Dow Chemical Company Annual Report - 1949

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    NJG 2 1949

    THE DOW CHEMICALCOMPANY/ /

    / ,/,

    , -1 9 4 9r:

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    ADDRESS DOWCHEMCO THE Dow CHEMICAL COMPANYNEW YORK CITYSAN FRANCISCO

    PHILADELPHIA MIDLAND l MICHIGANLOS ANGELESWASHINGTONSAINT LOUISCLEVELAND

    HOUSTONCHICAGOSEATTLE

    REG.U.S.PAT OFF

    July 25, 1949To the Stockholders :

    We present herewith the 52nd annual report of the operations of The DowChemical Company, its subsidiaries and associated companies, covering the fiscal yearended May 31, 1949.

    The annual meeting of stockholders will be held on Wednesday, August 24, 1949,at 2 p. m. (Eastern Standard Time) at the Companys offices in Midland, Michigan.The management solicits proxies from holders of the common stock concurrently withthis statement. .

    The year marked the return of this country to a highly competitive economy, a factwhich is being greeted in some circles with apparent apprehension. As in all periods oftransition, some localized and temporary hardships are inevitable, yet this trend consti-tutes a return of the very way of industrial life to which America has attributed its un-rivaled economic and industrial progress.

    While our own company has felt sharply the effect of retarded markets in manylines, we cannot ignore the fact that historically we have made progress in times of keencompetition. For our part, also, three significant facts stand out as encouraging notes forthe future.

    First, the chemical industry generally has not raised its prices in recent years to thedegree evident in many other industries, hence present price reversals should be lessstrongly felt.

    Second, the need for method and product improvement throughout all industryspells further dependence on chemical science. This is evidenced by the constant dis-covery of new uses for many of our old line products.

    Third, Dows history is a story of diversification, and today, as always, our researchis opening new avenues of activity. Thus new products and new markets give promiseof helping balance the scale for products which have felt the effect of retarded demand.

    Our future is our countrys future. Toward both the attitude of Dow managementcannot be other than optimistic.

    Sincerely,

    LELAND I. DOANPresident

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    Sales __--_-_-_-------_---_____________

    Total Income --_----_-_------__---------

    Net Income -_-----_---___-_-__- ______ -_Dividends-Preferred Stock --___----_----_-

    Net Income Applicable to Common Stock - -_ -

    Number of Shares of Common Stock Outstanding

    Earnings per share-Common Stock _------__-Cash Dividends Declared-Common Stock - _ _ -

    Stockholders Investment __----------_-----

    Number of Stockholders, Preferred and Common

    1949

    $200,370,952203,375,613

    25,260,4732,5 13,7 12

    22,746,76 15,126,024

    4.445,859,434

    189,986,29919,866

    :k to its stockholders in the ratio ofuring the year the Company distributed Common Stocone share for each forty shares held.

    NOTE-In the following pages will be found complete consolidated incomeand surplus statements, consolidated bal ante sheet, and notes.

    1948

    $170,696,037174,353,1902 1,066,646

    2,461,29618,605,3504,994,824

    3.724,994,824

    172,912,54518,669

    Per CentIncrease

    171720

    222

    3

    1917106

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    I N considering the happenings of the past year it is inevitable that one event, aboveall others, is foremost in the minds of all Dow management-the death of our latepresident, Dr. Willard H. Dow, in a tragic aircraft accident on March 31 of this year.The nations press has commented widely and sincerely on the loss sustained not

    only by our company, but by all industry as well, through the untimely passing of afine gentleman and brilliant leader. In that vein little can be said that has not alreadybeen said.

    Perhaps it is more in point to comment that Willard Dow has not only left us asplendid and inspiring heritage, but the means with which to take it up. Basic policieshave long been well formulated and clear-cut, and experienced leadership, well versed inthese policies, is in evidence through all segments of the organization. It is in point alsothat this leadership has automatically found a unity of purpose in dedicating itself whole-heartedly to the task of carrying forth the operations of The Dow Chemical Companyin keeping with the progressive ideas and human ideals which he daily evinced.

    From an operational standpoint, the fiscal year 1948-49 was markedly successful.Sales again reached a new high, as did net earnings, and while reduced demand for manyof our products was experienced during the closing months of the year, some strengthen-ing in others aided the over-all sales picture.

    Earnings rose from $2 l,O66,646 to $25,260,473. This, after preferred dividends,amounted to $4.44 per share on 5,126,024 shares of common stock outstanding as ofMay thirty-first as against earnings of $3.72 per share on the 4,994,824 shares outstand-ing at the close of the previous fiscal year. The increase in stock outstanding resultedprimarily from a 21/z per cent stock dividend during the third quarter of the year.

    Some 43 million dollars were spent during the year in property and plant additions.

    SA ESThe increased sales figure, while influenced somewhat by necessary price adjust-

    ments, resulted largely from greater volume of production. The income dollar was ac-counted for approximately as follows: Industrial Chemicals 60 %, Plastics 20%) Agri-cultural Chemicals 8 % , Pharmaceuticals 6 % , Magnesium 6 $%.Industrial Chemicals

    As might be expected, we have felt keenly the reduced demand for industrialchemicals which has been evident throughout the country since the latter part of 1948.

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    Even so, operation of our expanded facilities at or near capacity during the first half ofour fiscal year gave us a considerable increase in total volume, and it will be noted thatindustrial chemicals accounted for an even greater portion of our sales dollar than in1947-48.

    PlasticsPlastics sales have exhibited a fine growth during the year. Our major material,

    Styron, has become widely accepted in the plastics molding industry where its lightweight, low price and general utility have made it a favored material for housewares,refrigerator parts and numerous other volume items.

    Saran, an exclusively Dow product, finds much of its market in the field of fancyfabrics. In other forms its uses are most often industrial, dictated by its exceptional re-sistance to a wide range of chemicals.

    Our third basic plastic, Ethocel, is a relatively high priced material and in generalis used only where its special properties are needed.

    Styrofoam, primarily an insulating material, is also finding considerable use in thedecorative and novelty field. Production has been doubled during the past year.

    Agricultural ChemicalsAgricultural chemicals have likewise enjoyed broadened markets. Of particular in-

    terest has been the increased consumption of weed killers and soil fumigants. We wereamong the pioneeers in these fields and during the past year have brought several newformulations into either the commercial or field development stage.

    PharmaceuticalsPharmaceuticals have held up well and appear to have a sound outlook for the

    current year.

    MagnesiumSale of magnesium and magnesium products reached almost 23 million pounds this

    year as against 13.6 million for the year 1947-48. More encouraging, the magnesiumdivision realized a profit for the first time since the war and the outlook is now perhapsthe most promising in our history. While the stepped-up military aircraft program is animportant factor, commercial outlets for the metal in recent months have gained definitemomentum. The transportation, printing, textile and materials handling industries nowshow indications of becoming large users of magnesium alloys.

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    EMI'LOYEESOur over-all employment remained at a level essentially constant with that of the

    previous year. Despite the 25-day strike at our Midland Division last July we have en-joyed excellent company-wide labor relations, and an improvement in general plantefficiency has been evident.

    In addition to direct wages amounting to $53,482,000, an additional $4,048,000was paid out in indirect benefits, including employees group insurance, workmens com-pensation insurance, old age and unemployment taxes and our pension and profit-sharing plan which latter accounted for $2,177,000 of the total. This plan was placedin operation during the 1948 fiscal year. Our group insurance plan, to which bothemployees and the company contribute, has been in operation since 1934, withperiodic improvements, and about 99 per cent of our people are covered by it.

    In response to a stock offering to our employees last November 3,326 employeessubscribed for a total of 48,498 shares. Subscriptions are due to be completed inDecember of this year.

    DIVISIONSMidland Division

    While numerous construction and expansion projects were carried on in theMidland Division, the greatest consideration was given to our present and future powerneeds. Accordingly, construction was started on a new power house which will not onlypermit retirement of some older less efficient equipment, but accommodate increasedpower needs as well. -

    Keen interest in the most modern and efficient of power generating equipmenthas been a tradition of our company since its earliest days. It is significant, therefore,that a new type, high pressure boiler, which has aroused attention throughout industry,was installed at the main power house during the year. This boiler permits the useof cheaper fuels from a larger selection of sources. Similar equipment will be in-stalled in the new power house, which will ultimately represent a capital investment ofsome 8 million dollars and is expected to be ready for operation before the end ofthe current fiscal year.

    We are now taking 7 million gallons per day of Lake Huron water secured inconnection with a Saginaw-Midland joint waterworks project. While this is a smallpart of our daily requirements, it affords us a superior water for boiler feed andspecial process use.

    On the production front, a large plant for the manufacture of 2,4-Dow weedkiller was completed and placed in operation. Additional facilities were also providedfor production of Saran, improved ion exchange resins, phenol and other products.

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    Texas DivisionExpansion of Texas Division facilities accounted for a substantial part of the

    Companys total capital expenditures during the year.A vinyl-vinylidene chloride plant having a capacity of 5 million pounds per

    month was completed to supply the broadening market for our Saran formulations.As of May 17 we completed purchase of the remaining portion of the govern-

    ments magnesium facilities at Freeport which are connected with our own plant, andon the same date acquired a deed to the governments interest in the fresh water projectwhich has been financed jointly by Dow and the government during the war. Duringthe year we also purchased from the government 687 acres of unimproved land adjacentto the Velasco plant site.

    As a condition of the purchase of the Velasco styrene plant early in 1947, theCompany was obligated to construct an ethylene plant capable of producing suffi-cient ethylene to make 6,500 tons a month of styrene, the quantity which the Companywas obligated to sell the government if required. As a result of the subsequent avail-ability of additional supplies of natural rubber, the government reduced the Companyscommitment from 6,500 tons of styrene a month to 4,000 tons and released the Com-pany from its obligation to build the ethylene plant. Since our existing ethylenefacilities are considered ample for present and reasonably foreseeable requirements,construction of the proposed ethylene plant was abandoned during the year, resultingin a write-off of $2,089,000.

    With a few exceptions, the facilities of the Texas Division operated during theyear at or near capacity, and total shipments of products amounted to an increase of28.5 per cent over tonnage moved during the previous fiscal year.

    Great Western DivisionExtension of facilities in both old and new lines marked the year for our Great

    Western Division.Of special note is a new plant for the manufacture of xanthates. Great West-ern has long been the worlds leading producer of these materials used extensively in the

    refining of nonferrous metal ores. The new plant will utilize a new and more effi-cient process and is expected to provide for an increase in capacity of 20 per cent.

    Expansions of the chlorine and caustic soda facilities have increased our west coastcapacity of these two basic companion products by approximately 30 per cent, while acomparable increase in ammonia capacity was also completed during the year.

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    Our growing importance in the field of agricultural chemicals led to the construc-tion of enlarged facilities at Seal Beach for development and production in this line.

    The apparent usefulness of certain synthetic amino acids as supplements in animaland poultry feeds has stimulated our interest in large scale, low cost production of someof these otherwise costly chemicals. Accordingly, a plant to produce methionine ona commercial scale is under construction at Pittsburg and is expected to be ready foroperation later this year.Bay City Division

    Our magnesium foundry and fabrication division at Bay City, Michigan, did itsbest volume of business since the war. We have facilities for the production of sandand permanent mold castings and fabricated assemblies. These tie in with facilities inMidland for the production of rolled sheet, die castings and extrusions, and no signifi-cant extensions at either location were necessary during the year.

    The Saran fabrication department, which occupies a portion of the Bay City plant,is finding a modest but growing market for Saran lined steel pipe.Ludington Division

    The major projects completed at Ludington, Michigan, during the year were anew bromine plant, which began operation in January, and a series of new brine wells.

    Ludington continued the production of lime and magnesium chloride, the latterbeing converted to flake in Midland and sold largely for the manufacture of magne-sium oxychloride cements. This division was originally the cell feed section of awartime magnesium plant.

    SLIBSIDIAAYOMPANESBrazos Oil and Gas Company

    This wholly owned subsidiary was organized originally to insure our Texas Di-vision of ample long-range gas resources for both power and process use. Its usefulnessin that direction has been so apparent that during the past fiscal year it extended itsoperations into Michigan and California for our two other major divisions, and it nowhas leasehold interests covering some 150,000 acres in these three states.Cliffs Dow Chemical Company

    This subsidiary, in which we own a two-thirds interest, manufactures charcoal,methanol, acetic acid and other chemicals from the distillation of wood. The demandfor most Cliffs Dow products has been sharply off during the past six months.

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    Dowel1 IncorporatedThe American oil industry generally had a good year and Dowel1 prospered with

    it. At the same time major oil discoveries in Alberta prompted a most substantial in-crease in Dowells Canadian operations.

    Altogether, Dowells volume of business exceeded that of any previous year. It isever increasing its services to the oil industry and enjoys an outlook of sound andconsistent growth.Dow Chemical of Canada, Limited

    Our Canadian company operates a styrene plant for the Canadian government andis also engaged in the production of chemicals for our own account. Its sales were sub-stantially up, and further growth may be expected from facilities recently completed.

    A sizeable chlorine and caustic soda plant was placed in partial operation lastMarch and is gradually being brought up to full capacity. This plant utilizes a Dow-modified mercury cell.

    Major improvements were made to the Styron plant and to the ethylene glycolplant which produces permanent-type anti-freeze for the Canadian market. A sub-stantial portion of our Canadian Styron production was sold abroad.

    Under the Canadian income tax law provision is made for the allowance of depre-ciation at accelerated rates on machinery and equipment used in excess of an eight-hour shift in any twenty-four hour period. The Canadian company has used such rateson certain process equipment used on a multiple shift basis with the result that in-come was charged during the latter part of the year with accelerated depreciation ofapproximately $5 90,000. This amount was in addition to regular depreciation andcovers the entire fiscal year ended May 3 1, 1949.Midland Ammonia Company

    This subsidiary, in which we own 75 per cent of the capital stock, produces syn-thetic ammonia from the hydrogen generated in our chlorine cells at Midland. Oper-ations were carried on at increased capacity during the past year.

    ASEXIGIATEDOMPANIESDow Corning CorporationConsiderable expansion was undertaken during the year by Dow Corning Cor-

    poration, which we own jointly with Corning Glass Works.While the unusual properties of the silicones make them especially useful in

    various industries, some of them have obvious consumer applications, and market de-velopment has been carried on in both directions.

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    Best known consumer development has been Sight Savers, silicone-treated tissuesfor cleaning of eye glasses, which were placed on the market a year and a half ago.A recent market survey indicates that as of the close of the fiscal year, Sight Saverswere being sold in more than 80 per cent of all drug stores in the United States.

    Meanwhile, industrial markets consumed increased quantities of Dow Corningshigh temperature electrical insulating compounds, silicone resins, oils and greases.

    Ethyl-Dow Chemical CompanyEthyl-Dow, owned jointly with Ethyl Corporation, is our oldest associated com-

    pany. Its market has continued to grow and its Freeport facilities operated at near-capacity in the manufacture of ethylene dibromide for use in anti-knock leaded gasolines.This represents a stable market and the outlook is for continued effective and profitableoperation.

    The Saran Yarns CompanyThe manufacture of limited quantities of Saran fine fiber for developmental pur-

    poses was begun during the year in this companys new plant at Odenton, Maryland.The plant represents a capital investment of about a million dollars and provides amplespace for additional equipment which will be added as markets for this new textilematerial are developed.

    Saran Yarns, which is owned jointly with The National Plastic Products Com-pany, is working with virtually all branches of the textile industry in exploring possiblefields of application for this plastic fiber which is noted for its fire retardant and wearresistant characteristics.

    Company research activities are keeping pace with the expansion of Companybusiness. The coordination and direction of research is centered in an Executive Re-search Committee of three members, whose efforts are aided by a General ResearchCommittee of thirty members.

    Research is continuing to improve our existing manufacturing processes as well asthe quality of our stable line of products. The diversity of our manufacture also de-mands a great deal of research in analysis and testing methods. However, the greatesteffort is directed especially to those products, both new and old, which Dow, througheconomic and raw material advantage, can most profitably manufacture.

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    INCOJME AN11 INVESTMENT

    240

    UI20 oulZ0-I-I80 -I

    40

    I940 1941 I942 I943 I944 I945 I946 I947 I948 I949

    10

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    The chart on the opposite page illustrates the substantial growth of our Companyduring the past ten years.

    Our total income this year was more than five times the 1940 figure. We havemet the greatly increased demand for our products by large expenditures for plantsand equipment.

    The investment figures used are made up principally of working capital and netplant investment. The investment at the end of this fiscal year was about six timesthe 1940 figure.

    The ten year figures for income and investment are as follows:INCOME INVESTMENT

    1 9 4 0 - - - - - - _ - - - - - - - - - - - - - - - -1 9 4 1 - - - - _ - _ - _ - - - - - - - - - - - - ~ ~1942 _ - - - - - - - - _ _ _ _ _ _ _ - _ - - - - -1 9 4 3 - - - - - - - - - - - - - - - - - - - - - - -1 9 4 4 - - _ _ _ _ _ _ _ _ - - - - - - - - - - - - -1 9 4 5 - - - - - - - - - - - - * - - - - - - - - - - -1 9 4 6 - - _ - - - - - - - - - - - - - - - - - - - -1947 ---L----~-~-----

    $ 3 9 , 2 3 1 , OOO4 9 , 1 6 5 , OOO8 0 , 3 9 4 , 0 0 0

    108,767,OOO124,657,OOO127,987,OOO104,5 79,000132,787,OOO

    $ 4 3 , 3 9 3 , o o o67,003,OOO83,346,OOOSs,sb 1,000

    119672,000123,847,OOO1 1 4 , 3 8 3 , OOO1 8 6 , S S ,000

    1 9 4 8 - - - - - - - - - - - - - - - - - - - - - - - 1 7 4 , 3 5 3 , o o o 242,409,OOO1949 ----------------------- 203,375,OOO 259,566,OOO

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    Ethl ILOY EES ANI) STOCI/IHIILIIEtlS

    STOCKHOLDERS

    EMPLOYEES

    I8

    I6

    I2

    6

    1940 1941 I942 I943 I944 I945 I946 I947 I948 I949

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    The substantial increase in employees and stockholders of our company duringthe past ten years is illustrated in the graph on the opposite page.

    We have stockholders in every state in the United States, and it is interesting tonote that the owners now outnumber the employees.

    In this connection it should be pointed out that in computing the number of stock-holders no attempt has been made to eliminate duplications resulting from the owner-ship of more than one class of stock by a single individual. On the other hand,however, numerous organizations, such as brokers and nominees, appear on our recordsas single stockholders whereas in reality they represent many individual investors.

    Also of interest is the fact that in 1940 almost 70 per cent of our personnel wereemployed at the Midland Division, whereas today this division accounts for about 50per cent of our 14,25 7 employees. Our Texas Divisions payroll numbers 3 100 em-ployees and Great Westerns 900, while other divisions, subsidiaries, associated com-panies and offices account for an aggregate of about 3 100 persons.

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    IIISTI~Il~llTION OF INCOIIE I1OLLAI\

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    ACCOUNTANTS' ERTlFICATE

    HASKINS & SELL SCERTIFIED PUBLIC ACCOUNTANTS THE NATIONAL BANK BUILDINGDETROIT 26

    RESIDENT PARTNERSHAROLD W. SCOTT, c. P. A.ARTHUR W. KOELBEL, c. I. A.WILLI AM F. ROYER. C. P. A.

    The Dow Chemical Company:We have examined the consolidated balance sheet of The Dow Chemical

    Company and its subsidiary companies as of May 3 1, 1949 and the related state-ments of consolidated income and surplus for the year then ended. Our examinationwas made in accordance with generally accepted auditing standards, and accord-ingly included such tests of the accounting records and such other auditingprocedures as we considered necessary in the circumstances.

    In our opinion, the accompanying consolidated balance sheet and statementsof consolidated income and surplus present fairly the financial position of thecompanies at May 3 1, 1949 and the results of their operations for the year thenended, in conformity with generally accepted accounting principles applied on abasis consistent with that of the preceding year.

    HASKINS & SELLS

    J u l y 1 5 , 1 9 4 9

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    THE DOW CHEMICAL COMPANYI:()NSOLIIIATEII

    ASSETSCurrent Assets :

    Cash ____---___---_---_-_--~~-~--~~-~-~-~-~---~~-~~~~~~-~~~~~~United States Government securities-at cost -----_------___----______Notes and accounts receivable :

    Customers ____________-___________________________----------Associated companies ----_--__-----_-------------------- _______Employees _--__-_---~-__--~-_---~~~--~---~--~--~~~~~~~~~~~~~~

    Total --_-__---__----_----____________________~~~~~Less reserves for doubtful receivables _ _--- __ ----Net receivables _-_-----------_--__-______ _______

    Inventories :Finished goods and work in process (at lower of cost or market) _____-Materials and supplies (at cost-approximately market) :Raw materials _-- ______ - _____ - _____ - ___-_ -__-__------_----..-

    Supplies _--~-_-_____--____---~~~-----~------~~~~~~-~~~~~~~Materials and supplies in transit ----_-----_---------__________ -

    Total _-____--_----___----____________________-Total current assets ----__--------_--_- _______

    Investments and Non-Curr ent R eceivables :Notes receivable and capital stock (at cost) of associated companies (at May

    3 1, 1949, approximately $1,700,000 less than the equity in net assets asshown by unaudited balance sheets of companies) ______-__-______-__Non-current notes and accounts receivable (including employees receivables,1 9 4 9 , $ 4 9 , 7 7 1 ; 1 9 4 8 , $45,092) _--____--_--------_--m-------m---Sundry securities (at cost) -__---___----__----------- ______ - ____. _Claims for refund of prior years Federal taxes on income __-------_-_----

    Total investments and non-current receivables _ _ _ - _Property :

    Plant properties (exclusive of facilities acquired under certificates of necessity)(at cost) :Land __________________-------------------------------------Depreciable property (less reserves for depreciation, 1949, $62,922,597;1948, $49,405,273) _-_---_-----_-_------.---------e----T----

    Facilities acquired under certificates of necessity (at reinstated values, lessreserves for depreciation since reinstatement, 1949, $1,829,756; 1948,$1,219,838) _________--_-----_---~~~~~--~~~---~-----~--------Housing properties (exclusive of facilities acquired under certificates of neces-sity ) - at cost (less reserves for depreciation, 1949, $420,678; 1948,$345,883) ___________ -__--_-_--_--__-_--_--me-- --m- ____ -_--_

    Total property __- ______ ------__------__-----Patents- At cost or nominal value (less reserves for amortization, 1949,$ 1 3 6 , 6 2 6 ; 1 9 4 8 , $ 1 1 3 , 3 7 4 ) ____--_____----_--_-------------------Deferred Charges-Unexpired insurance premiums, unamortized discount andexpense on funded debt, and sundry --_----_-___-_--_- ____- --_-- _____

    1949

    MAY 31, 1949.

    May 31 1948$ 11,601,292$ 5,100,784

    $ 23,252,1714 5 6 , 6 3 91 2 9 , 3 5 2

    1 , 5 2 3 , 4 5 2$ 2 5 , 3 6 1 , 6 1 48 2 9 , 2 6 3$ 2 4 5 3 2 , 3 5 1

    $ 2 6 , 0 6 8 , 7 3 94 , 5 0 3 , 9 2 2

    1 1 , 3 6 7 , 3 9 71 , 2 3 2 , 7 4 4

    $ 4 3 , 1 7 2 , 8 0 2$ 8 4 , 4 0 7 , 2 2 9

    $ 2 1 , 7 9 7 , 6 9 74 , 1 2 5 , 8 4 09 , 8 8 2 , 5 0 4

    9 6 7 , 5 4 5$ 3 6 , 7 7 3 , 5 8 6 ,$ 8 3 , 1 5 4 , 4 4 8

    $ 3 , 0 6 5 , OOO $ 2 , 9 6 5 , OOO4 8 3 , 8 3 37 8 2 , 1 6 7

    3 , 4 0 8 , 9 2 8$ 7 3 7 3 9 , 9 2 5

    2 8 7 , 0 2 66 6 6 , 8 0 4

    4 . 7 7 3 . 7 2 3$4 8 , 6 9 2 , 5 5 3

    $ 2 , 8 9 4 , 5 6 41 8 8 , 7 7 2 , 3 6 2

    7 , 7 6 0 , 4 8 61 , 4 4 0 , 1 6 4

    $ 2 0 0 , 8 6 7 , 5 7 6$ 2 6 7 , 8 1 1$ 1 , 0 5 4 , 4 7 2$ 2 9 4 , 3 3 7 , 0 1 6

    $ 1 0 , 3 7 8 , 4 4 6$ 1 2 , 4 0 3 , 5 7 2$ 2 2 , 6 6 0 , 2 0 2

    5 4 7 , 8 3 21 0 5 , 7 6 17 3 2 . 3 1 6

    $ 2 4 , 0 4 6 , 1 1 14 4 7 , 2 6 7$ 2 3 , 5 9 8 , 8 4 4

    $ 2 , 3 7 9 , X 2 91 6 6 , 0 4 5 , 0 4 6

    8 , 3 7 0 , 4 0 5

    1 , 3 6 0 , 6 7 3$ 1 7 8 , 1 5 5 , 3 5 3$ 2 8 4 , 0 6 2$ 1 , 1 8 6 , 9 6 5

    Total _-_--___--_----_--_-________ $ 2 7 1 , 4 7 3 , 3 8 1See notes to financi

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    SUBSIDIARY COMPANIES

    LIABILITIESMav 311949 I 1948

    $ 11,006,58311,273,561

    1,877,575

    Current Liabilities :Accounts payable -Trade and sundry _-____ - __-_ - ____ -_-_--_--_-__-_Federal and Dominion of Canada income taxes (See Note B) ___-_____-. -Dividends payable ________--_-__-_________________________------Principal amount of debentures for which a sinking fund deposit is due with-in one year _______________-________________________----------Instalments on other long-term indebtedness due within one year - __ -_ _- _-Liability to employees for payments on subscriptions to Common Stock (SeeNote C) _____-____-_____________________________------------Accrued liabilities :

    Payrolls __-____~__~-__-~~______-_~_~~--_--~---_-_~-----__~_,-_Contributions under pension and profit-sharing plans ---__-----_-____Taxes -Social security, property, state income and franchise, and sundry __

    $ 7,906,01215,305,370

    2 , 6 7 8 , 0 8 31 ooo,ooo

    7 3 7 , 5 0 0 2 8 5 , 0 0 09 2 4 , 8 7 9

    1,634,880 l / 4 8 2 , 9 7 81 , 3 5 6 , 9 3 5 2 1 , 0 3 82 , 5 6 2 , 9 6 3 2 , 4 5 8 , 1 2 1

    5 0 2 , 2 1 1 4 8 3 , 5 2 8161,169 1 7 5 . 7 6 6

    Interest _--_--___-__-_-_________________________-------------Sundry ___--__-__-__-__________________________--------------

    Total current liabilities _ -_ _- _ _ __ -_ - _ __ _ - _- - - - $ 3 4 . 7 7 0 . 0 0 2 $ 2 9 , 0 6 4 , 1 5 0Long-Term Indebtedness :

    Fifteen year 2.35% debentures, due November 1, 1961 (sinking fund de-posits due annually-debentures for which a sinking fund deposit is duewithin one year are included in current liabilities) ----__--------_-Promissory notes, due January 1, 1972 (note prepayments due annuallybeginning January 1, 1953) __________ -- _____ ----------_--_- ____Mortgage note, due January 1, 1958 (instalments due within one year are in-cluded in current liabilities) __-__--_----_-_---_-_________ _______

    (in-ontracts and notes payablestalments due within one for purchase of interests inyear are included in current oil and gasliabilities) fields-----

    $ 2 9 , 0 0 0 , OOOa 3 5 , 0 0 0 , 0 0 0

    1 , 8 2 1 , 2 5 01,460,OOo

    $ 3 0 , 0 0 0 , 0 0 03 5 , 0 0 0 , 0 0 0

    2 , 0 5 6 , 2 5 01 5 0 . 0 0 0

    Total long-term indebtedness -----___-_------_Reserves for Fire and Accident Losses, Damage Claims, and Sundr y _-Minor ity Int erests in Subsidiary Companies _ _- _ -_ - __ _- - __ _ _ _- _ -- -Capital Stock :

    Cumulative Preferred Stock, Series A (authorized, 600,000 shares withoutpar value; outstanding, 303,869 shares) -cumulative annual dividend $4per share ___-_______-__-_--______________________------------Second Preferred Stock (convertible) (authorized, 400,000 shares without parvalue; outstanding, 1949, 398,868 shares) -cumulative annual dividend$3.25 per share _________________-______________________-------Common Stock (authorized, 12,000,OOO shares of $15 par value each; out-standing, 1949, 5,126,023.811 shares, including scrip for fractional sharesaggregating 690.8 11 shares; reserved for sale to employees and for conver-sion, 1949, 903,274.589 shares) ______ - ______ - ____ ---_---___-___

    Total capital stock ___- __-__-_ -__-_--_---_-__Surplus :

    $ 6 7 , 2 8 1 , 2 5 0$ 1 , 3 3 6 , 4 6 6$ 9 6 2 . 9 9 9

    $ 6 7 , 2 0 6 , 2 5 0$ 1 , 3 0 5 , 7 1 7$ 9 8 4 , 7 1 9

    $ 3 0 , 3 8 6 , 9 0 0 $ 3 0 , 3 8 6 , 9 0 03 9 , 8 8 6 , 8 0 0 4 0 , 0 0 0 , 0 0 0

    7 6 , 8 9 0 , 3 5 7$ 1 4 7 . 1 6 4 . 0 5 7

    7 4 , 9 2 2 , 3 6 0$ 1 4 5 , 3 0 9 , 2 6 0

    $ 4 0 7 , 0 9 82 7 , 1 9 6 , 1 8 7

    $ 2 7 , 6 0 3 , 2 8 5$ 2 7 1 , 4 7 3 , 3 8 1

    Capital surplus _-___-__-__-- ______ --_-_--_----__-_--_-__________ $ 7 , 3 2 0 , 3 4 03 5 , 5 0 1 , 9 0 2

    $ 4 2 , 8 2 2 , 2 4 2$ 2 9 4 , 3 3 7 , 0 1 6

    Earnedsurplus -_--_-___-----___-_----~-~~----~~~--~-~------~--~~Total surplus ____ _-- ___ _-_ -_- _ __ ___ -_- __ -_ _ _

    Total __- _____ -__- _____ -_-_on page 22.

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    THE DOW CHEMI CAL COMP ANY AND SUBSIDIARY COMP ANIESSTATEMENT OF

    FOR TH E YEARS END ED MAY 31, 1949 AND 1948

    Year Ended May 311949 1948Sales and Other Revenue:

    Sales _____-__________---_____________________---------------Dividends received from an associated company ____-____--__--_-__--Interest from associated companies --- ____ --__--_- ____ --___---__--Other interest income ______ - ___________ - _______________________Fees received in connection with operation of Government-owned plantsReversal of reserve for electrolytic cell replacements no longer required __Other income _-_-_--_____--_-__-_____________________~~~~~~~~

    Total ___-_____-_--__-_--_____________________---

    Costs and Other Charges:Cost of sales (excluding provision for depreciation and contributions underpension and profit-sharing plans) --_-_------_--_----_________Provision for depreciation -__-__-__----__------------------.- ____Contributions under pension and profit-sharing plans -_-_____---__---Selling and administrative expenses -_--_-__-__-_--_--__--------.--Interest and amortization of discount and expense on funded debt -__ _--Provision of reserve for product damage claims __-_--_--__---_-----_Loss on abandonment of an uncompleted plant in Texas -_--_-_---_---Other income charges _----_-------__--_-_--------------.-------Minority interests in income of subsidiary companies -__---_-_-------

    Income before Provision for Federal and Dominion of Canada Income Taxes -_Provision for Federal and Dominion of Canada Income Taxes (See Note B) --

    Income for the Year _ ___--__-_-_____-_---~~~~--~~-~~~~~~-~-- $ 2 X2 6 0 , 4 7 3 $ 2 1 , 0 6 6 , 6 4 6

    $ 2 0 0 , 3 7 0 , 9 5 21 ooo,ooo

    3 7 , 5 0 05 3 7 , 2 8 84 2 1 , 9 3 4

    1 , 0 0 7 , 9 3 9$ 2 0 3 , 3 7 5 , 6 1 3

    $ 1 7 0 , 6 9 6 , 0 3 75 0 0 , 0 0 0

    7 5 , 1 2 83 2 2 , 7 9 84 0 6 , 0 2 2

    1 , 1 7 0 , 7 7 81 , 1 8 2 , 4 2 7

    $ 1 7 4 , 3 5 3 , 1 9 0

    $ 1 2 3 , 5 4 8 , 3 7 71 8 , 7 0 6 , 8 9 9

    2 , 1 7 6 , 9 1 41 3 , 5 7 6 , 2 4 0

    1 , 6 7 3 , 9 8 8

    $ 1 1 0 , 9 8 6 , 3 9 414,178,366

    1,810,21810,686,476

    1,672,7591,000,000

    2 , 0 8 9 , 0 9 13 9 0 , 3 5 21 0 3 , 2 7 9

    $ 1 6 2 , 2 6 5 , 1 4 0

    3 7 4 , 4 9 31 3 2 , 4 7 4

    $140,841,180

    $ 4 1 , 1 1 0 , 4 7 3 $ 33,512,OlO1 5 , 8 5 0 , OOO 12,445,364

    See notes to financial statements on page 22.

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    THE DOW CHEMICAL COMPANY AND SUBSIDIARY COMPANIESSTATEMENT OF

    CONSOLIIIATEI~ SLIIWLLISFOR TH E YEARS END ED MAY 31, 1949 AND 1948CAPITAL SURPLUS

    Balance at Beginning of the Year ___________ --__----_-_--- _____Additions :

    Earned surplus capitalized by a wholly-owned subsidiary company inconnection with a stock dividend ________ -__-__---------_--__Premium received on sale of Second Preferred Stock _--_-_--_--__-___Excess of market value at dates of delivery over par value of CommonStock sold to employees ___________- -__--___----_---- _______Excess of approximate market value over par value of Common Stockissued as a stock dividend __--_-__- ____ -_--_-- _____ - ________Excess of conversion price over par value of Common Stock issued onconversion of Second Preferred Stock __-__-__-__---_--_-- _____

    Total ______-______-_-________________________---Deductions :

    Transferred to Common Stock account in connection with merger (SeeNote A) ______________-__-______________________--------Expenses in connection with merger and sale of Second Preferred Stock(portion equivalent to premium received on sale) _--_____-______

    Total __-______________-_-____________________---Balance at End of the Year __-_____________________ ---_-_-- --_

    EARNED SURPLUSBalance at Beginning of the Year ~_--~___~_~_--__-_------~-~~~~Addition-Income for the year ________________ ---___-__---__-_----__

    Total ________________-_______________________---Deductions :

    Dividends :Cash :

    Cumulative Preferred Stock-Series A _ ___ __ ___ ___ ___ _-_ --Second Preferred Stock ________________________________ -Common Stock -- ______ -__- -_______ - ____-_ - ______ -__-

    Common Stock-124,870.6 shares at an approximate market valueof $45.50 per share _____ -__- ________ -__-__-- _______ -_-Transferred to Common Stock account in connection with merger (SeeNote A) ___-__--___--__-_---____________________-------Expenses in connection with merger and sale of Second Preferred Stock(portion not charged to capital surplus) __- _______ - ________ -_-Earned surplus capitalized by a wholly-owned subsidiary company inconnection with a stock dividend _________________ -__-__--_--

    Total __-____-________________________________---Balance at End of the Year _- _-__-__ - --__________ -__-- _____ -__

    See notes to financial statements on page 22.

    Year Ended Mav 311949$ 4 0 7 , 0 9 8

    1948$ 1 , 0 3 0 , 1 9 1

    2 , 9 0 0 , OOO2 0 0 , 0 0 0

    128,1313 , 8 0 8 , 5 5 3

    7 6 . 5 5 8$ 7 , 3 2 0 , 3 4 0 $ 1,230,191

    $ 7 , 3 2 0 , 3 4 0

    $ 6 2 3 , 0 9 32 0 0 , 0 0 0

    $ 8 2 3 , 0 9 3$ 4 0 7 , 0 9 8

    $ 2 7 , 1 9 6 , 1 8 7 $ 5 0 , 7 2 0 , 2 6 52 5 , 2 6 0 , 4 7 3 2 1 , 0 6 6 , 6 4 6

    $ 5 2 , 4 5 6 , 6 6 0 $ 7 1 , 7 8 6 , 9 1 1

    $ 1 , 2 1 5 , 4 7 61 , 2 9 8 , 2 3 65 , 8 5 9 , 4 3 45 , 6 8 1 , 6 1 2

    $ 1 , 2 1 5 , 4 7 61 , 2 4 5 , 8 2 04 , 9 9 4 , 8 2 4

    3 7 , 0 0 5 , 3 5 81 2 9 , 2 4 6

    2 , 9 0 0 , OOO$ 1 6 , 9 5 4 , 7 5 8 $ 4 4 , 5 9 0 , 7 2 4$ 3 5 , 5 0 1 , 9 0 2 $ 2 7 , 1 9 6 , 1 8 7