47

TH ANNUAL REPORT
FOR THE YEAR ENDED MAY 31,1944

THE DOW CHEMICAL
MIDLAND MICHIGAN

COMPANY

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 a large 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 increasing numbers is an expression of responsibility to the nation, and our resources have aided materially in maintaining an ever growing bridge of supplies to the Army and the Navy, both at home and abroad. In this report of operations for the year ending May 3 7, 7944, it is the intention 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% capital stock were retired and 303,869 shares of new cumulative $4.00 stock, Series A, were issued. EMPLOYMENTThe 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 Company and its subsidiaries. WARTIME EXPANSIONpreferred preferred

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 Company has carried out some 58 wartime projects involving magnesium, styrene for synthetic 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 commitment 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 RELATIONSSince the beginning of the present emergency, the operations of the Company 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 Agricultural 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 and Allied 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 “collective bargaining” IS a matter of cooperative endeavor by supervision and labor to work together for the common good of employees, stockholders and the general public.
l

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 keeping working conditions on the highest and safest plane possible, in paying a reasonable 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 demonstrated. 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, research has proved to be the strength and life blood of the Company. CHEMICALS ESSENTIAL TO INDUSTRYits history became a leading producer in the fields of fumigants, and pharmaceutical compounds. With a largely based on the chemistry of brine, and of late water, it has been possible to greatly increase this lead,

The Company early in heavy chemicals, insecticides, policy of continued research, years on the chemistry of sea

until more than 500 essential products are now being marketed. All along the line, In some cases, the increase has been over production has been materially increased. 400 per cent of the prewar rate, and of course a large portion of this production has The by-products resulting from been allocated for war work and food production. 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. STYRENEWith 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 companies’ 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 styrene 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 Today the production of styrene in all Dow operated plants has Reserve Company. been increased approximately 25 fold over the production prior to the war, and today 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 production of styrene, it is important to note that the production of Dow owned facilities 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. PLASTICSFor a number of years the Company has carried out research in the development 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 Styralay. Since 1941 f the sales, technical development and research facilities of the Plastics 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 Plastic materials today are performing an direct request of the Army and Navy. almost infinite variety of important functions, both on the battle front and on the industrial front.

sented in detail to the Committee, and its president examined during the course of an entire day.

and other officers were cross-

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 limiting production and of manipulating prices or otherwise engaging in monopolistic practices, 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 Chemical Company and the Corning Glass Works to produce important strategic materials 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. silicone producing plan t is under construction At the present time land, Michigan, which will bee in operation later this summer. CONTRACT RENEGOTIATIONat Mid-

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 consolidated balance sheet accompanying this report. In conclusion, your President wishes to extend his appreciation to all the employees of the Company for the loyalty and untiring application and effort which they have constantly given for the continued progression of the war program. WILLARD H. DOW President

Midland,

Michigan

July 37, 7944

THE AND

DOW

CHEk
( Incorporate

SUBSIDIA

CONSOLIDATED BALANCE SHEET,

ASSETS
May CURRENT ASSETS: $ $ $ 14,119,518.42 16.884.153.36 $ $ $ 31 1943 6,573,225.15 2.325.000.00 10,337,8 13.70 168,286.61 32,640.26 262,924.16 lo,80 1,664.73 249,570.5 1 10.552.094.22 1,744,306.40

Cash ----------------------------------------------United States Government Securities (including Treasury tax notes, $8,680,000.00 1-at cost ----------------------Notes and accounts receivable: Customers ________________________________________Associated companies _______________________ - ______-Employees ---------------------------------------Sundry ------------------------------------------Total ----------------------------Less reserves for doubtful receivables __- _________________
--w-s--

Net receivables __________--_--------Billed and unbilled receivables from United States Government and its 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 companies (less than equity in net assets as shown by balance sheets 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-current receivables _ _ ___ _______ ______ 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 depreand amortization, 1944, $45,174,593.72; 1943, ciation $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, unamortized debenture discount and expense, and sundry __-____-________

11,650,822.72 432,926.60 33,549.69 277,638.38 $ 12,394,937.39 280,l 10.09 $ 12.1 14.827.30 $ $ $ 1,011,231.49 9,101,841.98 7,540,610.55 16,642,452.53

$ $ $ $

$ 60,772,183.10

7,925,689.72 6,79 1,244.45 $ 14,716,934.17 $ 35,91 1,559.94

$

3,538,OOO.OO 1,563,646.14 605,234.19 593.8 12.55

$

2,243,OOO.OO 1,645,8 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

$ 75,041,878.06 2,200,6 17.47 $ 77,242,495.53

$
$ $139.6

72,37 1.29 34 1,204.49 16.329.42

$ $

61,831.12 497,984.59 14.06

$1 19.008.3

NOTE:

Operations of the Company and its subsidiaries include transactio the Government the right under certain conditions to renegoti result of renegotiation proceedings for the years ended May 3 for those years except that, in the case of one subsidiary, a re 3 1, 1943, and it is expected that a similar refund may be ma ceedings for the year ended May 31, 1944 have not been stal it is the opinion of officials of the Company that excessive prc

:AL
Michigan)

COMPANY

I COMPANIES AND MAY 31, 1943

4AY 31,1944

LIABILITIES
May CURRENT LIABILITIES: $ 1944 $ 5,328,462.84 14,059,968.47 750,000.00 1,23 1,994.42 1,326,847.99 65,985.63 166,630.64 127,33 1.97 $ 23.057.221.96 31 1943 1,~00.00 5,588,505.10 20,078; 138.67 750,000.00 1,123,227.3 1,3;7,;;;2; 116:657:55 153;785.8 1 $ 3 1.098,048.92 1

--------------------------------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 ______-_--_ 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 current liabilities) __________________________________ -_ Total funded debt ______________ RESERVES FOR FIRE AND ACCIDENT LOSSES, DAMAGE CLAIMS, ELECTROLYTIC CELL REPLACEMENTS, AND SUNDRY ______ MINORITY INTERESTS IN SUBSIDIARY COMPANIES ----------

$

7,500,000.00

$

7,500,000.00

$

4,500,000.00 12,000.000.00

$

5,250,OOO.OO 12,750,OOO.OO

$ $

1.808.29

1.08

$ $

1,636,049.07 1,202,278.06

1 n270.426.12

CAP ITAL STOCK : Cumulative preferred stock, Series A (authorized, 600,000 shores without par value; outstanding, 303,869 shores) -annual dividend $4.00 per share ---------------------------Preferred capital stock-5% cumulative (at May 31, 1943, authorized and outstanding, 60,000 shares of $100.00 par value each) _______________________________________ Common capital stock (authorized, 2,000,OOO shares without par value; outstanding, 1,248,706 shares) -----------------Total capitol stock ______________ SURPLUS: Capital surplus -----------------^--------------------Earned surplus _______________________________ - _______ Total surplus __________________

$ 30,386,900.00

$ 37.293.908.83 $ 67,680,808.83

6,000,000.00

37,293,908.83 $ 43,293,908.83

$

638,84 1.93 33,160,739.50 1.43

$ 33,799,58

36,539.Ol 28,99 1,490.17 $ 29,028,029.18

$

TOTAL

__________- - __- - _- -

!$139,6 16,329.42

$1 19,008,3

14.06

rhich are subject to the provisions of war profits control legislation giving As a war contracts and subcontracts for the purpose of limiting profits. 942 and 1943, no refunds were required of the Company or its subsidiaries f, not relotively material in amount, was required for the year ended May my such subsidiary for the year ended May 31, 1942. Renegotiation proHowever, based upon the results of proceedings of the two prior years, within the meaning of the legislation have not been realized for such year.

TVE DOW CHEMICAL

COMPANY

AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED INCOME

FOR THE YEARS ENDED MAY 31, 1644 AND 1943
Year Ended May 31 1944 1943 $120,426,95 1.95 900,000.00 158,732.36 2,680,009.47 49 1,087.46 $124,656,78 1.24

SALES AND

OTHER

REVENUE:

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 _---_-___--________-____ -_ Total ___-___________ - ______

$105,427,854.78
800,OOO.OO 155,6 10.00 1‘877‘804.59 506,228.76

$108,767,498.13

COSTS AND OTHER CHARGES: Cost of sales (excluding provision for depreciation and amortization 1 ----------------Provision for depreciation -__----_-_----Provision for amortization of emergency facili----------------------ties ---------Selling and administrative expenses __-___--Interest and amortization of discount and expense on debentures ------------------.Loss on disposal by dedication for public purposes or by sale of property located within a townsite developed by the Company for employees -----------------------------Other income charges __----_____________ Minority interests in income of subsidiary companies -----------------------------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 _______________________ _____________

$ 83,208,320.47 4,l 18,785.23 7,530,695.50 5,8 14,088.Ol 275,643.56

$ 68,228,636.86 3,722,973.48 5,387,679.25 4,426,084.6 1 283,790.88

8 19,559.02 174,674.78 83,148.06

90,975.97 153,622.95

3,927,728.63 10,130,634.74 $116,083,278.00 $ 8,573,503.24

3,542,153.66 14,706,279.1 5100,542,196.77 $ 8,225,301.36 1

FOR THE YEAR _-----

THE DOW CHEMICAL

COMPANY

AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED SURPLUS FOR THE YEARS ENDED MAY 31, 1944 AND 1943

CAPITAL SURPLUS
BALANCE AT BEGINNING OF THE YEAR _____ $

Year Ended May 31 1943 1944 36,539.Ol $ 36,539.0 1

CREDIT-Excess of proceeds (less expenses) received from sole of 249,504 shares of cumulative preferred capital stock, Series A, over $100.00 per share credited to the capital stock account Total _______________________ $

630,477.92 667,016.93 28,175.OO $ 638,841.93 $ 36,539.Ol $ 36,539.Ol

CHARGE-Premium paid on retirement of 5,635 shares 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 ______________ - ________ $28,99 1,490.17 8,573,503.24 $37,564,993.41 $ 3,746,118.00 174,984.20 483,151.71 $ 4,404,253.9 $33,160,739.50 1 $24,8 12,306.8 1 8,225,30 1.36 $33,037,608.17 $ 3,746,1 18.00 300,000.00 $ 4,046,118.00 $28,99 1,490.17

CHARGE-Cash dividends: Common capital stock ____________________ 5% cumulative preferred capital stock _______ Cumulative preferred capital stock, Series A ___ Total BALANCE ------_____----___-----e--w

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

HASKINS
CERTIFIED PUBLIC

& SELLS
ACCOUNTANTS THE NATIONAL BANK BUILDING

DETROIT

ACCOUNTANTS’

CERTIFICATE

The Dow Chemical

Company: the consolidated balance sheet of The Dow Chemas of May 31, 1944 and the and

We have examined ical Company related statements have examined generally

and its subsidiary of consolidated

companies

income ond surplus for the year ended procedures of the companies, records and other evidence in support of and

that date, have reviewed the accounting their accounting such f inoncial statements. accepted auditing included all auditing systems of internal from United

Our examination

was made in accordance with in the circumstances procedures receivables

standards applicable

procedures we considered necessary, which control; it was not practicable departments to confirm

were applied by tests to the extent we deemed appropriate States Government and agencies

in view of the but we have

satisfied ourselves with respect to such receivables by means of other auditing procedures. In our opinion, the accompanying ments of consolidated consolidated balance sheet and statepresent the financial con-

income and surplus fairly

dition of the companies at May 31, 1944 and the results of their operations for the year ended that date, in conformity ing principles preceding year. HASKINS July 22, 1944. & SELLS with generally accepted accountwith that of the and practices applied on a basis consistent

THE DOW CHEMICAL COMPANY
MIDLAND, MICHIGAN

Directors
E. 0. BARSTOW E. W. BENNETT J. S. CRIDER 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 Vice President and Treasurer Vice President and Secretary Vice President Vice President Vice President Assistant Treasurer W. H. DOW E. W. BENNETT L. I. DOAN E. 0. BARSTOW C. J. STROSACKER M. E. PUTNAM J. S. CRIDER -

Assistant Treasurer and Assistant Secretary Assistant Secretary Assistant Secretary Assistant Secretary Assistant Secretary Auditor -

F. H. BROWN Assistant Secretary A. P. BEUTEL L. A. CHICHESTER R. L. CURTIS G. M. McGRANAHAN D. J. LANDSBOROUGH C. PENHALIGEN -

Transfer Guaranty

Agents

Stock Common Preferred Common and Preferred

Registrars The New York Trust Company Guaranty Trust Company of New York The Notional City Bank of Cleveland

Trust Company of New York

The National City Bank of New York The Cleveland Trust Company

Subsidiary

Companies Company

Cliffs Dow Chemical

Dow Chemical of Canada, Limited Dow Mognesium Corporation Dowell Incorporated Dowell Sociedad Anonima Midland Ammonia Company Companies Company

Associated Ethyl-Dow

Dow Corning Corporation Chemical