THE DOW CHEMICAL COMPANY

MIDLAND, MICHIGAN

Directorr E. 0. BARSTOW w. H. DOW J. S. CRIDER L. I. DOAN G. E. COLLINGS C. J. STROSACKER E. W. BENNETT J. T. PARDEE W. R. VEAZEY

Officer8 Chairman of the Board President and General Manager Vice President Vice President Vice President, Sec’y and Treasurer Vice President and Genera C Sales Manager Assistant Treasurer Assistant General Manager Auditor and Assistant Secretary L. Assistant Secretary J. T. PARDEE W. H. DOW G. E. COLLI NGS J. T. PARDEE E. W. BENNETT L.I.DOAN J. S. CRIDER A. P. BEUTEL A. CHICHESTER F. H. BROWN

..

Registrars The New York Trust Company 100 Broadway New York City The National City Bank of Cleveland Cleveland, Ohio

Transfer Agents Guaranty Trust Company of New York 140 Broadway . New York City

The Cleveland Trust Company Cleveland, Ohio

To the Stockholders

of The Dow Chemical Annual Report of

Company: your Company is presented is reproduced herewith. as part of

The forty-second The Consolidated been audited this report. The consolidated

Financial

Statements

for the fiscal year ended May 3 1, 1939 have

by Messrs. Haskins

fi Sells, whose certificate

net income of the Company and its subsidiaries for the year to $4,178,485.17, deducting after provision for depreciation per share on during the 31, ’ profit. After dividends on the preferred capital stock to $3.95 outstanding capital stock

ended May 3 1, 1939 amounted and Federal income taxes. of $300,000.00, the average year. 1938. number the consolidated

net income was equivalent

of shares of common or $3.91

Approximately (See Chart

17 cents per share may be regarded as non recurring No. 1 .I of the consolidated The total companies

This compares with $3,895,268.58

per share for the year ended May

The provision for depreciation $2,323,626.43 amortization now amounts to plant

amounted

to and

for the year under review. to $17,909,180.91. and property

reserve for depreciation

=ps

Additions of $4,147,526.91 nection

amounted value

to $1,643,235.26

during the year acquired in conCompany. to processes. $3.00

ended May 3 1, 1939, which is exclusive of fixed assets, having and a net depreciated of $2,439,886.90, Western with the statutory merger with Great

a gross book value

Electra-Chemical

The major expenditures Your preferred amounted $913,003.17, Net Company

were for additions distributed

to plant and improvements dividends Including disbursed

four equal quarterly during the the year. dividends

aggregating to

per share to the common stockholders capital stock of $300,000.00, After to $3,265,482.00. making the total

dividends on the shareholders the year

deducting

the dividends

paid during

from the consolidated

net income, there remained

as an addition

to earned surplus

earned surplus $11,229,152.45. to $26,762,28 graphs 1.95. (See Chart this year No. 2.1 are sub-

sales for this period amounted the

We wish to call to your attention mitted ing. on the basis of a consolidated As of December 31, 1938, its subsidiaries.

shown for

statement

of The Dow Chemical Electra-Chemical

Company and Company was

At present there are 1,03 1,988 shares of common stock outstandthe Great Western

consolidated with The Dow Chemical Company by the issuance of 86,988 shares As of March 31, 1939, the wholly owned subsidiary, lo-Dow of common stock. Chemical Company, was absorbed into The Dow Chemical Company. The present

organization companies

lof The

Dow Chemical

Company

and

its

subsidiaries

and

affiliated

is as follows:
Percentage of common stock owned

Dowell Midland Cliffs

Incorporated . Ammonia Chemical

. .

. .

. .

. . . . .

. . . . .

. . . . .

. 100% . 100% . . . 75% 60% 50% of the Great this Division Dow Chemical Western of your Com-

Dowel1S.A. Dow Chemical

Company Company Company merger,

Ethyl-Dow At

the time of the statutory Company

the activities however, that with The

Electra-Chemical Company, during

were covered in some detail,

which hardly

seems neces-

sary to repeat here.

It is only proper to report,

the five months of its association Electra-Chemical $720,000

pany, has more than earned its proportion for the purchase of Great Western As of January The capital structure stock without Chart No. 3.1 Total represented No. 4.1 The More foregoing details statements major taxes paid during 1, 1939, 60,000 fifteen

of the return on the capital Company.

stock issued

Series “D”,

of serial notes were retired. preferred stock of $100 (See

at present date is represented shares of 5% year 3%

by 1,03 1,988 shares of common

par value,

cumulative

par value and $5,000,000

debentures due December 1, 1951.

the year amounted

to $1,506,645.35

which

an equivalent

cost per share on common

stock of $1.54:

(See Chart

summarize

very

briefly

our

financial and

position. sub-

complete

can be obtained

by study

of the graphs

reports

mi tted herewith. It is believed than the stockholders history. During are more interested in current problems and

expectations employment to continue pounds. practice.

present

For this reason, it might be well to summarize to current production. It was, however, desired During the past year comstandard The more new more 100 new chemical applying uses.

some of our activities.

this past year, it was necessary to reduce our total problems and new problems. purposes more than statement

to a level equivalent research on current

we produced and submitted

for testing

This is a very conservative

and has become practically qualities and

This represents normal operation have to do with solvents,

of the laboratories, better

every effort

to produce new and improved products for recent developments and improved quality and disinfectants

improved alloys and methods of working, important are increased and

new plasticizers

for the plastic trade, new fungicides

and by no means the least

diversified uses for older established products. Very interesting development continues in the manufacture and use of styrene, ethyl cellulose and Thiokol, all items previously called to your attention.

At the beginning of the fiscal year just closed, we were enjoying a good volume of business; however, the volume steadily dropped until January of this year, when At the present time, the volume shows . months of 1937. to present have It little a chart meaning. showing Our the comour business began to show an improvement. a fair comparison with corresponding

In the past few years, we have attempted relationship between our business and that as the comparison has any significance what the future the potential undoubtedly standards record.

of industry

generally. is difficult

This

no longer

parisons must necessarily be with our past offers. All old standards of the chemical possibilities

to even predict However,

of comparison industry

have changed.

have no limit than ever. growth

in their application ’

and we continue to apply ourselves more diligently show satisfactory -est need of the chemical production, greatest manufacturing

We will carry on and is the establishment

results on the basis of present standards but the greatIndeed, at the highest point of the country’s employed fewer men than are now listed _ problems. The to the continued must be developed. success of your Wealth must

industry for newer and greater the country. industry actually

of new industry throughout

as unemployed.

Present industry cannot solve present unemployment could contribute Work

service our stockholders

Company would be to assist in any measure, no matter employment be created. for any purpose whatsoever. The future

how small, to the creation of

success of your Company also requires it. enjoyed a close contact between employees and

Our Company management. ciation ment with operating does not exist

has always details.

Even the directors

of your Company

enjoy unusual

and close assoare reis to

The principle

of remote control and remote managemanagements Our and operation. Our Company, wherever policy of work, initia-

in your Company.

Even the subsidiary

sponsible for all details of their management create junction wealth and consequently with

it may be located, operates itself for its own best local interest. new work by continuous of capital. application tive and invention, the assistance

Our purpose is to operate in con-

with the laws of nature and co-operate

in turn with the government. WILLARD H. DOW, President.

Midland,

Michigan

July 20, 1939

NOTICE t Information presented on following graphs including fiscal year 1937 apply to The Dow Chemical Fompany only. Information on graphs for fiscal year 1938 and 1939 is prepared from the Consolidated Statements of The Dow Chemical Company and its subsidiaries.

/~om,ooo I
/QOOQOUU

~Oao,ck3a-------------------

6, ~,OOO

p70~000 x

1930

I

I

I /93f

I

I /932

I

1933

I

I

I 1934
Chart

I
No.

I /935
1

I

I 1936

I

1937

I

I

I 1938

I

I /939

Chart

No. 2

Chart

No. 3

Chart

No. 4

I

The graphs appearing in this report are not to be reproduced or used without the permission of The Dow Chemical Company.

L

-

I

HASKINS
CERTIFIED PUBLIC

&

SELLS
RCSIOCNT PMTNLRS ClRlL n.DULLocK,C.RI HAROLD w. SCOTT.cc. cc THE NATIONAL SANK SUILDINO

ACCqUNTANfS

DETROIT

The chemical Dow company:
We have m&e an examination of the consolidated balance sheet of The Dow Chemical Comgany and its subsidiary ~anpanies as of May 31, 1939 and of the related statements of consolidated income and earned surplus for the year ended that date. In connection therewith, we made a review of the accountiq methods anb examined or tested accounting recotis of the comganies and other supporting evidence in a manner aal to the extent which we considered aggropriate In view of the systems of internal accuunting control. & . to inventories, the records were examined, the related procedure was reviewed, and the grices axyZ computations were tested; the scope of the examination did not include physical tests of spantitles. In our opinion, based upon such examination, the accmaxp lng consolidated balance &heet ti related statements of consolidated Incane and earn&l surplus IFaIrly presents in aczcoHance with accepted principles of accounting consistently followed by the canganies, their finanoial condition at May 31, 1939 and the results of their ogeratloas for the year ended that date.

ally 13, 1939.

J

THE bOW CHEMICAL

COMPANY

( Incorporated in Michigan)

AND SUBSIDIARY COMPANIES
CONSOLIDATED
I

BALANCE SHEET, MAY 31, 1939

ASSETS
CUta;;NT ASSETS: -------c-----------------------------------------$ 3,504,429.85 217,750.oo United States Government securities---at cost (face value, market value, $232,3 12.50) -----------------$200,000.00; Notes and accounts receivable: Customers, $3,253,67 1.96, associated company, $5,005.33, employees, $10,283.44, and sun----$ 3,387,959.86 ---------e-----m dry, $118,999.13 187,050.20 Less reserves for doubtful receivables __-----I nven tories : Finished goods and work in process (at lower of cost or market) _--__-----_-------_Maz%k:;nd supplies (at cost---approximately ----------------------------

3,200,909.66

$ 5,621,134.75 1,774,484.17 7,395,6 18.92 $14,3 l&708.43

Total current assets __________ -__-________- - __----INVESTMENTS: Associated company: Notes receivable, maturing November 15, 1942 __________ $753,000.00 Preferred and common capital stocks (at cost, which is less than the Company’s book equitv in the stocks as indicated by the balance sheet of the -w-s-61 7,300.OO $ 1,370,300.00 associated company) Receivable from employees and others on house and lot accounts ____- -_-___-_-_--__-__Miscellaneous securities (at cost, less reserve, --------------------------$53,137.32) Total investments ---------------------------------FIXED ASSETS: Real estate, plants, and equipment-at cost (less reserves for depreciation, $17,879,239.01) --Patents-at cost (less reserves for amortization, -------------------- -----$29,941.90) 47,085.64 8 1,994.68

1,499,3 80.32

$25,79 1,724.73 74,832.50 25,866,557.23 UNAND 170,347.33 $41,854,993.3 1

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

THE DOW CHEMICAL

COMPANY

( Incorporated in Michigan)

AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET, MAY 31, 1939

LIABILITIES
CURRENT LIABILITIES: Accounts payable-Trade and miscellaneous -----------------Employees’ compensation awards ---------------------------Federal income taxes - _-___ - __________________________ Accrued liabilities: Payrol Is ---------------------------------------------Taxes (other than Federal income taxes) __-_____________ Sundry ---------------------------------------------$ 1,179,482.78 62,189.11 75 1,485.40 323,882.60 300,497.4-l 33,089.46 $ 2,650,626.76 5,000,000.00 311,426.13 733,77 1.10 6,000,000.00 15,829,609.33

-__-

-___

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 CONTI NGENCI ES ----------------------------------MINORITY INTEREST IN CAPITAL STOCK AND SURPLUS OR DEFICIT OF SUBSIDIARY COMPANIES ______________________ PREFERRED CAPITAL STOCK-5% CUMULATIVE (authorized and outstanding, 60,000 shares of $100.00 par value each) -------e-COMMON CAPITAL STOCK (authorized, 2,000,OOO shares without par value; outstanding, 1,03 1,988 shares) -------------------SURPLUS: Capital surplus (no change during May 31, 1939) ------------------------Earned surplus --------------------------Total surplus year ended $ 100,407.54 11,229,152.45

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

11,329,559.99

TOTAL
NOTE:

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

$41,854,993.3

1

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

THE DOW CHEMICAL

COMPANY

AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED INCOME

FOR THE YEAR ENDED MAY 31, 1939

SALES (net of returns, allowances, cash discounts, and freight) COST OF SALES (exclusive of provision for depreciation) GROSS PROFIT SELLING AND ciation) : __________ GENERAL --___------_----___-------------mm EXPENSES (exclusive

______

__---_-----

$26,762,281.95 16,869,377.7 $ 9,892,904.24

1

of provision for depre$2,256,892.87 1,542,680.21 3,799,57X08

Selling and administrative Research and experimental PROFIT TION viously PROFIT OTHER

expenses ________expenses _______-

FROM OPERATIONS BEFORE PROVIDING FOR DEPRECIA-------------------------________-_______-_-_--made, $78,341.48) FROM INCOME: $ 994p49.02 249,739.13 e-e-FOR DEPRECIATION (less adjustment of provision ‘pre----c___---___-----------------OPERATIONS _- ____ - ________ -_______________

$ 6,093,33

1.16

PROVISION

2,323,626.43

$ 3,769,704.73

Dividends, $952,049.50, and interest, $41,999.52, from an associated company _______________ Other interest earned, royalties, and miscellaneous GROSS INCOME _--_______ ----------_----------------

1,243,788.15 $ 5,013,492.88

l NCOME CHARGES: Interest and amortization of discount and expense on funded debt -_-_-__--------_--------Miscellaneous ___-_-----------_-_---------

$

171,867.85 8,739.67 180,607.52 $ 4,832,885.36 678‘590.14

NET INCOME BEFORE PROVIDING PROVISION FOR FEDERAL INCOME

FOR FEDERAL INCOME TAXES _-__-------_--__---_

TAXES

NET INCOME BEFORE ADJUSTMENT FOR MINORITY IN SUBSIDIARY COMPANIES __-_-__-___--___-__---------MINORITY SIDIARY NET INTERESTS’ COMPANIES

INTERESTS $ 4,154,295.22 24,189.95 $ 4,178,485.17

SHARE OF PROFITS AND LOSSES OF SUB(net loss) -----_------------_--------_--___-__------_--_-------.----

INCOME

FOR THE YEAR

THE DOW CHEMICAL

COMPANY

1Incorporated in Michigan 1

AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET, MAY 31, 1939

LIABILITIES
CURRENT 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 OR DEFICIT OF SUBSIDIARY COMPANIES ___- __________________ PREFERRED CAPITAL STOCK-5% CUMULATIVE (authorized and outstanding, 60,000 shares of $100.00 par value each) -------q-COMMON CAPITAL STOCK (authorized, 2,000,OOO shares without par value; outstanding, 1,03 1,988 shares) -------------------SURPLUS: Capital surplus (no change during year ended $ 100,407.54 May 31, 1939) ------------------------11,229,152.45 Earned surplus --------------------------Total surplus ------------------------------------$ 1,179,482.78 62,189.11 75 1,485.40 323,882.60 300,497.41 33,089.46 $ 2,650,626.76 5,000,000.00 311,426.13 733,771.10 6,000,000.00 15,829,609.33 *

11,329,559.99

TOTAL
NOTE:

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

$41,854,993.3

1

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

THE DOW CHEMICAL

COMPANY

AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED EARNED SURPLUS

FOR THE YEAR ENDED MAY 31, 1939

BALANCE CREDIT-NET

JUNE

1, 1938 -----------------------------------INCOME FOR THE YEAR -----------------------

$10,3 16,149.28 4,17&485.17 $14,494,634.45 $2,965,482.00 300,000.00 3,265,482.00 $11,229,152.45

’ Total -_---------me------se------------------CHARGE-CASH DIVIDENDS: Common capital stock _- ______ - _____ - ______ stock _-___-__1939 ________ -__Preferred capital BALANCE MAY 31,

__---------------------------------

I

DOW CHEMICALS IN INDUSTRY
Carbon Bisulphide Carbon Tetrachloride Calcium Chloride Diethylene Glycol Ethylene Dichloride Orthodichlorbenzene Paraphenylphenol PaFhzno;tiary Phenol Propylene Dichloride Sulphur Chloride 1,1,2,2-Tetrachlorethane Triphenyl Phosphate Butyl

AUTOMOTIVE AND Al RCRAFT
Acetylene Tetrabromide Carbon Tetrachloride , Caustic Soda ’ Dowmetal Ethocel Ethylene Dibromide Ethylene Glycol Muriatic Acid Phenol

PLASTIC AND RESIN
Acetani I id Acetic Anhydride Aniline Oil Bis Phenol-A Camphor, Monobromated Carbon Bisulphide Carbon Tetrachloride Caustic Soda Chloroform Diethylene Glycol Diphenyl Ethocel Ethyl Chloride Ethylene Dibromide Ethylene Dichloride Ethylene Glycol Hexachlorethane Orthocresotinic Acid Orthodichlorbenzene Orthophenylphenol Paraphenylphenol Parhzn;ltiary Butyl Phenol Plasticizers Propylene Dichloride Salicyladehyde Salicylic Acid Styron 1,1,2,2-Tetrachlorethane Triphenyl Phosphate RAYON Acetic Anhydride Carbon Bisulphide Caustic Soda Epsom Salt Muriatic Acid Perchlorethylene Sodium Hydrosulphide Sodium Sulphide Zinc Bromide

EXPLOSIVES
Aniline Oil Diethylene Glycol Dimethylaniline Epsom Salt Ethylene Glycol Phenol

PAPER
Calcium Chloride Glycol Caustic Soda Diethylene Epsom Salt Muriatic Acid Sodium Sulphide

LEATHER
Carbon Tetrachloride Epsom Salt Ethylene Glycol Phenol Salicylic Acid Salt Sodium Acetate Sodium Sulphide

PETROLEUM
Calcium Chloride Caustic Soda Dowmetal Hexachlorethane Muriatic Acid Phenol Sulphur Chloride

MINING AND METALLURGY
Acetylene Tetrabromide Cadmium Bromide Caustic Soda Ferrous Chloride Hydrobromic Acid Magnesium Chloride Mining Salts Muriatic Acid Sodium Bromate Sodium Bromide Sodium Sulphide Sulphur Chloride

PHOTOGRAPHIC
Acetic Anhydride Ammonium Bromide Bromine Cadmium Bromide Carbon Tetrachloride Chloroform Ferric Chloride Hydrobromic Acid Monochloracetic Acid Phenol Potassium Bromide Sodium Bromide 1,1,2,2-Tetrachlorethane Triphenyl Phosphate

REFRIGERATION
Calcium Chloride Ethyl Bromide Ethyl Chloride Methyl Bromide Salt

PAINT, VARNISH, AND
LACQUER Acetanilid Acetic Anhydride

DOWi CHEMICALS IN INDUSTRY
RUBBER Aniline Oil Carbon Bisulphide Carbon Tetrachloride Caustic Soda ’ Chloroform Phenol Propylene Dichloride Sodium Sulphide Sulphur Chloride 1,1,2-Trichlorethane SOAP Caustic Soda Coumarin Diphenyloxide Ethylene Dichloride Perchlorethylene Phenol Salt TEXTILE Cadmium Bromide Calcium Chloride Carbon Bisulphide Carbon Tetrachloride Caustic Soda Chloroform Diethylene Glycol Epsom Salt Ethylene Dichloride Ethylene Glycol Ferrous Chloride Perchlorethylene Phenol Propylene Dichloride Sodium Acetate Sodium Sulphide Sulphur Chloride AGRICULTURAL Arsenate of Lead Bordow Calcium Arsenate Carbon Bisulphide Dowfume 75 Dowax Dowspray Dormant Ethylene Oxide Lime Sulphur, Dry Lime Sulphur, Solution Magnesium Arsenate Magnesium Arsenate Dust Mixture Methyl Bromide “Mike” Sulfur Orthodichlorbenzene Paradow Paris Green Special Garden Spray Special Potato Spray PHARMACEUTICAL Acetanilid, U. S. P. Acetphenetidin, U. S. P. Acetyl Salicylic Acid, U. S. P. Acetyl Salicylic Acid, Granulation with Starch Ammonium Bromide, U. S. P. Ammonium Salicylate, U. S. P. Antipyrene, U. S. P. Benzoic Acid, U. S. P. Bromoform, U. S. P. 1X Cadmium Bromide, U. S. P. Camphor, Monobromated, N. F. Carbon Tetrachloride, C. P. Chloroform, U. S. P. Coumarin Diphenyloxide, Perfume Grade Epsom Salt, U. S. P., Recrystallized Ethyl Chloride, U. S. P. Ferric Chloride Crystals, U. S. P. X Ferric Chloride Solution, U. S. P. Glycine, Medicinal Hydrobromic Acid, U. S. P. 1X Quality Iodine Lithium Bromide, N. F. Magnesium Salicylate Magnesium Sulphate, Desiccated Methyl Anthranilate Methyl Salicylate, U. S. P. Phenol, U. S. P. Phenyl Ethyl Alcohol Potassium 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, Purified 2,4,6-Tribromphenol Trichloracetic Acid, U. S. P.