Document eQLQmeapyeOJvvYNaro57OgG

THE GLIDDEN COMPANY CLEVELAND, OHIO i ! ANNUAL REPORT Year ended October 31, 1938 GLD002899 THE GLIDDEN COMPANY CLEVELAND, OHIO December 30, 1938 To the Shareholders of THE GLIDDEN COMPANY: On behalf of the Board of Directors the certified annual report of The Glidden Company for the year ending October 31, 1938, is herewith submitted. Our fiscal year closed with a loss in sales of 18J^% as compared with the previous year. The aggregate of net sales was 344,049,022.51. The continued decline in commodity markets, coupled with declines in price of many volume lines of manufactured products, made it extremely difficult to make a profit. The report shows a final net profit after taxes, depreciation and all charges, of $205,597.25. Inventories at the end of the year were priced at the lower of cost or market. All of the properties of the company have been maintained in splendid physical condition and the regular schedule of depreciation has been followed. The total depreciation charges for the past year amounted to $698,147.96. The annual report will indicate that the company is in good financial condition, the relation of current assets to current liabilities being better than ten to one. As predicted in our last annual report, our Food Division made an ex cellent record, the net profits showing an increase of 75% as compared with the previous year. The Paint and Varnish Division showed a loss of 23% in sales. This loss in sales was largely in the automobile, industrial, railroad and marine sales divisions. The Chemical and Pigment Division, depending largely on sales to the rubber, linoleum, and paint and varnish industries, contributed to the net loss. The Nelio-Resin Division suffered a serious inventory loss due to abnormal conditions in the Naval Stores Industry. The result was a final operating loss but inventories are now on a favorable basis. GLD002900 Prospects for the new fiscal year art encouraging. The results of opera tions for the month of November show a fine improvement over November of last year. With expenses well in hand and inventories on a satisfactory basis, any improvement in the business situation should be quickly reflected in month ly profits. During the year no reduction was made in the wage rates paid to our factory employees. Your Directors are gratified with the mutually satisfactory labor conditions existing throughout the organization. The good work of the executives and employees in meeting the unusual conditions that have prevailed is greatly appreciated, and the Directors take this opportunity of expressing their gratitude for this -hearty cooperation. By order of the Board of Directors. ADRIAN D. JOYCE, President. GLD002901 CONSOLIDATED The Glidden Company an October CURRENT ASSETS ASSETS Trade notes and acceptances receivable-------------- $ 98,127.50 Trade accounts receivable. 3,982,526.14 $4,080,653.64 Less reserves______ __________________ _____ -- 117,919.78 Inventories--at lower of cost or market: Raw materials, in process, finished goods and supplies..... ..... .......... --......... --..... --........... Other current accounts receivable.TM----- ----------- 1,467,296.54 3,962,733.86 11,449,791.35 165,663.13 $17,045,484.88 INVESTMENTS IN SUBSIDIARY AND AFFILIATED COMPANIES California mining companies--at less than cost-- Note A: Capital stock (wholly owned)---------------------- $ Bonds--principal amount $500,000.00........ Advances______________________ __________ 15,000.00 187.500.00 877,715.67 $ 1,080,215.67 Affiliated company--at cost--Note B: Capital stock. .. -- .......................... .......... 690,001.00 1,770,216.67 OTHER ASSETS AND INVESTMENTS Cash surrender value oflife insurance___________ Sundry investments . ------- -- ----------------- Miscellaneous notes and accounts, advances to salesmen and claims against closed banks, less $ 432,043.00 72,535.47 81,395.24 585,973.71 PROPERTY, PLANT AND EQUIPMENT Land--at cost or less .. _____ . --------- Buildings, machinery and equipment--at cost or less. _ -- ----- Less reserves for depreciation and depletion....-- INTANGIBLES Patents and rights to manufacture--at cost, less amortization___________________________ $ 2,128,172.00 18,957,620.76 $21,085,792.76 6,852,828.07 14,232,964.69 92,871.14 DEFERRED CHARGES Inventories of advertising stock and stationery, prepaid insurance and expenses_______________ Special new products development......................... $ 442,586.77 115,916.91 558,503.68 See notes on following page. $34,286,014.77 GLD00390? BALANCE SHEET d Consolidated Subsidiaries 31, 1938 LIABILITIES, CAPITAL STOCK AND SURPLUS CURRENT LIABILITIES Accounts payable---- -----.------------.------------ ------ Accrued taxes, royalties, interest, insurance, et<._ Federal, state and dominion taxes on income-- 1,306,687.33 308,936.72 40,241.71 1,655,865.76 LONG TERM NOTES PAYABLE Bank loans--250,000.00 principal amount ma turing January 2, 1940, July 1, 194*0, and January 2, 1941--interest at 2%, 2\^% and 3% respectively.....__________________________ Serial notes--principal amounts maturing 250,- 000.00 on July 1, 1941; 500,000.00 annually on July 1, 1942, July 1, 1943, July 1, 1944, and 2,000,000.00 on July 1, 1945--interest at 3% to 3$*%__..................................... .................... . RESERVE For contingencies..................... ...... .......... ............... CAPITAL STOCK AND SURPLUS Capital stock: Convertible preferred, 4)4% cumulative, par value 50.00 a share (redeemable at 53.75 per share through July 1, 1940, and 52.50 per share thereafter--each share convertible through March 1, 1939, into nine-tenths share of common stock and thereafter at rales specified in articles): Authorized 200,000 shares Converted 60 shares Issued and Outstanding 199,940 shjtes:._.:. .....:.;..;. ._9,997,000.00 Common, without par value: Authorized _ 1,200,000 shares Outstanding, in cluding treasury shares 835,591 shares Reserved for conversion 179,946 shares Stated capital______ _____________________ 4,180,655.00 Surplus: Capital surplus----- ----- ------ -------- ---- ------------- 8,374,605.02 Earned surplus......_................... ....... --............ -- 5,675,282.64 Less treasury shares--at cost: 5,602 shares--common.__ CONTINGENT LIABILITIES Letters of credit outstanding___________________ Guarantor of trade notes issued by or for accounts of customers--maximum liability-..- 750,000.00 3,750,000.00 4,500,000.00 67,885.56 14,177,655.00 14,049,887.66 28,227,542.66 165,279.21 28,062,263.45 34,286,014.77 286,066.00 2,039.51 CL0^ 903 NOTES TO CONSOLIDATED BALANCE SHEET Note A--Investment! in California mining companies, whose assets consist almost entirely of properties not being operated, are stated herein at less than cost, which carrying amount on the basis of unaudited balance sheets, wit 819,128.47 more than the aggregate net assets as shown by the books of those companies. Losses (aggregating 8275,848.01 in excctiof provisions or other credits of The Glidden Company applicable ibereagainst) hare been experienced by these companies from date of acquisition to October 31, 1938, however, tne losses for the past few years, since operations of properties were suspended, have represented principally expenses in maintaining the properties. The value of investments in these companies is indeterminable at this time. Note R--Investment in affiliated company represents one bundled per cent interest in 7% preferred stock of the American Zirconium Corporation, having a par value of 8600,0t>3.00, th<i dividends on which have been paid to October 1, 1938, and a forty-five per cent interest in the common stock of the tame company; the unaudited statement of the company shows accumulated undistributed earnings of 853,902.32 at October 31,1938, of which 826,159.70 is applicable to The Glidden Company's investment therein. CONSOLIDATED SURPLUS ACCOUNTS The Glidden Company and Consolidated Subsidiaries Year ended October 31, 1938 CAPITAL SURPLUS Balance November 1, 1937...................................... ADDITION Excess of amount of $30.00 a share, as determined by the board of directors for 34,697 shares of common stock issued for assets of Southern Pine Chemical Company, over amount of $5.00 a share allocated to stated capital........... Excess of selling price of $30.00 a share for 93 shares of common stock sold, over amount of $5.00 a share allocated to stated capital--....... $ 867,425.00 2,325.00 Less: Expenses in connection with issue of above shares.............................................................. .. $. 869,750.00 15,208.37 BALANCE OCTOBER 31, 1938 EARNED SURPLUS Balance November 1, 1937...................................... Add, net profit for the fiscal year ended October 31, 1938.................. .............................................. Less dividends paid: Convertible preferred--$2.25 a share................. Common--$.50 a share...................................... . $ 449,886.82 399,897.00 BALANCE OCTOBER 31, 1938 $ 7,520,063.39 854,541.63 $ 8,374,605.02 $ 6,319,469.21 205,597.25 3 6,525,066.46 849,783.82 $ 5,675,282.64 Note--In prior years certain items of discount and erpense, provision for contingencies and losses on dismantlements have been charged to capital surplus. If such items together with additional depreciation claimed for federal income tax pur* poses for the years 1932 to 1937 inclusive, had been charged againjt earned surplus instead of capital surplus* the respective amounts of such surplus accounts would be 84,766,290.55 and 89,283,597.11 as at October 3l,( 1938. The Company's federal income tax return for the year 1938 was not completed at the date of this statement but depreciation to be claimed therein will exceed provisions charged to profit and loss for the year ended October 31, 1938. GLD002904 CONSOLIDATED PROFIT AND LOSS STATEMENT The Glidden Company arid Consolidated Subsidiaries Year ended October 31, 1938 Net sales_______ _____ ___________ -_________________ ___________ Cost of goods sold, selling, administrative and general expenses (exclusive of depreciation)--Note A................................ ....... $44,049,022.51 43,194,840.79 PROFIT BEFORE INTEREST, DEPRECIATION AND OTHER INCOME........... Other income...................................................................... ................ ' $ 854,181.72 336,356.77 Other deductions: Interest on bank loans and serial notes....................................... Sundry................................................................................... _....... $ 118,438.57 186,978.64 $ 1,190,538.49 305,417.21 PROFIT BEFORE PROVIDING FOR DEPRECIATION AND TAXES ON INCOME........................................................... Provision for depreciation and depletion............ ............................ $ 885,121.28 698,147.96 PROFIT BEFORE TAXES ON INCOME.............. Credit arising from excess provision for federal, dominion and state taxes on income in prior years--.......... ,,......................... $ Less estimated provision for dominion and state taxes on income for current year.......................................................................... 34,032.61 15,408.68 $ 186,973.32 18,623.93 NET PROFIT...................................................... $ 205,597.25 Note A--Inventories at October 31, 1937, included certain raw materials priced at cost which exceeded market price at that date by approximately $95,000.00. Inventories at October 31, 1938, are stated at the lower of cost or market. ^ Note B--No provision has been made in the foregoing statement for loss on wholly owned, non-operating California mining companies for the year, amounting to 848,108.56 including provision for depreciation in the amount of $27,798.99. Note C--The Company's federal income tax return for the year 1938 was not completed at the date of this statement but depredation to be claimed therein will exceed provision in this statement due to depreciation claimed on costs written off or credited to revaluation reserve during 1932. ERNST 8C ERNST ACCOUNTANTS AND AUDITORS SYSTEM SERVICE CLEVELAND Union Commerce Building The Glidden Company, Cleveland, Ohio. .. We have made an examination of the consolidated balance sheet of THE GLIDDEN COMPANY and its wholly owned subsidiaries (California mining companies excluded) as at October 31, 1938, and of the consolidated statements of profit and loss and surplus 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 also made a general review of the accounting methods and of tne operating and income accounts for the year, but we did not make a detailed audit of the transactions. Inventories are stated on the basis of the lower of cost or market prices. Property, plant and equipment are stated at cost or less, reduction having been made in 1932 to eliminate appreciation and to provide for further write-downs. During the year the parent Company issued 34,697 shares of its common stock to Southern Pine Chemical Company in exchange for the assets of that company. Assets acquired were recorded on the books of the Company at the aggregate amount of $1,040,910.00 which included property, plant and equipment at net sound values as shown by independent ap- praisal and other assets principally at amounts shown by itatements of predecessor company at February 28, 1938. ^ The amount of $173,485.00, representing $5.00 per share far the stock issued was allocated to stated capital and the remainder ($25,00 a share) was allocated to capital surplus in accordance with authorization of the Company's board of directors. 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 and excluding the California mining companies, the accompanying balance sheet and related statements of profit and lots and surplus fairly present the consolidated position of the Company and its wholly owned subsidiaries at October 31, 1938, and the consolidated results of their operations for the year ended at that date. Further, it if our opinion that the statements have been prepared in accordance with accepted principles of accounting and, except that inventories of certain raw materials at October 31, 1937, were included at cost which exceeded market prices at that date, as stated in Note A to the profit and loan statement, on a basis consistent with the preceding year. ERNST * ERNST Certified Public Accountants Cleveland, Ohio December 22, 1938 GLD002905 BOARD OF DIRECTORS ADRIAN D. JOYCE R. H. HORSBURGH R. W. LEVENHAGEN W. J. O'BRIEN DWIGHT P. JOYCE P. E. SPRAGUE HOWARD BEATTY CLIFTON M. KOLB OFFICERS ADRIAN D. JOYCE, Prudent R. H. HORSBURGH, Senior Vice Pretident R. W. LEVENHAGEN, Vice President W. J. O'BRIEN, Vice President DWIGHT P. JOYCE, Vice President P. E. SPRAGUE, Vice President HOWARD BEATTY, Vice President J. A. PETERS, Treasurer CLIFTON M. KOI.!!, Secretary Transfer Agent THE NEW YORK TRUST COMPANY New York City Registrar THE CHASE NATIONAL BANK New York City GLD002906