Document bDn6wkDKv6Eek40rqDGxLqKO

DEC 61960 NOTES FOR ANNUAL MEETING December 8, I960 GLD003A44 INDEX Notea For Annual Meeting December 8, 1960 I BALANCE SHEET REVIEW A. Cash end Banting B. Short-Tern Securities C. Accounts and Notes Receivable- Trade D. Inventories E. Other Current Accounts andInvestaents F. Prepaid Insurance and Other Expenses G. Property H. Other Assets I. Short and Long Tern Financing ` J. Contingent Liability K. Stock and Stockholders II OPERATING STATEMENT A. Gross Profit B. Increase in Selling and Administrative Expense C. Other Income - Published P & L D. Depreciation E. Fixed Charges F. Advertising Expense G. Research and Development H. Average Assets and Profit Return I. Miscellaneous III CASH USE AND PROJECTION A. Application of Funds B. Five-Year Forecast - Cash Basis IV EMPLOYEE BENEFITS A. Pension Plans B. Bonus Plan C. Stock Options D. Wage and Salary Ratios E. Salaries F. Other Benefits V ACQUISITIONS, DISPOSITIONS AND CAPITAL EXPENDITURES A. Acquisitions B. Disposition and Shutdowns C. Mining Activity D. Major Capital Expenditures E. Extraneous Expenses VI OTHER MAJOR FUNCTIONS AND ITEMS A. Donations B. Audit C. Insurance D. Foreign Business E. Miscellaneous Page 1 1 2 3 4 5 5 5 5 7 8 10 10 12 12 12 13 13 13 13 14 IS 16 17 18 20 20 20 21 22 24 25 26 27 28 28 29 34 G LD 003445 NOTES FOR ANNUAL MEBTINa December 8, i960 1 Balance Sheet Review A. Cash and Banking The (Hidden Company maintains the following bank relationships: (Hidden Ltd. Int'l. Major Account and Credit Line Banks 21 3 Other Bank Relationships 12k 2 Total m1 4 2 Total Number of Bank Accounts 188 9 10 Cash is collected at 145 collection points in the U. S. and Canada, and is deposited in local bank accounts. In addition, 15 post office lock boxes are operated under arrangements with banks for servicing and depositing of funds received* Funds are then moved by depository transfer check and bank wire to 19 regional collection centers and are under the control of the Head quarters Banking Department. Invoices are paid by a central Accounts Payable Department and Division Ac counts Payable Departments which maintain working fund accounts. Small items in the branches are paid by issuance of an envelope draft. Funds are transferred to working fund accounts periodically by the Headquarters Backing Department, using bank wire and check transfers. Freight Payment Flans are used at two banks. Night depository arrangements are In effect where beneficial. B. Short-Term Securities At August 31, i960 we reflected $6,484,490. of short-term securities at cost on the Balance Sheet. These consisted of the following: U. S. Government Bonds and Certificates Commercial Paper Government Agency Obligations $ 3*005,074. 2,977,305* 502,031. $ 6,484,490 All of these securities had maturities of less than one year and were, in gen eral, placed to mature coincidentally with Dividend, Interest and Tax payments. During the year our average short-term portfolio was $4,550*000. The average after-tax interest income was 2.19$ (4.54$ equivalent before tax). GtD003<i46 Page 1 NOIiS FCR ANNUAL MEETING I BALANCE SHEET REVIEW C. Accounts and Notes Receivable - Trade (000 Quitted) 8/31/60 Accounts Receivable Notes Receivable Total Reserve for Bad Debts and Allowances Net per Annual Report $18,919 ___ 374 $19/293 565 8,720 $ Ead Debt Reserve to Receivables 2.9$ Bast Due Receivables: Dollar Amount $ of Gross Receivables $ 1,864 9.7$ Receivables Charged Off $ 271 Recoveries Against Receivables Charged Off no Net Bad Debt Loss $ I6T Bad Debt Loss as $ cf Sales: a/31/59 $17,194 7,417 .512 $16,905 2.9$ $ 1,215 7-1$ $ 222 102 $ 125 Auguat 31. 1958 Excluding Chemurgy Total $17,448 , 348 7,796 X 519 7,277 2.9$ $20,357 348 $20,705 529 $20,176 2.6$ $ 1,108 6.4$ $ 198 74 ? 125" $ 1,U3 5.4$ $ 198 74 | 125 i960 1959 1958 1957 1956 1955 .08$ .06$ .06$ .09$ .04$ .02$ Accounts receivable turnover for entire company approximately 36 days. This compares to 32 days in 1959 and 35 days in 1958. Somewhat slower turnover reflects continuing tread over recent years affecting all industry and accelerated during recent period of tight money and high interest rates. National median approximately 35 days for all types of business. Bad debt losses of $271,000 represent 23$ increase over prior year. Dun & Bradstract reports increase of 23$ in failure liabilities for all.business for first 6 months of I96G. Reports failure rate per 10,000 concerns for period was 56, the sighest rate since 1941. In addition to general business conditions, trend of company to sales through branches influences our bad debt losses and turnover of receivables. Instead of dealing with a smaller number of larger firms performing a distribution function, we now deal directly with wide range of accounts formerly serviced by distributors, and this leads to Increased losses and slower turnover. Secondly, branch credit functions per formed by less competent and well Qualified personnel than those employed in regional GLD003447 Page 2 I0TE3 FCR AMUAL MEESnRJ I BAIAHCE SHEET REVIEW C. Accounts and Hotea Receivable - Trade (000 omitted) - continued offices, and tills has had similar effects. A percentage breakdown of total receivables by major division is as follows: Paint Food C-P-M Organic Chemical Private ledger i960 64* 23* 9* 3* IM 1959 64* 23* 9* 3i (EEkxocllxuding Chemargy) 62* 27* 6* 4* lM D. Inventories Published inventory vas up $1,077*351 from $39*588,415 to $40,665,766 at August 31, I960. Detail is (000 omitted): August 31, i960 August 31, 1959 Increase (Decrease) Paint Pood C-P-M Organic Chemical UFO Reserve $19,297 12,147 7*750 1,897 $41,091 425 $40,666 $18,441 12,235 6,578 $40,2# $x39,588 $856 (88) 1,172 (1*126) Twr 264 $1,078 The principal items bringing about thlB increase of $lp077,351 were: Paints - Branch finished stock up $1,112,000 of vhich $892,000 repre sented stocks in new branches opened in fiscal I960- With sales volume at year end slightly belnv expectations, the Ifelnt Division vas $237,000 over its finished stock goals at year end. Fbods - Little net change with oil inventory reductions at Chicago and coconut stock reductions at Bethlehem not completely offset by increased oil stocks at Louisville. C-P-M - Greatly Increased finished stock at Adrian Joyce along with a small increase at Collinsville. Organic Chemical - Die lack of Valdosta inventories at August 31* I960 which to taled about $1,000,000 at August 31* 1959 is the principal reason for the reduced total. Inventories at Port St. Joe were down slightly at August 31* i960 compared to the previous year end. GLD003448 Page 3 NOTES TOR ANNUAL MBSTISa I BALANCE KHEET REVIEW D. inventories - continued LIFO Reserve - Of the LIFO Reserve reduction of $264,000, $195,000 is the result of the sale of the Organic Chemical Division's Valdosta operation. Turnover - Published Bet Sales to year-end net inventory: I960 - 4.86 to 1 1959 - 4.94 to 1 1958 - 5.91 to 1 1957 - 5.38 to 1 Inventory control is brought about through the Joint efforts of nanagenent and operating personnel. In the Faint Division on a seal-annual basis, Finished Stock dollar goals are set up by a Headquarters Inventory Committee on a Regional basis after careful study and consultation vlth Regional management. It is the responsibility of Regional management to allocate geographically and by product vlthin its goal. Results are coopered to goal each month, both at Headquarters and esch Region; and reasons for variances are determined and ranolvad. Rav material control is brought about by a translation of Finished Stock goals by the Joint effort of production management and purchasing person as1 at both Headquarters and each Region. Inventory control in the Food Division also has pars set for total inventory by Division through the Joint effort of Headquarters and Division management. Of greater importance is the daily control exercised for Rav Materials based on market quotations of edible oils and condiment rav materials. The Dtsrkee Trading Office is constantly projecting market conditions Into material require ments by means of teletype communication vith Headquarters and Division manage ment. Market conditions on pepper end other materials are also projected into requirements on a dally basis. She respective division managers in C-P-M and Organic Chemical exercise control of inventories as required by their Individual market sources and operating requirements situations. E. Other Current Accounts and Investments: Detail at August 31 vas: i960 Marketable Securities (Canada) $43,750 Margin Advances - Durkce & Hammond 62,970 Mlsc. Notes and Accts. (G.I.C.A. and from sales of property, etc.) A 7?7334 $MB9U0BS4S,H0a5M4BI mi $40,000 135,572 919,170 f,LD003AA9 Page 4 NOTES K ANNUAL MEETING I BALANCE SHEET REVIEW j*. prepaid Insurance and Other Expenses Detail at August 31 vas: i960 Prepaid Insurance Prepaid Texes Prepaid Royalties Other Prepaids $ 330,343 147,572 76,887 44,211 1959 $460,666 113,127 105,046 G. Property For schedule of major capital expenditures and 1961 projection, see ptge 25. Detail of lease of property to Central Soya Is on page 23. Depreciation Is covered on page 12. Insurable value of all buildings, machinery, and equipment owned by the Company but excluding land and foundation is $115,000,000. Rental obligations for buildings occupied by Company units are covered on page 8. H. Other Assets Detail at August 31 is: I960 1952 Prepaid Bond Discount and Expense Sundry Investments Advances, Deposits and Claims Mlsc. Notes and Accts- Receivable $ 713,863 74,014 148,914 81,772 ft,018,563 744,679 40,201 175,369 563,300 I. Short and Long Tern Financing 1. Short Term Borrowing and Bank Lines of Credit Fiscal I960 -0. Fiscal 1959 $ 87,500 * -0- 4,000,000 9/1 - 9/5/58 *ing -0- -0- -0-0 owing -0- 3-5* 9/12/58 vtained a line of credit of $10,000,000 for Gild GLD003450 Page 5 ' ROTES FCR ANNUAL MEETXRG I BALANCE SHEET REVIEW I. Short and Long Tern Financing (Continued) 1. Short Term Borrowing and Bank Lines of Credit (Continued) (plus $1,000,000 for International). These ware carried at major banks across the country as follows: Bunk City & State Amount Tfca Citizens & Southern Rational Bank Atlanta, Georgia $ 500,000 Continental Illinois Rational Bsnk & Trust Company of Chicago Chicago, Illinois 1,000,000 The First Rational Bonk of Chicago Chicago, Illinois 500,000 The Cleveland Trust Company Cleveland, Chio 500,000 The Rational City Bank of Cleveland Cleveland, Ohio 1,000,000 Atlantic Rational Bank of Jacksonville Jacksonville, Florida 500,000 The Florida Rational Sank of Jacksonville Jacksonville, Florida 500,000 Bank of America, N.T.& S.A., Bell Branch Ice Angeles, California 500,000 The Louisville Trust Company LouiBvill, Kentucky 500,000 The Chase Manhattan Bank Rev York City 1,000,000 Chemical Bank Rev York Trust Company Rev York City 1,000,000 The First Rational City Bank of Hew York Rev York City 1,000,000 The Boatmen's Rational Bank St. Iouls, Missouri 500,000 Mercantile Trust Company St. Louis, Missouri 500,000 Wells Fargo Bank San Francisco, California 500,000 Uhlon Commerce Bank * International Cleveland, Chio 1,000,000* Since we have not used our Credit Lines in two years, and it is not anticipated at present that we will have need of short-tern borrowing in I960, we have, since August 31, i960, reduced our lines to $7,500,000 (plus $1,000,000 for International). cu0003^1 Page 6 1 | j | | j / NOTES FCR ANNUAL MEETING I BALANCE SHEET REVIEW I. Short and Lofag Tern Financing (Continued) 1. Short Tern Borrowing end Benlc Lines of Credit (Continued) The Following lines haw been eliminated: Bank City & State Atlantic Rational Bank of Jacksonville Jacksonville, Florida Amount $ 500,000 The Florida Rational Bmt of Jacksonville JaoksonvUle, Florida 500,000 The Boatmen's Rational Bank St. Louis, Missouri 500,000 Mercantile Trust Company St. Louis, Missouri 500,000 Wells Fargo Bank San Francisco, California 500*000 Total Eliminated $2,500*000 2. Debenture Issue The entire indebtedness of The (Hidden Company (excluding normal accounts payable, interest, and taxes) is represented by the $30,000,000 of 4-3/4$ sinking fund debentures dated November 1, 195$ end due November 1, 19&3* The indenture provides for a sinking fund commencing November 1, 1964 to retire $1,500,000 of debenture annually and 100$ by maturity. The debentures were offered publicly on October 28, 195$ at 99* and the effective interest cost Is 4.98$ based on the set proceeds after all expenses. Annual Interest Cost -- Interest at 4-3/4$ Discount and Year $1,425,000. Mth $118,750* 2,568 ventures has varied from a high of 104-5/8 to a 'ket price was 103 on 8/31/60, and was on have been audited and final-oettleasat made thrrooui gh mow of no unusual items for the i960 fiscal yearr. (serve allowance for federal income taxes. Page 7 CAOOtO1'52 NOTES FOR ANNUAL MEETING I BALANCE SHEET REVIEW J. Contingent Liability (continued) NO problem in government contract through renegotiation or otherwise. Total government volume of business. Including state and local. Is only about one percent of Net Sales. The detail of major real estate lease commitments at August 31, I960 Is (CONFIDENTIAL -- DO NOT RELEASE): Total Contract Fiscal 1961 Paint Branches Active Pending Total $ 6,298,357 555,201 $ 6,853,558 $ 1,116,674 r ,50,651 $ 1,167,329 Bethlehem Plant Cleveland Executive Offices Miscellaneous Offices and Warehouses 354,375 1,723,294 353,980 67,500 262,175 112,702 $ 1,609,705 K. Stock and Stockholders 1. Common Stock (2,310,590 shares o/s at 8/31/60) The Company's common stock is listed on the New York Stock Exchange, and has unlisted trading privileges on the Midwest, Pacific Coast, and Rxiladelphla-Baltimore Stock Exchange. From January i, i960 through November 9, i960, the price of the Company ` s stock ranged between a high of 45*1/8 and a low of 34-5/8. (See Annual Report, Page 14, for prior years). Curing this sama period, an average of 925 shares vere traded each day on the New York Stock Ex change. Tbe closing price of Glidden Common Stock on December 7, I960 was Stock sury stock. i out, we do not now see any financing with stock. is are always under consideration, but we have no such. It is felt that stock dividends only spread value over a larger number of shares, with price ordlngly. GLD003A 53 Page 8 NOSES 7CR ANNUAL MEETING I BALANCE SHEET REVIEW K. -S--t-o--c-k----a-n--d---S---t-o--c-k--h--o--l-d--e--r-s- (Continued) 3. Holdings of shares as follows: _/ t August 31. i960 August 31, 1959 No. of Shareholders $ Shares Held Avg. Shs. No. of Held Shareholders $ Shares Held Avg. Shs Held Individuals Institutions Brokers Nominees Total 20,175 315 182 297 207?59 63.12$ 4.86 10.65 21.37 100.00% 72 357 1,353 1,662 110 20,253 288 179 273 20,993 64.26$ 4.21 11.30 20*23 100.00$ 73 337 1,1*56 1,710 110 4. Stockholders are not given special opportunity to buy Conpany products, as it Is difficult to handle, impractical and unfair. g u D003*54 Page 9 II OPERATING STATEMENT A. GROSS PROFIT Ratio to Net Sales Dollars Increase I960 over 1959: Due to Net Sales Increase Due to Gross Margin Increase Total 1960 Increase Published 1960 1959 27.77. $54,681,588 27.2% $53,229,592 $ 476,000 986.000 a$B1&.r4n6m2.s0m00n Bo INCREASE IN SELLING AND ADMINISTRATIVE EXPENSE The Annual Report shows an increase of $3,811,625, or 10,4% on a Net Sales in* crease of .97.. The Annual Report stated that the increase of almost $2,000,000 in selling and administrative salaries was the result of expansion of marketing and distribution programs with other contributing increases including research and development, rental of distribution facilities, and advertising and promotion. The changes broken down by major operating unit are as follows: Paint ..... Food.................. C-P-M ..... Organic Chemical Headquarters . $2,125,000 735.000 85,000 (25,000) 860.000 $3.780.000 PAINT - Within the Paint Division, the continued branch expansion accompanied by increased promotion and research occasioned the 1960 increase. Within 1960, compensation to employees of the Paint Division increased $950,000. The break* down of this increase is as follows: Office Salaries at new branches opened in 1960 .... Office Salaries increase in 1960 of new branches opened in 1959 ...................... ...... Salesmen*8 Compensation at new branches opened in 1960 ....... ............... Salesmen's Compensation increase in 1960 of net; branches opened in 1959 ...................... ... Regional Headquarters' Salary increases primarily as a result of the creation of various Regional Sales Managers, District Managers and other required accounting and stockkeeping personnel to supervise the expanded distribution system ................ ..... Other ...... ........................................................ GLD003455 Page 10 NOTES FOR ANNUAL MEETING II OPERATING STATEMENT The above chows Che result of the branch expansion program on employee com pensation. Rent Increased $219,000 in 1960 over 1959, of which $177,000 can be directly related to new branches opened In 1960 and the impact of a full year's expense in 1960 of new branches opened in 1959.. Other operating ex penses showed Increases related to this branch expansion. Research expense increased $176,000 and national advertising $53,000. FOOD - Within increased sales volumes at both Louisville and Bethlehem, sales men's compensation and expenses increased $221,000, but these increases were not out of line with the volume increases. Through a change in distribution methods by increased use of consignment Jobbers by the refinery operations, storage charges increased $70,000. Expanded use by Bethlehem of free and re duced price deals in coconut promotion resulted in a $100,000 increase which was partly offset by a $50,000 reduction at Berkeley. Promotional allowances granted as an inducement for the introduction of the Durkee spice line resulted in a $145,000 increase in Bethlehem sample and allowance expense. Tbe opera tion of the RAMAC data processing unit at Chicago and tha first full year of operation of a similar Installation at Bethlehem resulted in a $115,000 increase in tabulating expense. Appreciable results of these operations are already being seen in the reduction of administrative salaries, etc., and further re sults are expected. C-P-M - Compensation to office and sales personnel increased $24,000 and la considered the full effect of 40 people, 10 sales and 30 salary, added in 1959. The other major factor in $85,000 total Increase was a $27,000 increase in salesmen's expense which vaa again the result of the staff increases In 1959. ORGANIC CHEMICAL - Little change with slight reduction due to Valdosta disposal. HEADQUARTERS - Engineering - Salary increase of $121,000 resulting from full impact of 1959 personnel additions making necessary many project engineers. Chemical Administration - Increased Adrian Joyce Works co3ts of $87,000 plus . $164,000 of pre-operating costs at Lakehurst Mine. Paint Administration - Impact of the addition of nine people in 1959 plus increased costs of Central Region E.D.P. study and Training Program Salaries. Controller's - Almost $80,000 salary Increase due, necessary field subsidi sation of accounting trainees' salaries plus six men added to Special Services for continuing E.D.P. program. A brief statement as to cause of increase and comparative high level of Selling and Administration Expenses should admit to creeping increase largely tied to salaries and other expenses of added people which are integral part of our growth program. The jump in 1959 to published 18,8% is due primarily to Chemurgy which as a division had ratio veil below 10% so elimination raises overall level and also leaven unabsorbed overhead due to nonreinvestment of capital freed. GLD003A56 Page 11 The major Items this year and last year were: Technical Service Fees Interest Earned Gain - Disposal Capital Assets Gain Disposal of Securities Other 1960 $195,006 217,436 396,107 (2,844) 30,443 $836,148 1959 $332,131 209,376 75,378 27,528 120,388 $764,801 The decrease in "Technical Service Fees" is the result of the transfer of the Glazabreoks--Australia and Ishihara--Japan contracts to Glidden International. Included in "Gain - Disposal Capital Assets" is the $275,000 gain realized on the sale of the Valdosta operation. D. DEPRECIATION Depreciation and amortization charges for 1960 were $6,959,971 compared to $6,579,313 in 1959. The charge on Chemurgy properties was $2,013,837 which was more than covered by the rental income of $2,175,000 from Central Soya. Host property acquired since 1954 is depreciated for tar and book purposes on the Sum-of-the-Years' Digits method of accelerated depreciation using the following average lives: Buildings, 40 years; Machinery and Equipment, 20 years; and Furniture and Fixtures, 15 years. Total Depreciation and Amortization Chemurgy Estimated S-Y-D Excess Straight Line Charge--Excluding Chemurgy 1960 $6,959,971 2.013.837 $4,946,134 1.947.714 $2,998,420 1959 $6,579,313 2.100.056 $4,479,257 1.516,519 $2,962,738 E. FIXED CHARGES The two major items of this nature which may be of concern to shareholders and others are: Total Interest Expense - 1960 Real Estate Lease Liability - 1960 $1,425,000 1.609,706 $3.034.706 see page 8 i]i GLD003457 Page 12 / NOTES FOR ANNUAL MEETING II OPERATING STATEMENT F. ADVERTISING EXPENSE Total Company Advertising X to Sales Promotion X to Sales Total X to Sales 1960 1959 $4,781,861 4,753,263 2.417. 2.41 $734,411 691,547 .37X $5,516,272 .35 5,444,810 2.78X 2.76 1960 1959 Paint 3,541,064 3,448,963 By Division Food Chemical 1,759,236 1,723,816 84,879 78,281 Corporate 131,093 193,750 Total 5,516,272 5,444,810 G, RESEARCH AND DEVELOPMENT 1960 Actual 1959 Actual 1960 Budget 1961 Budget Incr. 1961 Budget Over Actual 1959 Research Sales Service Control Lab. Total $1,225,340 1.744,961 $2,970,301 1,162,209 $4,132,510 $1,066,756 1.570,902 $2,637,658 982,882 $3,620,540 $1,264,250 1,851,285 $3,115,535 1,136,175 $4,251,710 $1,474,200 1,998,500 $3,472,700 1,231,000 $4,703,700 20.OX 14.5 16.9X 5.9 13.8X H. AVERAGE ASSETS AND PROFIT RETURN 1960 Average Assets Paint Food C-P-M Organic Chemical Total $47,251,732 24,546,645 33,142,759 8,755,049 $113,696,185 Total Company $136,439,873 1960 Profit $6,961,752 4,232,284 3,210,572 511,663 $14,916,271 $13,638,356 1960 X Return 14.7X 17.2 9.7 5.8 13. IX 10.OX I. MISCELLANEOUS Attention may be called to ten year statistics in Annual Report. It may be pointed out, on inquiry, that all departments of the Company were operated profitably in 1960 except that the fine terpene development program at Jacksonville caused that operation to show a operating loss for 1960. Port St. Joe, which was the company's only unit operating at a loss in 1959, showed a smell profit In 1960. GLD003458 Page 13 MOTES FOR ANNUAL MEETING III CASH USE AND PROJECTION A. Application of Funds (La Thousands) Source of Fuads Net Income Depreciation Total from Operation* Sale of Debenture* $ Less Bank Loan Payments Sale of Common Stock under Option Plans (1960-2,7*tO sharec; 1959- 9,660 shares.) Disposition of Fixed Assets Other Sources - Net i960 $ 6,690 F 98 965 L 14,850 $ 30,000 26,000 1959 $ 7,634 jLm F 14,213 $ 4,000 351 202 (873) L 11,093 Disposition of Funds Dl-yidends Declared Expenditures for Property, Plant, and Equipment Changes in Working Capital: Cash (Deer.) $ Siort Term Securities-Lncr. (Deer.) (1,472) (1,473) w A/C Receivable-Net;lncr. (Deer.) Inventory-lncr.(Deer.) Other Accts.-(Decr.) Notes Payable-Deer. A/C Payable-(lncr.) Deer. Accrued Taxes-Qtncr.) Deer. Other Charges 1,823 1,077 (128) 323 1,488 J3&1 $ 4,621 8,764 , $ (428) t 7,957 $ 7,529 1,473 105S (3,271)* (939)* (806) 5,500 (1,209) (1,114) (14) $ 4,610 7,607 * Changes due to Chemurgy disposition are Accounts Receivable decrease of $2,896,438 and Inventory decrease of $3,756,24-9. GLD003459 Pag* 14 SOTES FOll MUUAL MEETING III CASH USE AND PROJECTION Bo FIVE-YEAR FORECAST - CASH BASIS Estimated Funds frcta Profit, Depreciation, Chemurgy Disposition and Miscellaneous Sources Less Estimated Dividends Net Cash in Flow Add Cash Balance Net Cash Available Needed for Receivable & Inventory Growth Needed for Receivable U Inventory Chataurgy Normal Capital ReplocesTient Normal Capital Replacs-nent-Chetcurgy Operational Cash Required Remaining Funds for Growth Usage Growth Capitul - b*03tly Approved Chemirgy Balance of Funds Available for Future Growth ht of 8/31 - 000 Omitted Next Last Five Years Five Years Fiscal 1961 1961-1965 1956-1960 (Actual) .$23,509 A,621 $10,963 13,880 $32,843 SOO m 5,240 6,000 $20,708 6,417 $88,189 23,841 $64,348 ^aoo $78,223 12,000 m 20,905 7,000 $38,323 9,319 $66,201 23,012 $43,139 13,,234 $56,423 11,886 (4,503) 13,040 921 6,000 $29,079 36,623 4,076 14,291 29,004 $(11,620) Capital Prelections: Paint Actual 5 Yrs, (1956-60) 9^341 1961 4,453 1962 1,388 1963 1,650 IS64 1,900 1965 , 2f150 Estimated 5 Yrs. (196l~65)$i.2,C46 Working Capital Eatiawtad 5 Yrs. (1961-65) $7,400 Food $4,855 2,038 2,482 800 900 1.000 $7,220 $2,350 CPM $28,364 3,956 1,197 300 900 1,000 $ 7,353 Organic Total Chemical (led. Hdq.) $6*236 98? 200 300 400 500 $2,387" $49*663 11,657 5,967 3,650 4,200 4,750 $30,224 $ 600 $1,050 $12,000 GLD003460 Page 15 <* j* fir vi H y y vs vv4no!* vo vo p- -H>J o H- at p" > 3v VvnI f? r -J vo v0n3 vron is s tt 2Ha** Mi a[-* ? GLD003A61 Pas's 16 V // / NOTES FOR ANNUAL MEETING IV EMPLOYEE BENEFITS A. Penaton Plana (Continued) As of October 31, I960, the cost and market values of our trust investments were as follows: Canadian Canadian U.S. Salary O.S. Hourly Salary Hourly Coat: Dollar Amount $11,524,105 $2,835,039 $669,461 $183,524 1 Equities Incl. Glldden Stock 37.181 (3.83%) 34.87% (3.36%) 40.3% 40.3% Fixed Income Convertibles 56.42% 6.40% 56.96% 8.17% 59.7% 59.7% Market: Collar Amount $12,505,516 $3,105,720 $626,123 $175,013 1 Equities Incl. Glldden Stock 45.23% (3.45%) 41.66% (2.97%) 38.2% 37.6% Fixed Income 48.78% Convertibles 5.94% Total Dollar Amount in Funds - At Cost At Market 50.12% 8.22% 61.8% $15,212,129 $16,412,377 62.4% Glldden shares held by Pension Fund ere voted by Refiner & Co., at Nominee of The Cleveland Trust Company, Trustee. B. Bonus Plan Original plan adopted February 8, 1951 and amended February 14, 1952. Administered by a Bonus Committee elected by the Board of Directors. In 1955 Gilbert suggested provision preventing bonus to top officers until a certain dividend has been paid. Formula provides 121 must be earned (pre tax) on bonus net capital (capital, term debt, etc.) before providing a bonus of 71 of profit. Net income must exceed 61 bonus net capital employed also. The 1960 computation was: Capital Stock, Debentures, Surplus (Bonus Net Capital) 12% Bonus Net Capital 122,800,634 14,736,082 Consolidated Net Income Add: Provision for Taxes, Bonus, Interest on Debt Leas: 12% Bonus Net Capital Net Bonus Income 7% Net Bonus Income (Maximum Provision) 6,690,356 8,385,000 15,075,356 14.736,082 339.274 23.749 Consolidated Net Income Less: 6% Bonus Net Capital Maximum Provision 6,690,356 7.368.041 --(677,685) Actual Provision -0- GLD003462 Page 17 NOTES FCR ANNUAL MEETING IT EMPLOYEE BENEFITS B. Bogus Plan (Continued) Since 1951 the maximum allowable provision was 42,557,863* We have returned to profit $952,163 leaving $1,605,700 for bonus pay out. Id 1959, 124 awards were made, totalling $209,750* The highest individual amount awarded was $8,000 (to Duncan and Halsey). A total of 1,196 awards have been made from 1951 through 1959- Maximum in any one year was 212, lowest W3. The highest individual amount awarded was $12,000 (to Duncan, Sprague, Ruth and Coldaeth in 1951*; Gilbert suggested resubmitting plan every five years to stockholders. We feel we need do so only vteu there is a material change No 'bonus avarij were made in i960. The purpose of the Bonus Plan is to provide reward and incentive to those employees and officers, except the Chairman of the Board of Directors and the President, who, beyond the call of duty, contribute to the success of the Company. As provided in the Plan, each avard of more than $1,000 is paid in annual installments of 25$ of the amount awarded or $1,000, whichever ia greater, and the Bonus Committee deter mines what part of my award ia to be paid in cash or stock. No bonus awarded to an employee for any fiscal year oay exceed 50$ of the basic annual salary of such employee at the end of such fiscal year. Ten officers of the Company who serve as directors, and approximately 500 other employees {including seven officers) who receive salaries of $750 or more per month, are currently eligible for consideration for bonus awards. The Chairman of the Board of Directors and President may not be awarded a bonus under the Plan. C. Stock Options 1. 1952 Stock Option Plan Lhder this Plan IX,OX shares of authorized and unissued Common Stock were made available. The Flan provided that no option could be granted to an em ployee after age 65, and to participant could receive options covering more than 5,000 shares. The Finn also provided that the option price could not be less than 95$ of the fair nruket value of the stock on the day the option was granted, and the option period could not exceed ten years from the date the option was granted nor more than three months after retirement of 8 participant. Ail rights to exercise options terminate when an employee ceases to be an employee for any cause other than death or retirement. As of August 31, i960, options to purchase 118,870 shares {58,900 by officers and directors) had been granted under the 1952 Plan. (Options for 20,210 shares had expired by reason of termination of employment, of which options for 18,870 share'? were reissued, as authorized by the Plan, to qualifying employee*?.) GLD003463 P*g 13 BOT2S FOR AHWUAL MEETIKC IV EMPLOYEE BENEFITS Options representing 19,260 shares had bean exercised (4,005 by officers and directors). There vers outstanding under the 1952 Flan as of August 31, 1960, options for 79,400 shares (54,895 for officers and directors) exer cisable over a period of ten years free* the date granted but not store than three Booths after termination of a participant's espleyoeat. A total of twenty officers and directors and 105 other employees held options under the 1952 Flan. Officers end directors named in the renusnratlon table on page held options ss follows: Option Price of $33 Expiring 6-24-62 Option Price of $38 Expiring 12-27-64 Option Price of $37 Expiring 11-29-66 Option Price of $37.50 Expiring 9-29-67 Option Price of $41.50 Expiring 12-28-68 Dwight P. Joyce 2,000 Alexander D. Duncan 1,120 Bosuford W. Msxey 2,000 John U. Weeks 1,500 Robert D. Homer 700 William G. Phillips Willard C. Lighter 500 Harvey L. Slaughter ... George M. Helney 400 Wo David Stallcup George S. Warner 500 All Directors and Officers as a group (including those nomad above) 9,645 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 200 800 2,000 20,800 1,000 1,000 1,000 1,000 2,000 2,000 2,000 2,000 2,000 800 2,000 18,700 ---- *aee we* ... --- 350 ... wmia mmm 300 500 1,000 <nn 1,000 1,000 500 5,400 On September 29, 1959, the authority of the Company's Stock Option Ccooittee to grant options under the 1952 Stock Option Incentive Plan was terminated by action of the Board of Directors. 2. 1959 Option Flan Provides Committee may option 100,000 shores of authorized and unissued Common Stock. Principal differences from old plan: a. Option price not loss thsn 100% of market (old plan 95%). Both not less than book value. b. No option to employee after age 60 (old plan 65). c. May not ba terminated and ralssuad at lower price. d. Term of option sot by Committee op to 10 years and may not be exorcised for two years after grant (old plan all for ten years). G\.003 Ab1' Page 19 I HOTCS FOR ANNUAL MEETING IV EMPLOYEE BENEFITS Co STOCK OPTIONS (continued) Under the 1959 Plan, options to purchase total of 18,900 shares ware granted to 77 employees (including 9 officers) on May 25, I960, at a price of $40 par share. Officers and directors receiving options were Dwight P. Joyce, 2000; Harvey L. Slaughter, 1000; G. M. Halsey, 1400; P. V. Heldhardt, 400. Total options grantod to all directors and officers as a group on that date amounted to 6000 shares. D, WAGE AND SALARY RATIOS Manufacturing Wages to Cost of Products Sold Total Wages and Salaries to Net Ssles Total Wagao, Salaries and Benefit Costs to Gat Sales 1960 8.51 18.6% $56,708,653 20.0% $39,484,429 1959 0.2% 17.3% $33,932,101 18.6% $36,436,403 S. SALARIES Our salary rates, including those for officers and other key employees. Including bonus, ere fully in lias with studies on this subject, such as by AMA. We must be competitive in salaries and other inducements such as stock options, to attract and bold good men. The Proxy Statement reports that total remuneration of all directors and officers ss a group increased from $640,557 in 1959 to $817,180. The principal reason for tho increase ie the addition of four regional vice presidents to the officer group. These additions accounted for $111,416 of the increase. F. OTHER BEHSFITS In addition to the Retirement Plan, employees are eligible to participate in a group life insurance and hospital and surgical benefit plan. During 1960, the company offered employees the opportunity to participate in a major medical plan and an accidental death insurance plan. Also in 1960, the company formalized a previously existing celery continuation policy whereby salaried employees receive a portion of their salary in tho event of prolonged illness-- the length of continuation depending upon the employee's length of service. GLD003465 Page 20 NOTES FOB. ANNUAL MEETING V ACQUISITIONS, DISPOSITIONS AND CAPITAL EXPENDITURES A. ACQUISITIONS Our acquisition program la an Important part of our futuro plana. We are empha sizing and will follow certain basic product approaches In our growth, first, research and development to improve existing products; second, create and Introduce new products; and third, acquisition of established companies and products in the same or related fields of interest. Acquisition of companies and produeta in the same or related fields gives us maximum benefit from the abilities of our manage ment, marketing, manufacturing and research people, and from our production facilities Canadian Branches - October 1, 1960 In two separate transactions purchased paint business of Humphrey Faint and of Movat-Grant Ltd. and Douglass Paint Ltd., both effective October 1, 1959. Purchase prices are: Movat-Grsnt & Douslsan Inventory Egpt. Total Vancouver, British Columbia Victoria, British Columbia $112,139 24,541 $40,312 10,247 $152,451 34,788 Humphrey St. Thomas, Ontario Windsor, Ontario London, Ontario 11,995 19,960 36.925 3,640 3,136 2.187 15,635 23,096 39.112 $205,560 $59,522 $265,082 Total Net Sales of these five units in their 1959 fiseal years was $1,372,355 of which a substantial portion vaa sales of Glldden materials purchased from our Toronto Division. Page 21 /NOTES FOE ANNUAL MEETING / V ACQUISITIONS, DISPOSITIONS AND CAPITAL EXPENDITURES B. DISPOSITION AND SHUTDOWNS Annual Sales Last Full Year Profit or (Loss) Last Full Year Pre-Tax Avg. Profit Profit or or (Loss) (Loss) on Last 4 Yrs, 8ala or Onerated Abandonment Hammond 7/16/51 $ 4,076,147 Oakland 10/25/54 627,505 Feed Hill 8/10/54 4,423,653 Portland 9/18/52 2,941,393 Cambridge 7/1/55 1,308,733 Tadkin - Jojaba - Castella m Barytes Hines m Buena Park 8/31/56 4,033,465 Eastern Harg. & Salad Prod. 2/1/57 9,996,668 Elmhurst Building A, 8/31/57:S,8/1/58 Scranton 6/9/58 1,100,590 St. Helena 3/31/58 - Buena Park Land 1/28/58 - Chemurgy 9/1/58 31,982,480 Southern Pine 2/28/58 1.070,947 Valdosta 3/28/60 2,941,738 Berkeley M. & SP.4/30/60 -5,645,470 $ (234,346) $ (373,225) $ (226,221) 39,296 65,538 15,608 92,554 13,771 (60,579) (9,537) -* -m as m (11,032) (67,338) 142,235 96,376 (290,471) (19,369) (6,542) (8,149) 50,597 m (253,580) (372,378) 52,028 as - 1,477,859 103,448 320,127 98.726 (414,580) m 66,056 - 1,503,501 68,240 156,671 66.787 (197,934) (252,240) 30,690 (1,215,239) 174,957 1,258,763 (76,237) 275,301 39.176 TOTAL $70,148,794 91.iOS.724 $1,065,250 $ 1251.666) After Tax Cash A Anset Utilisation Last Full Year Basis $ 2,044,710 997,955 2,417,154 1,224,149 851,472 58,673 125,640 11,679 1,095,247 2,383,320 1,269,854 455,467 925,924 136,635 27,555,267* 292,555 1,430,042 684.913 $43,960,656 Fixed Assets - Sold - Abandoned Book Value $17,457,727 2.304,320 $19,762,047 After Tax Cash Received $19,061,554 1.198.246 $20,259,800 Exceaa Cash Over Book Value $497,753 * Estimated on exercise of option to buy property August 31, 1961 GLD003467 Page 22 1 NOTES FOR ANNUAL MEETING V ACQUISITIONS, DISPOSITIONS AND CAPITAL EXPENDITURES B. DISPOSITIONS AND SHUTDOWNS 1. Chemurgy Businaa* of entire Chemurgy Division sold to Control Soy* Co. at September 1, 1958, with real estate leased for three years with option to buy at August 31, 1961. Inventory Sold at Book Value Receivables Assigned - Bet $3,756,249 2.898.438 1960 Rental Income - (per year) 1960 Depreciation Expense 1960 Misc. Expense - Net Net Gain (5.822) $ 155.341 The net book value of property leased at September 1, 1958 was $13,737,369 which will be reduced In each of the three years of the lease by approxi mately $2,100,000 depreciation and amortisation. The estimated net book value at August 31, 1961 will be $7,624,000 irtiereas the option priee Is $8,550,000. It is estimated that the exercise of this option will result in a capital gain equivalent to $.27 per share in fiscal 1961. 2. Sale of Valdosta Operation This operation with its fixed assets and inventories was sold to Nelio Resins, Inc. on March 28, 1960. Total assets freed through this disposition on basis of last four-year average assets was $1,133,000. Fixed assets with a net book value of $225,000 were sold for $500,000 resulting In a long term capital gain of $275,000. Inventories were sold st their book velue of $788,000. 3. Sale of Berkeley Margarine and Salad Products Business Berkeley Margarine and Salad Products business and its related machinery end equipment were sold to Beatrice Foods on April 30, 1960. Total assets freed on the basis of last four-year average assets were $555,818. Machinery and equipment with a net book value of $161,000 were sold for $200,000 resulting in a long taim capital gain of $39,000. Inventories were sold at their book value of $234,000. Certain warehouse space at the Berkeley plant has bean leased to Beatrice Foods for e period of three years beginning May 1, 1960 at $1,900 per month. GLD003A68 Page 23 NOT35 FOR ANNUAL MEETING V ACQUISITIONS, DISPOSITIONS AND CAPITAL EXPENDITURES C. MINING ACTIVITY A twenty-year supply of llmenlte ore, representing a substantial portion of requirements, was acquired In October, 1959 at Lakewood, New Jersey. A concen trating and separating plant is planned for completion In late 1961. Capital requirements par B.A.R. are (do not disclose): Land and Mineral Rights Plant Authorised Capital Mina Working Capital Total Required for Mine Adrian Joyce Works Inventory Reduction Net Required for Project $ 700,162 3,633.080 $4,333,242 340.000 4,873,242 (3,300.000) $1,573,242 At August 31, 1960, capital expenditures to date in connection with the Lakehurst Mine were $946,630. During fiscal 1960, pra-operating expenses which were absorbed in Headquarters Chemical Administration were $163,604. Page 24 GLD003469 / -V ACQUISITIONS, DISPOSITIONS AND CAPITAL EXPENDITURES D. MAJOR CAPITAL EXPENDITURES - I960 (in Thousands of Dollars) Expended Prior to I960 Expended in i960 To Be Expended In _______19ol Paint: 5 St. Louis Warehouse $ l4 Pacific Expansion 1-2-9-12-14 Universal Reactors (5) 16 Southwest Plant Cleve. Res. lab. - Paint 9 Plant Expansion Branches All Other Paint Total Paint 15 47 379 $ 22 221 1>187 134 38 381 637 $2,620 456 14 372 988 287 234 591 1*516 $4,458 Food: 13-21-22 13 21 22 22 13 13 22 Deodorizers (3) $ Boiler Plant Packing, Filling, & Whse. Land and Building Spice Building Solvent Fractionation Semi-Continuous Deodorizer Plant Expansion All Other Food 536 - m 31 - - k 132 438 280- - 9 - 68 $ $1,506 e 85 563 26 138 119 125 344 638 $2,038 C-P-M: 32 A.D.J. - Expansion $ 33 New Jersey Mine 32 Balt. Research lab 32 Calcium Ext. Pig. Mfg. All Other C-P-M 926 572 568 m 2,445 375 107 650 $ $3,577 205 2,686 4o 200 625 $3,956 ORGANIC CHEMICAL: 71 Menthol Plant $ Pitch Stripping Column All Other Org. Chem. 378 Headquarters: Total Company 961 $ 707 _ 20 $ 981 100 180 $ 987 80 218 $8,764 $11,657 Used in Annual Report 6-10 million GLD003470 Page 25 NOTES FOR ANNUAL MEETING V ACQUISITIONS, DISPOSITIONS AND CAPITAL EXPENDITURES E. Extraneous Expenses Start-up and development expenses at Jacksonville, Adrian Joyce Works, and lakefaurst Mine were the major contributing factors to the .09 cents per share net reduction in i960 (.05 in 1959)* i960 1959 Before Tax After Tax Before Tax After Tax lakehurst Mine St. Helena Adrian Joyce Works Jax. Development Loss or Default of Contractor Dumont Write-Off Pauli Capital Gains UFO Reversal Other 163,60h 60,363 4l6,794 1*79,685 72,1*21 109,326 (390,1*66) (263,662) 78,530 29,105 200,061 230,3^5 34,762 52,476 (292,850) (126,558) 109,697 170,993 113,269 - - 9,901 (90,508) 12,606 (19.647) mm 52,655 82,076 54,369 - 4,752 (67,881) 6,051 (02,036) 61*8,265 205,871 306,311 119,986 GLD003471 Page 26 IF3E3S FOR ADffiUAL TESTING VI OTHER MAJOR FUNCTIONS AMD HUS A. Donatlong Tb.e donations policy of the Company provides for reasonable support to educational, welfare and charitable organizations. Olio policy is administered by the Donations Committee under the direction and guidance of the President and Board of Directors. Educational support has been given through the following: 1. Awarding of four scholarships under the auspices of the Bational Merit Scholarship Foundation, i960 winners were: Edward A. Kucler (Case); Charles j. Savoca (Georgetown); Taylor R. Xurkam (Oberlin); John T. Meter (MH). 2. Cooperative Contribution Plan, under which the Company makes unrestricted grants to degree-granting universities in an equal amount to the donations Bads by employees of `the Cansx?ny to such colleges and universities. Contri buted i960 fiscal $3,730 to colleges. 3. Chemistry lectureship grants provided to six United States universities and one Canadian university to provide for lectures by outstanding individuals and to help promote understanding and interest in scientific achievement. 4. Outright grants to selected colleges and universities, such as Case and Western Reserve. 5. Grants to selected foundations, Including Ohio Foundation for Independent Colleges. In the Welfare and Health category, the Company has supported United Fund, Community Chest and Red Cross programs in the communities where it has plants or branches. In addition, selective support has been given to other service organizations and foundations. Contributions are not given to sectarian groups, labor orgEini^ations, etc. Education Health & Welfare Other I960 45 _7 1959 51 5 57 9 10 _8 Total Donations $103,233 $104,526 $6?#066 $70,811 # of Net Profit 1.62$ 1-37/i 1.14$ .97$ Per Employee $ 17.60 $ 17.35 $10.95 $ 10.97 GLD003*>f 2 Page 27 ROTES FCH AIE1UAL KSLirUS VI OTHER MAJOR FUHCTIQ AHD ITEMS (Continued) B. AUDI? 1. Erast & Ernst representatives present at the neeting will he Messrs. N. T. Halvorsen, Partner, and A. A. Wilhelm, Assistant Itaager. 2. Company internal audit staff conducts surprise audits of all operating units on a schedule calling for visits shout once each year. C. I83URAMC3 FIA. coverage on ell nanufacturin3 properties except Canada, Beam Park, San Francisco, Hew Orleans, St. Louis, Minneapolis Varnish only, Portland, Tulsa, Iron Street, Collinsville and Calumet ana River Elevators. Thin FIA policy for fire, wind, hail, explosion, aircraft, smoke, vandalism and sprinkler leakage. FIA coverage is on agreed amount "basis, with no co-insurance requirement. Locations excluded except St. Louis and Portland are under an Industrial Property Floater for fire, extended coverage and sprinkler leakage. Are on cc-n3urauce basis - no agreed amount. St. Louis and Portland are under separate policies for fire, extended coverage and sprinkler leakage. Coinsurance basi3. Elevators under Underwriters Grain Aas'xu policy. Uce and occupancy insurance also in FIA for locations they cover for fire, etc. except Minneapolis, Atlanta, and ARE where we have extra expense since other paint plants can make up lout production at increased cost. Use and occupancy insurance other divisions specific with co-insurance except Hew Orleans, St. Louis, Tulsa ard Portland vfcare we have extra expense oince other paint plants can make un lost production at increased cost. Also carry ocean marine anti cargo insurance to extant necessary. Carry boiler and pressure vessel insurance where necessary. All employees bonded in substantial amount. Workmen's Compensation - We self-insure in states where possible (ll),Tith an override $1,000, COO policy for catastrophe. Self-insurance on Workmen's Compensation has saved us over :j!,000,QCG in the last 29 years. Also carry CCTzprehsreiva bodily injury, product liability, and property damage liability. GLD003473 i ?.. NOTES FOR ANNUAL MEETING VI OTEER MAJOR FUNCTIONS AND HEMS (Continued) C. Insurance - continued There was one major fire in the i960 fiscal year. The Lo b Angeles Chemical Pigment and Metals Division warehouse stock in a leased location was total loss. Recovering $55*490. Three small fires resulted in total recoverable losses of $5*392. One lightning lo3s $1,911. Two windstorm losses $2,635* On explosion of paint mill $9*151* Total cost of insurance premiums for fire and extended coverage on buildings, machinery and equipment and inventory, plus use end occupancy and extra expense, was $23-0,030 for the fiscal year i960. (This figure should not be given out.) D. FOREIGN BUSINESS a. The Glidden Company - Export sales (both direct and indirect) totalled $2,117*251 in i960 compared to $1,311,596 the previous year. In addition, in i960 Bales to Glidden International were $2,139,933. The Glidden Company has eleven active foreign licensees and received $136,866 in technical service fees from these licensees in i960. This amount represented a reduction from the previous year, primarily due to transfer of licensees to Glidden International during the course of i960. A direct stock interest is held in the following companies: Name $ of Interest Net Book Value Unconsolidated Glidden International, C. A. Ishihara, Sangyo Kaicha, Ltd. A/S FJord-Plast Fabrics. Bacional Be Pintura3, . A. Consolidated The Glidden Company Limited 59# 2.24$ 25# 15.1$ 100$ $ 18,018 Mono 28,040 M5mo $ 46,058 50,000 $. GLD003474 29 IOTE8 FOB AiH'IUAl MEETING VI OTHER MAJOR FUKCTIOI-B AUD ITEMS (Continued) Do Foreign Business - Continued 1) Glidden International, C. A. - (Hidden holds 99 chares (1 share held by The Glidden Company, Ltd.) representing a 99# interest. Glidden International had a consolidated shareholderequity of $594,796 at August 31# I960 with a bode cost to Glidden of $18,018. 2) Isbihara Songyo Kaish?., Ltd. - Glidden holds 870,764- shares representing a 2.24$ interest. These shares have a current market value in Japan of $286,000 at Noveidber 14, i960 on which Glidden has a tax basis of $103,446 for taxes paid through August 31,1960. 3) A/s Fjord-Plast (iToruay) - Glidden holds 200 shares representing a 25# interest which m3 acquired an July 29, I960 at a cost of $28,040. 4) Fabrica Kacional de Finturas, S. A. (Cuba) - (Hidden holds 31,421 shares which represented a 15.1$.interest. The company was intervened by the Cuban government in October, i960. Accounts receivable due Glidden at this date total $28,271 and due Glidden International $17,248. Bad debt reserve of both ccffigaaicc are completely adequate to caver any loss on these accounts. Glidden International received technical service fees of $64,264 Rom Fabrica in i960 and additional fee3 of $21,701 have been reported as due but have not been paid end have not been taken into income. No collection of this latter amount is anticipated. 5) The Glidden Company, Ltd., (Canada) - Glidden holds 100$ (4,200 shares) vith a book cost of $50,000. Shareholder equity at August 31, i960, was $5,518,246 which is included in the consolidated financial statements in the annual report for i960. Following ore highly condensed financial statements for the periods indicated: GLD003475 Page 30 r The Glidden Company Limited Balance Sheet August 31, 19^0 Current Assets Property, Plant & Equipment, Ret Deferred Charges & Other Assets $4,779,031 1,358,673 $6,140,495 Current Liabilities Stockholders Equity $ 622,249 5,518,246 $6,l4o,495 Income Statement & Retained Earnings i960 Ret Sales Cost of Sales Operating Costs Inccose from Operations Other Income Income before Taxes Provision for Income Taxes Ret Income for the Period $9,618,916 5,933,530 2,939,645 $-1457710: 34,665 $ 780,406 385,000 $ 3$5,4o6 Retained Earnings, beginning of year Retained Earnings, end of year $5,072,840 $5,468,246 mz. $8,358,782 5,322,453 2,292,475 $ 743,854 46,019 $ 789,Y3 391,000 $ "398,873 $z*"Z2*22l $^,072,840 b. Glidden International, C. A. - The company is headquartered in San Juan, Puerto Rico, vith retail branch operations in San Juan and Ponce, Puerto Rico, and Panama, Republic of Panama. Collection of accounts is made through the Chase Maihatten Bank, San Juan, Puerto Rico. Glidden International funds hove been primarily secured from accumulated earnings and through bank borrowings at the Union Commerce Bank, Cleveland, Ohio. At August 31, i960, this loan amounted to $425,000 with subsequent payments to date bringing the balance to $300,000. The current rate of interest is 4-1/2$. The lean is guaranteed by The Glidden Company. GL0003A76 33 3KMES FOR ANNUAL MEETING * > VI OTHER MAJOR FUNCTIONS AND ETET-B (Continued.) % D. Foreign Business - Continued b. Glidden International, C. A. - Continued Glidden International has four banking associates: Union Commerce Bank, Cleveland, Ohio (Borrowing) Chase Manbatten Bank, San Juan, Puerto Rico Chase Manhatten Bank, Parana, Republic of Panama First National City Bank of New York, San Juan, Puerto Rico The accounts maintained Include four Collection Accounts and six Working Fund Accounts. At August 31, i960, Glidden International owed The Glidden Company $190,682 for merchandise purchased during August, i960. Glidden International^ investments at August 31, i960 were as follows: Name $ of Interest Net Book Value Unconsolidated Soja Glidden Argentina, S. A. Pinturas Ico, S. A. Pinturas Ecuatorianas, S. A. and Distribuidora Americanas, C. A. Pinturas Centro - Americanas 25# , 33-1/3# 33-1/3# 33-1/3# Memo $47,504 62,837 64,850 $ 175,191 Consolidated Industrias Glidden, S. A. Glidden Banara, S. A. 99.9a# 100# $ 32,000 20,000 $ss2ss2e7ac,1ae9B1K 1) Pinturas Ecuatorianas, S. A. and Dietribuidora Amaricana, C. A. (Ecuador) Glidden International holds 320 shares representing a l/3 interest at a cost of $62,837. Glidden International's share of shareholder equity at September 30, i960 was $60,377* 2) Pinturas Ico, S. A. (Colombia) - Glidden International holds 155,400 shares representing a l/3 interest at a current cost of $47,504. This current cost at August 31, i960 is the balance remaining after a writedown of $268,000 in August, i960* This writedown was necessitated as a result of continuing operating losses of this company. This writedown included recognition of Glidden 'b portion of losses to date and writeoff of book goodwill. GLD003477 3* NCGES FOR ANNUAL MEETING VI OTHER MAJOR FUNCTIONS AND ITEMS (CONTINUED) D. Foreign Business - Continued 3) Pinturas Centro-Americanas (Guatemala) - Glldden International holds 154 shareb, representing a l/3 Interest at a cost of $64,850. Glldden International's share of shareholder equity at August 31; I960 wets $94,342. At August 31; i960, Pincasa owed Glldden International $1,640, on open account. Pincasa also owed The Glldden Company $8,343 on open account and $50,000 as a note payable at that date. 4) Soja Glldden Argentina, S. A. - Glldden International holds 10,970 shares representing a l/4 interest (no cost basis). This company is currently Inactive. This interest has been assigned to Central Soya tinder the option agreement for the Checturgy Division and upon exercise of that option by Central Soya, these shares will be transferred to them. 5) Industries Glldden, S. A. (Mexico) - Glldden International holds 19,996 shares representing a 99*98# interest. This company is currently inactive and is carried at a cost of $32,000. In consolidation with Glldden International at August 31; I960, shareholders equity totalled $31;537* 6) Glldden Panama, S. A. - Glldden International holds 1,000 shares representing 100^ control. This company Is a paint branch and is carried at a cost of $20,000. 7) In September, i960, Glldden International purchased all of the out standing stock of General Paint Company de Mexico for $4,900. An additional $60,000 was Invested through the purchase of an advance account between General-Mexico and its former parent. The latter three companies are consolidated with Glldden International for the purposes of monthly financial statements. All others are carried on Glldden International's balance sheet at cost. Glldden International has nine active foreign licensees and received $434,571 in technical service fees from these sources in i960. This compares, with $67,893 for 1959* This increase results from larger payments from the previous year's paint licensees, addition of three new paint iieensees,aad two newchemical licensees, Billiton, Netherlands with Initial contract fees of $200,000 in i960 and Ishihara, Japan's Ti0,, contract. This latter transfer from The Glldden Company in i960 added $89,136 to Glldden International's technicals service fees la i960. Receipts from the Ishihara (Japan) TiOg contract and Fabrica (Cuba) ere not anticipated in fiscal 1961. Sales and profits of Glldden International are not consolidated with The Glldden Company for reporting purposes. Sales and profits of Glldden International are as follows: GLD003A78 33 HOTEj f c r a mu a l me b t z s o VI OTHER MAJOR FUKETICB3 AUD ITEMS (COUTIHUED) D. Foreign Business - Continued Fiscal I960 1959 1958 1957 1956 Sales 2,904,516 3,012,840 1,684,176 560,112 Profits 3l5,Oti 82,370 68,190 56,603 32,709 The sales increase of $400,000 Is Organic Chanical business and. of $130,000 In total Faint business was partly offset by decreases In both Durkee sad ChemicalsPigment8~lfe1als business. Vith the Direct Btoort Faint business net profit In i960 was $35,450, compared to a loss of $4-9,134 In 1959* Hato Bey paint branch increased its net profit $23,000. With an improvement of $30,000 in the net result from Organic Cbealcal business, total net profit, before technical service fees and the special charge of $266,000 writing down the Colombian investment, was $235,939 in i960 compared to $14,477 the previous year. E. EgSCELLAKBOlB Cost of the Axmrnl Report this year was 23 cents per copy which was the same as last year. Our 1956 Annual Report was Judged best of the Faint and Coatings industry by f t k a h c ia l WORLD. D. B. ERSKEEE Distribution: Mr. Dwight P. Joyce Mr. 5 W. Maxey Mr. R. D. Horner Mr. W. G. Phillips Mr. R. K. Dutton Mr. R. R. Augsburger GLD003A79 * SUPPLEMENTAL INFORMATION FABRICA - CUBA Cben .Account changes C-lidden's Fabrica Open account 8/31/59 Additional orders in process of shipment Glidden International's Fabrica open account Total Glidden's Fabrica open account @ 12/l/6o Freight drafts outstanding Glidden International's Fabrica open account Earnings on Fabrica - 8/31/39 to 12/l/6o Glidden sales to Fabrica -- $192,000, at cost plus approximately 10$ (Finished goods, cost plus 8$, intermediates at market, at a range from 10$ to 15$ over cost) Glidden International sales to Fabrica -- approximately $70*000 at cost plus 20$ (primarily Ti02 and Hard Butters) Technical Service Fees received from Fabrica Total Earnings Open Accounts 12/1/60 "Net Profit" Reduction in Accounts Net improvement in Glidden position $ 97,464 45,519 $"51,945 168,000 $219.945 $116,700 62,800 $179,500 34,000 $213.500 $ 28,004 267 $"28,271 17,2^3 $ ^5,519. $ 19,200 14,000 64,264 $ 97.464 GLD003*80