THE Dow CHEMICALCOMPANY

MIDLAND,MICHIGAN

FINANCIAL REPORT
- FOR YEAR ENDED
MAY 31,1937
 ‘THE DOW CHEMICAL COMPANY

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

Officers
Chairman of the Board - - J. T. PARDEE
President and General Manager W. H. DOW
Vice President - - - 0 G. E. COLLINGS
Vice President - - - J. T. PARDEE
Vice President, Sec’y and Treasurer E. W. BENNETT
Assistant Treasurer - - J. S. CRIDER
Assistant General Manager - I A. P. BEUTEL
Auditor and Assistant Secretary 0 L. A. CHICHESTER
Assistant Secretary - - 0 0 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
 ACCOUNTANTS’ CERTIFICATE

The Dow Chemical Company:

We hove mode on examination of the consolidated balance

sheet of The Dow Chemical Company and its subsidiary com-
ponies OS of May 31, 1937, and of the related statements of
consolidated income and earned surplus for the year ended that
dote. In connection therewith, we mode Q review of the QC-
counting methods and examined or tested accounting records
of the companies and other supporting evidence in a manner
and to the extent which we considered appropriate in view of
the systems of internal accounting control. We did not verify
the quantities and condition of the inventories which were cer-
tified to us by officials of the companies.

In our opinion, based upon such examination, the accom-

panying consolidated balance sheet and related statements of
consolidated income and earned surplus fairly present, in ac-
cordance with accepted principles of accounting consistently
followed by the companies, their financial condition at May 3 1,
1937, and the results of their operations for the year ended
that dote.

HASKINS & SELLS.

Detroit, July 3, 1937.

 THE DOW CHEMICAL COMPANY
(Incorporated in Michigan)

AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEET, MAY 31, 1937

ASSETS
CURRENT ASSETS:
Cash ---------------------------------mm $ 3,339,515.10
United States Government securities---at cost (face
value, $800,000.00; market value, $857,125.00) 847,8 12.50
Notes and accounts receivable (customers,
$2,488,005.74; associated company, $5 1,066.73;
employees, $9,629.57; and sundry, $58,067.92)
- less reserve for doubtful accounts,
$148,375.63 ---------------------e-em-v 2,458,394.33
Inventories of finished goods, work in process, and
materials and supplies-t cost _--------_-- 6,278,534.00

Total current assets __--- _--__ -_----- _--___ -- ____---- $12,924,255.93

CLAIMS AGAINST BANKS IN LIQUIDATION (less reserve for loss,
$35,000.00) ___--------_-------------------------------- 35,473.08
RECEIVABLE FROM INDIVIDUALS ON SALES OF HOUSES AND LOTS 18,908.g 1
INVESTMENTS:
Preferred and common capital stocks of on associ-
ated company (at cost, which is less than the
Company’s book equity in the stocks as indicated
by the balance sheet of the associated company) $ 557,800.OO
Miscellaneous securities (at cost, less reserve for
loss, $27,500.00) ----------------------- 79,623.35

Total investments -----------_---------------------- 637,423.35

FIXED ASSETS:
Real estate, plants, and equipment (less reserves
for depreciation, $12,686,034.39) ---------- $21,788,638.25
Patents (less reserves for amortization,$l6,891.12) 59,396.24

Total fixed assets ____ --_--_--- ____ -_- ______________ 21,848,034.49

DEFERRED CHARGES-UNEXPIRED INSURANCE PREMIUMS, UN-
AMORTIZED NOTE AND DEBENTURE DISCOUNT AND EXPENSE,
AND MISCELLANEOUS __________________ - ________________ 218,841.78

TOTAL -------------------------------------- $35,682,937.54

 THE DOW CHEMICAL COMPANY
( Incorporated in Michigan)

AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEET, MAY 31, 1937

LIABILITIES
CURRENT LIABILITIES:
Accounts payable- trade and miscellaneous ____ $ 1,681,360.40
Employees’ compensation awards --___----____ 81,194.13
Serial notes, 2% %, series due January 1, 1938 __ 720,OOO.OO
Federal income taxes _____ -_--__-___-- ______ 910,151.77
Other taxes accrued-including local property
taxes, Federal capital stock tax, and social se-
curi ty toxes ---------------------------- 300,5 16.58
Accrued interest payable ____-_______--______ 15,000.00

Total current liabilities ------------------------------ $ 3,708,222.88

SERIAL NOTES, 2%% (exclusive of $720,000.00 included in current
liabilities) -SERIES DUE JANUARY 1, 1939 ------__---_--_--__ 720,OOO.OO
FIFTEEN YEAR 3% DEBENTURES, DUE DECEMBER 1, 1951, (subject
to redemption through sinking fund commencing June 1, 1941) ____ 5,000,000.00
RESERVE FOR FIRE AND ACCIDENT INSURANCE AND DAMAGE
CLAIMS _____-_______----_______________________------- 2 15,932.63
MINORITY INTEREST IN CAPITAL STOCK AND SURPLUS OR
DEFICIT OF SUBSIDIARY COMPANIES ______________________ 904,4 19.29
PREFERRED CAPITAL STOCK - 5% CUMULATIVE (authorized,
60,000 shores of $100.00 par value each; outstanding, 29,692 shares) 2,969,200.00
COMMON CAPITAL STOCK (authorized, 2,000,OOO shores without par
value; outstanding, 945,000 shares) -------------------------- 12,685,OOO.OO
SURPLUS:
Capital surplus arising from acquisition of subsid-
iary companies --------- ----------------- $ 26,420.OO
Earned surplus ---------------------------- 9,453,742.74

Total surplus -------------------------------------- 9,480,162.74

TOTAL -------------------------------------- $35,682,937.54

NOTE: 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 $35,724.00 at May 31, 1937.
 THE DOW CHEMICAL COMPANY
AND SUBSIDIARY COMPANIES

STATEMENT OF CONSOLIDATED INCOME

FOR THE YEAR ENDED MAY 31,1937

SALES (net of returns, allowances, and freight) _____________ - ____ - $25,578,911.12

COST OF SALES (exclusive of provision for depreciation) _-----_---- 16,18 1,082.27

GROSS PROFIT -------------------------------------------- $ 9,397,828.85

SELLING AND ADMINISTRATIVE EXPENSES --- --___---____-__- 1,477,120.65

PROFIT FROM OPERATIONS BEFORE PROVIDING FOR DEPRECIA-

TION -------------------------------------------------- $ 7,920,708.20
PROVISION FOR DEPRECIATION ----------------------------- 1,839,783.36

PROFIT FROM OPERATIONS ---------------1----------------- $ 6,080,924.84

OTHER INCOME:
Dividends from on associated compony ____-___-__ $360,197.00
Cash discounts on purchases, interest earned, royal-
ties, and miscellaneous ______________ - _____ - 253,344.05 613,541.05

GROSS INCOME ------------------------------------------- $ 6,694,465.89

INCOME CHARGES:
Research and experimental expenses _____ - _______ $936,047.55
Interest and amortization of discount on serial notes
and debentures --------------------------- 158,575.53
Cosh discounts allowed - ________________-_---- 252,865.33
Purchase of annuities for employees __-_-___---- - 311,851 .OO
Provision for uncollectible accounts and miscellan-
eous ____-__---__________---------------- 139‘878.54 1,799,2 17.95

NET INCOME BEFORE PROVIDING FOR FEDERAL INCOME TAXES __ $ 4,895,247.94

PROVISION FOR FEDERAL INCOME TAXES (including $171,835.23
surtax on undistributed profits) ----------------------------- 893‘439.07

NET INCOME BEFORE ADJUSTMENT FOR MINORITY INTERESTS IN

SUBSIDIARY COMPANIES --------------------------------- $ 4,00 1,808.87
MINORITY INTERESTS’ SHARE OF PROFITS AND LOSSES OF SUB-
SIDIARY COMPANIES (net loss) ---------------------------- 87,304.39

NET INCOME FOR THE YEAR -------------------------------- $ 4,089,113.26

 THf DOW CHEMICAL COMPANY
AND SUBSIDIARY COMPANIES

STATEMENT OF CONSOLIDATED EARNED SURPLUS

FOR THE YEAR ENDED MAY 31,1937

EARNED SURPLUS AT BEGINNING OF THE YEAR:

Applicable to the company:
Closing surplus OS shown in lost annual r’eport
to stockholders (not consolidated) _______- $ 8,24 1,045.98
Adjustment of provision for depreciation and
additional assessment of Federal income tax
applicable to a prior year (allocated to the
year affected in the preparation of Q Registra-
tion Statement filed with the Securities and
Exchange Commission during the year) ____ 48,36 1.56

Total (as adjusted) ~~~~~~~~~~__~~ $ 8,289,407.54

Equity in net adjusted surplus at the beginning of
the year of subsidiary companies not previously
consol ida ted ---------------------------- 122,856.94 $ 8,4 12,264.48

NET INCOME FOR THE YEAR -------------------------------- 4,089,113.26

Total ---------------------------------------- $12,50 1,377.74

SURPLUS CHARGES:
Dividends paid in cash:
Common capital stock _____ - _____ - ________ $ 2,882,250.00
Preferred capitol stock _________ --__- _____ 163,845.OO

Total ----------------------------- $ 3,046.095.00

Premium on retirement of 308 shores of 7% pre-
ferred copi tal stock ______ ~~~~~~~~~~~___~_ 1,540.oo 3,047,635.00

EARNED SURPLUS AT END OF THE YEAR ______________________ $ 9,453,742.74