Dow Chemical Company Annual Report - 1942

8/14/2019 Dow Chemical Company Annual Report - 1942

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THE Dow CHEMICAL OMPANYMIDLAND,MICHIGAN

ANNUAL REP ORTFOR YEAR ENDEDMAY 31,194Z


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THE DOW CHEMICAL COMPANYMIDLAND, MICHIGAN

DirectorsE. 0. BARSTOW M. E. PUTNAME. W. BENNEl-T C. J. STROSACKERJ. S. CRIDER W. R. VEAZEYL. I. DOANA. B. DOWW. H. DOW

OfficersChairman of the Board, President and

General Manager - - - - W. H. DOWVice President and Treasurer - - E. W. BENNETTVice President and Secretary - - L. I. DOANVice President - - - - -E. 0. BARSTOWVice President - - - - C. J. STROSACKERAssistant Treasurer - - - - J. S. CRIDER

Assistant General Manager andAssistant Secretary - - - - A. P. BEUTELAssistant Treasurer and Assistant Secretary F. H. BROWNAssistant Secretary - - - L. A. CHICHESTERAssistant Secretary - - - - R. L. CURTISAssistant Secretary - - - C. M. SHIGLEYAsusi;;z;t Secretary - - D. -J. LANDSBOROUGH. C. PENHALIGEN

RegistrarsThe New York Trust Company100 BroadwayNew York City

The National City Bank of ClevelandCleveland, Ohio

Transfer AgentsGuaranty Trust Company of New York140 Broadway

New York CityThe Cleveland Trust CompanyCleveland, Ohio


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TO THE STOCKHOLDERS OFTHE DOW CHEMICAL COMPANY:

The forty-fifth annual report of your Company is presented herewith. Theconsolidated financial statements for the fiscal year ended May 31, 1942 have beenaudited by Messrs. Haskins 0 Sells, whose certificate is reproduced as part of thisreport.FINANCIAL STATEMENTS-

The consolidated balance sheet, statement of consolidated income and state-ment of consolidated earned surplus for the year ended May 31, 1942 are shownherein. The total assets of the Company and its Subsidiaries amounted to$103,094,230.70, which figure includes current assets of $29,212,794.38. Currentliabilities amounted to $19,643,000.63.EARN I NGS-

The consolidated net income of the Company and its Subsidiaries amountedto $9,221,485.76. After deducting dividends on the preferred capital stock of$300,000.00, the consolidated net income was equivalent to $7.14 per share onthe number of shares of common capital stock outstanding at the end of the year.This compares with $6.58 per share for the year ended May 31, 1941.DIVIDENDS-

The 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 $3,960,978.75.NEW CAPITAL-

During the current year, 1 13,519 additional shares of common capital stockwere offered to stockholders of record as of September 26, 1941. The commoncapital stock account was credited with the net proceeds of $1 1 124,862.00 realizedfrom the sale of these shares.SURPLUS-

The net increase in consolidated earned surplus for the year amounted to$5,878,462.46, b ringing the consolidated earned surplus as of May 31, 1942 to$24,812,306.81.

NET SALES-Net sales for the year ended May 31, 1942 amounted to $78,359,997.24, ascompared to $46,907,950.27 for the year ended May 3 1, 1941.TAXES-

Total major taxes for the year amounted to $12,183,783.74, which representsan equivalent cost per share on common stock of $9.76. This compares with $3.12per common share for 1941.


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The Companys taxable year closed on May 31, 1942. In the accompanyingfinancial statements, Federal taxes have been computed on the basis of the existinglaw. Ordinarily the contemplated Revenue Act to be passed this year would not applyto the Companys taxable year closed on May 31, 1942. However, there is thepossibility the precedent previously established may be abandoned in the new Reve-nue Act. If so, this would adversely affect the Companys earnings, the extent ofwhich is unknown at this time.GENERAL-

The above comments have been submitted as a very brief summary of thefinancial condition of The Dow Chemical Company and, due to the present emer-gency, the graphs formerly appearing in our annual reports have been deleted, aswell as a list of products produced by our Company. This is all in the interest ofNational Defense and we trust the stockholders will be willing to accept the neces-sary brevity of this report.

To add a little further general information, it will undoubtedly be of inter-est to every stockholder to know that a very large number of our men are servingon advisory committees in many of the National Defense organizations. Nearlyevery product we produce is on Government allocation for defense purposes. Inaddition, The Dow Chemical Company has designed, built and operated, or is in theprocess of building or operating new Government owned defense plants locatedthroughout our country. Every effort in our organization has been applied to theaccomplishment of an early victory and prompt execution of the very large defenseprogram assigned to us. On four different occasions, we have brought defenseplants into production ahead of schedule and every effort is made to continue therecord.

We suggest that successful accomplishment during war times is a measureof the capacity of the organization to meet successfully new emergencies after thewar. This is the only comment we feel justified in making pertaining to post-waractivity.

WILLARD H. DOW,President

Midland, MichiganJuly 24, 1942


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HASKINS & SELLSCERTIFIED PUSLIC ACCOUNTAN TS

THE NATIONAL BANK BUILDINGDETROIT

The Dow Chemica l Come:We have examined he consolidated alance heet of

The Dow Chemical ompany nd its subsidiary orn-es as of May 31,1942 a& the related tatements f consolidated ncome nd earnedsurplus or the year embed that date, have reviewed he accountingprocedures f the companies, nd have examined heir accountingrecords lrd ther evidence n support f such financial tatements.Our examination as made in accordance ith generally ccepted udit-ing stanSuds applicable n the circumstancesnd included ll audft-ing procedures e considered ecessary, hich procedures ere appliedby tests to the extent e deemed ppromiate b view of the systems finternal ontrol.

In our opinion, he accompanying onsolidated alance heetand statements f consolidated ncome nd earned urplus airly resentthe financial ondition f the corn-es at May 31, 1942 a; rd the resultsof their operations or the year ended that date, in conformity ithgenerally ccepted ccounting rinciples nd practices pplied n aBasis consistent ith that of the preceding ear.

July 16, 1942.


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THE DOW CHEMICAL COMPANY( Incorporated in Michigan)

AND SUBSIDIARY COMPANIESCONSOLIDATED BALANCE SHEET, MAY 31, 1942

ASSETSCURRENT ASSETS:

Cash---------------------------------------------------Notes and accounts receivable :

Customers, $9,420,886.92; associated company,$107,152.55; employees, $32,6 14.47; andsundry, $142,767.4 1 ---------------mm-- $ 9,703,421.35

Less reserves for doubtful receivables -------- 240,593.48Billed and unbilled amounts receivable from agencies of the United

States Government (other than for the sale of product) _-------l nven tories :

Finished goods and work in process (at lowerof cost or market) ---- __-____ -__------ $ 5,486,230.36

Materials and supplies (at cost---approximatelymarket) _-------____----__----------- 6,708,152.47

$ 6,29 1,790.83

9,462,827.87

1,263,792.85

12,194,382.83Total current assets __--------_________ ---------_---- $ 29,2 12,794.38

INVESTMENTS AND SUNDRY RECEIVABLES:Notes receivable and capital stock (at cost) of

associated company (equity at May 31, 1942 asshown by unaudited balance sheet of associatedcompany, $3,458,524.24) -----------------

lnstalment notes receivable, maturing 1943 to 1948Sundry securities and receivables (including em-

ployees receivables, $73,364.76) (less reserve,$121,212.88) ---__-- _______ -- ____ ------_

Total investments and sundry receivables --PROPERTY (including emergency facilities for na-

tional defense, completed and in progress, with agross book value (cost) of $24,409,906.33 subjectto amortization) :Plant properties and equipment - at cost (less

reserves for depreciation and amortization,$27,248,904.73) --_-__------me_- ________

Housing properties - at cost (less reserves fordepreciation and amortization, $160,730.78) --

$ 2,238,OOO.OO428,57 1.43

538,91 1.813,205,483.24

$68,356,269.771,469,527.95

Total property -------------------_-~~~~~~---~----.~-PATENTS---At cost or nominal value (less reserves

for amortization, $50,101.18) ------------------------------DEFERRED CHARGEsUnexpired insurance prem-

iums, unamortized debenture discount and expense,deferred cost of power facilities, and sundry --_____----------_-_

TOTAL -------------------_-~~~-~~~~----------

69,825,797.72

65,673.22

784,482.14$103,094,230.70


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THE DOW CHEMICAL COMPANY( Incorporated in Michigan)

AND SUBSIDIARY COMPANIESCONSOLIDATED BALANCE SHEET, MAY 31, 1942

LIABILITIESCURRENT LIABILITIES:Notes payable-Banks ________ - _______ ------__-_-----------Accounts payable-Trade and sundry _---__--__---------_----

Federal income and excess profits taxes (includingprovision for current year at rates under lawexisting at May 31, 1942; and provision for esti-mated additional taxes of prior years) ----------------------Customers special deposits for purchase of product ---------__---

Serial debentures maturing September 1, 1942 __-----_----__---Accrued liabilities:Payrol Is __-_----_------__------------------------------Taxes (other than Federal income and excess profits taxes) -----Interest _------_-----_- _--- ----------------_----------Rents __________--______------------------------------Sundry __-----_----__--_------------------------------

Total current liabilities ------------------------------FUNDED DEBT:

Ten year 2% % debentures, due September 1, 1950 $ 7,500,OOO.OOSerial debentures maturing in the amount of$750,000.00 on September 1, 1943 and annuallythereafter until September 1, 1950 (debenturesmaturing in 1942 included in current liabilities) 6,000,000.00

Total funded debt __-___-___-----__-----------------RESERVES FOR FIRE AND ACCIDENT LOSSES, DAMAGE CLAIMS,ELECTROLYTIC CELL REPLACEMENTS, ANDSUNDRY _----_-----_- _-_-- ----------______---_---------MINORITY INTERESTS IN CAPITAL STOCK ANDSURPLUS OR DEFICIT OF SUBSIDIARIES ---__-------_----__-_CAPITAL STOCK:

Preferred capital stock-5% cumulative (author-ized and outstanding, 60,000 shares of $100.00par value each) -------------_----------- $ 6,000,000.00Common capital stock (authorized, 2,000,OOOshares without par value; outstanding, 1,248,706shares) -------------------------------- 37,293,908.83

Total capital stock _----------_____-----------------SURPLUS:Capital surplus (decreased during the year endedMay 3 1, 1942 by expenses in connection withsale of additional shares of common capital

stock, $39,937.65) -------_---_______---- $ 36,539.01Earned surplus --_----_---- ______ -- ____ --_- 24,8 12,306.8 1Total surplus __------ ____ ------___------- ______ ----

TOTAL----------------------------------.-----

$ 1 ,ooo,ooo.oo4,730,24 1.5 1

10,336,621.85635,059.79750,000.0076 1,562.981,042,074.2995,47 1.26167,032.86124,936.09

$ 19,643,000.63

13,500,000.00

734,820.3 1

1,073,655.1 1

43,293,908.83

24,848,845.82$103,094,230.70


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THE DOW CHEMICAL COMPANYAND SUBSIDIARY COMPANIESSTATEMENT OF CONSOLIDATED INCOME

FOR THE YEAR ENDED MAY 31,1942

SALES (net of returns, allowances, cash discounts, and freight) ----__ $78,359,997.24COST OF SALES __----_a_---------__----------m----v------- 56,338,933.18GROSS PROFIT ____________---_____------------------------ $22,02 1,064.06SELLING AND ADMINISTRATIVE EXPENSES -----____-----_--__ 3,929,984.30PROFIT FROM OPERATIONS _____ - ________ -- _______ ------ __a_ $18,09 1,079.76OTHER INCOME:Dividends, $1,350,000.00, and interest,$155,610.97, from associated company ---_-- $ 1,505,610.97

Fees received in connection with construction ofcertain government owned plants ---------e- 268,375.06Royalties, rentals, and miscellaneous --_--_---- 252,126.83 2,026,1 12.86GROSS INCOME ___---_---- ________________ --_--__-___--___ $20,117,192.62INCOME CHARGES:Interest and amortization of discount and expenseon debentures __------__-_--_------ _--_-- $ 289,964.16

Other interest expense, loss on disposal of fixedassets, and miscellaneous __-__- ____ --- _---- 284,980.47 574,944.63NET INCOME BEFORE PROVIDING FOR FEDERAL INCOME ANDEXCESS PROFIT TAXES _-__--------__-------------w------B $19,542,247.99PROVISION FOR FEDERAL INCOME AND EXCESS PROFIT TAXES (atrates under law existing at May 3 1, 1942) :Normal tax and surtax --_--_-------_----__- $ 3,948,067.35

Excess profits tax -----___----_-_-_-_------ 6,13 1,058.48 10,079,125.83NET INCOME BEFORE DEDUCTING MINORITY INTERESTS ININCOME OF SUBSIDIARIES -------------------------------- $ 9,463,122.16MINORITY INTERESTS IN NET INCOME OF SUBSIDIARIES -_----- 24 1,636.40NET INCOME FOR THE YEAR __-- __-----_ --__-__------ ______ - $ 9,221,485.76

NOTES: The provision for depreciation and the amortization (as provided under the InternalRevenue Code) of emergency defense facilities charged against income forthe year ended May 3 1, 1942 amounted to $3,628,103.12 and $3,075,568.39,respectively. During the year adjustments were mode of depreciation rates oncertain classes of property which were applied retroactively to the years endedMay 31, 1941, 1940, and 1939 with the result that by credits to surplus thedepreciation previously provided for those years was reduced $325,264.22,$278,848.54, and $216,1 1 1.48, respectively. The net effect of these adjust-ments and miscellaneous other small adjustments of income of prior years,less the provision for additional Federal income and excess profits taxes thereon,was to credit earned surplus with $617,955.45, representing net increases inpreviously reported income for the years ended May 3 1, 1941, 1940, and 1939of $248,032.5 1, $185,240.46, and $184,682.48, respectively.Research and experimental expenses which hove been shown in previous yearsunder the caption Selling and General Expenses ore now included in costof sales.


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THE DOW CHEMICAL COMPANYAND SUBSIDIARY COMPANIES

STATEMENT OF CONSOLIDATED EARNED SURPLUSFOR THE YEAR ENDED MAY 31,1942

BALANCE, JUNE 1, 1941 ----------------------------------- $18,933,844.35CREDITS:

Net income for the year ____ -___--_---_-___-__-_______ _____ 9,22 1,485.76Adjustments to net income of prior years (see note

to Statement of Consolidated Income) -_----- $ 856,743.26Less provision for additional Federal income and

excess profits taxes thereon -_------------ 238,787.81 617,955.45Total ________-__--_-------------------------- $28,773,285.56

CHARGE-Cash dividends :Common capital stock _-__--_-- ______ -_----_ $ 3,660,978.75Preferred capital stock _-_---- _____-__-_----- 300,000.00 3,960,978.75

BALANCE, MAY 31, 1942 ---------------------------~~-~~~-~ $24,8 12,306.B 1


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Dow Chemical Company Annual Report - 1942

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