number of shares with price adjusting accordingly. d. The company is now in the process of converting stockholder records to electronic data processing on Glidden ' s own IBM 1401 computer. It is anticipated that conversion will be completed by January, 1964, and that thereafter, coduencing with the April quarterly disbursement, all dividend payments and other stockholder mailings will be completely automated at a considerable cost saving to the Company. 3. Holdings of shares an follows: August 31> 1963___________ August 31 1962 No. of # Scares Avg. Shs. No. of # Shares Avg. Shs Shareholders Held Held Shareholders Held Held Individuals Institutions Brokers Nominees Total 19,942 362 172 333 20,809 60.27# 5-68# 9-74# 24.31# 100.00# 71 366 1,320 1,703 113 20,181 359 173 330 61.69# 5-35# 10.00# 22.96# 100.00# 71 347 1,346 1,621 111 GLD003636 NOTES FOE ANNUAL MEETING II. Operating Statement A. Gross Profit 11 - Published 196-3 1962 Ratio to Net Sales Dollars 28.92$ $69,69^,797 27*35$ $65,063,802 Increase 1963 over 1$62 Due to Net Sales Increase Due to Gross Margin Net 1963 Increase $ 840,300 3,790.695 $4,630.995 B. Selling and Administrative Expense The Annual Report shows a Selling and Administrative Expense increase of $4,082,000 or 8.0$ on a net sales increase of 1.3$ in 1963* The major increases (decrease) by caption in 1963 are as follows: Sales Compensation Salesmen's Expense Sales Administrative Salaries Travel Storage Advertising (local and national) Samples and Allowances Product Development, Technical Service Research Office Salaries Office Supplies Communications Occupancy Employee Benefits, Payroll Taxes Professional Services Retirement, Bonus Development Costs Donations, Organization Dues Data Processing All Other $ 438,000 (104,000) (14,000) (123,000) 120,000 449,000 82,000 410,000 523,000 584,000 29,000 44,000 166,000 154,000 66,000 638,000 382,000 61,000 139,000 38.000 Total $4,082,000 GL CO 03 63 7 The Group breakdown of Selling and Administrative Expense increases over the prior year is: Increase over prior year Coatings and Resins 1953 $ (298,000) igpl-- $2,318,000 Foods Chemicals International Headquarters 1,958,000 1,680,000 390,000 201,000 1.542.000 1.779.000 897.000 360.000 Development 151,000 Total $4,082,000 $6.896.000 12 - MOTES FOR ANNUAL MEETING IIo Operating Statement No single item stands out significantly to account for the decrease in the Coatings and Resins Group. In Foods the Wolcott Division accounts for $970,000 of the over-all increase. Other items, after excluding Wolcott, were Corporate and Group Administration up $347,000; Sales Compensation up $139,000; and Advertising up $91,000. In the Chemicals Group increases of $505,000 in Research, $480,000 in Devel opment Costs and $377,000 in Technical Service account for 8l$ of the total increase. Increases in International Selling and Administrative Expense amounting to 42.5$ were in line with a 46.2$ increase In sales. Headquarters Headquarters Administrative expenses were $8,860,000 this year, compared to $7,3^,000 last year and $6,345,000 in 1961. The following schedule separates Pension Costs and Professional Services from other administrative expenses. 1963 Pension Costs msst Professional Services 521,000 Other Administrative Expenses 7.340,000 Total $8*860,000 1962 '$ 246,0OT 443,000 6.651.000 $7,340,000 1961 $"272,000 145,000 5,928,000 $6,345,000 The increase in other Administrative expenses was $689,000 in 1963 and $723,000 in 1962 over the preceding year. This other Administrative expense is further "broken down among the four Groups and the Corporate Administrative functions in the following schedule: (in Thousands) CoatingB and Resins Group Administration Jbods Group Administration Chemicals Group Administration International Group Administration Corporate Administration Total 12&$1,535 660 347 296 4.502 $7,340 1962. $17953 466 269 158 3,805 196l $1,808 44l 255 51 3,373 $5,928 Office Salaries, up $432,000; Data Processing, up $118, 000; and Occupancy, up $64,000 were the principal increases. C, Other Income - Published P & L - The major items this year and last were: Interest Earned Gain (Loss) - Disposal of Capital Assets: Fjord-Plast Common Stock & Surplus Minneapolis Land Baltimore Abandonment Loss Other Sale of Blue Chevron Trademark Sale of Tulsa Fixed Assets Other: Board of Trade (Chicago) Net Profit Scrap and Residue Sales Miscellaneous $236^01 (47,315) 9,887 (19,021) 364 127,293 119,849 134,364 $562,022 1562 $207,139 (4,952) 25,000 (7,813) 154,216 91,659 135,661. $600,910 GLD00363 B MOTES POP. ANNUAL MEETING - 13 - II. Operating Statement D. Depreciation Eook Depreciation charges for 1963 were $6,750,383 compared to $6,099,337 in 1962. Additional depreciation of approximately $2,193,000 will he claimed for Federal Tax purposes in 1963 as a result of the new "Guide Lines" adjust ment of asset lives. E. Fixed Chai-ges The two major items of this nature vhich may he of concern to shareholders are: Interest on long-term debt Estimated Real Estate Lease Liability (Confidential) See Page 1963 $1,425,000 1.897.288 $3,322,288 1964 $1,425,000 1.852.916 $3,277,916 Based on the 197,270 shares of preferred stock issued and outstanding at August 31, 1963, preferred dividends of $419,199 will become payable in 1964. F. Advertising Expense 1963 C & R# $3,518,797 By Group Poods Chemical Int'l. 2,417,437 $191,393 $62,930 Devel. Group $16,600 Corpo rate $10,627 ^ to Total Sales $6,217,784 2.48?. 1962 3,455,326 2,061,368 162,742 58,012 31,416 5,768,864 2.43^ * - Includes Canadian Devaluation G. Research and Development Research Admiuistrative Tech. Service to Mfg. Sales Service Control Lao Total 1962 Actual $2,446,106 208,466 1963 Actual $3,129,573 187,800 1963 Budget $3,395,757 210,645 Proposed 1964 Budget $3,928,000 231,000 212,733 2.415.369 1.232.832 $6,515,506 341,200 it J 409,778) 2.232.526 ^2.185,669) $5,891,099 $6,201,849 1,536,559 $7,427,658 2,827,000 $6,986,000 - Incr. 1964 Budget Over 1963 Actual $509,398 43,200 231,553 $784,151 - # to Net Sales 2.65^ 3.08^ 010003639 NOTES FOR ANNUAL II, Operating Statement H. Average Assets and Profit Return Coal ings and Resins Foods Chemicals International Total Groups Total Company I. Miscellaneous 1963 Average Assets $ 52,102,513 39,244,895 47,106,318 ^7,31^636 $145,768,362 $154,371,988 1963 Profit $ 6,3^9,832 4,181,248 6,205,718 'M,7& $17,388,596 $1^,467,335 1963 * Return 12.2$ 10.7$ 13.2$ 11.9$ 9.4$ It may be pointed out, on inquiry, that all Divisions of the Company vere operated profitably in 1963 with the exception of: The Carrollton Division of the SoutUvest Region, the Portland Division of the Pacific Region, the Berkeley Food Division and the Collinsville Chemical plant. J. Outside Consultant Fees Legal Department: Dov & Stonebridge - Glidden vs. Hellenic Lines, Ltd. Overton , Lyman Si Prince Grand Jury Investigation, Industrial Fats and Oils U-S. vs. Corn Products & U.S. vs. Armour Other $23,845 26,913 59,214 79.820 $189,792 Patent Department Executive Department: E&1` Audit Provision (1962 Bill was i $73,000) Mackay-Shields ($37,319 Re Pension Plans) Other 39,686 $72,000 47,519 -39,485 159,004 Controller's Department Other Administrative Departments Develoj'ment Cost: A. D. Little Stanford Research Institute Roy G. Peers Ronearch Consultant Fees' 58,743 111,070 $80,339 13,000 26,011 18.919 GLO0364 o MOTES FOR ANNUAL MEETING - 15 - II. Operating Statement K. Taxes 1. Guideline Tax Depreciation Revenue Procedure 62-21 permits, for a limited period of time, the deduction of depreciation based on arbitrary useful lives which may be substantially less than actual. This has resulted in an excess of tax depreciation over book depreciation in 1963 of $2,193,373 and in 1962 of $2,399,059. The higher tax deduction thus obtained has brought about a deferment of taxes payable in 1962 of $1,247,511, and in 1963 of $1,140,554. The Glidden Company will continue to employ for financial reporting purposes the asset lives based on statistical studies of our own replacement experience. Hie advantage obtained by the application of Revenue Procedure 62-21 lies in the immediate availability of cash that would otherwise be payable for current taxes 2. Investment Credit The Revenue Act of 1962 allows a credit against the tax liability of up to ?# of investment in property other than buildings since January 1, 1962. In 1962 this credit amounted to $325,663 and in 1963 the credit was $194,427. Of these amounts, 48# or $156,318 and $93,325, respectively, represent permanent tax savings. The remaining 52# (representing a reduced depreciation allowance in future years) will be a deferred tax payable and as such gives a current cash flow advantage. On the Company's financial reports the 48# permanent tax savings is reflected by a reduced Federal Tax provision. The remaining 52# is currently provided for and the liability is reflected in Deferred Federal Income Taxes. Deferment of taxes in 1963 for future years amounted to $1,396,000* This deferment of taxes provided an additional cash flow amounting to $.60 per common share and is made up as follovs: Deferment of Taxes (applicable to 1963 Guideline Depreciation) Additional Deferment applicable to 1962 Guideline Depreciation which was under provided for in 1962 Investment Credit Deferment - 1962 Investment Credit Deferment - 1963 52# of Depreciation applicable to Investment Credit - 1963 52# of Depreciation applicable to Investment Credit - 1962 52# of Rent Reduction applicable to Investment Credit - 1963 52# of Rent Reduction applicable to Investment Credit - 1962 Total Deferment of 1963 Taxes $1,140,554 30,511 169,344 101,102 (31,942) (8,209) (3,590) (1*779) $1.396.000 GL DC 03 641 - 16 ROTES FOR ANNUAL MEETING IT. Operating Statement L. Comparative Operating Profit Schedule (Thousands Omitted) Coatings and Resins "B" Branch Profit Provision Ret Operating Profit Foods Wolcott Net Market (Gain) loss Safflower Jferket loss Net Operating Profit Chemicals Hellenic Lines Claim (Prior Year) St. Helena Ore Transfer AdJ. St. Helena RAR on Depreciation Net Operating Profit International Billiton Net Operating Profit Development Architectural Products Corporate Development Costs Net Operating loss Other Income (Deductions) Pension Cutback Net Operating loss Tb Adjust for Effective Tax Rate Net Operating Profit Adjustments Itemized Above LIFO (Provision) Reversal Loss on loan Io bs on Fjord plast Assets Canadian Devaluation Total Published Profit 1963 Before After Taxes Taxes* 6,350 295 6,645 3,048 142. 3715ft 4,l8l (176) (216) 245 2,007 (84) (104) 118 17537 6,206 > b, 206 652 - 55? 2,979 m ~ 57575 346** - 346 1962 Before After Taxes Taxes* 4,947 m 4,947 4,363 (81) 435 - 4,717 5,674 (123) (42) (39) 5,470 888 (380) 338 2,375 cm 2,375 2,094 (39) 209 - 27264 2,724 (59) (20) (39)** 57 635 478** (182) ^96 (384) (641) W) (184) -m (1,516) (150) (1,666) (728) lS) 14,846 517 77677 2 76 (341) (47) (69) 14,467 1 36 (164) (23) (33)** 7,494 (122) (6ll) TT3J) (59) (293) "T352) (1,056) (803) TT7B55) ( 507 t3ffet) a? 137556 61 57358 1,033 271 - (329) 515 130 <3 (313)**' 14,025 6,690 * Computed at 48$ of before tax amount except those noted with a (**) double asterisk. GLr>0036 - 17 - NOTES FOR ANNUAL MEETING II. Operating Statement I. Oomparative Operating Profit Schedule (Thousands Omitted) - (continued) 1963 After Per Taxes Share Published Final Ret Profit 7,494 3.03 "B" Branch Profit iTovision 142 Wolcott (84) Net Market (Gain) Loss (104) Safflower Market loss 118 Pension Cutback (72) UFO Provision (Reversal) loss on loan (36) 164 loss on Fjord Plast Assets 23 Canadian Devaluation 33 Hellenic lines Claim (Prior Year Portion Only) - St. Helena Ore Transfer Adjustment s> St. Helena RAR on Depreciation A 7,678 .06 (.04) (.04) .05 (.03) (.02) .07 .01 .01 . - -- 3.10 1962 After Per Taxes Share 6,690 2.72 (39) 209 (385) (130) - 313 (59) (20) (39) 6,540 m (.02) .09 - (.16) (.05) m - 13 (.03) (.01) (.02) 2.65 Number of Shares 2,332,485 2,329,872 GLD0036^3 NOTES FOR ANNUAL MEETING III. Cash Use and Projection A. Application of Funds (in thousands) Source of Funds Net Income Depreciation Provision for deferred income taxes Total from Operations Sale of Common Stock under option plans (1963-2,613 shares; 1962-17,570 shares) Net current assets acquired from Pemco Corporation for Preferred Stock Other Source3 (applications): Disposition of fixed assets Prepaid bond discount and expense-Decrease Prepaid development costs-(Increase) Other non-current receivables-(Increase) Decrease All other - net J2&.. $ 7,494 6,751 ^,396 $15,641 100 - 73 30 (75) 116 21 $15.906 Application of Funds Dividends declared Expenditures for property, plant and equipment Additional investments in and advances to associated companies Redemption of $2,125 Cumulative Pri*ferri!d Stock (1,630 shares) Increase (decrease) in working capital $ 5,083 4,024 1,328 82 $ 1B5M.9uM06M - 18 - 1962 $ 6,690 6,099 .1,217 $14,006 630 3,381 156 31 (64) (888) -- 275 $17.527 $ 4,968 11,755 895 (91) $17.527 GL D003644 I Q\ LTS CO CM -h & so no N Wt.- .o ^ i y3 I vfl O c m cf\iQ 8 8t- cS JO>--*sI P| * la no -4 rs i nO H * co MS.4 CM 88 o -st -4 CM _ t& 8^LA-o4 8H Os CO CM O rl I ll\n no C- OJ no o o>.4 1a no -m4 CO -4 c- cu qo & *\ t-- no 4S CM P-W- C0M0 oo so no c-- 1Os CU-- sO-- SOI CM i-4 OS OO CM O 30 I LA | 33 no o LA CM CM S 30 CM 3t-0802-4*&LA CM -4 CM CD $ Os OO tA tCU no H UN & 3-J0 OOs tO- 8 O Jt -<-te- 'I * LA o OS CM C~- o o os rH \C0TS >A t- rH CM LA k un 8Hi 00 CM CM 3| 8 -4 f-- ps-4 O 3 UN rH UN O h f- o O os H CUMN O OJ Q\ & CM M3 LA OS uj^SH< 30t t-*-4 ^ * uS a*ii 6^03 no <H * sO CU 00 JH CO UN rH rH S' m A rH .4 IA 30 tm 0? m- 00 OITOS rT lA LA CM & s *t % rCHf\ On H'04 8;C"- t" 14 sSS ` CM S -I CM LA Os H O i-H H 1 rH O 1 H o*\ h% os d-* ts rH OO CM H cRS rH CO C3 CM 00 no -l * OS O j S 4 _4 I LA I o sQ t- O sO LA M3 CM no otl A--Cl4AM &4.- sO ^ *s 8 2fSrH C--4 _ -C os no .4 -4 O LA I & c- no os op SP CM nop OS O (s ** .4 t>^ro CM CM r-H UP. IoTS I O ro I troo t-os xO +& rH UN < g"1qON\ * H ** *4*s -4-4 LA tor H 00 cq o> *3 5 1 ao CPO 0 -p o -3")3 <cd co d) c C a) 8S 04 U o cO Eh d a t d M C) (L) *WT > H 5t< w a u M M M AO CM *1 COM sOos CJ~M- >-) -Jno 'w -h 9- C- A O C--MI I -O4S aAy ~l no r-i rlAl UQSCrOJ no 30 noso no OO - *t OS-4 rUHN -4 I UUNN:&8 CU iA UN & al rH ON CO 30 C-no r-L CO n-^ t'CM M3 CM rH #> c m n- l a 'mO t*- 1 -4 CO to Xf ON SO n CM UN n-7 CM OJ f- CM l Os SO m rlJ* CM H o S rr rH ft CM H no nso sOsSQ CM -rOH N--4* CO rH CM CO Xa0 H <0 0Xa.' O 2H a3 c14; <0'iws u0 -p w -C to U 4) < P4 +H5 p rH *rH 0u <i-l 'Oh Qh .O Li a. CU Ph to -3$ TJ V Moo TV-f >r +(Oo03 H X> rl ^ >p H 3 5 bO O CGC> M3 O l C 1 C 0rH P <rH3 U Pa01 l PJ -p c C0n 0) pfc. P 3 H O d (0 rH O Mw a0 ri P GrHj 0u) P. PO*-CH P a -i <L' f~ 4 OU $M> 03 Ih O 3 OU I4 ij P<u4 1 td? yfl Q ri m o 3 2 >4 g g Vh 0) > O O >O<, 0 HJ fc1. CO c <o MS MCO3 -rOH <3 > o a 8VrOHJ (0 P CO 0^ c- w o y c 9aj mS OIlh. a> M<3n os O a c rl c -srl 63 m> rfHl) rdH *H d > <e, M03) aO a a) CJ f0c. H 1U0 aa pQ _ d0 P dCJ S >0 w a0 Ma B -h IU ^*H a3 0MJ <d (0 sr *3 rH Pss P Pt a OO MSi 0V u u O44 3 < 5 a cu t. & 1 0 H 0>) ,0 H d -P Gl 5 d3 <9 P v-- a GLD0036A5 HOPES FOH ANNUAL MEETING co CM nnOo -h=mKIc'-mt>n - 20 - 4n 'O O H 4) R g CtM- oil sT\ CM T- 55 tu <0 P CM A o NO 1 CM no 3 03 no CM rH cu & PJ X) s <0 3 0 i--^ &| ^no P Q R rH 0\ on CO ON CM j CO tO. R no f- 3U CO! lA on rH 8 e* to- ri u CM t/\ o s NO no fO p- R H CM no NO i--1 8 l/N rH -to- -to- <0- 8 pi0CIi)3 w mMOO ftot., fCCMN CO cnto-o 00 a 0i1 8 rH NOON a r-( rHj On CO O' M no nNoO* o on wLA 3 *r6H* a *0p41. p CD 93 P rt SrOo oV -0oH) 4-1 rC0a u<3ou0 rH S' c3 5 rH on 5 t s S Ic>nd> CO CO D U 30 33 CO 3uO 33 Cooe<U3 & 0 rH 3 rH OCdcJ 5J*i G3 30 fc rt * 8 n H 1 O 0 pfl Hai> ft * CO 0 <4CC4>O>9 Pta oft Oc oft a 2 dj * > aHt o a 3 Gt-Dfl03 646 NOTES FOR ANNUAL MEETING 3- Age U5 and 15 years o f s e rv ic e - 3- F ifte e n years o f se rvice only- PM 4y3 tVo to d yy "> p V co O(3ycoy0 CsO >y 8 <yD cI oo yw s | Vi o Pc 5g 3* 0V9 dy> c y 2 cs O^ <b;O Oo y p > Vi >H r&<1 co OJ OO li 8 r<-0\ S3 O t 3 <t 3 V. S3 H 4} a (H r-4 ft 2 8 3 2 *3 % a(3m) PU S3 to >Oo VOl <8 S3H -s 0) I i& m: *3 y y pVi &y d yS3 & yu * <y>o> & 8 t 8 p Oj flj s ^3 yP> VOi to d itpCwHcoy Q0I P& 5 p c scu 'd 3 y>d p3c y s 2, jv 'Sal A^ y C 2H P s 2> &do, yo 0d0 VOi oo ^p ye to y < to & v l d y y to a > yv iH JS S 8, y to y p e- p t 10 SB -w- CM fA lA 21 S3 Va y at, m uy dy y vt vy 2T M 8 dy on o > CVJ S3 yyas au Uy do y ft a*ufccao> 8**o V iA a cv y OS' > oj UNITED STATES SALARIED AND HOURLYI , PENSION PLANS AMENDED JANUARY 1963 d f3H a sVi t- d d on 4(>0 pc 9) e *H CaJ 2 % o p p (3 Ve t? 3 p 2P MUT"i n ^rH p O > Ptyo v 3 >W CVJ OO oV p 2 (3 o P s * H I&4 CA 3 y p y d 2 c CVJ on GLf)003 647 Vested rig h t to b e n e fit ROTES FOR ANNUAL MEETING - 22 17. Employee Benefits (continued) B. Bonus Plan Original plan adopted February 8, 1951/ &nd amended February 14, 1952. Administered by a Bonus Committee elected by the Board of Directors. In 1955/ Gilbert suggested provision preventing bonus to top officers until a certain dividend has been paid. Formula provides 12$ must be earned (pretax) on bonus net capital (capital, tern debt, etc.) before providing a bonus of 7$ of profit. Ret income must exceed 6$ bonus net capital employed al3o. The 1963 computation was: Capital Stock, Debentures, Surplus (Bonus Ret Capital) 12$ Bonu3 Net Capitol 132,189,011 15,862,681 Consolidated Net Income Add: Provision for Taxes, Bonus, Interest on Debt Less: Dividends and Interest from unconBol. subs. Less: 12$ Bonus Net Capital Net Bonus Income ?$ Net Bonus Income (Maximum Provision) Consolidated Net Income Less: 6$ Bonus Net Capital Maximum Provision $ 7,494,335 8,410,000 $370,955 $ 15,533,380 15.862,681 $--7Twr,w $ (437,006) Actual Provision -0- Slnce 1951, the maximum allowable provision was $2,557,863. We have returned to profit $952,163 leaving $1,605,700 for bonus payout. In 1959, 124 awards were made, totaling $209,750. The highest individual amount awarded was $8,000 (to IXmcan and Halsey). A total of 1,196 awards have been made from 1951 through 1959- Maximum in any one year was 212, lowest 48. The highest individual amount awarded was $12,000 (to Duncan, Sprague, Ruth and Goldseth in 1951). Gilbert suggested resubmitting plan every five years to stockholders. We feel we need to do so only when there is a material change. No bonus awards vere made either in i960, 1961, 1962,or 1963. The purpose of the Bonus Plan is to provide reward and incentive to those employees and officers, except the Chairman of the Board of Directors and the President, who, beyond the call of duty, contribute to the success of the Company. As provided in the Plan, each award of more than $1,000 is paid in annual installments of 25$ of the amount awarded or $1,000, which ever is greater, and the Bonus Committee determines what part of any award is to be paid in cash or stock. No bonus awarded to an employee for any fiscal year may exceed 50$ of the basic annual salary of such employee at the end of such fiscal year. 0L 0003648 NOTES FOR ANNUAL MEETING IV. Employee Benefits - 23 - 3. Bonus Plan (continued) Nine officers of the Company who serve aa directors, and approximately 850 other employees (including nine officers) who receive salaries of $750 or more per month, are currently eligible for consideration for bonus awards. The Chairman of the Board of Directors and President nay not be awarded a bonus under the Plan. C. Stock Ootions Under the 1952 Plan 100,000 shares of authorized and unissued Common Stock were made available. The Plan.provided that no option could be granted to an employee after age 65, and no participant could receive options covering more than 5,000 shares. The Plan also provided that the option price could not be less than 95? of the fair market value of the stock on the day the option va3 granted, and the option period could not exceed ten years from the date the option was granted nor more than three months after retirement of a participant. All rights to exercise options terminate when an employee ceases to be an employee for any cause other than death or retirement. As of August 31, 1963, options to purchase 118,870 shares (48,000 to officers and directors) had been granted under the 1952 plan. (Options for 33,117 shares had expired by reason of termination of employment or lapse, of which options for 18,870 shares were reissued, as authorized by the Plan, to qualifying employees.) Options representing 39,498 shares had been exercised (11,700 by officers and directors). There were outstanding under the 1952 Plan as of August 31, 1963 options for 46,255 shares (34,800 for officers and directors) exer cisable over a period of ten years from the date granted but not more than three months after termination of a participant's employment. A total of 25 officers and directors and 72 other employees held options under the 1952 Plan. Officers and directors held options as follows: Dwight P. Joyce Alexander D. Duncan Beauford W. Maxey John H. Weeks Robert D. Horner William G. Phillips George M. Halsey George S. Warner Paul W. Neidhardt All Directors and Officers as a group (including those nEmed above) Option Price of $ 38 Expiring 12-27-64 2,000 2,000 2,000 2,000 2,000 2,000 200 2,000 300 Option Price of $ 37 Expiring 11-29-66 1,000 1,000 1,000 1,000 2,000 2,000 2,000 2,000 300 16,700 14,300 Option Price of $37.50 Expiring 9-29-67-- m mt -- -- - -- -- -- --- Option Price of $41.50 Expiring 12-28-68 -- -- -- mm 300 500 1,000 500 -- 500 3,500 GL D003649 MOTES ?0R AHHUiU, jffiSTIKG - 24 - IV. Snployee Benefits C. Stock Options (Continued) On September 2$, 1959) the authority of the Company's Stock Option Committee to grant options under the 1952 Stock Option Incentive Plan was terminated by action of the Board of Directors. 2. 1959 Option Plan Provides Committee may option 100,000 shares of authorized and unissued Common Stock. Principal differences from old' plan: a. Option price not less than 100$ of Market (old plan 95$)- Both not less than book value. b. Ho option to employee after age 60 (old plan 65). c. May not be terminated and reissued at lower price. d. Term of option set by Committee up to 10 years and may not be exercised for two years after grant (old plan all for ten years). Under the 1959 Plan, options to purchase a total of 76,700 shares have been granted to 117 employees (including 36>200 shares to 29 officers). Directors and officers held options as follows: Dwight P. Joyce B. W. Maxey R. D. Eorner George M. Halsey John H. Weeks Paul W. Neidhsrdt W. G. Phillips G. S. Warner All Directors and Officers as a group (including those named above) Option Price of $40 Expiring 5-25-7Q 2,000 -- Option Price of $41 Expiring 7-23-71 mmm -- 1,400 -- 4 00 -- -- -- 1,000 --- Option Price of $42.50 Expiring 12-21-71 2,000 2,000 2,000 2,000 2,000 2,000 2,000 7)000 4,400 24,800 At August 31> 1963> options for 72,900 shares vere outstanding and there were 26,500 shares of unissued Common Stock reserved for options which may be granted In the future under the 1959 Plan. GLD003650 - 25 - NOTES FOR ANNUAL MEETING IV. Employee Benefits B. Wage and Salary Ratios Manufacturing Wages to Cost of Products Manufactured Total Wages and Salaries to Net Sales Total Wages, Salaries and Benefit Costs to Net Sales 2S& 1262 13*7$ 19*5# $ 46,902,954 12.2$ 17*9$ $ 42,684,499 21.4$ 19.4$ $ 51,579,482 $ 46,053,835 E. Salaries Our salary rates, including those for officers and other key employees, including bonus, are fully in line with studies on this subject, such as by AMA. We oust be competitive in salaries and other Inducements such as stock options, to attract and hold good men. The proxy statement reports that total remuneration of all directors and officers as a group increased from $1,043,455 in 19^2 to $1,219,539* This increase is the result of the addition of other officers. F. Other Benefits In addition to the Retirement Plan, employees are eligible to participate in a group life insurance, hospital and surgical benefit plan, a major medical plan, and an accidental death insurance plan. The Company has a formalized disability benefit plan whereby employees receive a portion of their salary or wages during prolonged illness - the amount and duration of benefits depending upon the employee's length of service. GLD003651 - 26 - NOTES FOR ANNUAL MEETING V. Acquisitions, Dispositions and Capital Expenditures A. Acquisitions Although no acquisitions were consumated during fiscal 1963, it is per tinent to mention the 1963 and forecast 1964 financial results of our two major acquisitions in fiscal 1962, Femco and Olney and Caprenter. Psmco Net Sales Net Profit Before Taxes 1963 $ 9,596,410 $ 1,290,352 1964* Forecast $10,108,000 $ 1,435,000 Profit Per Share ** $ .09 $ .12 Olney and Carpenter Net Sales Net Profit Before Taxes Profit Per Share $ 6,218,867 $ 176,150 $ .04 $ 6,807,000 $ 324,000 $ .07 * 1964 forecast per share based on 2,350>000 common shares outstanding. ** After allowing for preferred dividends. B. Dispositions and Shutdowns - No Dispositions in Fiscal 1963 Pre-Tax Profit or Annual Profit Avg. Profit (Loss) on Sales or (Loss) or (Loss) Sales or Last Full Last Full Last 4 Yrs. Abandon Year Year Operated ment After Tax Cash & Asset Utilization Last Full Year Basis Hammond 7/16/51 Oakland 10/25/54 Feed Mill 8/10/54 Portland 9/18/52 Cambridge 7A/55 Yadkin Jojaba - Castella Barytes Mines Buena Park 8/31/56 Eastern Marg. & Salad Prod. 2/1/57 Elmhurst Building A,8/31/57; S,8/1/58 Scranton 6/9/58 $ 4,076,147 627,505 4,423,653 2,941,393 1,308,738 - - - 4,033,465 9,996,668 1,100,590 $ (234,346) $ (373,225) $ 142,235 $ 2,044,710 (226,221) 39,296 96,376 997,955 65,538 15,608 (290,471) 2,417,154 92,554 13,771 (19,369) 1,224,149 (60,579) (9,537) (6,542) 851,472 -- (8,149) 58,673 -- 50,597 125,640 - - - 11,679 (41,032) (67,338) (253,580) 1,095,247 (372,378) (414,580) (197,934) 2,383,320 _ 52,028 66,056 (252,240) 30,690 1,269,854 455,467 g l D00365? - 27 - NOTES FOR ANNUAL MEETING V. Acquisitions, Dispositions and Capital Expenditures B Dispositions and Shutdowns - No Dispositions in Fiscal 1963 (Continued) Annual Sales Last Full Year Profit or (Loss) Last Full Year Avg. Profit or (Loss) Last 4 Yrs. Operated Pre-Tax Profit or (Loss) on Sales or Abandon ment After Tax Cash & Asset Utilization Last Full Year Basis St. Helena 3/31/58 $ Buena Park Land 1/28/58 Cheaurgy 9/1/58 31,982,480 Southern Pine 2/28/58 1,070,947 Valdosta 3/28/60 2,941,738 Berkeley M & SP 4/30/60 5,645,470 Tulsa-Gen.Paint 6/1/62 398,897 $- 1,477,859 103,448 320,127 98,726 (7,795) 1,503,501 68,240 156,671 66,787 (1,796) $(1,215,239) 174,957 1,156,164 (76,237) 275,301 39,176 (7,813) $ 925,924 136,635 27,415,123 292,555 1,430,042 684,913 38,219 Total $70,547,691 $ 1,297,929 1,063,454 $ 362,078 $43,858,731 Book Value After Tax Cash Received Excess Cash Over Book Value Fixed Assets - Sold - Abandoned $11,275,722 2,423,837 $13,699,559 $18,890,121 1,260,395 $0,156,516 6,450,957 C. Mining Activity The mining of Ilmenite Ore at Lakehurst, New Jersey, which was begun in August, 1962, produced 31,153 tons of ore in fiscal 1963. Development Cost in 1963 of $l,l8l,379 was $661,879 more than fiscal 1962 and for the project to-date totaled $2,241,878. Capital expenditures todate for the mine as of August 31, 1963 were $5,060,727- Capital expendl tures in fiscal 1963 for the mine were $431,819. D. Major Expenditures Over $50,000 (Capital & Expense) - 1963 (Thousands of Dollars) Expended Expended To Be Prior to in Expended Coatings and Resins: 1963 1963 in 1964 Central - Project X Lab $ 95~ Eastern - Phase 1 Modernization - 33 29 Eastern - Finished Goods Warehouse 153 Nubian - Metal Decorating Lab Nubian - Big Batch Dept. 65 100 Montreal - Real Estate Midwest - Plant Modifications 75 245 66 Pressure Plant 4oo Elmwood - Continuous Reactor 106 Equipment Evaluation Lab - Bldg. Add'n. & Equip. - 22 80 PLD003653 - 23 - NOTES FOR ANNUAL MEETING V. Acquisitions, Dispositions end Capital Expenditures D. Major Expenditures Over $50,000 (Capital & Expense) - 1963 (Continued) (Thousands of Dollars) Expended Expended To Be Prior to in Expended Coatings and Resins: (Continued) Elmwood - Continuous Reactor 1963 - 1963 in 1964 - $ 106 Elmwood - Parking Lot -- 70 Other 1,271 522 1,397 Total Coatings & Resins $ $ 513 $ 2,676 Foods: Logan - Solvent Fractionation Plant $ 1,797 Logan - Gas Plant - Logan - Research Lab - Logan - Refining, Bleaching, Acidulation Fac. - Logan - Continuous Hydrogenation - Logan - Power Beading Equipment - Logan - Fractionation Storage - Louisville - Filling, Packing Whse. 1,242 Louisville - Four Scale Tanks - Louisville - Continuous Acidulation - Louisville - New Refining Equipment - Berkeley - Move and Improve Filling Operations - Bethlehem - Extract Manufacturing 15 Bethlehem - Coconut Manufacturing Modernization 4 Bethlehem - Sauce Mix Blender, Filling & Cartoning - All Other Foods 155 Total Foods $ 3,213 $ 101 208 69 - 127 50 - - 165 56 4oo $ 1,176 $- - - 235 80 100 50 38 100 300 50 2 108 103 932 $ 2,098 Chemicals: Hammond Oxide Production $- Femco Jet Milling Equipment 22 Pemco Dispersion Mixer Pemco Building Addition 3 - Adrian Joyce Works - Ore Handling - Adrian Joyce Works - Airveyors to Bins - Adrian Joyce Works - Increase Capacity of Swamp - Adrian Joyce Works - Expand Finishing Bldg. - Adrian Joyce Works - T102 Manufacturing 3,624 Lakehurst Mine 5,007 Lakehurst Mine - Caustic Scrubbing System - Lakehurst Mine - Tractor - Lakehurst Mine - Motors & Scavenging Systems - Lakehurst Mine - Replace Wet Mill Vibrating Screens - Organic - Power House - Organic - Research Office - Organic - Pyrolizers - Organic - Fine Chemical Blending Facilities - Organic - Column Modifications - Organic - S. S. Col. with Stillpot - Organic - Odor Improvement Equipment - $ 121 $ 50 56 68 - - 215 - 50 - 50 - 75 - 1,700 130 230 30 66 - 56 - 50 - 70 9 150 77 i4o 9 145 - 77 - 188 - 250 - 60 GLD003654 - 29 - NOTES FOR ANNUAL MEETING V. Acquisitions, Dispositions and Capital Expenditures Major Expenditures Over $50,000 (Capital & Expense) - 1963 (Continued) Chemicals: (Continued) Organic - Addition to Main Office Bldg. Organic - Oil Saponification & Storage Organic - Soap Skimmings All Other Chemicals Total Chemicals r International Group: Mexico - Paint Manufacturing Plant Panama - Whse and Plant Equipment Femco Belgium - Plant, Equip., Office, etc. All Other International Total International Expended Expended To Be Prior to in Expended 1963 1963 in 1964 $ - $ - 1 55" - - 200 -- 50 2,636 959 2,489 $10,292 $ l,7ol $ 5709S $ - $ - $ 231 -- 58 - 676 920 120 303 68 $ 120 $ 979 $ 1,277 Development Group $ 63 $ 53 $ 22 Headquarters: Reading Data Center (1964- Appropriation in C&R) $ All Other Headquarters Total Headquarters $ $ 12 IS $ - $ 61 155 123 155 $ "154 Total Company $15,216 * 4,787 $12,351 Extraneous Expenses 1963 Before Tax After Tax Lakehurst Mine St. Helena - Idle Plant 1,101,379 52,358 567,062 25,132 Adrian Joyce Works -- Carrollton Plant -- St. Jjouis Expansion Emery Plant --- Stauffer Property Midwest Trade Modernization - 2,458 1,180 Johnstown S.S. Powder 7,622 3,658 Johnstown Thin Layer Furnace Abandonments Capital (Gains) Losses Hammond - Filter Powder Hammond - Fluosolids LIFO Reversal 10,606 19,021 56,085 ^,351 4,877 (76,393) 5,091 9,130 42,064 2,088 2,341 (36,669) 1962 Before Tax After Tax 519,50<) 249,360 145,423 69,803 5,972 2,867 92,636 44,465 6,538 58,080 3,138 27,878 5,592 2,684 19,074 9,156 43,243 20,757 14,778 72,748 27,288 7,093 34,919 20,466 -- -- (270,731) (129,951) 1,262,364 621,077 740,l4l 362,635 GLD003655 - 30 - MOTES FOR ANNUAL MEETING VI. Other Major Functions and Items A. Donations The donations policy of the Company provides for reasonable support to educational; health and velfare; and charitable organizations. This policy is administered by the Donations Committee, under the direction and guidance of the President and Board of Directors. Educational support has been given through the following: 1. Awarding of four scholarships under the auspices of the National Merit Scholarship Corporation. 1963 winners were: Charles G. Churchman (Georgia Tech), Richard J. Toll (Purdue), Deana L. Astle (Pembroke), Howard M. Slyter (Harvard). The latter three are children of employees. 2. Cooperative Contribution Plan, under which the Company makes unrestricted grants to degree-granting universities in an amount equal to the donations made by employees of the Company to public colleges and universities, and twice amounts donated to private colleges and universities. Contributed in fiscal 1963 - $18,057 to 111 colleges. 3. Chemistry lectureship grants provided to six United States universities to provide for lectures by outstanding individuals and to help promote understanding and interest in scientific achievement. k. Outright grants to selected colleges and universities in the state of Ohio such as Case and Western Reserve and to the Ohio Foundation for Independent Colleges. In the Health and Welfare category, the Company has supported the United Fund, Community Chest, Red Cross and United Health Fund programs in the communities where it has plants or branches. In addition, selective support has been given to other service organi zations and foundations. Contributions are not given to sectarian groups, labo--r o--rug--an--iz---a--t-i-o--n--s/, e--t-c- . Education 1963 sijr 1962 w 1961 TW i960 55jT Health and Welfare 36# 36# 45# 45# Other 23# 19# 7# 7# Total Donations $171,690* $157,873 $120,571 $108,233 # of Net Profit 2.29# 2.36# 1.88# 1.62# Per Employee $22.87 $22.19 $18.92 $17,60 * Includes $17,671 in contributions of merchandise (C & R) not included in prior years - Cash Donations totaled $154,019 or 2.05# of Net Profit. GLD003656 - 31 - NOTES FOR ANNUAL MEETING VI. Other Major Functions and Items B. Audit Ernst & Em3t representatives present at the meeting will he Messrs. N. T. Halvorsen, Partner and George Walters, Partner. Company interned, audit staff conducts surprise audits of all operating units on a schedule calling for examinations about once each year. Audit verification is obtained on all acquisitions end investments. C. Insurance 1. Fire a. Factory Insurance Association (FIA) covers for Fire, Lightning, Windstorm, Hail, Explosion, Aircraft Damage, Vehicle Damage, Smoke Damage, Vandalism and Sprinkler leakage. (1) Coverage is agreed amount basis, with no co-insurance requirement. (2) Plants covered axe all manufacturing properties except Toronto, Montreal, San Francisco, New Orleans, St. Louis, Varnish Dept, at Minneapolis, Iron Street, Collinsville, APD Atlanta, Wolcott and Eden. b. Industrial Property Floater (IPF) covers for the same perilB. (1) Coverage is agreed amount basis, with no co-insurance requirement. (2) Plants covered are San Francisco, New Orleans, Varnish Dept, at Minneapolis, Iron Street, Collinsville, St. Louis, Wolcott, Eden and APD at Atlanta. c. Blanket Insurance covers for the same perils in Canada. (1) Coverage is agreed amount basis, with no co-insurance requirement. (2) Plants covered are Toronto, Montreal end H. J. Mayer, Windsor. 2. Use & Occupancy (U & 0) or Business Interruption a. FIA covei's for the same perils for all the manufacturing locations that cove:r for the Property Damage Perils. (l) Coverage is agreed amount basis, with no co-insurance requirement. b. Canadian Plants, Montreal and Toronto, are under a blanket policy. (l) Coverage on a reporting basis subject to over-all limit. GL00365? - 32 n o t e s f o r a n n u a l me e t in g VI. Other Major Functions and Items C. Insurance (Continued) 2. Use & Occupancy (U 0) or Business Interruption (Continued) c. Canners Exchange covers for the same perils as in the fire policy for 0 & C locations. (1) Coverage is agreed amount hasis vith no co-insurance. (2) Plants covered are Wolcott and Eden. d. Specific Insurance covers for the same perils. (1) Coverage is on a co-insurance basis. (2) Plants covered are San Francisco, Iron Street, APD Atlanta. e. Extra Expense Insurance only. (1) Coverage subject to limit only, no co-insurance. (2) Plants covered are New Orleans and St. Louis as we can make up lost production at increased cost at other remaining plants. 3. Boiler a. We carry boiler and pressure vessel insurance including U & 0 where necessary. (l) Coverage subject to limit only -- has deductible provision to exclude small claims. k. Transportation a. We carry blanket policies for Ocean and Inland Transportation Cargo losses. Small deductible applies to inland cargo losses. 5. Fidelity a. All employees are bonded in substantial amount under a blanket fidelity bond. Small deductible applies to exclude small claims. 6. Liability a. We carry Comprehensive Bodily Injury and Product Liability Insurance and Property Damage Liability. (1) Property Damage Liability is written with a sizeable deductible to give our sales force and legal department latitude in settling customer complaints. GLD003658 - 33 - MOTES FOR ANNUAL MEETING VI. Other Major Functions and Items C. Insurance (Continued) 7- Workmen's Compensation a. We self-insure Workmen's Compensation in twelve (12) states. (1) The self-insured states are California, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Ohio and Pennsylvania. (2) We have excess insurance in case of a catastrophe to cover accidents excess of $25,000 up to $1,000,000. (3) Self-insurance has saved us over $1,000,000 in the last thirty-two (32) years. b. Other states are insured for Workmen's Compensation except where there is a Compulsory State Fund. 8. Automobile a. We insure Company owned and leased cars and trucks for liability and physical damage in adequate amounts. 9- Losses a. There were no major fires in the last fiscal year. A fire at Reading amounted to $6,941-78 and one at Nubian $9,636.28, both Involved solvent handling. We also had a small field fixe at Adrian Joyce Works for $2,805.36 and in a boxcar at a California Warehouse for $1,718.45. Total Fire Losses were $21,101.87. b. We had a windstorm loss at Adrian Joyce Works costing $4,617-12 and one at Cleveland for $1,353- Total windstorm $5,970.12. c. Lightning caused two losses at the Lakehurst mine for $2,971-80 and $1,239-59 and one at Adrian Joyce Works for $1,581.01. The second lightning loss at Lakehurst shut down the dragline for 3s days resulting in a business interruption loss which is still being negotiated with the insurance adjustors. This is estimated at $9,272.89. Collected and estimated lightning losses total $15,065.29. 10. Insurance Cost a. Total cost of insurance premiums for fire and extended coverage and vandalism on buildings, machinery, equipment and inventory, plus use and occupancy (business interruption) and extra expense was $313,525. for the past fiscal year. (This figure should not be given out.) CLD0036 59 34 - VI. D. Foreign Bualness The Glldden Company Offshore sales (excluding Canada) totaled $1,965,780 in 1963 compared to $6,906,400 the previous year. The sharp decline vas the result of reduced sales by the Louisville Division. Glldden doneStic divisions realized $233,142, 12$ of gross profit on these sales in fiscal year 1<#>3 compared to $372,548, 5-4$, in 1962. in addition, Glldden International consoli dated sales in 1963 were $5,832,789 compared to $3,989,086 in 1962. The Glldden Company had two active licensees during 1963 aD& received technical service fees of $13,236 as compared to $9,035 in 1962. During 1963, the investment of $47,595 in A/s FJord-Plast (Norway) was written off. A direct stock interest vas held in the following companies at August 31, 1983: Name $ of Interest Net Book Cost Consolidated The Glldden Company, Ltd. - Canada Glldden International, C.A. - Venezuela Industries Glldden da Puerto Pico, Inc. 100$ 100 100 $ 50,000 18,018 1,000 re Unconsolidated Fabrics Nacional de Pinturas, 8.A. - Cuba Tr&ns-Caribe Supply Co. # Reliable Water Heater Co. * 15.1 100 100 Total * Equity through Industries Glldden de Puerto Rico 1) The Glldden Company, Ltd. (Canada) - Glldden holds 100$ (4,200 shares) at a book cost of $50,000. Shareholder equity at August 31, 1983 vas $7,390,112, which is included in the consolidated balance sheet In the Annual Report for 1963. 2) Glldden International, C.A. Glldden holds 99 shares (l held by Glldden, Ltd.) which represents effective 100$ control. Glldden International's consolidated shareholder equity at August 31, 1983 vas $2,491,686. Included in the consolidated equity of Glldden International are its consolidated subsidiaries, rvH<M*w Panama, General Paint de Mexico and Glldden Cbeaie GtobH. GLD003660 - 35 - VI. Other Mt jor Functions and Items D. Foreign Business - continued The Glidden Company 3) Industrias Glidden de Puerto Rico, Inc. - At August 31, 19^3, Glidden held 100 shares at a value of $1,000 which represented 100$ control. This company was organized in fiscal 1962 to he available as a bolding and/or operating company for the various Glidden operations in Puerto Rico. The extent of its operations at August 31 was as holder of Glidden's 100$ interest in Trans-Carite Supply Co. and Reliable Water Heater Company. On September 1, 1963, Industrias Glidden purchased at book value the assets of the Puerto Rican paint branches from Glidden International, C.Af Also, an additional 24,900 shares of common stock at a cost of $249,000 were issued to The Glidden Company. 4) Fabrics National de Pinturas, S.A. (Cuba) - Glidden holds 31,421 shares which represented a 15.1$ interest. The company was intervened by the Cuban Government in October, i960. Both Glidden and Glidden International were adequately provided to cover the rather nominal accounts receivable balances outstanding. Since the shares were acquired by Glidden at no direct cost, no investment loss was suffered through this intervention. 5) Trans-Caribe Supply and Reliable Water Heater Company (Puerto Rico) On July 1, 1963, Glidden, through Industrias Glidden de Puerto Rico, acquired the remaining 6,250 shares in each company, for a total of 12,500 shares in each company for 100$ control of each. The original 50$ interest in each company was acquired in August, 1962. There has been no direct payment for equity since such payments were dependent on future profits of the companies. Glidden's original loan of $500,000 was written down to $209,344 during 1963* International loaned the companies an additional $452,079 during the year. Glidden International, C.A. The company was headquartered in San Juan, Puerto Rico. It included an export department selling Glidden products in the world market and through Puerto Rican paint branches. As it did in 1962, Glidden International con* solldated its operations for fiscal 1963 with the operations of its paint subsidiaries, Glidden Panama, S.A. and General Paint Co. de Mexico, and its German holding company, Glidden Cbemie GmbH. Effective on September 1, 19^3 > the Puerto Rican paint branches vere sold to Industrias Glidden de Puerto Rico at net book value. The operations of the Export Division vere sold at net book value to The Glidden Company and moved to Jacksonville, Florida. During 1963, International purchased a shipyard in Bruges, Belgium fear con* version into a frit manufacturing plant to produce Pemco products in Europe. As of August 31, approximately one-half of the $1,500,000 authorized for the project had been expended. The plant was expected to begin operations In early 1964. GLD003661 36 - VI. Other Major Functions and Items D. Foreign Business - continued Glidden International, C.A continued In fiscal 1563, International also acquired a 5156 interest in Salchi SpA, an Italian paint company; a 5056 interest in Piucasa-Costa Rica, a Costa Rican paint company; a 25$ interest in Sekisan Kako, a Japanese paint company. Further information with regard to these acquisitions may he noted following the Glidden International investment schedule. Glidden International had twenty active foreign licensees and received $251,021 in fees from these sources in 1963. These fees were approximately $400,000 below fees received in 1962. The 1962 fees Included technical fees based on construction costs involved in T102 plant of Billiton which amounted to $380,000. In 1963, for the second year, Glidden International was consolidated with The Glidden Company for reporting purposes. Sales and net profits alter local tax are as follows: Sales Profits Fiscal 1963 1962 1961 i960 1959 1958 1957 1956 $5,832,789 3,989,066 2,644,641 3,255,946 2,904,516 3,012,840 1,684,178 560,112 $646,261 929,802 288,319 335,071 82,370 68,190 56,603 32,709 In addition, Industrias Glidden de Puerto Rico had a profit of $11,333 for fiscal year 1963. All operating units increased sales during 1963 as compared to 1962: Export Office Puerto Rican Br. Panama Mexico Totals Sales (in Thousands) ts1963 73 19^ 2,015 1,460 1,082 458 353 642 -J32 5,833 3,989 Variance Amount 1,258 dr 378 35 -2105 30 103 J 1,844 mS8HK7 GLD003662 - 37 - VI. Other Major Functions and. Items D. Foreign Business - continued Glldden International, C.A. - continued With the exception of Mexico, the operating units increased profits over last year. Mexico accrued $13,000 in technical service fees in 1963 and no such charges were included in 1562. The comparison of net profits after local tax is noted helow: Profit (in Thousands) 12M Variance Amount Export Office Puerto Rican Branches Panama Mexico 213 106 40 11 98 115 117 78 28 36 33 7 21 26 &) i58) Operating Totals 370 235 135 57 Glldden Chemie 151 International License Income 251 International Adis. Office (126) 102 49 48 646 (395) (61) (53) (73) (128) Total. Glldden Int'l. 646 930 (284) (31) Glldden International funds have been provided from accumulated earnings, hanh borrowings and borrowings from related companies. At August 31, 193 the following were the borrowings outstanding: The Glldden Company The Glldden Company, Ltd. Industries Glldden - Mexico Industries Glldden - Puerto Rico Union Ccmnerce Bank First National City Bank-Belgium Banque Lambert, Belgium Banque de Bruxelles, Belgium $ 900,000 730,500 25,000 444,037 725,000 154,646 24-3,337 219,965 *3.M>a,505 On September 1, Glldden International, C.A. sold its Puerto Rican paint branches to Industries Glldden de Puerto Rico. It vised a portion of the cash proceeds of the sale to repay the bank loan from Union Camnerce Bank. Glldden International, C.A. also sold other assets to The Glldden Company in satisfaction of its note payable and reduction of its August 31 account payable to Glldden of $899,349. GLD003663 - 38 - VI. Other Major Functions and Items D. Foreign Business - continued Glidden International, C.A. - continued As a result of the reorganization of the International operations, the borrowings outstanding as of October 31, 1963, were as follows: Glidden International, C.A. Consolidated The Glidden Company To Fabrica de Pinturas-Panama $356,000 To Glidden Panama, S.A. 100,000 The Glidden Company, Ltd. Industries Glidden-Mexico Industries Glidden-Puerto Rico First National City Bank-Belgiun Banque Lambert, Belgium Banque de Bruxelles, Belgium $ 456,000 730,500 25,000 444,037 192,737 291,637 261,431 $2,401,342 Industries Glidden de Puerto Rico The Glidden Company, Ltd. The Glidden Company $ 632,500 182,000 $1,014,500 Glidden International had sixteen banking associations at August 31, 1963: American Express Company Banca d'America e d'Italia Banque de Bruxelles Banque Lambert Chase Manhattan Bank Chase Manhattan Bank Chase Manhattan Bank Den Danske Londmandsbank First National City Bank First National City Bank First National City Bank Union Commerce Bank Banco de Comercio Banco National de Mexico Banco de Ccmercio Commerzbank Paris, France Milan, Italy Bruges, Belgiun Brussels, Belgium Frankfurt, Germany San Juan, Puerto Rico Panama City, Panama Rungsted Afdeling Brussels, Belgium Osaka, Japan San Juan, Puerto Rico Cleveland, Ohio Caracas, Venezuela Mexico City, Mexico Mexico City, Mexico Dusseldorf, Germany GLD003664 - 39 - VI. Other Major Functions and. Items D. Foreign Business - continued Glidden International, C.A- - continued At the end of the fiscal year, a direct stock interest vas held in the following companies: Kame i of Interest Ret Book Cost Consolidated Glidden Panama, S.A.-Panama General Paint Co. de Mexico-Mexico Glidden Chamie, GmbE-Germany Unconsolidated Glidden Curacao, N.V.-Curacao Industrias Glidden, S.A. de C.V.-Mexico Glidden-Salchi, S.p.A. - Italy Pinturas Centro-Americanas-Costa Rica Plnturas Centro-Awericanas - Guatemala Pinturas Ecuatoria&as, S.A. and Distribuidora Americanos, C.A.-Ecuador Sekisan Kako - Japan Red V Coconut - Fhillippines Ishihara Sangyo Kaisha, Ltd.-Japan Wulfing, KG - Germany 100 $ 20,000 100 246,356 100 250,000 $"516,556 100 100 51 50 33-1/3 $ 200 32,000 1,005,000 151,057 64,850 33-1/3 25 4 2.24 33-1/3 62,837 - 47,000 70,064 1,087,500 raosEr $3,036,864 1) Glidden Panama, S.A. - Glidden International, C-A. held 1,000 shares representing 100 control. The company vas operated as a paint branch and vas carried at an investment cost of $20,000. Earnings of $39*730 for fiscal year 1963 vers paid to Glidden International, C.A. at the end of the year. The financial results of this operation were con solidated with those of Glidden International, C.A. A sister company, Fabrlca de Plnturas Glidden, S.A., will become active in fiscal year 1$64 as a snail paint manufacturing plant. 2) General Paint Co. de Mexico, S.A. Glidden International held all 50,000 outstanding shares with a book cost basis of $246,356. Shareholder equity at August 31* 1963 totaled $351*036. The financial statements of this operation were consolidated with those of Glidden International for fiscal year 1963. GLD003665 % % ito - VI. Other Major Functions and Items D. Foreign Business - continued Glidden International, C.A. - continued 3) Glidden Chemie Gaits (Germany) - This German holding ccmpeny vas formed in fiscal 1961 to hold Glidden International's one-third interest in Lackverke V7ulfing QnbH & Co. Chemie1 s capitalisation of $250,000 represented approximately one-quarter of its investment in Wulfing. The remainder of Chemie's investment in Wulfing originally was financed through loans from Glidden International, C.A., but in April, 1963 $444,037 of this financing vas transferred to Industries Glidden de Puerto Rico. In September, 1963 the remaining financing of $356,000 vas transferred to Fabrics de Pinturas Glidden, 8.A. in Panama. Hie financial statements of this holding ccmpeny vere con solidated with those of Glidden International, C.A. 4) Glidden Curacao, N.V. - Glidden International held all 20 shares of the outstanding stock of this company with a book investment cost of $200. At August 31, 1963, the company had shareholder equity of $123. The company vas used in 1962 to receive technical service fees from Group Developneats, Ltd. of England. It currently is holding $25,000 from British Paints as Deferred Technical Service Fees pending out come of the Ford development work. 5) Induetrias Glidden, S.A. de C.Y. (Mexico) Glidden International held all 20,000 outstanding shares and this investment vas carried at its cost of $32,000. This corporate entity has never assumed an operating status. Shareholders equity at August 31, 1963 totaled $33,354. 6) Glidden-Salchi, S.p.A. (Italy) - As of May 31# 1963, Glidden Inter national, C.A. acquired 13,995 shares of stock for a 51$ interest in this Italian paint manufacturing plant. The investment vas recorded at its cost of $1,005,000. In accordance with the contract, International vill pay, as part of the purchase price, an additional $250,000 during 1965. International vill also make an additional payment to the previous owners based an three times the annual in crease of net earnings for each of the calendar years 1964 through 1967 over the previous highest net earnings. International's share of stockholders * equity at February 28, 1963, plus subsequent capital contributions, was $961,861. The financial statements of this com pany have not been consolidated with those of Glidden International,C.A. CLD003666 * - 4i - VI. Other Major Functions and Items D. Foreign Business - continued Glidden International, C.A. - continued 7) Pinturas Centro-Anericanas (Costa Rica) - On May 27, 1963, Glidden International, C.A. purchased 100 shares of the common stock of Pinturas Centro-Americanas Costa Rica, Ltda., giving International a 50$ interest in this corporation at a cost of $151,057. Inter national's share of the equity at September 30, 1963 vas $157,819At August 31, 1963, Pincasa Costa Rica had a loan of $34,180 from Glidden International, C.'A. The financial statements of this com pany have not been consolidated with Glidden International, C.A. 8) Pinturas Centro-Americanas (Guatemala) - Glidden International holds 154 shares representing a l/3 interest at a cost of $64,850 at August 31, 1963. Glidden International's share of shareholder equity at July 31, 1963 van $186,852. At August 31, 1963, Pincasa had loans of $12,755 from Glidden International and $105,000 from Glidden. 9) Pinturas Ecuatorisnas, S.A. and Distribuidora Americanas, C.A.(Ecuador) Glidden International holds a combined 320 shares representing a l/3 interest in both companies at a cost of $62,837. A net-after-tax dividend of $8,953 vas paid by the cunnanles to Glidden International during fiscal 1963* At August 31, 1963, after payment of these dividends, Glidden International's 3hare of shareholder equity vas $72,998. 10) Sekisan Kako (japan) - Glidden International, C.A. acquired 50,000 shares of common stock, a 25$ interest, from Sekisan Kako on November 29, 1962. The stock vas received in exchange for technical service infcreation and has been recorded at no cost. In calendar year 1964, Sekisan will increase its capitalizatL on and International trill have the right to maintain its 25$ interest by purchasing an additional 50,000 shares for approximately $69,500. At September 30, 1963, Glidden International's share of stockholders' equity vas $94,687. 11) Red V Coconut (Phlllippines) - Glidden International, C.A. held 1,200 shares, a 4$ interest, at August 31, 1963. The investment vas recorded at our cost of $47,000. International's share of the stockholders' equity at December 31, 1962 vas $38,231* GLD003667 Other Major Functions and Items D. Foreign Business - continued Glidden International, C.A. - continued 12) Iohihara Sengyo Kaisha, Ltd. (Japan) - As of November 1, 1962, Glidden International, C.A. acquired an additional 50k, 1*58 shares of stock as our allotment of new shares issued. These additional shares vere recorded at our cost of $70,06k. Before the new Is bu s , we held 870,76k shares at no book cost because they were obtained at no cost under a licensing agreement. The total of 1,375222 shares now held represented a 2.2\j> interest and had a market value at October 26, 1963, of $313,2k5. 13) Lackwerke Wulfing GmbH & Co. (Germany) - Glidden International, through Glidden Chernie, holds a l/3 interest in this company at a cost of $1,087,500. Glidden Cheanle share of partnership equity at August 31, l$o3 was $850,251. The difference between equity and investment cost was occasioned, by side payments to the Wulfing family for the excess of fair value over book value of KG assets, goodwill and agreement not to compete. Chernie's share of the understatement of fixed assets was calculated to be $250,000. 2. Miscellaneous Cost of the Annual Report this year was 20 cents each which was 2 cents less than last year. Our 1962 Annual Report was judged second best in the Paint and Coatings Industry by Financial World. *5 5 5 * Distribution: Mr. Dwight P. Joyce . B. W. Maxey . W. G. Phillips . R. W. Patterson . R. K. Dutton . M. D. Higbee D. E. ERSKUIE CI0003 66p