Document ZBZ8Ba6DjxnpK0NQZV4w8pzRO

THE GLIDDEN COMPANY i CLEVELAND, OHIO . \' t. an n u al ! r epo r t ! Fiscal Year Ended October 31, 1936 I ri: t h e : g l id d e n c o mp a n y PRINCIPAL DIVISIONS AND PRODUCTS The Glidden Company, manufactur ing Jap-A-La:, Speed-Wall, Ripolin, Florenarnel, Endurance House Paint, Gliddenspar Varnish, and a complete line of home and industrial paints, varnishes, lacquers, enamels. jMso owning and operating the followini;: Euston Lead Division, manufacturing Euston White Lead. Chemical s.nd Pigment Division, manu facturing Astrolith and Sunolith Lithopones, Cadmium Reds and Yellows, Titanolith, Titanium Dioxide Metals Refining Division, manufacturing MRCO Grid Metal, Mixed Metal, Wilkes Type Metal, Metro* Red Lead, Cuprous Oxide, Copper Powder, Litharge Soy Bean Division, manufacturing Lecithin, Soy Bean Meal, Oil, Flour and Protein. Nelio-Resin Division, manufacturing NelioResin, Turpentine, Rosin Dutkee Fa mous Foods Division, manufacturing Durlee's Famous Dressing, Dunham's Cocoanut, Durkee's Margarine, Durkee's Spices, Durkee's Shortening, Durkee's Worcestershire Sauce, etc. 0100029 2^ THE GLIDDEN COMPANY CLEVELAND, OHIO December 31, 1936 TO THE SHAREHOLDERS: On behalf of the Board of Directors the certified Annual Report of The Glidden Company for the year ending October 31, 1936 is herewith submitted. Comparisons with previous reports can easily be made as there has been no change in accounting procedure. During the year by means of the sale and exchange of 200,000 shares of 4J#% Convertible Preferred Stock the company has retired all of its funded debt and all of the 7% Prior Preference Stock, thereby effecting a very considerable saving and eliminating all long term indebtedness. The net profits for the year after Interest, Depreciation Charges and all State and Federal Taxes, amounted to 33,085,468.89 as compared with a profit of 32,645,590.17 for the previous year. After allowing for payment of dividends on the old Prior Preference Stock and the new Convertible Preferred Stock these earnings are equivalent to 33.29 per share on the outstanding Common Stock as compared with 32.91 per share for the previous year. All of the properties of the company have been maintained in splendid physical condition and the regular schedule for charging depreciation has been followed. Your Directors are pleased to report that the United States Supreme Court denied the Government's application to review the judgment dismissing the Govern ment's three million dollar suit against the company for alleged alcohol taxes, thereby finally disposing, in the company's favor, of a claim which, though without merit, had been the subject of considerable newspaper publicity. Mention was made in the last Annual Report of plans for the rebuilding of the Soya Bean Oil Extraction plant at Chicago and various Soya Bean processing auxiliaries. Construction of these plants has been completed and all departments are now contributing to the profits of the company. The sales for November and December, the first two months of the new fiscal year, show a large increase over the sales for the same period last year and the pros pects for our whole business for the new year are most encouraging. Your Directors desire to take this opportunity to express their appreciation of the good work of the executives and employees whose loyal efforts have contributed so substantially to the good results shown in this report. By order of the Board of Directors. ADRIAN D. JOYCE President. GLD002928 CONDENSED B; The Glidden Company an As at the close of busii ASSETS CURRENT Cash.__________ _______________________________ _ Customers notes and acceptances receivable 2 Customers accounts receivable__ _________________ 2 1,376,057.34 92,238.34 4,383,193.77 2 4,475,432.11 Less reserves.......................................... ........................ 177,472.08 4,297,960.03 Miscellaneous current accounts and creditors debit balances Inventory (lower of cost or market values): Raw material, in process, finished goods and supplies_________________________ ___________ 216,152.31 10,106,826.76 215,996,996.44 OTHER ASSETS Cash surrender value of life insurance Claims against closed banks, less reserve Miscellaneous notes and accounts, salesmen's ad vances, sundry investments, etc------------------------- 2 366,673.75 72,886.79 199,626.08 639,186.62 INVESTMENTS IN SUBSIDIARY AND AFFILIATED COMPANIES California mining companies (Note A) (at less than cost): Capital stock (fully owned) 2 Bonds (principal amount 2500,000.00)________ Advances.......................................... ...................... 15,000.00 187,500.00 841,279.61 5 1,043,779.61 Affiliated company (at cost) (Note B): Capital stock________________ _____ ____________ 2 Advances..................................................... ............... 600,000.00 85,040.20 685,040.20 1,728,819.81 PROPERTY, PLANT AND EQUIPMENT Land at cost or less_______ Buildings, machinery, equipment, etc., at cost or less____________________________________________ Less reserve for depreciation and depletion 2 1,929,334.86 15,828,634.70 217,757,969.56 5,743,587.21 12,014,382.35 INTANGIBLES Patents, rights to manufacture, formulas, etc. (unamortized portion)________ _________ _____ ... 104,848.49 DEFERRED Inventory of advertising stock, stationery, unexpired insurance premiums, prepaid taxes, etc--------------- Special new products development 2 366,838.67 115,916.91 482,755.58 230,966,989.29 l . GL0002929 JLANCE SHEET I Consolidated Subsidiary less October 31, 1936 LIABILITIES, CAPITAL STOCK AND SURPLUS CURRENT Notes payable for money borrowed from batiks------------------------------ 3 800,000.00 Accounts payable for purchases, pay rolls, etc------- -------- --------------- 1,340,635.07 Accrued taxes, interest, insurance, royalties, etc., including federal income tax 927,402.85 3 3,068,037.92 RESERVE For contingencies-------------------------------------- --------------------------------- 67,885.56 CAPITAL STOCK AND SURPLUS CAPITAL STOCK Convertible preferred stock, 4J^% cumulative-- par value 850.00 a share (convertible into com mon stock, share for share on or before March 1, 1937 and thereafter at rates specified in articles) Authorized and outstanding 200,000 shares______________ _ 310,000,000.00 Common--without par value: Authorized 1,000,000 shares Outstanding 800,000 shares Reserved for conversion-- 200,000 shares Stated capital at 35.00 a share............................. 4,000,000.00 314,000,000.00 SURPLUS Capital.................. .............................. .................... 3 7,524,343.82 Profit and loss................. ........................................ 6,306,721.99 13,831,065.81 27,831,065.81 330,966,989,29 I l (Note A) Investments in California mining companies, whose assets consist entirely of properties I not being operated, are stated herein at less than cost, which carrying value on the basis of unaudited balance sheets, was 873,772.93 less than the bool value of the net assets of those companies. Losses have been experienced by these companies from date of acquisition to October 31, 1936, however, the losses for the past few years, since operations of properties were suspended, have represented prin cipally expenses in maintaining the properties. The value of investments in these companies is inde terminable at this time. (Note B) Investment in affiliated company represents a 45% interest in common stock and 100% interest in preferred stock of a company, the unaudited statement of which shows accumulated un distributed earnings of 810,493.19 at October 31, 1936. (Note C) The Company was reported as having letters of credit outstanding in the'amount of 8932,083.44 and it was contingently liable in the maximum amount of 829,281.08 as guarantor of customers notes receivable issued under the National Housing Act and for a subscription to stock of another cor poration in the amount of 319,200.00. _ Under ar existing agreement, the Company may be required to purchase capital stock of a corporation up to a maximum amount of 8500,000.00. Gt-0002930 SURPLUS ACCOUNTS The Glidden Company and Consolidated Subsidiary October 31, 1936 CAPITAL SURPLUS Balance October 31, 193S_________________________ DEDUCTIONS Write-off of intangibles, not previously amortized, as authorized by Board of Directors: Good will, trade marks, formulas, etc3 2,693,141.24 Reorganization expenses and commissions on sale of preferred stock in prior years_____________ 365,921.09 3 9,870,176.72 3 3,059,062.33 Less restoration of portion of reserve for contingencies provided out of capital surplus at November l, 1931 67,912.46 3 2,991,149.87 Less net addition resulting from adjustment of capital structure: Excess of selling price of 322.00 per share over stated value of 35.00 per share of 46,119 shares of common stock, previously reserved for sale to officers, key employees and others? Excess of selling price of 352.50 per share over par value of 350.00 per share of 141,538 shares of convertible preferred stock (58,462 addi tional shares of convertible preferred stock exchanged for 29,231 shares of prior prefer ence stock)._______________________________ 784,023.00 353,845.00 Less: Underwriting fees and ex penses in connection with issuance of 200,000 shares of convertible preferred stock 3 Premium paid on retirement of 35,769 shares 7% prior pre ference stock 3 1,137,868.00 313,706.03 178,845.00 492,551.03 645,316.97 2,345,832.90 BALANCE OCTOBER 31, 1936 3 7,524,343.82 PROFIT AND LOSS--SURPLUS Balance October 31, 1935 3 5,358,242.84 ADDITIONS Net profit from operations for the fiscal year ended October 31, 1936 3 3,085,468.89 Less dividends paid: Prior preference--35.25 a share 3 341,250.00 Convertible preferred--3-56J^ a share 112,505.27 Common--32.00 a share 1,576,924.00 2,930,679.27 3 1,054,789.62 LESS: Premium on retirement of Glidden 5^9^ gold notes and first mortgage 6% bonds of subsidiary com panies 3 Unamortized note issue expense and expenses in curred in retirement and redemption of notes and bonds Reduction of investment in Nelio-Resin Corpora tion (net assets of which were acquired as of November 1, 1935) to net book value as shown on books of that Company at November 1, 1935 33,904.00 11,434.07 60,972.40 106,310.47 948,479.15 BALANCE OCTOBER 31, 1936.. $ 6,306,721.99 (Note A) In prior years certain items of discount and expense, provision for contingencies and losses on dismantlement have been charged to capital surplus. If such items together with additional depre ciation claimed for federal income tax purposes had been charged against earned surplus instead of capital surplus, the respective amounts of such surplus accounts would be 35,589,741.59 and 38,241,324.22 as of October 31, 1936. GLD002931 a. CONDENSED OPERATING STATEMENT The Glidden Company and Consolidated Subsidiary* For the fiscal year ended October 31, 1936 NET SALES (excluding inter-company and subsidiary sales and trans fers).................................................................. ..................................... Profit before interest, depreciation and other income..______________ Other income--net________________________________________________ ?44, 580,959.33 3S=S===S=SS J 4,091,032.70 149,889.71 Interest on funded debt$ Other interest expense____________________________________________ PROFIT BEFORE PROVIDING FOR DEPRECIATION AND FEDERAL INCOME TAX Provision for depreciation and depletion_________ _____ ____________ $ 4,240,922.41 108,656.26 30,062.19 138,718.45 $ 4,102,203.96 542,735.07 PROFIT BEFORE FEDERAL INCOME TAX Provision for federal income tax___________ _______________________ ? 3,559,468.89 474,000.00 NET PROFIT $ 3,085,468.89 `Including accounts of subsidiaries dissolved during the year. (Note A) No provision has been made in the foregoing statement for loss of fully owned non-operat ing California Mining Companies for the year, amounting to 341,836.77 including provision for depre ciation in the amount of S27.908.64. (Note B) Depreciation claimed for federal income tax purposes for the year 1936 was S75,440,96 in excess of the provision in this statement, such excess being due to depreciation claimed on costs written off or credited to revaluation reserve during 1932. (Note C) Special new products development, aggregating $20,346.20 for the fiscal year 1936, deferred in the accompanying balance sheet, was treated a: expense for the purpose of computing estimated federal income tax liability for the year. ERNST & ERNST ACCOUNTANTS AND AUDITORS SYSTEM SERVICE CLEVELAND Union Truai: Building The Glidden Company, Cleveland. December 22, 1936. We have made an examination of the consolidated balance sheet of THE GLIDDEN COMPANY and its wholly owned subsidiary THE GLIDDEN COMPANY, LTI).,, (California mining companies excluded) as at October 31, 1936 and of the statement of income and surplus (which includes subsidiaries dissolved during the year) for the year ended at that date. In connection therewith we examined or tested accounting records of the Companies and other supporting evidence, and obtained information and explanations from officers and employees of the Companies; we alio made a general review of the accounting methods and of the operating and income accounts for the year, hut we did not make a detailed audit of the transactions. Inventories, as indicated by tests made by us, a*e staled on the general basis of the lower of cost or market prices with sufficient allowances having been provided to eliminate estimated intercompany and inter-division profits. Property, plant and equipment are stated on the basis of cost or less, reduction having been made in 1932 to elimi nate appreciation and to provide for further write-downs. Officers of the Companies have expressed the opinion that pending lawsuits are of minor importance and that no material losses will result therefrom. In our opinion, based upon our examination arid excluding the California mining companies, the accompanying consolidated balance sheet and related statement of income and surplus fairly present the consolidated position of the Com pany and The Glidden Company, Ltd., at October 31, 1936 anc' the results from their operations (and including subsidiaries dissolved during the year) for the year ended at that date. Subject to the foregoing comments and to the footnotes on the accompanying statements, it is our opinion that the statements have been prepared tn accordance with accepted accounting principles and on a basis consistent with the preceding year. ERNST & ERNST Certified Public Accountants. GLD00293Z THE GLIDDEN COMPANY CLEVELAND, OHIO FACTORIES FROM COAST TO COAST BRANCHES IN PRINCIPAL CITIES Atlanta, Ga. Knoxville, Tenn. Bakersfield, Calif. Los Angeles, Calif. Baltimore, Md. Long Island City, N. Y Berkeley, Calif. Louisville, Ky. Binghamton, N. Y. Miami, Fla. Birmingham, Ala. Minneapolis, Minn. Boston, Mass. Montreal, Canada Buffalo, N. Y. New Orleans, La. Chicago, 111. Norwalk, Ohio Cleveland, Ohio Oakland, Calif. Chico, Calif. Pittsburgh, Pa. Collins, Ga. Portland, Ore. Collinsville, 111. Reading, Pa. Dallas, Texas Sacramento, Calif. Detroit, Mich. San Antonio, Texas Elmhurst, L. I. N. Y. San Francisco, Calif. El Paso, Texas San Jose, Calif. Evansville, Ind. Scranton, Pa. Ft. Worth, Texas St. Louis, Mo. Fresno, Calif. Stockton, Calif. Halifax, N. S. Tampa, Fla. Hammond, Ind. Toledo, Ohio Houston, Texas Honolulu, T. H. Jacksonville, Fla. Toronto, Canada Winnipeg, Canada Wilkes Barre, Pa. Wes: Palm Beach, Fla. 1 CONSENT In conformity with the Articles of Incorporation of The Glidden Company which require the affirmative vote or written consent of the holders of record of at least seventy-five (75) per cent, of the aggregate par amount of the Prior Preference Stock outstanding to the issuance of any obligations maturing more than one (1) year from their respective dates, the undersigned, a holder of Prior Preference Stock of said Company, hereby consents to the creation of indebtedness by said Company in an amount not in excess of $3,400,000 to be evi denced by unsecured promissory notes maturing on or before June 1, 1939, bearing interest at not to exceed two and one-half (2J4) per centum per annum and containing such other terms and conditions as may be authorized by the Board of Directors. This consent is given with the express understanding that the funds received from the creation of such indebtedness are to be used for the purpose of redeeming on June 2,1936, or as soon thereafter as is practicable, .11 of the outstanding Five Year Five and One-Half Per Cent. Gold Notes of The Glidden Company maturing June 1, 1939, in the principal amount of $3,262,000 and redeeming or paying the bonds of subsidiary companies heretofore assumed and now in the hands of the public in the aggregate principal amount of $97,200 all in accordance with the letter of the President dated March 23, 1936, a copy of which the undersigned has received. Dated this..........day of.............................. , 1936. In the presence of: Shareholder's Signature GLD00293A