Document v6gDNee2bo4zbaMG2bVVYKKOR

Annual Report Th e Sh e r w in -Wil l ia ms Co . Th e Sh e r w in -Wil l ia ms Co . GEORGE A. MARTIN CHAIRMAN OF THE BOARD To the Stockholders'. We submit herewith the Annua] Report of The Sherwin-Williams Company for the fiscal year ended August 31, 1944. After allowing for all charges including depreciation, but before providing for Federal Income and Excess Profits Taxes and Special Reserves, the earnings for the year were $11,409,943.68. The amount provided for Federal Income and Excess Profits Taxes was $6,144,000 and the amount set aside for Special Reserves was $1,190,000. The final Consolidated Net Profit after these deduc tions amounted to $4,075,943.68 available for dividends. This final Consolidated Net Profit, after deducting Preferred Dividends, is equivalent to $5.55 per share on the Coipmon Stock. Referring to the Special Reserves above mentioned, it was con sidered advisable to set up $600,000 for special plant obsolescence and $590,000 for postwar adjustments and contingencies. Renegotiation proceedings with the Government for the fiscal years ended August 31, 1942 and August 31, 1943 were concluded during the year and it was held that the Company had realized no excessive profits on its war business for these two years. The sales volume for the year was 10J^% greater than, the pre ceding year. Practically all divisions of the business contributed to this increase, but a large part of the gain is due to sales to the Government and Industrial accounts which are engaged in war production. The war has continued to impose severe restrictions in the operation of the business. There has been a continuous scarcity of raw materials, especially in oils and more recently in pigments. The high quality of the Company's products has been well maintained in spite of these shortages. Production and sales efforts were directed into lines requiring a minimum of critical materials, such as the Company's resin emulsion Kem-Tone Wall Finish which enjoyed a lecord volume of sales. The lack of metal for containers was overcome by the manufac ture of fibre cans, the Company's own development in packages referred to in our last year's report. This new unit produced during the year approximately forty-nine million containers, not only taking care of the Company's own requirements but also making available for sale large quantities to outside customers. The Company is fortunately not faced with any reconversion problem. The manufacturing facilities that supply war items are the same as those used for peacetime products. The Chemical division has enjoyed a record year in sales as well as profits. The Company continues to manufacture most of the acetanilid used in this country from which sulfa drugs are made. It is also now engaged in the production of D.D.T. (chemically known as dichlorodiphenyl-trichjoroethane) about which much has appeared in the public print. All of the output of D.D.T. is now allotted to the armed forces for use as a pest control. It has great possibilities as an insecticide for household and agricultural purposes in combating moths, ants, flies, mosquitoes and the like. During the year the Company acquired by purchase a paint company in Brazil, with a plant located at Sao Paulo. Under a management contract with.the Government the Com pany is now in its third year of operating a large Ordnance Plant at Carbondale, Illinois. The Company now has 2,691 of its former employees in the armed forces of whom 16 have given their lives for our country. Chairman of the Board President CONSOLIDATED PROFIT AND LOSS AND SURPLUS THE SHERWIN-WILLIAMS COMPANY AND SUBSIDIARIES Year ended August 31, 1944 PROFIT AND LOSS Profit from operations for the year ended August 31, 1944, before other income, provision for depreciation, other de ductions, and federal taxes on income Other income________________ _______ $13,361,820.46 215,182.70 Deductions: Provision for depreciation, including $600,000.00 for special purposes__ Provision for postwar adjustments and contingencies_ Loss on disposal of fixed assets and expenses applicable to nonoperating properties Interest expense---------------------------- Provision for foreign taxes, pension payments, and miscellaneous items. Provision for federal taxes on income--estimated: $13,577,003.16 $2,053,609.55 590,000.00 155,247.69 64,013.41 494,188.83 Normal income and declared value excess profits taxes----- ------------$2,634,000.00 Excess profits taxes (less postwar refund of $390,000.00).......... . 3,510,000.00 6,144,000.00 9,501,059.48 NET PROFIT.............................. $ 4 075.943 68 EARNED SURPLUS Balance at September 1, 1943 Add net profit for the year___ $30,942,402.84 4,075,943.68 Deduct: $35,018,346.52 Cash dividends declared and paid or provided for during the year: Preferred--$5.00 per share $ 531,007.50 Common--$3.00 per share__ _ 1,916,781.00 $2,447,788.50 Adjustment in connection with elimi nation of earned surplus (since date of acquisition) of former consoli dated subsidiary as _ the capital stock of such subsidiary was ex changed for capital stock of an un consolidated subsidiary as of the close of business August 31, 1944. _ 214,920.41 Premium on preferred stock called for redemption___________________ 24,750.00 2,687,458.91 BALANCE AT AUGUST 51, 1944 (Note A)--Other mcome^incJtjtles the amount of $55,417.36 for dividends received from the un consolidated Canadian subsidiary. Final statement as to operating results of that subsidiary for the year ended August 31, 1944. was not available at date of issuance of this report. The Company's pro- Fartionate share of net profitsof another subsidiary, not taken up, amounted to approximately $2,600.00. inai statement as to operating results of unconsolidated foreign (Brasil) subsidiary, since date of ac quisition in April of 1944, was not available at date of issuance of this report. (Note B)--Profits of the. companies include those from transactions subject to the provisions of the Renegotiation Act providing,for recapture of any profits found as a result of renegotiation to be excessive. Renegotiation proceedings for the years ended August 31, 1942, and 1943, have been com pleted and no excessive profits were determined. In regard to the year ended August 31, 1944, the companies do not consider they had any excessive profits within the meaning of the Act. CONSOLIDATED |AL AN ( THE SHERWIN-WILLIAMS OMPAN August 1,1944 CURRENT ASSETS Cash Assets U. S. Government securities (princi pally certificates of indebtedness) --at cost and accrued interest____ Trade notes and accounts receivable, less reserves (includes accounts ag gregating $25,168.71 receivable from subsidiaries not consolidated)------- - Inventories--raw materials and sup plies, in process and finished mer chandise stated on basis of lower of cost or market (estimated inter-plant and inter-company profits have been eliminated) less reserve of$500,000.00 for possible inventory shrinkage------ $16,462,364.12 CUR1 Tra d il 2,790,529.63 ,! Pre ] 9,274,223.47 I De f Ac ( Fe- Le 23,173,328.46 N< TOTAL CURRENT ASSETS............. $51,700,445.68 INVESTMENTS AND OTHER ASSETS Securities of subsidiaries not consoli- , dated--(Note A). --_____________ $4,816,083.34 Other securities--at or below cost.___ 19,292.74 T< RES Ft Estimated postwar refund of excess profits tax ___________________ 699,800.00 Miscellaneous receivables, insurance de posits and advances, less reserves-- 591,616.48 5,926,792.56 a CAI C PROPERTY, PLANT, AND EQUIPMENT Land, buildings, machinery and equip ment--at cost to consolidated com panies, less reserves for depreciation. 16,870,408.42 . vG % PATENTS AND TRADE-MARKS Nominal amount--------- --------------- LOO DEFERRED CHARGES Advertising stock, stationery, etc.__ _ Prepaid insurance, deferred taxes, etc.. $ 392,251.26 495,719.01 887,970.27 " $75,385,617.93 (Note A)--Investments in securities of subsidiaries not consolidated include (1) investment of $4,102,090.30 in Canadian subsidiary, stated at cost which was less_than the proportionate share of the book value (including intangibles) of the net assets of such affiliate as reported to the Company; net increase in equity in this subsidiary since date of acquisition, not taken up by the parent Company, amounted to approximately $472,200.00 as of August 31, 1943, (final statement as to operating results for the year ended August 31, 1944, was not available at date of issuance of this report);--(2) invest ment in a foreign (Brazil.) subsidiary amounting to $703,993.04 stated at cost; at the date of issuance of this report figures were not available as to operating results since date of acquisition;--(3) investment of $10,000.00 in another subsidiary, stated at cost; the Company's proportionate share of net profits of such subsidiary not taken up, '.rnounlto approximately $99,700.00. k $ d $ s E have Augi on i Corj cont forei certr indc 'ED a l a n c e s h e e t S C mp a n .y a n d s u b s i d i a r i e s ugustfl, 1944 Liabilities, Capital Stock, and Surplus CURRENT LIABILITIES Trade accounts payable, pay rolls, drum deposits and miscellaneous items--------------- .__------------------------ $ 8,979,117.94 Preferred dividend payable September 1, 1914...................................... ______ 128,111.25 Deposits--employees, employees bene fit association and officers 854,945.97 Accrued taxes (other than federal in come taxes) and miscellaneous items. 395,732.77 Federal taxes on income--estimated._ $ 7,681,765.53 Less United States Treasury Notes-- Tax Series (purchased and held for tax payments) 5,597,262.00 4,084,503.53 Notes payable to bank (in connection with advances to and loans by foreign subsidiary)___________________ 631,934.86 TOTAL CURRENT LIABILITIES__ $15,074,346.32 RESERVES Forpostwar ad; ustments, contingencies, maintenance of plants, employers' liability insurance, etc. -- __ 1,758,309.00 CAPITAL STOCK AND SURPLUS Capital Stock: Preferred-authorized 395,500 shares (par value $100.00 each--redeem able at $105.00 per share): Outstanding--Series "AAA" 5% cunsulative n ''cf0^^*6d ---- 102,489"shares ......... $10,248,900.00 Common--authorized 800,000 shares , (par value $25.00 each): Outstanding--638,927 shares. _. 15,975,175.00 $26,222,075.00 Earned surplus----------------------------- -- 32,330,887.61 58,552,962.61 $75,585,617.95 (Note B)--Net current assets (not significant) of consolidated foreign subsidiaries have been translated into U. 3. dollars at the applicable exchange rates in effect at August 31, 1944. Such subsidiaries are located in Argentina, Cuba, and Mexico. (Note C)--The Company was contingently liable at August 31, 1944, (1) as surety on a performance bond relative to performance by The Sherwin-Williams Defense iI Corporation (subsidiary not consolidated) as a party to a construction and operation contract with The United States of America; (2> as guarantor of the obligations of a foreign subsidiary (not consolidated) to the extent of approximately $104,000.00 on I? certain bank loans which it may incur. At August 31, 1944, such subsidiary was not indebted on such loans.