Document Ex7Nqo1N9LknOxO4jGYepRnMR

THE GLIDDEN COMPANY CLE VELAND, OHIO Gmmi ANNUAL REPORT Year Ended October 31, 1944 GL0002849 THE GL1DDEN COMPANY CLEVELAND, OHIO To the Shareholders o' The Glidden Company. Cleveland, Ohio, December 30, 1944. Gentlemen: In the following pages wi 1 be found the Consolidated Balance Sheet as of October 31, 1944, and the Consolidated Profit and Loss and Surplus Accounts for that year. The net sales for the fiscal year amounted to 3111,897,814.51 as compared to sales for the last year of $97,114,616.31, or an increase of $14,753,197.70. The net earnings for the year afrer all charges, inducing Income and Excess Profits Taxes, amounted to $2,117,288.63, which, after Preferred dividends, is equivalent to $2.02 per share on the Common Stock, as compared to $1.87 per share for the previous year. In recognition of continued exceptional production results, the Army-Navy "E" Flag was awarded to each of two plants of the Company and their employees. Renegotiation for the period ending October 31, 1943, resulted in no assessment and inasmuch as the general policy of the Company did not change during 1944, we do not expect there will be any assessment against 1944 profits when and as renegotiations are completed. During the year the Company acquired the outstanding minority interest in the American Zirconium Corporation, and now having taken over the assets of that Com pany it will hereafter he operated as a division of The Glidden Company. The operations of this plant have been hampered by the difficulty in getting adequate and necessary equipment, but this equipment is now being installed and prospects for profitable opera tions in 1945 are encounging. The Company's policy of using the last-in, first-out method of inventory pricing on raw materials has resulted in our inventories being carried on the books of the Company as of October 31, 1944, at a valuation of $3,302,139.95 less than the replacement cost as of that date. This with our contracts with various government agencies and our firm contract sales gives us a large measure of protection against loss through market declines. The acquisition of the minority interest in the American Zirconium Corporation, together with a tax adjustment relative to the investment in and advances to The GLD002850 California Zinc Company previously charged off, has resulted in the Company making a saving in Income and Excess Profits Taxes of which 31,200,000 has been set up as a reserve for contingencies. The Company's plants have seen maintained in the best possible condition and large sums have been expended in maintaining these properties and installing the most efficient methods of production. Inasmuch as there have been no plant additions added specifically for Government or war business, the Company has no reconversion problem. Our Production and Research Departments are continuing their efforts in the develop ment of our Soya Products Division. Substantial progress has been made in developing Soya Proteins, Soya Flour and commercial livestock and poultry feeds. The Research Department has made a siplendid contribution in the development of sterols and hor mones from soybeans, and these products are now being regularly produced. Additional laboratory facilities and additional research workers have been provided, so that scien tifically sound development of our various lines will be continued. The number of shareholders reported on the latest available list is 10,554 Common shareholders and 3,435 Preferred shareholders. Of our employees, 1,521 are now in the Armed Services. Early in our fiscal year the Company refinanced its deferred loan not only by increas ing it from 36,000,000 to 310,000,000 but by arranging for longer maturities. Not only does this improve the working capital of the Company, but there was considerable im provement through tax ad justment, net earnings over dividends, etc. We thought it wise to increase the deferred loan in order that the Company could more easily finance the larger inventories made necessary because of the tremendous increase in the Company's sales. The Company is continuing its policy of national advertising, giving publicity to its diversified products. The Company's long range plans insure steady progress, and while changes of great importance will result from current domestic and international developments, it is be lieved that in our field of unlimited scope, the Company can look forward confidently to continued progress. On behalf of the Board of Directors, I wish to acknowledge and express appreciation for the loyal and effective service rendered by the officers and employees of the Company. Yours very truly, ADRIAN D. JOYCE, President. 610002851 CONSOLIDATED The Glldden Comps October CURRENT ASSETS ASSETS Cash....................................... :.......................................................................... Dominion of Canada Victory Loan bonds....................................................... Trade notes receivable...................................................................................... 2 Trade accounts receivable.............................................................................. 4,1>4,279.87 119,369.37 15,018.16 6,683,142.98 Less reserves ........................... $ 6,698,161.14 ....................................................... 246,838.02 6,451,323.12 Inventories -- raw miterials, in process, finished goods -- Note A . . . . Other current accounts teceivable and advances, less reserve of 52,906.30 24,257,189.62 306,517.65 To t al Cu r r e n t As s e t s .......................................................................... 135,258,679.63 OTHER ASSETS AND INVESTMENTS Cash surrender value of life insurance........................................................... Miscellaneous notes and accounts receivable and advances, less reserve of SI 3,042.79 .................................................................................................. Estimated postwar refund of excess profits taxes........................................... Other investments . . .................................................................................. 616,624.75 107,406.69 593,400.00 35,892.47 1,353,323.91 PROPERTY, PLANT, AND EQUIPMENT Land - Note B.................................................................................................. 2,319,565.47 Buildings, machinery, and equipment -- Note B........................................... 26,210,170.56 28,529,736.03 Less reserves for depreciation, depletion, and amortization........................ 11,874,212.39 16,655,523.64 DEFERRED CHARGES Prepaid insurance and expenses 284,846.52 53,552,373.70 GLD002852 BALANCE SHEET ,ny and Subsidiaries 31, 1944 LIABILITIES, CAPITAL STOCK, AND SURPLUS CURRENT LIABILITIES Accounts payable................................................................................................................................3 6,497,886.10 Accrued taxes, royalties, inttresr, and insurance........................................... ... 621,766.24 Federal, state, and dominion taxes on ireome-- estimated................................................... 2,670,300.28 To t a l Cu r r e n t Lia b il it ie s ............................................................................................... . 3 9,789,952.62 LONG-TERM DEBT Note payable due July 1, 1952, interest at 3}i% ........................................ 3 4,000,000.00 Serial notes payable, maturing $1,000,'XX).00 annually from July 1, 1946, interest 2% to 2J4% ........................... .................................. 6,000,000.00 10,000,000.00 RESERVE For contingencies......................................................................................................................... 1,200,000.00 MINORITY INTEREST In capital stock and surplus of subsidiary company.............................................................. 213,497.85 CAPITAL STOCK AND SURPLUS Capital stock: Convertible preferred, 4Yi / q cumulative, par value 350.00 a share, re deemable at 352.50 a share, convertible into seven-tenths share of common stock: Authorized 200,000 shares Issued and outstanding, including treasury shares, 199,940 shares . . 3 9,997;000.00 Common, without par value: Authorized 1,200,000 shares Outstanding, including treasury s hares, 835,531 shares Reserved for conversion 139,958 shares Stated capital.............................................................................................. 4,177,655.00 Surplus --Notes C, D, E, and F: 314,174,655.00 Capital surplus................................................................... 3 8,444,162.99 Earned surplus................................................................... 9,906,670.17 318,35(^833.16 Less capital stock in treasury, at cost: Common 10,088 shares, convertiblepreferrcd400shares 176,564.93 18,174,268.23 32,348,923.23 353,552,373.70 ' Set notij to financial statemeats ot secondfollowing page. Gt00?85 3 CONSOLIDATED PROFIT AND LOSS AND SURPLUS The Glidden Company and Subsidiaries Fiscal year ended October 31, 1944 PROFIT AND LOSS STATEMENT Net Sales..................................... ............................................ ................................................................. 8111,897,814.51 Cost of goods sold, selling, administrative, and general expenses, including provision of if 1,344,230.06 for depreciation, depletion and amortization -- Note G ................................. 106,058,600.90 87,839,213.61 Other income............................................................................................................................................ 361,397.95 Other deductions: Interest on long-term den.................................................................................. 8 Other interest............................................. Provision for contingencies Miscellaneous -- Note H..................................... ................................................. 2 6,200,611.56 199,763.20 69,022.53 150,000.00 319,283.81 738,069.54 Pr o k it Be f o r e Ta x e s o n In c o me a n d Sp e c ia l Ch a r g e ..................................................J 5,462,542.02 Estimated taxes on income and special charge: Federal normal income tax and surtax.............................................................. 8 Federal excess profits tax (after deducting J167.800.00 postwar refund for 1944 and prior years) .................................... Dominion and state taxes (after deducting 817,300.00 for postwar refund) , Charge equal to reduction in taxes duetto deduction for certain claims pro vided for in prior yeats (credited to reserve for contingencies)................. 890,000.00 1,255,000.00 140,000.00 1,050,000.00 3,335,000.00 Net Pr o f it ................................................................................................................................f 2,127,542.02 Portion of net profit of subsidiary company applicable to minority interest................................. 10,253.39 Co n s o l id at e d Nef Pr o f it t o Su r p l u s .............................................................................. 2 2,117,288.63 SURPLUS CAPITAL SURPLUS Balaoce at November I, 1943, and October 31, 1944 ............................................................... 8 8,444,162.99 EARNED SURPLUS Balance at November I, 1943 .......................................................................... 2 8,961,567.02 Add; Net profit for the fiscal year........................................... 8 2,117,288.63 Recovery on investment charged off in prior year . . . 19,700.00 2,136,988.63 Deduct: Cash dividends paid: Convertible preferred -- 8' -25 per share................... Common -- 2 .90 per shar:.......................................... 8 811,098,555.65 448,986.78 742,898.70 1,191,885.48 Balance at October 31, 1944 ...................................................................................................... 9,906,670.17 To t al Su r pl u s at Oc t o b s r 31, 1944 .............................................................................. 118,350,833.16 See notes on following page. GLD002854 NOTES TO FINANCIAL STATEMENTS The (Hidden Company and Subsldiarle* October 31, 1944 Note \-- Inventories of principal raw material* are stated at cost Oast-in, first-out method) which did not exceed replacement market; other inventories are stated at the 1< wet of cost (accumulated average) or replacement market. Note B -- Property, plant, and equipment are stated at cost or less, reduction having been made in 1932 to eliminate appreciation and to provide far further write-dovrns. Note C-- The agreement relating vo long-term notes payable provides that the Company will not declare or pay dividends (other than dividends payable in common s to;k) on any shares of its common stock if in the aggregate such dividends would exceed an amounr equal to the consolidated net earri lgs accurt ulated subsequent to the fiscal year ended October 31, 1942, nor expend in excess of an aggregate of 5200,000.00 in the acquis.tion or retirement of outstanding stock of any class except out of such consolidated net earnings so accumulated. Consolidated net tunings (as defined in the agreement) since October 31, 1942, less dividends paid, amount to 51,730,637.73. Note D -- Net assets of Canjdiai subsidiary included herein comprise net current assets, 1663,479.26, included at the Control Board rate of exchange, and property, plant, and equipment and other assets, 1329,203.05, included at amounts shown by the books of that subsidiary. Consolidated net profit includes 5101,622.60 for the Canadian subsidiary, representing that subsidiary's net profit for the year after giving effect to adjustment of its net current assets to Control Board rate of exchange in effect ar October 31, 1944. Consoli dated earned surplus includes 5I,543,*S46.63 < f surplus of the Canadian subsidiary. Note E -- Profits of the compa lies include those from transactions subject to the provisions of the Renegotiation Act providing for the recapture of any profits found js a result of renegotiation to be excessive. In renegotiation proceedings for the Year ended October 31, 1943, it was determined that prnfir* realized from such transactions were not excessive, and it is believed that the effect, if any, that renegotiation proceedings may have upon the financial statements of the companies for the year ended October 31, 1944, will not be material. Note F -- In prior years certain items of discount and expense, provision for contingencies, and losses on dismantlements have been charged to capital surplus. If such items together with additional depreciation claimed for federal income tax purposes for rhe year 1932 to 1944 inclusive, had been chargsl against tamed surplus instead of capital surplus, the respective amounts of such surplus accounts would be 58,446.250.09 and 59,904,583.07 it October 31, 1944. Note G -- Depreciation claimed in the Company's federal income tax return for the year 1944 exceeded the amount included in this statement by 368,962,08 due to depreciation claimed on costs written off or credited to revaluation reserve during 1932.' Note H -- Includes 198,649 34 wrire-oflf cf unamortired cost of patents, rights to manufacture, and special new produce* develop ment. Board of Directors. The Glidden Company. Cleveland, Ohio. ERNST & ERNST CLEVELAND UNION COMMERCE BUILDING We have examined the consoltdar-.-d bala ice sheet of The Glidden Company and subsidiaries as of October Jl, 1944, and the con solidated statements of profit and !o,s and i urplus for the fiscal year then ended, have reviewed the system of internal control and the accounting procedures of the companies and, without making a detailed audit of the transactions, have examined or tested accounting records of the companies and other supporting evidence, by methods and to the extent we deemed appropriate. Our examination was made in accordance with generall/ accepted auditing standards applicable in the circumstances and included all procedures which we considered necessary. Such procedures inckdcd test confirmation of trade receivables and observation of procedures employed by the companies in atcertaining inventory quantities at locations selected by us. In our opinion, the accompanying balanc: sheet and related statements of profit and loss and surplus present fairly the consolidated position of The Glidden Company and its subsidiaries at October 31, 1944, and the consolidated results of their operations for the fiscal year, in ronformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Cleveland, Oh o, December 20, 1944. ERNST It ERNST Certified Public Affouniants. Gl-000?855 BOARD OF DIRECTORS ADRIAN D. JOYCE ROBERT H. HORSBURGH RICHARD W. LEVENHAGEN WILLIAM J. O'BRIEN DWIGHT P. JOYCE PAUL E. SPRAGUE CLIFTON M. KOLB JOHN A. PETERS OFFICERS ADRIAN D. JOYCE, President ROBERT H. HORSBURGH, Executive Vice-President RICHARD W. LEVENHAGEN, Vice-President WILLIAM J. O'BRIEN, Vice-President DWIGHT P. JOYCE, Vice-President PAUL E. SPRAGUE, Vice-President JOHN A. PETERS, Treasurer CLIFTON M. KOLB, Secretary WILLIAM W. CONANT, Assistant Secretary CLARENCE L. COLE, Controller Transfer Agent THE NEW YORK TRUST COMPANY New York City Registrar THE CHASE NATIONAL BANK New York City GLD00Z856