Document DGJrLvgqepmYZkq4a58krGY1n

THIRTY-SEVENTH ANNUAL REPORT MONSANTO CHEMICAL COMPANY 193 8--------------------------------- DSW 331254 STLCOPCB4077898 You are looking through Monsanto Vue-Pak, the new transparent plastic packaging material. Durable and tough, it can be shaped, drawn or folded into any practical form, giving each product a showcase of Its own. STLCOPCB4077899 THIRTY-SEVENTH TO THE STOCKHOLDERS OF MONSANTO CHEMICAL COMPANY if3OR SEVERAL YEARS it has been my privilege to report to you a steady increase in the sales iL, and earnings of our company.. I regret lhat I am unable to report a continuance while the depression that started in the last quarter of 1937 ran its course. Nineteen hundred and thirty-eight was not a good year. Sales dipped to low levels and net earnings were only $3,290,519, which is equivalent after minority interests and preferred dividend requirements to $2.35 a share on the common stock. Earnings reflected not only a decrease in sales but an increase in unit costs resulting from greater fixed charges on a declining output. Our gross profit suffered also approximately $865,000 as a result of lower prices on several important products while compensatory declines did not take place in raw materials. Further, the operations of our Plastics Division, which was organized upon our absorption of The Fiberloid Corporation on April 1, were unprofitable through September. In the following comparison of sales and earnings by quarters, the first and second columns include the operations of Plastics Division from April 1 of each year, and the last column contains the 1937 operations of Monsanto as .then constituted. Net Sales: First Quarter....................................... Second Quarter................... .... Third Quarter....................................... Fourth Quarter.................................. Total....................................... 1938 $ 6,551,326 7,221,965 8,449,526 9,712,574 $31,935,391 1937 $ 8,368,905 10,842,186 10,242,838 9,074,548 $38,528,477 1937 $ 8,368,905 8,933,742 8,327,043 7,572,666 $33,202,356 Net Income: First Quarter....................................... Second Quarter ............................. Third Quarter.................................. Fourth Quarter.................................. $ 669,311 555,424 731,353 1,334,431 Total....................................... $ 3,290,519 Minority Interest,Preferred Dividends 375,676 Earnings for Common Stock . . . $ 2,914,843 $ 1,368,608 1,776,216 1,495,156 1,081,157 $ 5,721,137 264,202 $ 5,456,935 $ 1,368,608 1,483,480 1,268,843 1,041,580 $ 5,162,511 264,202 $ 4,898,309 Liquidation of inventories by industries consuming our products apparently coincided with the general improvement in business that ushered in the fourth quarter. This general improvement is 3 DSW 331256 i STLCOPCB4077900 reflected in the more favorable operating results for this period. In constrast to operating results in the United States, our British associates, Monsanto Chemicals Limited, had relatively good sales and earnings in the early periods of the year, but, reflecting the general unsettlement following the crisis, operations in the last half were less satisfactory. The following comparison of income items also include in the first two columns those of the Plastics Division from April 1 of each year, and th e last column 1937 items of our compan was then constituted: 1938 % 1937 % 1937 % Gross profit................ $ 8,432,327 26.4 $11,522,738 29.9 $10,194,284 30.7 Selling, administration $ 3,301,169 10.4 $ 3,535,330 9.2 $ 3,140,793 9.5 Research..................... 1,221,623 3.8 1,234,604 3.2 1,011,629 3.0 Total..................... $ 4,522,792 14.2 $ 4,769,934 12.4 $ 4,152,422 12.5 Profit from operations . $ 3,909,535 12.2 Other income . . . . 685,968 2.1 Income charges . . . 451,107 1.4 Estimated income taxes 853,877 2.6 $ 6,752,804 17.5 528,559 1.4 407,644 1.1 1,152,582 3.0 $ 6,041,862 18.2 509,381 1.5 359,227 1.1 1,029,505 3.1 Net income................ $ 3,290,519 10.3 $ 5,721,137 14.8 $ 5,162,511 15.5 The larger items of Other Income and Income Charges were: 1938 1937 Other Income: Royalty income . . . . . . $321,539 $235,666 Dividends received........................ 48,013 163,266 Non-recurring profit on containers 105,308 Profit on securities........................ 46,730 Income Charges: Provision for doubtful accounts Federal capital stock tax . . Financial expense . ... Purchased process written off. Write-down of investment . Pilot plant written off . . . . . . . . . 38,893 84,701 19,998 75,000 76,760 97,357 87,823 88,252 39,142 58,336 1937 $235,666 163,266 84,966 81,452 38,854 58,336 a ** STLCOPCB4077901 Our experience indicates that under capacity production schedules, we must have approxi mately $1 in gross plant investment and approximately 25 cents in net current assets, exclusive of cash, for every $1 of annual sales. Due to this relatively low turnover, new products and expanding demands for some older products result in a constant requirement of additional capital for new plant and working assets. To provide for our needs from January 1,1936, through 1938, funds were obtained as follows: Net earnings retained in business .....................................................$ 3,311,391 Depreciation provided......................................................................... 6,080,140 Working capital of The Fiberloid Corporation amounted to ... . 2,150,018 From sale of 101,310 shares of common stock in 1936 ...... 5,890,930 From sale of 50,000 shares of $4.50 preferred stock in 1937 . . . 4,921,045 Other sources--Net............................................................................. 1,199,646 Total.................................................................................................... $23,553,170 And they were employed as follows: 1936 plant additions and replacements................ ............................ $ 5,253,771 1937 plant additions and replacements............................................. 7,187,181 1938 plant additions and replacements............................................. 3,409,457 Inventories and accounts receivable increased................................. 5,153,550 Cash and marketable securities increased......................................... 2,549,211 Total................................ $23,553,170 As market conditions toward the end of the year seemed propitious to obtain capital for our future program, 50,000 shares of our authorized preferred stock were sold in December, which pro vided the company with approximately $5,450,000 of permanent capital at a net rate of 4.1 per cent. BALANCE SHEET COMMENTS THE first of the following columns are Balance Sheet items of our consolidated statement as of * December 31, 1938, of Monsanto Chemical Company and its subsidiaries, Monsanto Chemicals ) Limited, New England Alcohol Company and Merrimac Chemical Transportation Company. For s comparison the second column is a consolidation, as of December 31, 1937, of Monsanto Chemical > Company and subsidiaries and The Fiberloid Corporation which was acquired during the year. The third column contains actual items as of December 31, 1937. i i ) WORKING CAPITAL i December 31, December 31, December 31, 1938 1937 1937 Current Assets: 3 Cash.............................. 5,229,116.64 $ 3,854,'626.95 $ 3,056,127.56 3 Marketable securities . 1,005,177.05 4,583,445.11 4,027,805.36 i Receivables . . . . 3,913,992.14 3,434,553.71 2,885,546.56 Inventories . . . . 9,171,997.61 8,474,619.26 7,577,190.12 > Total $19,320,283.44 $20,347,245.03 $17,546,669.60 ) 5 > i DSW 331258 > t ! STLCOPCB4077902 V iffm m i m m i u in n m n n Current Liabilities: Accounts payable . Estimated income taxes Dividends payable . Container deposits . Total Net Working Capital Current asset ratio December 31, 1938 2,997,745.76 889,024.24 217,000.00 408,471.54 December 31, 1937 $ 2,842,110.37 1,240,328.66 112,500.00 564,414.52 December 31, 1937 $ 2,600,653.64 1,042,328.66 112,500.00 553,679.52 $ 4,512,241.54 $ 4,759,353.55 $ 4,309,161.82 $14,808,041.90 $15,587,891.48 $13,237,507.78 4.28 to 1 4.28 to 1 4.07 to 1 Marketable securities consist of 2TH% United States Treasury Notes which mature June 15,1939. They have a par value of $1,000,000 and at year-end a market value of $1,019,375. Receivables are stated as usual after adequate reserves for notes and accounts doubtful of collection. It has been the policy of our Independent Accountants to verify our receivables at the end of the year by confirmation directly from our customers. This year receivables were so verified as of September 30, during the course of an audit that was made in connection with the preferred stock issue. In view of the verification at such a recent date, only a few large receivable balances were confirmed as of December 31. A summary of inventories follows: Finished goods . Goods in process Raw materials . Stores and supplies Total. December 31, 1938 $ 4,871,729.42 1,498,851.49 1,951,245.07 850,171.63 December 31, 1937 $ 3,463,900.97 2.231.116.56 1.941.209.57 838,392.16 December 31, 1937 $ 2,904,585.45 2,231,116.56 1,639,885.44 801,602.67 $ 9,171,997.61 $ 8,474,619.26 $ 7,577,190.12 We maintain perpetual inventory records by plant departments showing quantities and dollar values. Physical inventories are taken periodically and always at the close of the fiscal year. Such physical inventories at December 31, 1938, substantiated the quantities called for by our perpetual inventory records. Inventories are valued at the lower of cost or market. Our inventories remain larger than necessary for current volumes of sales. Accounts payable represent amounts due trade creditors in the ordinary course of business. Provision has been made for all known liabilities. Semi-annual dividends were declared on both Series A and B Preferred Stocks, payable June 1, 1939. These dividends were charged to earned surplus in 1938, although $187,500 is applicable to 1939. The liability for container deposits results from the sale of goods in containers which are paid for by customers and which are returnable by them for credit after the contents are used. Previously, this item was carried as a reserve. This account was recently cleared of deposits for containers which we believed would not be returned and the remaining amount included in current liabilities. DSW 331259 m m m 9 9 9 9 9 0 STLCOPCB4077903 To reflect the intended use the directors have earmarked the proceeds from the sale of 50,000 shares of Series B Preferred Stock for capital additions. They are therefore excluded from cash and stated separately in the balance sheet. OTHER ASSETS December 31, 1938 Due from officers, employes . $ 113,853.94 $ Invested in associated companies 702,223.77 Miscellaneous investments . . 350,452.64 Total...............................$ 1,166,530.35 $ December 31, 1937 December 31, 1937 174,410.28 $ 171,494.32 302,324.19 2,324.19 444,086.63 661,499.95 920,821.10 $ 835,318.46 Amounts due from officers and employes include $86,248 and $147,209 in 1938 and 1937, respectively, representing balances receivable under our Employe Stock Purchase Plan, which has been described from time to time. The remainder of this receivable consists of travel advances and other balances of relatively small amounts. Investments in associated companies include $700,000 which is the cost of our 50% interest in Shawinigan Resins Corporation of Springfield, Massachusetts. Miscellaneous investments consist of $283,050 of deposits in mutual insurance companies, which cover us against losses by fire, tornado, and compensation of injured employes, and $67,403 of investments and loans. Included in the 1937 amount was our investment of $267,769 in The Fiberloid Corporation which was eliminated upon the acquisition of the assets of that company. PROPERTY December 31, 1938 December 31, 1937 December 31, 1937 Land...........................................$ 1,782,079.18 $ 1,781,444.85 $ 1,731,398.48 Buildings................................... 9,586,993.77 9,182,711.52 7,661,284.17 Machinery and equipment. . 28,826,444.72 26,771,390.26 24,336,903.52 Phosphate deposits . . . 396,371.15 417,794.65 417,794.65 Total............................. $40,591,888.82 $38,153,341.28 $34,147,380.82 f' The valuation of land, buildings and machinery and equipment shown above represents reduced valuations established December 31, 1932, by our engineers, plus additions since that date at cost. Phosphate deposits are valued at cost, less a reserve for depletion. The increase in property accounts is explained in the operating review. RESERVES December 31, 1938 Depreciation and obsolescence $14,534,682.78 Fluctuations of exchange . . 140,258.75 Contingencies.......... 238,123.47 Total.................$14,913,065.00 December 31, 1937 $12,752,878.11 234,298.05 270,460.26 December 31, 1937 $10,368,861.78 234,298.05 257,115.72 $13,257,636.42 $10,860,275.55 i s. * a iu _ ^ ______ _____ ___ ............. _ _________ __ __________ ____ __________ _____ __ ' ' ` " " 7*. SW 331260 ___ _____ _ ____t - '* STLCOPCB4077904 The increase in the Reserve for Depreciation and Obsolescence is the net of $2,525,320 provided out of 1938 income less $799,560 representing charges for retirement of plant and $2,440,061 of reserve For depreciation applicable to the property acquired from The Fiberloid Corporation. Depreciation and obsolescence rates are based on the estimated life of individual units of property as determined by our engineers. The 1938 composite rate was 7.3% compared with a rate of 7.5% for 1937. The lower ratio does not reflect a lowering of rates but the changed character of our properties since the inclusion of those of The Fiberloid Corporation. Due to the decline in dollar value of the pound sterling, the net working assets, including deferred charges, of our British subsidiary, are carried at the reduced exchange rate of $4.64 a which prevailed at the year end. The difference of $94,039.30 resulting from the conversion at the lower rate of exchange was charged to the Reserve for Fluctuations of Exchange which was created several years ago out of an exchange profit. The decrease in the Reserve for Contingencies results principally from charges for additional income taxes applicable to prior years. CAPITAL MINORITY INTEREST IN SUBSIDIARY COMPANIES December 31, 1938 Preference Shares British Subsidiary . . . . .$ 1,940,000.00 December 31, 1937 $ 1,940,000.00 Interest in American Subsidiary 362,215.55 353,476.73 Total . . ... . ! $ 2,302,215.55 $ 2,293,476.73 December 31, 1937 $ 1,940,000.00 353,476.73 $ 2,293,476.73 Capital Stock: Preferred--Series A. Preferred--Series B . Common .... Surplus: Paid-in .... Earned . . ' . . Total.... CAPITAL STOCK AND SURPLUS December 31, 1938 December 31, 1937 December 31, 1937 . . $ 5,000,000.00 $ 5,000,000.00 $ 5,000,000.00 . . 5,000,000.00 . . 12.418,160.00 12,418,165.83 11,143,880.00 . . 11,322,147.87 . . 11,270,073.14 11,048,347.86 10,868,786.74 8,266,338.44 10,868,786.74 . . $45,010,381.01 $39,335,300.43 $35,279,005.18 . The American subsidiary is the New England Alcohol Company, in which a 45% interest is held by Central Aguirre Associates. Credited to Paid-in Surplus was the difference between the net proceeds from the sale of 50,000 shares of Series B Preferred Stock and its liquidating value of $100 a share, amounting to $453,025 and the excess of the value of the assets of The Fiberloid Corporation over the par value of the common shares issued in exchange for them. The Series B Preferred Stock is similar to the Series A Preferred in every respect excepting call price. Series B is callable at $115 a share, Series A at $110. Series A is lower by reason of the lower price at which if was issued. Both call prices decrease progressively to $107.50. 00 m oSXN 331261 0* * STLCOPCB4077905 Outstanding Common Stock increased by the number of shares issued in exchange for the assets of The Fiberloid Corporation. The book value of each outstanding share of common stock increased from $27.17 to $28.19. During the year dividends were paid as follows: Date Monsanto Chemical Company Common........................ March 15 June 15 Sept. 15 Dec. 15 Per Share $ .50 .50 .50 .50 Amount $557,194.00 620,857.50 620,872.50 620,882.50 $2,419,806.50 Preferred Series A. . . June 1 Dec. 1 2.25 2.25 $112,500.00 112,500.00 225,000.00 Monsanto Chemicals Limited Preference Shares . . . Match 31 Sept. 30 $ 40,012.50 38,678.75 Total .................................................................................. 78,691.25 $2,723,497.75 OPERATING REVIEW IN spite of the unfavorable outlook prevailing during most of the year, company activity did not diminish. Our organization was maintained essentially intact, salaries and wage rates of the staff were not reduced, many new plants and improvements that had been scheduled were erected and installed, and new sales promotional efforts were launched. ' STLCOPCB4077906 In the report for 1937, your attention was called to the difficulties we were experiencing in establishing our Monsanto, Tennessee, plant on a satisfactory basis'and the penalties suffered in the early days of its operation. Midyear of 1938, this project veered from an unsatisfactory to a profitable basis, and is proving a wise development. The Plastics Division now engages our attention as an operation, the absorption of which brought many problems. With its success relying on the purchases of only a few consuming industries, it has been in a position where marked declines force its operating schedules to levels below those of our other divisions. At the expense of immediate profits the management of Plastics Divi sion, assisted by the executives of all of our other divisions, is making progress in broadening the foundation so that its products will go into many instead of relatively few manufacturing fields. Expenditures in 1938 for new plants include many minor items, which were necessary for improved operations, and new construction principally at Monsanto, Illinois, and Monsanto, Tennessee: At the beginning of the year our Property Account was................ $34,147,380.82 Acquisition of The Fiberloid Corporation s plants added .... 4,034,883.69 And we expended for new construction......................................... 3,409,457.14 $41,591,721.65 Plant property retired and adjustments amounted to........................ 999,832.83 Leaving a year end balance of . . . ,,.........................................$40,591,888.82 At Monsanto, Illinois, we built a phosphorus-burning plant and a tetrasodium pyrophos phate plant. The former embodied new principles of construction developed in our laboratories, which permit the direct production of high strength phosphoric acid. At Monsanto/Tennessee, our effort was directed toward completion and refinement of the processes involved in the production of elemental phosphorus. At Springfield, Massachusetts, in partnership with Shawinigan Chemicals, Ltd., of Montreal, the Shcwinigan Resins plant for the production of vinyl acetals was completed. Difficulties and operating losses which attended the initial operations of this unit are being eliminated. A sub stantial'.market for vinyl acetal resins seems assured in safety glass and wire insulation, and other applications appear promising. The British company improved its position industrywise in a year of problems other than those normally a part of operation. Because of the crisis that developed overseas, much attention of management was diverted from routine to the planning of protection of personnel and property. Under existing conditions a review of operations would be incomplete if it did not include that which has been done to establish better working conditions for the company s personnel. An effort to maintain employment at constant level caused us to allow production to continue well beyond normal sales demand during the early months of the year. Reduction in operations, with consequent layoffs, were delayed in as great a degree as possible to coincide with vacations in the summer months. Maintenance programs that might have been postponed were in most instances carried on in order that men not needed in the production departments might be given work on such assignments. Our payroll amounted to about $9,500,000; the average number of employes was 5,737 rising to 6,229 at the year end. At its lowest point our staff numbered 5,324. os***2*3 nrrrnrc STLCOPCB4077907 *'T " STLCOPCB4077908 1 Our investment for the year in the health of workers through employment of staff physicians and nurses, and toxicological research to determine safe working conditions was $61,563. For added protection we spent substantial amounts for changes in equipment and safety devices to eliminate potential or suspected hazards. In comparison with 1937 there was a reduction of 44 per cent in frequency of lost-time accidents on a man-hour basis. In spite of the hazardous nature of many of the products handled by our men, the chemical industry is today among the safest industries in which a man can work. Our organization is kept cognizant of the necessity of "good housekeeping." Only through constant vigilance can our plants be maintained on the plane necessary to safeguard the investment of stockholders and the health and safety of employes. To this end, annual competitions determine the best maintained and best appearing plants. Monsanto, Tennessee, won the award for the larger operations, and Carondelet, Missouri, for the smaller works. Through periodic reports and special articles in our company magazine, which is mailed to our employes' homes, we have for several years been giving our employes facts that might other wise be unavailable to them, facts that bear relationship to their work and their future, facts for their consideration in their own estimation of the American economy. For it is our belief that American industry composed as if is of individuals has its proportion of human faults, but that as a whole it does not need apology -- only explanation. There is an identity of interest in industry among shareholders, management and employes. The accompanying graph shows clearly good profits and good wages and greater employment are possible only when industry is thriving and expanding. As Monsanto management receives a substantial share of its compensation from bonuses that are dependent upon company earnings, it too shares promptly the fortunes of shareholders and employes. ( ( ( ( ( I ( e COMPOSITE CHART OF THE EARNING RELA TIONSHIP OF SHARE HOLDERS, MANAGE MENT AND EMPLOYES OF MONSANTO TO THE ACTIVITY OF AMERICAN INDUSTRY. ^Operation of new Monsanto, Tennetsee, plant offset otherwise declining poytolU and employ ment. DSW 331265 STLCOPCB4077909 DEVELOPMENT fROM our laboratories this year have flowed many minor improvements and new products -- none of magnitude, yet all contributing to a steady progress. Among them are: A new process for vanillin which will soon offset to some extent the severe break in selling prices occasioned by new competition. More rugged catalysts have been devised for hydro genation to be reflected in better insecticides and rubber chemicals. The large scale production of new wetting agents and detergents and detailed information for their application and use has been brought into being. An ultra accelerator for rubber latex will prevent hindrance of develop ments tied down by scarcity of raw materials. Sun-checking or cracking of rubber goods exposed to light is now prevented by Santowax and soap can be preserved from rancidity by Sopanox. A new extreme pressure lubricant enables petroleum oils to perform more efficiently their function of preventing wear under heavy duty conditions. Ferrisul improved the cleaning of chromium steels and sodium aluminate decreased waste of fiber and filler in the paper industry,- a new synthetic tanning material makes leather of greater fastness to light, thus adding to the possible color varieties of leather; wool is being lubricated in spinning by new phosphates which are removed easily by simple washing,- alkyl phosphates have been produced for lubricants and humecfants; tetrapotassium pyrophosphate has been introduced to the soap industry to serve where the less soluble sodium salts were ineffective. A new plastic, vastly improving the effectiveness of safety glass, has been brought into being on large scale by the solution of sheeting problems of resin manufacture and of plasticizer. A process for Vue-Pak, a transparent plastic packaging material, was perfected. Because men thought of these things, because men worked over these things, and because men were able to bring these things to completion, people enjoy better living. The road is long and often discouraging, and at times the end achieved is not the one visualized in the beginning. In 1923, for instance, tetrasodium pyrophosphate was produced commercially in this country for the first time. It was introduced in fur dyeing and gradually into the boiling off of silk and other textile uses. Continuous study of its properties by both chemical and soap manufacturers led, in ' the early thirties, to its incorporation in soap because it helped soap function. Chemical manu( facturers worked to lower costs. Soap manufacturers worked and improved their formulas and another industry -- a small industry, but still another--came into being. > A new material to serve mankind better brings many benefits. Because tetrasodium pyrophost - phate is being used, more machinery has been produced and more workmen are needed in I processing raw materials and finished product. New sales opportunities require more salesmen and more accountants are necessary to keep costs. More men have made packages and been employed in transporting the products to the consumer. The development of tetrasodium pyro phosphate is traced in the accompanying chart as typical of the way chemical research by chemical companies, and application research by alert consuming industries, provide new comforts, new jobs and better living at lower costs. Our research expenditures for 1938 were $1,221,622.49. STLCOPCB4077910 TETRASODIUM PYROPHOS PHATE TYPIFIES HOW RESEARCH AND DEVELOP MENT BY INDUSTRY PRO DUCE BETTER PRODUCTS AT LOWER COSTS TO THE CONSUMER. W ii \ %% t i n u n t u u i i T T trrrn m [; ^NY opinion as to 1939 must give consideration to so many unpredictable factors that almost any prediction might prove correct. Although we are faced with reduced margins on many products, I hope the year will bring improved operating results. Thus far sales and earnings have been materially better than in the corresponding period of 1938. Events of recent months also give considerable encouragement to the thought that there is now a better understanding of industry's problems. If this results in a modification of recent legislation to give capital a sporting chance, I believe that many of our chronic problems will be on the way to) solution and that work will be available again to those who want to put in an honest day. ' The Monsanto management believe themselves fortunate to be in an industry wherein the vision of other scientists and the resourcefulness of other merchants provide always a healthy com petition--an industry that offers, even under conditions that have prevailed, opportunities to provide new jobs; to employ new capital; to serve American industry better that it may in turn be of greater service to mankind. We hope our efforts will meet the requirements of our responsibil ities for the well-being of the several thousand people with whom we work, the communities; wherein we operate and at the same time, provide a fair return on the capital entrusted to us.j Respectfully, For the Board of Directors, St. Louis, Missouri, March 6, 1939. DSW 331267 14 STLCOPCB4077911 HASKINS & SELLS CERTIFIED PUBLIC ACCOUNTANTS 418 OLIVE STREET SAINT LOUIS ACCOUNTANTS' CERTmOATg Monsanto Chemical Company: We have male an examination of the consolidated, balance sheet of Monsanto Chemical Company and Its subsidiary companies as of December 31, 1938, and of the related statements of consolidated lnoome and surplus far the year ended that date. In connection therewith, we examined or tested accounting records of the Companies and other supporting evidence; we also made a general review of the accounting methods and of the operating and Income accounts for the year, but we did not make a detailed audit of the transactions. As to Inventories, the records were examined, the related procedure was reviewed, and the prices and computations were tested; the scope of the examination did not Include physical tests of quantities. In our opinion, based upon such examination, the acoompanylng balance sheet and related statements of lnoome and surplus fairly present, In accordance with accepted principles of accounting consistently followed by the Companies, their consolidated financial condition as of Deoember 31, 1938, and the consolidated results of their operations for the year ended that date. February 15, 1939 DSW 331268 STLCOPCB4077912 u u t u i fi ntmm MONSANTO CHEMICAL COMPANY PARENT COMPANY Consolidated Balance ASSETS CURRENT ASSETS: Cash..................................................................................................$ 5,229,116.64 United States Treasury Notes -- at approximate market value 1,005,177.05 Receivables, less reserves............................................................. 3,913,992.14 Inventories -- at the lower of cost or market...................... . 9,171,997.61 $19,320,283.44 CASH APPROPRIATED FOR PROPERTY ADDITIONS................. 5,450,000.00 OTHER ASSETS: Due from officers and employes on purchases of capital stock,etc. $ Investments in associated companies--at cost or less .... Miscellaneous investments, deposits, etc. ................................. 113,853.94 702,223.77 350,452.64 1,166,530.35 PROPERTY: Land . . ................................ Buildings..................................... Machinery and equipment . . . Phosphate deposits, less depletion $ 1,782,079.18 9,586,993.77 28,826,444.72 396,371.15 ; 40,591,888.82 PATENTS AND PROCESSES ......................................................................... 1.00 DEFERRED CHARGES..................................................................... .................... 209,199.49 TOTAL................................................................. $ 66,737,903.10 NOTESi The net current assets, investments and deferred the rate of $4.64 to 1, and the remaining items at not more (50% owned) has decreased approximately $68,000.00 cash appropriated for property additions, $5,450,000.00, in December, 1938, of the OSVM 331269 4 4 \ i STLCOPCB4077913 %%% % tttt 11 i t AND SUBSIDIARY COMPANIES INCORPORATED IN DELAWARE Sheet, December 31, 1938 LIABILITIES CURRENT LIABILITIES: Accounts payable and accruals................................................. S 2,997,745.76 Estimated income taxes................................................................. 889,024.24 Dividends on preferred capital stock payable June 1,1939 . . 217,000.00 Deposits for returnable containers............................................. 408,471.54 S 4,512,241.54 RESERVES: Depreciation and obsolescence . . . .................................. $14,534,682.78 Fluctuations of exchange............................................................. 140,258.75 Contingencies.................................................................................. 238,123.47 14,913,065.00 MINORITY INTEREST IN SUBSIDIARY COMPANIES: Preference shares of British subsidiary -- 5%%, cumulative and redeemable -- authorized, 500,000 shares of 1 each; outstanding, 400,000 shares.....................................................$ 1,940,000.00 Beneficial shares and surplus of American subsidiary .... 362,215.55 2,302,215.55 CAPITAL STOCK AND SURPLUS: Preferred stock -- authorized, 275,000 shares without par value, issuable in series by Board of Directors; outstanding, 100,000 shares, $4.50 cumulative dividend -- at $100.00 a share: Series A............................................................................. $ 5,000,000.00 Series B.............................................................................. 5,000,000.00 Common stock -- authorized 1,725,000 shares, par value $10.00 each; issued, 1,262,957 shares, less 21,141 shares in treasury; outstanding, 1,241,816 shares............................. 12,418,160.00 Surplus: Paid-in . . .................................................................................. Earned.......................................................................................... 11,322,147.87 11,270,073.14 45,010,381.01 TOTAL $66,737,903.10 charges of the British subsidiary have been converted at then S4.85 to 1. The equity in associated companies since the dates of acquisition of their capital stocks. The represents the approximate net proceeds from the sale Series^ B preferred stock. I I > t DSW 331270 STLCOPCB4077914 STATEMENT OF CONSOLIDATED INCOME For the Year Ended December 31, 1938 NET SALES........................ COST OF GOODS SOLD GROSS PROFIT .... $31,935,390.73 23,503,063.42 $ 8,432,327.31 DEDUCT: Selling and administrative expenses................ $ 3,301,169.36 Research expenses . ............................. .... 1,221,622.49 4,522,791.85 NET PROFIT FROM OPERATIONS............................................................. OTHER INCOME..................................................................................... $ 3,909,535.46 685,967.78 GROSS INCOME..................................................................................... INCOME CHARGES.................................... $ 4,595,503.24 451,107.46 NET INCOME BEFORE PROVISION FOR INCOME TAXES........................ PROVISION FOR INCOME TAXES -- ESTIMATED................................ $ 4,144,395,78 853,877.07 NET INCOME........................-.................................................................. $ 3,290,518.71 DEDUCT: Portion' of net income applicable to minority interest in American subsidiary .................... $ Provision for dividends on preference shares of British subsidiary................................................. 62,738.82 77,186.99 139,925.81 NET INCOME TRANSFERRED TO EARNED SURPLUS................................ $ 3,150,592.90 NOTES: The net income of the British subsidiary has been converted at the rate of $4.85 to 1 for the first nine months and for the last three months at $4.64 to 1, except the provision for depreciation and obsolescence which was converted at $4.85 to 1. The loss of $94,039.30 from the conversion of net current assets, etc., at the current rate was charged to the reserve for fluctuations of exchange created in a prior year. The company's portion of the combined net losses for the year 1938 of associated companies (50% owned and not consolidated) is approximately $104,000.00. The provision for depreciation and obsolescence during the year amounted to $2,525,319.63. oSvi T i n . 1 1 1 1 # w- STLCOPCB4077915 STATEMENT OF CONSOLIDATED SURPLUS ACCOUNTS For the Year Ended December 31, 1938 EARNED SURPLUS BALANCES, JANUARY 1, 1938 ................................ $10,868,786.74 PAID-IN SURPLUS $ 8,266,338.44 ADDITIONS: Net income for the year as shown by the accom panying statement of consolidated income . . 3,150,592.90 Excess of valuation of tangible assets acquired from The Fiberloid Corporation over the par value of net shares of common capital stock issued, after deducting the cost of former investment in that company............................ -- 2,602,784.43 Excess of net proceeds from sale to underwriters of Series B preferred capital stock over invol untary liquidating value, less expenses of $46,975.00 in connection with its issuance . 453,025.00 Total .................................................... $14,019,379.64 $11,322,147.87 DEDUCTIONS: Dividends on capital stock of parent company: Preferred: Paid December 1, 1938 ............................. $ Declared payable June 1, 1939-- . . . . $187,500 applicable to 1939 112,500.00 217,000.00 Common -- at the rate of $2.00 a share . 2,419,806.50 Total ..................................................... $ 2,749,306.50 BALANCES, DECEMBER 31, 1938 ....................................... $11,270,073.14 $11,322,147.87 OS\N 331272 ) STLCOPCB4077916 MONSANTO CHEMICAL COMPANY lo lid a te d Balance Sheets as of Decem ber 31, 1929 to 1938 ASSETS Oo co cmo 6^CO Or*D ^ Too o CO 04 O CO 'oO Oift' O m h CO 04 O oi At*> 'O C0o0 T4"3 a> > CO *'0 0T" ^ oi oi ^<* m 0co4 co a. *3 co co v m tr-- Cr*O* oT 04 r- O ao O' PO Oj oi oi 04 2 Oin in 0O4 ft 00 N O ^ fo CO 04 m ui y sgs CD q r vT--O mCO C-OO O CD r Oco ocoo co O' 04 0^ co oo CD n r po r* oi oi r n m co i. 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O cv* --D 1o5 ~ "O ,, O I ~ .O tSM | < LU Q 81 8 o oi co oo r- 'COoO O' co co oT 8S3 III s Si ^ v S3 04 r- CO CO 04 oo m co oo O' co Ps 8 3 In 88S O O' 04 00 CO CO OC W r t-' O' 8S S5 in O< co O' co 04 co oT S888?S -- u -n 1/1 => 3 -s iC c ^tl CO <sC> "D ao ~2 a"- 2 .9 a o < a a U a iu DSW 331273 STLCOPCB4077917 S 88 a> > u _c I s' 00 CO O' 04 O' CK CN O' m^ S| 4) -O E 01 O 4) Q ~o 0) TJ c o 0) > 0) Eo ; 9 ~o 4) 4-- o "D Co u E 9D t/5 9 "i <1 n 5. aoi r***1 m od in a8s n ro 8r- <> ssp *rC0 m to< r- Ok rr- * f- in CD co O' coo oco O' 04 in co v otm-i 0tO-9 Ci'OnS go ^ 04 qT co a NWr c; *0 04 m O' co in t- o r- co O' omT CinN Ot'' 04 in r m of r LXLI m 8 O 2 J3 =0 C e "c a< c "O "o 2 J3 oc o D0 O g'i & o zu U = Q. 3 <D 8 (/) Q oc m 8S S S' O' 45 $ s 5CO r-.'- 3 04 8 o 04 >0 8S 8* ss 0) 01 U aE> 4) 2 O o zoo z o - o "8 C 5 Jb pc z 5 S2 O' co -5i o> o s o <1 3s o _2 Zp o .2 z <1 Sc c _* o. !2 04 o. S o o 3: '='? t 0i e|3 51 S I"8u !i' "c Sc i2n 2s J -5-n S' Isif ^<1 o J *1 15J_-C I O?Ss S.jl n &;? j 5 -0 1 a- I1 O Js> sho J-I . U-g-S J< _ o "* S jo 5 e s. 9 a V 9 o3- o _2 _2 r~ o a owo. > -- >5 r0o4 O' S O sC o: x~ c 2 0* FE >a O** in i Tc3 tcj i "O 3 0 ` ^ I2 s; o g 2 - ^in -fu= vo ~o 00 , in v; -D 8! S 2 ? ^icn c ^ :: t: 45 ~o ' o om iSr _ _0 so 0C0 JoT4- 88 04 04 T-' O c o O U c o Vp) c -p `> a co _c 3 & E O U O D> oEE O U If 51P I >o 0 E o o n CO oa U 40 g _oc 5=! P co pl_ _CcO p 'o _o o > a _D 5: r X _o O S Cxukl a. j . "D t _ = cr> C ^Z` ri So r 5 "|5.` . o Tin U .2 .-Oc O ^ 04 8-S - S 11 J IJ04J "o Oo"* a c* ^ 05 11" oh _u o s t O5 il I* 2 30Uc --u" . E n,' cOCddnP' .5 5* "5 r. ' 8 i -C0 .2 aO. Q :! s . au 5 DSW 331274 STLCOPCB4077918 MONSANTO CHEMICAL COMPANY ST. LOUIS, U. S. A. DISTRICT OFFICES 30 Rockefeller Plaza NEW YORK Tribune Tower CHICAGO Everett Station 80ST0N Brown Mary Building BIRMINGHAM Johnston Building CHARLOTTE Union Guardian Bldg. DETROIT TOO Bush Street SAN FRANCISCO 605 West Olympic Blvd. LOS ANGELES Second National Bldg. AKRON 378 St. Paul Sl,, West MONTREAL Victoria Station House LONDON King's House, King's Street, West MANCHESTER Hong Kong ft Shanghai Bank Bldg. SHANGHAI WORKS ST. LOUIS, MO. CARONDELET, MO. MONSANTO, ILL. EVERETT, MASS. NITRO, W. VA. NORFOLK, VA. ANNISTON, ALA CAMDEN, N. J. MONSANTO, TENN. SPRINGFIELD, MASS. RUABON, N. WALES SUNDERLAND, ENGLAND DAYTON, OHIO --Research Laboratories DIRECTORS Charles Belknap......................... St. Louis John C. Brooks.................Springfield G. Lee Camp................................. St. Louis Gaston DuBois . ..........................St. Louis John W. Livingston .... St. Louis Lloyd F. Nickell......................... London Edgar Monsanto Queeny . . St. Louis William M. Rand......................... Boston Theodore Rassieur..................... St. Louis Walter W. Smith ..................... St. Louis OFFICERS Edgar Monsanto Queeny .... President Gaston DuBois.......................... Vice-President John W. Livingston .... Vice-President JOHN C.' Brooks..................... Vice-President JULIUS A. BERNINGHAUS Assistant Vice-President OSBORNE BEZANSON . . Assistant Vice-President DANIEL S. Dinsmoor . . Assistant Vice-President WILLIAM C. BEMIS . . Assistant Vice-President SAMUEL W. ALLENDER . . Assistant to President JAMES W. Irwin................ Assistant to President Daniel M. Sheehan............................Comptroller Edwin J. Cunningham . Assistant Comptroller JOHN W. Ludwig .... Assistant Comptroller William I. Warren . . . Assistant Comptroller CHARLES Belknap . . Executive Vice-President G. LEE Camp............................. Vice-President William M. Rand..................... Vice-President Lloyd F. Nickell..................... Vice-President VICTOR E. Williams . Assistant Vice-President LYNN A. Watt . . . Assistant Vice-President HARVEY M. HaRKER . Assistant Vice-President CARL T. King .... Assistant Vice-President William W. Schneider............................ Secretary JOSEPH R. Mares .... Assistant Secretary CHARLES E. Caspari, Jr. . . Assistant Secretary FRED A. Ulmer ......................................Treasurer STEPHEN Louis.....................Assistant Treasurer JOHN F. Martin.................Assistant Treasurer TRANSFER AGENT Common and Preferred Stocks Guaranty Trust Company of New York REGISTRAR Common and Preferred Stocks The Chase National Bank of New York DSW 331275 PRINTED IN U S A. STLCOPCB4077919 This annual report is spiral bound with a plastics coil developed in 1938 by Monsanto's new Plastics Division. Its use with this report is its first commercial application. A sample of Vue-Pak is included with the title page to acquaint our stockholders with this new transparent packaging material. It is hoped new uses for the spiral coil and Vue-Pak may be sug gested by stockholders to us or to prospective users. The paper used in this report contains aluminum sulfate made by our Merrimac Division. The odor of the ink in this report is masked with Coumarin Monsanto. i . at. t } I I i* * '' F ' ^ ^ ....... ....................----- - . ' *' DSW 331276 STLCOPCB4077920