dow chemical company annual report - 1946

8/14/2019 Dow Chemical Company Annual Report - 1946

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H ANNUAL REPORTFOR THE YEAR ENDED MAY 31,1946

THE DOW CHEMICAL COMPANYMIDLAND MICHIGAN


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The next annual meeting of stockholders will be held on Wednesday, August28, 1946, at two oclock in the afternoon (Eastern Standard Time) at the Companysoffice in Midland, Michigan.A formal notice of the meeting, together with a proxy statement and form ofproxy, will be mailed to each holder of common stock separately from but concur-rently herewith, at which time proxies will be solicited by the management.


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TO THE STOCKHOLDERS OFTHE DOW CHEMICAL COMPANY:

We present herewith the 49th annual report of the Company operations. Anannual report OS the summotion of the financial condition of the Company is of vitalinterest to every stockholder; conversely, it is the duty of the management to presentas nearly OS possible the complete picture of the Company operations. However, withour extremely diversified activities and the almost innumerable products we make orcon make, if we attempted to write in great detail it would be necessary to publish Qvolume too big for anyone to read. Throughout the year, however, we publish o largeamount of literature concerning Company products and Company operations with theintention of keeping the stockholders currently informed.

EARN I NGS-The first item of interest is the statement of earnings. The consolidated net

income was equivalent to $3.95 per shore on the 1,248,706 shares of common stock,after deducting $I,21 5,476 paid during the year on the preferred stock. The compa-rable earnings for the fiscal year ending May 3 1, 1945 were $6.02 per shore. Anotheritem of interest is the dollar volume of sales, which amounted to $101,813,839. Thisis less by 18% than the peak of $124,570,200 attained last year, but we consider itexcellent in view of the cancellation of many contracts at the cessation of the war. Inaddition to the decrease in sales, the decrease in earnings for the current year wasoccasioned by increased labor rates, by write-offs and unusual charges as a result ofthe cessation of the war. The largest item other than amortization WQS approxi-mately $1,700,000 for obsolescence.

AMORTIZATION-During the war period the Company and its subsidiaries expended approxi-

mately $44,000,000 for emergency war facilities. These were purchased under cer-tificates of necessity permitting the amortization of the cost of such facilities over Qperiod of five years, or a shortened period ending with the end of the emergency period.During yeors prior to the current year amortization was token on the five-year basis.

With the end of the war and by Presidential proclamation, the Company waspermitted for income tax purposes to shorten the amortization period to end OS ofSeptember 30, 1945. Adjustments were mode on the books with the effect that, basedon the shortened period, amortization for years prior to the current year was increasedapproximately $13,100,000 and the amortization for the four months ended Septem-ber 30, 1945 amounted to approximotely $6,300,000. As Q result of the increasedamortization for prior years, refunds of income and excess profits taxes of approxi-mately $11,300,000 were tentatively allowed and paid by the Bureau of InternalRevenue.


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Because certain of the facilities which were fully amortized for income taxpurposes were deemed to be economically useful, such facilities were reinstated on thebooks OS of May 3 1, 1946, in the amount of approximately $9,600,000. This amountwill be subject to regular depreciation in the future, which will not be deductible forFederal income tax purposes.

men tsFor the effect of the foregoing transactions reference is mode

of consolidated income and surplus included in this report.to the state-

RENEGOTIATION-One other item of importance to stockholders is renegotiation. Under the

provisions of the lows covering the war activities, it was specifically determined thatthere should not be any excessive profits before taxes. Even though taxes ran as highOS 85.5 per cent, there WQS a sound reason for renegotiation. The price of very fewindividual products mode during wartime represented the final cost to the government,and to prevent the pyramiding of costs is therefore the justification of renegotiation.At times it was Q rather bitter pill to swallow when we stopped to think that byapplying all the skill available, we might be subject to penalty for building themost efficient plant we were capable of building. Be that as it may - the war isover and experience gained during the war should make for more lasting peace andgreater prosperity in peacetime. It has always been the practice of the Company topass on the benefits of improved operation by lower costs to our customers, and togain for the Company in larger volume operation and still lower costs. This practicewas apparently the reason our Company did not have to pay any renegotiationcharges during the war period, with the exception that Midland Ammonia Companyover Q two-year period paid a total charge of $12,675.NEW CONSTRUCTION-

When materials become more available, more plants will be built. As Q mat-ter of fact, all during the war one new plant after another come up for considera-tion, but only the most necessary were built. As a result, the accumulation ofauthorized construction additions and new product developments now stands on thebooks at a total of something over $40,000,000. This is a program which may takethe next three or four years to complete and con very probably be substantially fi-nanced from earnings and depreciation, although it may require additional capitol,which con be readily obtained.

With reference to capital, it should be brought to your attention that in ourfinancial report of o year ago, there appeared $12,000,000 in debentu.res. Thesewere called and entirely retired on September 1, 1945. Since these funds were notneeded at the time, it was thought wise to call the notes with the thought offinancing again when the cash was more urgently needed, in the meantime savingthe interest charges.EMPLOYMENT-

As of May 31, 1946 we ore not for from the peak of our wartime employ-ment. On that dote our total employment WQS 12,362. In addition, we ore stillresponsible for 1,275 employees operating the government-owned plants in Velasco,Texas and Los Angeles, California. Including these plants, of the 5,144 employees


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who left our employ to join the ormed forces, 2,13 1 hove returned to us OS of theabove dote, and in addition, 2,266 ex-service men not formerly employed by us hovejoined our organization.GOVERNMENT PLANTS-

We ore still operating the government-owned styrene plant and a portion ofthe magnesium plant in Velasco, Texas as well as the styrene plant in Los Angeles,California. We hove leased and are operating Q portion of the Ludington, Michiganplant, but are no longer responsible for the Marysville, Michigan plant. As of Aprilof this year we bought the Chemical Warfare Service plant located within our plantin Midland, Michigan. We ore bidding for the purchase of some of the governmentfacilities which we installed and operated for the government during the war.COMPANY OPERATIONS-

To discuss general Company operations, they con be best summarized bysubdividing the fields of our activities, but always bearing in mind that the inter-relation of chemical production must necessarily show many overlapping uses aswell as intraplant use of our own products. As a characteristic example, the veryfoundation of our production is the electrolysis of sodium chloride to produce causticsoda and chlorine. The caustic soda is finished and sold to the market, and TheDow Chemical Company is one of the largest customers. Only a small percentageof the chlorine produced is liquefied and sold as such, and that is from our Pittsburg,California plant. The balance of our chlorine is used to produce on indefinite numberof other products, in which the chlorine may or may not appear in the final salableproduct. We are probably the largest producer of chlorine in the world, producingapproximately 30 per cent of the total United States production. Let us subdivideour operations as follows:

INDUSTRIAL AND HEAVY CHEMICALS-Under this heading ore classed such industrial chemicals OS caustic soda, cal-

cium chloride, magnesium chloride, industrial solvents, phenol and phenolic com-pounds not used for pharmaceutical purposes, Dowicides and fumigants, dyes anddye intermediates, and many others. As a group, these products represent better thanone-half of our soles volume. Since they are the stondby group of fundamental prod-ucts so necessary to all industrial requirements, they seldom hove the glamour inthe public eye they so well deserve.PHARMACEUTICALS-

This is the group of products which is used either OS such for pharmaceuticalpurposes or as on intermediate to the final production of those materiols. Thesechemicals represent approximately 10 per cent of our dollar volume of sales.

PLASTICS AND RELATED COMPOUNDS-Possibly these are more publicized now than any other group of chemicals,

for although the American public has hod plastic materials for nearly fifty years,the fact remains we hove not become truly plastics conscious until recently. TheCompany produces four mojor plastics groups - Styrene and polymerized Styrene


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known OS Styron and the sister compound known as Alpha Methyl Styrene, Saran orthe vinyl-vinylidene group sold under various trade names by licensees of our Com-pony, Styraloy which is a modified Styrene and Butadiene polymer, and CelluloseEthers such as Ethyl, Methyl and Carboxy Methyl Cellulose. Each group of theseplastics is unique in its applications. The war requirements clearly demonstratedthe necessity of each type, ond market demands in peacetime hove confirmed thediscriminatory judgment of the war period. Plastics as new moterials will undoubt-edly create vast new markets, but it is questionable whether they will displace oldmarkets except OS they provide a better method of accomplishing a given result.Plastics as Q group represent at present about 20 per cent of our dollar volume of soles.

AGRICULTURAL CHEMICALS-To this group of chemicals con be attributed one of the most quickly noticeable

benefits to humanity. Inasmuch as agriculture is our largest industry, and prosperousagriculture necessarily means Q prosperous American people, it clearly behooves sucha basic industry as o chemical company to opply every effort to aid and assist ingreater and improved agricultural production. Agricultural chemicals include suchcompounds as ore required for the improvement of the health of livestock and poul-try, the improved germination of seeds, spray materials, soil fumigants, weed killersand growth hormones, fertilizers and preservatives for foodstuffs. The opportunitieshove by no means been exhausted, and a chemical truly beneficial to agriculture is inevery sense on economic necessity. This group of chemicals represents approximately10 per cent of our dollar volume of soles.MAGNESIUM-

During the war magnesium production and fabrication WQS OS high OS 30 percent of our sales volume, although the profits were less than 10 per cent of the totalprofits. With the cessation of hostilities, we hod large production facilities, but nobusiness. An intensive development and advertising program WQS required to developand bring old uses bock into production, but with the close of the fiscal year we orepleosed to report that our production facilities ore steadily gaining in volume and newuses ore constantly developing. We hove again started the production of mag-nesium in our Freeport, Texas plant. The aviation industry is still the largest consumerof magnesium, although there ore mony other applications which ore growing rapidlyto close seconds. The buying public is becoming justifiably conscious of magnesiumlightness ond strength.SUBSIDIARIES AND ASSOCIATED COMPANIES-

A report such OS this would not be complete unless some reference were modeto the activities of the various subsidiory and associated companies.CLIFFS DOW CHEMICAL COMPANY is a subsidiary, whose activities remain at ohigh level and whose production during the war was of no small importance to thewar effort. The importont point is that Cliffs Dow has paid dividends since makingup their starting losses, and with the close of the war they ore now proceeding withconstruction improvements which should further improve their position.DOW MAGNESIUM CORPORATION, a wholly owned subsidiary, was organized forthe express purpose of being on operating company for the government-owned


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magnesium plonts. Its job is nearly done and possibly within the year the com-pony will be dissolved.DOW CHEMICAL OF CANADA, LIMITED, Q wholly owned subsidiary, WQS originallyorganized for the purpose of being on operating company for the Canadian govern-ment styrene plant designed by Dow and operated by Dow of Canada for theCanadian government. With the cessation of hostilities we hod the opportunityto build Q Canadian plant, and within a few months it will be producing Styron forthe Canadian market. Additional plants ore under way to produce glycol and alliedproducts, and other expansion is contemplated for the near future. Dow Chemicalof Canado, Limited will be The Dow Chemical Compony representotive for all opera-tions and soles in Canada.DOWELL INCORPORATED, o wholly owned subsidiary, has originated many newapplications of chemicals for the production of more oil for the petroleum industry.Originally founded for the purpose of acidizing oil producing formations, its functionshove steadily enlarged. Dowell was the originator of plastic plugging and of theapplication of acidizing treatment to industrial boilers for scale removal. It is truly

-a service compony, in that it has rendered substantial service but has not been able topay dividends to the parent company because of the need to reinvest earnings in newand expanding equipment. The parent company has gained very substantially in thelarge volume of chemical soles and in royalties received. Dowell Incorporated is onunsung, modest hero of World War I I in its contribution to greater production of oilat Q time when every barrel was in demand.DOW CORNING CORPORATION, on associated company, is one of the youngest ofthe group. It mode Q substantial contribution to the war effort and is an organiza-tion of great potentialities. It is in the growing stage and making steady progress.The silicone products represent a combination of values not found in other plasticgroups. They range from free flowing fluids of constant viscosity, oils and lubricants,to Silastic, Q rubber-like material, and thermosetting plastics. All of the productsare capable of withstanding temperatures OS high as 500F. Through Corning GlossWorks, Dow Corning Corporation was the originator and first commercial producerof silicone compounds in this country.ETHYL-DOW CHEMICAL COMPANY is on associated company. The war demandsnecessitated the enlargement of facilities for the production of bromine from seawater, so that at the present time the plants hove much greater capacity thanpeacetime requirements justify. A write-off of war investments brought about areduction of earnings. Since May 31, 1946 Q substantial reduction of debt incurredfor construction has been mode with the parent companies.Ml DLAND AMMONIA COMPANY, a subsidiary located within the plant at Midland,is a steady operator, paying steody dividends, and is one of the most efficient am-monia plants in the country.CONCLUSION-

The wor is over. At least, it is a thing of the post OS for OS the operations ofThe Dow Chemical Company ore concerned. We ore justifiably proud of the warrecord of the Company. To soy that our contributions in the production of magnesiumand its alloys, in the production of styrene and in our knowledge of the productionof butadiene were of the highest order of scientific and practical value is a gross


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understatement. Al I the efforts in all the operations of the Company were of suchinestimable value to the country that they cannot be measured in dollars alone.Generally speaking, it is not considered good taste to attempt to tell of ones ownwonderful contributions to any cause. But in a report to Stockholders, it wouldhardly be fair to pass over Q world cataclysm such as World War II with so simpleQ statement OS We helped. Because the record has been mode, it is not ourdesire to get world acclaim, except to hove our Stockholders know they ore portowners in a Company where they hove every right and justification to feel theirinvestment was used to our greatest ability in protecting and furthering the bestinterests of the United States of America. We did our bit, as big or as little as itmay have been. We did not make large war profits, as so many people like tobelieve companies do in wartime, and this fact was simply explained under the head-ing of renegotiation.

stillWe are bock operating on a peacetime basis and running a Company which

believes the maintenance of the highest efficiency of operation and the lowestcosts will return the greatest benefits to both the consumer and the producer. Thechemical industry as a whole has been noted for steadily declining costs to consumers,and with the present hysteria about higher prices, there is little reason to change therecord. Our basic raw material, salt, we mine mechanically in our two largest plants.

Labor rates and other benefits in our Company are of the highest paid in theindustry. We hove been generous, but it is a notorious fact that manpower on theaverage is at about the lowest efficiency it has ever been. As long OS we continue totalk and think in terms of raising wages in order to meet higher costs of living,nothing can stop the continually ascending spiral of inflation. Inflation OS such isthe measure of human desire not to work and produce. Improved manpower effi-ciency gives quickly reduced costs and more production. Conversely, low productiongives higher costs and creates scarcity, with the consequent spiral of inflation, breadlines and general hardship for everyone. The wi II to work is the blessing we wi IIsooner or later recognize as the only solution to all our man-made problems. Pro-duce more. Hove more. No frontier was ever developed by wishing it so, and thechemical industry is no exception. Hard work has gotten us what we hove today.Work and more work and hard work will develop future frontiers. The chemicalindustry must pioneer for industry of tomorrow.

With the further development of all the projects which were necessarily tabledduring the war, our growth is practically unlimited in our field. The chemical industryand growth ore synonymous terms - one does not progress without the other.This follows into other industries as well, because with the development of productsof chemical origin, new industry is created in other fields. Plastics, new pharmaceu-ticals and agricultural chemicals as well as many others are clearly symbolic of this.There will never be an end to new developments. When we say this statement iswrong, one of two things has happened. Either we have become so wise we con com-prehend the entire universe, or else it is an indication we have gone to seed on our job.

And so, with the close of our 49th year we find we have more to accomplishthan ever before. We see more employment with more securitv for the industry andeveryone in it. We see the blessing of work with the pleasure ot accomplishing great-er goals and the complete satisfaction of having a job to do and having it well done.

WILLARD H. DOWPresidentMidland, MichiganAugust 5, 1946


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HASKINS & SELLSCERTIFIED PUBLIC ACCOUNTANTS

THE NATIONAL BANK BUILDING

DE T ROI T

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, 1946 and therelated statements of consolidated income and surplus for the year endedthat date, have reviewed the accounting procedures of the companies, andhave examined their accounting records and other evidence in support ofsuch financial statements. Our examination was made in accordance withgenerally accepted auditing standards applicable in the circumstances andincluded all auditing procedures we considered necessary, which procedureswere applied by tests to the extent we deemed appropriate in view of thesystems of internal control; it was not practicable to confirm receivablesfrom United States Government departments and agencies but we hovesotisfied 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, 1946 and the results of their operationsfor the year ended that dote, in conformity with generally accepted account-ing principles and practices applied on a basis consistent with that of thepreceding year.

HASKINS 0 SELLS

July 26, 1946.


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ASSETSCURRENT ASSETS:

Cash _---__-_--------------------------------------United States Government securities __-_______--___-______Notes and accounts receivable:Customers --_----c--------------------------------Associated companies --------------------_________^_Employees --_-------------------------------------Sundry ------------------------------------------

Total -----------------Less reserves for doubtful receivables _Net receivables _____________________ -

Billed and unbilled receivables from United States Governmentand its agencies (other than for sale of product) ----------Claims for refund of prior years Federal income and excess profits

taxes resulting from carry-back of unused excess profits creditsInventories:Finished goods and work in process (at lower of cost or market)Materials and supplies (at cost-approximately market) ____Total ______________________________

Total current assets _____L_____ -_INVESTMENTS AND NON-CURRENT RECEIVABLES:Notes receivable and capital stock (at cost) of associated com-panies (at May 31, 1946, approximately $3 1,000 in excessof the equity in net assets as shown by unaudited balancesheets of companies) --------------------------------Postwar refund of excess profits taxes _______ -__- __________Non-current notes and accounts receivable (including employeesreceivables, 1946, $47,907.49; 1945, $16,558.68) _- ______Sundry securities (1945, less reserve, $63,4 13.93 1 _ _ __ ___ _ ___

Total investments and non-currentreceivables _ _ _ __ __ _ __ _ - __ __ _ _PROPERTY:Plont properties and equipment (exclusive of facilities acquiredunder certificates of necessity)---at cost (less reserves for de-preciation, 1946, $34,668,856.85; 1945, $33,722,644.65) __Facilities acquired under certificates of necessity-net book value(See Note A) _____________________________________Housing properties (exclusive of facilities acquired under certifi-cates of necessity)--at cost (less reserves for depreciation,1946, $225,348.11; 1945, $178,489.23) -___-__________

Total property -----------------PATENTS-at cost or nominal value (less reserves for amortization,1946, $87,53 1.8 1; 1945, $7 1,862.94) --------------_---_DEFERRED CHARGES-Unexpired insurance premiums and sundryand, at May 31, 1945, unamortized debenture discount andexpense _________-______---_------------------------

TOTAL _ - __ _ _ _ _ __ _ _ _ __ _ _ _

THE DOW CHEhcAND SUBSIDFA

CONSOLIDATED BALANCE SHEET

May 311946$ 10,4m 1.52$ 10,760,000.00$ 10,587,967.06226,709.2085,059.68730,165.03$ 11,629,900.97330,929.50$ 11,298;97 1.47$ 298,399.82$ 1,175,106.93$ 11,241,092.35 $8,039,656.84 9,4 15,374.866,8 14,096.49$ 19,280,749.19 $ 16,229,47 1.3 5$ 53,23 1,348.93 $ 68,709,964.67

$ 5,988,OOO.OO18,936.49482,7 13.56 304,292.44659,189.l 1 658,664.1 1

$ 7,148,839.16 $ 9,247,987.76

$ 56,936,5 10.26 $ 46,278,977.099,590,242.9 1 20,098,29 1.30

1,2 10,332.42 1,262,702.59$ 67,737,085.59 $ 67,639,970.98$ 309,742.59 $ 64,9 1 1.46$ 329,27 1.7 1 $ 484,064.20$128,756,287.98 $146,146,899.07

1945-$ 17,505,643.48$ 22,885,OOO.OO

1,537,408.91193.527.9 1$1$1

4 1;344.80350,707.802,122,989.42305.244.70

$ 11,817;744.7;$ 272,105.12

$ 5,688,OOO.OO2,597,03 1.2 1

NOTES: A-As of September 30, 1945 the Company and its subsidiaries had emergenFollowing the Presidential proclamation of September 29, 1945 ending off. The portion of the amount writ ten off applicable to the year enderemainder, applicable to prior years, was charged to earned surplus. were deemed to be economically useful, were reinstated in the books atequivalent to the estimated Federal income tax which will result from B-Operations of the Company and its subsidiaries through December 3 1, 194the Government the right under certain conditions to renegotiate war cbeen completed through May 31, 1945, although the tentative agreemenot yet been executed. No refunds were required for any year except thyears ended May 3 1, 1942 and 1943. It is the opinion of officials of tthe seven months ended December 31, 1945.


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31, 1946 AND MAY 31, 1945

LIABILITIESCURRENT LIABILITIES:

Accounts payable-Trade and sundry __-_____--___________Federal income and excess profits taxes ____________________Serial debentures maturing within one year _________________Dividends payable _____________________ - ______________Accrued liabilities:

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

income and franchise, and sundry --------------------Interest __________________-_____________________--Rents -------------------------------------------Sundry ------------------------------------------

Total current liabilities ___-______FUNDED DEBT--Debentures (Redeemed as of September 1, 1945)

(Serial debentures maturing within one year included in currentliabilities) ________________________________________--

RESERVES FOR FIRE AND ACCIDENT LOSSES, DAMAGE CLAIMS,ELECTROLYTIC CELL REPLACEMENTS, AND SUNDRY _______

MINORITY INTERESTS IN SUBSIDIARY COMPANIES __________ $ 944,365.36 $ 1,3 12,455.09CAPITAL STOCK:

Cumulative preferred stock, Series A (authorized, 600,000 shareswithout par value; outstanding, 303,869 shares) --annual divi-dend $4.00 per share ___-_____-_________ -_-__- _____ -

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

Total capital stock _____________SURPLUS:

Capital surplus --------------_-----------------------Earned surplus _____-_____--__________________________

Total surplus __________________

TOTAL __ _ _ _ __ _ -_ _ __ _ __ c _

cquired under certificates of necessity with an aggregate cost of $44,369,812.42.period with respect to such facilities, the unamortized portion thereof was writtenbased upon the shortened amortization period, was charged to income and thecertain of the facilities with an original cost of $19,673,908.82, whichvalue of $9,590,242.91, representing cost less normal depreciation and an amountof depreciation thereon.which are subject to the provisions of war profits control legislation givings for the purpose of limiting profits. Renegotiation proceedings havefor no refund) with respect to the Company for the year ended May 31, 1945 hasof one subsidiary, refunds not relatively material in amount were required for theprofits within the meaning of the legislation have not been realized for

May 311946$ 6,382,397.32

3,527,26 1.451,240,398.50

664,94 1.12 926,805.20978,456.95

43,456.76159,902.34

$ 12,996,8 14.44

$ 1.465.068.98 $ 1,455,163.22

$ 30,386,900.00 $ 30,386,900.0037,293,908.83 37,293,908.83

I 67.680.808.83 $ 67,680,808.83

$ 1,030,190.83 $ 638,841.9344,639,039.54 35,697,508.53

$ 45,669,230.37 $ 36,336,350.46

$128,756,287.98 $146,146,899.07

1945$ 6,2=93.3 1

17,304,690.07750,000.00

1,240,398.50

1,280,932.8963,039.69

144,06 1.70107,600.l 1

$ 28,l 12,121.47

$ 11,250,000.00


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THE DOW CHEMICAL COMPANYAND SUBSIDIARY COMPANIESSTATEMENT OF CONSOLIDATED INCOME

FOR THE YEARS ENDED MAY 31, 1946 AND 1945

SAbLESsAND OTHER REVENUE:--_--_---------_-----------------Dividends received from an associated companyinterest from associated companies ------__-Other interest income _----_-_-_--_-_---_-Fees received in connection with constructionand operation of government owned plants -_Other income ---_--__---_.-.-___----------Total ---_---__---__---_--___

COSTS AND OTHER CHARGES:Cost of sales (excluding provision for deprecia-tion and amortization) --m--------s-----Provision for depreciation ---_--------___--Provision for amortization of emergency facili-ties (See Note A to balance sheet) ------Selling and administrative expenses _---__-_-Interest and amortization of discount and ex-pense on debentures ---_----------_----Premium paid on redemption of serial debenturesLosses on abandonment of equipment renderedobsolete by cessation of the war __-_-_----Other income charges ---_-_---_--_---_---Minority interests in income of subsidiary com-panies ------------------------------

Total _----_----_---___---___

INCOME BEFORE PROVISION FOR FEDERALINCOME AND EXCESS PROFITS TAXES -----

PROVISION FOR FEDERAL INCOME AND EX-CESS PROFITS TAXES:Normal tax and surtax ---_---_-----__----Excess profits tax _- ___---_---___--_ - ____

Total ------_----------m--m--Less reduction of Federal income and excessprofits taxes for prior years resulting from

carry-back of unused excess profits creditsNet provision ----------------

INCOME FOR THE YEAR ---------- _________

$101,813,839.08

Year Ended May 311946 1945$124,570,200.83500,000.003 17,792.17 294,955.42549,335.69 232,190.77

2,085,080.04305,109.60$127,987,536.66

1,449,270.22635,872.53$5104,766,109.59

$ 73,621,770.596,l 18,317.12 $ 82,03 1 153.295,332,O 14.666,308,4 19.22 8,353,549.707,929,767.12 6,840,949.68

107,7 18.62 265,618.841 12,500.OO1,689,878.62488,080.07 90,480.38

67,028.97$102,980,795.52

96,502.659; 96.472.954.01

$ 8,293,155.68 $ 25,006,741.14

$ 3,107,244.96 $ 4,307,365.49212,041.69 11,960,614.12$ 3,3 19,286.65 $ 16,267,979.6 1

1,175,106.93$ 2,144,179.72

$ 6,148,975.96

$ 16,267,979.6 1-$ 8,738,761.53--- -_- -. I___-_-


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THE DOW CHEMICAL COMPANYAND SUBSIDIARY COMPANIESSTATEMENT OF CONSOLIDATED SURPLUS

FOR THE YEARS ENDED MAY 31, 1946 AND 1945CAPITAL SURPLUS

BALANCE AT BEGINNING OF THE YEAR ---_--CREDIT-Increase in equity in the capital stockand surplus of a partially-owned subsidiary

company resulting from a restatement and re-allocation of the subsidiarys capital stock ----

BALANCE AT END OF THE YEAR ,,----:, __---EARNED SURPLUS

BALANCE AT BEGINNING OF THE YEAR ------CREDITS:Net income for the year _----_-_------_-_-Adjustments relating to facilities acquired undercertificates of necessity-net (See Note A)

Total --_------___-__-_---___CHARGE-Cash dividends (See Note B) :Common capital stock __---_-__-__- _______Cumulative preferred capital stock, Series A ___

Total __-------- ____ -___- ____BALANCE AT END OF THE YEAR ____________

Year Ended Mav 311946$ 638,841.93

39 1,348.90$ 1,030,190.83

$35,697,508.536,148,975.967,754,149.05

$49,600,63 3.54

1945$ 638,841.93

$ 638,841.93-

$33,160,739.508,738,761.53

$41,899,501.03$ 3,746,1 18.001,2 15,476.OO $ 4,682,647.501.5 19.345.00$ 4.961.594.00$44,639,039.54

NOTES: A-The net credit to earned surplus for adjustments relatingto facilities acquired under certificates of necessityconsisted of the following:Additional amortization applicable to prior years re-sulting from shortening the amortization period byPresidential proclamation on September 29, 1945less reinstatement as of May 31, 1946 of facilitiesdeemed to be economically useful (at cost, lessnormal depreciation to May 31, 1946 and an esti-mated amount equivalent to Federal income taxesthat will result from the future nondeductibility ofdepreciation on such assets) -------w---v-----

Net amortization adjustment (debit) __Reduction in Federal income and excess profit taxesof prior years resulting from the deduction of the

additional amortization (credit) - ________--_-Net credit to earned surplus before adjustment forminority interest ---_--___-__--------------Adjustment for minority interest in a subsidiary com-

pany __-__------------___---------------Net credit to earned surplus _____---_--.-.-___---

$ 6,20 1,992.50$35,697,508.53

$13,138,137.91

9,590,242.9 1$ 3,547,895.00

1 1,293,799.97$ 7,745,904.97

8,244.08$ 7,754,149.05

B--Dividends, on the basis of the dates on which they were declared, includefive regular quarterly dividends for the year ended May 31, 1945 andfour regular quarterly dividends for the year ended May 3 1, 1946.


14/18

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16/18

THE DOW CHEMICAL COMPANY

DirectorsE. 0. BARSTOW L. I. DOAN M. E. PUTNAM

E. W. BENNETT A. B. DOW C. J. STROSACKERJ. S. CRIDER W. H. DOW W. R. VEAZEY

OfficersChairman of the Board, President and

General Manager - - - - W. H. DOWVice President and Treasurer - - E. W. BENNEll-Vice President and Secretary - - - L. I. DOANVice President - - - - - E. 0. BARSTOWVice President - - - - - C. J. STROSACKERVice President - - - - - M. E. PUTNAMAssistant Treasurer - - - - - J. S. CRIDER

Assistant Treasurer and Assistant Secretary F. H. BROWNAssistant Secretary - - - - A. P. BEUTELAssistant Secretary - - - - L. A. CHICHESTERAssistant Secretary - - - - - R. L. CURTISAssistant Secretary - - - D. J. LANDSBOROUGHAuditor - - - - - - C. PENHALIGEN

Transfer Agents Stock RegistrarsGuaranty Trust Company of New York Common The New York Trust CompanyThe Nationai City Bank of New York Preferred Guaranty Trust Company of New YorkThe Cleveland Trust Company Common and Preferred The National City Bank of Cleveland


17/18


Executive Office: Midland, MichiganGeneral Sales Office: Midland, Michigan

Boston 16, Massachusetts20 Providence StreetChicago 3, Illinois

135 So. LaSalle StreetCleveland 13, Ohio

Terminal TowerDetroit 2, Michigan

Fisher BuildingHouston 2, Texas

2205 Commerce BuildingLos Angeles 14, California

634 South Spring Street

Sales Office8

New York 20, New York30 Rockefeller PlazaPhiladelphia 2, Pennsylvania

1400 S. Penn SquareSan Francisco 4, California

3 10 Sansome StreetSt. Louis 8, Missouri

Continental Building3615 Olive Street

Seattle 1, Washington1702 Textile Tower

Washington 5, D. C.915 Shoreham Building

Factories Locatedat

Midland, MichiganBay City, Michigan

Pittsburg, CaliforniaSeal Beach, California

Freeport, Texas


18/18


Subsidiary CompaniesCliffs Dow Chemical CompanyDow Chemical of Canada, Limited: General Office

WorksDow Magnesium CorporationMidland Ammonia CompanyDowel I I ncorpora ted

Chicago 3SalemWichita 2Baton RougeShreveport 23Baltimore 18Mt. PleasantDetroit 2Kansas City 8St. Louis 8New York 20Cincinnati 2Cleveland 13Oklahoma City 2Tulsa 3Philadelphia 2EorgerFort Worth 2Houston 2MidlandWichita FallsCalgary

Dowell Incorpor ated Soles Offices

Marquette, MichiganToron to, OntarioSarnia, OntarioMidland, MichiganMidland, MichiganTulsa, Oklahoma

IllinoisIllinoisKansasLouisianaLouisianaMarylandMichiganMichiganMissouriMissouriNew YorkOhioOhioOklahomaOklahomaPennsylvaniaTexasTexasTexasTexosTexasAlberta, Canada

308 Reaper BuildingP. 0. Box 292519 Union National Bank Bldg.P. 0. Box 1266326 First National Bank Bldg.1901 St. Paul Street

P. 0. Box 152932 Fisher Bldg.220 B. M. A. Bldg.3615 Olive Street30 Rockefeller Plaza521 Keith Bldg.1810 Terminal Tower Bldg.1350 First National Bldg.524 Kennedy Bldg.1400 South Penn SquareP. 0. Box 1029635 Fort Worth Club Bldg.21 15 Commerce Bldg.503 Petroleum Bldg.1 106 City National Bank Bldg.907 Lancaster Bldg.

Associated CompaniesDow Corning Corporation Midland, MichiganEthyl-Dow Chemical Company Freeport, Texas

dow chemical company annual report - 1946

Documents