Document M4oyz49rmvjzgj4db8DDaXEYj

Annual Report 1942 0fftP! Th e Sh e r w in -Wil l ia ms Co . Th e Sh e r w in -Wil l ia ms Co . GEORGE A. MARTIN CHAIRMAN OF THE BOARD To the Stockholders: The Annual Report of The Sherwin-Williams Company for the fiscal year ended August 31st, 1942 is herewith submitted. After allowing for all charges including depreciation, and after providing a reserve of $6,132,701.62 for Federal Income and Excess Profit Taxes, the final Consolidated Net Profit available for divi dends is $5,329,256.15. After deducting Preferred Dividends, the earnings are equivalent to $7.43 per share on the Common compared with $7.83 the previous year. The Consolidated Balance Sheet and Profit and Loss Statements which accompany this letter, give the detailed figures. The management feels that while the figures are largely selfexplanatory, it may not be amiss to comment briefly on the current situation in our business. We are pledged to do everything in our power to help the war effort, and turn out the needed volume of paints and protective coatings of all kinds for airplanes, army and navy equipment; also for spray and dusting insecticides to protect the vital food crops. In addition, there must be sufficient paints available to protect steel and metal and wood buildings and structures of all kinds from corrosion and weather. The conservation of property is a peace time economy and a war time must because these structures cannot be replaced for the duration. Paint protects and preserves them. In spite of the many limitation orders and priorities which have affected the Paint Industry as few industries have been hit, we have been able to take fairly good care of the situation from a consumer standpoint. This has been possible by the use of non-critical equipment and materials to a large extent. Our Research and Technical staffs have found ways and means of adapting our plants and operations to the new conditions. New materials are being developed and successfully used. In one of my previous reports I stated that ours is a chemical industry. Today this applies to our business and to our company more than ever before, and it stands us in good stead. In 1916 we set out to declare our future independence from foreign imports of dyes, chemicals, intermediates and colors. The first World War plunged America into the making of dyes and colors which today are recognized as having no superiors. And, necessity being the mother of invention, also saw as an aftermath of World War I, the development of nitrocellulose lacquers for automobile and industrial finishing. Today, science and chemistry again come to our aid. This time they bring us through their research and experiments, new materials to replace the large number of highly critical materials formerly used so extensively in our manufacturing processes. One of the outstanding developments of the past year is a new kind of flat wall finish made on a synthetic resin-emulsion base, yet can be mixed with water. Unlike so-called water paints however, it is highly durable and washable. This new product is marketed by all the companies in our Institu tion as a Specialty under the name of KEM-TONE. Made largely from non-critical materials, this product meets the needs of the home owner who wants a durable, washable flat wall finish easy to apply over wallpaper and other surfaces. To make its application still easier, we have developed a Roller-Koater to apply it and a decorative touch with our new Kem-Tone Trims. These develop ments are all geared to the present times and to the war economy. The container situation : a serious one but to meet the metal shortage, our new fibre package meets most of our requirements. The man who wants to paint his property next Spring can be reasonably assured at this time, of getting the paint. He may have to be satisfied with certain sizes, fewer colors, emergency containers --even pails without handles, but if our chemists continue to follow their present course, Mr. and Mrs. Consumer will have nothing to complain of by way of the quality of the material. *' To date over 1,000 of our men have joined the armed forces .but those of us who remain on the job are proud and happy to do a little more each day. Our best is but a feeble effort and contribution compared to theirs. It seems to me that the finest thing we can do for them is to assure them on their return, of a place in a stronger, freer world where the post war possibilities for new materials, new ideas, new markets, challenge the imagination. Chairman of the Board CONSOLIDATED PROFIT AND LOSS AND SURPLUS THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES Year ended August 31, 1942 PROFIT AND LOSS Profit from operations for the year ended August 31, 1942, before other income, provision for depreciation, other de ductions, and federal taxes on income Other income______________________ $13,394,292.55 221,647.67 Deductions: Provision for depreciation _ _-------- Loss on disposal of fixed assets and expenses applicable to non-operat ing properties ---------- ------------ Interest expense-------------------- _ - Provision for doubtful accounts, pen sion payments and miscellaneous items _ .__________ Provision for federal taxes on income $13,615,940.22 $1,382,999.68 149,127.75 81,399.17 540,455.85 Normal income taxes__________ $2,803,500.00 Excess profits taxes 3,338,589.72 $6,142,089.72 Less adjustments of prior years pro visions ______________________ 9,388.10 6,132,701.62 8,286,684.07 NET PROFIT _______________ $ 5,329,256.15 EARNED SURPLUS Balance at September 1, 1941_______ Add net profit for the year_________ $26,836,545.99 5,329,256.15 $32,165,802.14 Deduct: Cash dividends declared and paid or provided for during the year: . Preferred--$5.00 per share---- $ 580,507.50 Common---$3.00 per share_____ 1,916,781.00 $2,497,288.50 PnAmiijm nn Tirsfsrrcd stock for redemption____________________ 24,7o0.00 2,522,038.50 BALANCE AT AUGUST 31, 1942 $29,643,763.64 (Note A)---Other income includes the amount of $48,139.87 for dividends receiv ed from the unconsolidated Canadian subsidiary. Final statement as to the operating results of that subsidiary for the year ended August ol, 1942, was not ava:.a_.e a. date of issuance of this report. The Company's proportionate share of net profits ot the other unconsolidated subsidiary, not taken up, amounted to approximately $32,910.00. THE CONSOLIDATED BALAN SHERWIN-WILLIAMS COMPANY August 31, 1942 Assets CURRENT ASSETS Cash _____________________________- U. S. Government securities--at cost and accrued interest (quoted market $124,851.87) ______________ Trade notes and accounts receivable, less reserves (includes account amounting to $40,227.41 receivable ; from spbsidiary not consolidated) _ Inventories--raw materials and sup plies, in process and finished mer chandise stated on basis of lower of cost or market (estimated inter-plant and inter-company profits have neen eliminated) _____________________ TOTAL CURRENT ASSETS_____ $10,673,732.43 124,946.87 10,306,598.79 25,091,080.64 $46,196,358.73 INVESTMENTS AND OTHER ASSETS Securities of subsidiaries not consolidat ed (Note A)____ __________________ $ 3,705,825.00 Other securities--at or below cost _ _ 18,114.60 Insurance deposits, miscellaneous notes and accounts receivable, claims and advances, less reserves ___________ 432,722.69 4,156,662.29 PROPERTY, PLANT, AND EQUIPMENT Land, buildings, machinery and equip ment--at cost to consolidated com panies, less reserves for depreciation * 19,823,382.19 cur : Tk n c c 4 Pre 1 De Ao < Fei Nc TC RES Fc CAP C< PATENTS AND TRADE-MARKS Nominal amount _ _ ______._____ DEFERRED CHARGES Advertising stock, stationery, etc.-----$ Prepaid insurance, deferred taxes, etc. 1.00 618,704.62 388,556.25 1,007,240.87 $71,183,645.08 ^ < (Note A)--Investments in securities of subsidiaries not consolidated include (1) investment of $3,695,825.00 in Canadian subsidiary, stated at cost which was less than the proportionate share of the book value (including intangibles]) of the net _assets of such affiliate as reported to the Company; net increase in equity in this subsidiary since date of acquisition, not taken up by tne parent Company, amounted to approxi mately $86,700.00 as of August 31, 1941, (final statement as to operating resiilts for the year ended August 31, 1942, was not available at date of issuance of this report); (2) investment in another subsidiary amounting to $10,000.00 stated at cost; the Com pany's proportionate share of net profits of such subsidiary not taken up, amounted to approximately $32,910.00. have Augi folio Willi and AT ED BALANCE SHEET AMS COMPANY AND SUBSIDIARIES August 31, 1942 T32.43 >46.87 .598.79. ,v f 080.64 358.73 Liabilities, Capital Stock, and Surplus CURRENT LIABILITIES Trade accounts payable, pay rolls and miscellaneous items (includes ac counts payable to subsidiary not consolidated in the amount of $15,466.26)______ ____________________ Preferred dividend payable September 1, 1942 _________________________ Deposits--officers and employees -- _ Accrued taxes (other than federal in come taxes) and miscellaneous items Federal taxes on income--estimated _ Notes payable to bank (in connection with advances to and loans by foreign subsidiary)-------------- . _-------- ------ TOTAL CURRENT LIABILITIES _ RESERVES For contingencies, maintenance of plants, employers'liability insurance, etc._____________________________ $ 5,217,162.87 140.486.25 694,448.75 497.407.25 6,388,034.87 639,349.87 $13,576,889.86 750,916.58 ,662.29 i,382.19 1.00 240.87 ;,645.08 CAPITAL STOCK AND SURPLUS Capital stock: , Preferred--authorized 395,500 shares (par value $100.00 each--redeem able at $105.00 per share): Outstanding^--Series "AAA" 5% cumulative preferred-- 112,389 shares - _ $11,238,900.00 Common--authorized 800,000 shares (par value $25.00 each): Outstanding -- 638,927 shares _ 15,973,175.00 . $27,212,075.00 Earned surplus_____ ______________ 29,643,763.64 56,855,858.64 \ $71,185,645.08 l include i was less n<e assets u'osidiary i approxi!ts for the 3 report): the Comimounted (Note B)--Net current assets (not significant) of consolidated foreign subsidiaries have been translated into U. S. dollars at the applicable eschangerates in effect at August 31, 1942. Such subsidiaries are located in Argentina, Canada, Cuba, and Mexico. (Note C)--Contingent liabilities of the Company at August 31, 1942, were as follows: '. (1) As endorser of notes discounted by a consolidated foreign subsidiary, $3,415.64. (2) As surety on a performance bond relative_ to performance by The SherwinWilliams Defense Corporation (subsidiary not consolidated) as a party to a construction and operation contract with The United States of America.