Document evYjRJLQKL7o4j1zbqNezVwzq

1969 Annual Report Contents Pago Operations Summary........................................................ 1 Quarterly Results............................................................... 1 President's letter.............................................................. 2-3 Human/Environmental Relations...................................... 4-6 Products ........................................................................... 7-17 Dow Directory................................................................... 18 World Operations.............................................................. 19-27 Research & Development................................................. 28 Financial Statements........................................................ 29-36 Directors & Officers.......................................................... 37 ST B0: 'i 5 0 3 Annual Meeting The 1970 annual meeting of shareholders will be held at 2 p m. (EST) Wednesday. May 6. at Studio M Theater, 2926 West Midland Road, Midland. Michigan. The Site is just east of the Midland city limits. A formal notice of the meeting, with a proxy statement and form of proxy, will be mailed to each shareholder separately from this report ' J j \ ^ | 1 Dow Chemical Company | annual Report for 1969 i STOO04509 Highlights OPERATIONS SUMMARY IN MILLIONS Net Sales. . Total Income . Depreciation ..................... U S and Foreign Income Taxes .................. Net Income ....................... Earnings per Share |m dollars).......................... Cash Dividends Declared................................. Common Stockholders' Equity.......................... Book Value per Share of Common Stock at December 31 |m dollars)......................... 1969 S 1.797 1 1.875.6 177 9 81.5 148.7 4 91 77.3 1.08 0 2 35 75 Average Common Shares Outstanding................. Common Stockholders ................................. Employees ......... ......................... 30.296.994 90.500 47.400 1968 % Change S 7.652 5 1.723 3 157.2 ' 92TJ ' 136 0 4 51 72.5 -- hrtKfs 6 33 40 + 88 - 88 +132 -1+-4-- + 93 * 89 - 66 * 70 - 70 30.166.725 89.600 47.400 - 04 + 10 QUARTERLY RESULTS IN MILLIONS (except per-share amounts) Quarter Ended Sales 1969 1968 3 31 . 6/30 9 30 . 12 31................. TOTAL ................ S 413 0 464 3 455 5 464 3 $1,797 1 $ 383 3 4102 427 4 431 6 $1,652 5 1 Based on average shares outstanding Earnings per Share' 1969 1968 SI 13 1 50 1.23 1 05 $491 SI 03 1 27 1 18 1 03 $4 51 Products and Services Operating Income 1969 1968 $ 55 9 69 6 66 4 47 8 S 58 6 65 7 57 6 46.6 $239 7 S228 5 1 President's Letter ! Dow's earnings improved considerably in 1969. At $4.91 per share, earnings gain^ 9%. For the five-year period 1964-69. earnings per share advanced by an averag,, of about 10% per year. Profit after tax on average common stockholders' eqUlt was 14 2% in 1969. compared to 14% in 1968. V The major factors in 1969's good performance were the near doubling of prof,,, in Europe and a marked improvement in our global plastics business. The year obviously was a good one for our global marketing people as con. solidated sales reached an all-time high of $1,797 million, 9% ahead of 1968 Th,s was despite the beginnings of a slowdown in the U. S. economy which was reflect^ in our business beginning in the fall. The U. S. Area organization made concerted, effective efforts to reduce prK= attrition and increase operating efficiency. Our weighted index of U. S. selling priCes declined 2'/2% compared to nearly 5% in 1968. However, slackening U. S sales ir the fourth quarter and cost inflation combined with the moderate price decline t0 depress U. S operating earnings Bo in eh IS Ht cc O' P~ P< P< ec ai b1 Capital Programs Capital expenditures, at $371 million, again set a record, as did the fact that a thirc of the total was spent outside the United States. Another Dow record was $e; with the completion of $400 million worth of new plants, of which $100 million was in Europe. Our production people did an outstanding job of controlling start-up expenses, although these costs were high because of the record completions rr P v n c Outlays for new plant and equipment are expected to be about 10% lower in 1970 To help finance capital programs, we sold $100 million of 30-year. 7% debentures in the U. S. We also executed a loan agreement in West Germany for one billion Deutschmarks with a consortium of German state banks. do Research and Development cb Expenditures for research and development continued at a high level Because of inflation, the record $87 million spent in 1969 actually represented a slight decline `-f in real dollars from the $84 million support provided in 1968. cb As detailed later in this report, the year was a productive one for R&D in terms of new products brought to commercialization, improvements in manufacturing processes and new technological discoveries. Dividend Raised Effective at mid-year 1969. the cash dividend on Dow common stock was increased from 60 to 65 cents per share. This was the fifth boost in the cash dividend m the past six years. 1 T aineq erag6 `QUlty TOflts Cor>This ectea Pnce prices les m ne to third s set i was rt-up ions. 1970 '%%. y for e of dine arms jring Board Changes m October. LeRoy D Smithers. president of Dow Chemical of Canada. Limited, was elected a director of The Dow Chemical Company. Mr. Smithers. a Canadian citizen. ,s the second non-U. S. citizen to be named to the board. During 1969. John M. Henske. a vice president and director, resigned to accept a position with another company Dow and the Environment Public concern for the environment is especially pertinent to Dow. as the Company 1 orobably has more knowledge in the areas of pollution control and environmental protection than any other private organization in the world. Since 1958, this knowl edge has been brought together, researched and commercialized, first by our Water and Waste Treatment group, more recently by our Environmental Control Systems uusiness. Products and services of ECS were increasingly in demand in 1969. We believe that technology can help solve the environmental problems created by technology and the population explosion and that chemical means of alleviating many of these problems are available now. As a company, we are determined to play a leadership role, making available to others our products and know-how while continuing vigorous efforts to put and keep our own house in order. As a means to this end. the Board of Directors has established an Ecology Council to fix objectives, provide guidelines and catalyze action throughout the Company. The Future Measured by the strategy adopted in recent years for the long pull, our people are making excellent progress Dow s strength in basic chemicals continues to grow, both technologically and in the marketplace. On that base, as this report illustrates, we are building an extremely diversified group of products of a more specialized nature. The performance of many Dow people in expanding both of these broad activities globally has been outstanding. The simplest measure of all is our profit growth, which continues to follow the 10% per year average we believe Dow should deliver. This discipline not only serves the interests of stockholders but also guides us in the effective use of resources It enables us to provide challenging and satisfying careers for people and maximum benefits for customers, in which is included a responsiveness to the pressing needs of society. .sed i the March 12. 1970 Herbert D. Doan ' STO 0 04 5 I I Human and Environmental Relations : ST0 0 0 45\J1e Challenge of the S** Increasingly in 1969. Dow contributed to the solution of social and socio-econom,c problems Air and Water Quality One of the most prominent .contributions was Dow s temporary operation of ^ Westerly municipal sewage-treatment plant in Cleveland. Ohio-probably the first time that management of such a facility has been entrusted to a private cor poration. Phosphorous discharged into Lake Erie was reduced from 1.2 tons per day to .4 ton; suspended solids, from 27 tons per day to 9 tons. Previously, the application of Dow chemicals and technology to the sewage problems of the City of Grayling, Michigan, helped save the famous Au Sable trout stream. These and other instances have proved that chemical-treatment systems requiring virtually no capital expenditure can do much to alleviate the nation's sewage-disposal problem. Dow s anti-pollution weapons, available now. include flocculants and inorganic chemicals for wastewater treatment; plastic oxidation media for the biological treatment of wastewater and sewage; plastic domes for the containment of odors' incinerator design and construction services; technical and operating support services for liquid- and solid-waste management, and instruments for monitoring wastes. Other Dow products are designed to block the generation of pollutants. We developed Ch/orothene VG solvent to prevent contamination of the air in vapor degreasing operations in the metalworking industry. We are testing a closed-loop system with chlorinated solvents which would eliminate the discharge of polluted wastewaters from carpet-dyeing operations. We are developing specialized coatings to replace natural binders, such as starch, casein and protein--all causes of water pollution in the paper industry. Record Pollution-Control Expenditures Dow continued its efforts to avoid air and water pollution in its own operations, spending $14.7 million in capital and operating funds for waste control in the United States alone. The Texas. Oyster Creek. Louisiana and Western Divisions not only strive to stay in compliance with the current regulations of their respective states but also recognize the importance of making improvements beyond today s standards. Because it is ahead of schedule in a program for meeting higher waterquality standards, our plant in Midland. Michigan, has asked the state for stricter regulation of the Tittabawassee River. A $1.5 million incinerator, first of its kind in the world, was started up in Midland for the clean burning of waste tars. The Midland Plant also plans to burn more natural gas in its power plants. In 1974-75. when nuclear energy becomes available, the coal-burning plants will be shut down and dismantled. During 1969 the Packaging Manufacturing operations in Cleveland won the Cleveland Kiwanis Club's first annual water-pollution-control award. The latex plant m Dalton. Georgia, was cited by the Manufacturing Chemists Association for its reuse of waste-waters. Early this year, the plant in Pittsburg. California, was cited by state officials as the only one of 105 industrial plants and municipalities discharging water wastes in the San Francisco Bay area that was in full compliance with water-quality regulations. 4 " n - 'J - - that normally would be swept m by Rock and Mill Creeks, have increased life expectancy of Needwood Lake near Washington. O C-. from 50 years to 200 or more. Flasks compare treated and untreated water. ST OOOii 5 13 New construction system based on THRCAOune brand adhesive mortar was utilized m Nagel Plaza low income housing protect >n Detroit Iphoto) and repeated in other central-city protects. Efficiency of Clevelands Westerly sewage disposal plant was increased 'ourfold. surpassing new legal standards, 'firough application of Dow developed chemicals and techniques. Dow's Pittsburg. California, plant was only San Francisco Bay Area industry in full compliance with waterpollution -control regulations. New St.5million non polluting Dow tar burner Heft stack i became operational. The older unit it replaced Iright stack) was then demolished 6 I A .*>* Disposal of Used Packaging Dow is paying increased attention to the problem associated with disposak)| containers and other throw-away products. Our research to date indicates th3t controlled incineration offers the best potential for disposing of plastic bott|es and other used plastic items. Preservation of the Ecology Dow is concerned with both natural and man-made forces affecting the ecology An example of the former is the use of Dow flocculants to protect Needwood Lake in metropolitan Washington. D. C.. from destruction by silt deposits carried m by Rock and Mill Creeks during heavy rains. In the latter category, a new product we are developing, N Serve nitrogen stabilizer, not only increases the efficiency of fertilizers but also inhibits the release of nitrogenous contaminates to lakes ana streams by leaching. Progress in Minority Hiring Dow reiterated its dedication to Equal Employment Opportunity by restating it5 "Plan for Progress." The restatement includes specific commitments in the areas of recruiting, personnel selection, placement, upgrading, training and education Since Dow's first "Plan for Progress" was published in 1962. the number of em ployees from minority groups has grown more than 700%--from 170 to 1.400 Minority employees now constitute 4% of our total U. S. employment, a percentage we are endeavoring to increase by hiring qualified people and qualifying others The National Alliance of Businessmen cited our plant in Torrance, California, for its hiring of minority-group members, especially those classified as unemployed or under-employed. The Rocky Flats Division ranked second in Colorado in hiring the disadvantaged under nab s jobs program. Dow Products for Health Following the near-eradication of measles in the United States through the use of immunizing vaccines. Lirugen one-shot measles vaccine, a Dow product, was used increasingly abroad in 1969. Lirugen accounts for more than half of the children of many races and scores of nationalities immunized. Hundreds of thousands of doses have been donated to the needy by the Company. We consider medical research as a field in which Dow can make a definite con tribution to the preservation and improvement of life and are continuing to devote a sizable portion of our resources to this purpose. ! | j Contributions to Low-Cost Housing ! The Company answered the Department of Housing and Urban Development's call for new low-cost housing concepts by submitting three proposals under "Operation Breakthrough." Dow developed an adhesive-mortar system to make possible the fast, economi- cal erection of load-bearing block walls. Applied rapidly with a caulking gun. it eliminates the expensive, time-consuming process of laying on conventional cement mortar with a trowel. The system was used first in the Nagel Plaza low-cost-homes proiect in Detroit and has since been repeated in the much larger Martin Luther Kmg Homes project in Detroit and the Village West project in Louisville j ^ I j j | ( | u: ST0 00 45 products ; STC0045 I 5 le CHEMICALS/METALS at Sales (millions) Operating Margin on Sales Capital Expenditures (millions) 1969 S879 12 8% S282 1968 $829 14 4% S218 1969 % of Change Total Company - 6 49 - 29 76 y e. Continued price attrition and rising manufacturing costs, both principally in the United States, resulted in a slight decline in the operating margin of this product of group. More stable prices are expected in 1970 id Organic Chemicals Public interest in safety and product performance was reflected in the demand for Dow's organic chemicals. Much of this activity was in automotive applications. ts Voranot polyols were used increasingly in urethane-foam crash pads, head rests of n and seat cushioning. Our high-boiling-point brake fluids designed fortoday s higherspeed. higher-stress driving were specified increasingly An anti-leak additive was incorporated in Dow's two major anti-freeze/coolants 0* . 9e s During 1970 Dow will introduce a broad line of high-performance products, based on proprietary technology, to the automotive aftermarket. a. Four new functional monomers were introduced in 1969. Two are hydroxy- id alkyl acrylates, with uses in automotive topcoats and appliance and textile finishes. 19 Another. 2-sulfoethyl methacrylate, increases the adhesion of latex and thermo plastic coatings. Tert-butylstyrene is an improved form of styrene for use in thermo setting coatings and reinforced plastics. In commodities, sales of fiber-grade ethylene glycols were up strongly as the polyester market rebounded from a slow 1968. Our increasing switch from the of chlorohydrir. route to ethylene oxide in favor of direct oxidation is freeing the id chlorohydrin facilities for the production of the more profitable propylene oxide. Df Inorganic Chemicals and Solvents O Magnesium hydroxide sales rose as a manufacturer of periclase refractory brick n- for basic-oxygen steel furnaces in Manistee. Michigan, became a customer for te this product from our Ludington Plant. Caustic soda beads were added to the product line and are expected to become the most popular form of this basic industrial chemical in developed countries. Two fire-retardant products were introduced. SA-1138 dibromoneopentyl glycol reduces the flammability of polyester plastics. Vinyl bromide performs the 3ll same function for acrylic fibers. We also are offering a family of diphenyl oxides, in which have many uses as chemical intermediates, in a brominatqd. fire-retardant form. 11- In chlorinated solvents, one of Dow's major businesses. Chlorothene VG it solvent won increased nationwide acceptance in the United States and was intro nt duced to metalworkers in Europe. This premium vapor-degreasing material is very es low in toxicity. In 1970 we will endeavor to take fuller advantage of our large distri ig bution network for Dow-Per CS cleaning fluid by adding new products for the dry- cleaner. 7 A description of functionalchemical applications in environmental control will be found in the Human and Environmental Relations section of the report Functional and Designed Chemicals Sales and earnings of this group were up strongly Methocel methylcellulose products were sold out. even with increased pianj capacity The most significant growth areas were construction materials (Methoc# improves the performance of mortars and grouts) and processed foods (a food grade of the product functions as a binder or emulsifier). Dow-branded calcium chloride for ice and snow control enjoyed a record y6ar and sales to repackers doubled, indicating a growing preference for calcium chloride over salt among home and institutional users. We reassumed marketing responsibility for the major portion of Dowex i0n. exchange resins from our distributor and thus can now respond more directly t0 the needs of the growing water-conditioning market. Conversely, marketing rights for MAPP industrial fuel gas were sold to Air Reduction Company, resulting tn a substantial increase in distributor outlets for the product. Sales of Pusher chemicals for secondary oil recovery doubled as two massive flooding operations utilizing these polymers started in California and Colombia Sales of Dow Industrial Service gained substantially. Continued growth was exhibited in all phases of the business. Metals Consumption of primary magnesium outstripped production capacity for thefounh consecutive year. Congressional release of 25.000 tons from the U.S Government stockpile brought some relief. With the availability of additional capacity m the Texas Division, the need for such purchases should be lessened in 1970 Alloying with aluminum continued as the major market for magnesium, with automotive diecasting in West Germany and Brazil as a strong second. The magnesium mill-product business continued to show strength in selected areas Magnesium extrusions for luggage were sold at record levels. The sale of Dowetch Deadline magnesium photoengraving plate nearly doubled More than 80 U.S. newspapers now utilize this product in conjunction with Dowetch photoen graving chemicals. We extruded large aluminum landing mats for portable military airfields throughout the year. Deliveries of 105-foot aluminum wing spars for the Boeing 747 jumbo jet continued. Dowell Division Dowell Division sales were on a marked upward trend despite a less than 2% in crease in drilling-rig activity. All services, especially cementing, recorded gams Although rig activity is expected to decline as much as 5% in 1970. a further increase in Dowell sales is predicted. Sales of cementing tools and services and services to industries other than petroleum are expected to advance strongly. Introduction Of new services such as Clean Sweep service for injection-well stimulation, the addition of new materials and products for secondary recovery, and marketing of new products such as Protectozone workover fluid additives are expected to boost well-stimulation sales. Another growth area for sales to the petroleum industry is the Alaskan North Slope Dowell built the Slope's first service base and currently is the only service company with complete station facilities and mobile equipment there Services to the mining industry, Dowells primary diversification target experienced a sales increase of nearly 40% in 1969. A rapid growth rate is projected I a I Following its U. S. success. ChlOROTHcnE VG solvent was introduced in Europe for vapor degreasing of metal parts. Dow Europe used its "white lady" symbol of sparkling metal cleanliness to promote the product. Dowell oil-well service base at Prudhoe Bay is first facility of its kind on Alaskan North Slope [ ST0 0 0 4 5 I 7 seat cushioning, head rests and dash panels padded with urethane foams. Dow is the No 1 supplier of polyethers to the urethane industry. Arizona Public Service Company has installed utility poles painted gray to blend with skyline. Dow-developed system based on methylene chloride as carrier for pentachlorophenol preservative leaves the poles with an oil free, paintable surface. PLASTICS/PACKAGING Sales (millions) Operating Margin on Sales Capital Expenditures (millions 1969 $611 14 7% $ 74 1968 $522 11 S 74 % Change Molding and Extrusion Materials Sales and earnings of Dow plastic resins for molding and extrusion were ve strong in 1969. principally in the United States and Europe. Improvements pricing, marketing techniques and processing technology were major factors this performance. Our major plastic product, Styron polystyrene, was produced at record levels as Dow maintained its world polystyrene leadership. Process improvements boosted Dow's U. S. capacity for this popular resin to more than 750 million pounds and world-wide capacity to just under two billion pounds. Planned expansions will result in further substantial increases through 1975. Packaging, housewares and toys again were major polystyrene markets while among newer markets, furniture and disposable serviceware continued to demonstrate growth potential. Good progress was made with a color-concentrate program, designed to enable plastics fabricators to purchase natural resins and introduce colors in their own facilities. This results in improved efficiencies for the customer and Dow Dow's earnings from polyethylene were improved, largely as a result of lowercost processes, production expansions and improved pricing. Also contributing significantly to better plant operation and profitability in low-density polyethylene was a very significant reduction in the product line. Increased ldpe capacity brought our total output capability to over a half-billion pounds. High-density-polyethylene capacity also was substantially increased and is now some 200 million pounds New Tybrene acrylonitrile-butadiene-styrene (ABS) resins were developed and the product line was expanded from two to five products, thus raising the portion ol the total ABS market in which we can compete from 5% to 35%. We elected to phase out of polyvinyl-chloride resin production, but continue as the world's largest pro ducer of vinyl-chloride monomer. One plant was sold and one converted to other products. Continued growth is expected in the plastic-resin industry in 1970. The supplydemand balance for those products manufactured by Dow is expected to be good Prices should continue firm, with some increases likely. Designed Plastics Dow epoxy resins helped give the Apollo 11 and 12 astronauts a safe ride home following man's first landings on the moon. D.E.N. resin is a major constituent of the heat shield, which withstood temperatures up to 5.000 degrees F. as the com mand modules reentered the earth's atmosphere Demand for styrene-butadiene latexes was strong, particularly for coated papers and tufted-carpet backing. Dow Latexes 650 and 680 for paper and paperboard were introduced in the U. S. at premium prices. In Europe, we introduced Dow Latex CX 7117. a product developed specifically for the European art-paper market The Dow paving system based on latex-modified cement was further devel oped and will be utilized increasingly in 1970 to restore bridge decks-the biggest maintenance problem in the federal highway system Sales of Derakane vinyl-ester resins rose sharply in response to increased demand for corrosion-resistant piping, tanks, hoods and scrubbers in the chemicalprocess industries. Development of new applications is being pushed. 10 > T i> 8 9 <15 I if 'any ery in in els te<j )nd A/lll tnd ure to ieir 3W, 'ering ?ne ght ?ne ds and i of ase Magnesium frame of new 2X60' tennis racket, introduced for 1970 season, has thin profile for low wind resistance and shock and flex characteristics comparable to wood. Aluminum reaction raiC produced by Dow is a key part of propulsion system of revolutionary high speed (rain under development in California. Dow Ceramic Foam (photo) and a flame resistant grade of Thuranz brand urethane foam were two new insulation products introduced to construction industry. al' S rvRoeoAM brand plastic foam insulation was specified increasingly to protect sub surface concrete against freeze thaw cycles. Runways of Kotzebue Airport in North west Alaska and Alpine roadways in Switzerland were ma/or construction sites. Only one course of tour inch thick brick was needed to form full-height walls of new 23 story Cleveland National Bank Building. Walls were constructed off site in sections with high strength mortar made with Sarabono mortar additive and crane lifted into position. Dow epoxy resins m heat shield of Apwi0 space capsule charred during reentry to earth's atmosphere after historic moon landings, absorbing 5.0Q0 degree heat and protecting the astronauts. V Cable shielded with Zctabon plastic dad metals goes underground m North Dakota Zitabon products have won excellent acceptance from telephone companies in U. S' and Canada for corrosion protection. 12 I i I A description of functional- and designed-plastic applications in environmental control and low-cost housing will be found in the Human and Environmental Relations section of the report Functional Plastics Styrofoam brand plastic foam insulation enjoyed an excellent year. In Europe, more Vrryri 1.(~& millirtrti -tf 't.'yrrt.vtrie -arid nrWiii rutfi dtrcJn.-are Trow :rrfSu,iVicO'w/Vti this product. In the United Kingdom, it holds 50% of the poultry-house insulation market. A promising future for Styrofoam in Alaska was indicated when 1.4 million board feet were shipped there for airport-runway insulation. Halfway around the world, in Switzerland, the product was installed as insulation under new all-weather roads in high Alpine passes. Two new foamed-insulation products were introduced--Dow Ceramic Foam for industrial pipes, tanks and vessels and a flame-resistant grade of Thurane brand urethane foam for use in office buildings, apartment houses and other commer cial structures. Dow mortars and mortar additives, which make prefabricated masonry walls feasible and shorten construction time, were used in structures ranging from two- story dwelling units to high-rise office buildings. Based on recent performance, sales of Dow's construction materials should grow at an even faster rate than the construction industry itself, which is moving into a decade of unprecedented growth. Ethafoam brand polyethylene foam performed well on the strength of new gasketing applications in the automotive and appliance industries while maintain ing its solid growth in cushion packaging and sports-equipment padding. A flame- retardant tubing, Ethafoam FX flexible plastic-foam pipe insulation, was introduced for chilled-water piping in residential and commercial buildings. A shortage of stainless steel and other metals in the United States made possible the introduction of Moraf brand plastic-lined pipe products into many new applications. We now offer more than 17.000 plastic-lined pipes, fittings, pumps, valves and custom items to handle corrosive fluids. Saran microspheres, a new expandable filler material, were enthusiastically received. The product consists of millions of microscopic bubbles that impart desirable properties when dispersed in other materials. Lightweight paper, unique non-wovens. lightweight synthetic wood and marble, boat hulls and plastic foams are indicated strong applications. Packaging Products Sales of Dow packaging products gained in 1969. We increased our emphasis on products based on a strong Dow technological position, and continued to eliminate marginal items. Trycite polystyrene film was introduced as the first low-cost material for overhead-projector transparencies, and a marketing program aimed primarily at the vast education industry was initiated. The product also gathered strength in the rapidly growing window-envelope market and as a decorative laminate for housewares. Saran Wrap brand plastic film, the long-time leader in the household- and in dustrial-wrap field, was introduced in a new product line with heat-sealable coatings for the protective wrapping of foods, pharmaceuticals and specialty products. Saranex barrier film found new uses as a packaging material for medical items and processed meats and as a barrier laminate in corrugated cartons for products requiring extra protection against air and moisture. Dowpac thermoformed polystyrene tubs continued as the leading container for cottage cheese and other cultured dairy products. Numerous brands of flavored dessert yogurt are now packaged in a new eight-ounce Dowpac container. Automated systems for the machine packaging of dry flowable products and foods in Dow plastic films became fully commercial in 1969 t/ cr c c r-" 13 BIOPRODUCTS/ CONSUMER PRODUCTS Sales (millions) .......................... Operating Margin on Sales.......... Capital Expenditures (millions)...... 1969 S307 12 3% $15 1968 S302 17 1% $14 1969 * rU % Change Total Com^ + 2 17 +7 Operating margin of the Bioproducts/Consumer Products group declined substantially as a result of a deepening world over-supply of herbicides. We anticipate the supply-demand balance will improve in 1970 and enable the group to resumeits buoyant growth. Life Sciences Dow Life Sciences, a global department with a charter to innovate, achieved strong growth in pharmaceutical sales and earnings and materially expanded Dow's interests in human-health care through a series of new ventures. Gruppo Lepetit S.p.A.. based in Milan. Italy, was the pace-setter in the attain ment of record sales in the pharmaceutical segment of the department's over-all business. A Lepetit research discovery, the rifamycin antibiotics, showed out standing growth as a treatment for tuberculosis and gonococcal and meningococcal infections. Clinical trials for introduction in the U S. and Canada are underway Dow^ is the majority shareholder in Lepetit, which has more than 7,000 employees and| marketing or manufacturing activities in 104 countries involving human and veteri-, nary pharmaceuticals and personal-care products. Dow Rx Pharmaceuticals (formerly the Pitman-Moore Division) reported a continued increase in sales of Novahistine products for upper-respiratory congestion Lirugen one-shot measles vaccine held a 70% share of the U S. market More than million doses have been distributed since 1965. including 15 million recently shipped to West Africa through the Agency for International Development. To make the vaccine available worldwide, we have licensed manufacturers in Sweden, the United Kingdom, Mexico. France and Japan. Dow Generic Pharmaceuticals, a new venture, made plans to manufacture and market up to 10 generic drugs, chiefly for institutional use, by mid-1970 Cordis Dow Corp.. jointly owned with Cordis Corporation of Miami, was formed to provide products, systems and services in hemodialysis and blood oxygenation, its first product is the small, disposable artificial kidney developed by Dow's re search laboratories in Walnut Creek, California. Plans to establish a new medical diagnostic referral laboratory in West Germany in 1970 were announced by C H Boehringer Sohn and Bio-Science Laboratories, a wholly owned subsidiary. Bio-Science Laboratories opened a third branch laboratory and plans to add a new 35.000-square-foot facility at the main laboratory in Van Nuys, California, in 1970. Eleven new diagnostic tests were introduced in 1969. The Pitman-Moore trade name and line of ethical veterinary products were sold to Johnson & Johnson. Dow continues to supply non-prescription products for animal health to farmers and ranchers through the Agricultural Products Department 14 lets the sun worship you' is the theme of AZTfC sun care products, scheduled for expanded test marketing this year. Plastics with look of fine wood appeared in creasingly in furniture. "Prestige " line offers chair, sofa and love seat with 20pound arm assembly molded of S TYRON polystyrene resin. c z s 'ic o o is ; Low cost overhead protector transparencies made from ore cut sheets of Tryotc polystyrene him were introduced to U. S. schools. Dow-developed packaging system automatically packs citrus in preprinted Dow polyethylene film and delivers sealed bags ready for shipment. Agricultural Products T Although herbicide sales were down, new-product introductions and new markets emphasis brought impressive growth in animal-health products and fumigantj Total non-herbicide sales increased 25% During 1969, registration of Tordon herbicide for use on rangeland brushy the United States was further delayed, but sales of the product elsewhere in tf,e world continued to expand satisfactorily despite a severe drought in the Australia state of Queensland. Progress was exceptionally good in Brazil, Venezuela ana Colombia World ranching emerged as a prime market of opportunity for Tordon and other Dow products, including Dursban insecticide for cattle-tick control and Rueier* insecticide for the control of cattle grubs. Kedlor feed-grade biuret, a non-protetn nitrogen source for cattle and sheep, came on the U. S. market with initially go^ results and will be introduced in Australia in 1970. Two new bovine vaccines were added to Dow's line of products for the beef industry. Coyden coccidiostat. for the control of poultry disease, was introduced in the United States and gained an impressive share of market while maintaining its earlier strength in Canada, the United Kingdom, Europe, and Latin America. Meanwhile Zoamix coccidiostat, a much older material, has been able to expand its place in the market. Dow's soil fumigants achieved major sales increases, particularly as pre-plant treatments in European potato and vegetable fields and vineyards. Sales of a space fumigant which exterminates termites in residences were very strong on the U. S. West Coast Marketing and registration of Pfictran miticide for the orchard industry ex panded outside the United States; the product is expected to enter the U. S. market in 1971. Dursban insecticide was approved for on-premise insect control in the U S and recorded further growth in the control of breeding mosquitoes. The product also demonstrated its value against the Egyptian cotton-leaf worm in the Middle East. Among important developments in 1970 will be the introduction of an herbi cide for the control of weeds in irrigated rice, initially in The Philippines. Consumer Products Sales and earnings of Dow products marketed directly to consumers gained in 1969 Two new products were introduced in existing lines, and we prepared to enter the personal-care market with two others. Ziploc brand plastic food-storage bags were marketed regionally in the United States with outstanding results. Market coverage will be extended in 1970 The bags feature a patented zipper-type closure. In one of the fastest-growing segments of the household chemical market, Dow Bathroom Disinfectant Spray performed well in test market and early regional expansion. The product, which combines disin fection with an ability to destroy odors chemically, is now available in a substantial segment of the U S. During the 1969 summer. Aztec suntan gel was test-marketed. The formulation offers a non-sticky, moisture-resistant barrier to sunburn. A complete line of Aztec sun-care products has been developed and will be tested in a much larger area ot the U. S. in 1970. A second personal-care product. Touch of Sweden hand lotion, currently is in test market Based on technology similar to that used in Dow suntan products Touch of Sweden is aesthetically pleasing to women and is outstanding at moistunz- mg and holding body moisture. [ j j I I : _SXQ.tU.U44 16 1 Puctran miticide. already registered for use against orchard fruit mites abroad, was further tested in the U. S. Ampoules of nfamycin. promising antibiotic of Gruppo Lepetit. are filled in Torre Annuziata plant near Naples. c 7c i/ nno si On a western range, beef cattle receive Keolor feed-grade biuret m their rations as a non protein source of nitrogen needed for efficient, high-quality beef production. Korean youngster is inoculated with iirucen one shot measles vaccine. World wide doses passed 50 million mark in 1969 l The Dow Chemical Company CORPORATE HEADQUARTERS: MIDLAND, MICHIGAN UNITED STATES AREA Headquarters: Midland, Michigan Etiropp/ Canids SALES OFFICES IN 22 CITIES o 34 MANUFACTURING LOCATIONS IN 19 STATES Arizona Tucson (under Latin Ar construction) Arkansas Magnolia: Russellville (under construction) California Fresno l Pittsburg. Torrance. Van Nuys Colorado Denver, Golden Connecticut Gales Ferry Georgia | Pacific Dalton Hawaii Honolulu Indiana Indianapolis. Zionsville Louisiana Plaquemme Michigan Bay City. Ludington, Midland Minnesota Biwabik Missouri Cape Girardeau. Pevely New Jersey Carteret Ohio Cleveland. Findlay. Ironton. Newark Oklahoma Tulsa Pennsylvania Royersford Texas Freeport. Oyster Creek Utah Ogden (under construction)* Washington Dallesport (under construction), Kalama Virgin Islands St. Croix principal partly owned companies* Dolco Packaging Corp . Los Angeles, California Dow Badische Company Williamsburg. Virginia Dow Corning Corporation, Midland. Michigan The Kartridg Pak Co. Davenport. Iowa DOW CHEMICAL EUROPE S A. Headquarters: Zurich, Switzerland OFFICES IN 15 CITIES o 16 MANUFACTURING LOCATIONS IN 8 COUNTRIES France Drusenbeim . Germany Greffern; Stade (under construction) Greece Lavrion Italy Cuneo, Livorno. Milan. Naples The Netherlands Rotterdam, Terneuzen Portugal Lisbon Spam Bilbao. Santander, Tarragona United Kingdom King's Lynn, England; Barry. Wales principal partly owned companies*. Compagnie des Services Dowell Schlumberger. Paris. France Dowell Schlumberger Corporation, London, England Lurex NV . Amsterdam, The Netherlands Phrix-Werke AG.. Hamburg. Germany United Europe^ Canada Latin I Pacific T DOW CHEMICAL OF CANADA, LIMITED Headquarters: Sarnia. Ontario SALES OFFICES IN 6 CITIES o 10 MANUFACTURING LOCATIONS IN 4 PROVINCES. Alberta Edmonton Fort Saskatchewan British Columbia Ladner Ontario Don Mills. Thunder Bay. Sarnia. Toronto. Weston Quebec Montreal. Varennes. DOW CHEMICAL LATIN AMERICA Headquarters: Coral Gables, Florida OFFICES IN 9 CITIES o 10 MANUFACTURING LOCATIONS IN 6 COUNTRIES Argentina Buenos Aires. San Lorenzo (under construction! Brazil Sao Paulo (two locations) Chile Concepcion (under construction). Santiago Colombia Bogota. Cartagena Ecuador Quito Mexico Mexico City principal partly owned companies*: AtanorS A.M.. Buenos Aires. Argentina Polioiefinas Colombianas S.A.. Bogota. Colombia. DOW CHEMICAL PACIFIC Headquarters: Hong Kong offices in 14 CITIES o manufacturing OPERATIONS in Australia Altona. Rhodes. Smithfield Malaysia Kuala Lumpur (under construction) principal partly OWNED companies* AsahiDow Limited. Tokyo. Japan Austral-Pacific Fertilizers. Brisbane, Australia Ivon Watkins-Dow Limited. New Plymouth. New Zealand Korea Pacific Chemical Corporation. Ulsan. Korea Polychem Limited. Bombay. India. Companies in which Dow's interest'S substantial but less than a maionty ana whose tesults are not consolidated UNITI CO --( CD CD CD cn r-o OD 1 World Operations i der no. gia fan 'ew >n/a ton JED ny. 5ak i no. ao. 3ai ice 'he United Stales Europe/Africa Canada Latin America Pacific TOTAL [Rm' $1.154 6 351 1 119 9 107.5 640 $1,797.1 $1,103.8 283.0 111.9 101.8 52.0 $1,652.5 + 4.6 +24.0 + 7.1 + 5.8 +23.1 + 8.8 64.2 19.5 6.7 6.0 35 100.0 $144.8 61.1 17.9 75 8.4 $239.7 $162.2 31.5 19.3 9.2 63 $228 5 -10.7 +94.0 - 73 -18.5 +33.3 + 49 United Slats] Europe/Africa Canada Latin America Pacific TOTAL $1,711.1 356.4 171.8 46.8 17.0 $2,305.1 $1,576.9 283.2 154.5 31.5 14.3 $2,010.4 742 15.5 7.5 2.1 0.7 100.0 $243.6 81.8 24.2 18.5 2.7 $370.8 $229.3 57.1 16.3 2.7 0.9 $306.3 85.7 22.0 6.5 5.0 0.8 100.0 303 31.4 9.7 9.1 2.3 2.3 4.2 3.8 0.9 0.8 47.4 47.4 ftaf 604 25 5 75 31 3.5 100.0 63.9 20.5 4.9 8.9 1.8 100.0 n. id. UNITED STATES es. on >CO na hi- on in. Considerable progress was made in arresting price attrition: Dow s weighted selling price index decreased 2.5%during 1969compared to4 9%in 1968 However, higher costs depressed operating income below the 1968 level. Continued progress in stabilizing the selling-price index is expected in 1970 Plastics, Functional Products Gain Among maior U S. marketing developments was the halting of two years of severe price attrition in our large plastic-resin business. Dow Functional Products and Systems, which develops and markets products for special uses, enjoyed its second consecutive outstanding year, and has an outlook for continued high annual earnings growth. Recognizing the gathering boom in Alaska, Dow became the first major chemical company to establish a corporate office in the frontier state : ST0004527 Record Start-Ups The year saw the greatest number of new U S. plant start-ups in the history 0f d0w as S220 million worth of new facilities came on stream. Start-up problems were minimal Existing facilities operated at 83% of capacity, reasonably close to the maximum effective rate. Noteworthy among the new facilities is the new Oyster Creek Division near Freeport. Texas, which started producing vinyl chloride, chlorine and an inter, mediate stage of caustic soda in large-volume, highly-automated manufacturing units During 1970. the caustic process will be completed and work will begin on a third fully integrated, high-volume unit, which will produce phenol Major projects completed in the Texas Division included a new primary-mag. nesium plant of 25.000 tons' capacity, bringing Dow s total capacity to 120.000 tons per year. The plant utilizes a new process that recovers chlorine as a byproduct This provides a source of chlorine without an equivalent amount of caustic soda whose market growth rate is significantly less than chlorine's. The identical process will be installed in a new primary-magnesium plant in Dallesport. Washington scheduled to go into construction this year The Midland, Michigan, plant. Dow's oldest land largest in terms of employ, ment), proceeded with a large-scale program of replacing obsolete production units. The new, technologically advanced facilities will not only expand production capacity but also minimize pollution hazards through the use of closed-loopcoolmg systems and other devices. Dow's Engineering and Construction Services provided design engineering and construction administration for 99 major projects at 17 operating locations of the Company. We elected to phase out of the commodity-aluminum business (sheet, plate and small-press extrusions) by leasing the plant in Madison. Illinois, to Phelps Dodge Aluminum Products Corporation, which has an option to buy the facility in 1972. Dow Badische, Dow Corning, Ethyl-Dow Dow Badische Company, owned jointly with BASF Overzee N. V.. introduced Anavor polyester and Vivana nylon-6 fibers from its new 60-million-pound-per-year plant in Anderson, South Carolina, and both received strong market acceptance. These plus the established Zefran and Zefkrome acrylic fibers and Lurex metallic yarns give the company a broad and strong product line. Capacity of the nylon-6 plant is being expanded by 25 million pounds per year. Dow Badische's fiber sales doubled over the previous year, and chemical sales were at a record high for the third consecutive year Zefstat yarns, guaranteed to control static electricity in carpet, were introduced. Dow Corning Corporation, owned jointly by Dow and Corning Glass Works, enjoyed a year of healthy growth. Capacity for basic silicone chemicals and semi conductor silicon for the electronics industry was increased. A new family of flame-retardant silicone rubbers that will help set new stand ards of safety in passenger aircraft was introduced A contribution to roadside color is a new silicone coating for metal roof shingles that resists chalking and color change over long periods of direct sunlight exposure. These coatings have wide application to roadside businesses relying on roof color for instant recognition Bank of electrolytic cells in Texas Division's new primary magnesium plant, which recovers chlorine as byproduct of revised process. New Oyster Creek Division in Texas began high volume production of vinyl chloride 21 6ZSH001S Plant of Austral Pacific Fertilizers in Brisbane harbor started operations. Dow owns part interest in the company. Dow Chemical of Canada brought on stream a large new ethylene oxide plant at the major works in Sarnia, Ontario. oesiooois: Dow plant science specialist in Northern India checks effectiveness of Dupsbji\ insecticide against stem- borer in rice test plots as part of effort to increase crop yields throughout South and Southeast Asia. Polyethylene plant jointly owned by Colombian government and Dow was completed at Barrancaberme/a on Magdalena River. Pan Shield non-stick coating for cooking utensils is now available nationally The invisible coating, which can be applied at home by aerosol or dauber, releases sticky or burned foods and can also be used to repair damaged factory-applied non-stick coatings. Operations of the Ethyl-Dow Chemical Company plant in Freeport. Texas, were terminated in December The plant had manufactured ethylene dibromide, used in gasoline anti-knock fluids, utilizing bromine extracted from seawater Ethyl-Dow is jointly owned by Dow and the Ethyl Corporation. Disposition of the plant is still pending. Both companies are now producing ethylene dibromide in facilities based on Arkansas brines. Government Business Dow's direct sales to the United States Government declined substantially The volume of aluminum airfield landing mat supplied to the Defense Department was less than in 1968. and herbicide sales were reduced sharply. Sales of anti-freeze and some other large-volume products were substantially lower. Dow's indirect business--sales of product to other government suppliers--was higher in the areas of plastics and packaging. Our most-recent contract to supply napalm to the armed forces was completed in May. 1969. and we are currently without a contract. Although we held to the former price despite rising costs, we were unsuccessful in rebidding for a new contract in the fall We intend to bid on future contracts. During 1969 Dow became more heavily involved, through research and de velopment contracts, with U. S. Government and international agencies in the areas of water and waste management, health, food, transportation, housing and urban development, space exploration and international agricultural and industrial development. We also were associated with federal educational programs for the upgrading of work skills. A fire last summer at the Rocky Flats Division, near Golden, Colorado, ham pered production operations at the major facility we operate for the U. S. Atomic Energy Commission. However, no injuries resulted, and rapid restoration of opera tions has been accomplished by Rocky Flats personnel. Through Catalytic-Dow. a joint venture at the Kennedy Space Center in Florida. Dow engineers and Catalytic Construction Company personnel played a major role in man's successful landings on the moon in 1969. ' STOOD 4531 EUROPE/ AFRICA For Dow's operations in Europe, 1969 was the best year to date for total growth, market penetration and contribution to earnings. Business conditions were very good in most European nations, and supplydemand balances for Dow products were generally favorable. Our chlorinated solvents and other special chemicals, plastic molding and extrusion materials, coatings, construction materials and poultry products performed particularly well For the future, additional capital expansion should greatly improve Dow Europe's cost position and market penetration in key areas. For example, although sales volume in West Germany is higher than in any other European country, per centage of the market is smaller than in The Netherlands, where we have had sizeable production facilities for several years. We expect our German market share to rise with the coming on stream in 1971 of the Stade complex, for which we have 23 Cordis Dow Corp. was formed to manufacture and market the flashlightsized artificial kidney developed by Dow New silicone rubbers produced by Dow Corning pass aircraft industry's rigid flame tests. Fiber production in the Neumunster plant of Phnx Werke. Evening dress of orange wool and gold L urcx metallic yam. a product of Dow Badische. features an open slit front. Geoffrey Beene is the designer 'I p already authorized $100 million and expect to invest a total of $250 million during the next five years During 1969, nearly $100 million worth of new Dow plants were completed in Europe. Start-ups were achieved smoothly virtually across the board. The largest new units are located in the Netherlands chemical complex at Terneuzen. where we completed construction of a naphtha cracker capable of producing 400.000 metric tons of ethylene per year and a polyethylene plant with an annual capacity of 60.000 metric tons. We have authorized a second naphtha cracker of comparable capacity for Terneuzen and expect to locate our third Euro pean cracker at Stade within the next few years. During 1969 a program was begun that will boost our European polystyrene capacity from 170.000 metric tons to nearly 300.000 tons by 1972 through plant expansions and process improvements. At Bilbao, Spain, the manufacturing effi ciency of Dow-Unquinesa, in which we hold a majority interest, was upgraded, with performance improvements of as much as 30% for some plants. Phrix-Werke, Dowel I Schlumberger Phrix-Werke A. G., man-made-fiber producer with headquarters in Hamburg, Ger many, advanced in products and facilities. The company, jointly owned by Dow and Badische Anilin- & Soda-Fabrik, is a recognized leader in the rayon-staple business. It has developed a new high-wet-modulus rayon that makes excellent blends with polyester in fabrics. Plant capacity for the product is being expanded at Siegburg. Phrix-Werke also is expanding its nylon-6 plant and early in 1970 put in opera tion a new polyester facility at Neumunster. Engineering is in progress for a new polyester plant in Southern Germany which will have a capacity of 12.000 metric tons per year in its first phase. An expansion has been approved that will nearly double the capacity of the plant for Redon acrylic fiber at Krefeld. Dowell Schlumberger. which provides the same basic services to the oil in dustry in the remainder of the free world as the Dowell Division in North America, increased its sales by 34% and net income by 37% compared to 1968. Continued growth is forecast for 1970. with particular emphasis on the Middle East and Far East Dowell Schlumberger is owned jointly by Dow and Schlumberger Limited. * ST0 0 0 4 5 3 to Sales of Dow Chemical of Canada. Limited, reached a record high. All product divisions reported increased volume, with the best percentage gains recorded by inorganic chemicals, human-health products, and plastic resins, coatings and monomers. Higher costs, price erosion and new-plant start-up costs caused a decline in operating income. New manufacturing and distribution facilities strengthened Dow's marketing position with the pulp and paper industry, one of Canada's largest. Chlorine and caustic soda were supplied western producers from a new 300-ton-per-day facility at Fort Saskatchewan. Alberta. The Sarnia (Ontario) Works initiated liquid caustic shipments in a chartered tanker via the St. Lawrence Seaway (a "first") to new Dow bulk storage terminals at three points in the pulp- and paper-producing regions of Eastern Canada. Dow Canada continued to export about 10% of its output, principally to the United States and the United Kingdom but also to The Netherlands. Australia, Hong Kong and Mexico Glycols, solvents, styrene, polystyrene and benzoic acid were the major export products. A $12 million ethylene-oxide plant at Sarnia was the major capital addition 25 LATIN AMERICA PACIFIC 26 completed in 1969 Using the more efficient direct-oxidation process, it replaces facility of less capacity based on cblorohydrin which is being economically CQna verted to additional propylene-oxide capacity. ' \/E The Latin American Area's program of investment in local production facilnle advanced in both the planning and construction phases In Brazil. Dow received government authorization to proceed with construction of a plant for Voranol polyols, used principally in urethane foams, near Santos ,n the State of Sao Paulo At year's end, construction of the polyethylene facility at Barrancabermeja, Colombia, was completed and the plant owned jointly with the Colombian government was ready for startup. Utilizing the acquisition route we entered polystyrene production in Chile and Brazil. A program of cost reduction in transportation and cargo-handling advanced with the completion of a bulk marine terminal at Cartagena. Colombia, and con struction of a similar terminal was begun at Santos, Brazil. A program of technology transfer, a prime need in Latin America's rapid industrialization, was initiated with the opening of Dow technical-service laboratories in Buenos Aires, Sao Paulo and Caracas. ST 00 Jh 53 4 For Dow's Pacific Area. 1969 was a year of growth in sales, earnings, capital proj ects and strength as a business force Since 1966. when an area administration was established in Hong Kong, Dow sales in the Pacific have grown at the rate of 28% per year compounded. In the highest-volume region, Japan/Korea, sales in 1969 were 11% above 1968 despite severe competition from Japanese and other foreign companies and a general softening of prices. A five-year contract calling for the supply of at least $45 million worth of Dow products to the Japanese plastics industry was nego tiated. Asahi-Dow Limited, the Company's oldest foreign joint venture, experienced a 20% sales increase. Australia/New Zealand business increased 15% over 1968. An all-time record drought in the Australian state of Queensland, a major agricultural area, adversely affected the sale of weed-killers. A shift to marketing agricultural products di rectly. rather than through local representatives, will enable us to participate more fully in the huge Australian agricultural industry South and Southeast Asia sales were up 30%. reflecting a general business boom throughout the region and deeper penetration of Dow marketing activities in all product areas. In Australia, an agricultural-chemical formulating plant in Smithfield. near Sydney, began operations. Latex and epoxy-resin plants are due on stream in 1970 at our Altona complex, and styrene-monomer capacity will be increased during the year. Plants costing in excess of $4 million for propylene glycol and Voranol urethane chemicals are scheduled for completion late in 1971 at Altona. Austral-Pacific Fertilizers. Limited, began production in mid-year A Dow joint venture with Australian and other American investors, Austral-Pacific manu factures and markets nitrogenous fertilizers. In Japan. Asahi-Dow expanded its capacity for a number of plastic products Engineering and site plans for the vinyl-chloride monomer and polyethylene plants of Korea Pacific Chemical Corporation were nearly complete by year's end. Con struction on the $35 million project at the Ulsan site will begin this year Korea Pacific is a joint venture with Chungju Fertilizer, a Korean government company VENTURES DIVISION Our activities in the investment and financial services area were consolidated in the new Ventures. Investment and Finance Company Division, which has a char ter to broaden Dow's participation in new enterprises This division will be instru mental in the acquisition activities of the Company and also will handle the disposi tion of those Dow operations which no longer fit the Company's long-term pattern of development. The new division invests in venture-capital businesses and in established situations that can effectively utilize Dow-developed technology or products which do not readily fit into our existing product lines. This organization also invests in companies that have developed new tech nology of present or potential interest to Dow. It will provide, as required, manage ment and financial services to such companies. The division makes loans to business firms through its affiliate organization, Dow Chemical Financial Corp. The division portfolio includes investments in medical electronics, instrumentation, agricultural products and services, air- and water-pollution control, containerization and packaging development. SIGNIFICANT PLANT COMPLETIONS IN 1969 PRODUCT AlytcMv* CoOHKfM* GMariaa Trjojiafihi Trfdu fiha Vinyl dM YnyMm dianii Wrmmr ViO--f-d--n--Q-*t pvfW-i PLANT LOCATION Freaport Tom - Treopirt Tom. InmlteMaMi ImmUtKAnM Totmbm. Dm Freaport Tuan NMaarf. Mfchipaa Magnafa. Arkansas BIKmo. Spain Frasno. Cafifonaa Nmart. Ohs Oyttar Creak. Tam Ttreautn. Tfca IWtarfwh Freaport Tam Tanmzaa. Tha Natlwlands I DESCRIPTION ME ' NA NO Nl NP ME Nl Nl NA NP ME NA ME ME NP ME ME NA ME ME NA NP ME Nl ME NL Nl Nl NA ME ME OO --1 CD CD t-D c_n CO C_rj ME - naior aspansiaa at this locatisn NA = naw to this Dow Area ND - naw to Dow Nl = now to this location HP = raplacaawnt plant with now procass tachnolayy INDUSTRIAL RELATIONS RESEARCH 28 At the end of 1969. Dow and its consolidated subsidiaries employed 47.400 pe0D| identical to the year-ago total Total assets of our retirement plans, which areCOn tributed entirely by the Company, rose to $293 million. At the Texas Division, the largest bargaining unit involved in Dow labor neg0 tiations in 1969, a new contract was negotiated without a work stoppage Howeverextended strikes were experienced at three other locations, one of which was re solved in January and a second in July. The third, involving our Rx Pharmaceuticals facilities in Indianapolis and Zionsville, Indiana, was still in progress at year's end both locations were continuing in operation with supervisory and technical per sonnel. Seven contracts will be negotiated in the U. S. in 1970 Dow's aid-to-education program in 1969 exceeded $3 million Included were scholarships, fellowships, research grants, building materials, equipment and medicines. Dow's support of Research and Development, including pilot plants and Technical Service, reached a record high of $87 million in 1969. Dow operates 80 laboratories in 25 geographical locations in the United States and abroad. Projects Near Fruition Major product and process discoveries, modifications and development advances that reached the commercial stage in 1969 are described in the Product and World Operations sections of this report. Others expected to have a near-term impact include the following: In packaging--an improved manufacturing process for foamed meat trays, a new reclosable vacuum package. In plastics -- latexes to function as binders in the growing market for paper disposables, such as surgical gowns and hospital bed sheets. In chemicals--composite foam systems combining thermoplastics and ure thanes for improved seaft and crash cushioning; corrosion-inhibitor systems for gas-processing plants; a low-odor stabilizer system for Aerothene solvents for spray-on antiperspirants and similar personal-care products; polymers to increase the liquid-absorbency of cellulosics; polyglycols for cold-curing of plastics. In metals --a low-temperature process for the uniform deposition of aluminum on various substrates of almost any shape without the use of electricity or vacuum Facilities Speed Commercialization Two new facilities designed to reduce costs and speed the transition from labora tory to profitability were put in operation in Midland. Michigan A multi-project pilot plant with individual modules equipped for separate processing steps, such as crystallization or distillation, makes it possible to check out the manufacturing processes for new products economically. The other unit, a multi-product manufac turing plant also based on the modular concept, economically produces new prod ucts in the limited quantities required for market development. Dow researchers continued their pace (begun in 1958) of developing over 900 inventions a year. In 1969 Dow was issued 500 U. S. patents. More than a third of all Dow patents are in actual use by the Company or its licensees. Dow currently owns 5.679 U. S. and 8.211 foreign active patents. ST003453G inirir MfHMiMMltfi 'eple. e con- negovever as re peals 3 end; 11 Per- were 1 and mica/ ories nces Vorld i pact /s. a aper urefor for ase lum mm oraDilOt i as ring facod- yuu .1 of itly Consolidated Statement of Income THE 00W CHEMICAL COMPANY AND SUBSIDIARY COMPANIES Products and Services Ner sales ...................... Operating costs and expenses Cost of sales ................................. Depreciation................................ Selling and administrative .. . . Products and services operating income........... Non-Products and Services Investment and financial Profit on investment turnover.............................. Income from sundry investments Equity in earnings of Swiss banking subsidiary. Administrative expenses...................................... Year Ended December 31 1969 1968 SI .797.057.283 SI.652.492.908 1.155.954.658 177.882.468 223.532.962 1.557.370.088 239.687.195 1.053.295.887 157.227.205 213.474.777 1.423.997.869 228.495.039 11.117.707 2.572.591 2.112.725 (1.286.113) 9.273.142 2.922.409 I 648.018 (833.112) Investment and financial income....... Other Dividends from associated companies Sundry income--net........................... Interest expense--net...................... 14.516.910 13.010.457 9.278.203 26.213.026 (54.315.243) 8.562.401 15.789.540 (33.915.575 Non-products and services income (loss) (4.307.104) 3 446.823 Income Before Provision for Taxes on Income and Minority Interests.................................................. Provision for Taxes on Income (Note G)................ Income Before Minority Interests................... .. . Minority Interests' Share in Income 235.380.091 81.500,000 231.941.862 92.000.000 153.880.091 5.157.778 139.941.862 3.982.023 Net Income (Note H) Earnings per Share ... S 148.722 313 S 135.959.839 S4 91 S4 51 ST0DQ4537 See IVofes to Financial Statements 2S Consolidated Balance Sheet THE DOW CHEMICAL COMPANY AND SUBSIDIARY COMPANIES ASSETS Current Assets Cash........................................................................... Marketable securities and interest-bearing deposits (at cost, less reserve)........................... Accounts and notes receivable: Trade, less allowance for doubtful accounts Miscellaneous......................................................... Inventories--at lower of cost or market.................. . Decamber 31 1969 1968 S 42.516.851 s 40.236.154 90.895.715 101..427.994 316.425.596 113.570.252 289.069.575 286.695 300 71.167.537 276.328.670 852.477.989 775.855.655 liabi Investments and Non-Current Receivables Carried at equity in net assets-- Wholly owned Swiss bank (Note A)..................... Carried at cost, less reserves: Non-consolidated subsidiaries ............................ Associated companies (Note B)..................... Notes, securities and other assets held for investment................................. Sundry................................................................... 29.488.403 562.104 200.650.490 106.201.737 41.214.032 378.116,766 27.375.678 3.148.633 165.983.177 76.335,111 67.470.946 340.313.545 "STOO04538 Plant Properties (Note C) Cost......................................................................... Less --Accumulated depreciation......................... Goodwill (Note A)..................................................... Deferred Charges and Other Assets..................... TOTAL.......................................................... 2.305.128.787 1.010.128.768 2.060.427.146 933.403.766 1.295.000.019 1.127.023.380 62.739.806 44.862.610 31.441.036 24.169.752 $2,619,775,616 S2.312.224.942 See Notes to Financial Statements 30 I liabilities Current Liabilities Notes payable.......................... Long-term debt due within one year .......... Accounts payable........ United States and foreign taxes on income........... Accrued and other current liabilities December 31 1969 1968 S 337.752.058 16.615.938 140.544.515 51.603.401 133.967.646 S 246.493.512 8 775.086 124.959.351 52.472.408 138.692.116 680.483.558 571.392.473 Long-Term Debt (Note D)........................................ 797.992.233 684.584.393 Minority Interests in Subsidiary Companies........ 39.615.622 41.625.541 Reserves Deferred employee benefits (Note E).................... Loss on foreign investments.............................. 16.435.768 5.000.000 21.435.768 5.000.000 5.000.000 Stockholders' Equity (Note F) Common stock (1969--issued, 31,430.574 shares) Capital surplus...................................................... Earned surplus.......................................................... Less--Treasury stock at cost (1969-1.214.540 shares)................................... 157,152.870 574.699.429 430.696.301 1.162.548.600 82.300.165 1.080.248.435 156.152.454 562.171 177 358.830.020 1.077 153.651 67.531.116 1.009.622.535 TOTAL S2.619.775.616 S2.312.224.942 See Notes to Financial Statements 31 ST 00 04539 Consolidated Statement of Capital Surplus Balance at Beginning of the Year Add Excess of selling or market price over par value of common stock issued to employees. Excess of face value of debentures over par value of common stock issued on conversion Deduct --Capital surplus related to subsidiary company sold in 1968................... Balance at End of the Year Year Ended December 31 1969 1968 S562.171.177 S553.292.04o 12.284.061 244.191 574.699.429 9 011.687 273 797 56^577^ $574,699,429 406.347 S562.17tTt7 Consolidated Statement of Earned Surplus Balance at Beginning of the Year {1968, as adjusted)............................................... Add: Net income for the year.......................... Adjustments related to consolidation of subsidiaries.............................................. Deduct--Cash dividends. .. Balance at End of the Year Year Ended December 31 1969 1968 $358,830,020 148.722,313 401.252 507.953.585 77.257.284 $430,696,301 S294.389.349 135.959.839 931.326 431.280.514 72.450.494 $358,830,020 Notes to Financial Statements IM 1M 1M7 IBS* A. Principles of Consolidation The financial statements include all significant subsidiaries on a full consolidation basis, ex cept for a wholly owned Swiss banking company which is accounted for on the equity basis. Accordingly, if the bank were consolidated, there would be no effect on consolidated net income and stockholders' equity as reported The excess of the cost of investments in consolidated subsidiaries over their net assets at dates of purchase is carried as goodwill. In the opinion of management, no amortisation was required in 1969. Sales, including products manufactured in the United States, and products and services operating income of foreign subsidiaries comprised approximately 36% and 40% of the respective consolidated totals in 1969; gross plant properties constituted approximately 26% Foreign currency items have been translated into U S dollars at appropriate rates of exchange d . Associated Companies The Companysequity at December 31. 1969. in the combined net assets of associated com panies (50% owned), as shown by their unaudited financial statements, exceeded its invest ment at cost (less reserve) by approximately $23.100.000 The Company's equity in the combined net income of these companies was approximately S3.900.000 and $3,300,000 for the years ended December 31. 1969 and 1968. respectively M 1ASH f CR Sf 140 I MS c/"> CD q cli .p<_n -p~ CD 32 >8 '040 kttemxtmca (RATING MCOME \t'mm tf 2tZ 687 1^97 .524 ;347 ^77 0 ISM JSS7 ISM ISM IRNMGS PER SHARE MJ1 ISM 1M7 ISM MM ex- 3>S iet ets on ;es re- of mstthe iOO C. Plant Properties Properties and accumulated depreciation at December 31 1969 were Classifications (000 omittad) Accumulated Cot Depreciation Land Land and waterway improvements Buildings Machinery and Other equipment Wells and brine systems Furniture and fixtures Other Construction in progress Total S 47.904 ' 41304 250.661 1.577.422 35 089 25.325 21.162 306.262 S2 305.129 S 19.706 106.556 839.169 20.666 13.606 10.426 SI,010 129 Depreciation m the United Stales and Canada is computed primarily under the decliningbalance method, whereas in other countries the straight-line method is generally used D. Long-Term Debt Details of long-term debt were: (000 omitted) December 31 1969 1968 Promissory notes 4.5% due 1990. .... .......................... 5 0% due 1991. . ........................................... Debentures 4 35% due 1988. 6 70% due 1998 ... 7.75% due 1999....................................................................................... Debentures subordinate convertible. 3% due 1982 (1969 --24.146 common shares reservedl................ . Notes payable under revolving credit agreements, due 1971 Other (various rates and maturities from 1971 to 1990) Foreign currency loans Dollar loans ........................................ Total .................... .... SI 20.000 100.000 84.134 100.000 100.000 1.181 125.000 112.985 54.692 S797.992 $125 000 100.000 87 909 100.000 1 453 154.650 70.566 45.006 S684 584 (S The promissory notes and debentures are payable generally in annual installments beginning at various dates. Installments due on long-term debt in the five years after 1969 are. 1970, $16,616,000 1971. $183,965,000. 1972. $29,615,000. 1973. $41,260,000. 1974. S29.306.000 E. Deferred Employee Benefits Certain subsidiaries are required by law to provide termination benefits to employees based upon length of service. It is the companies' policy to accrue for these benefits as earned In 1968 deferred benefits of $12,081,000 were included in current liabilities F. Stockholders' Equity In 1969 the stockholders approved an increase in authorized common stock to 100.000.000 shares of $5 par value each, and authorized 25.000.000 shares of preferred stock with a par value of $1 per share. The changes in the number and amount of issued shares of common stock during 1969 were: Shares Amount Issued January 1 Sold to employees Exercised through options Awarded as restricted stock. Conversion of debentures Issued December 31 31:230.491 136.073 40.534 17 915 5.561 SI 56.152 454 680.365 202.670 89.575 27 806 31.430.574 S157.152.870 3. DISTRIBUTION OF IMS INCOME DOLLAR | CakMMxlH I DOW WAGE/SEUM6 PWCE MKX M M 17 M M A! December 31. 1969. there were 30.216 034 shares of common stock outstanaino after deducing 1.214.5*0 shares of treasury stock None of the preferred shares have In May 1969 the Company made an offering of common stock to its empi0yeei S62 00 a share, payable generally through payroll deductions At December 31. 1969. ^s at were unfilled subscriptions for 156.798 shares which may be cancelled at the option of rhe employee in current Partial payments liabilities on these subscriptions aggregating ^ S6.245.470 , are 'hciuaea The stockholders authorized in May 1969 an Award Plan providing for the grantmq during the ensuing ten-year period, of 350.000 shares of Restricted Stock or Deferred Stock or a combination thereof, to selected employees in lieu of cash for services During 1959 17 915 shares of Restricted Stock were issued under the Plan, net of 700 shares Issued ana later forfeited. No Deferred Stock was issued m 1969 The Plan also extends lor ten yeafs the previous authority for granting dividend units The stockholders previously authorized plans for granting options 1o purchase common stock at the fair market value at the date of grant to officers and key employees The options must be exercised within five years from the date of issuance Changes during 1969 m the number of shares under option were 1967 Option Plan Incantiva Plan Stock Options Oividend Units* Gthw Option Options. Outstanding January t Granted. Exercised.. Expired or terminated . Outstanding December 31 Not Optioned December 31 .. Price range on outstanding options at December 31 . .. 60447 248.100 8.300 300.247 99.753 S69 32 to S87 00 268.023 40.534 145.139 82.350 S60 00 to S76 25 59 475 2.585 640 61 420 1B8.580 632 692 A dividend unit is the right to receive for a specified period cash payments equivalent m value te c.tsh dividends paid during such period on one share of common stock. In computing earnings per share, no adjustment was made for common shares issuable under stock purchase and option plans or upon conversion of 3% debentures because they would have no material dilutive effect ZtSIGQOJLS Opir G. Taxes on Income It is the practice of the companies to record the income tax effect of significant timing dif ferences between accounting and taxable income The provision for 1969 taxes on income of S81.500.000 has been reduced by 53.817.000 for the tax effect of such timing differences Laws governing the determination of income taxes in the United States and certain foreign countries provide credits or allowances upon completion of qualified facilities The provision for taxes on income for 1969 and 1968 was reduced SI8,100.000 and $8,900,000. respectively, for such allowances claimed for those years. No provision is made for United States taxes on the unremitted earnings of subsidiary companies as such earnings are considered to be either permanently invested or the tax applicable thereto would not be significant Reference should be made to Note J regarding income tax assessments being con tested by the Company H. Profit on Discontinuance of Product Lines Net income for 1969 includes S6.305.000. after providing for income taxes of SI 623.000 representing net profit on discontinuance of several small product lines I. Retirement Plans The Company and certain of its subsidiaries have plans to provide retirement benefits for all eligible employees. The total cost of such plans for 1969 was $14,987,000. The Company s policy is to accrue and fund pension cost as computed by its actuary, unfunded prior service cost at December 31. 1969 was negligible. Pension fund assets exceed the actuartally computed value of vesied benefits 34 ding have es at 'here '' the uded Minq ;tock '969. d and years ihmon0ns n the J. Contingent Liabilities and Commitments During 1969 the Company settled all assessments of additional income taxes for the years 1956 through 1962, except *or one issue in which the Government has appealed a United States Tax Court decision favorable to the Company Additional assessments for 1963 and 1964 are being contested by the Company Provision has been made to cover only a portion of the total assessments, but m the opinion of management it is adequate to cover any potential settlement Lease rental payments Istated in millions) due m each of the five years after 1969 as required by agreements in effect were as follows 1970. $33 4; 1971. $25.4; 1972. S23 4. 1973. S22 2: 1974. $21 0 Opinion of independent Public Accountants --- -- -- ---------- - -- -- " " 'Dtion 'Ians 692 592 cash able 'use THE DOW CHEMICAL COMPANY We have examined the consolidated balance sheet of The Dow Chemical Company and its subsidiary companies as of December 31. 1969 and the related consolidated statements of income and surplus for the year then ended. 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 circum stances As to amounts included for the Company's wholly owned Swiss bank, we were furnished with the report of other accountants on their examination of the financial state ments of the bank for the year In our opinion, based on our examination and the report of other accountants referred to above, the accompanying consolidated balance sheet and consolidated statements of income and surplus present fairly the financial position of the companies at December 31. 1969 and the results of their operations for the year then ended, m conformity with generally accepted accounting principles applied on a basis consistent with that of the pre ceding year Detroit. Michigan February 20. 1970 *i c <?nnn i s dif- Source and Application of Funds )me es am Source of Funds (in millions) The 00. Net income for the year .................... Net income reserved for minority stockholders ary Depreciation ............................... fax Cash flow Increase in long-term debt, excluding on- convertible debentures Decrease in working capital ................. Sale of common stock to employees . Increase in reserves....................... JO. Disposal of sundry assets and other receipts . Total . .................... Application of Funds (in millions) New plant and equipment for Cash dividends 1YS Investments /ice Increase in deferred charges and other assets ally Purchase of treasury stock Total S 148 7 52 177 9 331 8 1 13 7 32 5 12.0 14 4 21 2 S 525.6 $370 6 77.3 37 8 25.1 14.8 $525 6 Cx Condensed Comparative Statements THE DOW CHEMICAL COMPANY AND SUBSIDIARY COMPANIES pirecto /1 o o o i sm Financial Condition (in millions) Current Assets Cash and marketable securities Receivables (less reserves) inventories . Total current assets Current Liabilities Notes payable . Accounts payable and accruals Taxes on income ... .. . . Total current liabilities Working Capital Property (at cost) Depreciation . (A) .. ... Net property. Other Assets Investment (Al plus (8) plus (C) Long-term Indebtedness Preferred Stock.................. Minority Interest Reserves............. (B) . (C) . ID) ......... ................. ................... ......................... Total .............. .. .. (E) Common Stockholders Equity (D) minus (E).. . 1969 1968 - 1967 1966 1965 10 Year, a90 1959 20 y A 1949 S 133 4 430 0 289 1 8525 S 141 7 357 9 276 3 775 9 S 104 5 307 0 2166 628 1 S 1272 254 9 195 2 577 3 S 1146 2189 183 6 517 1 S 46 4 106.8 146 1 299 3 337 8 291 1 51 6 680.5 172 0 2.305 1 1.010 1 1.295 0 472 2 1.939 2 798 0 39 6 21 4 8590 SI.080.2 246 5 272 4 52 5 571 4 204 5 2.060 4 .933 4 1.1270 409 3 1.740 8 684 6 41 6 5.0 731.2 SI .009 6 175 5 199 0 45.7 420 2 207 9 1 .756 0 859.9 896 1 389.0 1 .493.0 551.6 8 50 557 4 S 935 6 58 8 176 5 53 1 288 4 288 9 1.673 5 823 8 849 7 279 2 1.4178 552 3 8 50 558 1 S 859 7 36 3 161 2 53 1 250 6 266 5 1.523 3 772 7 750 6 259 2 1 .276 3 454 6 8 5.0 460 4 S 8159 58 0 72 5 38 0 168 5 1308 1.065 8 528 7 537 1 22 6 690 5 172 3 14 173 7 S 5168 S- .1$. 7 *4 5 43 2 84 4 14 e; 153 348 49_6 266 0 65 1 200 9 91 259 6 67 3 70 3 10 13 139 9 S119 7 Income (in millions) Net sales of products and services Cost of sales ....................... Depreciation ..................................... Selling and administrative expenses. ....... Products and services operating income Investment and sundry income --net.................... Interest income (expense) Non-products and services income (loss) Taxes on income ......... .................. Minority interests share in income. Net Income ... SI.797 1 1.156.0 177.9 223.5 239 7 SI.652.5 1.053.3 157.2 213 5 228.5 si.382.7 883 2 1360 148.6 2149 SI.309 7 842.4 122.6 142.8 201 9 si .1762 750 5 115.6 133 7 176.4 s 705 4 429 5 82.7 68 5 124 7 50.0 154 3) (4 3) 37 4 (33.9) 35 26,1 (21 01 51 19.7 (176) 21 182 (113) 69 1t (9 4) (8 31 81.5 5.2 S 148.7 92 0 40 S 1360 87 7 S 132 3 81 3 S 122 7 750 s 108 3 53 3 2 s 62 9 S200 4 127 4 187 140 40 3 20 11 1) 9 159 S 25 3 Other Statistics (in millions) Additions to property .. Research and development expenses...................... Taxes Imaiorj .... Wages and salaries paid Cost of employee benefits ............ Number of employees at year-end (thousands) . Cash dividends declared on Common Stock. Earnings per share on Common Stock (in dollars) (') Cash dividends per share paid to stockholders on Common Stock (m dollars) |*l Market closing price of Common Stock on December 31 im doilarsi C) Adjusted for stock splits and stock dividends S 370 6 87.3 140 7 4155 59 1 47 4 77 3 491 2 50 68 63 S 3063 83 8 144 5 389 3 50 8 47 4 72 5 4 51 2.35 78 00 S 192.3 76 8 1259 325 6 36 2 364 66 1 441 2.15 87 13 S 241 5 71 3 116 5 302 1 32 9 35 0 59 9 4 09 1 95 61 63 s 248 3 66 2 105 6 279 6 28 7 33 8 54.1 3 58 1 79 77 13 s 59 0 43 3 71 7 174 9 18 9 27 1 31 4 2 21 93 05 S 43 0 100 20 4 53 5 32 14 14 6 Directors & Officers s i s ' i o o m ,s f* Board of Directors Officers & Assistant Officers Carl A. Gerstacker Herbert D Doan Chairman President. Chief Executive Officer _ Donald K Ballman Carl A. Gerstacker Earle B Barnes Chairman of the Board Robert B. Bennett Leland I Doan ' A. P. Beutel Chairman of the Executive Committee ' C B. Branch > Melvin Calvin C B. Branch Executive Vice President ' William R Dixon Donald K Ballman Herbert D. Doan Senior Vice President Leland I Doan t Herbert H. Dow Earle 8 Barnes Vice President Julius E Johnson Max Key A. P. Beutel Vice President | Zoltan Merszei Julius E. Johnson LeRoy D. Smithers Vice President Macauley Whiting G. James Williams G. James Williams Vice President Executive Committee Leland I. Doan Chairman Donald K Ballman A. P. Beutel C. B. Branch Herbert D Doan Carl A. Gerstacker Herbert H Dow Secretary, Alternate Member Robert B Bennett Treasurer Herbert H Dow Secretary H. H. Lyon Controller. Assistant Secretary William A. Groening. Jr. General Counsel. Assistant Secretary David C. Baird Assistant Secretary J M. Leathers Assistant Secretary Finance Committee Carl A, Gerstacker Chairman Donald K. Ballman Robert B. Bennett Leland I Doan Herbert H. Dow H. H. Lyon A P Hanmer Assistant Controller. Assistant Secretary Wilson A. Gay Assistant Treasurer David N. LeVert Assistant Treasurer John Van Stirum Assistant Treasurer Dale A. Bywater Auditor Transfer Agents The Cleveland Trust Company Morgan Guaranty Trust Company of New York Certified Public Accountants Haskins & Sells Registrars The National City Bank of Cleveland Chemical Bank New York Trust Company THE DOW OHcMICAL COMPANY rv.'iDi-AiifD, MICHIGAN 48640 ; ST0004546