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1970 Annual Report cn Covers A chemical engineer m Oyste- Creek. Texas, and a secretary in Midland. Michigan, sym bolize the 47.400 people around the world who dauy give substance and meaning to The Dow Chemical Company Contents Operations Summary......................... Quarterly Results................................ President's Letter ............................... Products .......................................... Financial Statements.......................... World Operations................................ Partly Owned Companies........... Directory of Dow Locations............. Human and Environmental Relations Directors and Officers........................ Pg 1 1 2-3 4-14 15-22 23-32 32 33 34-36 37 I ST C0 ; 45 48 Annual Meeting The 1971 annual meeting of stockholders will be held at 2 p.m Wednesday. May 5. at Midland. Michigan. A formal notice of the meeting, with a proxy statement and form of proxy, will be mailed to each stockholder separately from this report. The Dow Chemical Company Annual Report for 1970 6 m : oois Highlights OPERATIOMS SUMMARY IN MILLIONS Net Sales ....................................................... Depreciation ................................................................. U S and Foreign Income Taxes.................................. Income before Extraordinary hems ............................ Net Income alter Extraordinary Items......................... Earnings per Share belore Extraordinary Items (in dollars! .................................. Earnings per Share alter Extraordinary Items (in dollars! ........................................ Cash Dividends Declared ............................................ Comnon Stockholders' Equity ................ 8ock Value oer Share of Common Stock si Decemfcer 31 (m dollars) ................ Average Common Shares Outstanding Common Siockhclders Employees .. 1970 S 1.911 1 207 7 88.1 122.3 103.4 4 38 3 42 78 5 1.102 6 36 SO 30.191.S48 90.975 47.400 1969 % Change S 1.797.1 177 9 81 5 148.7 148 7 -t- 6.3 + 16 8 + 81 - 11 0 -30 5 4 913 - 10 8 4 913 77 3 1.080.2 -30 3 + 1S -r- 2 1 35 75 * 2 1 30.29S.994 90 500 47.400 - 03 - 05 QUARTERLY RESULTS IN MILLIONS (except per-share amounts) Quarter Ended Sales 1970 1969 Earnings per Share1 Before Extraordinary Items 1970' 1969' 3-31 6 30 9 30 12 31 TOTAL............... S 456 6 493 4 480 4 480.7 SI. 911.1 S 413.0 464 3 455 5 464 3 SI.797 1 SI 03 1 26 1.10 99 $4 38 $1.13 1 50 1 23 1 05 $4.91 1 Based or. average shares outstand.ng 1 Restated from published quarterly earnings tenons to exclude extraordinary ite-ns > incud.rg special credits, equivalent to S 21 per share Products and Services Operating Income 1970 1969 S 59 4 76.1 68 3 55 8 $259 6 S 55 3 69 6 66 4 47 8 S23S 7 1 Presidents Letter Herbert D Doan President until February 1971 C B Branch Dows new president The Business Year For the first time in 10 years. Dow's earnings declined in 1970 --to $4.38 per share (before extraordinary items) from $4.91 in the previous year, or a decrease of 11% If special credits of S 21 per share are excluded from reported 1969 income for comparative purposes, the decline in 1970 earnings was 7%. Net return on the average of the common stockholders' equity (before extra ordinary items) was 12 1%. compared to 14.2% in 1969. The earnings reduction was due to sluggish business conditions in the United States and also to non-operating items such as higher interest costs and lower miscellaneous income Although a decline in earnings is unpleasant news. I am convinced that Dow people performed exceptionally under recession conditions Dow's world-wide consolidated sales rose 6% to a record $1.911 billion Sub stantial increases in the European. Latin American and Pacific Areas and our global Life Sciences operations more than offset a 1% decline in our U S. sales. Substantial earnings increases in these segments of our business, however, only partially compensated for declines elsewhere. The extraordinary items included a charge of $31.1 million after taxes, equiv alent to $1.03 per share, resulting from the write-off of our total $43.3 million investment in Phrix-Werke AG., the German fiber company in which we own a half interest (A further discussion of Phrix-Werke will be found on page 32 and in the Notes to Financial Statements ) This charge was partially offset by special - credits of $2 1 million after taxes, or $ 07 per share, from the disposition of interests tn in two partly owned companies Net income after these extraordinary items was --I $3 42 per share 3 A promising development of 1970 was the turnaround in chemical prices For the first time in 13 years, the weighted index of U. S. selling prices for Dow products ^ rose slightly instead of slipping, and prices elsewhere in the world generally were t_n firmer. As the only major American industry whose wholesale price index in 1969 was below the 1957-59 average, the chemical industry obviously needs this. Pro- c-3 ductivity gains are still fundamental to our technologically based business, but without price increases we can't absorb the type of inflation we have had world-wide in recent years Capital Spending Continues at High Rate Capital expenditures, at $348 million, were down 6% from 1969's record high of $371 million, and we expect a further reduction of about 7% in the current year, with an increased proportion spent outside the United States. Despite these de clines. our outlays for new facilities continue at high levels, reflecting the abundance of good growth opportunities available to us 8etter than half of our physical plant world-wide is new within the past five years and is in excellent competitive condition During 1970. we went twice to the U S. money markets, selling a total of $300 million of 30-year debentures A 110-million Eurodollar, five-year revolving credit facility was arranged with a consortium of 16 international banks and is available to provide short- and medium-term financing for expansion, particularly in Europe. As a result of these borrowings, the Company is in a very strong liquidity position Good evidence of this is seen in Standard & Poor's recent assignment of an A-1 rating to our commercial paper No additional long-term debt issues in the United States are planned for the current year. Several small overseas bond issues are contemplated, primarily to refinance short-term debt 2 Changes in Board of Directors At the January 1971 board meeting. Dr A P. Beutel retired as a director and vice president of the Company Dr. Beutel was in his 55th year of Dow service. His contributions to Dow's growth are incalculable, but any listing (and it would be a long one) would be headed by the Texas Division, which he pioneered in the 1940s The Louisiana. Dowell and Brazos Divisions and the Government Affairs Department are among the many other enduring monuments to his energetic leadership. Elected to the board were J. M. Leathers, vice president and operations director of the U. S Area, and Paul F Oreffice. who had been named financial vice president in November Their elections increased the board's membership from 17 to 18. Dow and the Environment Dow continued to make real progress in the urgent matter of environmental improve ment We are in relatively good shape in this area and believe our efforts not only will meet any reasonable requirements but also will, in total, be profitable. In short, we intend to surprise both those environmentalists who doubt we'll do enough and those members of the financial community who fear it will cost too much. Continuing Commitment to Technology Dow's long suit is the breadth and depth of its technology and the tremendous product diversification that this produces. We are constantly adding to our tech nological storehouse by supporting research and development at high expenditure levels The bulk of this work --process development and improvement of existing products --generates little glamor but considerable profit. Occasionally, lightning strikes in the form of a barnburner of a product, of which Dow research has produced many A recent example is rifampicin antibiotic, a product of Lepetit for the treat ment of tuberculosis and other diseases and winner of the Prix Gallien. France s top pharmaceutical award, in 1970. All of which adds to our conviction that through technological progress --both the unglamorous and the spectacular --Dow will better serve the world and assure its own success. *** At the February board meeting, the directors accepted my retirement as president, chief executive officer and chairman of the Executive Committee and elected C B Branch, executive vice president since 1962. to these positions My decision to retire is based on my belief that, as between change and con tinuity. the emphasis should favor change in all phases of our business I have attempted to keep the scales tipped in that direction during eight years as your president I long ago decided the dynamics of change should include me personally I feel a real pleasure in turning over my duties to Ben Branch, who in my opinion is one of the world's finest managers. Although I will continue to serve as a director of the Company, this is the last President s Letter I will write to Dow stockholders As my parting thought. I would like to express my conviction that Dow. in terms of both people and physical facilities, is in excellent condition for substantial profit growth and that, in Dow. you have a good investment February 4. 1971 Herbert D Doan cy> --t CD <_n on 3 A description of functionalchemical applications m environmental control will be `ound in the Human ana Environmental Relations section of the recort 6 Organic Chemicals A "Super'' line of products was introduced to the U S. automotive aftermarket with good initial results It includes Super Coolant Antifreeze. Carb Cleaner. Carb & Choke Cleaner, Chrome & Vinyl Cleaner. Starting Fluid. Brake Fluids. Windshield De-Icer, and Stop-Leak Pellets. Additional products scheduled for test market and possible national introduction in 1971 could give us the most complete line of branded automotive products on the market. Softness in the economy hit some organic chemicals hard. Sales to the auto industry and its suppliers were significantly affected by the General Motors strike in the second half. Sales of phenol, used extensively in plywood glues, followed the dip in housing starts A sharp decline in the industry growth rate for urethane products adversely affected our sales of Voranof polyols; nevertheless, the longrange outlook for urethanes continues very favorable, and we are endeavoring to be the first to produce urethane polyols in several developing countries Our continuing switch from the chlorohydrin to the direct-oxidation route to ethylene oxide is releasing additional chlorohydrin facilities for production of the more profitable propylene oxide Meanwhile, we are taking steps to deploy more of our ethylene oxide toward higher-return derivatives. Functional and Designed Chemicals Results for Methocel cellulose ether products were strong as the result of firmer prices in the U. S. and increased volume in Europe. These products thicken paints, improve the properties of plasters and mortars, and assist in polymerizing vinyl chloride to PVC. The latter uses are especially pertinent to Europe, which is the ^ largest PVC producer and makes heavy use of concrete in building construction --( A new catalyst. Type S. for producing butadiene from butylenes was launched co and is expected to make obsolete the Type B catalyst that has long been the major ^ product of its kind in the world The new product's improved performance offers in- creased earnings potential for both Dow and the customer ^ Sales of Separan flocculants increased in 1970. reversing a three-year trend on The new growth was due primarily to uses in the paper and mining industries Dow *= mining chemicals as a whole, including frothers and collectors, enjoyed an ex cellent year Sales of antimicrobials were off 10% because of the slow economy and the discontinuation of two products A new antimicrobial for preserving cosmetics and another for latex paints were introduced. Ecological concerns increased the appeal of our preservatives, which are non-mercury-based Despite the economic slowdown, sales of Dow Industrial Service continued to grow. DIS increased its capabilities for serving the nuclear power industry with cleaning and other services Secondary-oil-recovery floods employing Pusher mobility control chemicals were m progress in seven states and five foreign countries in 1970 A second Dowdeveloped oil-field process, using Channelbiock chemicals, was introduced in the fourth quarter on a developmental basis; based on polymers of exceptionally high vis cosity. it corrects gross bypassing of injection fluids in secondary-recovery projects Metals Consumption of primary magnesium exceeded production capacity for the fifth consecutive year Dow purchased 6.000 tons from the U S. Government stockpile in first-half 1970. but by mid-year, our new 24.000-ton-per-year facility m Freeport. Texas, was brought up to its full production rate, rendering stockpile purchases unnecessary for the rest of the year. Knit fabrics, en/oying a popularity boom, require special cleaning care to preserve fresh -from-the-dressbox look Dow supplies a line of drydeamng solvents with gentle, effective cleaning power and supplements it with technical advice to drycleaners and computerized analysis of their solvent systems. Plastic panels extruded from Dow ABS resins provide durable, lightweight siding for recreational vehicles, as the "Apache " camping trailer. SSS^OOIS Dow made a ma/or appeal to automotive aftermarket with "Super " line of car maintenance and cleaning products. Lockheed "Tri-Star" is second jumbo tet utilizing large extruded aluminum wing spars from Dow 7 ' ST 0 0 Ck 5 56 Alloying with aluminum continued as the major market for magnesium, with automotive die casting as a strong second The latter is due mainly to requirements for the German Volkswagen, which also is produced in Brazil and. since 1970. in Mexico. A new magnesium diecasting alloy. AS41. developed by Dow research in less than a year, provides improved high-temperature properties to match the operating characteristics of new. higher horsepower engines. Magnesium extruded battery stock was sold at record levels as magnesium became the standard energy source for military back packs, replacing zinc. Dow continued to produce large aluminum landing-mat extrusions for the Government and wing spars for the Boeing 747 Stratojet. We also are furnishing wing structures for the Lockheed Tri-Star, so that two of the three jumbo jets now use Dow alumi num extrusions. Dowetch Deadline magnesium photoengraving sheet became available in a new form with the photo resist coating (PRC) already applied, thus saving additional time for the photoengraver. PLASTICS/PACKAGING Molding and Extrusion Materials Global sales of Dow plastic resins for molding and extrusion were up moderately and operating income up substantially despite generally softer business conditions and prolonged strikes at some key customer industries. The improvement in operating income was due mainly to higher sales volume and better pricing for low-density polyethylene, combined with operating econo mies made possible by process improvements and a reduction in our line of LDP5 resms. Excess industry capacity caused high-density-polyethylene prices to weaken, but we continued to operate our HDPE business profitably with manufac turing improvements and increased sales. Results for our major plastic material. Styron polystyrene, were down slightly from 1969 Operating income was up substantially in Europe and to a lesser degree in Latin America and the Pacific. In the United States and Europe, we sacrificed a share of market in an effort to hold the line on prices but met with only partial success Styron 470. a new high-performance impact resin, was introduced in the U S --the first of a new series of products designed to reinforce our world poly styrene leadership Dow introduced new medium-impact ABS (acrylonitrile-butadiene-styrene) resms m 1970 and high-impact formulations are planned for 1971. This broader line enables us to pursue a significantly larger portion of the ABS market Manufacture of Pelaspan expandable polystyrene beads, used m molded cusnlon packaging and other lightweight items, was terminated in the U S but continues in Canada for the Canadian market Pelaspan Pac polystyrene foam strands for loose-fill packaging as well as the Styrofoam and Dorvon brands of r eg id polystyrene foam are unaffected by this move Functional and Designed Plastics Styrofoam brand plastic foam experienced another great year. In Canada, for ex ample. sales increased over 1969 despite a 15% drop in over-all construction spending Styrofoam HI was installed as insulation under taxiways of Anchorage Airport, the second major Alaskan airport to utilize the product, and under runway extensions of the airport at Vaasa. Finland In the U S. Styrofoam FR was used in 8 5 tvron polystyrene was specified increasingly for components of high quality toys. Shown are "Hot Vfheels Sizilers " racing set, "Poweride X 7 O' car. "AstroScope" color screen viewer, and a parking ramp-service center Chlorinated polyethylene from Dow is incorporated in Celotex Corporation's single-ply roof membrane tor West Palm Beach Auditorium Eye makeup and other cosmetics retain freshness longer with new. specially tailored preservative. Dow/Cil 200. Plastic honeycombs of Surfpac biological oxidation media, installed at Sacramento treatment plant, provide home for sewage-loving bacteria. 9 ST 0 0 0 45 Prefabricated brick curtain walls make the scene, thanks to super strong mortar /omts produced by Sarabond mortar additive. This scene is the 29 story University Center in Austin. Texas Housewares made from new line of Thru styrene-acrylonitrile resins offer added protection against heat distortion. Dow epoxy resins function as an adhesive binder in molded fiber glass skis by K-2. 10 S Aran microspheres are blended with polyester resin and sprayed with fiber glass to produce unusually lightweight boat hulls and deck parts, as in this "Mako 19" powerboat. Concrete block reaches new high in load bearing walls in 14 story Alexander Arms. Honolulu. Thrcadunb brand adhesive mortar is a key material in "shell block" construction concept on which building is based. A description of functional- and destgnedplastic applications in environmental control and low-cost housing w-li be found in the Human and Environmental Relations section of the report panel cores by 46 manufacturers of camper and house trailers and truck campers Styrofoam TC. a tongue and groove sheathing material for houses and farm build ings. was introduced. IRMA (Insulated Roof Membrane Assembly), a new system that employs Styrofoam or Roofmate brand plastic foam in an entirely new concept, was introduced on a developmental basis. In Malmo. Sweden, a bank building was constructed with prefabricated panels incorporating Sarabond brand mortar additive --the first use of the product in Europe The Dow paving system based on latex-modified cement and a new automated paver was used to restore approximately 50 bridge decks on Middle West and New England highways, including portions of the interstate system. World-wide sales of Dow plastic-lined piping products rose 15%. and the number of products in the line was increased 13%. A shortage of nickel (resulting from a strike in Canada early in 1970) gave plastic-lined piping products the oppor tunity to prove their utility in many new applications. Sales of Dow coatings were off by a fraction of a percentage point even though the drop in housing starts depressed carpet installation and with it our various latex products for the carpet industry A new latex binder that meets government fire-retardancy standards for carpet backing was introduced late in 1970. Sales of latex to the paper and paint industries were about level with 1969. We terminated our relatively small production of acrylic latex and henceforth will concentrate in styrene-butadiene latex, whose development we pioneered in the 1940s ^ Our over-all coatings business was buoyed by a boost in sales of electrocon^_( ductive resins for office-copier paper. Markets for ECR resins underwent a rapicto development in Europe and Japan, and our production plant in Midland. Michigan*^ twice expanded its capacity to meet the demand. c=> Epoxy resin sales were off as a result of reduced activity in the television, aero-^ space, reinforced plastics and industrial coatings markets. The 1971 outlook i^j-, much brighter, based on new products and marketing approaches During the year.co Eagle I. which is fabricated from Dow epoxy resins and other high-strength mate rials. by Windecker Research. Inc., became the first plastic aircraft to receive type certification by the Federal Aviation Administration. Packaging Products Dow's packaging products business. 80% of which is concentrated in the U S.. achieved a marked improvement in profitability, with every major product line con tributing to earnings Manufacturing economies, the continued culling of un profitable products and success in selectively raising prices were major factors The world-wide polyethylene-film market again experienced healthy growth and the prices of various products either steadied or increased. Refinements in our family of films opened new opportunities. Saran Wrap brand plastic film with heat-sealable coatings was chosen by a leading food-products manufacturer as the wrapping for a line of prepared cookie doughs- Two new formu lations of Saranex coextruded two-ply films were introduced with encouraging results Trycite polystyrene film with a more sealable surface performed satisfactorily in bacon-package windows and is being evaluated for window envelopes. Our plastic-container business was supplemented by a new ABS line that opened new markets for us in the packaging of margarine and butter. THE DOV* CHEMICAL COMPANY MIDLAND. MICHIGAN 48640 3rd CLASS BULK RATE U. S. POSTAGE PAID Permit No. 2582 Detroit. Michigan ST00 I t 5 G0 BIOPRODUCTS/ Life Sciences CONSUMER PRODUCTS Sales of Dow's human health business grew 19% in 1970 Prospects are excellent for expanded contributions in pharmaceuticals and biologicals. diagnostic services and products, instrumentation, and biomedical devices Gruppo Lepetit, the Italy-based multinational pharmaceutical producer in which Dow holds the majority interest, was a major contributor to Life Sciences' 1970 performance. A key factor was the heavy demand abroad for Rifadin (rifampicin) antibiotic for tuberculosis and other disease. Applications to market rifampicin in the United States for treatment of tuberculosis and the carrier state of meningitis are pending. Researchers are studying the effect of rifampicin derivatives on viral diseases and leukemia Lepetit in 1970 acquired extensive fermentation facilities in Brindisi. Italy, and expanded its chemical plant in Garessio A new pharmaceutical plant is under construction in Spain and another is planned for central Italy. A Lepetit plant under construction in Sao Paulo. Brazil, will extract L-Dopa. used in the treatment of Parkinson's disease, from a natural source Bio-Science Laboratories, a wholly-owned subsidiary based in Van Nuys, California, developed a new urine screening test to detect drug abuse. The nation's leading clinical-chemistry reference laboratory. BSL provides more than 600 tests for patient care and medical research In West Germany, a medical diagnostic referral laboratory being built by BSL and a German partner neared completion. In the United States, Dow's human-health operations were organized as the Indianapolis Division of Life Sciences. The principal unit is Rx Pharmaceuticals, best known for Lirugen one-shot measles vaccine and Novahistine decongestants A second unit. Generic Pharmaceuticals, introduced 10 products in 1970 from facilities in St. Croix. U. S. Virgin Islands. Hanover. New Jersey; and Indianapolis. Indiana. A third unit. Diagnostics, introduced four new Diagnostest reagents sets, bringing to 14 the number of such tests designed for use in physicians' offices Coordinated research efforts by the various segments of our global Life Sci ences organization produced promising leads to treatments for certain types of cardiovascular diseases, inflammatory diseases (such as arthritis) and disorders of the nervous system Significant progress was recorded in the development of rubella (German measles) and mumps vaccines. Efforts are being made to combine one or both with L/rugen measles vaccine for greater convenience to patients and physi cians Broad clinical trials began on a new agent for lowering blood cholesterol, with introduction abroad a possibility in 1971 Agricultural Products Substantially improved performance characterized our world-wide agricultural products business in 1970. with sales and earnings well above the previous year Our herbicide business, soft in 1969. executed a turnaround on the strength of better prices and a larger share of market. Dollar sales of phenoxy herbicides (2.4-D. 2,4.5-T) increased sharply Sales of Tordon herbicide for rangeland brush control gained substantially in Latin America and Australia and were launched in the United States with a state registration in Texas: meanwhile, use of this herbicide for controlling brush on utility rights of way continued to grow, mainly in the U S. Dowpon grass killer was a significant contributor to our improved U S busi ness. with higher pricing and sales increases in the face of pressure from imported materials. Premerge herbicide gained federal clearance for an additional crop use (soybeans) and was used increasingly in combination with other herbicides Tavron herbicide for weed control in irrigated rice was introduced in The Philippines 12 New PoivfiLM 303 shrinkbundling film protects dairy prod ucts and wide variety ofother items in shipment andstorage. A Swedish beauty gives the nod to Touch Of Swede*/ hand lotion. Product won good acceptance from women m large US. regional market. ; STOOD 4561 Now it's "plastic hay. " Ruff- Tabs polyethylene roughage replacer mixed with feed stimulates digestive /wees in rumen ffirst stomach) of bovines. performs function normally requiring large quantities of hay New sight in Hong Kong --iceberg lettuce from U S. with freshness preserved by Tbycitepolystyrene film. Premerge dmitro weed killer was approved for an additional use--control of weeds at base of soybean plants. The herbicide is applied with precision directed-spray equipment. : ST0 0 04 5G2 Efforts to advance in the world ranching market began to show results as sales of our vaccines and insecticides for livestock increased and additional products were added Kedlor feed-grade biuret, a nonprotein nitrogen source for cattle, moved to U. S. customers in substantial amounts for the 1970-71 winter feeding season. The product sold very well in its first year on the market in Australia. The growing cost of natural feeds indicates a good future for Kedlor. Coyden coccidiostat for the control of poultry disease was successfully intro duced in Japan In its second year on the U S. market, the product achieved sales nearly equal to those of our older Zoamix coccidiostat Between them, the two con tinued to hold a major share of both the U S. and overseas markets. Our insecticides business, based largely on increased use of the relatively new Dursban insecticide, will be supplemented in 1971 by the return to market of Zectran insecticide Planned uses are control of spruce budworm in forest management, general insect control in nurseries, greenhouses and home gardening and control of fly larvae in poultry houses. Consumer Products Our established national-brand consumer products --Saran Wrap. Handi-Wrap, Dow Oven Cleaner. Dow Bathroom Cleaner --and five products in regional market ag gregated a 22% sales increase in 1970 Saran Wrap brand plastic film continued as the top-selling quality film food wrap on the market. Handi-Wrap brand plastic film again outsold all other poly ethylene wraps combined Products in various stages of regional marketing were Zip/oc brand plastic food storage bags, which moved to 50% of national distribution early in 1971. Handi-Wrap brand sandwich, storage and trash bags, our newest entries in the burgeoning bag market. a Dow Bathroom Disinfectant Spray, a product combining disinfection with an ability to destroy odors chemically. Aztec suntan products, our first entry in the personal-care market a Touch of Sweden hand lotion, an outstanding skin moisturizer, our second personal-care product. In Argentina, locally produced Dow-brand household cleaners sold well In Europe, arrangements were made to market Aztec suntan products through Gruppo Le petit. DOWELL DIVISION Environmental considerations on Alaska's North Slope and elsewhere, the reduction in the depletion allowance, and the high cost of money combined to curtail drillingrig activity in the North American petroleum industry in 1970. As-a result. Dowell Division's business servicing oil and gas wells declined in the last three quarters, and sales for the year were down. Although appreciable improvement in the industry is not anticipated until the second half, Dowell forecasts a better business year in 1971. Revenues from environmental services are expected to grow substantially. These include chemical sealing of settling ponds, small reservoirs and lakes; water clarification and dust control in the mining industry: and backfilling of abandoned coal mines. 14 Consolidated Statement of Income THE DOW CHEMICAL COMPANY AND SUBSIDIARY COMPANIES Products and Services Net sales................................... Operating costs and expenses. Cost of sales........................ Depreciation ........................ Selling and administrative . . Products and services operating income ... Non-Products and Services Investment and financial (Note I): Profit on investment turnover.......................... Income from sundry investments..................... Equity in earnings of Swiss banking subsidiary Administrative expenses ................................. Investment and financial income...................... Other: Dividends from associated companies............. Sundry income-net (Note J).......................... Interest expense --net ........... Non-products and services income (loss) Income Before Provision for Taxes on Income Provision for Taxes on Income (Note L|..... Income Before Minority Interests................ Minority Interests' Share in Income................ Income Before Extraordinary Items (Note J). . Extraordinary Items --net of tax (Note B)......... Net Income...................................................... Earnings per Share: Income Before Extraordinary Items.............. Extraordinary Items --n^' of tax (Note B) .... Net Income.................................................... See Notes to Financial Statements Year Ended December 31 1970 1969 SI .911.105.081 si.797.057.283 1.193.300.411 207.744.199 250.436.657 1.651.481.267 1.155.954.658 177.882.468 223.532.962 1.557.370.088 259.623.814 239.687.195 10.658.493 3.912.369 2.331.584 (1.974.248) 14.928.198 7,451.640 15.890.983 (73 521.590) (35.250.769) 11.117.707 2.572.591 2.112.725 (1.286.113) 14.516.910 9.278.203 26.213 026 (54.315.243i (4.307.10C) GO CT> o c_n t*a 224.373.045 88.100.000 136.273.045 3.977.670 235.380.091 81.500.000 153.880.091 5 157.778 132.295.375 (28,908.208) 148.722.313 S 103.387.167 S 148.722.313 $4.38 I 96) S3 42 $4 91 S4 91 15 Consolidated Balance Sheet THE DOW CHEMICAL COMPANY AND SUBSIDIARY COMPANIES m u io o is : ASSETS 16 Current Assets Cash .... ........................................................ Marketable securities and interest-bearing deposits (at cost--approximately market)....... Accounts and notes receivable: Trade, less allowance for doubtful accounts (1970 $11,470,611; 1969. $9.371.070)...... Miscellaneous.................................................... Inventories --at lower of cost or market: Finished and in process................................... Materials and supplies...................................... December 31 1970 1969 $ 30.280.740 $ 42.516.851 48.362.673 9C.895.715 349.640.162 95.329.549 316.425.596 113.570.252 256.734.955 111,504,818 891.852.897 202.701.375 86.368.200 852.477.989 Investments and Non-Current Receivables Carried at equity in net assets -- Wholly owned Swiss bank (Note A)...... Carried at cost (less reserves --1970. S7.885.004. 1969. $4,517,619): Non-consohdated subsidiaries............... Associated companies (Note C) ............. Notes, securities and other assets held for investment ...................................... Sundry ............................................................... Plant Properties (Note E) Cost.............................................. Less-Accumulated depreciation Goodwill (Note D)............................. Deferred Charges and Other Assets TOTAL ......................... 31.819 987 29.488.403 654.191 176.981.484 101.094.000 31.361.573 341.911.235 562.104 200.650.490 106.201.737 41.214.032 378.116.766 2.524.312.720 1.086.124.485 1.438,188.235 2.305.128.787 1.010,128,768 1.295,000.019 72,195.649 35.653.499 62,739.806 31.441.036 $2,779,801,515 $2,619,775,616 See Notes to Financial Statements LIABILITIES Current Liabilities Notes payable ....................................................... ... Long-term debt due within one year...................... Accounts payable................................................... United States and foreign taxes on income.......... Accrued and other current liabilities...................... December 31 1970 1969 S 229.255.553 61.980.998 150.566.715 56.770.254 144.732.366 643.305.886 S 337.752.058 16.615.938 140,544.515 51.603.401 133.967.646 680.483.558 Long-Term Debt (Note F)....................................... 969.844.553 797.992.233 Minority Interests in Subsidiary Companies......... 39.932.009 39.615.622 Reserves Deferred employee benefits (Note G)................... Loss on foreign investments........................... 19.168.418 5.000.000 24.168.418 16.435.768 5.000.000 21.435.768 Stockholders' Equity (Note H) Common stock (1970 --issued. 31.617.824 shares) Capital surplus......................................................... Earned surplus.............................................................. 158.089.120 585.046.077 454.802.305 1.197.937.502 157.152.870 574.699.429 430.696.301 1.162.548.600 Less--Treasury stock at cost (1970-1.413.829 shares)........................................ 95.386.853 1.102.550.649 82.300.165 1.080.248.435 TOTAL ..................................................... $2,779,801,515 S2.619.775.616 See Notes to Financial Statements 17 ; ST C0 0 'i 5 6 5 Consolidated Statements of Surplus Capital Surplus Earned Surplus Balance at Beginning of the Year......................... Add: Excess of selling or market price over par value of common stock issued to employees Excess of face value of debentures over par value of common stock issued on conversion. Deduct-- Retirement of treasury shares and transactions related to acquisition of subsidiaries........................................ Balance at End of the Year...................................... Balance at Beginning of the Year.......................... Add Net income for the year........................................ Adjustments related to consolidation of subsidiaries................................................... Deduct: Cash dividends...................... Retirement of treasury shares Balance at End of the Year....... Year Ended December 31 1970 1969 S574.699.429 S562.171.177 10.671.487 86.145 S585.457.061 12.284.061 244.191 S574.699.429 410.984 S585.046.077 S430.696.301 103.387.167 188.308 S534.271.776 78.499.230 970.241 S454.802.305 S574.699.429 S358.830.020 148.722.313 401.252 S507.953.585 77.257.284 S430.696.301 ' ST00345G6 Consolidated Source and Application of Funds Source of Funds (in thousands) Net income............................................................ Non-cash charges (credits) to income: Depreciation....................................................... Write-off investment in associated company.... Minority interests' share in income................... Equity in earnings of Swiss banking subsidiary Other --net.......................................................... Proceeds from sale of investments, less gams reflected in net income...................................... Funds provided from operations............... Issuance of debentures........................................ Sale of common stock to employees.................. Reserve transferred from current liabilities.......... Disposal of plant property and sundry............ I Application of Funds New plant and equipment........................................ (in thousands) Cash dividends...................................................... Purchase of treasury stock..................................... Decrease (increase) in revolving credit and other long-term debt............................................. Noncurrent investments.......................................... Increase in deferred charges and other outlays ... . Acquisitions of subsidiaries and purchase of minority interests: Working capital................................................. Goodwill............................................................. Other --net......................................................... Increase (decrease) in working capital 18 Year Ended December 31 1970 1969 $103,387 S148.722 207.744 43.367 3.978 (2.3321 9.316 177.882 5.158 (2.113) 5.560 13.094 378.554 274.000 10.258 3.858 S666.670 7.436 342.645 100.000 1 1.996 12.081 17.851 S484.573 S348.C99 78.499 15.969 S370.579 77.257 14.769 108.074 19.484 4.660 (13.680) 38.813 8.706 2.178 9.456 3.699 590,118 S 76.552 17.877 2.721 517.042 S (32.469) Notes to Financial Statements 6: ST C0 0 45 1 A. Principles of Consolidation The financial statements include all significant subsidiaries on a full consolidation basis, except for a wholly owned Swiss banking company which is accounted for on the eauity basis. Accordingly, if the bank were consoli dated. there would be no effect on consolidated net income and stockholders' equity as reported During 1970. several minor subsidiaries were acquired. One acquisition was accounted for as a pooling of interests: the others were accounted for as purchases. The effect of these acquisitions on the results of operations was not material. Foreign currency items have been translated into U S dollars at appropriate rates of exchange. Finan cial information regarding foreign operations is pre sented on page 23. B. Extraordinary Items During 1970. Phrix-Werke A G.. a 50%-owned German fiber producer, experi enced financial difficulties which resulted in a decision to begin significant curtailment of its activities While all factors regarding the future of Phrix were not de terminable at December 31. 1970. Dow management considered its investment therein to be worthless Accordingly, income was charged with S31.073.000. or SI.03 a share, representing the cost of the investment in Phrix. after income lax reduction of $12,294,000 Investments in two additional 50%-owned com panies were disposed of during 1970 at a profit of S2,165.000. or S 07 a share, after income tax of $710,000 The foregoing resulted in an extraordinary charge of S2S.908.000. or $.96 a share C. Associated Companies Investments in asso ciated companies represent a 50% interest in several domestic and foreign companies. The Company's equity in the combined net income of these companies, as shown by their unaudited financial statements, was S8.700.000 in 1970 and S2.200.000 m 1969 The equity in the undistributed net earnings of these companies since acquisition was approximately S25.000.000 at December 31. 1970. The associated companies re ferred to in Note B were excluded from the equity determinations. D. Goodwill The excess of the cost of investments in consolidated subsidiaries over their net assets at dates of acquisition is carried as goodwill Recently promulgated accounting rules provide for compulsory amortization of goodwill arising after October 31. 1970. All goodwill in the accompanying balance sheet relates to investments acquired prior to November 1. 1970. In r^e opinion of management, these investments have appreciated in value since acquisition, and no amortization of goodwill was re quired in 1970. E. Plant Properties Properties and accumulated depreciation at December 31. 1970 were: Classifications (000 omittsd) Accumulated Cost Depreciation Land and waterway improvements....................... Buildings.................................... Machinery and other equipment.............................. Wells and brine systems ...... Furniture and fixtures............. Other ..................................... Construction in progress ..... Total............................ S 52.080 50.870 286.666 1.816.035 39.346 27.514 21 378 230.424 $2,524.31 3 S 21.936 120.020 893.369 22.909 14.554 10.985 2.351 $1,086 1 24 Depreciation in the United States and Canada is computed primarily under the declining-balance method, whereas in other countries the straight-line method is generally used. F. Long-Term Debt & Available Credit Facilities (a) Details of long-term debt were: (000 omitted) December 31 1970 1969 Promissory notes 4 5%. final maturity 1990................. 5 0%. final maturity 1991................. $115,000 $120,000 96.000 100.000 Debentures 4.35%. final maturity 1988.............. 6 70%. final maturity 1998 ........... 7 75%. final maturity 1999 ............ 8 875%. final maturity 2000 .......... 8 90%. final maturity 2000.............. 79.010 100.000 100.000 142.000 132.000 84 134 100 000 100 000 Debentures, subordinate convertible. 3% due 1982 (1970-22.184 common shares reserved) .. .. Notes payable under revolving credit agreements 1.085 1.181 Due 1973 Itotal available facility S225.000.000)......................... Due 1975 (total available facility S110.000.000l................................ Other (various rates and maturities) Foreign currency loans.................... Dollar loans......................................... 40.000 117.769 46.981 125.000 112.985 54,692 Total ......................................... S969.845 $797,992 The promissory notes and debentures are payable generally in annual installments beginning at various dates Agreements relating to the issuance of the 8 875% and the 8.90% debentures provide for delivery of $8.000.000 and SI8.000.000 principal amounts, re spectively. subsequent to December 31. 1970 The debentures are recorded as debt when proceeds are received 19 ; $ T G0!U 5 6 8 ' Installments (stated in millions) due on long-term debt in the five years after J970 are: 1971. $62.0. 1972. S31 6; 1973. $46 2; 1974. $39.5: 1975. $83.6. (b) Available credit facilities at year-end: In addition to the revolving credit agreements referenced above, the company had a 10 billion Deutsche mark agreement with a group of major German banks exercisable through 1974. Of the Ger man credit facility, 30.0 million Deutsche marks were in use at December 31. 1970. G. Deferred Employee Benefits Certain foreign subsidiaries provide termination benefits to employees in amounts stipulated by law. It is the companies' policy to accrue for these benefits as earned. H. Stockholders' Equity At December 31. 1970 authorized capital stock consisted of 100.000.000 common shares and 25.000.000 preferred shares of S5 par and $1 par per share, respectively The changes in the number and amount of issued shares of common stock during 1970 were Shares Amount Issued January 1................... Sold to employees.............. Awarded as restricted stock Conversion of debentures . 31.43C.574 166.583 18.705 1.962 S157.152.870 832.915 93.525 9.810 Issued December 31 31.617.824 S158.089.120 At December 31. 1970, there were 30.203.995 shares of common stock outstanding, after deducting 1.413.829 shares of treasury stock. None of the pre ferred shares have been issued. In May 1970. the Company made an offering of common stock to its employees at $57.75 a share, payable generally through payroll deductions. At December 31. 1970. there were unfilled subscriptions for 151,541 shares which may be cancelled at the option of the employee. Partial payments on these subscriptions aggregating $5,814,000 are included in current liabilities. The stockholders authorized in 1969 an Award Plan providing for the granting, during the ensuing ten-year period, of 350.000 shares of Restricted or Deferred Stock, or a combination thereof, to selected employees in lieu of cash for services. During 1970, 18.705 shares of Restricted Stock were issued and 745 shares of Deferred Stock were awarded. At Decem ber 31, 1970, there were 312.635 shares available for grant. The Plan also extended to May 1979 the previous authority for granting dividend units. The stockholders previously authorized plans for granting options to purchase common stock at the fair market value at the date of grant to officers and key employees. The options must be exercised within five years from the date of issuance. Changes during 1970 in the number of shares under option were: 1967 Option Plan 1964 Incentive Plan Dividend Units' Options: Outstanding January 1... . 300.247 Granted ............................ 30.000 Expired or terminated .... 1.500 Outstanding December 37..................... . 328.747 Not optioned December 31..................... 71.253 Price range on outstanding options S6t.44 to at December 31............... . 87.00 82.350 61.420 15.600 66.750 61.420 188.580 560 00 to 76.25 A dividend unit is the right to receive for a specified penod cash payments equivalent m value to cash dividends paid during such period on one share of common stock. In computing earnings per share, no adjustment was made for common shares issuable under stock purchase and option plans or upon conversion of 3% debentures because there would be no material dilutive effect. I. Investment and Financial Income Except for the earnings of the Swiss banking subsidiary, invest ment and financial income relates generally to the companies' investment activities. The assets held for investment appreciation, excluding working capital, are shown in the balance sheet caption--Notes, securi ties and other assets held for investment Profit on investment turnover represents gain on disposition of these investments. Income from sundry investment in cludes dividends and lease income. J. Special Credits--1969 Sundry income for 1969 included $7,928,000 representing profit on dis continuance of several small product lines, which after income tax contributed $6,305,000 to net income, equivalent to $ 21 a share. 20 S T 0 0 U4 5 6 9 K. Retirement Plans The Company and certain subsidiaries have plans to provide retirement benefits for eligible employees. The Company's plan was amended effective January 1, 1970 to extend coverage to substantially all full-time employees and to provide additional benefits. The cost of the plan was $14,398,000 in 1970 and $13,634,000 in 1969. The Company's policy is to accrue and fund pension cost as computed by its actuary. Pension fund assets ex ceed the actuarially computed value of vested benefits. The total cost of pension plans for all companies in the consolidated group in 1970 and 1969 was $17,177.000 and $14,987,000, respectively. These plans exclude the deferred employee bene fits referenced in Note G L. Taxes on Income and Investment Credits The companies compute and record income taxes cur rently payable based upon their determination cf taxable income which may be different from pretax accounting income These differences may arise from recording in pretax accounting income, transactions which enter into the determination of taxable income in another period. The tax effect of these timing dif ferences is recognized by adjustment currently to the provision for taxes Accordingly, the 1970 and 1969 tax provisions were reduced by $73,000 and S3 817.000. respectively No provision has been made for income taxes on the unremitted earnings of subsidiary companies, except as required under United States income tax laws Untaxed earnings are considered to be either permanently invested or the tax applicable thereto would not be material. Laws governing the determination of United States and certain foreign income taxes provide for investment credits or allowances which are deductible generally upon completion of qualified facilities. The provision for taxes on income in 1970 and 1969 was reduced S9.100,000 and $18,100,000. respectively, for such credits claimed in those years In addition to investment tax credits, certain for eign countries provide investment incentives in the form of tax free grants. These grants were utilized in 1970 to the extent of $200,000 to offset development and construction expenses of new facilities to which they relate. The excess of the grants earned over ex penses incurred was deferred to cover similar expenses in the future at those facilities. Agreement was reached in 1970 with the Internal Revenue Service on all contested tax assessments for 1956 through 1964. M. Contingent Liabilities and Commitments The Company's position on mercury pollution litigation is discussed on page 36. Other suits have been started against the Company and certain subsidiaries because of alleged product damage and other claims. All suits are being contested and the amount of uninsured liability thereunder, if any. is considered to be im material. Lease rental payments (stated in millions) due in each of the five years after 1970 are: 1971. $36.3: 1972. $31.9; 1973. S30.5; 1974. $28.1; 1975. $25.9. Opinion of independent Public Accountants HASKINS & SELLS ctffnto uoucACcouNf4Nrs 1330 GoA*BM OITnorr February 19. 1971 THE DOW CHEMICAL COMPANY We have examined the consolidated balance sheet of The Dow Chemical Company and its subsidiary companies as of December 31. 1970 and the related consolidated statements of income, surplus, and source and application of funds for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered nec essary in the circumstances. In our opinion, such financial statements present fairly the financial position of the companies at De cember 31. 1970 and the results of their operations and the source and application of their funds for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. 21 Condensed Comparative Statements THE DOW CHEMICAL COMPANY AND SUBSIDIARY COMPANIES : s T00 0h570 Financial Condition (in millions) Current Assets Cash and marketable securities......... Receivables (less reserves) .............. Inventories ........................................ Total current assets ......... Current Liabilities: Notes payable ................................ Accounts payable and accruals ...... Taxes on income Total current liabilities .. . . Working Capital........................................................ (A] Property (at cost] .............................................. Depreciation......................................................... Net property ..... ................................. I 3) Other Assets .....................................................(C) Investment (A) plus (8) plus {C).......................... (Oj Long-term Indebtedness.......................................... Preferred Stock .................... .................. Minority Interest Reserves ............................... ............. Total ............................................................(E) Common Stockholders' Equity |D) minus (E) .. Income (in millions) Net sales of products and services Cost of sales Depreciation............................. Selling and administrative expenses ............. .. Products and services operating income Investment and sundry income -- net . Interest income (expense} . .. Non-products and services income I loss) Taxes on income ........... ....................... Minority interests' share in income Net income before extraordinary items Net income after extraordinary items Other Statistics (in millions) Additions to property........ Research and development expenses................. Taxes (maior) ........................... Wages and salaries paid............... ............ Cost of employee benefits................................... Number of employees at year-end (thousandsl Cash dividends declared on Common Stock Per share of Common Stock (in dollars) () Earnings before extraordinary items Earnings after extraordinary items . Cash dividends paid............................ Market closing price on December 31 {) Adjusted tor stock splits and stock dividends 22 1970 1969 1968 196.7 1.966. t,Wi WJl S 78 6 445 1 368 2 891 9 S 1334 430 0 289 1 852 5 S 141.7 357 9 276 3 775.9 S 104 5 307 0 2166 628 1 5 127 2 254.9 195 2 577 3 S 50 8 114 9 162 9 328 6 S 43 3 30 1 34 0 107 4 229 3 357,2 568 643 3 248 6 2.524 3 1.086 1 t .438 2 449.7 2.136 5 969 8 39 9 24 2 1.033 9 SI.1026 337.8 291 1 51 6 680 5 172 0 2.305.1 1.010 1 1.2950 472.2 1.939 2 798 0 39 6 21.4 859 0 SI.0802 246 5 272 4 62 5 571.4 204 5 2.060 4 933 4 1.127.0 409 3 1.740 8 684 6 41 6 50 731 2 SI.009 6 175 5 199.0 45 7 420.2 207 9 1.7560 859 9 896 1 389 0 1.493 0 551 6 8 50 557 4 S 935 6 58.8 176 5 53.1 288.4 288 9 1.673 5 823 8 849 7 279 2 1,417.8 552.3 8 50 558 1 S 859 7 96 4 74 5 28 2 199 1 129 5 1.228 1 633 8 594 3 52 6 776 4 140 9 1.6 142 5 S 633 9 24.8 192 44.0 63 4 299 6 87 5 212 1 78 283 3 62.6 46 4 .9 e 110.7 $172 6 SI.911 1 1.1934 207 7 250 4 259 6 SI. 797.1 1.1 56 0 177 9 223 5 239 7 SI.652.5 1.053 3 157 2 2135 228 5 SI.38 2 7 883 2 136 0 148 6 2149 SI.309 7 842 4 122 6 1428 201 9 S 8198 519 2 81 9 103.8 114 9 S220 8 133 5 20 3 160 51 0 38 3 173 5) (35.21 50.0 154 3) 14 3) 37 4 (33 9) 35 26 1 (21 0) 51 197 (17.6) 21 12 9 (6.3) 66 38 (1 5) 23 88 1 40 S 132 3 S 103 4 81 5 52 S 148 7 S 148 7 92.0 40 S 136 0 S 136 0 87 7 S 132 3 S 132 3 81 3 S 122 7 S 122.7 50 8 ( 11 19 5 S 70 8 S 70 8 S 33 8 S 33 8 S 348 1 915 136 5 440.6 67 8 47 4 78 5 4.38 3 42 2 60 73 63 S 370 6 87.3 140 7 4155 59 1 47 4 77 3 4 91 4 91 2.50 68 63 S 306.3 838 144 5 389 3 50 8 47 4 72 5 4 51 4 51 2.35 78.00 $ 192.3 76 8 125 9 325 6 36 2 364 66 1 4 41 4 41 2.15 87.13 S 2415 71 3 1)6 5 302 1 32 9 35 0 59 9 4.09 4.09 195 61 63 129 0 47 3 75 7 209 8 22 1 30 5 39 6 S 290 110 267 552 55 145 10 1 2 34 2 34 1 32 74 63 144 144 46 7888 World Operations Idollars m millions) Latjgwnejici] fPacjfiy TOTAT miiii<yiyiwi ,1 1 ,.o| --SALES _, , . .v PRODUCTS AND SERVICES ; O' OPERATING INCOME 1970 3WB& , , 1969 \ *1*E % Change E3 ' 1970 % cl Total Company !2 1970 TUW <0 caw =3306? 2 j tU 26.2J n flKJIM I JS> j >i3Q ] m <m j | | 1.._J2G> & i ;m. j I23B WEZM m m m V*|dolTrs __ millions) r- *y ^uhV',' i-t--,.-'r t-.--; ^ " GROSS PLANT PROPERTIES 1970 ^ ^1970 % o1~ ; 1969 _ Total Company mm I grew IHSX ------- ---^rr^rrrrrsag' CAPITAL EXPENDITURES ir - --.i.^ii >. ji.-i vc: 5^1970 % o11 1370 1369 Total Company v EMPLOYEES'''"^: 1 (thousands) j JLl8?0- ' ft 3 II o \m>i i Wi57? WEE7^0.8^ mzm M<*Vs^ 155 TtotaTT i, .w....^ $2.5\243.***'! 'r$2,305.1 ^100.0 ; $348.1 .100.0 .47.4 UNITED STATES Hourly worker--Michigan Dow's weighted index of U S selling prices gained 0.7% in 1970 This was the first increase since 1957 But higher costs (including the cost of money) and softness in the economy combined to depress our income from U. S. operations. Agricultural Products paced all others in earnings improvement, followed by the Inorganic Chemicals and Solvents Department. Metals, and Packaging Plastic resins achieved a moderate earnings gain despite lower sales. U. S. operating earnings in the current year are expected to continue at the 1970 level, with slightly higher prices for Dow products being offset by continued cost escalation and little growth in demand. New plant start-ups in the U. S again were at a record level as more than S240 million worth of new facilities came on stream. The largest concentration was in the Louisiana Division and featured a new ethylene oxide and glycol facility costing in excess of S25 million. Multi-million dollar caustic-finishing plants were completed and brought on stream in the Louisiana Division and the Oyster Creek Division in 23 Biggest Dow capital protect completed in 1970 was ethylene oxide and glycol plant world's largest, in Louisiana Division. Coo/rng tower in foreground minimizes discharge of heated water to Mississippi River J /STC0 5 2 Largest solvents plant in western U.S. came on stream at Dow s Western Division plant m Pittsburg. California -. New low-density polyethylene plant in the Texas Division is based on a technologically advanced process for producing resins for high clarity film. Plant operators - Michigan Texas. No unusual start-up problems were encountered in any of our projects. Exist ing facilities operated at 81 5% of capacity, a slight decline from 1969's 83%. As a result of relatively heavy capital spending, nearly 50% of our present U. S capacity is new within the past five years. For this reason and because of high construction costs and slowness in the economy. Dow's U S. capital spending in 1971 will be significantly lower. The rate of new authorizations has been reduced, and several previously authorized projects have been "stretched out" where such delays will not penalize us in the market place. Start-up costs, which are burden some no matter how smooth the start-up. thus will be better spaced, and more personnel will be available to extract operating economies from existing plants. Dow's Engineering and Construction Services provided design engineering and construction administration for 102 major projects at 16 operating locations. During 1970. Dow became a partner in Promix. a joint operating company formed in the 1960s by three petroleum companies We now own one-fourth of the assets of Promix. which owns pipelines and separation facilities for natural-gas liquids in southern Louisiana In addition to sharing in the earnings of this profitable enterprise. Dow has entered into an extended-term agreement with Promix to supply hydrocarbon feedstocks for Dow's Gulf Coast operations thus assuring a con tinuing supply of these vital materials. Government Business Direct sales of products and services to the United States Government declined moderately to 1% of our total consolidated sales. Our business decreased with the Department of Defense and the Space Agency but improved with non-defense agencies. Reflecting the shift of emphasis in government spending. Dow activity in creased in federal, state and local programs dedicated to enhancing the quality of life These included environmental improvement, transportation, health and educa tion. and housing Dow broadened its contract research and development programs with government agencies, and gained acceptance of additional products and services, in these newer areas. Liaison was provided by our Government Affairs Department. The Catalytic-Dow joint venture, which provided engineering services at Ken nedy Space Center. Florida, was completed and terminated at mid-year A number of key Dow personnel from this effort were assigned to other positions in the Company EUROPE/ AFRICA Dow's operations in Europe experienced a fine year, with a strong sales gam and a ma|or increase in the area's contribution to total operating income. Although the European economy was somewhat less vigorous than in 1969. generally good business conditions prevailed. This included further strengthening of chemical prices. European plant completions in 1970 totaled 5131 million At Terneuzen. the 400.000 metric ton naphtha cracker completed in late 1969 was brought on stream and produced ethylene, propylene, butadiene and benzene in planned quantities STOOU4573 25 1' ST0 0 045 4 Plant manager --Greece Construction of a second naphtha cracker at Terneuzen was started Work also was started on the chlorine-caustic-solvents complex at Stade, West Germany, with the first production units due on stream in late 1971 or early 1972 Our investment at Stade is expected to total S250 million by 1975 With the permission of the Spanish government. Dow successfully made a public offer to purchase class A shares of Dow-Unquinesa of Spain from share holders. Aim of the offer was to increase Dow's ownership from the present 54% to about 80% -- the level deemed necessary for Dow to commit the resources nec essary to assure a profitable future for the Spanish company --and 85% ownership actually was achieved CANADA Sales of Dow Chemical of Canada, Limited increased to a new record high Oper ating income was again caught in the squeeze between price attrition and further increases in the costs of employment, raw materials and energy The best marketing gains were seen in inorganic chemicals and human and animal health products Consumer brands and all major plastics also performed well. Sales of some products were curtailed by lengthy strikes in the construction and automotive industries and by the effects of tight money and relative flatness in the economy The sharp gam m inorganic chemical sales reflected Dow Canada's strong position in the pulp and paper industry, whose production levels continued to run high. Distribution services to customers in this industry were further strengthened with the addition of a liquid caustic soda bulk storage depot at Botwood. New foundland Sales to export markets again accounted for about 10% of Dow Canada's output. The main export products were glycols, solvents, styrene, polystyrene and benzoic acid. Capital expenoitures of $25 million again were concentrated at the maicr works in Sarnia. Ontario A new manufacturing location at Varennes. Quebec, started operations with a plant for Styrofoam and Roofmate brand plastic foams Negotiations were begun for the purchase of land in the deep-water Canso Strait area of Nova Scotia as the possible site of a future Dow Canada production complex. LATIN AMERICA Growth amid change was the keynote for Dow's Latin American operations in 1970 Seven republics acquired new administrations, and a wide variety of political and economic conditions prevailed. For most of the area's regional offices. 1970 saw results not only above 1969 levels but also above their goals for the year. Among the major regions, plant expansions and local production acquisitions, coupled with a robust increase in sales of U S. Area-produced products, contributed to outstanding gains m Brazil. Colombia, and Mexico The smaller sales regions also prospered. Peru and Central America based their substantial sales increases on U S Area exports, but the year also saw the beginnings of intra-area sales of products produced in Dow plants in the regions 26 sm ooois. At the Terneuzen complex in The Netherlands, a second styrene facility fright in photo) was ma/or plant completion. Dow's giant naphtha cracker at Terneuzen was started up successfully and work on a second cracker was started. Dow extended its plastic-foam production to eastern provinces with new plant in Varennes. Quebec. Dow's research and development capability in Canada was expanded with completion of S3 million center at Sarnia. Ontario. 27 Secretary --Cora! Cables Since 1966. when the Latin American Area was established. Dow's sales in the area have grown annually at an average rate in excess of 20%. A large portion of the plant construction program begun in 1968 was com pleted Biggest unit is the petrochemical complex at Concepcion. Chile; built with Chilean government participation, it will produce polyethylene, vinyl chloride mon omer and polyvinyl chloride resins. Progress on future investments assuring additional local production was substantial Dow received approval from the government of Argentina to proceed with planning for a petrochemical complex at Bahia Blanca, and both Argentine private capital and a government corporation signified an interest in joining the venture ST0004576 PACIFIC Sales Manager --Hong Kong Dow's growth in the Pacific continued in 1970 despite mixed business conditions throughout the area in the second half of the year. Reduced demand in the United States for the products of Pacific countries dampened economic growth in Japan and the South Asia and East Asia regions Labor disputes and an extended drought were added factors slowing the economies of Australia and New Zealand. As a result, many products manufactured by Dow were in excess supply and prices were under considerable pressure. However, we were able to exceed our sales and profit goals on the strength of continuing firm over-all demand for Dow products, selective price increases, a broadened product base and the availability cf product from three new production plants in the area. In Japan/Korea, our largest volume region, sales were up 36%. The loss of some plastics business (the result of severe price competition from Japanese producers) was offset by commodity and specialty chemicals, especially Chloro thene solvents and Coyden coccidiostat. the latter newly introduced to the Japanese poultry feed-additive market. Australia/New Zealand posted a 27% sales increase The prolonged Australian drought prompted the introduction of Kedlor feed-grade biuret, a non-protein nitrogen source for cattle and sheep, six months ahead of schedule South and East Asia sales were up 9% INDUSTRIAL RELATIONS 28 The number of people employed by Dow and its consolidated subsidiaries at the end of 1970 was 47.400. unchanged from the previous year. However employment within the United States declined by about 1.400 while increasing by the same number abroad. A nine-week work stoppage by hourly employees occurred during wage negotiations at the Rocky Flats Division, but the plant continued in operation with salaried employees. Six other hourly labor contracts were concluded without incident. The strike at the Indianapolis Division, longest (18 months) in the Com pany's history, was ended by a decision of the employees to dissociate from union representation Despite the softer economy in the U S . increased sales per employee were achieved The world-wide cumulative accident frequency rate among Dow employees in 1970 was the lowest since the Company began keeping records and was one of the best in all industry. Improved yields tn Philippine nee cultivation are expected from use of Tavronherbicide to control weeds in irrigated fields. Latin American phenomenon --retail stores selling only plastic articles. This Bogota outlet is supplied by local industry using Dow's made in Colombia polystyrene and polyethylene resins. Dow Corning introduced Rust Patrol a pastehke rust dissolver. Packaged in eight-ounce plastic squeeze bottle. the product is being test-marketed in selected hardware stores. /m oons Carpet of ZlxxROMt yarn by Dow Badische provides durable floor covering for schoolers. Yarn contains 3% ZeeSTAT yarn to keep static electricity below noticeable levels. New workboat puts Dowell Division in position to gain larger share of expanding market for cementing and acidizing services to offshore wells on Gulf Coast. 29 INVESTMENT & FINANCIAL In its second year of formal organization, the Ventures, Investment and Finance Company Division contributed $ 25 per share to Dow's earnings. This division handles business acquisition and disposition activities, invests in venture-capital businesses and manages an investment portfolio. Its resources exceed $100 million (at cost) and include loans and land as well as equity investments. Its objec tive is capital appreciation from its investments Some examples will demonstrate the diversity of the Ventures Division's interests Through an equity-capital investment, the division in 1970 acquired a majority position in a manufacturer of X-ray generating equipment for medical therapy, science and industry. Minority positions were acquired in firms making medical X-ray and diagnostic equipment. The division invested in an Alaskan housing venture, and a joint company was formed to develop land in the south west for housing and other uses. The division plans its investments by its own investment criteria, not by any resultant sale of Dow products. Earnings of Dow Banking Corporation, a wholly owned subsidiary, increased by 11% as the Eurodollar market continued its vigorous growth. DBC. which is incorporated in Switzerland and has its head office in Zurich, opened a full-service branch in the City of London and a representative office in New York in 1970. The Amsterdam branch, established in 1969. became a fully authorized Dutch bank, serving corporate customers and financial institutions in the Benelux countries. In Luxembourg. DBC acquired 50% of Eurocapital S A . which will begin operations as a multinational underwriter of securities in 1971. Bank Mendes Gans. Amsterdam. The Netherlands, continues to perform an excellent function as Dow's European money collection center, as it has since we obtained a substantial minority position in 1962. Dow in 1970 further expanded its large minority position in Banco Cidad^/q de Sao Paulo S.A.. a rapidly growing commercial bank, headquartered in Sao--t Paulo. Brazil. 0C:D3 RESEARCH & DEVELOPMENT Chemist --United Steles cn ~^i Dow's support of Research and Development, although not keeping pace with cosP3 inflation, increased $4 million to a total of $91 million in 1970. This included fund ing for pilot-plant operations and technical service An increased proportion of research and development effort was devoted to the broad field of environmental improvement Involved were. Development of products and techniques for controlling solid, liauid and gaseous wastes, which eventually are utilized in our own plant operations and/or marketed to others through our Environmental Control Systems busi ness. Included was research on new strains of bacteria to degrade chemical wastes not previously biodegradable Development of new categories of toxicological data for Dow products --a further extension of the broad program started by our Toxicology Laboratory, which was founded in the early 1930s Intensified studies of the effect of agricultural chemicals on the ecosystem New testing requirements have increased to eight or 10 years and $10 million the time and cost of taking a new pesticide from discovery to market. 30 A number of important new products and processes commercialized in 1970 are described m the World Operations. Products, and Environmental Relations sections of this report Other significant developments included: In designed chemicals --a flocculant lor the paper industry that reduces the loss of paper-fiber fines and pigments and speeds water drainage on the papermaking machine, thus saving raw materials and reducing pollution, vinyl ester resins with wood-like properties In organic chemicals -- polyglycols for improved flexible and rigid urethane foams for automobile seating and furniture. In plastics --high-density polyethylene resin and a special surface treatment for automotive gasoline tanks offering lower hydrocarbon vapor loss, easier installation and greater puncture resistance A new laboratory was established in Greenville. South Carolina, to develop chlorinated-solvent dyeing processes for the textile industry. Dow was issued 421 new U.S patents in 1970 At year's end. the Company's portfolio of active patents included 5.962 U.S. and 8.508 from other countries More than a third of all Dow patents are in actual use by the Company or its licensees STC0 045 1 9 SIGNIFICANT PLANT COMPLETIONS IN 1970 riu.'ir Antibiclics.................................. Chlorine...................................... Chlorine/Ceustic Soda............... Caustic Beads............................ Caustic Soda............................... Dursban insecticide................... Dowftakt calcium chloride......... Epoxy resins.......................... Epoxy resins............................... Epoxy resins............................... Ethylene/propylene.................... Ethylene dibromide.................... Ethylene oxide/glycol................ Laminating/coating facility ...... Light-metal extrusions.............. Light-metal extrusions.............. Polyethylene............................... Polyethylene.............................. PotyfUm polyethylene film........ Polyvinyl chloride...................... Separan flocculants................... Styrene........................................ Styrene-butadiene latex ............ Styrene-butadiene latex............ Styrene-butadiene latex.......... Styrofoam plastic loam............. Styrofoam plastic foam............ Thurane plastic foam ............... Vinyl chloride............................. Vinyl chloride.............................. Ziploc plastic bags.................... ......... Brindisi. Italy....................................................... NL ......... Midland. Michigan................................................ ME ......... Plaquemine. Louisiana..................... ......... ME ......... Midland. Michigan............................ ......... NO ......... Oyster Creek. Texas........................................... NL ......... Midland. Michigan.............................................. ME ......... Midland. Michigan............................................... NP ......... Altana, Australia............................................... NA ......... Sao Paulo. Brazil............................. ......... NA ......... Torrance. California......................... ......... NL ......... Plaquemine, Louisiana........................................ ME ......... Magnolia. Arkansas......................... ......... NL ......... Plaquemine, Louisiana........................................ ME ......... Cleveland, Ohio.................................................... ME ......... Cenver. Colorado............................. ......... NL ......... Russellville. Arkansas.................. ......... NL .........Concepcion. Chile .............................. ......... NA .........Freeport. Texas..................................................... ME ......... Honolulu, Hawaii............................. ......... ME ...... Concepcion. Chile............................. ......... NA ......... Tlalneplantla. Mexico...................... ......... NA ......... Terneuzen. The Netherlands.......... ......... ME ......... Altona. Australia............................. ......... NA ......... Livorno. Italy..................................... ......... NL ....... San Lorenzo. Argentina................... ......... NA ......... Orusenheim. France............................................. NL ......... Varennes. Quebec............................ ......... Ironton. Ohio..................................... ......... NL ......... NL ......... Concepcion. Chile............................. ........ NA ......... Sarnia. Ontario................................ ......... ME ......... Bay City. Michigan.......................... ......... ND Nl - New lo At* location M - Motor eipanno* at An location NO New to Dow NA - New to An Dow Area. NP - Replacement plant with new proctu technology 31 ' ST0004500 PARTLY OWNED COMPANIES Dividends from 50%-owned companies, whose operating results are not consoli dated in Dow's financial statements, totaled $7.5 million, compared to $9.3 million in 1969 Excluding operating losses of Phrix-Werke A.G . Dow's equity in the net income of the companies as a group improved markedly, rising to $8.7 million from $2.2 million in the previous year as a principal U S company began to over come its operational difficulties. We elected to write off our entire investment of $43.3 million in Phrix-Werke. a German fiber producer whose business was heavily concentrated in rayon fibers. A combination of circumstances forced Phrix into financial difficulties in 1970 Devaluation of the French franc, revaluation of the German mark and a wage in crease in excess of 20% in late 7 969 all came at a time when German fiber prices were dropping sharply Although some Phrix plants continue to operate, our ap praisal indicated a write-off of the investment as the conservative course Highlights of the 50%-owned companies in 1970 were as follows, with indi vidual companies listed in order of sales volume: Dow Corning Corporation, Midland. Michigan -- In common with many other industrial-material suppliers, Dow Corning felt the pressures of the declining U S. economy but experienced continued growth abroad The company is aggressively developing new materials technology and. through ongoing improvement in basic production techniques, leading to more attractive prices, is opening up new and broader applications for silicones. Asahi-Dow Limited, Tokyo. Japan -- Our oldest foreign joint venture enjoyed record sales and profits. Design work was completed for a plant to produce Chioro thene solvents, representing the company's first move into non-plastic products. Dow Badische Company, Williamsburg. Virginia -- Sales reached substantial new highs despite the downturn in the U.S. economy. Sales of chemical products were at record levels for the fourth consecutive year Fiber sales gained 30% over 1969 Since 1966. Dow Badische has oriented its fibers marketing effort toward the knit apparel and carpet industries, both substantial growth markets In 1970. the company made significant progress toward overcoming its start-up and devel opmental difficulties The Anderson. South Carolina, plant for Anavor polyester and Vivana nylon ran essentially at capacity in 1970. A 40% capacity expansion was completed early in 1971. Dow Badische recently acquired full ownership of Uni versal Textured Yarns Inc., engaged in texturizing several types of yarns, and announced its 90% ownership of Bentex Mills Inc . engaged in commission knitting, dyeing and finishing of fabrics. Dowell Schlumberger, London. England, and Paris. France -- Revenues of Dowell Schlumberger. which performs the same oil-industry services in the rest of the free world as our Dowell Division in North America, increased 6%. The in ternal situation in Libya caused a major sales decline in that country as well as a slight reduction in over-all earnings. A company in which we hold a minority interest. Austral-Pacific Fertilizers. Brisbane. Australia, experienced financial difficulties, primarily because of strained conditions in the fertilizer market. Dow and Swift & Company, the principal stock holders, have agreed in principle with I.C.I. of Australia and New Zealand to merge their fertilizer interests in eastern Australia in a new company. Consolidated Ferti lizers. Limited. The merger should improve the performance of all facilities involved. 32 The Dow Chemical Company CORPORATE HEADQUARTERS: MIDLAND, MICHIGAN ST000. 58I UNITED STATES AREA/Earle B. Barnes. General Manager Headquarters: Midland. Michigan SALES OFFICES IN 24 Cities o 29 MANUFACTURING LOCATIONS in 18 STATES Arizona Tucson Arkan sas Russellville California Fresno. Pittsburg. Torrance Colorado Denver. Golden Con necticut Gales Ferry Georgia Dalton Hawaii Honolulu Louisiana Plaquemine Michigan Bay City. Ludington. Midland Minnesota Biwabtk Missouri Cape Girardeau. Pevely New Jersey Carteret Ohio Cleveland. Findlay. Ironton. Newark* Oklahoma Tulsa Pennsylvania Royersford Texas Freeport. Oyster Creek Utah Ogden (under construction) Washington Dallesport (under construction) o principal partly owned companies* Dolco Packaging Corp . Los Angeles. California Dow Badische Company. Williamsburg. Virginia Dow Corning Corporation. Midland. Michigan The Kartridg Pak Co.. Davenport. Iowa DOW CHEMICAL EUROPE S.A./ Zoltan Merszei. President Headquarters: Zurich, Switzerland OFFICES in 18 CITIES o 14 manufactlRing locations in 8 COUNTRIES: France Drusenheim Germany Greffern: Stade (under construction) Greece Lavrion Italy Livorno The Netherlands Rotterdam. Terneuzen Spam Barcelona. Bilbao. Santander, Tarragona Sweden Norrkopmg (under construction)* United Kingdom King's Lynn. England. Barry. Wales o principal Partly Owneo companies': Compagme des Services Dowell Schlumberger. Paris. France* Dowell Schlumberger Corporation. London England Lurex N.V.. Amsterdam. The Netherlands Phrix-Werke A G . Hamburg. Germany DOW CHEMICAL OF CANADA, LIMITED/ LeRoy D. Smithers. President Headquarters: Sarnia. Ontario SALES OFFICES in 6 CITIES o 10 MANUFACTURING LOCATIONS IN 4 PROVINCES Alberta Edmonton. Fort Saskatchewan British Columbia Ladner Ontario Don Mills. Thunder Bay. Sarnia. Toronto. Weston Quebec Montreal. Varennes. DOW CHEMICAL LATIN AMERICA S.A./Dave W. Schornstein, President Headquarters: Coral Gables, Florida offices in 11 cities o 10 manufacturing LOCATIONS in 5 countries Argentina Buenos Aires. San Lorenzo Brazil Santos (under construction). Sao Paulo (two locationsl Chile Concepcion. Santiago Colombia Bogota. Cartagena Mexico Mexico City o principal partly owned com panies* Atanor SAM, Buenos Aires. Argentina Poliolefinas Colombianas S A,. Bogota. Colombia DOW CHEMICAL PACIFIC LIMITED/ Robert W. Lundeen, Managing Director Headquarters: Hong Kong OFFICES in 14 cities o manufacturing operations in Australia Altona. Rhodes Smithfielq o principal partly owned companies': Asahi-Dow Limited. Tokyo. Japan Austral-Pacific Fertilizers. Brisbane. Australia Ivon Watkins-Dow Limited. New Plymouth. New Zealand Korea Pacific Chemical Corporation. Ulsan. Korea Pacific Chemicals Berhad. Kuala Lumpur. Malaysia Polychem Limited. Bombay. India LIFE SCIENCES DEPARTMENT/William R. Dixon, General Manager Headquarters: Midland. Michigan inOianaPOuS DIVISION (flx Pharmaceuticals. Generic Pharmaceuticals. Diagnostics. Environmental Bio-Engineering). Indianapolis. Indiana Gruppo Lepetit. SpA, Milan. Italy 8io-Soence Laboratories, Van Nuys. California Laboratories Industrials Farmaceuticos Ecuatorianos. S.A Quito. Ecuador Photovolt Corporation. New York. New York o principal partly owned companies*: Bioscientia Klimsch-Diagnostisches Institut GmbH. Ingelheim am Rhem. Ger many Cordis Dow Corp . Miami. Florida Medical Laboratory Automation. Inc.. Mt Vernon. New York Nova Quest. Los Altos. California * Compin.es m which Dow s interest is substantial but less than a maiontv anc whose results are not consolidated m Dow s financial statements ^ Human 7 Environmental Relations Recognizing the broader implications of environmental preservation. Dow manage ment m 1970 established a corporate Ecology Council to set objectives, provide guidelines and spur action throughout the Company. By year's end. ecology subcouncils had been formed in all of our U.S. manufacturing divisions and product departments and in our area managements outside the U S The broad purpose of the councils is to assess the impact of existing and proposed Dow operations and products on the ecology and to take appropriate action in the light of this knowledge Water and Air Quality By the end of 1970. Dow s phosphorous-removal technology had been used in more than 40 municipal waste-treatment plants in the Great Lakes watershed. The goal of 80% phosphorous removal was exceeded in all full-scale operations as well as plant trials. Detergent manufacturers have reacted to the public debate over phosphates by attempting to remove these nutrients from their products. Dow s view, shared by many scientists and at least one major detergent producer, is that enough phosphorous from other sources reaches our lakes and rivers to assure continued growth of algae, the cause of eutrophication, and that the only real solution is to take out the phosphates at the sewage-disposal plant The Dow process accom plishes just that. The first of four huge (200-foot-diameter) Dow Domes was completed at the municipal waste-treatment plant in Winston-Salem. North Carolina. Dow Dome^r) prevent odor emissions from sewage-disposal facilities and enhance their appear~^ ance and operating efficiency. More than 100. constructed by our spiral-generatiorco technique, have been installed in the US. c=> Some 243.000 cubic feet of Surfpac bio/ogical oxidation media were installecF^ in two trickling-filter towers in Sacramento. California. Installations incorporating^ these plastic honeycombs for aerobic bacteria, which destroy sewage, are novtco operating in 19 states. Canada and Mexico. During 1971. a multimillion dollar incineration system designed by Dow engi neers will be completed at 3M Company's plant near St. Paul I: will burn a va riety of wastes, mainly liquids, while operating well within Minnesota's strict emission standards. Dow Plant Operations Dow in 1970 spent $20 7 million in capital and operating funds for waste control in the United States, up from $14.7 million the previous year These figures do not include the cost of process improvements that reduce or eliminate wastes The thrust of our efforts is toward waste prevention, since process materials that are not wasted can contribute to more profitable plant operations and conserve resources 34 A'tractive 261 unit Village West profeet for tow-income families in Louisville, Kentucky, has 26 brick veneered buildings. Load-bearing concrete-block walls were prefabricated with ThR[adun( brand adhesive mortar and trucked to site Municipal wastewater treatment plant at Grand Rapids. Michigan, is site of 12-month national demonstration of Dow phosphate-removal process with fully automated equipment. STO004583 used polyethylene milk bottles returned by custoi Golden Arrow Dairy. San Diego, are converted to agricultural drainage tile. Dow. supplier of the polyethylene, provided technical assistance. Dowell Division backfilled abandoned coal mines under Rock Springs. Wyoming, to stop settling of homes and commercial buildings. 35 The Mercury Problem In August 1969. following discussions with Ontario Water Resources Commission personnel. Dow Chemical of Canada. Limited initiated action to make improvements in its mercury cell chlor-alkall plants at Sarnia to reduce losses of mercury into the St Clair River In February 1970. when commission personnel reported finding mercury residues in fish, Dow Canada launched a crash program to complete the work already under way. and the job was completed and the plant "buttoned up" on March 27. Until recently it was generally considered that metallic mercury and inorganic mercurial compounds were inert in water and were not converted to forms that could be concentrated in fish This was the assumption under which Dow Canada's mercury-cell plants and some 200 others throughout the world had always oper ated Less than 5% of the chlorine produced by Dow and its subsidiaries comes from mercury cells. All of the rest is made in Dow diaphragm cells, in which no mercury is used. Several damage suits related to mercury have been lodged against Dow and Dow Canada. Dow and Dow Canada feel they are not legally liable and. therefore, are contesting these suits Following an offer to make methods available. Dow has received some 3.000 requests for its mercury analytical methods, which it has now perfected to detect the element to 0.2 part per billion. Dow also has received nearly 200 requests for its comprehensive index/bibliography of literature on mercury in the environment, which was compiled in the spring of 1970. CO Dow Stands by 2,4,5-T JZj During 1970. the registration of 2.4,5-T herbicide for certain uses was cancelled b^co the U. S. Department of Agriculture. The department acted after a laboratory unddi0 contract to the National Cancer Institute, using an unrepresentative sample oT^ 2.4.5-T obtained in 1964. reported birth deformities following doses given to micg^ and rats The sample contained 27 parts per million of a dioxin impurity. Our ow=tests with Dow production-grade 2.4.5-T. which contains less than 1 ppm of the impurity, produced no birth defects The tests conformed to government-approved procedures Because of our firm belief that Dow 2.4.5-T is and always has been safe when used as recommended, we have appealed the ruling Rocky Flats Plant and Area Are Safe During 1970, numerous allegations were made regarding plutonium contamination from the Rocky Flats facility near Golden. Colorado, which we operate for the Atomic Energy Commission. These allegations were investigated by the Colorado Depart ment of Health. which concluded that no hazard exists in the Denver area or in the area surrounding the plant itself. Equal Employment Opportunity During a year of reduced hiring activity, the number of employees from minority groups increased from 1.714 to 1.781 or from 5% to 5.2% of our total U. S employ ment Of total additions to payrolls. 30% were minority persons, defined by the fed eral government as Negroes. Orientals. American Indians and Spanish Americans. As a result of hiring and promotions, the number of minority persons in tech nical and professional positions increased by 62% from the previous year Additional counselors were appointed to encourage participation by minority employees in the Company's training and self-improvement programs. Directors &-Officers (Effective February 4. 197)) Board of Directors Car! A Gerstacker Chairman Donald K Ballman Senior Vice President Earle B. Barnes Vice President Robert B Bennett Treasurer C B Branch President Melvin Calvin Professor of Chemistry. University of California --Berkeley William R. Dixon General Manager. Life Sciences Department Herbert D Doan President (until February 4. 1971) Leland I Doan Former President Herbert H, Dow Secretary Julius E. Johnson Vice President Max Key Director of Corporate Administration J. M. Leathers Vice President Zoltan Merszei President. Dow Chemical Europe S A Paul F Oreffice Financial Vice President LeRoy D. Smithers President. Dow Chemical of Canada. Limited Macauley Whiting Director of Basic Resources G James Williams Vice President Executive Committee C B Branch Chairman Donald K. Ballman Earle B Barnes Carl A Gerstacker Max Key Zoltan Merszei Herbert H. Dow Secretary. Alternate Member Finance Committee Carl A Gerstacker Chairman Donald K. Ballman Robert B Bennett Herbert H. Dow Frank Harlow H H. Lyon Paul F Oreffice Officers & Assistant Officers C B. Branch President. Chief Executive Officer Carl A Gerstacker Chairman of the Board Donald K Ballman Senior Vice President President. Ventures. Investment & Finance Company Division Earle B Barnes Vice President General Manager. U S Area Julius E. Johnson Vice President Director Research & Development J. M. Leathers Vice President Operations Director. U S Area Paul F. Oreffice Financial Vice President G. James Williams Vice President Commercial Director. U. S Area Robert B. Bennett Treasurer Herbert H Dow Secretary H H Lyon Controller. Assistant Secretary William A Groenmg. Jr. General Counsel. Assistant Secretary A P Hanmer Assistant Controller. Assistant Secretary Firmm A. Paulus Assistant Controller David C. Baird Assistant Secretary Wilson A. Gay Assistant Treasurer David N leVert Assistant Treasurer John Van Stirum Assistant Treasurer Dale A. Bywater Auditor Transfer Agents The Cleveland Trust Company Morgan Guaranty Trust Company of New York Registrars The National City Bank of Cleveland Chemical Bank New York Trust Company Certified Public Accountants Haskins & Sells S8^ 0001S