Document 8OzwOLwMm8VjbDEanxZZO6D7Z

r THE GLIDDEN COMPANY CLEVELAND, OHIO ANNUAL REPORT Fiscal Year Ended October 31, 1937 THE GLIDDEN COMPANY CLEVELAND, OHIO December 31, 1937 To the Shareholders of THE GLIDDEN COMPANY: On behalf of the Board of Directors, the certified annual report of The Glidden Company for the year ending October 31, 1937 is herewith submitted. Our fiscal year closed with the largest volume of sales in the history of the organization. The net sales aggregated more than Fifty-four Million Dollars and showed an increase over the previous year of a little more than 21%. During ten months of the year the profits were satisfactory, running well above the previous year, but in the last two months of the year the commodity markets declined very rapidly so that on the last day of the fiscal year the commodity index reached the lowest point since 1934. In taking inventory at that time, raw materials, having a quotable market, were written down to the lower of market or cost. While this adversely affected the showing for the fiscal year last closed, yet it placed our business in a good inventory position for the new fiscal year. At the present time uncertainty is the controlling factor in taxes, labor and security markets. Because of this uncertainty it has been impossible to make constructive plans for the next year. If the labor situation could be stabilized and the undistributed profits tax could be repealed, and if business could be given an opportunity to properly plan for the future, a great number of men now unemployed could be quickly put to work and prosperity would result. There is a tremendous dormant demand for Paints and Varnishes. On every hand there is need of new construction and of renovizing. Under normal conditions it would take several years to catch up with painting requirements. The increased use of color and the desire of the people for modern homes, better living conditions, and better finished furniture and household equipment all add 'V : ; . vL- ^..1 GLD002908 to the good prospects for the Paint and Varnish industry when political factors will permit it to function normally. Our Food Division is in excellent position on inventories, and owing to the low costs of vegetable oils such products as oleomargarine, shortening, cooking oils, etc. are enjoying a good sale. Regardless of conditions, people must eat and the prospects for the Food Division are most encouraging. In our Soya Bean manufacturing operations we have spent large sums during the past year on research, sales, and advertising with the result that our products are well established in the markets of the country. Our new units are functioning perfectly and prospects are favorable. In the Chemical and Pigments Division our lead, lithopone and titanium pigment operations are proceeding satisfactorily and we are finding an expanding market for the products. The annual report will indicate that the Company is in good financial position and all the properties of the Company are in fine physical condition. The processes, machinery and equipment are all modern and production can be maintained on a competitive basis. Notwithstanding the higher expenses caused by the various State Income Tax laws, and by the Social Security taxes and all-time peak wages, had it not been for the slump in commodity prices, final results would have been most gratifying. In spite of adverse conditions, encouragement is found in the fact that the sales for the first six weeks of the new fiscal year are only 6% below the good figures for the same period of last year. Your Directors are gratified with the mutually satisfactory labor condi tions existing throughout the organization. They take this opportunity of expressing their satisfaction with the good work of the executives and employees whose loyal efforts have contributed in maintaining the satisfactory relations with our customers which have enabled us to make a new sales record. By order of the Board of Directors, ADRIAN D. JOYCE, President. GLD002909 CONSOLIDATED The Glidden Company and O October J ASSETS CURRENT ASSETS Cash........................................... .......r_____ ____________ Trade notes and acceptances receivable..... .................. Trade accounts receivable...................... ......................... - . $ 1,234,817.92 2 16';,823.30 4,339,060.66 $4,502,883.96 Less reserves............................ _......_................................ 127,340.56 4,375,543.40 Inventories--at lower of cost or market except as stated in Note A: Raw materials, in process, finished goods and supplies_____________________________________ Other current accounts receivable and advances on purchase commitments..................... ................. -........ 11,778,663.43 549,302.55 217,938,327.30 INVESTMENTS IN SUBSIDIARY AND AFFILIATED COMPANIES California mining companies--at less than cost-- Note B: Capital stock (wholly owned)-............................... Bonds--principal amount $500,000.00.................. Advances........................ ............................................. 2 15,000.00 187,500.00 857,481.46 $ 1,059,981.46 Affiliated company--at cost--Note C' Capital stock........................ ...................... ................... 600,000.00 1,659,981.46 OTHER ASSETS AND INVESTMENTS Cash surrender value of life insurance.......................... Claims against closed banks, less reserve.--............... Sundry investments, less reserve___________________ Miscellaneous notes and accounts, advances to sales men and sundry deposits. ----------------------------- ----- $ 399,629.25 50,725.15 . 165,551.64 60,183.69 676,0%9.73 PROPERTY, PLANT AND EQUIPMENT Land at cost or less_________________ ______ --......... Buildings, machinery, equipment, etc., at cost or less Less reserves for depreciation and depletion..- ...... INTANGIBLES Patents and rights to manufacture, at cost, less amor tization........ .................. -.........-..... ............................. $ 1,995,463.92 17,242,069.60 $19,237 533.52 6,293,458.33 12,944,075.19 95,213.87 DEFERRED CHARGES Inventory of advertising stock, stationery, unexpired insurance premiums and prepaid expenses Special new products development___________ _____- $ 428,203.48 115,916.91 544,120.39 $33,857,807.94 GLD002910 w hNCE SHEET ited Canadian Subsidiary 7 LIABILITIES, CAPITAL STOCK AND SURPLUS CURRENT LIABILITIES Note* payable to banks and through broker._...... ..... Accounts payable................................... ................. ......... Accrued taxes, royalties, insurance, etc____ .___ ___ _ Provision for federal and state taxes on income- estimated....... ........................ .................................. ..... 3 3,750,000.00 1,373,904.44 391,650.64 467,533.07 $ 5,983,088.15 RESERVE For contingencies........................ ........ .............................. CAPITAL STOCK AND SURPLUS Capital stock: Convertible preferred, 4 V%cumulative-^par value {>50.00 a snare (each snare convertible into nitietenths share of common stock on or before March 1, 1939, and thereafter at rates specified in the articles): Authorized 200,000 shares Converted 60shares Issued and outstanding 199,940 shares_______ Common--without par value--Note D: Authorized 1,200,000 shares Outstanding 800,801 shares Reserved for conversion 179,946 shares Stated Capital____________________________ ____ 39,997,000.00 4,006,705.00 314,003,705.00 . 67,885.56 Surplus: Capital surplus------- -------------------------------------------Earned surplus__________________________________ 37,520,063.39 6,319,469.21 13,839,532.60 Less treasury stock--at cost: 1,100 shares common_____________________________ 327,843,237.60 36,403.37 27,806,834.23 333,857,807.94 Note A--Inventory of oleo resin (raw material from which ne'tio resin is produced by a patented process) it included on the basis of average cost, which cost aggregated approximately $95,000.00 more than market value computed on the basis of quo tations for small quantities at October 31, 1937. No adjustment ban been made in respect of this raw material inventory as, in the judgment of the management, the cost represents a fait valuation of the quantity which is being carried and which it required for continuous operation. The Company was committed to purchase certain taw mateiials at prices, which, In the aggregate, exceeded quoted market pricca at the dace of this balance sheet by approximately $101,000.00. Note B--Investments in California mining companies, whose assets consist almost entirely of properties not being operated, are stated herein at lest than cost, which carrying value, on the basis of unaudited balance sheets, was $28,980.09 less than the book value of the net assets of those companies. Losses (aggregating $244,110.07 in exceaaof proviaiont or_other credits of The Glidden Company applicable thcrcagainst) have been esperienetd by theie companies from date of acquisition to October 31, 1937, however, the lossea for the past few years, since operations of properties were suspended, have represented principally expenses in maintaining the properties. The value of investments in these companies is indeterminable at this time. Note C--Investment in affiliated company represents one hundred per cent interest in 756 preferred stock of the American Zirconium Corporation, having a par value of $600,000.00, the dividends on which have been paid to October 1, 1937, and a forty-five per cent interest in the common stock of the tame company; the unaudited statement of the company (hows accu mulated undistributed earnings of $24,434.50 at October 31, 1937, of which $12,928.77 it applicable to The Glidden Company's investment therein. Note D--Warrants evidencing the rights to subscribe for 64,004-4/5 shares of common stock it $30.00 a share were issued to common shareholders of record October 4, 1937. As of October 31, 1937, holders of warrants for 741 shares hid exercised euch rights; the remainder of the warrants outstanding, entitling holders thereof to subscribe to 63,263-4/5 shares of common stock, expire December 15, 1937. Contingent liabilities: The Company was reported aa having letters of credit outatanding in the amount of $990,996.82 and it was contingently 4;';.. liable in the maximum amount of $11,799.20 at guarantor of trade notes issued by or for account of customers. v- y GLDD02911 C "fV- SURPLUS ACCOUNTS The Glidden Company and Consolidated Canadian Subsidiary October 31, 1937 CAPITAL SURPLUS Balance October 31, 1936................................................. " * 3 7,524,343.82 DEDUCTION Registration and other expenses in connection with offer to common shareholders for subscription of 78,400-12/25 shares of common stock.................. Less excess of selling price of 330.00 a share over stated value of 741 shares sold.............................. ................ 3 22,805.43 18,525.00 4,280.43 BALANCE OCTOBER 31, 1937 3 7,520,063.39 EARNED SURPLUS Balance October 31, 1936........................... ..................... 3 6,306,721.99 ADDITION Net profit for the fiscal year ended October 31, 1937 3 2,542,793.30 Less dividends paid: Convertible preferred--32.25 a share...................... . 3 449,920.08 Common--32.60 a share.............................................. 2,080,126.00 2,530,046.08 12,747.22 BALANCE OCTOBER 31, 1937 . 3 6,319,469.21 Note--In prior years certain items of discount and expense, provision for contingencies and losses on dismantlement hare been charted to capita) surplus. If such items together with additional depreciation claimed for federal income tax purposes for the years 1932 to 1936, inclusive, hid been charged aiaintt earned eurplus instead of capital lurplne, the respective amounts of such surplus accounts would be $3,602,488.81 and $8,237,043.79 aa at October 31, 1937. The Company's federal income tax return for the year 1937 was not completed at the date of this statement hat depreciation to be claimed therein will exceed provision charged to profit and lots for the year ended October 31, 1937. GLD002912 CONSOLIDATED PROFIT AND LOSS STATEMENT The Glidden Company and Consolidated Canadian Subsidiary For the fiscal year ended October 31, 1937 Net sales........................... ........................................................ ........................... Cost of goods sold, selling, administrative and general expenses (exclusive of depreciation)__________ __________ ___________ ____________________ $54,052,233.07 50,870,807.32 PROFIT BEFORE INTEREST, DEPRECIATION AND OTHER INCOME Other income ($609,631.58) less other deductions ($162,353.99)-------------$ Less interest expense______ __ _____ _________ __ ______________________ $ 3,181,425.75 447,277.59 48,971.29 398,306.30 PROFIT BEFORE PROVIDING FOR DEPRECIATION AND FEDERAL, DOMINION AND STATE TAXES ON INCOME $ 3,579,732.05 Provision for depreciation and depletion---------------------------------------------- 607,735.02 PROFIT BEFORE FEDERAL, DOMINION . AND STATE TAXES ON INCOME ` Provision for estimated federal normal income tax and dominion and state taxes on income (no provision for surtax on. undistributed profits considered necessary)---------- ---------- ------------- --------- ------------- ------ ------ NET PROFIT $ 2,971,997.03 429,203.73 $ 2,542,793.30 Notes: No provision has been made in ibe foregoing statement for losi of wholly owned non-operating California mining com panies for the year, amounting to 44,792,84 including provision for depreciation in the amount of 27,908.64. The Company's federal income taa return for the year 1937 was not completed atthc date of this stateroentbut de predation to be claimed therein will exceed provision in this statement due to depreciation claimed on costa written of or credited to revaluation reterva during 1932. Reference it made to Note A to the balance sheet concerning pricing of certain raw material inventories. ERNST & ERNST ACCOUNTANTS AND AUDITORS SYSTEM SERVICE CLEVELAND Union Trust Building The Glidden Company, December 24, 1937 Cleveland, Ohio. We hare made an examination of the balance sheet of THE GLIDDEN COMPANY and its wholly owned subsidiary THE GLIDDEN COMPANY, LTD., (California mining companies excluded) as at October 31, 1937, and of the statements of profit and loss and surplus for the year ended at that dale. In connection therewith we examined or tested accounting records of the Companies and other supporting evidence, and obtained information and explanations from officers and em ployees of the Companies; we alio made a general review of the accounting methods and of the operating and income account! for the year, but we did not make a detailed audit of the transactions. Baeed on our tests of prices used in the inventories, it ii our opinion that the inventories are stated on the basis of the lower of cost or market prices except certain taw materials referred to in Note A to the balance sheet. Property, plant and equipment are stated on tht basis of coot or lest, reduction having been made in 1932 to eliminate !;.V. appreciation and to provide for further write-downs. . Officers of the Companies have expressed the opinion that pending lawsuits are of minor importance and that no material losses will result therefrom. In our opinion, based upon our examination and excluding the Cxlifornix mining companies, the accompanying balance sheet and related atatements of ptofit and loss and surplus fairly present the consolidated position of the Company and The Glidden Company, Ltd., at October 31, 1937, and the consolidated results from their operations for the year ended at that date. Further, it out opinion that except for the It elution of certain raw materiala ia inventories at coat which ex- ... cecded market price at October 31, 1917, as stated in Note A to the balance sheet, the statements hive been prepared in teO?JS cordance with accepted principles of accounting and on a basis consistent with the preceding year. ii ( ERNST r ERNST Certified Public Accountant! GLD002 913 THE GLIDDEN COMPANY CLEVELAND, OHIO FACTORIES FROM COAST TO COAST BRANCHES IN PRINCIPAL CITIES Atlanta, Ga. Long Island City, N. Y. Bakersfield, Calif. Louisville, Ky. Baltimore, Md. Miami, Fla. Berkeley, Calif. Minneapolis, Minn. Binghamton, N. Y. Montreal, Canada Birmingham, Ala. New Orleans, La. Boston, Mass. Norwalk, Ohio Buffalo, N. Y. Oakland, Calif. Charlotte, N. C. Oklahoma City, Okla. Chicago, III. Orlando, Fla. Cleveland, Ohio Pittsburgh, Pa. Chico, Calif. Portland, Ore. Collins, Ga. Readirg, Pa. Collinsville, 111. Sacramento, Calif. Dallas, Texas San Antonio, Texas Detroit, Mich. San Fianciseo, Calif. Elmhurst, L. I., N. Y. San Jose, Calif. El Paso, Texas Scranton, Pa. Evansville, Ind. St. Louis, Mo. Ft. Worth, Texas St. Petersburg, Fla. Fresno, Calif. Stockton, Calif. Halifax, N. S. Tamp3, Fla. Hammond, Ind. Toledo, Ohio Houston, Texas Toronto, Canada Honolulu, T. H. Valdosta, Ga. Jacksonville, Fla. Washington, D. C. Knoxville, Tenn. Winnipeg, Canada Los Angeles, Calif. Wilkes Barre, Pa. West Palm Beach, Fla. GLD002914