Document YpyBkGQQrQxMp9mGQZpzVGZN

the GLIDDEN company annual report 1957 GLD002612 j if <r"3! M *? >sr Mil. \y/.c1 ,,T. . . .. liit ; that we have, as managers, is the The greatest .Kpt.ns.biM/ indi,,d,,a|. Bo sl)Ccessll SI' f", " - * "T--. !-TM stcuctae built opon the tUllls ,anfl.leE"nes Pe0|,le ^l11' ,,h lead, peeple who c,e3tftP tf;n| Ste hS7. ...The Glidden Company/>'Sll",h7 1 * T " enab lie t.h. e ind.ivi.d.ua.l ,to giV0ii'ha best that is within him. DWIGHT P. JOYCE, tiI"1 0`V,5IOn Man8Em Mee,l"K- Au,:lJ^,, 1997 * I \1 J, GLDOO 2613 the GLIDDEN company 40th Annual Report fiscal year ended August 31, 1957 |jfi| TABLE OF CONTENTS A Five- Vein Comparison The President's. Report Paint Durkee Famous Foods Chemicals-Pigments-Metals Chenmigy Southern Chemical Consolidated Balance Sheets Consolidated Income Statement Source and Disposition of Funds Accountants' Report Management and Corporate Data page 2 page 3 page 6 page 8 page 10 page 12 page 14 page 16 page 18 page 19 page 19 page 20 A FIVE-YEAR COMPARISON Net Sales Income before Taxes Taxes on Income Net Income after Taxes Per Share Sc to Shareholders' Equity Cash Dividends Declared Per Share % of Net Income Earnings Reinvested Shareholders' Equity Per Share Long Term Debt Working Capital Current Ratio Plant and Equipment--Net Tutal Assets Depreciation and Amortization Per Share Expenditures for Plant and Equipment Shares Outstanding Number of Shareholders Number of Employees 12 Months August 31 1957 1956 10 Months August 31 1955 12 Months October 31 1954 1953 $225,537,291 $226,290,387 $180,524,822 $209,083,579 $211,758,522 15,387.437 8,123.000 16,450,737 8,304,000 14,324,567 7,212,000 14,235,043 7,142,000 14.834,272 7,725,000 7,264.437 3.16 8.5% 4.594,340 2.00 63.2% 2,670,097 85.837,116 37.35 27,500.000 8,146,'.'37 3 55 9.8% 4,591,`135 2.00 56/-% 3,555,302 83,090,719 3619 7,500.000 7,112,567 3.10 8.9% 4,588,588 2.00 64.5% 2,523,979 79,513,017 34.64 9,000,000 7,093,043 3.09 9.2% 4,581,860 2,00 64.6% 2,511,183 76,922,608 33.54 10,500,000 7,109,272 3.10 9.6% 4,578,538 2.00 64.4% 2,530,734 74,324,321 32.44 7,000,000 52,301.673 2.93 35,695,1148 2.27 47,155,983 3.58 51,225,674 4.36 46,004,697 3.15 59.516.961 53,413,732 39,993,479 34,493,146 33,234,243 140.369.855 118.738.003 106,762,124 102,669,755 102,749,597 5.046.378 2.20 5.870,339 1.25 2.234,960 .97 2,332,685 1.02 2,185,184 .95 12.465,415 2.298.170 21,686 6,455 16,637.000 2,295.')90 20.758 6.387 8.155,366 2,295,350 20,019 6.397 4,020,936 2,293,455 19,174 6,198 4,149,573 2,290,794 18,726 6,218 GLD002615 > the; presideht's report To the Shareholders: November 12, 1957 Net sales for the fiscal year which ended August 31, 1957, were $225,537,291. Income after taxes and all charges was $7,264,437. The slight decline in sales from $226,290,387 in 1956 was due to the disposal of our margarine and salad products business east of the Rocky Mountains and the discontinuance of our soybean and flaxseed operations at Buena Park, California. If the 1956 sales which resulted from these oper ations were subtracted frcm the totals reported last year, sales for 1957 would show an increase of 2%. The source of 1957 sales by divisions was: Per Cent of Total Paint .................................. $76,357,447 34% Durkee Famous Foods .... Chemicals - Pigments - Metals Chemurgy.............................. Southern Chemical.............. 88,779,546 16,965,447 35,113,745 8,321,106 39 7 16 4 Each of the five divisions operated profitably during 1957. A detailed review of division results and progress begins on page six of this report. Consolidated net income of $7,264,437 was equal to $3.16 per share on the 2,298,170 shares outstanding at the year-end. In 1956 net income was $8,146,737 or $3.55 per share on 2,295,990 shares outstanding at August 31, 1956. Operating results in 1957 were much better than net income per share indicates. Operations absorbed non-recurring costs and higher depreciation and amortization charges, both of which are the result of our program for sound, long-range growth. Net income for 1957 was reduced by 29 cents per share because of start-up expenses on new facilities and non-recurring costs arising from the relocation and discontinuance of certain operations. Depreciation, depletion and amortization charges for 1957 totaled $5,046,378 equivalent to $2.20 per share, compared with $2,870,339 or $1.25 for 1956. These charges include rapid amortization on our new grain elevators and "sum-of-the-years-digits" depreciation on most other capital additions since 1954. Rapid amortization of the grain elevators exceeded straight-line depreciation on these facilities by $1,182,317 in 1957 and by $98,714 in 1956. Depreciation by the "sum-of-the-years-digits" method exceeded straight-line depreciation by $946,188 in 1957, compared to $195,986 in 1956. Although 1957 net income was lower because of these increased deprecia tion and amortization charges, cash earnings (net income after taxes plus depreciation and amortization) were higher. In 1957 they totaled $12,310,815 or $5.36 per share compared with $11,017,076 or $4.80 per share for 1956. 1957 1956 Per Share Per Share Net Income ........................... $ 7,264,437 $3.16 Depreciation and amortization 5,046,378 2.20 Total cash earnings $12,310,815 $5.36 $ 8,146,737 $3.55 2,870,339 1.25 $11,017,076 $4.80 GLD00 2616 3 Cash earnings, of course, provide some of the funds required for capital expenditures and increased working capital. Throughout the growth of any business enterprise, certain segments evolve which are either alien to the basic goals of the company, no longer econom ically justifiable or static with little potential for future growth. We have aggressively followed a policy of eliminating operations of this nature to provide additional funds for investment in new and promising ventures or for expansion of more profitable existing activities. Since 1951, when this program was initiated, over $12,000,000 has been diverted to more profitable use. While such action is not always immediately possible due to such factors as our position in the industry or the degree of integration with other oper ations, we continue to examine critically each of our activities and products to make sure that both our capital and personnel are being employed to the best advantage. In addition to these sources, external financing has been required to cover our heavy capital investment in new and expanded facilities. Early in 1957 we borrowed $20,000,000, with interest at 4^4%, from 10 commercial banks on a revolving credit arrangement which expires late in 1960. This, of course, is only an interim method of financing, and a more permanent type of financing will he necessary during the next several years. The method, amount and timing of this financing are not yet determined. Capital expenditures in 1957 continued at a high rate. Amounting to $12,465,415, these funds were primarily invested in facilities for titanium dioxide, tall oil, terpene chemicals and paint. During the last three years we have spent a total of $37,257,781 for expansion and modernization. The percentage of this threr-year total invested in each division is shown below. Paint .................................................................. 12% Durkee Famous Foods....................................... 6 Chemicals - Pigments - Metals............................ 47 Chetnurgy .......................................................... 24 Southern Chemical............................................ 11 We continually review cur capital expenditure program in relation to industry and general economic conditions and to our own internal requirements for funds. We anticipate that 1958 capital spending will be about the same as the amount spent in 1957. Cash dividends totaling $2.00 were declared during the fiscal year. This includes the regular quarterly dividends of 50 cents per share paid January 2, April 1, July 1 and October 1, 1957. Dividends have been paid continu ously since 1935. Inventories at August 31, 1957, totaled $47,387,605, an increase of $8,895,365 over the total reported last year. Two major factors contributed most to this increase. With the opening of the new Adrian Joyce Works, it was necessary that we stockpile substantial quantities of imported titanium bearing ores to prevent any interruption in production due to raw material shortages. Also, market conditions in crude vegetable oils made it advan tageous to purchase sizable quantities during the latter part of the crop year and hedge these purchases with forward sales. Other major commodity inven tories are also hedged to the maximum extent possible. This practice, coupled with a LIFO reserve of $1,044,285 on some of these commodities, provides protection against extreme market fluctuations. Miscellaneous current accounts receivable include $2,227,719, which repre sents claims established for insurance recovery in connection with the fire losses at our Cleveland paint and Chicago protein plants. Federal income tax returns for 1954 through 1957 have yet to be reviewed by the Internal Revenue Service, but no major adjustments are anticipated. Retirement funds :'or employees deposited with bank trustees now total GLD002617 $10,486,538. Our retirement plans are non-contributory, the company paying the entire cost. Total advertising and promotion expenses for 1957 were $4,688,856 compared with $5,116,370 for 1956. This reduction in total expense resulted from the margarine 2nd salad products disposition, as advertising efforts, in general, were intensified. Research and development activities have been broadened considerably, and our newly-created central technical staff has undertaken a thorough evaluation of our present and future programs. The 1958 budget for research and development is 23% greater than that for 1957, primarily due to an increase in the number of professionally-trained people in our technical organizations. As is evident in the divisional reports, our research activities have provided important new products and promise to provide an even greater number hi the future. We continued the expansion of our overseas activities throughout 1957. Glidden International opened a new sales and administrative office in Nassau, Bahamas, and established new paint branches in Panama and Puerto Rico. We have added to and strengthened our export sales organization to improve the distribution of our products in major overseas markets. During 1957, v.e entered into technological assistance and royalty agree ments for titanium dioxide in Mexico, terpene chemicals in England and for paint in Spain. Our Canadian subsidiary, The Glidden Company, Ltd., set new sales records in 1957. We are now studying various means by which we can expand and diversify our activities in the growing Canadian economy. This, in time, may necessitate some major readjustments in our current methods of operating in Canadc. Several important executive changes occurred during the year. Paul E. Sprague, senior vice president and a director, retired from active service after 42 years of loyal association with our company. We are fortunate in being able to retain his valuable counsel on a part-time basis. Dr. W. David Stallcup was elected to succeed Mr. Sprague as vice president in charge of the Southern Chemical Division. Willard C. Lighter was elected to the new position of executive vise president. His former position as vice president in charge of theChcniurgy Division has been filled by Richard 0. Westley. Clark P. Maxson, formerly director of purchases, was elected vice president--purchasing and trade relations. In addition, we have recently centralized our engineering functions and have appointed James W. Pollard to the office of chief engineer. Capable, aggressive personnel at all levels and adequate financial resources are essential to continued growth. We have a sound financial structure, and we are proud of the caliber of our people. With these two important assets, wc have great confidence in the future of this company. chairman and president CLD002618 5 PAINT DIVISION For the second successive year, sales and earnings set new records. Sales of $76,357,447 increased 2% over the $74,977,744 sales figure reported last year. However, earnings increased 5% as a result of higher profit margins. Consumer products accounted for virtual!) the entire sales increase. Sales volume of industrial finishes and coatings was maintained at 1956 levels, in spite of a decline in production in certain indus tries. particularly durable goods. This highly' satis factory performance in both phases of our paint business was made possible by the sale of new prod ucts and an expanded distribution pattern. The most significant development in the Paint Division during 1957 was the progress made on emulsion coatings. For many years, a portion of our research has been concentrated on the development of water-reducible paints to eliminate the hazards of conventional solvents and to obtain the better filmforming properties inherent in emulsion-type paints. In 1949, we introduced Spred Satin, the first synthetic latex interior emulsion for consumers; in 1954, we introduced Spred Glide-On, an exterior emulsion for masonry and asbestos shingles. We have now solved many of the technical prob lems involved in the industrial use of emulsions lor protective coatings on metal. During the year-, the Ford Motor Company began to use emulsion coatings on certain structural parts, and we are continuing our work with Ford to develop more extensive appli cations for these finishes. Emulsion coatings are of major interest to the industrial user because of their cost advantages. There are still many problems to overcome, and the final accomplishment is a longrange project. When that time comes, The (Hidden Company's leadership in emulsion technology will provide great opportunity for growth. Our emulsion work has also led to the develop ment of a new Spred Satin which will be introduced to consumers during 1958. Without impairing the outstanding qualities of the present product, we have materially improved the durability, appearance and decorating characteristics in the new Spred Satin. In addition, this new product will he attractively packaged with a foil label, similar to the one which has been so successful with Spred Lustre, our alkyd enamel. We are continuing our technical and market development on petroleum-based resins and coatings, such as Glidpol polyesters and Glid-Rez butoxy resins. These products make possible further diversification into markets outside the conventional paint field. Our program for the expansion of consumer prod ucts distribution proceeded on schedule with the addi tion of 16 paint branches. We now have 89 such branches in operation, compared with 43 at the end of 1954. As part of this program, we are staffing our branches with maintenance sales specialists who arc concentrating on the growing painter and build ing maintenance markets. We expect to maintain this over-all program which will contribute materially to the growth of the Paint Division. In February, a sizable portion of our Cleveland plant was destroyed by fire. Customer requirements were adequately handled by our other plants and outside sources so there was no adverse effect upon earnings. Rehabilitation of the plant was started immediately after the fire, and normal operations were resumed late in the summer. This moderniza tion has provided a 25% increase in the plant's capacity through the use of efficient, high speed manufacturing and material handling equipment. We are now in the process of equipping a new research laboratory in Cleveland to conduct basic studies affecting the paint, resin arid coating fields. The staff will augment and supplement the work performed in our divisional laboratories. Though confronted with many marketing and pro duction problems throughout the year, the Paint Division turned in a highly creditable performance. Our continual development of an aggressive organi zation assures further improvement in the steady growth of this division. GLD002bl9 IB kill .. I- *mc VICt PRESIDENT Akuandei 0 Duncan GFMRAl MANAGER. TRAOF JAiiS I' A. Nodl'ctdt GFNFKAL MANAGER, INOUSFRIAl SAUS I N Anuel GFN( RAI SUf't RIM F NDENT C :l Mu\ t .'.uni t DIRfl (OR or RfSEARCH E sctwite DIVISlONAl MANAGERS Atlanta, G'Mii'u I l. Beauchamp Cim .igj, liiii uii H. E Miles C'lnago, Illinois P. C Brockman Clf-.-'iani), O.'i o R B Simpson Minneapolis Minnesota R. H Sif;'eo> !liv. Oileai.s Loijisimiii VI G S.'ei: Rending, PtMiii>,'liuma- H f.Wirjvt St 11 iis, Mi'S nun - G, J Seith San lianosco. California ! ^^ lo> Angele;, Calilcrnu | lo". nit) Ontana, Canada l. IV. la<s> >ii Mo I'. j I yi.:.. Canada R. ECUritUOis PRODUCES Si'.a il Sat.ii Sen 0 GtiDf i Sf h i ii lostii1 EM' i.m'iC: FMI.WAflCf IvUillAI EM'UrtAUCi Vil.'t SHU' AAII Jv a \i. RI-*. A El o i; .vmi p u r.Avn Guii lost S'diii , Got1 lt:M v' r it ,lies 0Avn)Nt Co'ui. $p k a . Hay In* BRU'u [iay hit Indus'ii-il Fn.ijt..j CllD Hi i Co -t , 5 and Rtsi is Gil Puli Poljtstt:i Callings Gilt).".': Purest' i Resins NUUiut. F'liiii: s and Enamels Hunt ti l. $ and HR Enamels WU-fVf. Pilin' i. a id Enamels Wood finishes GllOVAti Wiie l' I'l'r. Vnm co.t NU IV. Colt VCV f: meis an.' F nameli I Whether it be a dealer's store or a customer's factory, this is the salesmen's 'office*. To his customer, he is The Glidden Company. Only through him can the customer's needs be related to those who provide the products and services. GLDD02620 I DURKEE FAMOUS FOODS DIVISION 8 Improved profit margins and the elimination of low profit items produced a significant increase in divi sional earnings, which reached the highest level in recent years. Sales decreased slightly, from $88,927,483 in 1956 to $88,779,546 in 1957. Sales of edible oil products were stable throughout the year and physical volume compared favorably with that of 1956. Our leadership in the development of specialty edible oil products and uses, particularly for prepared mixes and confection coatings, has strength ened our position in a highly competitive industry. Coconut and condiment sales and profits reached all-time highs, largely due to the expanding bulk distribution of these products by our refinery sales organization. We have only begun to develop this phase of our business, which involves the addition of bulk seasonings and coconut to our regular line of shortenings and other edible oil products sold to bakers, and candy and food manufacturers. The Gourmet seasoning line introduced last year has proven very popular with consumers, and several new items have been added. GLD002621 ^5/ VICE PRESIDENT Harvey l. Slaughter DIRECTOR OF REFINERY OPERATION' G. N. [imee DIRECTOR OF MANUFACIUKING N. Realty DIVISIONM MANAGERS Berkeley, California R, J. Ha-i-'r BethH'hen . Pennsylvania V. D. Mutsli Chicagc, IIReois (?)- G. F Atkinson louisvllle, Kentucky-L. Y. Pulliam PRODUCTS Bulk Shortenings Puff Pastry Shortenings Baker's Margarine Ra h a v DGM Hard Butteis Specially EdriUf Oil Products Margarine 0ns Refined Vefetahle Oils MElvO frying Shortening Margarine SlAvr h i iL* Coconut Dix ie Cur Coconut Sn o v .iia k i Coconut Spices and Ertrauts GOURMEi Seasonings Meat Temlenytr Seasoning Salts Vegetable Hakes Cake Decorations Fa mo u s Sa u c e WorcesTutsh re Sauce Mayonnaise and Salad Dressings Package Shortening Salad Oils Deep Frying Oil The bookkeeper records. The accountant brings those records to life. By interpreting their meaning, he helps others improve their own performance. a < The major reorganization of Durkee operations begun in 1956 was continued. Last year we reported our plans to discontinue edible oil operations at Elmhurst, Long Island, and to relocate them at our refineries in Louisville and Chicago. This plan has been completed and we are now in the process of revising the former Elmhurst product line and elimi nating marginal business previously carried for volume purposes only. Eastern markets will continue to be served by the same sales force. We have recently discontinued all other operations at Elmhurst and have entered into a long-term lease for a modern, rme-story building in Rethlehem, Penn sylvania. to house our new coconut and condiment operations. This building, which contains over 200,000 square feet of floor space, has been equipped w ith the latest processing and packaging equipment. The efficiencies from this new plant layout and equip ment are expected to produce a 10% increase in over all divisional earnings by 1959. The net proceeds from the ultimate sale of the Elmhurst building will amply cover the $750,000 new investment at Bethlehem. As part of our reorganization program, we dis posed of our entire consumer table margarine and salad products business east of the Rocky Mountains during the second quarter. For the past several years, irie return from these operations has failed to meet our performance standards, and as major suppliers of refined margarine oils to independent manufac turers, we found ourselves competing with many of our present and potential oil customers in the East and Midwest. Our primary position is in the edible oil field and the loss in sales volume incurred by this disposilion has already been offset by additional edible oil business. Material progress has been made within the Durkee Division. 1958 will be a year of consolidation and further improvement. We have eliminated many of our problems so that management and staff can now devote their efforts to the further development of our profitable activities. GLD002622 I ii 9 it / CHEMICALS PIGMENTS M ETALS DIVISION Heavy start-up and depreciation expenses, combined with a softening in demand for titanium dioxide and a decline in copper prices, reduced earnings sub stantially below their 1956 level. Sales of $16,965,447 were off 8% from the $18,428,612 record high reported in 1956. Even with these factors, 1957 results have been surpassed only in 1955 and 1956, and return on investment for 1957 was still satisfactory. Titanium dioxide has had a phenomenal growth record. However, the pattern throughout the industry has been one in which occasional periods of surplus productive capacity immediately follow long periods of shortages. Naturally, when demand exceeds sup ply it is not possible to develop new markets. Only when additional capacity becomes available can this process be begun. Such is the case at the present time. During recent years demand for titanium dioxide has been far in excess of supply, and customers were placed on VICE PRESIDENT G. M. Halsey SALES MANAGEMENT W. J. Barnett R. B. Quelos i. C. Rankin MANAGER. RESEARCH AND DEVEIOPMEN! H. L. Rhodes PLANT MANAGEMENT Baltimore, Maryland i f f Njch0|as Scranton, Pennsylvania J Baltimore, Maryland-E. W. Cooper Collinsville, Illinois- W, K. Kelley Hammond, Indiana-E. P. Palmer PRODUCTS ZOPAQUf Titanium Dioxide Ca DMOUIH Red Colors Me n c a d mo iiih Red Colors Ca d mc iiih YelloA Colors SuNOLMH litliopone Titanated lithopone EUSION White lend Lead in Oil CilfiriND Brazing Compound Coppei Powder lead Powder Tin Powder Alloy Powders Cuprous Oxide Cupric Oxide Copper Pigment xV>**'> GLD002623 ,1 v h! allocation. In 1956, however, industry capacity was increased 24fr, while demand for titanium dioxide fell off because of lower production levels in the paper and appliance industries. These factors made 1957 a difficult operating year for the division as earnings were further burdened with heavy start-up expenses and first-year depreciation charges on the new Adrian Jovce Works. We look upon the current situation in titanium dioxide as similar to that which occurred in 1949 following a major increase in industry capacity. W e have complete confidence in the future of this product and are proceeding with the com pletion of our expansion program. To complete our titanium dioxide program, it is necessarv that we acquire adequate domestic ore reserves. At the present time, we are purchasing titanium-bearing ores from non-domestic sources. In April, we entered into a lease for 7,000 acres of ore lauds on Cumberland Island, located off the southern coast of Georgia. However, the status of this lease is now being litigated, and we will not know the final outcome for several months. If our lease is upheld, this property will give us a 15 to 20 year supply of raw material which can be economically shipped to Baltimore through the Inland Waterway. Production and sales of metal powders remained quite stable throughout 1957. However, a severe decline in the price of copper, one of our principal jaw materials, was reflected in earnings which were well bdow the record earnings of 1955 and 1956. Sales of lithopone and color pigments continued at about the same level as in the previous year. Lower prices on the metals used in these pigments are expected to permit more realistic profit margins for the coming year. While 1957 results for the Chemicals-PigmentsMetals Division were below our expectations, we be lieve its long-term potential is still promising. Many are the problems of a production superintendent -- bu" not without reward. A feeling of satisfaction comes with bringing men, materials and machinery together to produce a useful product. CHEMURGY DIVISION Chemurgy Division earnings foi 1957 were substan tially lower than for 1956 because of unsatisfactory soybean processing margins and rapid amortization charges on the division's new grain elevators. While sales of S35,113,745 were below the $35,807,498 reported for 1956, this decline was caused by the elimination of the Buena Park operations which wert discontinued at the end of 1956. Increased corn marketing by Commodity Credb. Corporation, amounting to more than half the corn moving into commercial channels, sharply reduced merchandising in the private coni trade during 1957. Since corn is the principal commodity merchandised through Chicago, our new grain activities were at a lower level than had been anticipated. The entire cost of the new elevators in Chicago, Indians,polis, I.ockport and Seneca, used by our grain merchandis ing operation, is being amortized over a five-year period ending in 1961. While the 1956 soybean crop, at 455 million bushels, was the largest on record, processing margins, except during the early part of the year, continued to be unsatisfactory. Government price suppoil policies on soybeans, coupled with the fact that there are no government supports on soybean oil and soy bean meal, kept a tight squeeze on processing margins from the beginning of March to the end of the crop year. For the past six years, soybean processing margins have been far from satisfactory as excess processing capacity in the industry has created an abnormally high demand for beans to keep facilities running. F.ach year the industry has optimistically expected some improvement in processing margins as the quantity of soybeans harvested has increased. How ever, the growth in industry capacity has more than kept pace with the expanded soybean harvest. This new capacity has been in efficient, instru mented processing units added to large existing plants or installed in new plants. Whether a better balance between supply and demand will eventually result from the elimination of marginal plants or from increased demand for the end products, soybean oil and meal, we are unable to foresee. We have serious doubts that this condition will correct itself for several years. In the meantime, we continue to stress the develop ment of high profit margin products derived from the soybean to eliminate our dependence upon pri mary processing margins. Sales of industrial protein, soybean flour and lecithin now represent 24% of total division sales. Profit margins on these products are satisfactory. To further improve our leadership in the field of industrial protein, our applications laboratory has recently been equipped with production-type coaters which will permit better technical service on the use of protein in paper coatings. A fire in the packaging and grinding department of the protein plant interrupted production during the month of July. We were able to continue supply ing our customers out of inventory and through the use of emergency facilities. The entire protein opera tion is now back to normal. On the basis of our technical and market develop ment work on edible protein, we have started con struction of a new protein plant at Indianapolis. Promine, our trade name for this edible protein, is an entirely new product. There are no other natural or synthetic proteins which have comparable chemical or physical properties and cost advantages. The evaluation of this product by leading food companies has stimulated a great deal of interest, not only because of its nutritional values, but also for use as a coating, thickening and gelling agent to improve the quality of many existing food products. Soybean derivatives have provided this division with a steady, growing source of income and it is our ultimate goal to utilize a major portion of our meal and oil output in the production of these products. The closer we come to the achievement of this goal, the greater will be the profit potential of the division. 12 GLD002625 Obtaining the right materials at the right time and at the right price presents a challenge for the buyer to make his contribution to the success of the organization. GLD002 626 13 SOUTHERN CHEMICAL DIVISION Although sales increased from $8,149,050 in 1956 to $8,321,106, 1957 earnings were moderatel) lower. Two new additions to our terpene chemical facili ties were completed on schedule and were put in operation during the middle of the year. Start-up costs and initial depreciation charges on these facili ties were primarily responsible for a slight decline in terpene profit margins. Further improvement in out synthetic resin business was evident throughout 1957. With the changing character of the division's activities over the past five years, gum naval stores and wood distillation operations have taken a rela tively minor position. The cyclical gum naval stores business continued on one of its down cycles daring the year, and very small profits were realized. In the second quarter, we disposed of our 50% interest in Jacksonville Processing Corporation, a gum naval stores producer. Wood distillation operations were fairly satisfactory, but were at a lower level than in the previous year. A further decline is likely during 1958. Construction of our new $3,400,000 tall oil plant at Port St. Joe, Florida, is nearing completion after a delay of several months caused by shortages of certain construction materials. Initial production will be limited, and full capacity probably will not be reached until early in fiscal 1959. Start-up and intro ductory expenses will limit earnings from this plant during its first year of operation. Utilizing bv-products of the St. Joe Paper Company as raw materials, the plant will produce crude tall oil, distilled tall oil and tall oil fatty acids and rosin. New processes employed in the design of these facilities are expected to yield products superior in quality to those pre sently on the market. There is a growing demand for these products for use in paper, protective coatings, rubber, detergents, soaps and chemicals. For the past ten years, this division has been direct ing its research efforts toward the use of inexpen sive terpene hydrocarbons to produce fine organic and aromatic compounds through chemical process ing. While many of these compounds have been available from natural sources, their supply, quality and price is necessarily affected by variations in soil, climate and import-export restrictions. The chemical synthesis of these products from domestic raw materials provides the consuming industries, both here and abroad, with a regularity of supply, price stability and consistent quality not otherwise available. Within recent years, some of this research work has been successfully concluded, resulting in products such as anethole, a synthetic anise flavoring, and nopol, which is used in soap perfumery. We are now in the process of introducing the first synthetic geraniol to the essential oil trade. This terpene aro matic, which is used in perfumery, is expected to receive excellent commercial acceptance and will lead the division into still further activities in terpene aromatic chemicals. The division's most important step in this field is still in the developmental stage. Design and engi neering studies are now being completed for the construction of a plant at Jacksonville to produce synthetic laevo-menthol with patented processes which we believe to be the first commercially feasible approach to the synthesis of this important natural flavor. Pilot quantities of this product have received an excellent reception from manufacturers of pro prietary drug, confection and tobacco products. We expect to start construction of this plant in 1958. Throughout 1957 we have continued to build for the future of the Southern Chemical Division, and, although its present contribution to profits is small in relation to the total, the gradual introduction of new facilities and products should materially increase this contribution during the next several years. 14 GLD00262T '- . .<.<ny>ww!--.........*<>,*.' \ ,V*t *-# /'*'V*>v**i j vj Long, quiet hours of searching and thinking lay the foundation for scientific advancement. Once conceived, the ideas of the research chemist are expanded in the laboratory, the plant and the market place. | i V <. *4 GLD00262& vir p r f s io im O SUtlcri? ASSISTANT DIVISION VANACFR 0 b Vudtey (,t Of RAl SAlfS MANAGER 1 K G.ii -isv n iiii.'Ccron or k ,s f a k ii I. P Hum Cl AM MAAAGtVff.l JsrFsnru l.e. find i I S Hei,P> i'o't St Jet. flame M. W. K.fCItr Valdosta G?a't;ia i; S|iH r I'.iODUCIS Almu mien-; Alphi P.fcc A [:ll i Ti`fi m I An i'f cl.; fee P.a- 0 C.in it I'd" Du- ittne Cl lltlTi CtM.Tt:l MutM CI Avi I I My'tfi f P.1U L'yh i * Nt; u Gt.ri Tst: Ni im fvc O' j. 'i:t.: Mill) Si Pet; ic >v p j r.Y.fol PlMIMll I) S'. (Cl Tat1 C !,.i o.i r.j-t, !< 111! (in Ft., r T.vll C, I.' A I. $v; t. ... A. bur,; in U Ih Peril. Tat Dll Pin ' 0,1 Pm, VI Mirk Sjv*r SiJ.i n l Tui,, i'll.n. C.t SS Oils Vim/ Vtt.ii - Marts tillh! fit.' C Dm. f.*::- *Rt.'s R. si!i 0, s Alkyl PtS.ri Pure Pv.r `; -.,us I I CONSOLIDATED INCOME ii and earnings retained for use in the business The Glidden Company and Canadian Subsidiary Years ended August 31, 1957, and August 31, 1956 income Net sales . . . . . ........................................ Other income ............. .......................................... Cost of products sold....................................................... Selling, administrative, and general expenses............... Provision for depreciation, depletion, and amortization Interest expense ............................................................. INCOME BEFORE TAXES ON INCOME Taxes on income -- estimated: Federal ..................... .................................................... Dominion and state............................. ......................... NET INCOME ............................................ 1957 *225,537,291 1,448,679 *226,985,970 *172.105,550 33,168,829 5,046,378 1,277,776 *211,598,533 * 15,387,437 * 7,620,000 503,000 * 8,123,000 * 7,264,437 1956 *226,290,387 673,148 *226,963,535 *174,894 035 31,947,320 2,870,339 801,104 *210,512,798 * 16,450,737 * 7,834,000 470,000 * 8,304,000 * 8,146,737 earnings retained in the business Balance at beginning of year ........................................ Net income........................................................................ Cash dividends declared -- per share....................... Balance at end of year .................................................. * 50323,547 7,264,437 * 57,587,984 4,594,340 * 52,993,644 * 46,768,245 8,146,737 * 54,914,982 4,591,435 * 50,323,547 GL00026?9 SUMMARY OF SOURCE AND DISPOSITION OF FUNDS The Glidden Company and Canadian Subsidiary Years ended August 31, 1957, and August 31, 1956 Source of funds: Net income ........ ................. Provision for depreciation, depletion, and amortization Total from operations . Long term borrowings (repayments) Other sources [net]............................... .................... 1957 $ 7,264,437 5,046,378 112,310,815 20,000,000 1,354,765 *33,665,580 Disposition of funds: Dividends declared...................................................... Expenditures for property, plant, end equipment Increase (decrease) in working capital..................... *4,594,340 12,465,415 16,605,825 *33,665,580 1956 * 8,146,737 2,870,339 *11,017,076 (1,500,000) 251,224 * 9,768,300 * 4,591,435 16,637,000 (11,460,135) * 9,768,300 ACCOUNTANTS' REPORT i Shareholders and Board of Directors, The Glidden Company, Cleveland, Ohio. We have examined the consolidated financial statements of The Glidden Company and its Canadian subsidiary for the year ended August 31, 1957. Our examination was made in accordance 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 circumstances. In our opinion, the accompanying balance sheet, statements of income and earnings retained for use in the business, ard summary of source and disposition of funds present fairly the consolidated financial position of The Glidden Company and Canadian subsidiary at August 31, 1957, and the consolidated results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Cleveland, Ohio October 15, 1957 Certified Public Accountants GLD002630 19 BOARD OF DIRECTORS Dw ig h t P. Jo y c e Al ex an d er D. Du n c an B. W. Max ey Jo h n H. We e k s R. D. Ho r n e r W. G. Ph il l ip s Wil l a r d C. Lig h t e r Ha r v e y L. Sl a u g h t e r G. M. Ha l s e y W. D. St a l l c u p G. S, Wa r n er OFFICERS Dw ig h t P. Jo y c e, Chairman of the Board and President Wn.LXRn C. Lig h t er , Executive Vice President B. W. Ml ax ey , Vice President -- Finance Al e x an d e r D. Du n c a n , Vice President Ha r v ey L. Sl a u g h t e r , Vice President Jo h n H We e k s , Vice President -- Personnel G. M. Ha l s e y , Vice President W. D. St a l l c u p , Vice President C. P. Max s o n , Vice President -- Purchasing and Trade Relations R. 0. We s t l e y , Vice President R. D. HORNER, Secretary and General Counsel W. G. Ph il l ips , Treasurer G. S. Wa r n er , Controller W. P. St e t ze l be r g er , Assistant Secretary GENERAL STAFF M. A. DUPONT, General Manager, Glidden International, C.A. W. v o n Fis c h e r , Coordinator of Research F. R. Hy s el i,, General Traffic Manager C. A. Lieac h Insurance Manager J. W. Po l l a r d , Chief Engineer CORPORATE DATA Executive Olfices 900 Union Commerce Building Cleveland, Ohio Transfer Agents The New York Trust Company New York City The Cleveland Trust Company Cleveland, Ohio Registrars The Chase Manhattan Bank New York City Central National Bank of Cleveland Cleveland, Ohio Common stock of the Company is listed on the New York Stock Exchange ami has trading privileges on other major stock exchanges. 20 Printtd In U. S. A. GLD002631 I GLD00p 63? the GLIDDEN company annual report 1957 GLD002633