Document mpZeag5bEzLo3wVOr58Lp70qk

THE GLIDDEN COMPANY 39th Annual Report fiscal year ended August 31, 1956 table of contents ,9 i A Five-Year Comparison page S The President's Report page 8 Chemieals-Pigments-Metals page 6 Paint page 8 Durkte Famous Foods page 10 Chemurgv page IS Southern Chemical page H Consolidated Balance Sheets page IS Consolidated Income Statement page 18 Accountants' Report page 19 Management and Corporate Data page SO Gi 00Z659 1 f iiV'; A FIVE YEAR COMPARISON! Twelve Months August 31 1956 Ten Months August 31 1955 Twelve Months October 31 1954 1953 1952 Net Sales Income before Taxes Taxes on Income Net Income after Taxes Per Share % to Shareholders' Equity Cash Dividends Declared an Common Per Share % of Net Income Earnings Reinvested Shareholders' Equity Per Share Long Term Debt Net Working Capital Current Ratio Plant and Equipment--Net Total Assets Depreciation Gross Expenditures for Plant and Equipment Shares Outstanding Number of Shareholders Number of Employees $226,230,387 16,450,737 8,304,000 8,146,737 3.55 9.8% 4,501,435 2.00 56.4% 3,555,302 83,090,719 36.19 7,530,000 35,695,848 2.27 53,413,732 118,738,003 2,870,339 16,637,000 2,295,990 20,758 6,387 $180,524,822 14,324,567 7,212,000 7,112,567 3.10 8.9% $209,083,579 14,235,043 7,142,000 7,093,043 3.09 9-2% $211,758,522 14,834,272 7,725,000 7,109,272 3.10 9.6% $205,113,304 14,203,805 7,255,000 6,948,805 3.04 9.7% 4,588,588 2.00 64.5% 2,523,979 79,513,017 34.64 9,000,000 47,155,983 3.58 39,993,479 106,762,124 2,234,960 4,581,860 2.00 64.6% 2,511,183 76,922,608 38.54 10,500,000 51,225,674 4.36 34,493,146 102,669,755 2,332,685 4,578,538 2.00 64.4% 2,530,734 74,324,321 32.44 7,000,000 46,004,697 3.15 33,234,248 102,749,597 2,185,184 6,134,246 2.25 73.9% 1,814,559 71,643,893 31.36 8,500,000 46,474,504 3.13 31,393,854 101,957,921 1,965,339 8,165,366 2,295,350 20,019 6,397 4,020,936 2,293,455 19,174 6,198 4,149,573 2,290,794 18,726 6,218 3,042,934 2,284,739 18,310 6,152 GLD0026t> 2 the president's report to the shareholders November 18,1956 The year 1956 witnessed the accomplishment of a portion of our long range plans. Late in the year our new terminal grain elevator in Chicago and the first unit of our new titanium dioxide plant in Baltimore were com pleted and put in operation. Twenty new paint branches were opened. Construction of additional terpene chemical facilities and of a new tall oil plant was started, and our edible oil operations were realigned for more efficient production. These are major ele ments of an over-all plan to obtain the maximum profit potential from the capital entrusted to us. Net sales for the twelve months which ended August 31, 1956, were $226,290,387 and net profits were $8,146,737, or $3.55 per share on the 2,295,990 shares outstanding at the year-end. Start up expenses on some of the expansion projects mentioned above were absorbed during the year and amounted to 13 cents per share. Each of our five divisions operated profitably. A detailed review of their results and progress begins on page six of this report. In 1955 we announced the formation of a wholly-owned subsidi ary, Glidden International, C. A., to expand the licensing, distri bution and production of Glidden products in countries other than the United States and Canada. During 1956 we started to build an organization staffed with specialists on overseas operations. To head this organization, Mr. Robert M. Kirk was recently appointed general manager of Glidden International. His 15 years of experi ence in the export and overseas fields will be of great value in developing this program. It is intended that International's expansion will include sub sidiary manufacturing operations and technological assistance agree ments for which it may receive an equity interest in overseas con cerns. This past year, Glidden International and W. R. Grace & Co. jointly established paint companies in Colombia and Ecuador. In return for technological assistance, International received an equity interest in Soya Glidden Argentina, S. A., a firm recently organ ized in Argentina v.o process soybeans and refine edible oils. GLD002661 3 Our Cuban associate, Fabrica Nacional de Pinturas, S. A., has moved into a prominent position in the Cuban market and is now producing all t he major items in the Glidden consumer paint line. Ishihara Sangyo Kaisha, Ltd., our Japanese associate, increased Ereduction of titanium dioxide and also began to manufacture Spred atin for the Japanese market. The Glidden Company, Ltd., with plants at Toronto and Mont real, registered a new high in sales. This subsidiary and Glidden International offer us an opportunity to participate in the economic growth of Canada and many overseas countries. Research and development continue to receive major emphasis. Our current budget for these activities is about ten per cent higher than last year. I)r. William von Fischer, formerly head of the department of chemistry and chemical engineering at Case Insti tute of Technology, has recently joined us as coordinator of research. In this newly-created position, he will coordinate the decentralized research and development activities of all our operating divisions. In addition to internal growth through research and market de velopment, we are actively searching for products and companies which would complement or supplement our present organization. We are not. interested in acquisitions which create sales or asset size alone. Adequate profit potential must exist. A new department has recently been established to devote full attention to this impor tant program. During the year we thoroughly investigated a num ber of possibilities. Due to our highly selective approach no acqui sitions resulted, but several are still under active consideration. Gross capital expenditures amounted to $16,637,000, more than double that of any previous year, and the continuation of our cur rent expansion program will require a similar level of spending dur ing 1957. The greatest portion of this expansion has been financed through retained earnings and capital freed by the disposition and discontinuance of low profit portions of our business. Within the last several years this disposition program has released over $10,000,000 for use in more profitable ways. Additional financing will be necessary in the near future and, for the immediate period, will be in the form of increased debt. Regular cash dividends of $2.00 were declared during the fiscal year and charged against retained earnings. This includes the 50 cent dividend paid October 1. Other dividends of 50 cents per share were paid January 2, April 2 and July 2. Dividends have been paid continuously since 1933. Inventories, of $38,492,240 were almost $5,000,000 higher than those at August 31, 1955, due to price increases on certain raw materials ami additional inventory requirements of our new ter minal elevator and titanium dioxide plant. Our policy of hedging GL0002bbl 4 all major commodity inventories, coupled with a LIFO reserve of $1,358,671 on certain of these commodities, provides protection against extreme market fluctuations. Advertising expenses in 1956 were $4,585,776, or 2.0% of sales, compared with $3,769,639, or 2.1% of sales, for the 10 months in fiscal 1955. Retirement funds for employees deposited with bank trustees now total $9,225,784. Our retirement plans are non-contributory, the company paying the entire cost. Federal income tax returns for 1954, 1955 and 1956 have yet to be reviewed by the Internal Revenue Services. No major adjust ments are anticipated. Company-wide, we are building a sound organization and are concentrating our resources on those activities which have the greatest earnings potential. Barring any unfavorable turn in the general economy, we expect further improvement in our operations for 1957. chairman and president GLD002663 5 V&r-;,v'9 'V'-q CHEMICALSPIGMENTSMETALS DIVISION Sales of $18,428,612 represented an all-time high for the Chemicals-Pigments-Metals Division. Earnings were also at record levels and produced a new high in return on invest ment. This outstanding performance was due to capacity sales of titanium dioxide, continued strong demand for metal powders and improvements in operating efficiency. Prior years' increases in productive capacity at our St. Helena Works proved beneficial as titanium dioxide re mained in very short supply throughout the year. Although the demand for this pigment dropped sharply in July to allow for inventory adjustments, we have been able to continue operating at capacity. Production at the St. Helena Works has never been curtailed since the end of World War II. The first test batch of titanium dioxide was produced at the new Adrian Joyce Works early this summer. Operation of this unit should contribute to earnings in 1957. Initial re sults led to the decision to start immediate construction of additions which will quadruple the plant's present capacity. These additions, originally planned for completion in 1960, will now be completed late in 1958. The over-all cost of this entire project is estimated at $30,000,000. Operations at our metal powder plant at Hammond, Indi ana, were slightly below the 1955 level due to the slowdown in the automotive industry. However, 1956 was still the second best year on record. The entire metal powders field continues to grow as the knowledge of powder metallurgy increases. During the year we began producing tin powder and sales of this product to the automotive and appliance pigments and metal powders . . . industries far exceeded our expectations. We have been working on the development of a number of filter powders and progress to date has been encouraging. These powders are finding greater use in fluid systems to filter out impur ities or make separations. Lithopone has largely been replaced by titanium dioxide as a white pigment but there are still a number of applica tions where its properties are superior. A recent decision by one of our competitors to discontinue the manufacture of lithopone will be of benefit to us. We are currently introducing a new series of red pigments, marketed under the trade name Mercadmolith. These pig ments were developed to eliminate our dependence upon selenium, which is becoming more difficult to obtain, and will permit us to offer our customers a steady source for red pigments. For a number of years we have conducted exploratory operations at our mining property in Shasta County, Cali fornia, while negotiating with mining companies interested in operating this property. Since we were unable to nego tiate a satisfactory arrangement for commercially mining the property, exploratory operations were discontinued last summer. During 1956, the Chemicals-Pigmenls-Metals Division substantially increased its contribution to the over-all results of The Glidden Company and the future of this division is exceptionally promising. VICE PRESIDENT G. M. Halsey PLANTS Baltimore, Maryland (2) Collinsville, Illinois Hammond, Indiana Scranton, Pennsylvania PRODUCTS Zopaque Titanium Dioxide Cadmolith Red Colors Mercadmolith Red Colors Cadmolith Yellow Colors Sunolith Lithopone Titanated Lithopone Eutton White Lead Lead in Oil Cubond Brazing Compound Copper Powder Lead Powder Tin Powder Alloy Powders Cuprous Oxide Cupric Oxide Copper Pigment USES Appliances Automobiles Bearings Bronze Parts Bushings Carbon Brushes Ceramics Chemical Reagents Coated Fabrics Felt-Base Products Floor Tile Glass Lead Greases Leather Metallic Packings Paint Paper Pigments Plastics Porcelain Enamel Printing Inks Rubber Synthetic Fibers Wallboard Wallpaper i markets for Glidden products include the rubber. . . tiH GLD002665 VICE PRESIDENT Alexander D. Duncan PLANTS Atlanta, Georgia Chicago, Illinois ( 2) Cleveland, Ohio Los Angeles, California Minneapolis, Minnesota New Orleans, Louisiana Reading, Pennsylvania St. Louis, Missouri r.,,San. Francisco, .California. Montreal, Quebec, Canada Toronto, Ontario, Canada PROD.UC.TS feji Spred Satin Spred Glide-On Spred Lustre Endurance Endurance Imperial Speed-Wall Japalac Ripolin Florenamel Pli-Namel Glid-Tone Stains Glid-Tone Varnishes Gliddenspar Varnish Dramatone Colors Spray-Day-Lite Brush-Day-Lite Industrial Finishes Butoxy Resins Gel-Kote Polyester Coatings Glidpol Polyester Resins Nubelite Primers and Enamels Nubelon Enamels Nu-Pon Primers and Enamels Wood Finishes Glidvar Wire Coating Vinyl-Cote Nti-Pon Cote USES Acoustical Tile Agricultural Equipment Air Conditioning Automobiles Aviation Equipment Building Materials Cabinets Closures Containers Electrical Equipment Exterior Surfaces Furniture - Metal and Wood Hardware Heating and Ventilating Home Appliances Industrial Maintenance Interior Surfaces Lighting Fixtures Machinery and Equipment Marine Equipment Office Equipment Paper Plumbing Supplies Railroad Equipment Rubber Signs Sporting Goods Toys Wire Coatings yrrr.?.rr.^l..- PAINT DIVISION fi^uaMty finishes find , : S" Both sales and profits of the Paint Division exceeded those of any previous year. Sales rose to 574,977,744 of which approximately 60% was in consumer items. The balance came from industrial sales of product finishes, protective coatings and resins. Our sales increases in both the con sumer and industrial categories continue to be greater than those reported by the paint industry as a whole. Spred Satin, Spred Glide-On and Endurance house paints remain the backbone of our consumer line. The Dramatone Color System, introduced in 1955, has given us more prod uct flexibility and increased sales. During 1956 we brought out another "do-it-yourself" line -- Glid-Tone stains and varnishes -- designed for finishing wood furniture. Several new consumer products and applications are planned for this year. Japalac, a 55-year old brand name in enamels, will appear in aerosol spray cans. Permitting easy touch-up work on toys, outdoor furniture and appliances, this item will be a valuable addition to our line. Early in the year we will introduce a series of colored wood stains utiliz ing the Dramatone Color System which will offer consumers a wide variation in finished wood interiors. Spred Lustre, an alkyd enamel, will soon be introduced. A marketing companion to Spred Satin, it will permit match ing colors where a semi-gloss sheen in kitchens or bathrooms is desired. This fall we began promoting the use of Spred Glide-On for asphalt roof shingles. Extensive tests indicate this finish not only reduces the amount of heat absorbed by the roof, but also increases the life of the shingles. This use also will enable us to offer complete exterior color styling. Increased sales and earnings from consumer products have been primarily the result of wider distribution. Two years ago we had 43 branch warehouses throughout the United States and Canada. Today we have 73. Within two more years we will have 100 such branches. Designed to provide fast and efficient service to dealers, painters and other cus tomers, these branches offer the key to future growth in the consumer field. As a part of the branch expansion program, our consumer sales force has been increased 20% during the last two years. In that time, the industrial sales force has increased 15%. This larger sales organization will permit more inten sive coverage of the markets for the division's products. 8 GLD02fct>fc \ During the year we established a new sales and laboratory group to direct and assist our salesmen in selling finishes j for the original painting and upkeep of commercial and inJ dustrial buildings and equipment. This will better enable us j to realize the full potential in this broad field. i Industrial markets continued strong throughout 1956. The increasing use of cans for packaging detergents and beverages j has resulted in larger sales of can coatings. Sales of appli ance finishes were excellent. We are gradually increasing our share of this important market through a superior line of products. Mew industrial emulsions have permitted the development of finishes which will adhere to metals under conditions where adhesion was previously impossible. This has opened up a number of new markets. Sales of polyester resins and coatings continue to grow as new uses for these outstanding materials are developed. Market testing of Butoxy resins (C-Oil) shows considerable promise. Potential uses for this petroleum-based product include pipe coatings, can coatings, adhesives and binders. In September we started construction of additions to pro vide a 15% increase in the capacity of our Heading, Penn sylvania, plant. This project should be completed early in 1957. Expansion of the Atlanta and Montreal plants was completed during the year and additional equipment for the production of synthetic resins was installed at Toronto and Reading and the Nubian industrial plant in Chicago. We are also planning a new laboratory at the Nubian plant. In recent years, sales volume has approached the capac ity of our production facilities. We have instituted a major study to determine what steps must be taken in future years to keep pace with the growing markets for our products. Due to higher costs of labor and material, it was neces, sary in September, 1956, to increase prices of both con sumer and industrial products. Paint sales have risen steadily since 1946. With new prod ucts, increased distribution and additional manufacturing ! facilities, we expect this growth to continue at an average rate of five to ten per cent each year. GLO 002667 VICE PRESIDENT Harvey L. Slaughter PLANTS Berkeley, California Chicago, Illinois (2) Elmhurst, L.I., New York Louisville, Kentucky Macon, Georgia Norwalk, Ohio PRODUCTS Bulk Shortenings Puff Pastry Shortenings Baker's Margarine Paramount Hard Butters Specialty Edible Oil Products Margarine Oils Refined Vegetable Oils A-P-0 All Purpose Oil ^JUdvarF,rying .Shortening Margarine . Dixie Cut Coconut l . Snowflake Oncnnnt -1.-'--- Spices and Extracts Meat Tenderizer Seasoning Salts Vegetable Flakes Worcestershire Sauce Mayonnaise Whipped Salad Dressing Sandwich Spread French Dressing Tossed Salad Dressing Famous Sauce Package Shortening Salad Oils Deep Frying Oil USES Bread Cakes Candy Canned Foods Chocolate Coatings Cookies Crackers Danish Pastries Doughnuts French Pastries Fried Foods Frozen Desserts Ire Cream Margarine Meat Products Pickles Pies Popcorn Potato Chips Prepared Mixes Pretzels Salad Dressings Salad Oils Whipped Toppings ' DURKEE FAMOUSM ffATTAl FOODS%DvIYrwIASvIaONiaiWe Durkee operations fell short of our expectations. For only the second time in the past ten years, Food Division profits (before taxes) were below the 3^-million dollar level. During part of the year unsettled marketing conditions in the edible oil industry prevented us from maintaining our normal dollar profit margins. This situation has improved in recent months. Almost three fourths of our $88,927,483 sales in 1956 con sisted of bulk products used by food processors, bakers and institutional kitchens. The balance represents spices, coco nut, margarine, salad dressings and similar products dis tributed through retail channels under Durkee and other labels. On the bulk side, physical volume was slightly below last year because of a substantial decline in government busi ness. We continue to be a leading supplier of special shorten ings for prepared mixes. Our recent development of several new ingredients for mixes should further strengthen our position in this rapidly expanding industry. Sales of specialty edible oil products for coatings and other confections held firm. We have recently opened a complete new laboratory and technical service center at our Chicago refinery. This facility is not only equipped to handle general research on fats and oils, but also to simulate production processes in the bak ing, confectionery, ice cream and other industries served by our edible oil organization. At Louisville we have com pleted additions which substantially increase refining capac ity and permit more efficient production. Late in the year a decision was reached to discontinue all edible oil processing operations at our Elmhurst, Long Island, plant and relocate these operations and much of the equip- 10 GL0002668 1 i merit at the Louisville, Chicago and Berkeley plants. Due j to its location, we have experienced crude vegetable oil and finished product freight disadvantages on shipments to and i from Elmhurst. Relocation of these refinery operations will ' not only produce higher earnings, but also will release ap proximately $2,000,000 in investment which has been tied up in a low profit location. Coconut and condiment opera tions will be continued at Elmhurst:. At the beginning of 1956 we reorganised our consumer products sales force to improve earnings through better supervision and lower distribution costs. Coconut and condi ment operations continued strong arid profitable throughout the year. However, consumer margarine and salad products were affected by the same factors as our edible oil operations and results were unsatisfactory. This year we became the first coconut producer to utilize aluminum foil bags and foil labels for packaging. Also, a new gourmet line of spices and seasonings has been introduced in attractive new packages. The reception given these items has been excellent and we expect them to benefit sales, par ticularly in the self-service stores. While over-all Food Division operations were profitable, they did not meet our performance standards. The return of normal profit margins, together with the elimination of our problems at the Elmhurst refinery, should provide im proved results for 1957. However, we still continue to study thoroughly our basic position in the food industry, and we expect to take further action which should materially strengthen the division and permit us to concentrate on the development of those activities which have proven sound. GLD002669 CHEM1JRGY DIVISION soybean derivatives * Chemurgy Division profits were at their highest level since 1951. While soybean processing margins showed some im provement over those for the previous three years, they still leave much to be desired. Early in the year margins were good, but in April and May, a fear that there might be a shortage of soybeans at the end of the crop year ad vanced prices for soybeans out of proportion to the prices received for soybean meal and oil. The price of soybeans is not determined by the demand for soybean products, but by demand for the beans them selves to fill the excess crushing capacity of processors. On the other hand, the prices received for meal and oil are gov erned by the total domestic and world supply and demand for protein meals and edible fats and oils. It is not yet pos sible to determine the full effect of the government loan program on the availability of soybeans during 1957. How ever, the 1956 crop of approximately 470 million bushels is far in excess of the 370 million bushel crop of 1955 and should bring the supply of beans more closely into balance with the demand of processors. While earnings of this division can be materially affected by processing margins, it has been our policy to develop products from meal and oil which would eliminate total dependence upon primary processing margins as a source of income. This program is far from complete, but is prov ing its value in improving our earnings. Sales of protein, flour, lecithin and fine chemicals now comprise about 20% of the division's sales of $35,807,498. Both sales and earnings from these products showed a sub- VICE PRESIDENT Willard C. Lighter PLANTS Chicago, Illinois Indianapolis, Indiana GRAIN ELEVATORS Chicago, Illinois (2) Indianapolis, Indiana Lockport, Illinois Seneca, Illinois PRODUCTS Soybean Oil Meal ii Soybean Oil Alpha Protein ! Beta Protein I! Promine Edible Protein I} Edible Soybean Flours Protein Industrial Flours i stantial increase in 1956. Our work on the development of Industrial Lecithin an edible protein is continuing. Its initial reception by the RG Lecithin food industry has been promising, but extensive tests are still being conducted to obtain a proper evaluation. Steroids Grain Storage During 1956, Alpha Protein gained industry-wide accept Grain Merchandising ance as a basic coating ingredient for fine printing papers. Our industrial applications laboratory is presently working USES on several new uses for Alpha Protein which appear to have Adhesives considerable potential. Animal Feeds Bakery Products Our new $6,000,000 terminal elevator, on the Calumet Candy River in Chicago, is in operation. With a capacity of Cereals 6,500,000 bushels, this elevator has already established itself Fire-Fighting Foam as a very efficient, high handling-capacity grain operation. Floor Coverings In addition, it is also proving of value to our commodity hedging activities. Two smaller elevators, with a capacity Indoor Plywood Industrial Drying Oils I; of 200,000 bushels each, have recently been completed at Insulating Board I Lockport and Seneca on the Illinois River. They will serve as "feeders" to the terminal elevator in Chicago. Leather Margarine The operation of our flaxseed and soybean processing Meat plant at Buena Park, California, was permanently discon Paint tinued this summer. At best a marginal operation, its shut Paper Coatings down has released some $2,500,000 working capital for more Petroleum Products profitable investment elsewhere. Pharmaceuticals The past year has been one of progress for the Chemurgy Division. Its efforts have been concentrated upon those areas which have the greatest profit potential. On the basis of the present outlook, we anticipate continued improve ment in division operations during 1957. Plastics Prepared Cake Mixes Prepared Roll Mixes Rubber Salad Oils Shortening Soup Textile Sizes Wallpaper VICE PRESIDENT Paul E. Sprague PLANTS Jacksonville, Florida Port St. Joe, Florida (under construction) Valdosta, Georgia PRODUCTS Alloocimenc Alpha Pinene ^-Anethole,. Beta Pinene Camphene Dipentene _dl Limonenei^'^:'. SOUTHERN CHEMICAL DIVISION .terpene .. ...... . . .. y ***^*>' ' Methyl Chavicol Myrcene Nelio Gum Turpentine Nelio Pine Oil (Synthetic) Nelio Sulfate Turpentine Nopol Penetrell Terpene Chemicals Anti-Skinning Agents Cordage Tar DD Pine Oil In spite of a number of handicaps, the performance of this division was highly satisfactory, thus substantiating the value of our policy of chemically upgrading naval stores products. Division sales of $8,149,050 were derived from four sepa Pigmentar rate and distinct operations -- turpentine processing, rosin Sunny South DD Turpentine Wood Charcoals Gloss Oils Merez Metal Resinates Nelio Gum Rosin derivatives, wood distillation and gum naval stores. Our leadership in the field of turpentine processing and terpene chemicals continues to add impetus to the changing character of the division's operations. Products in this group Rosin - Modified Resins range from synthetic pine oil, a versatile material used in Rosin Oils Alkyd Resins Pure Phenolic Resins detergents, mining, paper and other products, to chemical dipentene, used as a chemical intermediate. During the year several new chemicals were added to our growing line. USES Adhesives Chemical Intermediates Cleansers Cordage Detergents Disinfectants Flavors Floor Coverings Mining Paint Paper Size Perfumes Petroleum Products Pharmaceuticals Plastics Printing Inks Rubber Soap Solvents Synthetic Resins Textile Processing Varnish Two construction projects are under way at our Jackson ville, Florida, plant. Our turpentine processing facilities are being expanded to round out production capacity for these products. This expansion is scheduled for completion in Janu ary, 1957. We are also constructing a new terpene fine chemical unit which will produce several new products as well as a number of products previously produced on a pilot plant basis. This project should be completed in April of 1957. The total cost of the Jacksonville expansion will be about $500,000. In 1947 this division began to direct a portion of its re search efforts toward the synthesis of several important ma terials used in the flavoring and aromatic fields. This research has now progressed to the design and engineering stage and construction should be started late in 1957. Construction of our new tall oil plant at Port St. Joe, Florida, has been proceeding on schedule up to this point. However, it now appears that delays due to labor stoppages and the difficulty of securing nickel-bearing alloys will pre vent us from meeting the original April, 1957, completion date. Expected to cost about $3,400,000, this plant will pro- GLD00267? 14 1 duce crude and distilled tall oil, tall oil fatty acids and a premium grade tall oil rosin. Crude tall oil is a low-cost mixture of resin and fatty acids usable as such, but prefer ably as the source of the separated and purified rosin and * fatty acid constituents. Tall oil fatty acids are used in such products as rubber, paints, detergents, plastics and soaps. The rosin to be produced at this new plant is expected to be j substantially superior in quality to any tall oil rosin cur*. rently available and should meet, the requirements of a wider domestic and export market.. Although production of rosin-based derivatives was re tarded by a fire in that department at Jacksonville, profits from this activity showed improvement over previous years. Our wood distillation business, principal products of which are charcoal and pine tar, was also able to show a profit im provement despite reduced demand from the rubber indus try. This business is relatively static and is not a sizable profit producer. Although crude gum production was substantially lower than that of the previous year, we were able to maintain our volume on gum rosin and turpentine. The cyclic gum naval stores business was on one of the down cycles during the year so profits were small. This summer we dissolved E. W. Colledge, G. S. A., Inc., a wholly-owned subsidiary, which handled the sales activ ities of this division. The Colledge organization has been consolidated with that of the division. While the contributions of the Southern Chemical Division are presently small in relation to the total company, they are nonetheless important. Completion of the tall oil and Jacksonville expansion projects will be reflected in opera tions beginning in 1957 and increasing through 1958. For some time to come, continued research on naval stores de rivatives may be expected to develop new products for com mercialization. The Glidden Company and Subsidiary August 31, 195C> and August 31, 1955 assets CURRENT ASSETS Ca3h........................................................................... Trade accounts receivable, less allowances for doubtful accounts of $477,131 (1955 - $400,244). Inventories -- raw materials, in process, and fin ished goods Priced at the lower of cost (accumulated average) or replacement market except for certain basic materials stated at cost (last-in, firstout method) which did not exceed replace ment market................................................ Other current notes and accounts receivable, ad vances and investments..................................... 1956 $ 5,512,638 18,244,642 38,492,240 1,593,612 1955 $ 13.233,718 17,080,926 33,701,460 1,388,986 TOTAL CURRENT ASSETS . . . $ 63,843,132 $ 65,405,090 OTHER ASSETS Prepaid insurance and expense............................... Miscellaneous notes and accounts receivable, ad vances and investments.................................... $ 863,216 $ 617,923 652,563 710,992 TOTAL OTHER ASSETS................ $ 1,481,139 $ 1,363,555 PROPERTY, PLANT AND EQUIPMENT Land, at cost........................................................... Buildings, at cost................................................... Machinery and equipment, at cost........................ $ 3,888,059 28,219,303 47,732,654 $ 3,606,158 23,689,062 37,126,162 $ 79,840,016 $ 64,421,382 Less accumulated depreciation, depletion and amortization........................................................... 26,426,284 24,427,903 TOTAL PROPERTY, PLANT AND EQUIPMENT, NET.................. $ 53,413,732 $ 39,993,479 $118,738,003 $106,762,124 16 CLD002674 liabilities and shareholders' equity CURRENT LIABILITIES 1956 1955 Notes payable to banks: Short term........................................................... Serial notes maturing within one year................ $ 9,500,000 $ 1,500,000 -01,500,000 Accounts payable....................................................... Accrued taxes, insurance, royalties and interest . . 6,824,354 1,429,106 6,346,925 1,307,975 Dividend payable............................... ................... 1,147,995 1,147,675 Federal, dominion, and state taxes on income, estimated............................................................... 7,745,829 7,946,532 TOTAL CURRENT LIABILITIES. . . $ 28,147,284 $ 18,249,107 LONG-TERM DEBT Serial notes, payable $1,500,000 annually, interest 3% to 3M%........................................................... 7,500,000 9,000,000 SHAREHOLDERS' EQUITY Capital: Common stock par value $1C per share: Authorized 3,000,000 shares: reserved for sale to key employees, 05,340 shares (1955 -- 95,980 shares) Oustanding 2,295,990 shares (1955--2,295,350 shares)............................................................ Additional amount paid in................................ $ 22,959,900 9,807,272 $ 22,953,500 9,791,272 Earnings retained for use in the business including retained earnings of Canadian subsidiary $5,135,989 (1955 - $4,766,533)........................ 50,323,547 46,768,245 TOTAL SHAREHOLDERS' EQUITY $ 83,090,719 $ 79,513,017 $118,738,003 $106,762,124 17 cto oo*b1t' and earnings retained for use in the business The Glidden Company and Subsidiary Twelve months ended August 31, 1956, and ten months ended August 31, 1955 income Net sales.................................................................... 1956 1955 $226,290,387 $180,524,822 Other income................................................... 673,148 480,287 $226,963,535 $181,005,109 Cost of goods sold..................................................... $174,894,035 $140,008,434 Selling, administrative and general expenses . . . 31,947,320 24,144,648 Provision for depreciation, depletion and amorti zation ................................................................... 2,870,339 2,234,960 Interest expense............................ 801,104 292,500 $210,512,798 $166,680,542 INCOME ISEFORE TAXES ON INCOME $ 16,450,737 $ 14,324,567 Taxes on income, estimated: Federal normal tax and surtax............................ $ 7,834,000 $ 6,865,000 Dominion and state taxes................................... 470,000 347,000 $ 8,304,000 $ 7,212,000 NET INCOME........................... $ 8,146,737 $ 7,112,567 earnings retained for use in the business Balance at beginning of period.................... $ 46,768,245 $ 44,244,266 Net income................................................. 8,146,737 7,112,567 $ 54,914,982 $ 51,356,833 Deduct cash dividends -- $2 per share ... 4,591,435 4,588,588 BALANCE AT END OF PERIOD .... $ 50,323,547 $ 46,768,245 18 GLD002676 Shareholders and Board of Directors, The Glidden Company, Cleveland, Ohio. We have examined the consolidated financial statements of The Glidden Company and subsidiary for the year ended August 31, 1956. Our exami nation was made in accordance with generally accepted auditing stand ards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the cir cumstances. In our opinion, the accompanying balance sheet and statements of income and earnings retained for use in the business present fairly the consolidated financial position of The Glidden Company and subsidiary at August 31, 1956, and the consolidated results of their operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. Cleveland, Ohio October 15, 1956 Certified Public Accountants GLD002677 BOARD OF DIRECTORS Dwight P. Joyce Paul E. Sprague John P. Ruth Alexander D. Duncan B. W. Maxey John H. Weeks R. D. Homer W. G. Phillips Willard C. Lighter Harvey L. Slaughter OFFICERS Dwight P. Joyce, Chairman of the Board and President Paul E. Sprague, Vice President B. TV. Maxey, Vice President, Finance Willard C. Lighter, Vice President Alexander D. Duncan, Vice President Harvey L. Slaughter, Vice President John H. Weeks, Vice President, Personnel G. M, Halsey, Vice President R. D. Homer, Secretary W. G. Phillips, Treasurer G. S. Warner, Controller W. P- Stettelherger, Assistant Secretary CORPORATE DATA Executive Offices 900 Union Commerce Building Cleveland, Ohio Transfer Agents The New York Trust Company New York City The Cleveland Trust Company Cleveland, Ohio Registrars The Chase Manhattan Bank New York City Central National Bank of Cleveland Cleveland, Ohio Common stock of the Company is listed on the New York Stock Exchange and has trading privileges on other major stock exchanges. t I l20 Printed in V. S. A, GLD002678 t \ j The Glidden Company GLR002679 r