Dow Chemical Company Annual Report - 1944

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47H ANNUAL REPORTFOR THE YEAR ENDED MAY 31,1944

THE DOW CHEMICAL COMPANYMIDLAND MICHIGAN



TO THE STOCKHOLDERS OF

THE DOW CHEMICAL COMPANY:

During the forty-seven years of its operations, The Dow Chemical Company,

through periods of prosperity and depression, has continued to grow in strength and

knowledge, and has served our country in three major periods of national emergency.

In the course of the year under review, the Company continued to devote alarge share of its productive and research facilities to the prosecution of the war.On a dozen battle fronts around the world, the use of our products in increasingnumbers is an expression of responsibility to the nation, and our resources haveaided materially in maintaining an ever growing bridge of supplies to the Army andthe Navy, both at home and abroad.

In this report of operations for the year ending May 3 7, 7944, it is the in-tention of the management to concentrate principally on outlining the contributions

of the Company to the war effort.

FINANCIAL RESULTS-

The dollar value of sales for the fiscal year 7944 was the largest in the history

of the Company and amounted to $7 20,426,952 representing a 74% increase as

compared with the previous fiscal year. The consolidated net income of the Company

and its Subsidiaries amounted to $8,573,503 representing a 4% increase over the

previous year. Taxes amounted to $76,583,000. After deducting dividends on

the preferred capital stock of $658,7 36 the consolidated net income was equivalent

to $6.34 per share on 7,248,706 shares of common capital stock at the end of the

year. This compares with $6.35 per share for the year ended May 37, 7943. With

the payment of $4,404,254 as dividends on the preferred and common stock there

remained $4,7 69,249 for general Company operations.

During the year the previously outstanding 60,000 shares of 5% preferred

capital stock were retired and 303,869 shares of new cumulative $4.00 preferred

stock, Series A, were issued.

EMPLOYMENT-

The total number of employees for all operations reached an all time peak

of 76,47 0 as compared with 76,340 for 7 943. Wages paid out for the period

amounted to $47,400,000 for the 72,300 employees of The Dow Chemical Com-

pany and its subsidiaries.

WARTIME EXPANSION-

Since the beginning of the present emergency, the Company has cooperated to

the fullest extent of its ability with the varoius branches of the Services and of the

government in providing supplies for the conduct of the war. Since 7940 the Com-

pany has carried out some 58 wartime projects involving magnesium, styrene for syn-

thetic rubber, high octane gasoline and basic chemicals required for the manufacture

of munitions, at a cost of $200,000,000, of which some $50,000,000 was provided

by the Company itself. It is a credit to the entire organization that every commit-

ment made by the Company has been carried through to completion.



ARMY-NAVY “E” AWARDS-

Since Pearl Harbor the Company, as was outlined in last year’s report, has

received six “E” awards in recognition of its contributions to the war effort, and has

received in addition nine stars for its continued high achievement in the production

of strategic chemicals.

EMPLOYEES IN THE SERVICE-

Up to the present time 4,099 employees of The Dow Chemical Company and

its Subsidiaries have entered the Armed Forces. Twenty-five of this number have lost

their lives in the service of their country.

LABOR RELATIONS-

Since the beginning of the present emergency, the operations of the Com-

pany have not suffered from a single interruption due to labor disagreements. The

Company through its several divisions has working agreements with the United

Mine Workers of America, District 50; with United Automobile’ Aircraft and Agri-

cultural Implement Workers of America (U. A. W. 1 C. I. 0.; with the Oil Workers

International Union -C. I. 0.; and with the International Council of Chemical andAllied Industries Unions-A. F. L.

The Company has had very successful labor relations, primarily because both

management and labor representatives have endeavored to make prompt settlement

of labor problems a matter of first importance. The Company believes that “collec-

tive bargaining” lS a matter of cooperative endeavor by supervision and labor to

work together for the common good of employees, stockholders and the general public.

It is the policy of management continually to strive for better understanding

of labor problems and for better labor relations. There is a responsibility involved

in meeting payrolls on time, in producing quality goods and meeting shipping

dates, in maintaining a high standard of living for all concerned by keeping wages

and salaries at a high level, in producing better products at lower prices, in keep-

ing working conditions on the highest and safest plane possible, in paying a reason-

able return to stockholders for the use of their money and in being able financially

to develop new products and improve old processes.

RESEARCH AND DEVELOPMENT-

In the many fields of the war program in which the Company has been able to

furnish technical experience and to provide products of exacting specifications, the

value of the intensive years of research and development has been clearly demon-

strated. Had the Company not been able to maintain this research program it can be

truly said that this country would not have had magnesium, synthetic rubber, and

many other vital products to meet the emergency demand. Thus, as in the past, re-

search has proved to be the strength and life blood of the Company.

CHEMICALS ESSENTIAL TO INDUSTRY-

The Company early in its history became a leading producer in the fields of

heavy chemicals, insecticides, fumigants, and pharmaceutical compounds. With a

policy of continued research, largely based on the chemistry of brine, and of late

years on the chemistry of sea water, it has been possible to greatly increase this lead,



until more than 500 essential products are now being marketed. All along the line,

production has been materially increased. In some cases, the increase has been over

400 per cent of the prewar rate, and of course a large portion of this production has

been allocated for war work and food production. The by-products resulting from

the manufacture of these materials have contributed greatly to the civilian needs for

chemicals during a critical time of shortage.

While immediate postwar operations may be curtailed somewhat awaiting the

adjustment of many industries to peace time operations, it is hoped that the time

will not be far distant when the total capacity of existing plants will find a ready

market. The Company is extremely fortunate in that it will continue, for the most

part, to make the same products after the war as are being produced today and will

have no serious conversion problems.

STYRENE-

With the Japanese invasion of British Malaya and the Dutch East Indies in

January, 1942, almost the entire supply of natural rubber was cut off from the

United States, precipitating the most crucial raw material crisis of the entire war.The government, in cooperation with the principal rubber, oil and chemical compan-

ies’ launched a gigantic synthetic rubber program which was ultimately to call for a

production of 850,000 long tons per year. The type of synthetic rubber chosen for

the bulk of this program was Buna S, a copolymer of butadiene and styrene.

Prior to the war, The Dow Chemical Company was the only producer of sty-

rene in the country and pioneered in the development of butadiene. When the call

for the new synthetic rubber plants came in the spring of 1942, the Company was

called on to build and operate for the government three new styrene plants, two in

the United States and one in Canada. Plants in California and Texas were designed

and built by Dow for the Defense Plant Corporation and are operated for the Rubber

Reserve Company. Today the production of styrene in all Dow operated plants has

been increased approximately 25 fold over the production prior to the war, and to-day the Dow process is used in whole or in part in producing 90 per cent of all the

styrene now being used in the rubber program.

Although at the present time the war is absorbing the Company’s entire pro-

duction of styrene, it is important to note that the production of Dow owned facili-

ties can be easily diverted to other uses for which there is a ready market. Thus, in

looking to the future, styrene has an almost unlimited commercial significance both

for synthetic rubber and plastics.

PLASTICS-

For a number of years the Company has carried out research in the develop-

ment of plastic materials and since the beginning of the war has been producing four

major synthetic plastics, known by the trade names Ethocel, Styron, Saran and Styra-

lay. Since 1941 f the sales, technical development and research facilities of the Plas-

tics Department have been devoted almost entirely to war work. Some 150 specific

projects have been undertaken and completed, of which more than 100 were at the

direct request of the Army and Navy. Plastic materials today are performing an

almost infinite variety of important functions, both on the battle front and on the in-

dustrial front.



sented in detail to the Committee, and its president and other officers were cross-

examined during the course of an entire day.

As a result, the Committee issued a special report on magnesium which not

only cleared the Company of the charges of membership in a foreign cartel, of limit-

ing production and of manipulating prices or otherwise engaging in monopolisticpractices, but also recognized and commended it for the high service rendered to

the war effort. The record and testimonies presented at this hearing were recently

incorporated in a booklet entitled “Dow and Magnesium”. Some 42,000 copies have

been distributed to stockholders, newspapers, magazines’ universities, customers of

the Company and most of the leading industrialists throughout the nation.

DOW CORNING CORPORATION-

As was stated in last year’s Annual Report, the Dow Corning Corporation

was incorporated on February 77, 1943 under the joint ownership of The Dow Chem-

ical Company and the Corning Glass Works to produce important strategic materi-

als for government account. Because of military secrecy orders, it was not possible at

that time to state the nature of the products being manufactured.

On July 12, 1944, representatives of the Dow Corning Corporation, The Dow

Chemical Company and the Corning Glass Works announced the first commercial

production of “silicones” -new organo-si I icon oxide materials. Based on sand,

brine, coal and oil, these silicones are already proving to have far reaching industrial

importance. The most important of these silicone materials are high temperature

insulating resins, but silicones can be produced either as solids or liquids in an

infinite variety of forms. The Dow Corning Corporation is now working closely with

electrical manufacturers in utilizing silicone insulation to permit the manufacture of

a new class of electrical equipment based on high operating temperatures.

land,At the present time

Michigan, which will beesilicone producing plan t is underin operation later this summer.

construction at Mid-

CONTRACT RENEGOTIATION-

In the last Annual Report, mention was made of the fact that operations of

the Company and its Subsidiaries include transactions which are subject to the

provisions of war profits control legislation giving the government the right under

certain conditions to renegotiate contracts and subcontracts. A summary of the

status of the Company’s renegotiation proceedings has been appended to the consoli-

dated balance sheet accompanying this report.

In conclusion, your President wishes to extend his appreciation to all the em-

ployees of the Company for the loyalty and untiring application and effort whichthey have constantly given for the continued progression of the war program.

WILLARD H. DOW

President

Midland, Michigan

July 37, 7944



ASSETS

CURRENT ASSETS:

Cash -----------------------------------------------

United States Government Securities (including Treasury taxnotes, $8,680,000.00 1 at cost -----------------------

Notes and accounts receivable:Customers ________________________________________-Associated companies _______________________ - ______--Employees ----------------------------------------

Sundry -------------------------------------------

Total -w s

Less reserves for doubtful

-----------------------------

receivables __- _________________

Net receivables __________--_----- -----

Billed and unbilled receivables from United States Government andits agencies (other than for sale of product) --------------

Inventories:Finished goods and work in process (at lower of cost or market)Materials and supplies (at cost-approximately market) ____

Total -________________-____________

Total current assets __________-__

INVESTMENTS AND NON-CURRENT RECEIVABLES:

Notes receivable and capital stock (at cost) of associated com-panies (less than equity in net assets as shown by balancesheets of companies) --------------------------------

Post-war refund of excess profits taxes _______________-___-Non-current notes and accounts receivable (including employees’

receivables, 1944, $41,320.5 1; 1943, $64,336.75) --------

Sundry securities (less reserve, 1944, $63,413.93; 1943,$108,413.93) _____________________________________

Total investments and non-currentreceivables _ _ ___ _______ ______

PROPERTY (including emergency facilities for national defense,completed and in progress, with a gross book value(cost) subject to amortization, 1944, $42,368,941.32; 1943,

$38,890,695.21) :Plant properties and equipment-at cost (less reserves for depre-

ciation and amortization, 1944, $45,174,593.72; 1943,

$35,334,98 1.48 1 -----------------------------------Housing properties--at cost (less reserves for depreciation and

amortization, 1944, $416,786.13; 1943, $288,347.06) _---

Total property ______________-___

PATENTS--At cost or nominal value (less reserves for amortization,1944, $64,403.1 1; 1943, $56,943.28 1 -------------------

DEFERRED CHARGES-Unexpired insurance premiums, unamortizeddebenture discount and expense, and sundry __-____-________

THE DOW CH

( Inco

AND SUBSIDI

CONSOLIDATED BALANCE

May 31

1943

$ 14,119,518.42

$ 16.884.153.36

$ 6,573,225.15

$ 2.325.000.00

$ 11,650,822.72432,926.60

33,549.69277,638.38

$ 12,394,937.39

280,l 10.09

$ 12.1 14.827.30

$ 10,337,8 13.70168,286.61

32,640.26262,924.16

$ lo,80 1,664.73

249,570.5 1

$ 10.552.094.22

$ 1,011,231.49

$ 9,101,841.987,540,610.55

$ 16,642,452.53

$ 60,772,183.10

$ 3,538,OOO.OO1,563,646.14

605,234.19

593.8 12.55

$ 1,744,306.40

$ 7,925,689.726,79 1,244.45

$ 14,716,934.17

$ 35,91 1,559.94

$ 2,243,OOO.OO1,645,8 19.84

876,282.99

529.340.05

$ 6.300.692.88 $ 5.294.442.88

$ 70,826,904.63

1,302,973.03

$ 72,129,877.66

$ 72,37 1.29

$ 34 1,204.49

$139.6 16.329.42

$ 75,041,878.06

2,200,6 17.47

$ 77,242,495.53

$ 61,831.12

$ 497,984.59

$1 19.008.3 14.06

NOTE: Operations of the Company and its subsidiaries include the Government the right under certain conditions result of renegotiation proceedings for the years endfor those years except that, in the case of one subs3 1, 1943, and it is expected that a similar refund mceedings for the year ended May 31, 1944 have noit is the opinion of officials of the Company that ex



1,1944 AND MAY 31, 1943

LIABILITIES

May 31

CURRENT LIABILITIES: 1944

Notes payable-Banks ---------------------------------Accounts payable--Trade and sundry _________~__~~~~~~~--~Federal income and excess profits taxes ___________---------Serial debentures maturing within one year __---__----------Accrued liabilities:

Payrolls ------------------------------------------Taxes-Social security, property, Federal capitol stock, state

income and franchise, and sundry --------------------

Interest ------------------------------------------

Rents --------------------------------------------

Sundry -------------------------------------------

Total current liabilities ______-_--_

$ 5,328,462.8414,059,968.47

750,000.00

1,23 1,994.42 1,123,227.3 1

1,326,847.9965,985.63

166,630.64

127,33 1.97

$ 23.057.221.96

FUNDED DEBT:Ten year 2 ‘/4 % debentures, due September 1, 1950 ___-_--__-Serial debentures maturing in the amount of $750,000.00 on

September 1, 1945 and annually thereafter until September 1,1950 (debentures maturing within one year included in cur-rent liabilities) __________________________________ -_

Total funded debt ______________

$ 7,500,000.00

4,500,000.00 5,250,OOO.OO

$ 12,000.000.00 $ 12,750,OOO.OO

RESERVES FOR FIRE AND ACCIDENT LOSSES, DAMAGE CLAIMS,ELECTROLYTIC CELL REPLACEMENTS, AND SUNDRY ______ $ 1.808.29 1.08

MINORITY INTERESTS IN SUBSIDIARY COMPANIES ---------- $ 1 n270.426.12

CAP ITAL STOCK :

Cumulative preferred stock, Series A (authorized, 600,000 shoreswithout par value; outstanding, 303,869 shores) -annualdividend $4.00 per share ----------------------------

Preferred capital stock-5% cumulative (at May 31, 1943,authorized and outstanding, 60,000 shares of $100.00 parvalue each) _______________________________________

Common capital stock (authorized, 2,000,OOO shares without parvalue; outstanding, 1,248,706 shares) ------------------

Total capitol stock ______________

$ 30,386,900.00

37.293.908.83

$ 67,680,808.83

SURPLUS:

Capital surplus -----------------^---------------------Earned surplus _______________________________ - _______

Total surplus __________________

$ 638,84 1.93 $ 36,539.Ol

33,160,739.50 28,99 1,490.17

$ 33,799,58 1.43 $ 29,028,029.18

1943

$ 1,~00.005,588,505.10

20,078; 138.67750,000.00

1,3;7,;;;2;

116:657:55

153;785.8 1

$ 3 1.098,048.92

$ 7,500,000.00

$ 1,636,049.07

$ 1,202,278.06

$ 6,000,000.00

37,293,908.83

$ 43,293,908.83

TOTAL _ _ _ _ _ _ _ _ _ _ - - _ _ - - _ - - !$139,6 16,329.42 $1 19,008,3 14.06

of war profits control legislation givingnd subcontracts for the purpose of limiting profits. As ano refunds were required of the Company or its subsidiaries

relotively material in amount, was required for the year ended Maysubsidiary for the year ended May 31, 1942. Renegotiation pro-

based upon the results of proceedings of the two prior years,the meaning of the legislation have not been realized for such year.



TVE DOW CHEMICAL COMPANYAND SUBSIDIARY COMPANIES

STATEMENT OF CONSOLIDATED INCOME

FOR THE YEARS ENDED MAY 31, 1644 AND 1943

SALES AND OTHER REVENUE:

Year Ended

1944

$120,426,95 1.95900,000.00

158,732.36

Sales ___________--_--__-_-------------Dividends received from associated company _-

Interest from associated companies _---_-__--Fees received in connection with the construction

and operation of government owned plants--Other income _---_-___--- ________-____ -_

$105,427,854.78800,OOO.OO

155,6 10.00

2,680,009.4749 1,087.46

1‘877‘804.59506,228.76

Total ___-___- ________ - ______ $124,656,78 1.24 $108,767,498.13

COSTS AND OTHER CHARGES:Cost of sales (excluding provision for deprecia-

tion and amortization 1 -----------------Provision for depreciation -__----- _-_----- -Provision for amortization of emergency facili-

ties ---------- -----------------------

Selling and administrative expenses __-___---Interest and amortization of discount and ex-

pense on debentures ------------------.-Loss on disposal by dedication for public pur-

poses or by sale of property located within atownsite developed by the Company for em-ployees ------------------------------

Other income charges __----- _____________Minority interests in income of subsidiary com-

panies ------------------------------Provision for Federal income and excess profits

taxes :Normal tax and surtax _________________Excess profits tax (less post-war refund and

credit for debt retirement) ____________

Total _______________________

INCOME FOR THE YEAR _----- _____________

May 31

1943

$ 83,208,320.47 $ 68,228,636.864,l 18,785.23 3,722,973.48

7,530,695.50 5,387,679.25

5,8 14,088.Ol 4,426,084.6 1

275,643.56 283,790.88

8 19,559.02174,674.78

83,148.06

3,927,728.63 3,542,153.66

10,130,634.74 14,706,279.1 1

90,975.97

153,622.95

$116,083,278.00 5100,542,196.77

$ 8,573,503.24 $ 8,225,301.36



THE DOW CHEMICAL COMPANYAND SUBSIDIARY COMPANIES

STATEMENT OF CONSOLIDATED SURPLUS

FOR THE YEARS ENDED MAY 31, 1944 AND 1943

CAPITAL SURPLUS

BALANCE AT BEGINNING OF THE YEAR _____

CREDIT-Excess of proceeds (less expenses) re-ceived from sole of 249,504 shares of cumulativepreferred capital stock, Series A, over $100.00per share credited to the capital stock account

Total _______________________

CHARGE-Premium paid on retirement of 5,635shares of 5% cumulative preferred capital stock

BALANCE AT END OF THE YEAR ____________

EARNED SURPLUS

BALANCE AT BEGINNING OF THE YEAR _____CREDIT-Net income for the year _-- _____-__-

Total ______________ - ________

CHARGE-Cash dividends:Common capital stock ____________________5% cumulative preferred capital stock _______Cumulative preferred capital stock, Series A ___

Total ------_____----___-----e--w

BALANCE AT END OF THE YEAR -_-_----____

Year Ended May 31

1944 1943

$ - 6,539.Ol $ 36,539.0 1

630,477.92

$ 667,016.93 $ 36,539.Ol

28,175.OO

$ 638,841.93 $ 36,539.Ol

$28,99 1,490.178,573,503.24

$37,564,993.41

$24,8 12,306.8 18,225,30 1.36

$33,037,608.17

$ 3,746,118.00174,984.20483,151.71

$ 3,746,1 18.00300,000.00

$ 4,404,253.9 1

$33,160,739.50

$ 4,046,118.00

$28,99 1,490.17



HASKINS & SELLS

CERTIFIED PUBLI C ACCOUNTANTS

THE NATIONAL BANK BUILDING

DETROIT

ACCOUNTANTS’ CERTIFICATE

The Dow Chemical Company:

We have examined the consolidated balance sheet of The Dow Chem-

ical Company and its subsidiary companies as of May 31, 1944 and the

related statements of consolidated income ond surplus for the year ended

that date, have reviewed the accounting procedures of the companies, and

have examined their accounting records and other evidence in support of

such f inoncial statements. Our examination was made in accordance with

generally accepted auditing standards applicable in the circumstances and

included all auditing procedures we considered necessary, which procedures

were applied by tests to the extent we deemed appropriate in view of the

systems of internal control; it was not practicable to confirm receivables

from United States Government departments and agencies but we have

satisfied ourselves with respect to such receivables by means of other audit-

ing procedures.

In our opinion, the accompanying consolidated balance sheet and state-

ments of consolidated income and surplus fairly present the financial con-

dition of the companies at May 31, 1944 and the results of their operations

for the year ended that date, in conformity with generally accepted account-

ing principles and practices applied on a basis consistent with that of the

preceding year.

HASKINS & SELLS

July 22, 1944.



THE DOW CHEMICAL COMPANY

MIDLAND, MICHIGAN

E. 0. BARSTOW

E. W. BENNETT

J. S. CRIDER

Directors

L. I. DOAN

A. B. DOW

W. H. DOW

M. E. PUTNAM

C. J. STROSACKER

W. R. VEAZEY

Officers

Chairman of the Board, President and

General Manager - - - W. H. DOW

Vice President and Treasurer - - E. W. BENNETT

Vice President and Secretary - - L. I. DOAN

Vice President - - - - E. 0. BARSTOW

Vice President - - - - C. J. STROSACKER

Vice President - - - - M. E. PUTNAM

Assistant Treasurer - - - - J. S. CRIDER

Assistant Treasurer and Assistant Secretary F. H. BROWN

Assistant Secretary - - - - A. P. BEUTEL

Assistant Secretary - - - L. A. CHICHESTER

Assistant Secretary - - - - R. L. CURTIS

Assistant Secretary - - - G. M. McGRANAHAN

Assistant Secretary - - D. J. LANDSBOROUGH

Auditor - - - - - C. PENHALIGEN

Transfer Agents Stock

Guaranty Trust Company of New York Common

The National City Bank of New York Preferred

The Cleveland Trust Company Common and Preferred

Registrars

The New York Trust Company

Guaranty Trust Company of New York

The Notional City Bank of Cleveland

Subsidiary Companies

Cliffs Dow Chemical Company

Dow Chemical of Canada, Limited

Dow Mognesium Corporation

Dowell Incorporated

Dowell Sociedad Anonima

Midland Ammonia Company

Associated Companies

Dow Corning Corporation

Ethyl-Dow Chemical Company



Documents

Dow Chemical Company Annual Report - 1944