Document RKdzXz03rROgKOqr1d9y8g2n

PLAINTIFF'S EXHIBIT 1961 ANNUAL REPORT MONSANTO CHEMICAL COMPANY LAM016719 MAS 000660 DIRECTORS AND OFFICERS BOARD OF DIRECTORS OFFICERS Charles Allen Thomas, Chairman............ St. Louis Charles Allen Thomas .... Chairman of the Board of Dillon Anderson.................................................Houston Charles H. Sommer John L. Christian.............................................................St.Louis Directors President and Chairman of the Executive Committee Fredrick M. Eaton.......................................................NewYorkEdgar M. Queeny ............... Chairman of the Finance John L. Gillis.....................................................................St.Louis Committee Carroll A. Hochwalt.....................................................St.LouisJohn L. Christian........................................ Vice President Herbert Hoover Jr.............................. Los Angeles John L. Gillis VicePresident Carroll A. Hochwalt............................... Vice President Robert K. Mueller.........................................................St.LouisRobert K. Mueller................................... Vice President Edward A. O'Neal Jr......................................New York William W. Schneider.............................. Vice President Edgar M. Queeny.............................................................St.LouisFelix N. Williams.......................................Vice President William W. Schneider....................................................St.Louis Charles H. Sommer....................................................... St.LoursH. Harold Bible............................................................. VicePresident Alan H. Temple.................................................New York Edward J. Bock............................................................... VicePresident Felix N. Williams............................................................St.LouisJohn R. Eck.......................................................................VicePresident Arthur W. Lucas............................................................VicePresident Robert M. Morris......................................................... VicePresident EXECUTIVE COMMITTEE Tom K. Smith Jr...............................................................VicePresident Erwin G. Somogyi........................................................... VicePresident Charles H. Sommer. Chairman J. Russell Wilson.......................................................... VicePresident John L. Christian Edgar M. Queeny Marshall E. Young.......................................................VicePresident John L. Gillis Carroll A. Hochwalt Robert K. Mueller William W. Schneider Charles Allen Thomas Felix N. Williams Edwin J. Cunningham.........................................Controller Edwin J. Putzell Jr............................................ Secretary Patrick J. Dowd....................................................Treasurer FINANCE COMMITTEE Edgar M. Queeny, Chairman Fredrick M. Eaton Charles H. Sommer Herbert Hoover Jr. Alan H. Temple William W. Schneider Charles Allen Thomas Transfer Agent Morgan Guaranty Trust Company of New York Registrar The Chase Manhattan Bank Lloyd R. Cole................... Marlette C. Covert. ... Earl B. Mills................... Walter C. Thilking. Earl J. Wipfler. Charles E. Caspari Jr. John N. Ehlers........... Rodney Harris Jr........... Franklin C. Rehfeld ... J. Robert Matlock........ Thomas M. Rasmussen . . Rolla H. Stocke.............. George F. Wingard. .. Assistant Controller . Assistant Controller Assistant Controller Assistant Controller Assistant Controller . Assistant Secretary Assistant Secretary . Assistant Secretary Assistant Secretary . Assistant Treasurer . Assistant Treasurer Assistant Treasurer Assistant Treasurer Regional Vice Presidents Roy L. Brandenburger Edward W. Gamble Jr. MAR 000661 LAM016720 The next Annual Meeting of the shareowners of the Company is to be held on Thursday, March 22, 1962, at the Company's General Offices, 800 North Lindbergh Boulevard, St. Louis County, Missouri. A formed notice of the meeting, together with a proxy statement and form of proxy, is being mailed to each shareowner. CONTENTS Summary of Income and Expenses Page .1 Message................................................ .2 Classifications of Sales .... 15 Statement of Financial Position . Statement of Income .... Statement of Paid-in Surplus and Retained Earnings .... ............................19 Financial Review........................ ...................... 20 Accountants' Opinion .... ...................... 22 Source and Disposition of Funds ........................... 23 Comparative Financial Data . ........................... 24 Petroleum Operating Data ..........................28 Board of Directors........................ ........................... 29 Directors and Officers .... Inside back cover SHAREOWNERS OF RECORD 1961 Number of Shareowners Number of Shares Men...................................... 28,722 4,723.196 Women............................... 24,565 3,647,262 Joint Accounts................ 17,346 852,952 Charitable Institutions. 234 125,849 Educational Institutions 111 154,489 Estates and Trusts____ 8,191 1,875,843 Insurance Companies. 190 859,916 Brokers and Nominees 1,120 9,090,762 All Others.......................... 1,724 6,693,171 Total........................ 82,203 28,023,440 i960 Number of Share owners Number of Shares 29,953 4,810,770 24,680 3,682,808 18,173 923,112 263 130,699 107 151,581 7,755 1,804,416 178 782,364 1,063 8,666,965 1,637 6,242,474 83,809 27,195,189 1959 Number of Share owners Number of Shares 28,830 4,856,599 23,629 3,673,086 16,654 862,573 255 169,421 106 92,336 6,458 1,666,564 177 722,566 1,312 9,953,829 1,254 1,159,883 78,675 23,156,857 1958 Number of Share owners Number of Shares 24,990 4,752,196 21,460 3,678,163 11,973 724,561 265 179,961 114 131,892 5,260 1,954,219 169 772,671 1,126 8,989,736 1,070 1,073,201 66,427 22,256,600 1957 Number of Share owners Number of Shares 22,877 4,811,506 20,017 3,799,064 9,756 648,250 288 206,025 139 145,224 4,716 2,004,601 179 767,352 1,158 8,856,181 906 988,426 60,036 22,226,629 1957 1958 1959 1960 1961 MAR 000662 NUMBER OF SHAREOWNERS (in thousands) L1THO IN U.S.A. PR-C2-01;-M LAM016721 SUMMARY OF INCOME AND EXPENSES (In Thousands of Dollars Except Per Share Figures) Income: From sale of products....................................................................... From licenses, dividends, interest, etc.......................................... Deductions from Income: For raw materials, fuel, supplies, etc............................................ For wages and salaries to employes............................................. For depreciation; obsolescence, depletion.................................... For taxes.............................................................................................. For interest, principally on long term debt.................. '................ For minority interests in subsidiaries............................................. Which Left as Net Income................................................................ Distributed to Shareowners as Cash Dividends............................. Retained for Future Growth................................................................... 1961 $932,916 11,755 944,671 480,645 223,790 84,527 75,092 11,579 382 876,015 68,656 27,316 $ 41,340 Per Common Share Parent Company: Net income......................................................................................... Cash dividends paid.......................................................................... Book value.......................................................................................... $ 2.45 1.00 23.24 Common Shares Outstanding................................................................ 28,023,440 1960 $890,114 10,411 900,525 459,459 209,683 76,088 73,557 12,362 1,569 832,718 67,807 25,659 $ 42,148 $ 2.49 1.00 22.06 27,195,189 The above summary includes the operating results of Monsanto Chemical Company and all of its subsidiary companies, including The Chemstrand Corporation and its subsidiaries. LAM016722 000663 TO THE SHAREOWNERS Monsanto achieved record sales of $932,916,000 in 1961, compared to sales of $890,114,000 in 1960. The increase, which amounted to $42.8 millions or 4.8 per cent, was attained despite declining selling prices throughout the U.S. chemical industry. The per cent increase in tonnage of products sold was far greater than the 4.8 per cent gain in dollar sales. The year's net income was $68.7 millions, com pared to $67.8 millions for the previous year, a gain of 1.3 per cent. Due to an increase in shares outstanding, how ever, per-share earnings declined from $2.49 in 1960 to $2.45 in 1961. The share increase resulted mainly from the two per cent stock dividend paid in December, 1961. Adjusted for this stock dividend, 1960 per-share earnings were $2.44. Cash flow per share from earnings before depre ciation, obsolescence and depletion was $5.47 in 1961 and $5.29 in 1960. Monsanto's leadership in many basic product groups enabled us to maintain our profit level despite the lower prices, which we met to keep our commanding position in the market place. In most cases, industry-wide overcapacity was responsible for price decreases. Helping to offset their effect was Monsanto's strength in such major products as phosphates, nylon, plasticizers, alkyl benzene, ammonia, vinyl butyral film, pesticides and feed chemicals. Helping also were new processing efficiencies and cost-control methods throughout the company. The year's achievements went beyond the areas of marketing and production. The Chemstrand Corporation, the nation's second largest manu- ***** 00664 LAM016723 facturer of chemical fibers, became a wholly owned subsidiary and gave us new scope and new oppor tunities. We made good headway at Chocolate Bayou, near Alvin, Tex., in the on-schedule con struction of a chemical refinery which will shortly provide us with our own hydrocarbon raw materials at a substantial cost saving. Also, we opened our Research Center in St. Louis County, creating an environment which should breed and encourage practical inventiveness. And, in the area of forward integration, we acquired Gering Plastics Company and thus moved closer to the consumer in certain areas where the present is profitable and where the future holds promise. In 1961, competition from chemical imports was increasingly evident. The volume of such imports still is not great. But their effect on already de pressed prices is mounting. The consequences of the changing complexion of the world markets are apparent. Trade blocs will present problems as well as opportunities. Proposed changes in federal legislation on trade agreements, if adopted, could mean sharp reductions in U.S. chemical tariffs. We deem unwise any legislation not providing for truly reciprocal tariff bargaining and not recognizing the burdens borne by U.S. industry with its high income taxes, with the highest labor rates in the world and with depreciation allowances less favorable than those enjoyed in most industrial countries of the free world. It could be harmful to our nation, our industry, our cus tomers, our employes. The year's operations are reviewed in the sections of this letter that follow. Our expenditures for new plants and equipment, including property of acquired companies, were at an all-time high in 1961. They totaled $153,818,000, compared to 1960 expenditures of $121,253,000. Major 1961 projects will be discussed later in this report. In the 12-month period, a total of $9,810,000 was invested in or advanced to our 50 per cent COMPARATIVE CONSOLIDATED SALES, INCOME AND EARNINGS A SHARE BY QUARTERS SALES: 1961 1960 (In Thousands) Per Cent Increase Decrease First quarter___ .$219,354 Second quarter. . 246,322 Third quarter___ . 229,338 Fourth quarter.. . 237,902 $226,295 234,382 218,321 211,116 3.7 5.1 5.0 12.7 $932,916 $890,114 4.8 INCOME: First quarter....... .$ 15,508 Second quarter. . 19,079 Third quarter___ 15,545 Fourth quarter.. 18,524 $ 18,943 19,420 15,373 14,071 $ 68,656 $ 67,807 78.7 7.8 1.1 31.6 1.3 1961 1960 Adjusted for 1961 Stock As Reported Dividend EARNINGS A SHARE: First quarter........ .... $ .55 Second quarter.. ..............68 Third quarter___ ...............56 Fourth quarter... ..............66 $ .70 .71 .57 .51 $ .68 .70 .56 .50 $2.45 $2.49 $2.44 SHARES OUTSTANDING DECEMBER 31: 1961....................................................... 28,023,440 1960....................................................... 27,195,189 MAR 000665 LAM016724 owned associate companies and to affiliated com panies in which our ownership is less than 50 per cent. The Agricultural Chemicals Division completed its first full year of operation with sales of farm chemicals up more than 20 per cent. Successful research and development effort re sulted in the introduction of five new products that further broadened our line of fertilizer materials, pesticides and feed supplements. The expanded product base will permit greater future participa tion in a sophisticated agricultural industry. Fertilizer Materials Sales of our plant food materials, which include ammonia, ammonium nitrate, urea and related products, rose to record levels. Sales of ammonia for field application were up about 40 per cent. To take advantage of the growing midwestern fertilizer market, we added new direct distribution outlets and also began construction of a 15,000-ton storage terminal for agricultural ammonia at Mus catine, Iowa. An ammonia manufacturing plant with a 200-ton-per-day capacity also is being built there, with completion scheduled for fall of 1962. Pesticides Sales of weed and insect killers rose more than 30 per cent. Our wild oat herbicide, Avadex, sold well ahead of expectation in its first year of commercial avail ability in the U.S. The weed control resulting from its use boosted yields as much as 50 per cent in some areas. Sales rose for Randox weed killers, which offer farmers an economical, effective solution to infesta tion of broadleaf and grassy weeds in corn, soybeans and other field crops. Vegadex herbicide continued to gain popularity. Sales of our parathion and methyl parathion in secticides were the highest in our history, as some agricultural areas battled abnormally heavy insect infestation. Finding highly active, highly selective weed killers, fungicides and insecticides is one of the most important jobs of the Agricultural Chemicals Division. A major effort was made in 1961 to determine, under controlled laboratory conditions, how each important environmental factor such as rainfall, temperature, soil condition or tilth, affects the performance of all products, new and old. As a result, additional information was acquired as to how to formulate products to take advantage of the climates and the soils where they are sold. Feed Supplements Sales of feed chemicals climbed sharply. Santoquin, an antioxidant that preserves the nutritive value of feeds and dehydrated forage for poultry and livestock, doubled its sales. So did feed-grade urea, a source of protein for ruminants. Sales of MHA, a protein feed supplement to boost growth of poultry and livestock, rose 40 per cent. Blasting Agents Sales of ammonium nitrate for use in blasting materials rose to a record level, as the trend toward this inexpensive, easy-to-use material continued. In addition to supplying ammonium nitrate for this purpose, we began marketing the finished blasting agent -- a bagged ammonium nitrate-fuel oil formulation sold under the Monsanto trademark directly to the user. Formation of the Hydrocarbons Division in October was the result of planning which began in 1955 with the acquisition of Lion Oil Company, its facilities, its reserves and its personnel. The new division's responsibilities include pro duction of chemical raw materials from petroleum sources, as well as all of Lion's activities. From the refinery it operates at El Dorado, Ark., MAR 000666 LAM016725 come gasolines, fuel oils, asphalts and other Lion branded products. Principal products of the plant at Texas City, Tex., are styrene monomer, vinyl chloride monomer and acrylonitrile, all of which are marketed by or used by our Plastics Division, or used by Chemstrand. The chemical refinery at Chocolate Bayou, near Alvin, Tex., will be on stream late in 1962. Texas City Completion of the final phase of a 200-millionpound styrene monomer expansion increased our capacity for that product to 560 million pounds a year. Capacity for vinyl chloride monomer was stepped up to 150 million pounds annually. Also in 1961, we announced plans to build a 45million-pounds-per-year unit to produce vinyl acetate monomer for our own needs. Construction is to start early in 1962. Texas City will be connected by three 23-mile pipelines to the Chocolate Bayou refinery to permit interchange and upgrading of products between the two plants. Chocolate Bayou Shareowners will recall the large and unique refinery we are building to convert petroleum into ethylene, propylene, naphthalene, benzene and other important hydrocarbon raw materials to feed Monsanto plants elsewhere. Ground was broken in March, three months after our initial announcement. Since then, the work has progressed with remarkable speed and efficiency, due largely to advanced construction methods. At this writing, site preparation is substantially complete. All underground pipelines are installed. Boilers, cracking towers and storage vessels are going up. The bayou itself is dredged, straightened and widened to accommodate regular barge traffic. The plant will utilize computers being developed especially for our operations. # Production and Exploration Production and exploration efforts in the TexasLouisiana Gulf Coast area were intensified. The major quest was for oil and gas reserves to supply our raw material needs at Chocolate Bayou and Texas City. Developmental wells were augmented by additional gas discoveries. In 1961, we participated in the completion of 56 producing wells, representing a net interest to Monsanto of 32.77 wells. Sixteen wildcat discoveries in the U.S. and Canada included eight oil wells and eight gas wells. An unusual discovery was made on our plant site at Avon, Calif., where, with others, we drilled a successful gas well. Exploration expenditures were $11.5 millions, slightly more than those of 1960. Continued restrictions on allowable production of domestic crude oil, along with pipeline proration, resulted in a six per cent reduction in our produc tion and sale of crude oil. Our total crude produc tion for the year was 8,017,000 barrels, while our natural gas production of 22.6 billion cubic feet was three per cent below the 1960 level. Lion Oil Company Record throughput of crude oil was achieved at the El Dorado refinery. Approximately 12.3 million barrels were run to stills, a daily average of 33,800 barrels. The 1960 average was 32,700 barrels a day. Our gross refinery sales were higher by six per cent. Branded product sales were up five per cent. Jobbers and distributors were established in five new marketing areas. Phosphorus and Phosphates Production and sales of phosphorus chemicals exceeded previous records. Virtually every product contributed to the gain. To meet the demands of expanding and changing 00667 LAM016726 markets, many capital projects were initiated or completed. Sodium, calcium and potassium phosphate, and phosphoric acid facilities in the St. Louis area were enlarged. Capacities of the sodium tripoly phosphate and phosphoric acid units at Long Beach, Calif., were doubled. In the third quarter, we announced plans to build a plant at Augusta, Ga. Its initial products, phosphoric acid and sodium phosphates, will go into production late in 1962. Detergents Sales of surface-active agents were higher. Demand for alkyl benzene reached a record high level. Market acceptance of our alkyl phenols for liquid detergents exceeded expectations. A new type of alkyl benzene was developed and marketed. Four new alkyl phenol-based surfaceactive agents also were introduced. Heavy Chemicals Although sales turned up in the last quarter, they were off slightly for the year. The year's orders for sulfuric acid plants of Monsanto design set a record in terms of the total capacity they represented. Such units, built by wholly owned Leonard Construction Company, now make 55 per cent of the free world's contact sulfuric acid. A new sulfuric acid catalyst we marketed in 1961 is 30 per cent more active than the product it supersedes. We introduced two new Santocel silica aerogels. One, Santocel T, is used as an additive in the manu facture of polyester resins. The other, Santocel Z, is an aid in producing certain blueprint papers. Chemicals for the Electronics Industry The year was characterized by increased com petition and decreased profits for the electronic device manufacturer. At least two-thirds of silicon suppliers either ceased manufacture or refinanced by merger or new ownership. But in the last quarter there was a significant upturn in silicon usage and even the most con servative predictions indicate continuing future growth. Monsanto's silicon project showed continuously lower cost of manufacture and continuously greater sales through the second half of the year. Sales of III-V compounds, especially gallium arsenide, increased. Monsanto, the first supplier of epitaxial gallium arsenide to the industry, will begin pilot-plant production of the product in the first quarter of 1962. ORGANIC CHEMICALS Volume and dollar sales of organic chemicals were the same as those of 1960. Our vigorous program of cost reduction led to improved processing and materials handling. Centralization of facilities for handling bulk liquids at the John F. Queeny Plant in St. Louis proved a major economy. In December, our new Delaware River Plant, near Bridgeport, N. J., had an unusually smooth start-up. Its initial products are phthalic anhydride, benzyl chloride and Santicizer 160, a plasticizer derived from the first two products. Functional Fluids and Petroleum Additives Sales were up slightly, due primarily to gains by gear oil additives. Sales of dielectric fluids, however, were checked by slowness in the electrical industry. Santolube 801, a detergent additive for motor oils, and Santolube 605, an additive for automatic transmission fluids, were introduced successfully. So was a new anti-icer additive for gasoline. At Anniston, Ala., our manufacturing capacity for biphenyl was increased 20 per cent with the installation of a new reactor of Monsanto design. Intermediates Sales for this group were up slightly. Extensive modernization at the Monsanto, 111., plant resulted in a 10 per cent phenol capacity increase as well as improved efficiency and by product recovery. Production of phenolsulfonic acid got under way at Avon, Calif. Capacity for MAR 000668 LAM016727 PARENT COMPANY AND DOMESTIC SUBSIDIARIES 200 INDEX OF HOURLY WAGE RATES, PRICES OF RAW MATERIALS AND SELLING PRICES HOURLY WAGE RATES PRICES OF RAW MATERIALS 1947--1949=100 SELLING PRICES 200 190 180 170 160 150 140 130 120 110 100 90 1952 1853 1954 1955 1956 1957 195E 1959 I960 1961 paranitrochlorobenzene was increased at Mon santo, 111. Among three intermediate chemicals recently introduced was a special acid used exclusively in an aluminum anodizing process licensed nationally by Kaiser Aluminum and Chemical Corporation. Paper Chemicals and Wood Preservatives Sales of Mersize fortified rosin sizes were above those of 1960. Sales of pentachlorophenol and Santobrite, industrial preservatives, were down. In July, we consolidated our applied research, development and sales efforts on chemicals for the pulp and paper industry to streamline and strengthen our services to this major chemical consumer. # Pharmaceuticals, Flavors and Condiments Bulk aspirin and our new food-grade adipic acid led this product group to a higher sales level. Higher selling prices on saccharin and caffeine also helped. New and expanded facilities for Santophen 1, an important germicide, began operating at Monsanto, 111. At St. Louis, we tripled our capacity to make aspirin starch granulations. Plasticizers Despite a short supply of phthalate esters during the year's first half and depressed prices later, sales exceeded those of 1960. We strengthened our position in "permanent- MAR 000669 LAM016728 type" (polymeric) plasticizers with the successful introduction of two more which give long-lasting flexibility to vinyl plastics. They are Santicizer 405, a specialty product of extremely low volatility, and Santicizer 411, a low-cost product for generalpurpose use. At mid-year, we began making phthalate esters at Long Beach, Calif. This enhanced our stake in and service to the fast-growing West Coast plastics industry and increased our total capacity for these products. Resin Materials The continuing shortage of naphthalene (raw material for phthalic anhydride) and the increased competition for maleic anhydride markets combined to hold sales below 1960 levels. New Phosgard flame retardants for such ma terials as wood, synthetic fibers and plastics underwent intensive market development. Phosgard C-22-R, used as a flame retardant for foamedin-place urethane insulation, was introduced commercially. Rubber Chemicals Increased activity in the automotive and rubber industries helped us improve our sales. Elastopar rubber modifier, which we developed in 1956 and which made possible the successful commercialization of the butyl rubber tire, was found to impart both added resilience and heat stability to natural and synthetic rubbers. Dis closure of this discovery made Elastopar the subject of intensive evaluation by all major rubber com panies for potential use in tires and mechanical goods. Manufacturing capacity for the product was doubled at Monsanto, 111., to accommodate large-scale testing and expected commercial requirements. In plastics, sales volume was the same as that of 1960, while dollar sales declined. In 1961, we achieved significant yield and quality improvements and substantial manufacturing economies. We also stepped up efforts to give customers better products and service. More products, for instance, were shipped in railroad hopper cars (of which we own the industry's largest fleet) at substantial savings to customers. New or improved Monsanto plastics met specific needs in such large end uses as floor covering, wire and cable, packaging, automobiles and refriger ators. Our new materials and our market develop ment support helped customers establish new uses for plastics, mostly in industrial engineering applications where other materials were displaced. This progressive marketing opened new sales op portunities both for Monsanto and the plastics industry. Noteworthy new products include four Opalon vinyl chloride polymers -- a plastisol resin and three resins for extrusion, molding and calender ing; a patented, liquid-modified phenolic resin binder for producing heat-resistant thermal insula tion; 60-inch widths of Shadowlite Saflex polyvinyl butyral, a special interlayer used in laminated architectural safety glass to lessen the amount of light and heat passing through windows; a highgloss, high-impact polystyrene for refrigerator components; two polyethylenes for extrusion coating and laminating at high speeds and low temperatures; a general-purpose polystyrene with improved heat resistance for specialized packaging film, battery cases and radio cabinets; and a polyethylene from which films are made at a strength 40 per cent greater than that obtained with general-purpose resins. Two major products introduced in 1960 showed additional promise. They are Santofome styrene foam film and Lustran styrene-based molding and extrusion compounds. A new unit to make San tofome tripled our output of this "plastic paper," which is already used in insulated cups, packages and decorative displays. Lustran, an unusually tough and durable plastic, made progress in its first year. Interim production MAR 000670 LAM016729 facilities at Springfield, Mass., were taxed to supply the material for such uses as luggage, refrigerator components, appliance housings and a new chair for children. Early in 1962, at Addyston, Ohio, we will start making the product in a plant designed to produce 40 million pounds annually. The largest potential uses are for metal and wood replacement in furniture, appliances, automobiles and refrigerators. The complex technology required to make Lustran came from fundamental research and engineering studies into the mechanism and control of polymer formation. These studies paid off not only in better materials but in the acquisition of new knowledge that gives us important competi tive advantages. In December, we purchased the Gering Plastics Division of Studebaker-Packard Corporation, re named it the Gering Plastics Company and made it a department of Monsanto. Gering, a 35-year-old company, now markets a broad line of plastics for industrial and consumer use. To the plastics industry it sells molding and extrusion compounds. Its consumer plastics prod ucts include garden hose, bags, floor mats, furni ture coverings and closet accessories. Gering's headquarters and plant are at Kenil worth, N. J. Its employes number about 700. In its first year as a wholly owned subsidiary, Chemstrand bettered its sales. Its shipments of fiber and yarn increased 12 per cent. The gains were made in the face of mounting competition from foreign and domestic producers. Acrilan acrylic fiber competed with unbranded acrylics produced domestically and sold at prices below market. Nylon met stepped-up competition in quality and in price, as capacities were increased domestically and abroad. In 1961, Chemstrand began a 200 per cent expan sion of its nylon yam capacity at Greenwood, S. C. # MAR 000671 Strong demand again helped increase sales of nylon yams. Tire cord volume expanded, with nylon cord tires winning a record 58 per cent of the automobile replacement-tire market. Nylon also made material gains in truck and bus tires. Cumuloft continuous filament textured nylon carpet yam continued to make good headway in the carpet market. Codon multilobal continuous filament yam continued to show promise in the upholstery field, as well as in outerwear and other apparel uses. Elsewhere, other textured nylon yams pushed forward in growing end uses. One such use was woven fabrics for undergarments, a field in which stretch yams showed important promise. Another market of considerable interest is that of molded fabrics, involving both nylon and Acrilan. This is a new development to which Chemstrand technology contributed substantially. Initial success was achieved with this new fabric by brassiere manufacturers. Acrilan improved its position in a number of major uses. These include jersey fabrics for sports shirts, blouses and dresses; blankets; broadwoven fabrics for apparel; and fiberfill applications. A new tufted blanket material was introduced. Solu tion-dyed Acrilan attracted interest in deep-pile fabrics for liners, outerwear and certain home furn ishings. Acrilan and nylon gained prominent posi tions in the field of foam-laminated garments. A new step was taken to develop Acrilan in the sweater field when Chemstrand bought a 50 per cent interest in Blume Knitwear, Inc., maker of "Helen Harper" sweaters and coordinates. This move effectively provides a means of further de veloping and displaying Acrilan in the acrylicfiber sweater field. Overseas, Chemstrand fibers and yams from the U.S. were sold in more than 30 countries. Chem strand Limited, the corporation's wholly owned British subsidiary, increased its Acrilan sales. A 50 per cent expansion of its plant at Coleraine, Northern Ireland, began in 1961 and is scheduled for early 1962 completion. Another subsidiary, Chemstrand Overseas S. A., LAM016730 type" (polymeric) plasticizers with the successful introduction of two more which give long-lasting flexibility to vinyl plastics. They are Santicizer 405, a specialty product of extremely low volatility, and Santicizer 411, a low-cost product for generalpurpose use. At mid-year, we began making phthalate esters at Long Beach, Calif. This enhanced our stake in and service to the fast-growing West Coast plastics industry and increased our total capacity for these products. Resin Materials The continuing shortage of naphthalene (raw material for phthalic anhydride) and the increased competition for maleic anhydride markets combined to hold sales below 1960 levels. New Phosgard flame retardants for such ma terials as wood, synthetic fibers and plastics underwent intensive market development. Phosgard C-22-R, used as a flame retardant for foamedin-place urethane insulation, was introduced commercially. Rubber Chemicals Increased activity in the automotive and rubber industries helped us improve our sales. Elastopar rubber modifier, which we developed in 1956 and which made possible the successful commercialization of the butyl rubber tire, was found to impart both added resilience and heat stability to natural and synthetic rubbers. Dis closure of this discovery made Elastopar the subject of intensive evaluation by all major rubber com panies for potential use in tires and mechanical goods. Manufacturing capacity for the product was doubled at Monsanto, 111., to accommodate large-scale testing and expected commercial requirements. In plastics, sales volume was the same as that of 1960, while dollar sales declined. In 1961, we achieved significant yield and quality improvements and substantial manufacturing economies. We also stepped up efforts to give customers better products and service. More products, for instance, were shipped in railroad hopper cars (of which we own the industry's largest fleet) at substantial savings to customers. New or improved Monsanto plastics met specific needs in such large end uses as floor covering, wire and cable, packaging, automobiles and refriger ators. Our new materials and our market develop ment support helped customers establish new uses for plastics, mostly in industrial engineering applications where other materials were displaced. This progressive marketing opened new sales op portunities both for Monsanto and the plastics industry. Noteworthy new products include four Opalon vinyl chloride polymers -- a plastisol resin and three resins for extrusion, molding and calender ing; a patented, liquid-modified phenolic resin binder for producing heat-resistant thermal insula tion; 60-inch widths of Shadowlite Saflex polyvinyl butyral, a special interlayer used in laminated architectural safety glass to lessen the amount of light and heat passing through windows; a highgloss, high-impact polystyrene for refrigerator components; two polyethylenes for extrusion coating and laminating at high speeds and low temperatures; a general-purpose polystyrene with improved heat resistance for specialized packaging film, battery cases and radio cabinets; and a polyethylene from which films are made at a strength 40 per cent greater than that obtained with general-purpose resins. Two major products introduced in 1960 showed additional promise. They are Santofome styrene foam film and Lustran styrene-based molding and extrusion compounds. A new unit to make San tofome tripled our output of this "plastic paper," which is already used in insulated cups, packages and decorative displays. Lustran, an unusually tough and durable plastic, made progress in its first year. Interim production MAR 000672 LAM016731 10 GROSS ADDITIONS TO PROPERTY AND DEPRECIATION (in S millions) * Depreciation includes: depreciation, obsolescence, amortization and depletion. _19_5_2__1_9_53___1_95_4___19_5_5__1_9_56___19_5_7__1_95-8....1.9..5.9. iI_9_60_?_i;__19_6_1_'i' (1) Including Chamstrand and subsidiaries. will participate in the manufacture and sale of nylon in a new company at Montevideo, Uruguay, in which it will have a 45 per cent equity. Monsanto technology contributed substantially to the year's gains. In 1961, following an eight-year period in which 327 parent-company products were introduced, 230 of these products contributed 26.0 per cent of total sales for our four chemical divisions and 28.2 per cent of gross profits. Forty-nine new products survived screening tests in 1961 and were sold commercially. Also in 1961, our parent company was granted 249 U.S. patents and 383 foreign patents. Expenditures for research, development, patent work and basic engineering amounted to $46.7 millions in 1961. The comparable 1960 figure, adjusted for certain Chemstrand expenses which had been included in cost of goods sold but which are more appropriately classified as research ex penses, was $46.4 millions. Our new Research Center in St. Louis County was completed and staffed on schedule. The multimillion-dollar complex has about 13 acres of en closed floor space. Even though the Research Center was not sub stantially staffed until last summer and, indeed, not dedicated until October 27, evidence already exists that its principal objectives will be realized. Many advantages result from placing under one MAR 000673 LAM016732 roof research groups in varying fields of activity and with varying goals. Specific efficiencies in centralized services are among these advantages. Work at the Research Center represents only about a third of our total research effort. Divisional research projects are undertaken here and at lab oratories from Springfield, Mass., to Seattle, Wash. All Monsanto research departments now use digital and analog computers. For example, in the Agricultural Chemicals Division, the structural formulas of tens of thousands of chemicals and the results of nearly a million tests on these compounds are stored in a computer's giant memory for instant retrieval. Since the machine does its own cross indexing of data, our scientists need only feed in their laboratory results and the computer periodi cally prepares well-organized reports for their use and guidance. This materially shortens the research time to convert an interesting lead into a market able product. Research projects handled under government contract are the responsibility of Monsanto Re search Corporation, a wholly owned subsidiary with laboratories at Dayton, Ohio, and Everett, Mass. Monsanto Research Corporation's current investigations include the desalting of sea water, and the development of fuel cells, atomic power devices for generators in satellites, and high-energy fuels for supersonic aircraft, among other projects. The subsidiary's scientists occupy approximately one-half of our Dayton laboratories, following the transfer to St. Louis of Research & Engineering Division personnel last summer. Export sales were less than those of 1960's record year. The drop was expected in view of the increased capacity for many standard chemicals throughout the world, including the increased capacities of some of our overseas companies. Generally, our exports of heavy chemicals have leveled off, while those of chemical specialties have increased. For example, exports of weed killers and exports of hydraulic fluids for aircraft have been growing. Subsidiaries Companies in which our common stock interest exceeds 50 per cent are called subsidiaries. All such companies are included in our consolidation. Monsanto Chemicals Limited, our subsidiary in the United Kingdom, had sales about equal to those of 1960. More pounds of material were sold. But increased competition, both domestic and foreign, pushed selling prices lower and caused a sharp drop in earnings. Among 1961 highlights were the successful introduction of Avadex weed killer, the completion of a new maleic anhydride plant and the start-up of a unit to make ultra-pure silicon for the electronics industry. The main problem before British industry today is how to adjust to Great Britain's expected entry into the European Common Market. Should Britain enter this economic community, short-term readjust ments in price structures and productivity rates will be required. On a long-term basis, however, such entry should mean a stronger economic climate and consequent gains by our subsidiary. Monsanto Canada Limited, wholly owned, showed slightly higher sales but lower profits. The profit drop was largely due to fixed charges on new plants still operating at less than capacity. High Canadian unemployment and generally depressed conditions also created problems. At year end, the economy showed signs of recovery. Monsanto Chemicals (Australia) Limited was caught in the downswing of the Australian economy. Changes in government policies on imports and credit contributed to a major recession in Australia. Purchases of consumer durables fell sharply. And MC(A)L's sales to manufacturers of such products dropped. The styrene monomer plant of Australian Petrochemicals Pty. Ltd. had a successful start-up. Monsanto has a 55 per cent equity in this company. The shifting fortunes of foreign ventures were well illustrated by the success of our Argentine company, Monsanto Argentina S.A.I.C. For 1960, we could merely note that new units had begun making vinyl compounds, phthalic anhydride and plasticizers. For 1961, we can report that these MAR 000674 LAM016733 operations were eminently successful with respect to sales and profits. Wholly owned Monsanto Mexicans S.A. had lower sales and profits. Sharply increased compe tition hurt sales of its two main products: poly styrene and sodium tripolyphosphate. New facili ties for high-impact polystyrene strengthened the company's market position. At Ghent, Belgium, our subsidiary, Monsanto Belgium S.A., started production of Saflex poly vinyl butyral interlayer for laminated safety glass. Late in the year we increased our equity in this company from 75 to 100 per cent. Associates and Affiliates Our associates are companies in which we have a one-half interest. In affiliates, our equity is less than 50 per cent. Although neither type of company is included in our consolidation, some of the major ones operating in foreign countries are discussed here. Mitsubishi Monsanto Chemical Company, our Japanese associate, showed a healthy increase in sales and profits. The company is a major producer of polyvinyl chloride and polystyrene in Japan. Societe Monsanto Boussois, our French associate which produces polystyrene and styrene copolymer, did not match its 1960 sales or profits. Our new Spanish associate, Monsanto Iberica S.A., produces stabilizers, plasticizers and a cata lyst for vinyl resins manufacture. A major expan sion now under way will provide facilities for production of calcium carbide and acetylene derivatives. We have a minority interest in another Spanish company, Etino Quimica S.A., a producer of polystyrene and polyvinyl chloride. Sicedison S.p.A., our 40 per cent owned Italian affiliate, experienced a downward trend in prices of many plastics and chemical products during a large and costly expansion program. Final sales and earnings figures are not available as this report goes to press. Although the operations of our domestic associ ates are not consolidated with those of Monsanto and subsidiaries, some discussion of them may be of interest. Mobay Chemical Company, owned with Farbenfabriken Bayer A.G. of West Germany, continued its fast growth. Today Mobay is the nation's largest producer of urethane chemicals. Wider use of urethane foam cushioning in house hold furniture, commercial seating and mattresses was mainly responsible for the company's 70 per cent increase in sales of urethane raw materials. Growing acceptance of rigid foams for structural insulation in the construction and refrigeration industries also helped. So did a marked increase in use of flexible foam interlining by the apparel and textile industries. Introduction of "Texin" urethane elastoplastic material as a moldable or extrudable resin for the plastics and rubber-processing industries proceeds on schedule. The product shows promise of sizable potentials. "Merlon" polycarbonate resin, a high-impact, transparent thermoplastic, acquired additional stature when it was classified as a self-extinguishing plastic by Underwriters' Laboratories, Inc. "Merlon" is a unique specialty resin. Products made from it can withstand the pounding of a heavy hammer without cracking or shattering. In October, ground was broken for a 50,000square-foot research center adjacent to Mobay's headquarters in suburban Pittsburgh. Scheduled for 1962 completion, the modem facility will house general research and customer service laboratories, administrative offices and a technical library. Mobay expanded its tolylene diisocyanate iTDI1 plant at New Martinsville, W. Va., for the fifth time since 1956. And a sixth major expansion of TDI capacity was scheduled for 1963 completion. At the same site, construction was begun on facili ties to make organic isocyanates and intermediates MAR 000675 LAM016734 for use in pharmaceuticals, herbicides, insecticides, adhesives, protective coatings and elastomer products. Plax Corporation, owned with Emhart Manu facturing Company, increased its sales. But income was lowered by the high costs of plant start-ups and foreign operations. Plax put three plants on stream and expanded another. The new plants are at Sharonville, Ohio; Anaheim, Calif.; and Yardville, N. J. The expan sion occurred at Ligonier, Ind. The big move of liquid detergents to polyethylene bottles took place in 1960. In 1961, household bleaches, representing an annual market for 500 million containers, made a similar move. As a major manufacturer of plastic bottles, Plax bene fited substantially. "Polyflex" biaxially oriented polystyrene film was used increasingly by growers to wrap such produce as lettuce, cabbage and cauliflower. The transparent film keeps such vegetables fresh longer. This potentially large market represents the first significant use of the product as an overwrap material. Heavier "Polyflex" sheeting was used extensively in thermoformed domes, trays and cradles for food packaging. Shawinigan Resins Corporation, owned with Shawinigan Chemicals Limited of Canada, made sales advances in almost all established applications. However, sales of Shawinigan's principal product, polyvinyl butyral for laminated safety glass inter layer, were down. Increased use of tempered glass plus greater production of compact cars with smaller glass areas reduced the market. At year end, the company was completing capacity increases for polyvinyl alcohol and related products at Springfield, Mass. Increased demand in the adhesives, textile and surface coatings industries, coupled with promising new growth in the paper, building products and packaging industries, prompted the expansions. Shawinigan's export sales increased, as overseas markets for its polyvinyl formal, polyvinyl butyral and polyvinyl alcohol expanded. Fome-Cor Corporation had somewhat higher sales. But the young company, still in its develop mental stage, did not turn a profit. Marketing efforts on "Fome-Cor" lightweight laminated board -- a sandwich of styrene foam between layers of kraft paper --. were reoriented. There was a new concentration of emphasis on selling to the construction, automotive and graphic arts industries, all of which represent potentially big outlets. Specific applications, both commercial and developmental, include ceiling panels, ductwork for air conditioning systems, low-cost movable partitions, automobile headliners and door panels, signs and displays. Geospace dome shelters, made from "Fome-Cor" by Filtered Rosin Products Company (a Monsanto subsidiary), provided one of 1961's most interest ing uses. Fome-Cor is owned with St. Regis Paper Company. Employe relations were excellent. Personnel development activity continued at a brisk pace. In the conviction that better trained managers and scientists insure a more successful company, we continued our academic and advanced management leave programs, while at the same time carrying on an extensive training program within the company. New efforts were exerted to strengthen technical recruiting. For example, 52 science professors from the nation's colleges and universities were guests at the October dedication of our Research Center. The occasion provided good opportunity to familiarize these educators with the scope of our research program. Our 1961 safety performance, although among the chemical industry's best, was not as good as that of 1960. Still, it was almost five times better than our industry's average. mar 000676 LAM016735 Constant encouragement of safe work habits not only benefits our employes but continues to lower our insurance premiums. New two-year work contracts were successfully negotiated at six plants. New three-year work agreements were negotiated at two. The only work stoppage was a week-long strike at Nitro, W. Va., over a subcontracting issue. In 1961, about 1,200 people (our employes and their families) transferred to St. Louis from other Monsanto locations. Many were personnel of the Plastics Division and Lion Oil Company -- head quarters of which were shifted from Springfield, Mass., and El Dorado, Ark., respectively. The move greatly strengthened the coordination be tween division managements and placed all di vision headquarters in St. Louis. Others trans ferred to St. Louis were scientists from El Dorado and Dayton, Ohio, who joined the staff of the Research Center. The year's executive reassignments included the transfer of Irving C. Smith to Italy to become deputy managing director of Sicedison S.p.A. Mr. Smith had served Monsanto ably as a vice presi dent and as chairman of our Budget Committee and our Corporate Planning Group. At the same time, Arthur W. Lucas was elected a Monsanto vice president and named chairman of a new Corporate Planning and Evaluation Staff. Mr. Lucas had been a vice president of Chemstrand and executive director of finance for that company. The Budget Committee, which Mr. Smith had headed, now has the company president as its chairman. Mr. Lucas and Edwin J. Cunningham, our controller, were added to its membership in 1961. In October, Vice President Robert K. Mueller, who had been serving as general manager of the Plastics Division, was elected a director and a member of the Executive Committee. Succeeding him as the Plastics Division's general manager was John R. Eck, who had been the division's assistant general manager. Mr. Eck, who also was elected a vice president, is a former president of Mobay Chemical Company. Also in October, Vice President H. Harold Bible, who had been general manager of our Lion Oil Company Division, was appointed general manager of our newly formed Hydrocarbons Division. **** Thus went 1961, the year of Monsanto's 60th anniversary. Our company has come a long way since it began in 1901 as the part-time venture of its founder. It has weathered many vicissitudes since it set out to make its first product -- sac charin. Its research today is a far cry from that conducted on an empty packing case in a large, windowless closet. But despite the changes of the first 60 years, the objective has been constant. From the start, Monsanto's mission has been to extend man's mastery of the atom and the molecule and, in doing so, to develop, make and market at a profit products that contribute to human welfare. Our success in this mission is to the credit of our employes and to the benefit of our shareowners. Sincerely, February 16, 1962 St. Louis, Missouri MAR 000677 ___ Chairman of the Board- President LAMO16736 15 # PARENT COMPANY AND ALL SUBSIDIARIES SALES BY PRODUCT GROUPS Chemical Fibers................................................................................ ................ Plastics, Synthetic Resins and Surface Coatings........................ ................ Phosphate Products and Detergents............................................ ................ Intermediates and Plasticizers....................................................... ................ Rubber and Oil Chemicals.............................................................. ................ Agricultural Chemicals..................................................................... ................ Petroleum Products--Net of purchases....................................... ................ Pharmaceuticals, Flavors and Condiments.................................. ................ Textile and Paper Chemicals.......................................................... ................ Heavy Chemicals.............................................................................. ................ Other................................................................................................... ................ 1961 % 25.2 21.0 12.2 10.7 7.7 7.2 6.7 3.6 2.8 2.6 .3 100.0 I960 % 23.6 21.7 12.0 11.2 8.3 6.3 6.6 3.6 3.5 2.9 .3 100.0 1956 % 16.2 23.5 15.1 11.3 9.7 6.3 6.8 4.2 2.3 4.1 .5 100.0 PAR ENT COM PA N Y SALES TO PUBLIC AND CONSU MING INDUSTRIES 1961 Position % of Total Agriculture...................................................... 1 13.16 Soap and Detergent...................................... 2 12.56 Petroleum....................................................... 3 11.16 Plastics and Resins....................................... 4 9.37 Rubber............................................................ 5 7.90 Paper and Printing........................................ 6 5.73 Textile.............................................................. 7 5.06 Stone, Glass and Vitreous Product............. 8 4.90 Metal................................................................ 9 4.82 Public-Service Station Sales, etc................. 10 4.67 Paint, Varnish and Printing Ink................... 11 3.45 Pharmaceutical.............................................. 12 3.37 Food................................................................. 13 3.01 Lumber and Timber...................................... 14 2.06 Iron, Steel and Related Product................. 15 1.68 Color and Dyestuff........................................ 16 1.26 Transportation Equipment........................... 17 1.15 Non-ferrous Metal......................................... 18 .71 Other................................................................ 3.98 1 100.00 I960 Position % of Total 2 11.85 1 12.03 3 10.91 4 9.57 5 8.81 8 5.57 7 5.62 9 5.32 6 5.63 10 4.58 11 4.20 12 3.03 13 2.61 14 2.09 15 1.59 17 1.28 16 1.30 18 .74 3.27 100.00 1959 Position % of Total 2 11.46 1 12.75 4 9.88 3 10.03 5 8.94 9 4.96 6 6.54 8 6.00 7 6.07 10 4.35 11 4.01 12 2.72 13 2.50 14 2.31 17 1.28 15 1.58 16 1.32 18 .56 2.74 100.00 MAR 00067 LAM016737 16 MONSANTO CHEMICAL COM P A\ STATEMENT OF CONSOLIDATED FINANCIAL POSITIOI ASSETS Current Assets: Cash............................................................................................. Marketable securities, at cost which approximates market Net receivables.......................................................................... Inventories.................................................................................. 1961 1960 (In Thousands) 28,914 $ 32,757 18,600 75,110 152,704 124,425 154,438 354,656 153,479 385,771 Investments and Miscellaneous Assets, at Cost or Less: Investment in and advances to associates..................... Miscellaneous investments and receivables................... Property, Plant and Equipment, at Cost............ Less accumulated depreciation and depletion Net property................................................ 33,545 56,942 90,487 27,789 47,646 75,435 1,224,923 544,119 680,804 1,092,323 476,621 615,702 Deferred Charges 16,326 12,737 The above statement should be read in conjunction with pages 20 and 21 of this report. MAR 000679 $1,142,273 $1,089,6 LAM016738 SUBSIDIARIES 17 AT DECEMBER 31, 1961 AND 1960 LIABILITIES Current Liabilities: Accounts payable and accruals................................................................... Income taxes................................................................................................... Sinking fund payments, less $1,000,000 debentures in treasury........ 1961 1960 (/n Thousands) $ 109,560 48,794 8,937 167,291 $ 86,477 46,777 9,820 143,074 Debentures, Bonds, etc.--Less Current Portion Above............................. 128,225 148,239 Income Debentures___ Other Liabilities: Deferred income taxes Miscellaneous.............. 141,000 28,069 3,394 31,463 141,000 31,138 3,117 34,255 Minority Interests in Subsidiary Companies 23,065 23,114 Shareowners' Equity: Common shares--authorized, 35,000,000 shares, par value $2 each; outstanding, 28,023,440 shares in 1961 and 27,195,189 shares in 1960...................................................................................................... Paid-in surplus................................................................................................ Retained earnings.......................................................................................... 56,047 323,055 272,127 651,229 $1,142,273 54,390 286,666 258,907 599,963 $1,089,645 MAR 000680 LAM016739 fMONSANTO CHEMICAL COMPAN STATEMENT OF CONSOLI1 D AT E D INCOME Income: Net sales............................................................................... Other...................................................................................... 1961 $932,916 11,755 944,671 1960 (In Thousands) $890,114 10,411 900,525 Increase Decrease $42,802 1,344 44,146 Deductions: Cost of goods sold............................................................... Selling, administrative and research expenses.............. Interest.................................................................................. Minority interests................................................................. Other...................................................................................... Income Before Income Taxes.............................................. Provision for Income Taxes................................................. Net Income.............................................................................. 672,924 131,407 11,579 382 1,339 817,631 127,040 632,696 126,364 12,362 1,569 934 773,925 126,600 58,384 58,793 $ 68,656 $ 67,807 40,228 5,043 783 1,187 405 43,706 440 409 $ 8490 The above statement should be read In conjunction with pages 20 and 21 of this report. MAR 000681 LAM016740 STATEMENT OF CONSOLIDATED PAID-IN SURPLUS AND RETAINED EARNINGS PAID-IN SURPLUS Balance at Beginning of Year............................................................................... Additions: Excess of approximate market value of common capital stock distributed as a stock dividend over the par value thereof....................................... Excess of amounts received over the par value of common capital stock issued under stock option plans................................................................ Adjustment resulting from an increase in the stated value of common stock of The Chemstrand Corporation (see retained earnings below). Other...................................................................................................................... Balance at End of Year.......................................................................................... 1961 1960 (/n Thousands) $286,666 $230,517 27,022 9,367 $323,055 16,175 970 39,000 4 $286,666 RETAINED EARNINGS Balance at Beginning of Year........ Addition--Net Income for the Year Deductions: Dividends on capital stock of parent company: Cash--at the rate of $1 a share................... Stock--2%........................................................ Cash dividend on capital stock of The Chemstrand Corporation Transfer to common capital stock account by The Chemstrand Corpora tion resulting from an increase in the stated value of its common stock (see paid-in surplus above).............................................................. Balance at End of Year $258,907 68,656 327,563 27,316 28,120 55,436 55,436 55,436 $272,127 $272,861 67,807 340,668 23,159 17,102 40,261 2,500 42.761 39,000 81.761 $258,907 The above statement should be read in con|unction with pages 20 and 21 of this report. MAR 000682 LAM016741 The accompanying financial statements (pages 16 through 19) consolidate with the parent com pany all active domestic and foreign subsidiaries in which Monsanto Chemical Company owns more than 50 per cent of the voting capital stock. The equity in the unaudited 1961 net income of 50 per cent owned companies was $3,652,000, compared with $2,165,000 in 1960. Dividends of $573,000 were received from these companies in 1961 and $563,000 in 1960, which have been in cluded in the parent's income. The equity in the unaudited net assets of such companies at the end of 1961 was $36,871,000, which exceeded the carrying value of $33,545,000 by $3,326,000. Charges against income for depreciation, ob solescence and depletion totaled $84,527,000, of which $81,852,000 was depreciation and obsoles cence, and $2,675,000 depletion of mines and wells. In 1960, such charges were $73,218,000 and $2,870,000. The excess of depreciation provided by the sum of the years digits method over straight line depreciation increased from $10,644,000 in 1960 to $12,263,000. Accumulated depreciation and depletion at year end: 1961 I960 (In Thousands) Depreciation............................... $514,849 $449,383 Depletion.................................... 29,270 27,238 Total........................... $544,119 $476,621 Repair and maintenance charges included in operating expenses were $57,883,000 in 1961 and $60,785,000 in 1960. In certain prior years, provisions were made for income taxes payable in future years resulting from the excess of depreciation and amortization of facil ities constructed under Certificates of Necessity for income tax purposes over depreciation for account ing purposes. For the years 1961 and 1960, $4,049,000 and $3,021,000 of such taxes became payable and were charged against the reserve provided in prior years. Inventories are valued substantially at the lower of cost or market. Annual rates of turnover were 4.4 in 1961 and 4.5 in 1960. Reserves for doubtful accounts were $4,110,000 in 1961 and $3,081,000 in 1960. Debentures, bonds, etc., and income debentures were comprised of: Debentures, bonds, etc.: Parent company: 3\4% sinking fund debentures, due 1968......... 2.65% debentures, due 1971 (less $1,000,000 in treasury)........................................................... 3%% sinking fund debentures, due 1972......... The Chemstrand Corporation and subsidiaries: 4y2% term loans from banks, due 1962............. 41/2% min. term loan from bank, due 1963....... 3Vi% first mortgage bonds, due 1976................ Monsanto Chemicals Limited (British subsidiary): 6% debentures, due 1977/82.............................. 5% debentures, due 1982.................................... Other subsidiaries (less $289,500 in treasury)... Total................................................................ 1961 1960 (In Thousands) ..$ 11,250 .. 23,000 .. 11,000 .. 62,257 8,400 9,800 2,518 $ 12,500 24,000 11,500 10,000 1,907 69,392 8,400 9,800 740 $148,239 Income debentures -- Parent company: 33/4%, due 2002...................................................... 414%, due 2008...................................................... Total............................................................... ..$ 91,000 $ 91,000 50,000 $141,000 MAR 000683 LAM016742 21 The May 1,1962 and 1963 sinking fund payments on the 2.65 per cent debentures were anticipated by the purchase of $2 millions of these debentures. The parent company has executed an agreement for the sale to an institutional investor of $75 millions principal amount of 4% per cent promis sory notes, due January 1, 1993. On January 16, 1962, $50 millions of such notes were sold; the remaining $25 millions will be sold in May, 1962. The notes require that 93 per cent of the principal amount be prepaid in equal annual installments commencing January 1,1973, with the balance due at maturity. The company expects to sell an addi tional $25 millions of such notes in June, 1962, on a basis to yield 4 per cent interest over the average life of the notes. In 1961, four quarterly cash dividends of 25 cents each were paid on the common shares. Also, a stock dividend of two per cent was paid in December. The parent company has three stock option plans in effect: the plans authorized by shareowners in 1951 and 1960 for key employes, and the Second Employes' Stock Plan, authorized by shareowners in 1960 for hourly and salaried em ployes except participants in the first mentioned plans. The status of the authorized shares of each and the changes occurring during the year were: 1951 1960 Stock Stock Option Plan Option Plan Second Employes' Stock Plan Outstanding 1/1/61___.390,816 Unoptioned 1/1/61..., Authorized during year Optioned during year.. Exercised during year. .215,968 Terminated during year............................ 740 Outstanding 12/31/61..177,808* Unoptioned 12/31/61. 237,660 119,340 193,000 281,750 13,932 2,060 513,370* 33,696* 423,692 26,308 11,696 49,460 33,694 352,234 48,306 Adjusted for 1961 two per cent stock dividend. Under the Stock Option Plans, 383 options are outstanding, at prices ranging from $26.03 to $56.13 a share. Where applicable, the prices have been adjusted for stock dividends and for the 1955 three-for-one split. The three-year Second Employes' Stock Plan, which became effective on June 3, 1960, provided for the grant to hourly paid and salaried employes of options to purchase a maximum of 450,000 Mon santo shares. On June 5, 1961, and December 4, 1961, the anniversary dates of the plan, options were offered to those employes who had not pre viously been eligible to participate. At the end of the year, the options outstanding were: Date of Offering Number of Employes June 3,1960............... .... 8,621 December 5, 1960___ .... 355 June 5, 1961............... .... 245 December 4, 1961___ ..... 513 Total................... .... 9,734 Number of Shares 330,460 10,393 4,441 6,940 352,234 Price a Share $39.25 40.75 50.25 50.50 The prices are approximately 95 per cent of the New York Stock Exchange average price on the dates the options were offered. Payments by the employe over the option period are made by payroll deductions on which the company has been credit ing interest at a minimum rate of four per cent. MAR 000684 LAM076743 ACCOUNTANTS' OPINION HASKI NS a SELLS CEPTIFIEO PUBLIC ACCOUNTANTS BOATMEN'S BANK BUILDING SAINT LOUIS 2 Monsanto Chemical Company: We have examined the statement of consolidated financial position of Monsanto Chemical Company and its subsidiary companies as of December 31, 1961 and the related statements of consolidated income and paid-in surplus and retained earnings for the year then ended. Our examination was made In accord ance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circum stances. In our opinion, the accompanying statement of consolidated financial position and statements of consolidated income and paid-in surplus and retained earnings present fairly the financial position of Monsanto Chemical Company and its subsidi aries at December 31, 1961 and the results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that LAM016744 23 MONSANTO CHEMICAL COMPANY AND SUBSIDIARIES SOURCE AND DISPOSITION OF FUNDS (In Thousands) Source of Funds: Net income.......................................................... Provisions for: Depreciation, etc............................................. Deferred income taxes................................... Sale of securities: 4Vi% income debentures............................... 6% debenture stock of British subsidiary... Common shares issued under options........... Other--net............................................................ TOTAL $266,596 306,737 6,235 50,000 8,400 26,242 14,471 678,681 196lO> $ 68,656 84,527 9,926 5,560 157,540 1960(U $ 67,807 76,088 1,040 677 145,612 1959 $ 53,473 51,691 25,000 13,846 9,087 153,097 1958 $ 36,882 48,884 1,839 25,000 3,780 872 6,988 124,245 1957 $39,778 45,547 4,396 4,620 558 3,288 98,187 Disposition of Funds: Dividends on common shares: Monsanto.......................................................... Chemstrand...................................................... Plant additions and replacements................... Investment in affiliated companies................ Retirement of debt............................................. Increase--decrease in working capital(2!....... . Increase--decrease in cash and securities... 116,624 2,500 119,124 466,605 48,415 42,462 39,638 37,563 $678,681 27,316 27,316 153,818 9,810 21,928 5,021 60,353 $157,540 23,159 2,500 25,659 121,253 9,723 9,915 27,479 48,417 $145,612 22,414 22,218 22,414 68,657 5,504 3,999 3,485 56,008 22,218 58,057 20,232 3,870 7,862 12,006 $153,097 $124,245 21,517 21,517 64,820 3,146 2,750 2,761 3,193 $98,187 (1) The accounts of The Chemstrand Corporation and subsidiaries are included only in the years 1961 and 1960. (2) Exclusive of cash and securities. Italics indicate decrease. mar 000686 L.AM016745 24 MONSANTO CHEMICAL. COMPANY HISTORICAL STATEMENT OF CONSOLIDATED (In millions) ASSETS Current Assets: Cash............................ Marketable securities Net receivables......... Inventories................. Investments, etc 1961`1) lSSOd) 1959 1958 1957 10 YEARS AGO 1951 25 YEARS AGO 1936 $ 28.9 18.6 152.7 154.5 354.7 $ 32.8 75.1 124.4 153.5 385.8 $ 25.7 93.3 101.6 105.5 326.1 $ 24.6 38.5 93.5 100.4 257.0 $ 28.3 22.7 79.6 108.3 238.9 $ 25.8 17.5 35.9 56.1 135.3 $ 4.9 2.4 2.9 5.9 16.1 90.5 75.4 79.6 76.4 55.4 12.5 .9 Property: Land...................................................... Buildings............................................... Machinery and equipment................ Phosphate deposits............................ Producing oil and gas properties___ Undeveloped oil and gas leaseholds. Accumulated depreciation, etc......... Accumulated depletion...................... Net property.............................. 23.4 195.0 907.0 8.5 82.1 8.9 514.8 29.3 680.8 19.2 181.0 795.5 8.1 79.5 9.0 449.4 272 615.7 14.2 110.4 524.1 6.9 76.6 10.0 307.7 25.6 408.9 11.8 107.3 484.4 6.2 74.9 12.8 274.3 24.4 398.7 10.9 103.0 453.3 6.1 67.7 19.7 238.5 22.3 399.9 4.9 46.5 175.7 4.0 79.5 .5 151.1 1.7 6.7 18.9 .4 9.0 18.7 Deferred Charges 16.3 $1,142.3 12.7 10.2 $1,089.6 $824.8 8.5 $740.6 6.5 $700.7 2.3 $301.2 .2 $35.9 (1) The accounts of The Chemstrand Corporation and subsidiaries are included only in the years 1961 and 1960. italics indicate deduction. MAR 000687 LAM016746  AND SUBSIDIARIES 25 FINANCIAL POSITION (fn millions) LIABILITIES Current Liabilities: Accounts payable and accruals... Income taxes less tax notes.......... Sinking fund payments.................. 1961(1) 19600) $ 109.6 $ 48.8 8.9 86.5 46.8 9.8 167.3 143.1 1959 $ 65.5 36.1 1.8 103.4 Debentures, Bonds, etc..................... 128.2 148.2 68.8 Income Debentures........................... 141.0 141.0 141.0 1958 $ 63.0 22.0 1.8 86.8 72.5 116.0 1957 $ 61.2 25.7 1.8 88.7 72.3 91.0 10 YEARS AGO 1951 25 YEARS AGO 1936 $ 29.4 34.6 $ 3.1 1.2 64.0 4.3 30.3 Other Liabilities: Deferred income taxes................... Miscellaneous.................................. Minority Interests in Subsidiaries.. 28.1 3.4 31.5 23.1 31.1 19.0 3.1 1.7 34.2 20.7 23.1 21.6 19.3 17.5 2.5 3.3 21.8 20.8 20.4 20.2 4.5 9.0 13.5 18.8 .6 .6 2.3 Shareowners' Equity: Preference shares........................... Common shares.............................. Paid-in surplus................................. Retained earnings........................... 56.0 323.1 272.1 651.2 $1,142.3 54.4 286.7 258.9 600.0 $1,089.6 46.3 222.6 200.4 469.3 $824.8 44.5 187.2 191.4 423.1 $740.6 44.4 186.5 176.8 407.7 $700.7 15.0 24.4 64.9 70.3 174.6 $301.2 11.1 8.3 9.3 28.7 $35.9 MM 000688 LAM016747 26 MONSANTO CHEMICAL. COMPANY HISTORICAL STATEMENT OF CONSOLIDATED INCOME (In millions except per share earnings) Income: Net sales. Other___ 1961'11 $932.9 11.8 944.7 I960'1> $890.1 10.4 900.5 1959 $688.0 12.3 700.3 1958 $611.3 8.9 620.2 1957 $624.8 7.3 632.1 10 YEARS AGO 1951 25 YEARS AGO 1936 $305.7 2.6 $28.9 .4 308.3 29.3 Deductions: Cost of goods sold.............................. Selling, administrative, research___ Interest.................................................. Minority interests................................ Other..................................................... 672.9 131.4 11.6 .4 1.3 817.6 632.7 126.3 12.4 1.6 .9 773.9 512.5 83.4 7.5 1.6 1.8 606.8 469.1 75.4 7.3 .5 5.1 557.4 468.8 77.7 6.0 .8 6.0 559.3 205.8 31.5 .8 1.2 1.8 241.1 19.6 3.8 .1 .3 23.8 Income Before Income Taxes.............. Provision for Income Taxes................. Net Income.............................................. Per Common Share: Adjusted for splits............................... Adjusted for splits and stock divi dends................................................ 127.1 58.4 $ 68.7 $ 2.45 $ 2.45 126.6 58.8 $ 67.8 $ 2.49 $ 2.44 93.5 40.0 $ 53.5 $ 2.31 $ 2.22 62.8 25.9 $ 36.9 $ 1.66 $ 1.56 72.8 33.0 $ 39.8 $ 1.79 $ 1.69 d subsidiaries are included only in the years 1961 and 1960. 67.2 42.8 $ 24.4 $ 1.63 $ 1.45 5.5 1.0 $ 4.5 $ .45 $ .40 1 MAR 000689 LAM016748 27 N D SUBSIDIARIES OTHER DATA (In millions except where italicized) 196l(' ' Depreciation, depletion, etc............ .. $ 84.5 I960'11 $ 76.1 1959 $ 51.7 1958 $ 48.9 1957 $ 45.5 10 YEARS AGO 1951 25 YEARS AGO 1936 $ 12.6 $ 1.6 Book value a share12'........................ $23.24 $22.06 $20.27 $19.01 $18.34 $10.93 $2.88 Gross additions to property............. .. $153.8 $121.3 $ 68.7 $ 58.1 $ 64.8 $ 42.0 $ 5.3 Employes13'......................................... 37,576 35,427 25,148 24,524 24,331 18,192 4,799 Net working capital........................... .. $187.4 $242.7 $222.7 $170.2 $150.2 $ 71.3 $11.8 Employed capital14'........................... .. $943.5 $912.3 $700.7 $632.0 $591.2 $223.7 $31.0 Employed capital per employe....... $25,no $25,752 $27,863 $25,771 $24,298 $12,297 $6,460 Parent company: Cash dividends on common shares $ 27.3 $ 23.2 $ 22.4 $ 22.2 $ 21.5 $ 12.1 $ 3.2 Per common share12'..................... Preference shares outstanding....... Common shares outstanding12'.... Number of shareowners................... $1.00 28.0 82,203 $1.00 27.2 83,809 $1.00 $1.00 $1.00 $.83 23.2 22.3 22.2 150,000 14.6 78,675 66,427 60,036 19,527 $.33 10.0 6,216 J) Data for The Chemstrand Corporation and subsidiaries are included only in the ye< 1961 and I960. (2) Adjusted for splits. (3) Excluding employes of government plants. (4) Net worth and long term debt. MAR 000690 LAM016749 28 PETR OLEUM OPERATING DATA Expenditures for Exploration................. Portion Capitalized.............................. Portion Expensed................................. Leaseholds Expired and Abandoned... Number of Producing Wells (net)......... Natural Gas Produced--Net MCF(1) 2 3 Liquefied Pet. Gas Produced--Bbls___ Gross Crude Oil Produced--Barrels.... Net Crude Oil Produced--Barrels......... Average Crude Price Per Barrel121......... Domestic Undeveloped Acreage........... Domestic Producing Acreage................ Crude Oil Run to Stills--Barrels............ Daily Average Crude Oil Runs--Barrels. Refinery Production--Barrels......... . Station Sales--Gallons........................... Refined Oil Sales--Gallons131................. 1961 1960 1959 1958 1957 $11,522,563 $ 7,020,962 $ 4,501,601 $10,470,702 $ 7,339,777 $ 3,130,925 $11,374,804 $ 7,869,800 $ 3,505,004 $11,765,858 $ 8,031,826 $ 3,734,032 $15,647,840 $11,401,163 $ 4,246,677 $ 2,349,316 $ 2,949,815 $ 4,363,793 $ 4,038,948 $ 2,654,890 1,229 1,171 1,167 1,157 1,141 22,580,513 23,315,450 22,454,760 21,161,443 21,456,156 881,501 804,223 936,923 733,306 884,804 9,231,679 9,845,270 10,300,226 8,050,160 8,568,035 8,017,188 8,553,981 8,927,401 7,103,196 7,502,654 $2.80 $2.86 $2.87 $2.90 $2.98 741,380 639,580 629,463 1,301,657 2,392,507 86,639 87,572 83,450 79,203 78,141 12,326,902 11,956,667 10,943,015 10,392,687 10,527,774 33,772 32,668 29,981 28,473 28,843 12,695,132 12,784,443 11,758,846 11,375,494 11,347,931 152,987,798 144,378,691 130,968,526 114,177,697 111,562,216 534,653,119 499,065,023 455,425,433 478,416,598 455,120,546 (1) Excludes gas returned to formations. (2) At end of year. (3) Includes station sales. **** 000691 LAM016750 29 Charles Allen Thomas Chairmen of the Board of Directors LAM016751 30 LAM016752 30 JL LAM016754 IONSANTO CHSMICAL COMPANY . BOO N. LINDBERGH BLVD., ST. LOUIS 66, MO MAR 000696 LAM016755