Document 7RgMgKO4jGaj9pojRD3mz5bqB

The Glidden Company Annual Report 1960 Financial Highlights 1960 1959 Change Net sales...................................... Income before taxes................... ... . . . Net income .............................................. Per share ....................................... ... . Dividends.................................................. Per share.............................................. Depreciation and amortization............... Per share .............................................. Expenditures for plant and equipment . . Working capital ...................................... Current ratio.......................................... Shareholders' equity.................................. Per share .............................................. Number of shareholders........................... Number of employees.............................. $197,490,831 $195,764,389 $ 13,638,356 $ 15,925,531 $ 6,690,356 $ 7,633,531 $2.90 $3.31 $ 4,620,700 $ 4,609,795 $2.00 $2.00 $ 6,959,971 $ 6,579,313 $3.01 $2.85 $ 8,764,000 $ 7,607,001 $ 59,721,934 $ 58,248,341 4.97 to 1 4.45 to 1 $ 92,846,742 $ 90,678,607 $40.18 $39.29 20,969 20,993 6,151 6,023 + 1% -14% -12% -- + 6% + 15% + 3% + 2% -- + 2% Contents The President's Report............................... 1 Paints..............................................................3 Durkee Famous Foods .... ... 4 Chemicals............................... ... 5 Financial Review...........................................8 Consolidated Balance Sheets......................10 Consolidated Income Statements .... 12 Source and Application of Funds .... 13 Accountants' Report..................................13 A Ten-Year Comparison..............................14 Management................................................. 16 Corporate Data, Plants & Products ... 16 GLD002504 pi# ** * The Glidden Company Dwight P. Joyce The President's Report For the fiscal year which ended August 31, the company's net sales amounted to $197.5 million. This represents a marginal increase over the sales results of the prior year. Unsettled economic conditions and strong competition in certain product lines were contributing factors and prevented us from ob taining the sales gains forecast at the beginning of 1960. Net income declined 12% to $6.7 million. Expenses for the year were budgeted for a much higher sales level than was reached. Those relating to current operations have been effectively brought under control. However, it is not our intention to reduce other expenses which are related to the develop ment of longer terra profit potential. Among the items included in thi3 category are research and development, market studies, distribution growth and expansion of productive capacity. Increases in these activities accounted for more than half of the profit decline. Both the Paint and Durkee Famous Foods Divisions registered a sales im provement, while sales of the Chemicals Division were off slightly. Only the Durkee Division produced a profit increase. A detailed review of the operations of each division begins on Page 3 of this report. Capital expenditures for the year amounted to $8.8 million, which repre sents a 15% increase over the previous year. Principal projects included terpene chemicals, expansion of resin-producing facilities, additions to the titanium dioxide plant and further modernization of our edible oil refineries. On the basis of current plans, capital outlays for fiscal 1961 will be between $8 and $10 million. Our long-range planning activities, which were started several years ago, have now been formalized under the guidance of a full-time staff. We have come a long way in recent years, strengthening and revamping the organi zation and product structure of this company--but we still have a great deal of work ahead of us in order to reach all our objectives. Expenses connected 1 CLD002505 with this program undoubtedly will continue to have a substantial effect upon profits for at least the next two years. Research and development expenditure!} for the year were increased $300,000. To date, most of our technical activities have been devoted to creating new markets and to meeting the needs of our customers through new products and product improvement. As a part of our planning effort, we have concentrated on a review of our entire research, development, and related technical operations. With the help of outside consultants, we have confirmed many of our actions; we have found technical assets on which we can capitalize; and we have found areas where we can make improve ments. To the extent consistent with sound financial policy, we will continue to broaden and build upon this vital function. During the year, the former Chernicals-Pigments-Metals and Organic Chemical Divisions were consolidated into a single Chemicals Division to provide more effective and efficient management guidance and control. Mr. G. M. Halsey was appointed to head this new division; and Mr. G. S. Warner, who was formerly controller, was elected vice president--operations. In a similar move, Mr. P. W. Neidhardt was recently elected vice president-- operations of the Paint Division. The creation of these new positions will permit the senior divisional executives to devote more of their time to corporate planning, rather than day-to-day operations. Mr. D. E. Erskine was elected controller to succeed Mr. Warner. Operations of The Glidden Company, Ltd., showed substantial improve ment during the year. With an expanding' distribution system and greater production facilities, we are confident that our Canadian subsidiary will con tinue to grow at a faster rate than similar domestic operations. Progress was made in the development of our overseas activities through Glidden International, an unconsolidated subsidiary. A technological assist ance and licensing agreement was entered into with N. V. Titaandioxydefabriek for the construction of a titanium dioxide plant in the Nether lands. Another license agreement, covering paint products, was made with Courtaulds, Ltd., one of the leading chemical companies in Great Britain. After the close of the fiscal year, Glidden International acquired General Paint de Mexico, a subsidiary of the General Pacific Corporation. It is our intention to use this operation, together with other acquisitions, to build our paint business in the growing Mexican economy. We have been investigating a number of opportunities in the European Common Market, and I am hope ful that one or more of these possibilities will materialize during the current year. At this time, it is difficult to discern an upward or downward direction in our national economy. Thus, to forecast is not only difficult but also impru dent, as there are many cross-currents which can affect the many segments of our business. Nonetheless, I personally believe that this year will be at least as good as last, and there is a reasonable possibility that it will be considerably better. November 8, 1960 2 Chairman and President GLD002506 Both consumer and industrial paint sales in creased in I960, reaching a new high of$89,914,001, as compared to the 1959 figure of $83,664,828. Sales resulting from new products and new mar kets offset declines caused by a series of adverse economic factors. The market for consumer paints was affected by poor weather conditions during key retail selling months and by competition from lowpriced, low-quality interior paints. Earlier in the year, the steel strike slowed down demand for industrial coatings, and a sharp drop in the production of durable goods, particularly appli ances, resulted in a lower sales potential during the last three months. Because of these factors, the division was unable to obtain the full benefit from marketing programs designed to better the growth rate of prior years. Earnings Affected by Expansion Program Divisional earnings were lower than the record set the previous year. This condition can be directly traced to costs connected with vital long-range growth programs, such as production and distribution expansion, research, and newproduct introduction. Continued emphasis has been placed upon en largement of the distribution system for con sumer products, including further acceleration in the opening of company-operated wholesaleretail units. During the past year, over 30 such units were added, bringing the total to 180 now in operation. Latex House Paint Successfully Introduced Spred House Paint, the new latex-emulsion paint for exterior wood siding, wtis successfully introduced last spring. In order to obtain the many advantages and to assure top performance from this product, a special primer must be used on the first application. While consumer interest was high, sales were somewhat limited because of'this requirement. Once the consumer becomes more familiar with Spred House Paint, resistance will diminish. And, within a few years, exterior latex house paint will occupy as strong a market position as is now enjoyed by interior products such as Spred Satin. More attention is being given to the develop ment of new markets for industrial resins and coatings. Research and development expenditures have been increased, and existing technical knowl edge is being directed toward selected fields of special promise in which the company is not now active. As a part of this program, cooperative development projects have been started with companies in the paper, plastics and metal deco rating industries. During the year, new acrylic enamels were introduced to the appliance industry and other metal fabricators; further improve ment was made in water-reducible finishes for automotive and general industrial use; and a line of resins and coatings was developed for lumbermill application on cedar siding, plywood, hardboard and particle board. Plant Expansion Planned Plans are now being drawn for a new paint plant to be located on a 34-acre tract at Carroll ton, Texas, a suburb of Dallas. This facility is being designed to produce a full line of consumer and industrial paint products, and will enable the division to better serve the growing market in the Southwest. Additional resin reactors were placed in opera tion at the Chicago, Cleveland, San Francisco and Toronto plants, and a similar reactor is now being installed at the Reading, Pennsylvania, plant. With the increasing importance of poly ester resins and the development of new resins and latexes for use in the company's paint prod ucts, further resin expansion will undoubtedly be necessary in the near future. While an improvement in sales volume is antici pated for 1961, near-term profit gains will be modest due to the costs involved in obtaining broader retail distribution and in accelerating research and development. These programs are essential in the creation of new markets and are expected to greatly improve the division's profit potential in future years. GLD002507 7 Unit volume of the Durkee Famous Foods Division in 1960 increased 11%. Because of lower vegetable oil price levels, dollar sales were up only 1%, from $78,305,989 in 1959 to $79,433,510 in 1960. Durkee was able to increase its share of the market in all major categories, despite severe competition within the edible oil industry. Divisional Profits Up 15% Increased volume plus the cost savings from new processing equipment enabled the division i register a 15% gain in profits. This improvement also reflects continuing emphasis upon the de velopment of specialty products and services as a means of maintaining satisfactory profit margins. For example, a new pourable cake shortening, Fluid Flex, was introduced to the commercial baking industry this past year. Initial interest in this completely different product has been good, and market acceptance will improve as new tech niques for its use are further developed. Another new edible oil product, Kaola Gold, is now being marketed to restaurants, drive-ins and other mass-feeding establishments. A yellow shorten ing made from vegetable oils by a patented process, it is specially designed for grill and pan frying and has a very sizable market potential for use in institutional food preparation. Both sales and profits from retail food opera tions showed improvement. Instant Minced Onion was successfully placed in national dis tribution and is gradually gaining in consumer acceptance. A 72-item line of gourmet seasonings in decorator-styled glass jars was also introduced last year. Research Activities Increased In the future, even greater emphasis will be placed on research and market development activities. Additional key personnel have been employed for both functions, budgets have been increased, and more management attention is being devoted to directing these activities in an effort to maximize sales and profit opportunities. A new home economics department has been established at the Bethlehem plant to supplement existing facilities in Chicago. In addition to in ternal growth, an active search is being conduct ed for the acquisition of specialty food companies and grocery items to broaden the division's product line. Refinery Expansion Continues Additional land, adjacent to each of the three edible oil refineries, has been acquired for future expansion. Another semicontinuous deodorizer and other equipment are being installed at Berkeley, California, to modernize that plant fully. A new warehouse and packaging building is being erected at Louisville to free existing space for more production equipment. In Chicago, construction of additional refinery capacity is now under way and is scheduled for completion by mid-1962. This addition repre sents a part of a long-range research program directed toward the development of new methods for processing vegetable oils. Utilizing technology derived from the chemical industry, the new process will permit the production of a series of new edible oil products. The final step in the division's reorganization plan was completed when the remaining segment of the table margarine and salad products busi ness was sold during the third quarter to Beatrice Foods, Inc. The elimination of this operation, which was carried on at the Berkeley plant, will permit personnel to concentrate on the further development of the bulk edible oil business on the West Coast. The efforts of recent years to strengthen the division's personnel, products and production facilities have begun to pay off in terms of in creased sales and profits. Although the food in dustry remains extremely competitive, the pros pects for continued improvement during the current year are good. GLD0O250B Sales of the Chemicals Division were $2&, 143,320 compared to $28,793,572 in 1959. This reduction reflects the loss of volume provided by the former gum naval stores operation, which was sold in April. Divisional profits were considerably lower than those of the previous year. The major portion of the profit decline was caused by start-up and development costs--amounting to more than $1 million. These costs were connected with the new ilmenite mining operation, expansion of titanium dioxide capacity, the new synthetic menthol and aromatic chemical plant plus increased research activities. Profits were also affected by higher depreciation and ether fixed charges without a corresponding increase in sales. Pigment Operations Satisfactory Sales of titanium dioxide and other pigments showed a slight increase over the record level set in 1959. The construction of additional tita nium dioxide capacity has been virtually com pleted and will provide more flexibility in pro ducing the various pigment grades necessary to meet changing customer needs. A new cost-saving grade of titanium dioxide pigment for paper coating is now being introduced and should further strengthen the company's position as a major supplier to this industry. After a year of extensive engineering develop ment and testing, construction of mining and processing facilities has been started at the Lakehurst, New Jersey, ilmenite ore Bite, which was acquired in October of last year. Scheduled for completion by 1962, this operation will provide a major portion of the ore requirements for tita nium dioxide production and should permit a sub stantial reduction in raw material inventories and operating costs. A sharp decline in demand from the automo tive and appliance industries during the latter part of the year resulted in lower sales and profits from the metal powder operation, which has historically been very cyclical. In order to diversi fy this business, research and development has been increased and is being conducted at a laboratory and pilot plant recently completed at Hammond, Indiana. Menthol Plant Nears Completion Construction of the new synthetic menthol and aromatic chemical plant at Jacksonville has pro ceeded on schedule. Limited quantities of menthol have been produced in recent months, and this output is being successfully marketed as a re placement for natural menthol. To date, the de sign of these facilities has permitted the produc tion of only test or semicommercial quantities. During 1961, the plant will gradually be brought to full-scale commercial production. Tall Oil Now Profitable Sparked by the introduction of several new items and a more aggressive marketing program, sales of tall oil products were almost double those of the previous year. Production problems, which had prevented profitable operation, have been solved, and month-to-month improvements in profit were made during the second half of the year. A more substantial gain in sales and earn ings is expected for the current year. As previously mentioned, the gum turpentine and rosin plant at Valdosta, Georgia, was sold to Turpentine and Rosin Factors, Inc., during the third quarter. With the change in emphasis away from the historic naval stores business, the products and facilities of this plant no longer met the division's long-range needs. Progress was made in rearranging and strength ening the division, although sales and profits for 1960 did not come up to expectations. The out look is good, and with an anticipated reduction in start-up and development expenses, operating results for the current year should be consider ably better. 5 GLD002 509 Through dealer demonstrations, consumers were shown the many advantages of Spred House Paint. This new latex-emulsion paint for exterior wood siding was introduced nationally during 1960. Additional reactors at five key plants will permit the Paint Division to meet the growing demand for polyester resins and to produce specially developed resins for its paint products. i To aid in the development of Improved pigments for the paper industry, the complete paper-making process can be dupli cated in this section of the new Chemicals Division laboratory. 6 CLD002510 1 i 't i Kaola Gold, a new Durkee vegetable shortening now being intro duced to the restaurant and drive-in trade, has been specially de signed for institutional use in preparing pan- and grill-fried foods. Among the new Durkee food products is this 72-item line of gourmet spices and seasonings packaged in decorator-styled jars. The $2,000,000 synthetic men thol and aromatic chemical plant nears completion at Jacksonville. Plans are being drawn for a new paint plant near Dallas, Texas, which will enable the company to better serve the growing market in the southwestern United States. GLD002511 Net Income Net income after all taxes and charges was $6,690,356, equal to $2.90 per share, compared to $7,633,531 or $3.31 a share in 1959. On a comparative quarterly basis, net income was: Financial Review Sales Net sales for the fiscal year ended August 31, 1960, were $197,490,831, compared to sales of $195,764,389 for the previous year. The source of 1960 sales by divisions was: Paint....................... Durkee Famous Foods Chemicals............... Amount (000) $89,914 79,434 28,143 Per Cent of Total 45.5% 40.2 14.3 Gross Profit Gross profit in 1960 increased to $54,681,558, providing a gross profit margin to sales of 27.7%. The comparable figures for the 1959 fiscal year were $53,229,592 and 27.2%. Income from Operations The gain in gross profit was offset by & sub stantial increase in selling and administrative expenses. As a result, income from operations declined from $16,425,704 in 1959 to $14,066,045. The addition of personnel, required by expan sion of marketing and distribution programs, re sulted in an increase in selling and administrative salaries of almost $2,000,000. Other principal increases were for research and development, rental of distribution facilities, and advertising 8 and promotion. Quarter Ended: Nov. 30 Feb. 29 May 31 Aug. 31 1960 1959 Amount Per Amount Per (000) Share (000) Share $1,415 1,011 2,002 2,262 $ .61 .44 .87 .98 $1,754 1,278 2,137 2,465 $ .76 .56 .92 1.07 Depreciation Depreciation and amortization charges against income increased to $6,959,971 in 1960 from $6,579,313 in 1959. These charges included $4,946,134 taken against properties operated by the company and $2,013,837 taken against the former Chemufgy Division properties now leased to the Central Soya Company. Cash Flow Cash flow generated from operations was $13,650,327, equivalent to $5.91 per share, com pared to $14,212,844 or $6.16 a share for the previous year. Dividends Dividends totalled $4,620,700, based upon the regular $2.00 annual rate. In fiscal 1960, 69% of net income was distributed to shareholders as dividends. During the 1960 calendar year, the following quarterly dividend payments were made: Record Date December 8 March 8 June 8 September 8 Date Paid January 4 April 1 July 1 October 3 Amount Per Share $ .50 .50 .50 .50 GL0002512 The indenture, under which the company's 4H% Sinking Fund Debentures are issued, re stricts the payment of dividends after August 31, 1958, to consolidated net income earned subse quent to that date plus $10,000,000. At August 31, 1960, $15,093,392 was free of such restriction. Working Capital Working capital of $59,721,934 at the year end represented a new all-time high. The ratio of current assets to current liabilities was 4.97 to 1. Inventories Inventories at August 31, totalled $40,665,766, compared to $39,588,415 at the end of the 1959 fiscal year. The increase in inventories was entire ly due to higher finished products, primarily in the Paint Division for stocking new distribution, outlets. Inventories are valued at the lower of cost or market, using the average cost method on the major portion, and the last-in, first-out method on certain edible oils and other commodities. Ac August 31, 1960, inventories carried on a LIFO basis amounted to $1,665,437, which was approxi mately $426,000 less than replacement market. All dead and obsolete stocks have been eliminated or written down to disposable value. Property, Plant and Equipment Capital expenditures for new property, plant and equipment were $8,764,000 in 1960, com pared with $7,607,001 in 1959. The percentage of the 1960 total invested in each division was: Paint................................................. 30.1% Durkee Famous Foods...................17.6 Chemicals...................................... 52.3 The production and grain storage facilities of the former Chemurgy Division are being leased to the Central Soya Company under an agree ment which provides that Central Soya pay an annual rental of $2,175,000, plus property taxes and insurance, during the three-year term which began September 1, 1958. Central also has an option to purchase these properties ort August 31, 1961, for $8,550,000, payable in cash. At that time, the properties will have an unamortized cost on the company's books of approximately $7,624,000. Common Stock Common stock outstanding at August 31,1960, consisted of 2,310,590 shares. At the beginning of the 1960 fiscal year, options were outstanding for 82,640 shares of common stock pursuant to a restricted stock option plan for key management employees approved by shareholders in 1952. During the year, options for 2,740 shares were exercised, and options for 500 shares were can celled under the 1952 plan. On September 29, 1959, the Board of Directors terminated authority to grant options under the 1952 plan. On Decem ber 10, 1959, shareholders approved a new stock option incentive plan under which options may be granted to key personnel for the purchase of up to 100,000 shares of stock at a price not less than 100% of the market value of the shares at the time such options are granted. Under the 1959 plan, options are exercisable in whole or in part after two years from the date granted. Dur ing the year, options for 18,900 shares were granted under the 1959 plan. At August 31,1960, options were held by key employees for 98,300 shares under both plans, and 81,100 shares were available for the granting of options under the 1959 plan. Wages and Salaries Total wages, salaries and employee benefits amounted to $39,484,429 in 1960 and were 20.0% of sales. The comparable figures for fiscal 1959 were $36,436,403 and 18.6%. Employee retire ment funds deposited with bank trustees now total $15,151,782. The retirement plans are non contributory, the company paying the entire cost. At August 31, 1960, the unfunded liability for past service costs under the plans was esti mated to be $4,200,000, and the annual current service cost (which does not include funding of the pastservice cost) was estimated to be $960,000. Taxes Taxes on income were $6,948,000, equal to $3.01 per share. Taxes other than on income amounted to $2,085,530. 9 GLD002513 Consolidated Balance Sheets THE GLIDDEN COMPANY AND CANADIAN SUBSIDIARY August 31, 1960, and August 31, 1959 CURRENT ASSETS Cash ............................................................. Short-term securities- at cost....................... Trade accounts receivable, less allowances of $565,083 (1959--$511.868)....................... Inventories--generally s.t the lower of accumulated-average cost cr replacement market: Raw materials and work in process . . Finished products.................................. Other current accounts and investments . . Prepaid insurance and other expenses . . . To t a l Cu r r e n t As s et s PROPERTY, PLANT AND EQUIPMENT Land and mineral deposits-- at cost .... Buildings--at cost.......................................... Machinery and other equipment--at cost Less accumulated depreciation, depletion and amortization.............................................. Chemurgy properties leased to Central Soya Company--net.......................................... To t al Pr o p e r t y , Pl a n t a n d Eq u ipme n t --Ne t DEFERRED CHARGES AND OTHER ASSETS........................................................ 1960 $ 7,395,990 6,484,490 18,727,921 1959 $ 8,868,172 7,957,140 16,904,805 $ 18,433,436 22,232,330 $ 40,665,766 904,054 599,013 $ 74,777,234 $ 19,212,522 20,375,893 $ 39,588,415 1,094,742 708,912 $ 75,122,186 $ 4,933,451 24,559,667 52,026,932 $ 81,520,050 29,030,133 $ 52,489,917 9,616,328 $ 62,106,245 $ 4,189,075 23,163,987 46,941,888 $ 74,294,950 25,018,408 $ 49,276,542 11,630,175 $ 60,906,717 1,018,563 $137,902,042 1,523,549 $137,552,452 GL000251A t CURRENT LIABILITIES I960 1959 I Accounts payable.......................................... $ 7,353,721 $ 7,676,924 Accrued taxes, interest and other expenses . 1,535,204 1,549,489 Dividend payable.......................................... 1,155,295 1,153,925 Income taxes payable-estimated............... 5,011,080 6,493,507 y To t a i Cu r r e n t Lia b il it ie s $ 15,055,300 $ 16,873,845 i- AH% SINKING FUND DEBENTURES -payable $1,500,000 annually 1964-1983 . . $ 30,000,000 $ 30,000,000 SHAREHOLDERS' EQUITY Common Stock, par value $10 per share: Authorized--3,000,000 shares Reserved for options--179,400 shares (1959-83,480) Outstanding--2,310,590 shares (1959--2,307,850).................................. Additional capital paid in.............................. Earnings retained for use in the business, in cluding retained earnings of Canadian sub sidiary $5,468,246 (1959-35,072,840) . . To t a l Sh a r eh o l d e r s 'Eq u it y $ 23,105,900 10,187,084 59,553,758 $ 92,846,742 $137,902,042 See earlier sections of this report for information regarding Chemurgy properties, dividend restrictions, stock options and retirement plans. $ 23,078,500 10,116,005 57,484,102 $ 90,678,607 $137,552,452 11 GLD002515 Consolidated Income and earnings retained for use in the business THE GLIDDEN COMPANY AND CANADIAN SUBSIDIARY Years ended August 31,1960, and August 31, 1959 1960 1959 Net sales.......................... . Operating costs: Cost of products sold ......... Selling and administrative expenses . . . In c o me Ff .o m Op er a t io n s $197,490,831 $142,809,273 40,615,513 $183,424,786 $ 14,066,045 $195,764,389 $142,534,797 36,803,888 $179,338,685 ' $ 16,425,704 Other income and (deductions): Interest expense ...................................... Rental income--Chcanurgy properties . . Depreciation--Chemurgy properties . . . Other items--net...................................... In c o me Be f o r i; In c o me Ta x es $ (1,425,000) 2,175,000 (2,013,837) 836,148 $ (427,689) $ 13,638,356 $ (1,339,918) 2,175,000 (2,100,056) 764,801 $ (500,173) $ 15,925,531 Provision for income taxes: Federal......................................................... Dominion and state.................................. Ne t In c o me Provision for depreciation and amortization, including Chemurgy properties, was $6,959,971 (1959-$6,579,313) $ 6,390,000 558,000 $ 6,948,000 $ 6,690,356 $ 7,696,000 596,000 $ 8,292,000 $ 7,633,531 Balance at beginning of vear....................... Net income...................................................... Cash dividends declared--$2.00 per share. . Balance at end of year.................................. $ 57,484,102 6,690,356 $ 64,174,458 4,620,700 $ 59,553,758 $ 54,460,366 7,633,531 $ 62,093,897 4,609,795 $ 57,484,102 CLD002516 Summary of Source and Application of Funds THE GLIDDEN COMPANY AND CANADIAN SUBSIDIARY Years ended August 31,1960, and August 31,1959 From operations: Net income..................... ... Provision for depreciation and amortization, which did not involve current expenditures.............. To t a l Fr o m Op e r a t io n s Sale of debentures........................................ Less payments of bank loans....................... Sale of Common Stock under ojition plan (I960 --2,740 shares: 1959--9,680 shares) . Other changes........................................... 1960 1959 $ 6,690,356 $ 7,633,531 t lo 6,959,971 $ 13,650,327 -0- 98,479 1,109,487 $ 14,858,293 1 6,579,313 $ 14,212,844 $ 30,000,000 26,000,000 $ 4,000,000 351,033 (671,111) $ 17,892,766 Dividends declared.................................... Expenditures for property, plant and equipment............................. Increase in working capital......................... $ 4,620,700 8,764,000 1,473,593 $ 14,858,293 $ 4,609,795 7,607,001 5,675,970 $ 17,892,766 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 Canadian subsidiary for the year ended August 31,1960. 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 of 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 Canadian subsidiary at August 31, 1960, and the consolidated results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the pre ceding year. Cleveland, Ohio October 14, 1960 Certified Public Accountants GL000251 7 13 A Ten-Year Comparison (All dollar amounts are expressed in thousands, except figures given on a per share basis) INCOME Net sales........................................................................... Cost of products sold........................................................................... Selling and administrative expenses.................................................. Income from operations....................................................................... Income before taxes ........................................................................... Taxes on income................................................................................... Net income............................................................................................ Dividends on common shares.......................................................... Dividends on preferred shares........................................................... Earnings reinvested............................................................................... Depreciation, depletion and amortization...................................... I960 $ 197,491 142,809 40,616 14,066 13,638 6,948 6,690 4,621 -- 2,069 6,960 12 Months--August 31 1959 1958 $ 195,764 142,535 36,803 16,426 15,926 8,292 7,634 4,610 -- 3,024 6,579 $ 217,353 168,976 34,146 14,225 12.35C 6,287 6,06c 4,596 -- 1,467 5,838 FINANCIAL POSITION Working capital................................................................................... Property, plant and equipment--net.............................................. Total assets............................................................................................ Long-term debt................................................................................... Shareholders' equity............................................................................... $ 59,722 62,106 137,902 30,000 92,847 $ 58,248 60,907 137,552 30,000 90,679 $ 52,572 59,992 133,240 26,000 87,304 PER COMMON SHARE Net sales....................................................................................... $ 85.47 Net income............................................................................................ 2.90 Depreciation, depletion and amortization...................................... 3.01 Dividends................................................................................................ Shareholders' equity............................................................................... Price of Glidden common shares1--High.......................................... --Low.......................................... 2.00 40.18 45.63 34.75 $ 84.82 3.31 2.85 2X)0 39.29 50.25 41.88 $ 94.58 2.64 2.54 2.00 37.99 47.00 28.00 OTHER STATISTICS Expenditures for property, plant snd equipment......................... % net income to shareholders' equity.............................................. % dividends to net income...................................................... Ratio of current assets to cjrrent liabilities...................................... Common shares outstanding.............................................. Number of shareholders .... .............................................. Number of employees...................................................................... $ 8,764 7.2% 69.1% 4.97 2,310,590 20,969 6,151 $ 7,607 8.4% 60.4% 4.45 2,307,850 20,993 6,023 $ 9,214 6.9% 75.8% 3.64 2,298,170 22,405 6,353 PRO FORMA Excluding operations of Che\nurgy Division for the fitcal ytars 1951-- 1958) Net sales........................................................................................... Income from operations.................................................................. Income before taxes ........................................................................... Net income............................................................................................ $ 197,491 14,066 13,638 6,690 $ 195,764 16,426 15,926 7,634 $ 185,380 11,923 10,294 5,076 14 'Calendar years, except 1960 which is fo October 14,1960 GLD002518 i i 1 1957 $ 225,537 176,874 32,995 15,668 15,387 8,123 7,264 4,594 -- 2,670 5,046 1956 $ 226,290 177,538 31,974 16,778 16,451 8,304 8,147 4,592 -- 3,555 2,870 10 Months August 31 1955 $ 180,525 142,047 24,047 14,431 14,325 7,212 7,113 4,589 -- 2,524 2,235 1954 12 Montha---October 31 1953 1952 $ 209,084 107,845 27,701 13,538 14,235 7,142 7,093 . 4,582' -- 2,511 2,333 $ 211,758 170,492 26,739 14,527 14,834 7,725 7,109 4,578 -- 2,531 2,185 $ 205,113 164,890 26.238 13,985 14,204 7,255 6,949 5,134 -- 1,815 1,965 1951 $ 228,523 186,333 26.282 15,908 16,001 7,687 8,314 4,512 402 3,400 1,731 $ 53,100 59,517 140,370 27,500 85,837 $ 35,696 53,414 118,738 7,500 83,091 $ 47,156 39,993 106,762 9,000 79,513 $ !il,226 34,493 102,670 :.0,500 76,923 $ 46,005 33,234 102,750 7,000 74,324 $ 46,475 31,394 101,958 8,500 71,644 $ 46,416 30,894 95,875 10,000 69,739 $ 98.14 3.16 2.20 2.00 37.35 37.50 29.50 $ 98.56 3.55 1.25 2.00 36.19 41.12 34.50 $ 78.65 3.10 .97 2.00 34.64 44.50 36.12 $ 91.16 3.09 1.02 2.00 33.54 42.50 28.75 $ 92.44 3.10 .95 2.00 32.44 38.12 27.88 $ 89.78 3.04 .86 2.25 31.36 42.62 32.88 $ 100.22 3.65 .76 2.25 30.58 48.50 27.75 $ 12,465 8.5% 63.2% 2.96 2,298,170 21,686 6,455 $ 16,637 9.8% 56.4% 2.27 2,295,990 20,758 6,387 $ 8,155 8.9% 64.5% 3.58 2,295,350 20,019 6,397 $ 4,021 9.2% 64.6% 4.36 2,293,455 19,174 6,198 $ 4,150 9.6% 64.4% 3.15 2,290,794 18,726 6,120 $ 3,043 9.7% 73.9% 3.13 2,284,739 18,310 6,127 $ 5,918 11.9% 57.0% 3.88 2,280,238 17,989 6,130 $ 190,424 13,590 13,590 6,402 $ 190,483 13,956 14,252 7,091 $ 151,752 12,706 13,102 6,526 $ 169,823 11,362 12,271 6,150 $ 170,717 12,414 12,907 6,184 $ 164,283 11,779 12,249 6,010 $ 188,012 10,203 10,462 5,541 ` , i GID002 519 15 Board of Directors Dw ig h t P. Jo y c e Al e x a n d er D. Du n c a n B. W. Ma x ey Jo h n H. We e k s R. D. Ho r n er W. G. Ph il l ip s Wil l a r d C. Lig h t e r Ha r v e y L. Sl a u g h t e r G. M. Hal s ey G. S. Wa r n e r W. P. Smit h P. W. Ne id h a r d t Qf-pipppc, Dw ig h t P. Jo y c e, Chairman of the Board and President B. W. Ma x e y , Vice President--Finance Al e x a n d e r D. Du n c an , Vice President Ha r v e y L. Sl a u g h t e r , Vice President Wil l a r d C. Lig h t e r , Vice President Jo h n H. We e k s , Vice President--Personnel G. M. Hal s ey , Vice President G. S. Wa r n e r , Vice President J. W. Po l l ar d , Jr ., Vice President--Engineering P. W. Ne id h ar d t , Vice President R. D. Ho r n er , Secretary and General Counsel W. G. Ph il l ip s , Treasurer ' D. E. Er s k in e, Controller R. K. Du t t o n , Assistant Secretary Corporate Data Ex ec u t iv e 0fpice3 900 Union Commerce Building Cleveland, Ohio Tr u s t ee--Sinking Fund Debentures First National City Trust Company New York City Tr an s f er Ag en t s --Common Stock Chemical Bank New York Trust Company New York City The Cleveland Trust Company Cleveland, Ohio Reg is t r ar s --Common Stock The Chase Manhattan Bank New York City 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 8, 1960, at ten 16 o'clock in the morning, in the Euclid Ballroom of the Hotel Statler-Hilton, Cleveland, Ohio. GLD002520 -! 4 1 Paints Vice Presidents Alexander D. Duncan P. W. Neidhardt Plants Atlanta, Georgia Chicago, Illinois (2) Cleveland, Ohio Los Angeles, California Minneapolis, Minnesota New Orleans, Louisiana Portland, Oregon Reading, Pennsylvania St. Louis, Missouri San Francisco, California Tulsa, Oklahoma Montreal, Quebec, Canada Toronto, Ontario, Canada Products Interior Paints and Enamels House Paints Floor Paints and Enamels Stains Varnishes Lacquers Tinting Bases Product Finishes for Metal, Wood and Other Surfaces Maintenance and Anti-Corrosive Finishes Marine and Yachting Finishes Polyester Resins and Coatings Butoxy Resins Durkee Famous Foods Vice President Harvey L. Slaughter Plants Berkeley, California Bethlehem, Pennsylvania Chicago, Illinois (2) Louisville, Kentucky Products Bulk Shortenings Baker's Margarine Hard Butters Specialty Edible Oil Products Food Emulsifiers Margarine Oils Refined Vegetable Oils Coconut Spices Seasonings and Herbs Dehydrated Onion Products Flavor Extracts Food Colors Cake Decorations Famous Sauce Salad Oils Package Shortening Chemicals Vice Presidents G. M. Halsey G. S. Warner Plants Baltimore, Maryland (2) Collinsville, Illinois Hammond, Indiana Jacksonville, Florida Port St. Joe, Florida Products Titanium Dioxide Pigments Cadmium Red and Yellow Pigments Lithopone Copper Powders Lead Powders Tin Powders Alloy Powders Copper Oxides Copper Pigment Brazing Compound Perfumery and Aromatic Chemicals Laevo Menthol Terpene Chemicals Distilled Tall Oil Tall Oil Rosin Tall Oil Fatty Acids Pine Oils Solvents GLD002521 GLD002 52 2 The Glidden Company Annual Report -iGlidden); LHMO. IN