Document 4b60VR42np0kzRNx8LZwzKvp

The Dow Chemical Company MIDLAND, MICHIGAN Annual Report FOR YEAR ENDED MAY 31, 1942 f.'ST0003734 THE DOW CHEMICAL COMPANY MIDLAND, MICHIGAN E. O. BARSTOW E. W. BENNETT J. S. CRIDER Directors L. I. DOAN A. B. DOW W. H. DOW M. E. PUTNAM C. J. STROSACKER W. R. VEA2EY Officers Chairman of the Board, President and General Manager ... Vice President and Treasurer Vice President and Secretary Vice President - Vice President .... Assistant Treasurer ... W. H. DOW E. W. BENNETT L. I. DOAN E. O. BARSTOW C. J. STROSACKER J. S. CRIDER 9 0OOO1 S;U Assistant General Manager and Assistant Secretory - - - A. P. BEUTEL Assistant Treasurer and Assistant Secretary F. H. BROWN Assistant Secretary --- L. A. CHICHESTER Assistant Secretary -- -- R. L. CURTIS Assistant Secretary - - - C. M. SHIGLEY Assistant Secretary D. J. LANDSBOROUGH Auditor C. PENHALIGEN Registrars The New York Trust Company 100 Broadway New York City The Notional City Bank of Cleveland Cleveland, Ohio Transfer Agent* Guaranty Trust Company of New York HO Broadway New York City The Cleveland Trust Company Cleveland, Ohio TO THE STOCKHOLDERS OF THE DOW CHEMICAL COMPANY: The forty-fifth annual report of your Compcny is presented herewith. The consolidated financial statements for the fiscal year ended May 31, 1942 have been audited by Messrs. Haskins Cr Sells, whose certificate is reproduced as part of this report. FINANCIAL STATEMENTS-- The consolidated balance sheet, statement of consolidated income ond state ment of consolidated earned surplus for the year ended May 31, 1942 are shown herein. The total assets of the Company ond its Subsidiaries amounted to $103,094,230.70, which figure includes current assets of $29,212,794.38. Current liabilities amounted to $19,643,000.63. EARNINGS-- The consolidated net income of the Company and its Subsidiaries amounted to $9,221,485.76. After deducting dividends on the preferred capital stock of $300,000.00, the consolidated net income was equivalent to $7.14 per share on the number of shares of common capital stock outstanding at the end of the year. This compares with $6.58 per share for the year ended May 31, 1941. DIVIDENDS-- The Company distributed four equal quarterly dividends aggregating $3.00 per share, to the common stockholders during the year. Including dividends on the preferred capital stock of $300,000.00, the dividends disbursed to shareholders amounted to $3,960,978.75. NEW CAPITAL-- During the current year, 113,519 additional shares of common capital stock were offered to stockholders of record as of September 26, 1941. The common capital stock account was credited with the net proceeds of $1 1,1 24,862.00 reolized from the sale of these shares. SURPLUS-- The net increase in consolidated earned surplus for the year amounted to $5,878,462.46, bringing the consolidated earned surplus as of May 31, 1942 to $24,812,306.81. NET SALES-- Net sales for the year ended May 31, 1942 amounted to $78,359,997.24, as compared to 546,907,950.27 for the yeor ended May 31, 1941. TAXES-- Total major taxes for the year amounted to $12,183,783.74, which represents an equivalent cost per share on common stock of $9.76. This compares with $3.12 per common share for 1941. STOOQ3736 The Company's tcxable year closed on May 31, 1942. In the accompanying financial statements. Federal taxes have been computed on the basis of the existing law. Ordinarily the contemplated Revenue Act to be passed this year would not apply to the Company's taxable year closed on May 31, 1942. However, there is the possibility the precedent previously established may be abandoned in the new Reve nue Act. If so, this would adversely affect the Company's earnings, the extent of which is unknown at this time. GENERAL-- The above comments hove been submitted as a very brief summary of the financial condition of The Dow Chemical Company and, due to the present emer gency, the graphs formerly appearing in our annual reports have been deleted, as well as a list of products produced by our Company. This is all in the interest of Nafionol Defense end we trust the stockholders will be willing to accept the neces sary 'Drevity o't t'nis report. To odd a little further general information, it will undoubtedly be of inter est to every stockholder to know that a very large number of our men are serving on odvisory committees in mony of the National Defense organizations. Nearly every product we produce is on Government ollocotion for defense purposes. In addition. The Dow Chemical Company hos designed, built and operated, or is in the process of building or operating new Government owned defense plants located throughout our country. Every effort in our organization has been applied to the accomplishment of an early victory and prompt execution of the very large defense program assigned to us. On four different occasions, we have brought defense plants into production ahead of schedule and every effort is made to continue the record. We suggest that successful accomplishment during war times is a measure of the capacity of the organization to meet successfully new emergencies after the war. This is the only comment we feel justified in making pertaining to post-war activity. WILLARD H. DOW, President Midland, Michigan July 24, 1942 ST 0003/37 HASKINS & SELLS CCITTincO *uauc ACCOUWTUni 4.444,4 , I J C S'* 114 * 4 I444K4 C * me MAflONAL liMII Ut*-DKa OITKOIT ST00Q3738 ACCOOTflAOTS1 CBgmCAIS The Dew Chemical Company: VS have examined tbe cone olidated 'balance sheet of Tbe Do* Chemical Company and its aubeldiary companies as of Hay 31, 19^2 and tbe related statements of consolidated income and earned surplus for tbe year ended that date, have reviewed tbe accounting procedures of tbe companies, and have examined their accounting records and other evidence in support of such financial statements. Our examination was made ln accordance with generally accepted audit ing standards applicable in tbe circumstances and included all audit ing procedures we considered necessary, which procedures were applied by tests-to the extent we deemed appropriate ln Tlew of the systems of internal control. In our opinion, the accompanying consolidated balance sheet and statements of consolidated income and earned surplus fairly present the financial condition of the companies at May 31, 1942 and the results of their operatlone for the year ended that date, ln conformity with generally accepted accounting principles and practices applied on a basis consistent with that of the preceding year. July 16, 1942. THE DOW CHEMICAL COMPANY (Incorporated in Michigan) AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET, MAY SI, 1942 r ST0003739 ASSETS CURRENT ASSETS: Cash_____________________________________________ $ 6,291,790.83 Notes and accounts receivable: Customers, S9,420,886.92; associated company, SI 07,152.55; employees, $32,614.47; and sundry, SI42,767.41 $ 9,703,421.35 Less reserves for doubtful receivables_________ 240,593.48 9,462,827.87 Billed and unbilled amounts receivable from agencies of the United States Government (other than for the sale of product) Inventories: Finished goods and work in process (at lower of cost or market) ------------------------------------- $ 5,486,230.36 Materials and supplies (at cost--approximately market) ___________________ _______________ 6,708,152.47 1,263,792.85 12,194,382.83 Total current assetsI_________ ____ ! 5 29,212,794.38 INVESTMENTS AND SUNDRY RECEIVABLES: Notes receivable and capital stock (at cost) of associated company (equity at May 31, 1942 as shown by unaudited balance sheet of associated company, $3,458,524.24)____________________ Instalment notes receivable, maturing 1943 to 1948 Sundry securities and receivables (including em ployees' receivables, $73,364.76) (less reserve, SI 21,212-88) ________________________________ $ 2,238,000.00 428,571.43 538,911.81 Total investments and sundry receivables -- 3,205, 483.24 PROPERTY (including emergency facilities for no tional defense, completed and in progress, with a gross book value (cost) of $24,409,906.33 subject to amortization) : Plant properties and equipment -- at cost (less reserves for depreciation and amortization. $27,248,904.73) Housing properties -- ot cost (less reserves for depreciation and amortization, $160,730.78)-- $68,356,269.77 1,469,527.95 Total property__-________________________ 69,825,797.72 PATENTS--At cost or nominal value (less reserves for amortization, $50,101.18) ----------------------------- 65,673.22 DEFERRED CHARGES--Unexpired insurance prem iums, unamortized debenture discount and expense, deferred cost of power facilities, and sundry---------- T0TA1_______________________________ 784,482.14 $103,094,23070 THE DOW CHEMICAL COMPANY (Incorporated in Michigan) AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET, MAY 3T, 1942 O'/^EOOOlSi LIABILITIES CURRENT LIABILITIES: Notes payable--Bonks 5 1,000,000.00 Accounts payable--Trade and sundry 4,730,241.51 Federal income ond excess profits taxes (including provision for current year at rates under law existing at May 31, 1942; and provision for esti mated additional taxes of prior years) Customers' special deposits for purchase of product------------------------- Serial debentures maturing September 1, 1942 ------------------------------- Accrued liabilities: Payrolls Taxes (other than Federal income and excess profits taxes)-------- Interest Rents Sundry_________________________________________________ ______ 10,336,621.85 635,059.79 750,000.00 761,562.98 1,042,074.29 95,471.26 167,032.86 124,936.09 Total current liabilities $ 19,643,000.63 FUNDED DEBT: Ten year 2Va% debentures, due September 1, 1950 Serial debentures maturing in the amount of $750,000.00 on September 1, 1943 and annually thereafter until September 1, 1950 (debentures maturing in 1942 included in current liabilities) $ 7,500,000.00 6,000,000.00 Total funded debt 13,500,000.00 RESERVES FOR FIRE AND ACCIDENT LOSSES, DAMAGE CLAIMS, ELECTROLYTIC CELL REPLACEMENTS, AND SUNDRY- 734,820.31 MINORITY INTERESTS IN CAPITAL STOCK AND SURPLUS OR DEFICIT OF SUBSIDIARIES --........................... ............. 1,073,655.11 CAPITAL STOCK: Preferred capital stock--5% cumulative (author ized ond outstanding, 60,000 shares of $100.00 par value each) Common capital stock (authorized, 2,000,000 shares without par value; outstanding, 1,248,706 shares) $ 6,000,000.00 37,293,908.83 Total capital stock._______________________ SURPLUS: Capital surplus (decreased during the year ended May 31, 1942 by expenses in connection with sole of additional shares of common capital stock, $39,937.65) ---------------------------------------- Earned surplus 24,812,306.81 $ 36,539.01 Total surplus---------------------------------------------------------------------- TOTAL 43,293,908.83 24,848,845.82 $103,094,236770 THE DOW CHEMICAL COMPANY AND SUBSIDIARY COMPANIES STATEMENT OF CONSOLIDATED INCOME FOR THE YEAR ENDED MAY 31, 1942 SALES (net of returns, ollowonces, cosh discounts, ond freight) COST OF SALES- --________________________________________ GROSS PROFIT --------------------------------------------------------- -- SELLING AND ADMINISTRATIVE EXPENSES______________ PROFIT FROM OPERATIONS............ ............................................. OTHER INCOME: Dividends, $1,350,000.00, ond interest. $155,610.97, from associated company_______ Fees received in connection with construction of certain government owned plants_____________ Royalties, rentals, and miscellaneous;___________ $ 1,505,610.97 268,375.06 252,126.83 GROSS INCOME_________________________ ________ __________________ INCOME CHARGES: Interest ond amortization of discount and expense on debentures $ 289,964.16 Other interest expense, loss on disposal of fixed assets, and miscellaneous._____________________ 284,980.47 NET INCOME BEFORE PROVIDING FOR FEDERAL INCOME AND EXCESS PROFIT TAXES PROVISION FOR FEDERAL INCOME AND EXCESS PROFIT TAXES (at rates under law existing ot May 31, 1942) : Normal tox ond surtox $ 3,948,067.35 Excess profits tax 6,131,058.48 NET INCOME BEFORE DEDUCTING MINORITY INTERESTS IN INCOME OF SUBSIDIARIES_____ MINORITY INTERESTS IN NET INCOME OF SUBSIDIARIES NET INCOME FOR THE YEAR ____________________ _______________ $78,359,997.24 56,338,933.18 $22,021,064.06 3,929,984.30 $18,091,079.76 2,026,11Z86 $20,117,192.62 574,944.63 $19,542,247.99 10,079,125.83 $ 9,463,122.16 241,636.40 $ 9,221,485.76 NOTES: The provision for depreciation ond the amortization (ai provided under the Internal Revenue Code) of emergency defense facilities charged ogainst income for the year ended May 31, 1942 amounted to $3,628,103.12 and $3,075,568.39, respectively. During the year adjustments were made of depreciation rotes on certain closscs of property which were applied retroactively to the years ended May 31, 1941, 1940, ond 1939 with the result ihot by credits to surplus the depreciation previously provided for those years was reduced $325,264.22, $278,848.54, and $216,111.48, respectively. The net effect of these adjust ments and miscellaneous other small adjustments of income of prior years, less the provision for additional Federal income and excess profits taxes thereon, was to credit corned surplus with $617,955.45, representing net increases in previously reported income for the years ended May 31, 1941, 1940, ond 1939 of $248,032.51, $185,240.46, and $184,682.48, respectively. Research ond experimental expenses which hove been shown In previous years under the caption "Selling and General Expenses" are now included in cost of sales. i mooois :r.i THE DOW CHEMICAL COMPANY AND SUBSIDIARY COMPANIES STATEMENT OF CONSOLIDATED EARNED SURPLUS FOR THE YEAR ENDED MAY 31, 1942 zmooois BALANCE, JUNE 1, 1941 ---------------------------------------------------------------- CREDITS: Net income for the year---------------------------------------------------------------- Adjustments to net income of prior years (see note to Statement of Consolidated Income)________ $ 856,743.26 Less provision for additional Federal income and excess profits taxes thereon________________ 238,787.81 Total CHARGE--Cash dividends: Common capital stock $ 3,660,978.75 Preferred capital stock__________________________ 300,000.00 BALANCE, MAY 31, 1942 _________ _______ --.......... ---------------------- $18,933,844.35 9,221,485.76 617,955.45 $28,773,285.56 3,960,978.75 $24,812,306.81