Document g24Nw98w4Jdnn4L9K6gg2Q9Q3

d e c u mi ROTES TOR ARRUAL MEETUP December 14, 1961 x GLD003536 uhex Botes for Annual Meeting Dsceriber 14, 19^1 S tS e C C C P P I Balance Sheet Review A. Caah and TUmiHng B. Short-Term Securities C. Accounts and Botes Receivable - Trade D. Inventories E. Other Current Accmuts and Investments F. Prepaid Insurance and Other Expenses G. Property H. Deferred Charges and Other Assets I. Short and Long Term Financing J. Contingent Liability K. Stock and Stockholders II Operating Statement A. Gross Profit B. Selling and Administrative Expense C. Other Incoma - Published P * L D. Depreciation S. Fired Charges F. Advertising Expense G. Research and Development H. Average Assets and Profit Return I. Miscellaneous HI Cash Use and Projection A. Application of Funds B. Five-Tear Forecast - Cash Basis 37 Employee Benefits A. Pension Plana B. Bonus Plan C. Stock Options D. Wage and Salary Ratios E. Salaries F. Other Benefits V Acquisitions, Dispositions and Capital Expenditures A. Acquisitions B. Disposition and Shutdowns C. Mining Activity D. Major Capital Expenditures E. Extraneous Expenses VI Other Major Functions and Items A. Donations B. Audit C. Insurance D. Foreign Business E. Miscellaneous Page & S R S fclS P |2 |3 i5 Gl~ D0 3S3? BOTES FOR ANNUAL MEETING December l4, 1961 I. Balance Sheet Review A. Cash and. Banking The Glldden Company maintains the following bank relationships: Glldden Ltd. Int'l. Major Account and Credit Line Banka Other Bank Relationships Total 22 3 3 4 Total Number of Bank Accounts 204 10 l4 Cash is collected at 192 collection points in the U. S. and Canada, and is deposited in local bank accounts. In addition, 16 post office lock boxes are operated under arrangements with banks for servicing and depositing of funds received. Funds are then moved by depository transfer cheek and bank wire to 20 regional collection centers and are under the control of the Bead* quarters Banking Department. Invoices are paid by a central Accounts Payable Department and Division Ac counts Payable Departments which maintain working fund accounts. Small ltms in the branches are paid by issuance of an envelope draft. Funds ere trans ferred to working fund accounts periodically by the Headquarters Banking De partment, using bank wire and check transfers. Freight Payment Flans are used at three hanks. Night depository arrangements are in effect where beneficial. B. Short-Term Securities At August 31, 1961, we reflected $1,991*447.00 of short-term securities at cost on the Balance Sheet. These consisted of the following: U. S. Treasury Bills Commercial Paper Government Agency Obligations $ 993*829*00 497,361.00 500,261.00 $ 1,991*4*7.00 All of these securities had maturities of less th*m one year and were, in general, placed to mature coincidentally with Dividend, Interest and Tax payments. During the year, our average short-term portfolio was $3*386,000.00. The average after-tax interest income was 1.48 (3.05^ equivalent before tax). CI"00353, NOTES FOR ANNUAL MEETING -2- I. Balance Sheet Review C. Accounts and Notes Receivable - Tirade (000 emitted) ^31/a 8/31/60 8/31/59 Accounts Receivable Notes Receivable Total Reserve for Bad Debts and Allowances Net per Annual Report $21,933 wM $18,919 $17,1$* 223 $i?,*L7 &rM419 wM U5$f $ Bad Debt Reserve to Receivables 1.9* 2.9* 2.9* Fast Dus Receivables: Dollar Amount 1> of Gross Receivables $ 2,114- $1,864 $1,215 9.5* 9-7* 7*1# Receivables Charged Off Recoveries Against Receivables Charged Off Net Bad Debt Loss $ 407 $ 271 $ 222 r-* 110 102 I 1ST r~&5 Bad Debt Loss as of Sales: 1959 1958 1957 1956 Accounts receivable turnover for entire company approximately 39 days. Ibis compare to 36 days In i960 and 32 days in 1959* Somevtosfc clover turnover reflects continuing trend over recent years affecting all industry and ac celerated during recent recession. National median approximately 33 days for manufacturers and 1(0 days for vholesalers. Bad debt losses of $407,000 represent an increase of $136,000 or 50 over prior year. However, total sales increased $8,000,000 during this period. Dun & Bradstreat reports failure liabilities for ail business hit a nav his torical peak during the year, exceeding previous records set in 1932. In addition to general business conditions, trend of company to sales through branches Influences our bad debt losses and turnover of receivables. Instead of dealing vith a smaller nunber of larger firms performing a distribution function, ve now deal directly vith vide range of accounts formerly serviced by distributors, and this leads to increased losses end slower turnover. Additionally ve are aggressively expanding our sales activities in tbs painter.maintenance field where receivables are inherently slower turning ea GL0003*3 9 NOTES FOR ANNUAL MEETING -3- I. Balance Sheet Review C. Accounts and Notes Receivable - Trade (000 emitted) - continued most contractors, through long-established trade practice, pay suppliers from the final Job settlement. Secondly, branch credit functions are per formed by less competent sad veil-qualified personnel than those employed in regional offices, end this has had similar effects. A percentage breakdown of total receivables by major division is as follows: Coatings & Resins Food C-P-M Organic Chemical Private Ledger 63* ski 10* 3* (Nominal) 155* i960 6h* 23* 9* 3* -1* 155* jm &* 23* 9* 3* 15$ D. Inventories Published total inventory was up $936*3*10 from $1*0,665,766 to $**1,602,106 at August 31* 196l. Changes between year rads by group were as follows: August 31, 1961 19&> Increase (Decrease) Coatings end Resins Food C-P-M Organic Chemical UFO Reserve $18,731 $19*297 13,188 12,147 7*3^0 7,750 2*9** 1*897 $42,203 Call 601 b25 $**1,602 "3S5J55S $(566) l.ohl (*U0) i*ofJ $1*112 r(iT6> r5 The principal factors earning this net Increase by group were: Coatings and Resins - Total inventory for this group was down through a combination of efforts to reduce Inventory levels particularly in the Reading and San Francisco Divisions coupled with high sales volume la most areas in the late months of fiscal 1961. The group's year-end finished stock inventory was same $290,000 below its goal reflecting this greater than anticipated year-end sales level. GLD0035a o BOTES FOR ANNUAL MEETING -4- I. Balance Sheet Review D. Inventories - continued Food - Total oil physical inventory quantities were up about five per cent over the previous year end which coupled with higher 1961 year-end price levels in cotton seed and coconut oils resulted in an in crease in dollar inventories at the oil divisions of $1,250,000. In spite of a &f> increase in sales level at Bethlehem, better inventory control resulting from the RAMAC installation enabled that division to achieve a $190,000 reduction in finished stock levels. C-P-M - Sharply reduced ore stocks at the Adrian Joyce Works resulted in a reduction of $900,000 in inventories at that location. This decrease was partially offset by the 1961 year-end inventory stocks of $435,000 re sulting from the fiscal 1961 acquisition of the Johnstown operations. Organic Chemical - The substantial increase in inventory investment in this division results from a substantial increase in Work-in-Process inventories at Jacksonville. Most of this increase of $390,000 is in the Fine Terpene area. Increased finished stock at Port St. Joe of Sylvaros 80 accounted for $525,000 of the $710,000 total Organic Chemical finished stock increase. UFO Reserve - Higher price levels of certain Food Group oil stocks resulted in a substantial Increase in the LIFO Reserve at August 31, 19&L compared to the same date of the previous year. Turnover - Published Net Sales to year-end net inventory: 1961 i960 1959 1958 - 4.97 to 1 - 4.86 to 1 - 4.94 to 1 - 5.91 to 1 Inventory control is achieved through the Joint efforts of management and operating personnel. In the Coatings and Resins Group on a semi-annual basis, subject to monthly reviews, Finished Stock dollars goals are established by & Headquarters In ventory Committee on a regional basis. These goals ere established only after careful study and consultation with Regional management. It is the responsi bility of Regional management to allocate by operating unit and by product within its goal. Performance is compared to goal each month, both at Head quarters and each Region. Explanations of variances are determined and any GIDC03541 NOTES FOR ANNUAL MEETING *5- I. Balance Sheet Review D. Inventories - continued action that is appropriate Is Initiated. Rav Material control is established by a translation of Finished Stock goals through the Joint effort of production management end purchasing personnel at both Headquarters and at each Region. Inventory control in the Food Group ia established through pars set for total Inventory by division through the Joint effort of Headquarters and Division management. Of even greater importance is the dally control exercised on rav materials baaed on market quotations of edible oil* and condiment rav materials. The Durkee Trading Office is constantly projecting market condi tions into rav material requirements through teletype communication vith Headquarters and Division management. Market conditions on pepper and other materials are also projected into requirements on a daily basis. The respective division managers in C-P-M and Organic Chemical exercise control of inventories as required by their individual market sources and operating requirements situations. E. Other Current Accounts and Investments Detail at August 31 van: Marketable Securities (Canada) Margin Advances (Durkee) Open Account (Glidden Int'l.) Central Soya Co. Open Account (Pincasa-Guatemala) Shedd-Bartush Payments (Berkeley) Installment Sales Creditors' Debit Balances Southwest Industrial Properties Jones Hettelsater Construction Co. Misc. Notes end Accounts M19M6M1) $ 88,552 241,591 111,1*81 32,365 30,2k0 32,709 1*7,211* 14,906 i960 $ 1*3,750 62,970 190,682 m 58,31*3 30,685 3**, 633 41,287 56,400 47,983 F. Prepaid Insurance and Other Expenses Detail at August 31 vas: Prepaid Insurance Prepaid Taxes Prepaid Royalties Other Prepalde 1& $228,632 152,637 44,326 120 $330,343 147,572 76,887 44.211 g V0003^/i2 BOTES FOB ANNUAL MEETING -6 - G. Property For schedule of major capital expenditures and 1962 projection, see page 26* Detail on disposal of Chemurgy property to Central Soya is an page 24. Depreciation is covered on page 13. Insurable value of all buildings, machinery and equipment owned by the Company but excluding land and foundation is $96,000,000. Rental obliga tions for buildings occupied by Company units are-covered on page 8. E- Deferred Charges and Other Assets Detail at August 31 vas: lgl 120 Prepaid Bond Discount and Expense Investments Chicago Board of Trade Glidden International, C. A. A/S FJord-Plast - Norway Miscellaneous Loan to Pincasa - Guatemala Glidden Ltd. Loan to Glidden Int'l. Deferred Research and Engineering Costs Employee Loans Misc. Notes and Accts. Receivable $ 683,047 27,951 18,018 37,984 5 125,000 400,000 432,341 .121,167 68 $ 713,863 27,951 18,018 28,040 5 sa57f,8e30 I. Short and Long-Term Financing 1. Short-Term Borrowing and Bank Lines of Credit FlBoal 1961 Average Short-Term Borrowing Maximum Short-Term Borrowing Amount Dates Minimum Short-Term Borrowing Amount Dates Year-End Balance Average Interest Bate Paid Date of Pay-off of Last Short- Term Borrowing $ 956,164 4,000,000 2/28-3/7; 3/20-3/30 V3-5/3 -09/1-2/16; 6/15-8/31 -04.5* 6/15/61 Fiscal I960 -0-0- -0-0-0-0- C/.0003543 NOTES FOR ANNUAL MEETING -7 - I. Balance Sheet Review I. Short and Long-Term Financing - Continued 1. Short-Tern Borrowing and Bank lines of Credit - Continued At August 31, 1961, ve maintained a line of credit of $7,500,000 for Glidden (plus $1,000,000 far International). These were carried at major banks across the country as follows: Bank City & State Amount The Citizens & Southern, National Bank Atlanta, Georgia $ 500,000 Continental Illinois National Bank & Trust Company of Chicago Chicago, Illinois 1,000,000 The First National Bank of Chicago Chicago, Illinois 500,000 The Cleveland Trust Company Cleveland, Ohio 500,000 The National City Bank of Cleveland Cleveland, Ohio 1,000,000 Bank of America, N. T. & S.A. Los Angeles, California 500,000 The Louisville Trust Company Louisville, Kentucky 500,000 The Chase Manhattan Bank New York, New York 1,000,000 Chemical Bank New York Trust Company New York, Nev York 1,000,000 First National City Bank of New York New York, New York 1,000,000 Union Commerce Bank * International Cleveland, Ohio 1,000,000* Our present credit lines of $7,500,000 (plus $1,000,000 for International) will be maintained throughout fiscal 1$6. 2. Debenture Issue The entire indebtedness of The Glidden Company (excluding normal accounts payable, interest, and taxes) is represented by the $30,000,000 of 4-3/4$ sinking fund debentures dated November 1, 195S, and due on November 1, 1983* The indenture provides for a sinking fund connanclng November 1, 1964, to retire $1,500,000 of debentures awniaiiy and 100$ by maturity. GLD003544 / NOTES FOR ANNUAL MEETING I. Balance Sheet Review I. Short and Long-Term Financing - Continued The debentures were offered publicly on October 28, 1958* at 99, and the effective interest cost is 4.98$ based on the net proceeds after all expenses. Annual Interest Cost Year Month Interest at 4-3/4$ Amortization of Discount and Expense $1,425,000 30,816 mm tsfs $118,750 2,568 Market prlco of debentures has varied from a high of 104-5/8 to a low of 95 Market price was 99 on 8/31/61 and was on December 13, 1961. CiUurO - loO'6- O (o J. Contingent Liability ^ Ofcwa--i*agai^wngW QjUr^i (00'^ J Federal income tax returns hove been examined through 1959 and final settle ment raa/jte through our 1958 fiscal year. We know of no unusual items for the i960 and 1961 fiscal years and have made no special reserve allowances far Federal income taxes. Our audit for fiscal 1959 remains open pending final determination by the Internal Revenue Service of the tax liability of Central Soya's acquisition of Glidden's Chemurgy Division. We anticipate that alternative treatments of this disposition will have little effect on Glidden tax liability. NO problem in government contracts through renegotiation or otherwise.. Total government volume, including state and local, is less than one per cent of net sale8. The detail of major real estate Lease commitments at August 31, 19& is (CONFIDENTIAL -- DO NOT RELEASE) Total Fiscal Contract 1962 Faint Branches Active Pending $ 6,957,422 $ 1,270,552 40.620 * u h Iit s Bethlehem Plant Cleveland Executive Offices Miscellaneous Offices and Warehouses 1,074,375 2,086,067 244,115 &aai^JEr 67,500 201,877 GLD003545 NOTES FOR ANNUAL MEETING -9- I. Balance Sheet Rsvlav K. Stock and Stockholders 1. Common Stock (2,311,2^5 shares o/s at 8/3l/6l) Preferred Stock (199,640 shares, emulative $2,129 per share) The Company's cocrncn stock is listed on the New York Stock Ex* and has unlisted trading privileges on the Midvest, Pacific Coast, and Philadelphla-Baltioore Stock Exchange. From January 1, 19&L, through October 25, 19&, the price of the Company's stock ranged between a high of 45-3/4 and a low of 36. (See Annual Report, Page ]fl-9, for prior years.) During this same period, an average of 1,320 shares were traded each day on the New York Stock Exchange. The closing price of Gliddcn Common Stock on December 13, 19&1, vae lf4YS' ^ 2. Other Cansants on Stock a. Ve have no treasury stock. b. The $2,125 cumulative preferred stock vas issued in cident to the agreement of merger of Femeo Corporation into the Glidden Company. 1. Holders of the shares are entitled to dividends of $2,125 per annua payable quarterly on the first days of February, May, August, snd November. 2. Holders have no voting rights, except under cer tain conditions. (See Paragraph 8, Page 4, Special Meeting Proxy Statement.) 3. The stock is not Redeemable prior to August 31, 1966, and la thereafter redeemable at the fol lowing prices: $55.00 per share prior to 9/1/71 53*00 per share prior to 9/1/76 52.00 per share prior to 9/1/81 51.00 after 9/1/81. 4. Entitled to $50.00 per share plus mpaid cumula tive dividend in case of an involuntary liquida tion and to redemption price current at the time of the distribution or payment date In ease of voluntary liquidation. OLD 003546 NOTES FOR ANNUAL MEETING 10 - I. Balance Sheet Review K. Stock and Stockholders - Continued 5. The Company is obligated to set aside on or be fore November 15 of each year out of the earnings of the previous fiscal year the sue of $200,000 to be vised to purchase the $2,125 preferred stock if and to the extent obtainable at a price not exceeding $50.00 per share. Any monies remaining at December 31 ere released and repaid to the general funds of the Company. 6. Each share is convertible into common stock of the Company at the conversion ratio of 1.125 shareb of common for each share of preferred. 7. Holders of cumulative preferred stock have no pre-emptive rights in any stock or securities convertible into stock. c. Stock dividends are always under consideration but we have no plans now for such. It is felt that stock divi dends only spread earnings and value over a larger nvnber of shares vith price adjusting accordingly. 3< Holdings of shares as follows: August 31, 1961 August 31, 19&) No. of $ Shares Avg. Shs. Shareholders Held Held No. of $ Shares Avg. Shs Shareholders Held Held Individuals Institutions Brokers Nominees Total 20,046 336 175 316 20^73 62,04$ 4.93$ 10.12$ 22.91fr 100.00$ 72 339 1*337 1,676 111 20,175 315 182 297 &,9&9 63.12$ 4.86$ 10.65$ c21,37$ 100.00$ 72 357 1,353 1.668 ^35 GLD003547 NOTES FOR ANNUAL MEETING - 11 - II Operating Statement A. Gross Profit _____ Published_______ 19^1 19^0 ~ Ratio to Net Sales Dollars 27.3J& $56,529,709 27.7$ $54,661,553 Increase 1961 over 1960: Due to Net Sales Increase Due to Gross Kargin Decrease Net 1961 Increase $2,551>000 (703,000) $1,045,000 B. Selling and Administrative Expense The Annual Report shows a Selling and Administrative Expense increase of $3,235,000 or 8.0$ on a Net Sales increase of 4.7$ in 1961. The Net Sales and Gross Profit increases have not been sufficient to absorb the Selling and Administrative Expense increases, resulting in lower income from operations. The major increases (decreases) by caption, in 1961 are as follows. lost year figures have been reworked for changes' in presentation brought about by the 1961 revision of the Chart of Accounts. Development Costs have been removed from i960 figures for better caparisons. Sales, Salaries and Compensation Salesmen's Expense Travel Storage Bad Debt Provision (less Recoveries) Advertising (local and national) Samples and Allowances Product Development, Technical Service Research Office Salaries Communications Occupancy Employee Benefits, Payroll Taxes Retirement, Bonus Development Costs (charged to S & A) All Other $ 557,000 149,000 220,000 113,000 125,000 (530,000) 70,000 146,000 361,000 624,000 54,000 302,000 177,000 (437,000) 1,154,000 150,000 Total $3,235,000 The Group breakdown of Selling and Administrative Expense increases over the prior year is: Increase over prior yetear Coatings and Resins 196l $1,724,000 $^,125?000 Foods Chemicals Headquarters 270,000 1,944,000 -i222*22o) 735.000 60,000 860.000 Total te.g35.ooo GLD 003548 NOTES FOR ANNUAL MEETING - 12 - II Operating Statement B. Selling and Administrative Expense (Cont'd) Development Costs have played a large part in the above increases. In 1961 there van $2,151,000 charged to Selling and Administrative Expense as com pared to $997,000 in i960. An additional $676,000 of Development Costs vas charged to Cost of Sales in i960. Operating Groups The increase can all he attributed to improving the sales distribution systems of these Groups, Coatings and Resins Group's branch expansion program accounts for at least $1,1*75,000 of their $1,724,000 increase. Foods increased expenses were related to the additional sales manpower which helped to effect a 10.8$ sales increase. Realignment of the sales staff at the C-P-M Division and the addition of Johnstown and Johnsohburg caused the C-P-M increases. The larger portion of research expense charged to the sales department caused the Organic Chemical increase. Headquarters Headquarters Administrative Expenses were $6,345,000 this year compared to $7,034,000 last year and $6,062,000 in 1999. Changes in pension, bonus and Development Costa have distorted the total administrative expense comparison. The following schedule will break out these major items to allow a better comparison. 1961 I960 PenaIon Costs $ 272,000 $ 809,000 ,000 Bonus Provision Development Costs 41,000 -o- 44,000 731*000 247.000 331.000 Other Administrative Expenses 6,032,000 5,450,000 4,710,000 Total $6,345,000 $7,034,000 $6,062,000 The Increase in Other Administrative Expense was $740,000 in i960 and $582,000 In 1961 over the preceding year. This Increase is further broken down among the four Groups and the Corporate administrative functions in the following schedule: (in Thousands) 1961 I960 Coatings & Resins Group Administration mm Foods Group Administration 448 417 355 Chemicals Group Administration International Group Administration 263 211 188 51 m - Corporate Administration -3. Total $6,032 $5,450 $4,710 Increased salaries due to staff additions and increases to presort staff was the major item. The staff increases also carried along Increases in \ the overhead expenses as well as & general cost of living increase. Gl-D003549 HOTES FOR ANNUAL MEETING - 13 - II Operating Statement C. Other Income - Published P & L Thft major items this year and last year vote: Technical Service Fees Interest Earned Gain (Loss) - Disposal of Capital Assets- (Other than Chemurgy disposal in 1961 shown separately*}: Jacksonville Abnormal Retirement due to process changes Baltimore Abnormal Retirement due to process changes Baltimore Abandonment Loss on Drying System Sale of Valdosta Property Sale of Honolulu Property Sale of Norwalk Property Sale of Scranton Property Other Gain (Loss) - Disposal of Securities Other: Board of Trade (Chicago) Net Profit Scrap and Residue Sales Loss on Default of contractor Dumont Write-off Miscellaneous 1961 FE&7723 147,485 (51,238) (16,131; (23,610) (797) (7,936) 144,697 73,646 (25,228) i960 $ 195,006 217,436 275,301 49,768 (29,768) 39,176 61,630 (2,844) 109,813 39,21* ( , )(72,421) 109 326 D. Depreciation Depreciation and amortization charges for 1961 were $7,440,940 compared to $6,959,971 in 1959. The charges for Chemurgy properties were $1,974,260 compared to the rental income of $2,175,000 received from Central Soya. Most property acquired since 1954 is depreciated for hook and tax purposes on the 8um-of-the-years' digits method of accelerated depreciation using the following average lives: Buildings, 40 years; Machinery and Equipment, 20 years; and Furniture and Fixtures, 15 years. Total Depreciation and Amortization Less Chemurgy Estimated S-X-D Excess Estimated Straight Line itS&goifa-OT-079 E. Fixed Charges The two major items of this nature which may be of concern to shareholders are: 1961 1962 Total Interest Expense $1,^72,6^37 $1,425,000 Estimated Real Estate Lease Liability (Confidential) See Page _8__ 1,609,706 1.686,500 fe,0fe393. GLD0D3550 NOTES FOR ANNUAL MEETING - 14 - II Operating Statement E. Fixed Charges (Ccot'd) Under provisions of the Femco merger effective November 1, 1961, the following preferred dividends will be payable from retained earnings on the 199,840 shares issued: Fiscal 1962, $318,495; Fiscal 19^3 $424,660. F. Advertising Expense By Group 1961 i960 C &R $3,354,9^9 3,541,064 Foods 1,759,236 0. Research and Development 1961 Actual i960 Actual Chemical Corporate Total &7,797 $ 30,217 ` ^,995,6^9 84,879 131,093 5,516,272 % to Bales S.klt 2.7816 I96I Budget Proposed 1962 Budget Incr. 1962 Budget Over 1961 Actual Research Sales Service Control Lab Total l6 to Net Sales $1,776,781 2,030*258 $3,607,739 1,020,004 $4,827,743 2.34l6 $1,225,340 1,744,961 $2,970,301 $0357510 2.0916 $1,474,200 .ha&y& $3,472,700 1,231,000 $4,703,$00 $2,004,380 $4,771,215 12.816 36.2 2.0 2074^6 a, Average Assets and Profit Return 1961 Average Assets Coatings and Resins $49,356,514 Food 27,591,276 C-P-M 33,442,471 Organic Chemical 8,520.440 Total groups $116,910,701 1961 Profit $5,837,925 4,470,571 3,161,366 (181,5441 $13,268;321 1961 16 Return "TO? 16.2 9.5 (2.1) 11.216 Total Company $134,507,664 $12,606,983 9.4# I, Miscellaneous Attention may be called to ten year statistics in Annual Report. It may be pointed out, on inquiry, that all Divisions of the Company were operated profitably in 1961 with the exception of the newly acquired Architectural Products Division and the Organic Chemical Division's Jacksonville operation where the fins terpene development program resulted in an operating loss for fiscal 1961. GL.D003551 NOTES FOR ANNUAL MEETING III Cash Use and Projection A. Application of Funds (In Thousands) Source of Funds Net Income Depreciation Total from Operations Sale of Common Stock Under Option Plans (1961-655 shares; i960 2,7to shares) Disposition of Fixed Assets Other Sources - Net Disposition of Funds Dividends Declared Expenditures for Property, Plant and Equipment Changes in Working Capital: Cash - Incr. (Deer.) Short Term Securities-{Deer.) $ 680 (`>,`*93) Accounts Receivable, Net-Incr. Inventory - Incr. Other Accounts - Incr. (Deer.) Accounts Payable - (incr.) Deer. Accrued Taxes - (Incr.) Deer. Other Charges 2,977 936 9,321 (162) 149 - (ira - 15 - 1961 6, tor 7Ml mfes i960 $ 6,690 6,960 $13,050 24 8,599 . (802) 98 965 145 -$i4,M $ 4,622 7,823 9.a> $21,679 $ 4,621 8,764 $(1,472) (i,vrc) $(2,945) 1,823 i.orr (122) 323 1,482 (165) 1**73 $14,858 GL0OO355? BOSES FOR AHNUAL MEETIHO HI Cosh Use and Projection B. Five-Year Forecast - Cash Baals TO BE ABEKO LATER. - 25 i GLD003553 GLD00355** Salary sourly Expense Per Books $ 336,849 137,000 7/31/61 T ru st Funds On Deposit $12,809,131 3,<*5,821 Ho. o f Empl. Funded 1*26 999 E x c lu d in g R etired Bnployeea Receiving B enefits C apital Gain o r Lobb 231 4.27 322 4 * 7 NOTES FOR ANNUAL MEETING IV Employee Benefits - 18 - A. Fengion Plans (Continued) As of October 31, 19&L, the cost and market values of our trust investments vere as follows: Canadian (IsmnAiim U.S. Salary U.S. Hourly Salary Hourly Cost: Dollar Amount * Equities Incl. Glldden Stock $12,695,166 53.15* (3**7*) $3,021,427 51.77* (3.15*) $7*2,459 40.2* $212,588 . *0.2* Fixed Income Convertibles 3*.30* 12.55* 35.12* 13.11* 59-8* 59.8* Market: Dollar Amount $15,324,817 $3,6*0,442 * Equities Incl. Glldden Stock .12*, (3.32*) m Fixed Income Convertibles 27.85* 11.03* 23.80* 32.33* Total Dollar Amount in Funds - At Cost At Market $770,6*9 *3.6* 56.4* >16,671,6*0 il9,So0,026 $224,118 43.0* 57* Glldden shares held by pension fund are voted by Haffcer & Co., as nominee of The Cleveland Trust Company, Trustee. B. Bonus Plan Original plan adopted February 8, 1951, and amended February 1*, 1952* Admin* istered by a Bonus Committee elected by the Board of Dirednrs. In 1955, Gilbert suggested provision preventing bonus to top officers until a certain dividend has been paid. Formula provides 12$ must be earned (pretax) on bonus net capital (capital, term debt, etc.) before providing a bonus of 7* of prefit. Net income must exceed 6* bonus net capital employed also. The 1961 computation vas: Capital Stock, Debentures, Surplus (Bonus Net Capital) 12$ Bonus Net Capital $124,2*7,57* 1*,909,TQ9 Consolidated Net Income $6,4l6,S83 Add: Provision for Taxes, Bonus, Interest on Debt 7,805,687 Less: 12$ Bonus Net Capital Net Bonus Income 7* Net Bonus Incase (Maximum Provision) Consolidated Net Income Less: 6$ Bonus Net Capital Maximum Prevision $ 14,222,670 * (ffl.039) * (lloffiU) Actual Provision -0- GLD003555 ROTES FOR ANNUAL MEETING - 19 - IV Employee Benefits B. Bonus Plan (Continued) Since 1951, the maximum allowable provision was $2,557,863. We ^ave *tomaed to profit $952*163 leaving $1,605,700 for bonus payout. In 1959, 124 awards were mads, totaling $209,750. The highest individual amount awarded was $8,000 (to Duncan and Halsey). A total of 1,196 awards have been from 1951 through 1959* Maximum in any one year was 212, lowest 48. The highest individual amount awarded was $12,000 (to Duncan, Sprague, Ruth and Goldseth in 1951*) Gilbert suggested resubmitting plan every five years to stockholders. We feel we need do bo only when there is a material change. Ho bonus awards were made either in i960 or 1961. The purpose of the Bonus Plan is to provide reward and incentive to those employees and officers, except the Chairman of the Board of Directors and the President, who, beyond the call of duty, contribute to the success of the Company. As provided in the Plan, each award of more than $1,000 is paid in instalments of 25$ of the amount awarded or $1,000, which ever is greater, and the Bonus Comittee determines what part of any award is to be paid in cash or stock. Ho bonus awarded to an employee for any fiscal year may exceed 50$ of the basic annual salary of such employee at the end of such fiscal year. Ten officers of the Company who serve as directors, and approximately 500 other employees (including ten officers) who receive salaries of $750 or more per month,are currently eligible for consideration for bonus awards. The Chairman of the Board of Directors and President may not be awarded a bonus under the Plan. C. Stock Options 1. 1952 Stock Optica Plan Under this Flan 100,000 shares of authorized and unissued Common Stock were made available. The Plan provided that no option could be granted to an employee after age 65, and no participant could receive options covering more than 5,OX shares. The Plan also provided that the option price could cot be less than 95$ of the fair market value of the stock on the day the option was granted, and the option period could not ex ceed ten years from, the date the option was granted nor more than three months after retirement of a participant. All rights to exercise options terminate when an employee ceases to be an employee for any cause other than death or retirement. As of August 31, 1961, options to purchase 118,870 shares (51,100 to officers and directors) had been granted under the 1952 plan. (Options for 24,110 shares had expired by reason of termination of emplyment, of which options for 18,870 shares were reissued, as authorized by the Plan, to qualifying employees.) ^0g 035S6 KOTES FOR AHNUAL 14BETIIJG - 20 - IV Employee Benefits C. Stock OptIona (Continued) Options representing 19,915 shares had been exercised (3,355 by officers and directors). There vere outstanding under the 1952 Flan as of August 31, 1961, options for 74,845 shares (47,745 for officers and directors) exer cisable over a period of ten years from the date granted but not more than three months after termination of a participant's employment. A total of twenty officers and directors and 105 other employees bald options under the 1952 Plan. Officers and directors named in the remuneration table on page 9 held options as follows: Option Price of $35 Expiring 6-24-62 Option Price of $38 Expiring 12-27-64 Option Price of $37 Expiring 11-29-66 Optica Price of $37.50 Expiring 9-29-67 Option Price of $41.50 Expiring 12-26-68 Dwight P. Joyce 2,000 2,000 1,000 -- mm Alexander D. Duncan 1,120 2,000 1,000 mam -- Beauford V. Maxsey 2,000 2,000 1,000 mm mm John E. Weeks 1,500 2,000 1,000 mm mm Robert D. Horner 700 2,000 2,000 -- 300 William 0. Phillips 500 2,000 2,000 -- 500 Harvey L. Slaughter 2,000 2,000 mm George M. Halsey 400 200 2,000 -- 1,000 George S. Warner 500 2,000 2,000 mm 500 Paul W. Heldhardt 150 300 300 mm Richard H. Turk MSB mm mm All Directors and Officers as a group (including those named above 9,5*5 18,300 16,300 mm 3,200 ,___ ____ _____ ____ On September 29, 1959, the authority of the Company's Stock Option Coamittee to grant options under the 1952 Stock Option Incentive Plan vas terminated by action of the Board of Directors. 2. 195S Option Plan Provides Committee may option 100,000 shares of authorized and unissued Common Stock. Principal differences from old plan: a. Option price not less than 100$ of market (old plan 95$) Both not less then book value. b. Bo option to employee after age 60 (old plan 65). c. May not be terminated and reissued at lover price. d. Term of option set by Committee up to 10 years and may not be * exercised for tvo years after grant (old plan all for ten years). GLD0035 57 NQJ7SS FOR ANNUAL MEETING - 21 - IV Employee Benefits C. Stock Options (Continued) Under the 1959 Plan, options to purchase a total of 28,900 shares have "been granted to 91 employees (including 12 officers). Directors and officers named in the remuneration table on page 5 held options as follows: Option Price Option Price of $40 Expiring of $Ul Expiring 5-25-70 7-23-71 Dwight P. Joyce Harvey L. Slaughter 2,000 1,000 -- George M. Halsey 1,400 --- Paul W. Neidhardt 4oo 1,000 All Directors and Officers as a group (including those named above) 7,300 1,000 ^. <j->-- u-. *-*--^ 1, t At August 31, 1961, options for 28,700 shares were outstanding and there were 71,300 shares of unissued Common Stock reserved for options which may be granted in the future under the 1959 Plan* D. Wage and Salary Ratios Manufacturing Wages to Cost of Products Sold . $1961 11 8 Total Wages and Salaries to Met Sales Total Wages, Salaries and Benefit Costs to Ret Sales 18.8$ $33,903,919 20.2$ $te,798,04l 18.6$ $36,708,653 20.0$ $39,484,429 Based on former Chart of Accounts E. Salaries Our salary rates, including those for officers and other key employees, in cluding bonus, are fully in line with studies on this subject, such as by AMA. We must be cosqaetitive in salaries and other inducements such as stock options, to attract and hold good men. The Proxy Statement reports that total remuneration of all directors and officers as a group decreased from $817,180 in i960 to $786,251. The principal reason for the decrease is a reduction in bonuses paid in 1961. P. Other Benefits In addition to the Retirement Plan, employees are eligible to participate in a group life insurance, hospital and surgical benefit plan, a major medical plan, and an accidental death insurance plan. The Company has a formalized salary continuation policy whereby salaried employees receive a por tion of their salary during prolonged illness -- the length of continuation depending upon the employee's length of service* GLD003558 NOTES FOR ANNUAL MEETING - 22 - V Acquisitions* Dispositions and Capital Expenditures A. AcquisitIona In line with our program for future growth through research and develop ment* through the introduction and marketing of new products and through acquisitions* the following results In the area of acquisitions were achieved in fiscal 1961. Architectural Products - May 17> 1961 Purchased the Reinforced Fiber Glass Paneling Business of the MsPhran Corporation of Marietta* Georgia. Purchase price was: Accounts Receivable Inventory Furniture & Fixtures, Equipment Patents, Trademarks $ 1,601 11,421 38,350 1 $51,~3?2 In two separate transactions acquired the Metal Powders business of Crane Company* Johnstown, Pennsylvania and Magnetic Powders* Inc., Johnsonburg* Pennsylvania, Purchase prices were: Johnstown - January 31, 1961 Inventory Buildings and Improvements Furniture & Fixtures* Equipment Land Other $336* 565 30*000 419*3^0 6k0 1*029 $787,594 Johnsonburg - May 26, I96I Cash Accounts Receivable Inventory Land Machinery & Equipment Other Bargain Purchase $ 34,629 13*931 32*020 1,325 25*000 8,208 5*113 10,113 105,000 GLD003559 NCCES FOR ANNUAL MEETING - 23 - V Acquisitions, Dispositions and Capital Expenditures A. Acquisitions (Cont'd) Femco - November 1, 1961 At a special meeting held November 3, 1961, (Hidden Shareholders approved a plan to merge Femco Corporation into The Olidden Company. The merger was acconplished through an exchange of new Olidden $2,125 cumulative preferred stocl< for Femco outstanding common stock. Olidden exchanged 199,81tO of its preferred shares for 99*920 Femco common shares. Femco ia a manufacturer of inorganic chemicals, specializing In frits and colors and will be operated as a separate division of the Chemicals Group of The Glidden Company. Femco has averaged Net Sales of $8,500,000 per year for the last five years with average net Income for that period of $590,000 or 6.9# to average net sales. At August 31, I961, Petaco had total assets of $6,1*35,582 with shareholders' equity in those assets of $5,502,016. For the period from September 1, 1961 to November 5, 1961, Pemeo has re ported net sales of $1,521,660 which resulted in a profit after federal income tax of $144,602 or 9*5$ to net sales. Combined Earnings of the Companies 1961 i960 , 1959. ... 1958 l?5T Net Income - Glidden $6,416,91*3 $6,690,356 $7,633,531 $6,063,062 $7,264,437 Per Share Earning $2.78 $2.90 $3.31 $2.64 $3.16 Net Income - Femco 485,804 501,3U 718,551 584,089 673,684 Combined Net Income $6,902,787 $7,191,667 $8,352,082 $6,&4t,i51 $7,938,121 Preferred Dividend Net Income available to Company Fer Share Earnings 424,660 $6,478,127 $2.80 424,660 $6,767,007 $2.93 424,660 $7,927,422 $3.43 424,660 $6,222,491 ,$2.71 424,660 $7,513,461 $3.27 Per Share Earnings assuming conversion of preferred into common $2*72 $2.84 $3.30 $2.63 Comparative Book Value of Common Shares $3,15 Glidden - Based on Out standing Shares at 8/31/61 Femco - Based on Out standing Shares at 8/31/61 Combined - 8/31/61 Based on Based on Actual Out- 199,840 Pre standing plus common ferred shares into which preferred Outstanding Is convertible $40.96 $55.06 $39.02 $39.50 GLD003560 NOTES FOR ANNUAL MEETING - 2k - V Acquisitions, Dicpooitions and Capital Expenditures B, Disposition and Sihutdovns Annual Sales Last Full Year Profit Avg. Profit <jr (Loss) or (Loss) Last Full Last 4 Yrs. Year Operated Pre-Tax Profit or (Loss) on Sale or Abandon ment After Tax Cash & Asse'i Utilization Last Full Year Basis Hammond 7/l6/51 Oakland 10/25/54 Feed Mill Q/lofch Portland 9/18/52 Cambridge 7/l/55 Yadkin Jojaba - Costella Barytes Mines Buena Park 8/31/56 Eastern Margo & Salad Prod. 2/1/57 Elmhurst Building A,8/31/57; S,8/1/58 Scranton 6/9/58 St. Helena 3/31/58 Buena Park Land 1/28/58 Chemurgy 9/1/58 Southern Pine 2/28/58 Valdosta 3/28/60 Berkeley M & SP 4/30/60 $ 4,076,147 $ (234,346) $ (373,225) $ 142,235 $ 2,044,710 627,505 (226,221) 39,296 96,376 997,955 4,423,653 2,941,393 65,538 92,554 15,608 13,771 (290,471) (19,369) 2,417,154 1,224,149 1,308,738 (60,579) (9,537) (6,542) 851,472 -* (8,149) 58,673 - 50,597 125,640 - -- - 11,679 4,033,465 (11,032) (67,338) (253,580) 1,095,247 9,596,668 (372,378) (414,580) (197,934) 2,383,320 m 1,100,590 31,982,480 1,070,947 2,941,738 %6h5,k70 52,028 m 1,477,859 103,448 320,127 98,726 66,056 - m 1,503,501 68,240 156,671 66,787 (252,240) 30,690 (1,215,239) 174,957 1,156,164 (76,237) 275,301 39A76 1,269,854 455,467 925,924 136,635 27,415,123 292,555 1,430,042 684,913 Total Book Value After Tax Cash Received Excess Cash Over Book Value Fixed Assets - Sold - Abandoned $11,242,909 $18,859,261 1.260,395 $6,452,910 The option to purchase the Chemurgy real estate on August 31* 1961 vas exercised by the Central Soya Company. The results of the sale of the business September 1, 1958, the three year lease of the real estate and the sale of the property August 31* 1961, are as follows: Sale of Business - 9/l/58 Inventory sold at Book Value $3*756,249 Receivables assigned - Ret 2,898,438 i6T Three Year Lease - 9/l/58 through 8/31/( Rental Income $6,525,000 Depreciation Miscellaneous Expense (65.088,153) Net Rental Income CLD003561 NOTES FOR ANNUAL MEETING - 25 - V Acquisitions, Dispositions and Capital Expenditures Bo Disposition and Shutdowns (Coat'd) Sale of Property 8/3l/6l Exercise of Option by Central Soya 8/31/61 $8,550,000 Net Book Value 9/1/58 Depreciation & Abandonments 9/1/58 - 8/31/61 Net Book Value 8/31/61 tom 369 7,642,068 Capital Gain on Sale of Chemurgy Property * 907,932 The after tax result of this sale amounts to a capital gain equivalent to $.31 per share in fiscal 1961. C. Mining Activity A twenty-year supply of llmenlte ore, representing a substantial portion of requirements, vas acquired In October, 1959 Lakewood, New Jersey. A concentrating and separating plant is planned for coupletIon in late I96&. Capital requirements per B.A.R. are (do not disclose): Plant Authorised Capital Mine Working Capital Total Required for Mine Adrian Joyce Works Inventory Reduction Net Required for Project At August 31, 1961, capital expenditures to date in connection with the Iakehurst Mine were $1,609,492. During fiscal 1961, pre-operating expenses were $348,944 with the development costs of this project to date totaling $537,193. GLD003562 BOTES FOR ANNUAL MEETING V Acquisitions, Dispositions and Capital Expenditures D. Major Capital Expenditures TO BE ADDED LATER. 26 C-LD003563 NOTES FOR ANNUAL MEETING V Acquisition, Disposition and Capital Expenditures E. Extraneous Expenses 1961__________ Before Tax After Tax Lakehurst Him 3l*8,9h4 St. Helena 27,512 Adrian Joyce Works 59,279 Jacksonville Development 845,026 Dallas Plant 23,356 St. Louis Expansion 32,807 Emery Plant 28,278 Stauffer Property Abandonments 46,779 223,322 Capital Gains (1,045,501) LIFO Reversal 175,423 Other - 167,493 13,206 28,454 405,612 11,211 15,747 13,573 22,454 107,195 (779,019) 84,203 - 765,225 - 27 - _________I960 Before Tax After Tax 163,604 60,363 416,794- 479,885 - - m (390,466} (263,662) 181,747 78,530 29,105 200,061 230,345 - m m m (292,850} (126,558) 87,238 648.265 205,871 GLD003564 NOTES FOR ANNUAL MEETING - 28 - VI Other Major Functions and Items A. Donations The donations policy of the Company provides for reasonable support to educational; health and welfare; and charitable organizations. This policy Is administered by the Donations Coasaittee, under the direction and guidance of the President and Board of Directors. Educational support has been given through the following: 1. Awarding of three scholarships under the auspices of the National Merit Scholarship Corporation. 1961 winners were: Michael Chaback (iehlgfa); Jean Ann KHmick (Knox); and John G. Niles (Stanford). 2. Cooperative Contribution Plan, under which the Company makes un restricted grants to degree-granting universities In an amount equal to the donations made by employees of the Cospany to such colleges and universities. Contributed in fiscal 1961 $5,121 to 100 colleges. 3. Chemistry lectureship grants provided to four United States universities to provide for lectures by outstanding individuals and to help promote understanding and Interest In scientific achievement. 4. Outright grants to selected colleges and universities, such as Case and Western Reserve. 5. Grants to selected foundations, including Ohio Foundation for Independent Colleges. In the Health and Welfare category, the Company has supported United Fund, Comnunlty Chest and Red Cross programs in the communities where It has plants or branches. In addition, selective support has been given to other service organizations and foundations. Contributions are not given to sectarian groups, labor organizations, etc. Education Health & Welfare Other Total Donations 111 45* 4516 51* 57# 7# 7# 5# 9# $120,571 $108,233 $104,526 $69,066 # of Net Profit 1.88# 1.62# 1.37# l.l4# Per Employee $18.92 $17.60 $17.3? $10-95 CLD003565 NOTES FOR ANNUAL MEETING - 29 - VI Other Major Functions and Items B. Audit Ernst & Erast representatives present at the meeting vlU he Messrs. N. T. Halvorsen, Partner and A. A. Wilhelm, Assistant Manager* Conqpaay internal audit staff conducts surprise audits of all operating units on a schedule calling for examinations about once each year. C. Insurance FIA coverage on all manufacturing properties except Canada, Buena Bark, San Francisco, New Orleans, St. Louis, Minneapolis Vanish only, Portland, Tulsa, Iron Street, Collinsville, Marietta and Jdhssohbuxg. This FIA policy for fire, wind, hail, explosion, aircraft, smoke, vandalism and sprinkler leakage. FIA coverage is on agreed amount basis, with no co-insurance requirement. Locations excluded except Canada, St. Iculs and Portland are under an Industrial Property Floater for fire, extended coverage, sprinkler leakage and vandalism. Are on co-insurance basis - no agreed amount. St. Louis and Portland axe under separate policies for fire, extended coverage, sprinkler leakage and vandalism. Co-insurance basis. Separate policies are issued for Canadian manufacturing locations. They closely parallel the FIA as far as coverage is involved. Use and occupancy insurance also in FIA for locations they cover for fire, etc., except Minneapolis, Atlanta, A & E and Carrollton where we have extra expense since other paint plants can make up lost production at Increased cost. Use and occupancy insurance other divisions specific with co-insurance except New Orleans, St. Louis and Portland where we have extra expense since other paint plants can make up lost production at increased cost. Also carry ocean marine and cargo insurance to extent necessary. Carry boiler and pressure vessel insurance where necessary. All employees bonded in substantial amount. Workmen'8 Compensation - We self-insure in states where possible (12), with an override $1,000,000 policy for catastrophe. Self-insurance on Workmen's Compensation has saved us over $1,000,000in the last 30 years. Also cany comprehensive bodily injury, product liability, and property damage liability. There were no major fires in the 1961 fiscal year. Seven small fires re sulted in total recoverable losses of $19,807* One explosion loss of $9,166. One Sprinkler Leakage Loss of $b,0k7. Gl-D003566 MOTES FOR ANNUAL MEETING - 30 - VI Other Major Functions and Items C. Insurance (Cont'd) Total cost of insurance premiums for fire and extended coverage on buildings, machinery and equipment and inventory, plus use and occupancy and extra expense, vas $@70,699 for the fiscal year 1961. (This figure should not be given out.) D. Foreign Business The Olldden Company Export 8ales (both direct and indirect) totaled $4,606,873 in 1961 compared to $2,1^7,251 the previous year. In addition, Olldden International sales in 1961 were $2,644,641. The Glidden Company has ten active foreign licensees and received $126,323 in Technical Service Fees from these licensees in 1961. A direct stock interest is held in the following companies: Name Consolidated The Glidden Company, Limited-Canada $ of Interest 100$ Net Book Cost $ 50,000 Unconsolidated Olldden International, C.A.-Venezuela A/S Fjord-Plast - Norway 100$ 25 $ 18,018 37*984 $ 56,002 $106,002 1) The Glidden Company, Ltd. (Canada) - Olldden holds 100$ (4,200 shares) at a book cost of $50,000. Shareholder equity at August 31* 1961 vas $5,778,730 which is Included in the Consolidated Balance Sheet in the Annual Report for 1961. 2) Olldden Intematlonal,C.A. - Olldden holds 99 shares (1 held by Glidden Ltd.) which represents an actual 100$ interest. Olldden International had a consolidated shareholder equity of $883,578 at August 31* 196l with a book cost to Glidden of $l8,0l8. 3) A/s Fjord-Plaat (Norway) - Glidden holds 200 shares representing a 25$ interest. Initial operations of the company have resulted in losses which through August, 1961, Glidden'8 share amounted to $13,140 on an investment totaling $37*984. In October, 1961 The Glidden Company loaned the operation $70,000 to meet current working capital requirements. This loan has been guaranteed by the shareholders proportional to their stock interests. 4) Fabrics Nacional de Fiuturaa, S.A. (Cuba) - Olldden holds 31*421 shares which represented a 15*1$ interest. The company was Intervened by the Cuban Government in October, i960. Both Olldden and Qlidden International were adequately provided to cover the rather nominal accounts receivable balances outstanding. Since the shares were acquired by Glidden at no direct cost, no investment loss vas suffered through this intervention. GL0005567 MOTES FOR ANUUAL MEETING - 31 - VI Other Major Functions and Items D- Foreign Business (Coat'd) Olldden International, C.A. The company i3 headquartered la San Juan,, Puerto Rico* with retail "branch locations In San Juan, Peace and Mayoguez, Puerto Rico, and Panama, Re public of Panama. Collection of accounts is made through the Chase Manhattan Bank, San Juan, Puerto Rico. Olldden International funds have been primarily secured from accumulated earnings end through borrowings from the Union Commerce Bask, Cleveland, Ohio and The Glidden Conyany, Ltd. At August 31, 1961, bank borrowings amounted to $825,000 with subsequent payments to date bringing the balance to $675,000. The current rate of interest is 4-l/2$. The loan is guaranteed by The Glidden Company. In March, I96L, Glidden International borrowed /) $400,000 from The Glidden Company, Ltd. at a 6# Interest rate to aid in its financing of the purchase of a one-third interest in the Wulfing (Germany) KG 1 This investment was channeled through a newly created entity, Glidden Chemie GmbH. Glidden International has five banking associations: Union Commerce Bank, Cleveland, Ohio (Borrowing) Chase Manhattan Bazik, San Juan, Puerto Rico Chase Manhattan Bazik, Panama, Republic of Panama First national City Bank of New York, San Juan, Puerto Rico Chase Manhattan Bazik, Frankfurt, Germany The accounts maintained include four collection accounts and six working accounts. At August 31, 1961, Glidden International owed The Glidden Company $241,591 for merchandise purchased during August, 1961. A direct stock interest is held in the following companies: * of Name Interest Consolidated - Glidden Panama, S.A. - Panama 100$ Bet Bode Cost $ 20,000 Unconsolidated - 'Pinturas-Ico,--S^._-_Coloeibia ' Pictures Ecuatorianas, S.A. and Distribuidora Anericanas, C.A. Pinturas Centro-Americanas - Guatemala General Paint Co. de Mexico, S.A. - Mexico Industrias Glidden, S.A. de C.Y. - Mexico Ishlhara Saxigyo Kaisha, Ltd. - Japan Glidden Chemie GmbH - Germany 33-1/3* 33-1/3 33-1/3 100 100 2.24 100 *- 62,837 64,850 174,900 32,000 6,300 $360,887 g LD003568 BOTES FOR ANNUAL MEETING - 32 - VI Other Major Functions and Items D. Foreign Business (Cont'd) 1) Glidden Panama, S.A. - Glidden International holds 1,000 shares representing 100# control. This company Is currently operated as a paint branch and is carried at a Investment cost of $20,000. Shareholder equity at August 31# 1961 amounted to $143#276. 2) Plnturas Ico, S.A. (Colombia) - Glidden International holds 155,400 shares representing a l/3 interest. The original cost of $315# 504 is fully reserved at August 31# 1961 vith $47,504 of this reserve having been provided against operations in fiscal 1961. The Company is being reorganized by its principal creditor, our fellow Shareholder, Grace y C1&, vith such action eliminating our interest. The current license arrangement vith Glidden International will continue vith the successor corporation. 3) Plnturas Ecuatorianas, S.A. and Dlstribuidora Americana, C.A. (Ecuador) - Glidden International holds a combined 320 shares representing a 1/3 interest in both conpanies at a cost of $62,837. Glidden International's share of shareholder equity at August 31# 1961 was $66,167. 4) Plnturas Centro-Anericanas (Guatemala) - Glidden International holds 154 shares, representing a l/3 Interest at a cost of $64,850. Glidden International's Chares of shareholder equity at June 30, 1961 vas $134,239* At August 31# 1961# Pincasa owed Glidden International $5,085 on open account. Pincasa also owed The Glidden Company $32,365 on open account sad $125,000 as a note payable at that date. 5) General Paint Co. de Mexico, S.A. - Glidden International holds all 2,000 outstanding shares vith a book cost basis at August 31# 1961 of $174,900. Shareholder equity through August 31# 1961 totals $235,427. A substantial portion of this excess of equity over cost results from the discounting of the original purchase cost at acquisition In 8eptenfeer, i960. Operations for the nine months ending August 31, 1961 resulted in net sales of $325,260 and after tax profit of $10,037* The fiscal year end of this operation vas changed during fiscal 1961 from November 30 to August 31* 6) Industrias Glidden S.A. de C.7. (Mexico) - Glidden International effectively holds all 20,000 outstanding shares and this invest ment is carried at its cost of $32,000. This corporate entity has never assumed an operating status. Shareholders equity at August 31, 1961 totaled $31,890. GLD003569 NOTES FOR ANNUAL MEETING VI Other Major Functions and Items - 33 - D. Foreign Business (Cont'd) 7) Xshlhaxa Saagyo Kaisha, Ltd* (Japan) - Glidden International holds 870,764 shares representing a 2.24$ Interest. These shares have a current market value In Japan of $164,478 at October 16, 1961. These shares were transferred to Glidden International by Glidden in August,, 1961 with no book entries being made since Glidden has no book cost basis for these shares. (Hidden's tax basis of these shares of $113,717 at August 31, 1961 has been added to the tax basis of its investment in Glidden International. 8) Glidden Chemie GmbH (Germany) - In fiscal 1961, this holding company vas established in Germany as the vehicle for Glidden International's investment as a one-third partner in the Hermann Wulfing Wings- Lackfahrik KB. As of August 31, 1961, Glidden International's interest in its wholly-owned GmbH consists of an investment of $6,300, and short and long term loans totaling $1,089,648. Through August 31, 1961, Glidden Chemie's share of the KG profits for the six months in which it has participated amounted to $156,000. The Glidden Chemie*e original contribution to the partnership of $650,000 plus payments to the Wulfing family for the excess of real property values over book property values, goodwill and agreement not to compete of $437,380 result in a total cost of the investment at August 31, 1961 of $1,087,500. Annualizing the previously mentioned six months earnings, this forecasts for the Glidden Chemie a 28.856 pre-tax profit on its Investment. Glidden International has ten active foreign licensees and received $231,520 In Technical Service Fees from these sources in I96I. These fees are down from $434,571 In fiscal i960 primarily as a result of the termination of the T102 contract with Iahihara (Japan) in August, i960, the $100,000 second installment payment from the Billiton (Netherlands) compared to the Initial $200,000 fee received in fiscal i960 and cessation of fees from Fabrics (Cuba) which amounted to $64,264 in fiscal i960. Glidden International is not consolidated with The Glidden Company for re porting purposes. Sales and profits of Glidden International areas follows: Fiscal 1961 I960 1959 1958 1957 1956 Sales $2,644,641 3,255,946 2,904,516 3,012,840 1,684,178 560,112 Profits ^288,319 335,071 82,370 68,190 56,603 32,709 L 03570 HOPES FOR ANNUAL MEETING - 34 - VI Other Major Functicns and Items D Foreign Business (Cont'd) Sales decrease of $440,000 in the Organic Chemical Department, $125,000 at the Hato Rey, Puerto Rico Paint Branch, $100,000 In the Food Depart* meat and $50,000 In Paint Direct Exports vere only slightly offset by a $1(0,000 sales increase in C-P-M Department, and slightly increased sales at the new Puerto Rican and at the established Panama Branch operations. Although profits suffered resulting from the $200,000 reduction in Technical Service Fees, the $4,500 loss on Organic Chemical Sales com pared to a $36,000 profit in i960, .and the final $47,500 realisation of loss on the Colombian investment, final profits vere down only $47,000 since the initial $266,000 loss realization on the Colombian investment vas recognized in fiscal i960. E. Miscellaneous Cost of the Annual Report this year vas 23 cents each which vas the same as last year. Our 1958 Annual Report vas Judged best In the Paint and Coatings industry by FINANCIAL WORLD. Distribution: Mi.-. IX/ight P. Joyce Mr. B. W. Maxey Mr. R. D. Homer Mr. W. 0. Phillips Mr. R. K. Dutton Mr. R. R. Augsbuziger D. E. ERSKDJE r GLD003571 I