Document K67mGb3B2X3k2paOK5n8wKN0x

The Dow Chemical Company * MIDLAND, MICHIGAN Annual Report FOR YEAR ENDED MAY 31, 1940 THE DOW CHEMICAL COMPANY MIDLAND, MICHIGAN E. 0. BARSTOW W. H. DOW J. S. CRIDER Director* E. W. BENNETT J. T. PARDEE L. I. DOAN W. R. VEAZEY G. E. COLLINGS C. J. STROSACKER Officer* Chairmon of the Board - J. T. PARDEE President ond General Monoger - W. H, DOW Vice President .... G. E. COLLI NGS Vice President - J. T. PARDEE Vice President, Sec'y and Treasurer E. W. BENNETT Vice President and General Soles Manager - L. I, DOAN Assistant Treasurer - J. S. CRIDER Assistant General Manager A. P. BEUTEL Auditor ond Assistant Secretary L. A. CHICHESTER Assistant Secretary - F. H. BROWN KST 0 0 036 0C Registrar* The New York. Trust Company 100 Broadway New York City The National City Bonk of Cleveland Cleveland, Ohio Transfer Agents Guaranty Trust Company of New York 140 Broadwoy New York City The Cleveland Trust Company Cleveland, Ohio TO THE STOCKHOLDERS OF THE DOW CHEMICAL COMPANY: The forty-third annual report of your Company is presented herewith. The consolidated financial statements for the fiscal year ended May 31, 1940 have been audited by Messrs. Haskins & Sells, whose certificate is reproduced as part of this report. FINANCIAL STATEMENTS-- The consolidated balance sheet May 31, 1940, statement of consolidated income for the year ended May 31, 1940 and statement of consolidated earned sur plus for the year ended Moy 31, 1940 are shown herein. The total assets of your Company and its Subsidiaries omounted to $48,185,010.09, which figure includes current assets omounting to SI5,965,682.69. Current liabilities amounted to 55,151,315.07. EARNINGS-- The consolidated net income of the Company and its Subsidiaries for the year ended May 31, 1940 omounted to $7,159,167.12 after provision for deprecia tion and Federal income taxes. After deducting dividends on the preferred copital stock of $300,000.00, the consolidated net income was equivalent to $6.65 per share on the number of shores of common copital stock outstanding during the year. This compares with $4,178,485.17 or $3.95 per share for the year ended Moy 31, 1939. (See Chart No. 1.) DIVIDENDS-- Your Company distributed four equal quarterly dividends, aggregating $3.00 per share, to the common stockholders during the year. Including dividends on the preferred copitol stock of $300,000.00, the dividends disbursed to shareholders amounted to $3,395,764.50. SURPLUS-- The net increose in consolidated earned surplus for the yeor amounted to $3,763,402.62, bringing the consolidated earned surplus as of Moy 31, 1940 to 514,992,555.07. NET SALES-- Net soles for this period amounted to $37,743,546.64. (See Chart No. 2.) PLANT AND PROPERTY-- Additions to plant and property amounted to $7,322,035.99 during the year ended May 31, 1940. The major expenditures were for additions to plants and improvements to processes. (See Chart No. 3.1 M S uQILLS_^ 1 MAJOR TAXES-- Total mcjor taxes paid during the year amounted to $2,533,994 80, which represents an equivalent cost per share on common stock of $2.45. (See Chart No. 4.1 The foregoing statements summarize very briefly our financial position. More complete detoils may be obtained by study of the graphs and reports submit ted herewith. SUBSIDIARIES-- Dowell Incorporated (100% owned) and Dowell Sociedad Anonima of Mex ico 000% owned, except for qualifying shares for Directors as required by Mexican low)--Dowell Incorporated operotes in 14 Stotes ond 2 Canadian Provinces, with 27 service sfotions, to give chemical treatment to oil wells. Midland Ammonia Company (75% owned) is a manufacturing unit for the production of ommonio from the waste hydrogen generated by our chlorine cells. Cliffs Dow Chemical Company (60% of common stock owned) is a subsid iary operating in Marquette, Michigan on the carbonization of wood to produce charcoal and other products, including activated carbon for water purification, anti freeze solvent ond other chemicals. This past year is the first to show a profit on the operation. AFFILIATED COMPANY-- Efhyl-Dow Chemical Company is 50% owned by The Dow Chemicol Company and 50% by the Ethyl Gasoline Corporation. The business of this Company con tinues at a good substantial volume and the earnings reported in our statement rep resent substantially our share of the earnings of this Company for the period. We consider the operations of the above companies as satisfactory ond a definite trend of progress is shown in each unit. GREAT WESTERN DIVISION-- This Division, since the merger of the Great Western Electro-Chemicol Company with The Dow Chemicol Company on December 31, 1938, has shown Steady growth ond progress. Its earnings, based on the number of shores issued in connection with the merger, hove been more than the herein stated per share earnings of The Dow Chemical Company. TEXAS DIVISION-- During the past two years, we have been surveying the possibilities for increasing the capacity for various products with the thought of obtaining cheaper costs ond necessary increased production. Shortly offer January 1940 the Board of Directors authorized the construction of o plont at Freeport, Texas for the pro duction of magnesium and related products. Freeport, Texas is situated approx imately 65 miles south of Houston on the Brazos River ship channel. It is also ' ST 0003 G90 connected with ether ports by a Government inland waterway and, therefore, accommodates both ocean and borge as well as railroad transportation. Purchose of more thon 1,000 acres of land was made and contracts were let for the con struction of a 50,000 k. w. power plant. In addition, a magnesium cell plant and other related plants and service facilities are now under way. The total invest ment in plant will be approximately $15,000,000 in order to complete the plans contemplated. The Freeport, Texas plant will be known as the Texas Division, The Dow Chemical Company. OTHER PLANT EXTENSIONS-- Many large demands are required for other plant extensions to relieve congestion in production ond to provide for new manufacture. The volume of olmost every product has increased and new demands are placed upon us for many new products. The record soles and profits for this past year are indicative of the progress of research ond development. With the above demands, it will be necessary in the near future to provide additional working capital, either by loons, sale of debentures or sale of stock. STOO03691 EMPLOYEES-- Our Company enjoys o close contoct and understanding between its employees ond its management. The employees are paid additional compensation under a profit sharing plan which has been in operation since approximately 1916, but which has been modified from time to time. Under this plan, there was accrued and charged to expense during the fiscal yeor just closed on amount of $450,784.90 --approximately 50% of which was disbursed December 20, 1939 and the balance July 17, 1940. The following five members of the Board of Directors--the Chair man of the Board, the President and General Manager, a Vice President, the Treas urer and the Assistant Treasurer, do not participate in the profit sharing plan. Midland, Michigan July 24, 1940 WILLARD H. DOW, President NOTICE Information presented on the following graphs for fiscal years 1931-1937 inclusive, apply to The Dow Chemical Company only; information for subsequent years is prepared from the Con solidated Statements of The Dow Chemical Company and its subsidiaries. s T0003692 ECSCG0D1Sr *UfiOO.OOO /2000fi00_ n. ooopoo 10.000,000 9.000. 000 o. ooo.ooo_ 7.000. 000 6.000. 000- Net income ix/ore depreciation and taxes j,ooo.ooo_ 4.000.000 \ 5000.000 2L.OOO.OOO I.OOOflOO 229 t.97 i.33 3.56 3.29 4.42. 4J7 391 3.95 Earnmfs per share hi%se4 an 944,000 Shares common stock up to /9J9 Jfjt - based an 90/^43 Shores (averaft number sharts outs/enef/nf) /940- based on /OJ/.fSa Shares (present outs/andinf shares) /9J/ /942 m3 t934 ms 1936 1937 ma /939 6.65 1940 Chari No. 1 4O,O0O,OOO_ JO. 0OO. ooo 20,000,000 /o,ooo,ooo / i t/< r/ Sc /es \ rofuA b u _________ ?STOO 03694 N Div! 9end OQic /.000.000 e.a - . 'arm ">os per , ihare com non . itock 3.Si -144 4,92. 4J7 / 3.9/ 3.9S 2.29 1.97 /.jj /00,000 1931 J932 1933 1934 /9JS 1936 1937 1933 1939 /940 Earnings per share based on 943.000 Shares common dock up ho /939 /9J9 ~ based on 90/.2.4S Shares(avera^e number chares oubshand/no) /9 40 based on /03/.938 Shares-foresenh outstanding shares Chart No. 2 SC,000/XX! 40,000,0O_ JO.OOO.OCO 20000,000 10.000,000 /nvajtod Capita Funoed in c /udi \ \erve /or ifepret. iaf/ob / Net HJ ?l/l f. Ca, ?//a/ r ST0003B95 tfiOCfiOO J./9 439 2.93 3.U 336 S. 40 3.97 J.J7 X/O 2.20 8a Curr nt A&ieU__ to. Cu rron) a hi/. ;Mej 1939 1932 /933 9934 J93S 7936 i937 9933 /939 9940 Chart No. 3 ! 1 S.OOOfiOO S.000.000 4/500,000 3,000/500 2/500,000 Oiridi '.nds , >a/d < "as/r \ IP00.000 SOO.OOO \ y ( Majo, - yd X*J . a/d Ala/oi Tax ts p er j bare comr ion si act 2.43 r-L fOO /.36 /.S 4 139 .93 .06 .39 .903 312 .99 100/500 9939 9932 9933 1934 /9JS 1936 9937 9933 9939 9940 Note - Per Share da/a is based on 943,000 Shares common stock, up to 1939 1939-basedon 939,245staresfaverage number shares outstanding J 9940-based on 9039,963 shares-^resent outstanding shares^ 'STOO03696 Chart No. 4 4 17,000,000 16,000,000 \ 13jOOO,OOQ\ 14,000,00Q\ CURRENT ASSETS ST0003697 J.000.000 1931 1932 1933 1934 1435 1936 1937 1933 1939 1940 Chart No. 5 i The Dow Chemical Company and Subsidiary Companies Payroll paid durinp rise a l rear 1940 0G9OOOISj 3 *10,363,000 Dividends paid la JloeAholders Fiscal y,ear 19*0 Major Taxes paid Fiscal Year 1940 iff 3,395,764 *2,533,994 Chart No. 6 r ST00Q3699 The grophs oppeoring in this report ore not to be reproduced or used without the permission of The Dow Chemicol Company. HASKINS & SELLS CCBTir'CD *VBUC ACCOUNTANTS *-aou not* <* k wO<l TH( HATlONA*. #UIUO**0 oct*o*t ' ST0O037OO ACC0TOIAOT3' GKPTmCATB The Cot Qiasical Company: To boro examined the consolidated balance sheet of The Cot chanrif-ni coeany ad its subsidiary ccopanies as of Say 31, 1940 and the statements of consolidated income and earned surplus for the year ended that date, have reviewed the systems of in ternal control and the accounting procedures of the companies, and have examined or tested accounting records and other supporting evidence by methods and to the extent ee deemed appropriate. In our opinion, the accompanying consolidated balance sheet end related statements of consolidated income and earned surplus fairly present the financial condition of the companies at Kay 31, 1940 and the results of their operations for the year andad that date, in oonfonnity with generally accepted accounting principles fallared by the companies on a basis consistent with that of the preceding year. *_ V- JUly 15, 1940. THE DOW CHEMICAL COMPANY (Incorporated in Michigan) AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET, MAY 31, 1940 CURRENT ASSETS: ASSETS Cosh United States Treasury bonds, 33A% -- at cost (face value, $200,000.00; market value $223,375.00)____ _________________ Notes and accounts receivable: Customers, $3,888,783.90; associated company, $5,312.85; employees, $27,166.21; and sun dry, $84,319.5! $ 4,005,582.47 Less reserves for doubtful receivables_________ 171,663.05 $ 5,337,553.39 217,750.00 3,833,919.42 Inventories: Finished goods and work In process (ot lower of cost or market). Materials and supplies (at cost--approximately market) _________________________________ $ 4,256,768.27 2.319,691.61 6,576,459.88 Total current assets_____________________ INVESTMENTS AND MISCELLANEOUS ASSETS: Associated company: Notes receivable, maturing No vember 15, 1942 ___________ $519,500.00 Preferred and common capital stocks -- at cost (equity in net worth of associated com pany ot Moy 31, 1940 was $1,405,575 84 os shown by its unaudited balance sheet)___ 363,300.00 $15,965,682.69 $882,800.00 Instalment notes receivable, maturing 1942 to 1948 ________________ _______ --........................ Housing properties (less reserves for depreciation, $27,715.87) and related receivables Miscellaneous securities and receivables (less re serve, $46,718.14) 500,000.00 301,474.48 168,358.77 Total investments and miscellaneous ossets FIXED ASSETS: Real estate, plants, and equipment--at cost (less reserves for depreciation, $19,942,527.26)----- Patents--ot cost or nominal value (less reserves for amortization, $36,593.28) ----------------------- $30,124,829.43 78,681.12 1,852,633.25 Total fixed ossets----------------------------------------------------------DEFERRED CHARGES--Unexpired insurance premiums, unamortized debenture discount and expense, and miscellaneous----------------------- TOTAL 30,203,510.55 163.183.60 $48,185,010.09 lo m o o is : T THE DOW CHEMICAL COMPANY I Incorporated in Michigan > AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET, MAY 31, 1940 LIABILITIES CURRENT LIABILITIES: Accounts payable--Trade and miscellaneous $ 2,404,222.67 Employees' compensation owords__________________________________ Federal income and excess-profits taxes___________________________ Accrued liabilities: Payrolls and bonus Taxes (other than Federal income toxes) _______________________ Sundry Total current liabilities $ 5,151,315.07 FIFTEEN YEAR 3% DEBENTURES, DUE DECEM8ER 1, 1951 (subject to redemption through sinking fund commencing June 1, 1941)___ RESERVES FOR FIRE AND ACCIDENT LOSSES, DAMAGE CLAIMS, FOREIGN EXCHANGE LOSSES, AND CONTINGENCIES__________ MINORITY INTERESTS IN CAPITAL STOCK AND SURPLUS OR DEFICIT OF SUBSIDIARY COMPANIES__________________________ CAPITAL STOCK: Preferred capital stock--5% cumulative (au thorized and outstanding, 60,000 shores of $100.00 par value eoch) $ 6,000,000.00 Common capital stock (authorized, 2,000,000 shores without par value; outstanding, 1,031,988 shares) 15,829,609.33 Total capital stock 21,829,609.33 SURPLUS: Capital surplus (increased during the year ended May 31, 1940 by profit on trading in fractional shares of common capital stock, $324.85)----- Earned surplus--------------------------------------------------- $ 100,732.39 14,992,555.07 Total surplus 15,093,287.46 55,445.81 1,531,039.51 629,993.98 414,855.56 115,757.54 5,000,000.00 346,059.69 764,738.54 z o m o o is ; TOTAL _________ _______ ____ ________ _______________ $48,185,010.09 kjOTES' Purehoi* commitments mod* through a construction company in connection with th* extension of the Compony'i plont facilities. prlncipolly ot Freeport, Texoi, aggregated approximately $4,900,000 at May 31, 1940- .___^ Accrued dividends on the Clou A preferred capitol stock held by th* minority In terest of the Cliffs Dow Chemical Company, a subsidiary company consolidated herein, which hod not been declared by the Board of Directors ofthotcornpony or provided for In this balance sheet, omounted to $85,188.00 ot May 31, 1940. THE DOW CHEMICAL COMPANY AND SUBSIDIARY COMPANIES STATEMENT OF CONSOLIDATED INCOME FOR THE YEAR ENDED MAY 31, 1940 ; ST 0 0 IJ3 10 3 SALES (net of returns, allowonces, cosh discounts, and freight) COST OF SALES (exclusive of provision for depreciation) $37,743,546.64 22,979,159.32 GROSS PROFIT________ SELLING AND GENERAL EXPENSES (exclusive of provision for depre ciation) : -- Selling and administrative expenses___________ $2,817,025.31 Research and experimental expenses__________ 1,744,459.91 $14,764,387.32 4.561.485.22 PROFIT FROM OPERATIONS BEFORE PROVIDING FOR DEPRECIA TION --------------------------------------- --------------------------------------------------- PROVISION FOR DEPRECIATION (less adjustment of provision for prior year, $69,247.19) $10,202,902.10 2.663.340.22 PROFIT FROM OPERATIONS OTHER INCOME: Dividends, $1,255,907.50, and interest, $45,634.46, from associated company Other interest earned, royalties, and miscellaneous $1,301,541.96 186,592.95 $ 7,539,561.88 1,488,134.91 GROSS INCOME INCOME CHARGES: Interest and amortization of discount ond expense on debentures $ 159,394.56 Loss on disposal of fixed assets, foreign exchange losses, and miscellaneous_____________________ $ 9,027,696.79 89,700.72 249,095.28 NET INCOME BEFORE PROVIDING FOR FEDERAL INCOME AND EXCESS-PROFITS TAXES PROVISION FOR FEDERAL INCOME AND EXCESS-PROFITS TAXES-- $ 8,778,601.51 1.533,466.95 NET INCOME BEFORE ADJUSTMENT FOR MINORITY INTERESTS IN SUBSIDIARY COMPANIES MINORITY INTERESTS' SHARE OF PROFITS OF SUBSIDIARY COM PANIES NET INCOME FOR THE YEAR $ 7,245,134.56 85,967.44 $ 7,159,167,12 r THE DOW CHEMICAL COMPANY AND SUBSIDIARY COMPANIES STATEMENT OF CONSOLIDATED EARNED SURPLUS FOR THE YEAR ENDED MAY 31, 1940 BALANCE, JUNE I, 1939 CREDIT--NET INCOME FOR THE YEAR_____________________ ______ CHARGE--CASH DIVIDENDS: Common capital stock $3,095,764.50 Preferred capital stock___________________________ Totol 300,000.00 BALANCE, MAY 31, 1940......................... --.................................. .......... $11,229,15245 7,159,167.12 $18,388,319.57 3,395,764.50 $14,992,555.07 'lOiECOOiS : DOW CHEMICALS IN INDUSTRY -- A PARTIAL LIST -- STOOD 3705 AUTOMOTIVE AND AIRCRAFT Corbon Tetrachloride Caustic Soda Dowmetol Ethocel Ethylene Glycol Methanol Perchlorethylene Thiokol EXPLOSIVES Ammonia, Anhydrous Aniline Oil Charcoal, Pulverized Diethylaniline Diethylene Glycol Dimethylaniline Diphenylomine Hexachlorethane Monochlorbenzene Phenol LEATHER Dowicides Epsom Salt Ethocel Iron Liquor Methocel Salt Sodium Acetate Sodium Sulphide Sulphur Dioxide MINING AND METALLURGY Acetylene Tetrabromide Ammonia, Anhydrous Ammonium Chloride Chlorine, Liquid Ferrous Chloride Flotation Oil (Wood Creosotes) Mining Salts Muriatic Acid Perchlorethylene Sodium Sulphide Sulphur Chloride Xanthates F Reagent, Potassium Furfuryl Xanthote Potassium Hexyl Xanthate 2-3, Potassium Ethyl Xanthate 2-4, Sodium Ethyl Xanthote 2-5, Potossium Amyl Xanthate 2-6, Pentasol Xanthate 2-8, Secondary Butyl Xonthote 2-9, Potassium Isopropyl Xonthote 2inc Ammonium Chloride PAINT, VARNISH AND LACQUER Acetic Acid Bis Phenol-A Corbon Tetrachloride Diethylene Glycol Dowicides Dowtherm Ethocel Ethylene Dichloride Methanol Methocel Methyl Acetone Methylene Chloride Orthodichlorbenzene Phenol Plasticizers Propylene Dichloride Styron Thiokol Triphenyl Phosphate PAPER Caustic Soda Chlorine, Liquid Dowicides Dowtherm Ethocel Methocel Plasticizers Sodium Sulphide 2inc Hydrosulphite DOW CHEMICALS IN -- A PARTIAL LIST PETROLEUM RAYON An-irrvoma, Anhydrous Calcium Chloride Caustic Potash Caustic Soda Dowell Products Dowmetol Ethylene Dibromide Acetic Acid Carbon Bisulphide Caustic Sodo Epsom Solt Ethocel Muriatic Acid Sodium Sulphide Inhibitors REFRIGERATION Muriatic Acid Phenol Sulphur Dioxide Ammonia, Anhydrous Calcium Chloride Ethyl Bromide Ethyl Chloride PHOTOGRAPHIC Methyl Bromide Methylene Chloride Acetic Acid Salt Ammonium Bromide Sulphur Dioxide Carbon Tefrochloride Ferric Chloride RUBBER Hydrobromic Acid Iodine Acetic Acid Acrylic Nitrile Monochlorocetic Acid Ammonia, Anhydrous Phenol Potassium Bromide Sodium Bromide Aniline Oil Butadiene Carbon Bisulphide Carbon Tetrachloride PLASTIC AND RESIN Caustic Soda Charcoal, Pulverized Aniline Oil Bis Phenol-A Carbon Tetrachloride Caustic Soda Charcoal, Airfloat Diphenylguanidine Ethylene Dichloride Hardwood Pitch "Mike" Sulfur Muriatic Acid Phenol Diphenyl Ethocel Ethofoil Ethyl Chloride Sodium Sulphide Styrene Sulphur Chloride Thiokol Ethylene Dichloride SOAP Hardwood Pitch Methoeel Orthophenylphenol Caustic Potash Caustic Soda Coumarin Pora Tertiary Butyl Phenol Diphenyloxide Phenol Dowtherm Plasticizers Styran Thiokol Phenol Phenyl Ethyl Alcohol Salt INDUSTRY TEXTILE Acetic Acid Ammonium Chloride Calcium Chloride Carbon Tetrachloride Caustic Soda Chloroform Dowicides Epsom Salt Ethocel Ethylene Dichloride Indigo ond Brom Indigos Iron Liquor Methoeel Perchlorethylene Phenol Sodium Acetote Sodium Sulphide Sulphur Chloride Vat Dyes AGRICULTURAL Arsenate of Lead Bordow Calcium Arsenate Carbon Bisulphide Caustic Soda Charcoal, Granulated DN-Dust Dowfume Dowax Dowsproy Dormant Ethylene Dichloride Ethylene Oxide K-383 (Fly Spray) Lime Sulphur Magnesium Arsenate Methyl Bromide "Mike" Sulfur Parodow Paris Green Phenothiazine Special Garden Sprays Sulphur Dioxide Xanthates s T00o3106 DOW CHEMICALS IN INDUSTRY -- A PARTIAL LIST -- PHARMACEUTICAL AND AROMATIC Acetanrlid, U. S. P. Acetphenetidin, U. S. P. Acetyl Salicylic Acid, U. S. P. Ammonium Bromide, U. S. P. Ammonium Chloride Ammonium Salicylate, U. S. P. Antipyrene, U. S. P. Bromoform, U. S. P. IX Cadmium Bromide, U. S. P. Calcium Bromide, U. S. P. Camphor, Monobromated, N. F. Corbon Tetrachloride, C. P. Chloroform, U. S. P. Coumarin Diphenyloxide Epsom Solt, U. S. P. Ethyl Chloride, U. S. P. Ethyl Salicylate Ethyl Salicylate Corbonate Ferric Chloride, U. S. P. Glycine Iodine Lithium Bromide, N. F. Magnesium Bromide Magnesium Salicylate Methyl Anthranilote Methyl Salicylate, U. S. P. Phenol, U. S. P. Phenyl Ethyl Alcohol Potassium Bromide, U. S. P. Salicylic Acid, U. S. P. Solol, U. S. P. Sodium Acetate, U. S. P. Sodium Bromide, U. S. P. Sodium Salicylate, U. S. P. Strontium Bromide, N. F. Strontium Salicylate, N. F. Tetrochlorethylene, Purified Trichloracetic Acid, U. S. P. WATER PURIFICATION AND SEWAGE DISPOSAL Ammonia, Anhydrous Carbon, Activated Chlorine, Liquid Ferric Chloride ELECTRICAL Carbon, Activated Hardwood Pitch Trichlorbenzene Styron LUMBER Creosote Oil Dichlor Diphenyloxide Dowicides Orthodichlorbenzene ST000370? ST0003708 This cover is ETHOFOIL IDow Ethylccllulose film). It >s availob'e m cleor transporent ond in mony colon