dow chemical company annual report - 1939

8/14/2019 Dow Chemical Company Annual Report - 1939

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THE DOW CHEMICAL COMPANYMIDLAND, MICHIGAN

Director rE. 0. BARSTOW E. W. BENNETTw. H. DOW J. T. PARDEE

J. S. CRIDER W. R. VEAZEYL. I. DOANG. E. COLLINGS

C. J. STROSACKER

Off icer8Chairman of the Board - - - - J. T. PARDEEPresident and General Manager - - - W. H. DOWVice President - - - - G. E. COLLI NGSVice President - - - - - J. T. PARDEEVice President, Secy and Treasurer - E. W. BENNETTVice President and Genera C Sales Manager - L.I.DOANAssistant Treasurer - - - - J. S. CRIDERAssistant General Manager - - - A. P. BEUTELAuditor and Assistant Secretary - L. A. CHICHESTERAssistant Secretary - - - - F. H. BROWN

.

Regist rarsThe New York Trust Company100 Broadway

New York CityThe National City Bank of Cleveland

Cleveland, Ohio

Transfer AgentsGuaranty Trust Company of New York

140 BroadwayNew York City .

The Cleveland Trust CompanyCleveland, Ohio


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To the Stockholders of The Dow Chemical Company:The forty-second Annual Report of your Company is presented herewith.

The Consolidated Financial Statements for the fiscal year ended May 3 1, 1939 havebeen audited by Messrs. Haskins fi Sells, whose certificate is reproduced as part ofthis report.

The consolidated net income of the Company and its subsidiaries for the yearended May 3 1, 1939 amounted to $4,178,485.17, after provision for depreciationand Federal income taxes. After deducting dividends on the preferred capital stockof $300,000.00, the consolidated net income was equivalent to $3.95 per share onthe average number of shares of common capital stock outstanding during theyear. Approximately 17 cents per share may be regarded as non recurring profit.

his compares with $3,895,268.58 or $3.91 per share for the year ended May 31,1938. (See Chart No. 1 I

The provision for depreciation of the consolidated companies amounted to$2,323,626.43 for the year under review. The total reserve for depreciation andamortization now amounts to $17,909,180.91.

=ps Additions to plant and property amounted to $1,643,235.26 during the yearended May 3 1, 1939, which is exclusive of fixed assets, having a gross book valueof $4,147,526.91 and a net depreciated value of $2,439,886.90, acquired in con-nection with the statutory merger with Great Western Electra-Chemical Company.The major expenditures were for additions to plant and improvements to processes.

Your Company distributed four equal quarterly dividends aggregating $3.00per share to the common stockholders during the year. Including dividends on thepreferred capital stock of $300,000.00, the dividends disbursed to shareholdersamounted to $3,265,482.00. After deducting the dividends paid during the yearfrom the consolidated net income, there remained as an addition to earned surplus$913,003.17, making the total earned surplus $11,229,152.45.

Net sales for this period amounted to $26,762,28 1.95. (See Chart No. 2.1

We wish to call to your attention the graphs shown for this year are sub-mitted on the basis of a consolidated statement of The Dow Chemical Company andits subsidiaries. At present there are 1,03 1,988 shares of common stock outstand-ing. As of December 31, 1938, the Great Western Electra-Chemical Company wasconsolidated with The Dow Chemical Company by the issuance of 86,988 sharesof common stock. As of March 31, 1939, the wholly owned subsidiary, lo-DowChemical Company, was absorbed into The Dow Chemical Company. The present


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organization lof The Dow Chemical Company and its subsidiaries and affiliatedcompanies is as follows:

Percentage ofcommon stock ownedDowell Incorporated . . . . . . . 100%Dowel1S.A. . . . . . . . . 100%Midland Ammonia Company . . . . 75%Cliffs Dow Chemical Company . . . . 60%Ethyl-Dow Chemical Company . . . . 50%

At the time of the statutory merger, the activities of the Great WesternElectra-Chemical Company were covered in some detail, which hardly seems neces-sary to repeat here. It is only proper to report, however, that this Division of yourCompany, during the five months of its association with The Dow Chemical Com-pany, has more than earned its proportion of the return on the capital stock issuedfor the purchase of Great Western Electra-Chemical Company.

As of January 1, 1939, Series D, $720,000 of serial notes were retired.The capital structure at present date is represented by 1,03 1,988 shares of commonstock without par value, 60,000 shares of 5% cumulative preferred stock of $100par value and $5,000,000 fifteen year 3% debentures due December 1, 1951. (SeeChart No. 3.1

Total major taxes paid during the year amounted to $1,506,645.35 whichrepresented an equivalent cost per share on common stock of $1.54: (See ChartNo. 4.1

The foregoing statements summarize very briefly our financial position.More complete details can be obtained by study of the graphs and reports sub-mi tted herewith.

It is believed the stockholders are more interested in current problems andexpectations than present history. For this reason, it might be well to summarizesome of our activities. During this past year, it was necessary to reduce our totalemployment to a level equivalent to current production. It was, however, desiredto continue research on current problems and new problems. During the past yearwe produced and submitted for testing purposes more than 100 new chemical com-pounds. This is a very conservative statement and has become practically standardpractice. This represents normal operation of the laboratories, applying every effortto produce new and improved products for better qualities and uses. The morerecent developments have to do with improved alloys and methods of working, newand improved quality solvents, new plasticizers for the plastic trade, new fungicidesand disinfectants and by no means the least important are increased and morediversified uses for older established products. Very interesting development con-tinues in the manufacture and use of styrene, ethyl cellulose and Thiokol, all itemspreviously called to your attention.


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At the beginning of the fiscal year just closed, we were enjoying a good volumeof business; however, the volume steadily dropped until January of this year, whenour business began to show an improvement. At the present time, the volume showsa fair comparison with corresponding months of 1937.

In the past few years, we have attempted to present a chart showing therelationship between our business and that of industry generally. This no longerhas any significance as the comparison standards have little meaning. Our com-parisons must necessarily be with our past record. It is difficult to even predictwhat the future offers. All old standards of comparison have changed. However,the potential possibilities of the chemical industry have no limit in their applicationand we continue to apply ourselves more diligently than ever. We will carry on andundoubtedly show satisfactory results on the basis of present standards but the great-

-est need of the chemical industry for newer and greater growth is the establishmentof new industry throughout the country. Indeed, at the highest point of the countrysproduction, manufacturing industry actually employed fewer men than are now listed _as unemployed. Present industry cannot solve present unemployment problems. Thegreatest service our stockholders could contribute to the continued success of yourCompany would be to assist in any measure, no matter how small, to the creation ofemployment for any purpose whatsoever. Work must be developed. Wealth mustbe created. The future success of your Company also requires it.

Our Company has always enjoyed a close contact between employees andmanagement. Even the directors of your Company enjoy unusual and close asso-ciation with operating details. The principle of remote control and remote manage-ment does not exist in your Company. Even the subsidiary managements are re-sponsible for all details of their management and operation. Our Company, whereverit may be located, operates itself for its own best local interest. Our policy is tocreate wealth and consequently new work by continuous application of work, initia-tive and invention, with the assistance of capital. Our purpose is to operate in con-junction with the laws of nature and co-operate in turn with the government.

WILLARD H. DOW,President.

Midland, MichiganJuly 20, 1939


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t NOTICEInformation presented on followinggraphs including fiscal year 1937apply to The Dow Chemical Fompanyonly. Information on graphs for fiscalyear 1938 and 1939 is prepared fromthe Consolidated Statements of TheDow Chemical Company and its sub-sidiaries.


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I

x

I I I I I I I I I I I I I I I I I I I1930 /93f /932 1933 1934 /935 1936 1937 1938 /939Chart No. 1


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Chart No. 2


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Chart No. 3


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Chart No. 4


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The graphs appearing in this reportare not to be reproduced or usedwithout the permission of The DowChemical Company.


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-

I

HASKINS & SELLSCERTIFIED PUBLIC ACCqUNTANfS RCSIOCNT MTNLRS THE NATIONAL SANK SUILDINOClRlL n.DULLocK,C.RIHAROLD w. SCOTT. c . cc DETROIT

TheDow hemicalompany:We ha ve m&e an examina tion of th e consolidated balan ce

.

sheet of The Dow Chemical Comgan y nd its subsidiary ~anp an ies asof May 31, 1939 an d of the relat ed sta temen ts of consolidated in-come and earn ed surplus for the year ended tha t date. In connectionth erewith, we mad e a review of th e account iq meth ods an b examinedor tested account ing recotis of the comgan ies an d other support ingevidence in a manner aal to the extent which we considered aggro-priat e In view of th e systems of inter na l accuu nt ing cont rol. &to inventories, th e records were examined, th e relat ed procedur ewas reviewed, an d th e grices axyZ omputa tions were tested; th escope of the examina tion did not include p hysical tests of spa n-titles.

In our opinion, based upon such examina tion, th e a ccmaxplng consolidated balan ce &heet ti relat ed sta temen ts of consolidatedIncan e an d ear n&l sur plus IFa Irly present s in aczcoHance with acceptedpr inciples of accoun tin g cons isten tly followed by th e canga nies, th eirfina noial condition at May 31, 1939 an d th e resu lts of th eir ogerat loasfor the year ended tha t da te.

ally 13, 1939.


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J THE bOW CHEMICAL COMPANY( Incorporated in Mich igan)AND SUBSIDIARY COMPANIES

CONSOLIDATED BALA NCE SHEET, MAY 31, 1939I ASSETS

CUta;;NT ASSETS:-------c------------------------------------------United States Government securities---at cost (face value,$200,000.00; market value, $232,3 12.50) ------------------Notes and accounts receivable:

Customers, $3,253,67 1.96, associated company,$5,005.33, employees, $10,283.44, and sun-dry, $118,999.13 ---------e-----m ----- $ 3,387,959.86Less reserves for doubtful receivables __------ 187,050.20

I nven tories :Finished goods and work in process (at lower

of cost or market) _--__-----_-------_- $ 5,621,134.75Maz%k:;nd supplies (at cost---approximately---------------------------- 1,774,484.17 7,395,6 18.92

$ 3,504,429.85217,750.oo

3,200,909.66

Total current assets __________ -__-__- ______- - __-----INVESTMENTS:

Associated company:Notes receivable, maturing No-vember 15, 1942 __________ $753,000.00Preferred and common capitalstocks (at cost, which is lessthan the Companys book equi-tv in the stocks as indicatedby the balance sheet of the

associated company) -w-s-- 61 7,300.OO $ 1,370,300.00

$14,3 l&708.43

Receivable from employees and others on houseand lot accounts ____- -_-___-- _-_--__-__-Miscellaneous securities (at cost, less reserve,$53,137.32) ---------------------------

47,085.648 1,994.68

Total investments ----------------------------------FIXED ASSETS:

Real estate, plants, and equipment-at cost (lessreserves for depreciation, $17,879,239.01) --- $25,79 1,724.73Patents-at cost (less reserves for amortization,$29,941.90) -------------------- - ------ 74,832.50

Totat fixed assets _-----_---------____--------------DEFERRED CHARGES-UNEXPIRED INSURANCE PREMIUMS, UN-AMORTIZED DEBENTURE DISCOUNT AND EXPENSE, ANDMISCELLANEOUS __-_-__--__-___---------------------Mm-

1,499,3 80.32

25,866,557.23170,347.33

$41,854,993.3 1


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THE DOW CHEMICAL COMPANY( Incorporated in Michigan)AND SUBSIDIARY COMPANIES

CONSOLIDATED BAL ANCE SHEET, MAY 31, 1939LIABILITIESCURRENT LIABILITIES:

Accounts payable-Trade and miscellaneous ------------------Employees compensation awards ----------------------------Federal income taxes - _-___ - __________________________ -__-Accrued liabilities:

Payrol Is ----------------------------------------------Taxes (other than Federal income taxes) __-_____________ -___Sundry ----------------------------------------------

$ 1,179,482.7862,189.11

75 1,485.40323,882.60300,497.4-l

33,089.46Total current liabilities -----------------------------

FIFTEEN YEAR 3% DEBENTURES, DUE DECEMBER 1, 1951 (subjectto redemption through sinking fund commencing June 1, 1941) ___RESERVES FOR FIRE AND ACCIDENT LOSSES, DAMAGE CLAIMS,AND CONTI NGENCI ES -----------------------------------

MINORITY INTEREST IN CAPITAL STOCK AND SURPLUS ORDEFICIT OF SUBSIDIARY COMPANIES ______________________PREFERRED CAPITAL STOCK-5% CUMULATIVE (authorized andoutstanding, 60,000 shares of $100.00 par value each) -------e--COMMON CAPITAL STOCK (authorized, 2,000,OOO shares withoutpar value; outstanding, 1,03 1,988 shares) --------------------SURPLUS:

Capital surplus (no change during year endedMay 31, 1939) ------------------------- $ 100,407.54Earned surplus --------------------------- 11,229,152.45

$ 2,650,626.76

5,000,000.00311,426.13733,77 1.10

6,000,000.0015,829,609.33

Total surplus ------------------------------------- 11,329,559.99

TOTAL -------------------------------------- $41,854,993.3 1

NOTE: Accrued dividends on the Class A preferred capital stock held by a minority interestof the Cliffs Dow Chemical Company, a subsidiary company consolidated herein,which had not been declared by the Board of Directors of that company or providedfor in this balance sheet, amounted to $68,700.00 at Moy 31, 1939.


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THE DOW CHEMICAL COMPANYAND SUBSIDIARY COMPANIESSTATEMENT OF CONSOLIDATED INCOME

FOR THE YEAR ENDED MAY 31, 193 9

SALES (net of returns, allowances, cash discounts, and freight) ______ $26,762,281.95COST OF SALES (exclusive of provision for depreciation) __---_----- 16,869,377.7 1GROSS PROFIT __________ --___------_----___-------------mm $ 9,892,904.24SELLING AND GENERAL EXPENSES (exclusive of provision for depre-

ciation) :Selling and administrative expenses ________- $2,256,892.87Research and experimental expenses _______- 1,542,680.21 3,799,57X08

PROFIT FROM OPERATIONS BEFORE PROVIDING FOR DEPRECIA-TION ________-_______-_-_--- -------------------------- $ 6,093,33 1.16

PROVISION FOR DEPRECIATION (less adjustment of provision pre-viously made, $78,341.48) ----c___---___------------------ 2,323,626.43

PROFIT FROM OPERATIONS _- ____ - ________ -___- ____________OTHER INCOME:

Dividends, $952,049.50, and interest, $41,999.52,from an associated company _______________ $ 994p49.02

Other interest earned, royalties, and miscellaneous 249,739.13GROSS INCOME _--___- ____ ----------_---------------- e-e--l NCOME CHARGES:

Interest and amortization of discount and expenseon funded debt -_-_-__--------_--------- $ 171,867.85

Miscellaneous ___-_-----------_-_--------- 8,739.67NET INCOME BEFORE PROVIDING FOR FEDERAL INCOME TAXESPROVISION FOR FEDERAL INCOME TAXES _-__-------_--__---_NET INCOME BEFORE ADJUSTMENT FOR MINORITY INTERESTS

IN SUBSIDIARY COMPANIES __-_-__-___--___-__----------MINORITY INTERESTS SHARE OF PROFITS AND LOSSES OF SUB-SIDIARY COMPANIES (net loss) -----_------------_--------

$ 3,769,704.73

1,243,788.15$ 5,013,492.88

180,607.52$ 4,832,885.36

678590.14

$ 4,154,295.2224,189.95

NET INCOME FOR THE YEAR -_--___-__------_--_-------.---- $ 4,178,485.17


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THE DOW CHEMICAL COMPANY1 ncorpora ted in M ich igan 1AND SUBSIDIARY COMPANIES

CONSOLIDATED BALAN CE SHEET, MAY 31, 1939LIABILITIESCURRENT LIABILITIES:

Accounts payable-Trade and miscellaneous __-__________ - ____Employees compensation awards _____-___ ---- ___-___________Federal income taxes --------------------__________c______Accrued liabilities:

Payrol Is ----------------------------------------------Taxes (other than Federal income taxes) __----_-- ___________Sundry ----------------------------------------------

Total current liabilities -----------------------------FIFTEEN YEAR 3% DEBENTURES, DUE DECEMBER 1, 1951 (subject

to redemption through sinking fund commencing June 1, 1941) ___RESERVES FOR FIRE AND ACCIDENT LOSSES, DAMAGE CLAIMS,AND CONTINGENCIES _________________________________ -_MINORITY INTEREST IN CAPITAL STOCK AND SURPLUS ORDEFICIT OF SUBSIDIARY COMPANIES ___- __________________PREFERRED CAPITAL STOCK-5% CUMULATIVE (authorized andoutstanding, 60,000 shares of $100.00 par value each) -------q--COMMON CAPITAL STOCK (authorized, 2,000,OOO shares withoutpar value; outstanding, 1,03 1,988 shares) --------------------SURPLUS:

Capital surplus (no change during year endedMay 31, 1939) ------------------------- $ 100,407.54Earned surplus --------------------------- 11,229,152.45

$ 1,179,482.7862,189.11

75 1,485.40323,882.60300,497.41

33,089.46$ 2,650,626.76

5,000,000.00311,426.13733,771.10 *

6,000,000.0015,829,609.33

Total surplus ------------------------------------- 11,329,559.99

TOTAL -------------------------------------- $41,854,993.3 1

NOTE: Accrued dividends on the Class A preferred capital stock held by a minority interestof the Cliffs Dow Chemical Compony, a subsidiary company consolidated herein,which had not been declared by the Board of Directors of that company or providedfor in this balance sheet, amounted to $68,700.00 at May 3 1, 1939.


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THE DOW CHEMICAL COMPANYAND SUBSIDIARY COMPANIES

STAT EMENT OF CONSOLIDAT ED EARNED SURPLUSFOR THE YEAR ENDED MAY 31, 1 939

BALANCE JUNE 1, 1938 ------------------------------------CREDIT-NET INCOME FOR THE YEAR $10,3 16,149.28----------------------- 4,17&485.17

Total -_---------me------se-------------------CHARGE-CASH DIVIDENDS: $14,494,634.45

Common capital stock _- ______ - _____ - ______ $2,965,482.00Preferred capital stock _-___-__- ________ -__- 300,000.00 3,265,482.00BALANCE MAY 31, 1939 __--------------------------------- $11,229,152.45


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I DOW CHEMICALS IN INDUSTRYAUTOMOTIVE ANDAl RCRAFT

Acetylene TetrabromideCarbon Tetrachloride ,Caustic Soda DowmetalEthocelEthylene DibromideEthylene GlycolMuriatic AcidPhenol

EXPLOSIVESAniline OilDiethylene GlycolDimethylanilineEpsom SaltEthylene GlycolPhenol

LEATHERCarbon TetrachlorideEpsom SaltEthylene GlycolPhenolSalicylic AcidSaltSodium AcetateSodium Sulphide

MINING AND METALLURGYAcetylene TetrabromideCadmium BromideCaustic SodaFerrous ChlorideHydrobromic AcidMagnesium ChlorideMining SaltsMuriatic AcidSodium BromateSodium BromideSodium SulphideSulphur Chloride

PAINT, VARNISH, ANDLACQUER

AcetanilidAcetic Anhydride

Carbon BisulphideCarbon TetrachlorideCalcium ChlorideDiethylene GlycolEthylene DichlorideOrthodichlorbenzeneParaphenylphenolPaFhzno;tiary ButylPhenolPropylene DichlorideSulphur Chloride1,1,2,2-TetrachlorethaneTriphenyl Phosphate

PAPERCalcium ChlorideCaustic SodaDiethylene GlycolEpsom SaltMuriatic AcidSodium Sulphide

PETROLEUMCalcium ChlorideCaustic SodaDowmetalHexachlorethaneMuriatic AcidPhenolSulphur Chloride

PHOTOGRAPHICAcetic AnhydrideAmmonium BromideBromineCadmium BromideCarbon TetrachlorideChloroformFerric ChlorideHydrobromic AcidMonochloracetic AcidPhenolPotassium BromideSodium Bromide1,1,2,2-TetrachlorethaneTriphenyl Phosphate

PLASTIC AND RESINAcetani I idAcetic AnhydrideAniline OilBis Phenol-ACamphor, MonobromatedCarbon BisulphideCarbon TetrachlorideCaustic SodaChloroformDiethylene GlycolDiphenylEthocelEthyl ChlorideEthylene DibromideEthylene DichlorideEthylene GlycolHexachlorethaneOrthocresotinic AcidOrthodichlorbenzeneOrthophenylphenolParaphenylphenolParhzn;ltiary ButylPhenolPlasticizersPropylene DichlorideSalicyladehydeSalicylic AcidStyron1,1,2,2-TetrachlorethaneTriphenyl Phosphate

RAYONAcetic AnhydrideCarbon BisulphideCaustic SodaEpsom SaltMuriatic AcidPerchlorethyleneSodium HydrosulphideSodium SulphideZinc Bromide

REFRIGERATIONCalcium ChlorideEthyl BromideEthyl ChlorideMethyl BromideSalt


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DOWi CHEMICALS IN INDUSTRYRUBBER

Aniline OilCarbon BisulphideCarbon TetrachlorideCaustic Soda ChloroformPhenolPropylene DichlorideSodium SulphideSulphur Chloride1,1,2-Trichlorethane

SOAPCaustic SodaCoumarinDiphenyloxideEthylene DichloridePerchlorethylenePhenolSalt

TEXTILECadmium BromideCalcium ChlorideCarbon BisulphideCarbon TetrachlorideCaustic SodaChloroformDiethylene GlycolEpsom SaltEthylene DichlorideEthylene GlycolFerrous ChloridePerchlorethylenePhenolPropylene DichlorideSodium AcetateSodium SulphideSulphur Chloride

AGRICULTURALArsenate of LeadBordowCalcium ArsenateCarbon BisulphideDowfume 75DowaxDowspray DormantEthylene OxideLime Sulphur, DryLime Sulphur, SolutionMagnesium Arsenate

Magnesium Arsenate Dust MixtureMethyl BromideMike SulfurOrthodichlorbenzeneParadowParis GreenSpecial Garden SpraySpecial Potato Spray

PHARMACEUTICALAcetanilid, U. S. P.Acetphenetidin, U. S. P.Acetyl Salicylic Acid, U. S. P.Acetyl Salicylic Acid, Granulation withStarchAmmonium Bromide, U. S. P.Ammonium Salicylate, U. S. P.Antipyrene, U. S. P.Benzoic Acid, U. S. P.Bromoform, U. S. P. 1XCadmium Bromide, U. S. P.Camphor, Monobromated, N. F.Carbon Tetrachloride, C. P.Chloroform, U. S. P.CoumarinDiphenyloxide, Perfume GradeEpsom Salt, U. S. P., RecrystallizedEthyl Chloride, U. S. P.Ferric Chloride Crystals, U. S. P. XFerric Chloride Solution, U. S. P.Glycine, MedicinalHydrobromic Acid, U. S. P. 1X QualityIodineLithium Bromide, N. F.Magnesium SalicylateMagnesium Sulphate, DesiccatedMethyl AnthranilateMethyl Salicylate, U. S. P.Phenol, U. S. P.Phenyl Ethyl AlcoholPotassium Bromide, U. S. P.Potassium Iodide, U. S. P.Salicylic Acid, U. S. P.Salol, U. S. P.Sodium Acetate, U. S. P.Sodium Benzoate, U. S. P.Sodium Bromide, U. S. P.Sodium Salicylate, U. S. P.Strontium Bromide, N. F.Strontium Salicylate, N. F.Tetrachlorethylene, Purified2,4,6-TribromphenolTrichloracetic Acid, U. S. P.


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dow chemical company annual report - 1939

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