Document N1ybwX95y9eXjxn2rBjqaE6R

THE GL1DIDEN COMPANY CLEVELAND, OHIO TO THE SHAREHOLDERS: December 31, 1935 On behalf of the Board of Directors the certified annual report of The Glidden Company for the year ending October 31, 1935 is herewith submitted. There has been no change in the company's established procedure in bookkeeping and accounting and the figures contained therein can easily be compared with the last annual report. The net profits for the year after interest, depreciation charges and all State and Federal taxes, amounted to $2,645,590.17 as compared with a profit of $1,532,323.99 for the previous year. After allowing for payment of dividends on the Prior Preference stock, these earnings are equivalent to$3.23pcr share on 678,883 shares of common capital stock, which was the average number of shares outstanding for the year. At the end of our last fiscal year there were outstanding 650,000 shares of common capital stock. At the end of July, 1935 the company sold 103,881 shares, bringing the number of shares outstanding on October 31, 1935 to a total of 753,881. The profits per share on the common stock outstanding at the end of the year amounted to $2.91 per share. All the properties of the company have been maintained in splendid physical condition and the regular schedule for charging depreciation has been followed. The total depreciation charges for the past fiscal year amounted to $527,871.39 In the last annual report attention was directed to the modern Soya Bean Oil extraction plant at Chicago which had just been completed, and to the Lecithin and Soya-Protein plants which were being constructed. These plants were completely destroyed by a disastrous explosion on October 7, 1935. Fortunately, the buildings and equipment were well covered by insurance and full settlement, not only for loss by explosion but for Use and Occupancy, has been received. Reconstruction of the various units comprising these new enterprises is now under way and will be pushed to completion as rapidly as possible. It is the belief of the management that the new plants will be in operation early in the Spring so the company can take advantage of the opportunities afforded by the present large crop of Soya Beans. During the year the plant of our affiliated company, the American Zirconium Corporation, built for the production of titanium pigments, has been put into complete operation and should now show satisfactory profits. The company has purchased the minority interest in the Nelio-Resin Corporation and this corporation is now a wholly owned subsidiary. The output of its plants has been sold for the ensuing year and the future looks very bright for this new development. The profits for November, the first month of the new fiscal year, as compared with November of last year, were nearly double. Our sales are increasing in all divisions and the prospects for our whole business for the new year are most encouraging. The Board of Directors and officers desire to take this opportunity of expressing their appreciation of the good work of the employees and executives in charge of operations whose efforts have contributed so substantially to the results shown in this report. By order of the Board of Directors. ADRIAN D. JOYCE President. CONDENSED B THE GLIDDEN COMPANY AND CONSOLIDATED SUBSIDE ASSETS Current Cash on Hand, on Deposit and in Transit Customers' Notes and Acceptances Receivable 100.60S.92 Customers' Accounts Receivable 4,041,819.20 1,030,969.19 Less: Reserves $ 4,142,425.12 193,955.18 3,948,469.94 Miscellaneous Current Accounts and Creditors' Debit Balances Inventory (lower of cost or market values): Raw Material, in Process, Finished Goods and Supplies 149,799.59 9,258,576.03 $ 14,387,814.75 Other Assets Insurance Claims Paid in December 1935 Cash Surrender Value of Life Insurance Claims Against Closed Banks, Less Reserve Miscellaneous Notes and Accounts, Salesmen's Advances, Sundry Investments, etc. 707,241.85 334,148.75 77,875.62 124,632.61 1,243,898.83 Investments in Subsidiary and Affiliated Companies (At less than cost) California Mining Companies (Note A) Capital Stock (fully owned) Bonds (principal amount 500,000.00) Advances 15,000.00 187,500.00 826,901.97 $ 1,029,401.97 Other Affiliated Companies: (Note A) Capital Stock Advances $ 483,200.00 545,920.79 1,029,120.79 2,058,522.76 Permanent Land Buildings, Machinery, Equipment, etc. on basis of Cost or Appraisal Value, Less Special Write-down Less: Reserve for Depreciation and Depletion 1,831,136.00 14,319,073.11 16,150,209.11 5,254,088.54 10,896,120.57 Intangibles Good Will Patents and Trade Marks Rights to Manufacture, Secret Processes, Formulas, etc. 2,492,007.93 233,173.18 70,327.98 2,795,509.09 Deferred Inventory of Advertising Stock, Stationery, Unexpired Insurance Premiums, Prepaid Taxes, etc. Special New Products Development Reorganization Expenses, Including Com mission)! on Sale of Preferred Stock Unamortized Note Issue Expense $ 383,618.11 95,570.71 365,921.09 10,368.81 855,478.72 32,237,344.72 The Glidden Company, December 24, 1925 Cleveland. We have made an exaninatien of tbe consolidated balance sheet of THE GLIDDEN COMPANY--CLEVE- LAND and iu fully twned labsidiarics (eiclmive of California mining companies) * at October 51, 19J5 and of the statement of income and surplus for the year ended at that data, la connection therewith we examined or tested accounting records of the (Companies and other supporting evidence, end obtained information aad explanations from officers and employees of the Company; wc also made a general review of the accounting methods end of the operating and income account* for the year, bet we did not make a detailed audit ef the transactions. Our tests of inventories indicated that they are stated on the hasla of the lower of cost or market vetoes nod tkat estimated inter-compsny profits have keen eliminated. The fixed assets art staecd on the basis of cost or appraised values less reserves provided for revaluation, depre ciation and depletion. The remaining portion of unrealised appreciation included in the gross value ef these assets is offset by a portion of the revaluation reserve and that reserve was also provided te reduce the cost value ef certain assets to estimated basis of values prevailing during the year 1952 determined by the Board of Directors. The cost - of fixed aisers principally consists of rash expenditures, although certain properties were acquired partly for stock* * The net value of the fixed assets is net intended to represent the present value of the properties. Good will, patent, trade marks and other items classified as intangibles are stated at valaee assigned thereto at of dates of acquisition for cesb or capital stock of the Compaay, less small amounts amortised. Of the items repro* GLD002940 N 2173.01 IALANCE SHEET IARIES AS OF THE CLOSE OF BUSINESS, OCTOBER 31. 1935 LIABILITIES, CAPITAL and SURPLUS Current Notes Payable for Money Borrowed from Banks $ 1,000,000.00 Accounts Payable for Purchases, Pay Rolls, etc. 1,279,798.76 Accrued Taxes, Interest, Insurance, Royalties., etc, (including federal income tax) 754,374.38 Five Year S^% Gold Notes--Due June 1, 1935 Called August 1, 1934 and Not Presented 3,000.00 First Mortgage 6% Gold Bonds of Subsidiary Company due April 15, 1936 33,000.00 Long Term Debt {exclusive of amounts shown as current) Five Year 5J^% Gold Notes due June 1, 193S $ 3,259,000.00 First Mortgage 6% Gold Bonds of Subsidiary Companies, Less Held in Treasury 64,200.00 Deferred Credit Unapplied Portion of Insurance Settlement Reserve For Contingencies (including amount of {>67,912.46 provided from capital surplus in 1932) Capital and Surplus Capital Stock Prior Preference--7% Cumulative Authorized 75,000 shares $ 7,500,000.00 Less: Unissued and Redeemed 10,000 shares 1,000,000.00 $ 6,500,000.00 Common--Without Par Value Authorized 800,000 shares Outstanding 753,881 shares Reserved: For Sale to Officers and Key Employees 46,000 shares For Sale to Others 119 shares Stated Capital at 35.00 a share 3,769,405.00 Surplus Capital $ 9,870,176.72 Profit and Loss 5,358,242.84 15,228,419.56 $ 3,070,173.14 3,323,200.00 210,349.00 135,798.02 25,497,824.56 (Note A) (Note B) (Note C) Investments in California Mining Companies, whose assets consist almost en tirely of properties not being operated, are stated herein at less than cost, which carrying value on the basis of unaudited balance sheets, was $115,609.70 less than the book value of the net assets of those companies. Losses have been experienced by these companies from date of acquisition to October 31, 1935, however, the losses for the last 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. Securities of other affiliated companies represent a 50% interest in common stock and 100% interest in preferred stock of a company, the unaudited statement of which shows an accumulated deficit of $81,730.63 at October 31, 1935;and approximately 54% of common stock of a company, at cost, which was $31,638.75 in excess of the equity in that company's net assets at October 31, 1935. The Company was reported as having letters of credit outstanding in the amount of $976,957.48 and it was contingently liable for subscriptions to capital stock of other corporations in the amount of $199,600.00. This balance sheet is subject to the comments submitted herewith. $ 32,237,344.72 tented under (hi* classification the amount of J97.19i.JS is Iteing amortized. No amortization hat beta provided against reorganization ripensea and commissions on sale of preferred stock, classified at deferred. Officials of the Company have eapreiaed the opinion that pending lawsuits are of minor importance and that the Companies will have no material losses in connection Herewith.. During the year the Company entered into in underwritini agreement for the sate of 104,000 sharei of its common stock, of which 1UJ.88I shares were sold, principally to shareholders, at 22.00 each and the remaining 119 shares have been reserved for issuance. Of the proceeds realized, the amount of 5.00 a share was credited to stated capital and the remainder to capital Surplus, after deducting therefrom underwriting fees and commissions and eapenaca in connection with the issue. The corporate minutes record an authorisation for the issuance of 46,000 additional com mow shares to officers and key employees at a price of 22.00 a share. No allocation of these shares bad been made at October 31, 1935. tn our opinion, based upon our examination, the accompanying consolidated balance sheet and related statement of income and surplus fairly present the consolidated position of the Company and its subsidiaries, excepting Cali fornia mining companies, at October 31, 1935 and the results from operations for the year ended at chat dace. Subject to the foregoing comments and to the footnotes on the accompanying statements, it is our opinion that the statements have been prepared io accordance with accepted accounting principles *ad o p a basis consistent with the preceding year, Erast It Ernst. Certified Public Accountaata* GLD 002941 CONDENSED OPERATING STATEMENT THE GLIDDEN COMPANY AND CONSOLIDATED SUBSIDIARIES For the Fiscal Year Ended October 31, 1935 Net Sales (Excluding inter-company and sudsidiary sales and transfers) 339,528,738.84 Profit Before Interest, Depreciation and Other Incomi Other Income--Net Interest on Funded Debt Other Interest Expense Profit Before Providing for Depreciation and Federal Income Tax Provision for Depreciation and Depletion Profit Before Federal Income Tax Provision for Federal Income Tax 3 185,926.45 58,509.76 3 3,750,355.16 59,542.61 3 3,809,897.77 244,436.21 Net Profit 3 3,565,461.56 527,871.39 3 3,037,590.17 392,000-00 3 2,645,590.17 (Note A) (Note B) (Note C) No.provision has been made in the foregoing statement fot (I) Ion of fully owned nen-operated California mining companies for eke year, amounting to 845,714.71, including provision for depreciation in the amount of 834,362.88 and (2) portion of Ion amounting to 854,522.29* applicable to the Company's investment in common stock of other affiliated companies. Discount and expense on notes and bonds of the companies were charged to capital surplus as of November 1* 1931 at authoriwd by the Board of Directors. If these items had been amortized on the basis of mousy in use, the amount of 811,814.48 would bave been charged against income for the year ended October 31, 1935. t Deprecation or amortization on patents and rights is included In the above statement in the amount ol 87**07.60 on n groat value of 8106,325.40. No amortization has been provided for other intangibles or for reorganisation eipensss and commissions en solo of preferred (Note D) (Note E) Depreciation claimed for federal income tax purposes during the j>iit several years exceeded the provisions charged against income SJ1 the Company*! records, such excess being due to depreciation clainrcd on costs written of or credited to revaluation reserve during 1932. The federal income tai return for the year I93S has not, at yet, been prepared* but it is anticipated chat depreciation provided therein will exceed that charged on the records of the Company. Special new products development* aggregating 861,535.0(5 for the fical rear 1935* deferred in accompanying balance abeet* was treated as expense for the purpose of computing estimated federal incomi caa liability for the year. Capital Surplus Balance October 31, 1934 SURPLUS ACCOUNTS Addition Excess of Selling Price Over Stated Value of 103,881 Shares of Common Stock Less: Underwriting Fees and Commissions 3 108,500.00 Other Expenses in Connection with Above Issue 28,251.92 3 1,765,977.00 136,751.92 Profit and Loss--Surplus Balance October 31, 1934 Addition Net Profit from Operations for the Fiscal Year Ended October 31, 1935 Deductions Dividends Paid: Prior Preference--7% Common--31.60 a Share Balance October 31, 1935 3 2,645,590.17 3 455,000.00 1,081,526.40 1,536,526.40 Balance October 31, 1935 3 8,240,951.64 1,629,225.08 $ 9,870,176.72 3 4,249,179.07 1,109,063.77 3 5,358,242.84 (Note A) Discount and expense in the amount of 8130,052.90 on Icni; term debt were charged to capital sarplaa as of November 1, 1931, a* authorised by the Board of Directors. If the items of discount and expense, portion ef reserve for contingencies provided from capital surplus in prior year* and additional depreciation claimed for federal income tax purposes had been charged against i-anicd surplus, instead of eapitnl wslii, thempoctiv amounts of such surplus accounts would be 84,876,717.24 and 810*351,/0U3 as of October 31* 1935. GLD002942