THE Dow CHEMICALCOMPANY

MIDLAND,MICHIGAN

ANNUAL REPORT
FOR YEAR ENDED
MAY 31,1943
 The next annual meeting of stockholders will be held on Wednesday, August
1 1, 1943. A formal notice of the meeting together with a proxy statement and form
of proxy 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.
 THE DOW CHEMICAL COMPANY
MIDLAND, MICHIGAN

Directors
E. 0. BARSTOW M. E. PUTNAM
E. W. BENNETT C. J. STROSACKER
J. S. CRIDER W. R. VEAZEY
L. I. DOAN
A. B. DOW
W. H. DOW

Officers
Chairman of the Board, President and
General Manager - - - - W. H. DOW
Vice President and Treasurer - - E. W. BENNETT
Vice President and Secretary - - L. I. DOAN
Vice President - - - E. 0. BARSTOW
Vice President - - - - - C. J. STROSACKER
Vice President - - - - - M. E. PUTNAM
Assistant Treasurer - - - - J. S. CRIDER

Assistant Treasurer and Assistant Secretary F. H. BROWN

Assistant Secretary - - - A. P. BEUTEL
Assistant Secretary - - - -L. A. CHICHESTER
Assistant Secretary - - - - R. L. CURTIS
Assistant Secretary - - - C. M. SHIGLEY
/b&;z;t Secretary - - D. -J. LANDSBOROUGH
.
C. PENHALIGEN

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 COMPANY:

The forty-sixth annual report of your Company is presented herewith. The

consolidated financial statements for the fiscal year ended May 31, 1943 have
been audited by Messrs. Haskins & Sells, whose certificate is reproduced as part
of this report.

FINANCIAL STATEMENTS-

The consolidated balance sheet, statement of consolidated income and state-

ment of consolidated earned surplus for the year ended May 31, 1943 are shown
herein. The total assets of the Company and its Subsidiaries amounted to
$1 19,008,3 14.06, which figure includes current assets of $35,91 1,559.94. Current
liabilities amounted to $3 1,098,048.92.

EARN I NGS-

The consolidated net income of the Company and its Subsidiaries amounted
to $8,225,301.36. After deducting dividends on the preferred capital stock of
$300,000.00, the consolidated net income was equivalent to $6.35 per share on
the number of shares of common capital stock outstanding at the end of the year.
This compares with $7.14 per share for the year ended May 3 1, 1942.

DIVIDENDS-

The Company distributed four equal quarterly dividends aggregating $3.00

per share, to the common stockholders during the year. Including dividends on the
preferred capital stock of $300,000.00, the dividends disbursed to shareholders
amounted to $4,046,1 18.00.

NET SALES-

Net sales for the year ended May 31, 1943 amounted to $105,427,854.78, as
compared to $78,359,997.24 for the year ended May 31, 1942.

TAXES-

Total major taxes for the year amounted to $20,453,773.46, which represents
an equivalent cost per share on common stock of $16.38. This compares with $9.76
per common share for 1942.

WAGES AND SALARIES PAID-

The total wages paid amounted to approximately $38,355,000. This com-

pares with $22,898,000 paid in the fiscal year ending May 31, 1942. The total
employment by The Dow Chemical Company is 16,340 employees, and at the present
time there are 2593 past employees in the military service.

GENERAL-

Dow Magnesium Corporation was organized to build and operate certain Mag-
nesium plants for the United States Government. Dow Magnesium Corporation is a
wholly owned subsidiary and is now engaged in operating these plants.
 In the same way, Dow Chemical Company of Canada, Limited, was organized
to be the operating company in Canada for the Canadian Government plant designed
by The Dow Chemical Company for the Canadian Government. This also is a
wholly owned subsidiary which undoubtedly will have more important activities as
time goes on.

Dow Corning Corporation was organized for the purpose of producing some
important strategic materials for Government account. This Company is jointly
owned by The Dow Chemical Company and Corning Glass Works.

One other item of general interest to the stockholders of The Dow Chemi-
cal Company is the record made by this Company in all of our Government contracts.
In the case of the various contracts with the Government to build defense plants, we
have made several records of completing construction ahead of schedule. Also, we
have been able to develop greater capacity than the plants were originally designed
for and our all-round record has been, without doubt, most creditable. The stock-
holders are entitled to feel great pride in the accomplishments of your Company for
all wartime activity. In recognition of these outstanding accomplishments, six
Army-Navy “E” Awards have been made to the major producing plants.

The accompanying financial statements record the financial condition of

the Company at the close of its taxable year ending May 31, 1943. At this time
renegotiation of Government contracts and subcontracts has begun but has not
reached a point permitting determination of the effect, if any. It is only proper, how-
ever, to advise of these proceedings and the possibility of adjustments.

WILLARD H. DOW,
President

Midland, Michigan
July 22, 1943
 THE DOW CHEk
( I ncorpora tee
AND SUBSIDIA
CONSOLIDATED BALANCE SHEET,
ASSETS
May 31
/
1943 1942
CURRENT ASSETS:

Cash -_----------------^-___^________________------ $ 6,573,225.15 $ 6,29 1,790.83

United States Treasury tax notes, Series C ____--____________ $ 2,325,OOO.OO
Notes and accounts receivable:
Customers ---------------------------------------- $ 10,337,8 13.70 $ 9,420,886.92
Associated companies ________________________________ 168,286.6 1 107,152.55
Employees,,_,,__,,,__,,,,_,,,,,,,,,___,____,_____- 32,640.26 32,6 14.47
Sundry ------------------------------------------- 262,924.16 142,767.41

Total ------------------------------------ $ JO,80 1,664.73 $ 9,703,421.35

Less reserves for doubtful receivables __--_---____--______ 249,570.5 1 240,593.48

Net receivables _____-_________________ $ 10,552,094.22 $ 9,462,827.87

Billed and unbilled accounts receivable from United States Govern-
ment and its agencies (other than for the sale of product) -_- $ 1,744,306.40 $ 1,263,792.85
Inventories:
Finished goods and work in process (at lower of cost or market) $ 7,925,689.72 $ 5,486,230.36
Materials and supplies (at cost-approximately market) ____ 6,79 1,244.45 6,708,152.47

Total ------------------------------------ $ 14,716,934.17 $ 12,194,382.83

Total current assets --_---_______ $ 35,91 1,559.94 $ 29,2 12,794.38

INVESTMENTS AND NON-CURRENT RECEIVABLES:
Notes receivable and capital stock (at cost) of associated com-
panies (equity as shown by unaudited balance sheets of com-
panies, May 31, 1943, $3,392,540.64; May 3 1, 1942,
$3,458,524.24) ___------___________________________ $ 2,243,OOO.OO $ 2,238,OOO.OO
Post-war refund of excess profits tax - _____________________ 1,645,8 19.84
Non-current notes and accounts receivable (including employees’
receivables, May 3 1, 1943, $64,336.75; May 31, 1942,
$73,364.16) _______________-____________________^_ 876,282.99 50 1,936.19
Sundry securities (less reserves, May 3 1, 1943, $108,413.93;
May 31, 1942, $121,212.88) ------------------------- 529,340.05 465,547.05

Total investments and non-current

receivables __________________ $ 5,294,442.88 $ 3,205,483.24

PROPERTY (including emergency facilities for national defense,

completed and in progress, with a gross book value (cost) subject
to amortization, May 31, 1943, $38,890,695.21; May 3 1,
1942, $24,409,906.33 1:
Plant properties and equipment---at cost (less reserves for depre-
ciation and amortization, 1943, $35,334,98 1.48; 1942,
$27,248,904.73) ___________________---------------- $ 75,04 1,878.06 $ 68,356,269.77
Housing properties-t cost (less reserves for depreciation and
amortization, 1943, $288,347.06; 1942, $160,730.78) --_- 2,200,6 17.47 1,469,527.95

Total property ----------------- $ 77,242,495.53 $ 69,825,797.72

PATENTS--At cost or nominal value (less reserves for amortization,
1943, $56,943.28; 1942, $50,10 1.18 1 ------------------- $ 61,831.12 $ 65,673.22

DEFERRED CHARGES-Unexpired insurance premiums, unamortized

debenture discount and expense, and sundry ________________ $ 497,984.59 $ 784,482.14

TOTAL __- _____ - _a____ $1 19,008,3 14.06 $103,094,230.70

NOTE: s Operations of the Corporation and its subsidiaries in

profits control legislation giving the Government
subcontracts with resulting reduction in and ref
been begun but have not reached a point permit
may have upon these financial statements. -
CAL COMPANY
I Michigan 1
Y COMPANIES
GY 31, 1943 AND MAY 31, 1942
LIABILITIES
May 31
1943 1942

CURRENT LIABILITIES:
Notes payable--Banks --------------------------------- $ 1,900,000.00 $ 1 ,ooo,ooo.oo
Accounts payable-Trade and sundry ------------,--------- 5,588,505.10 5,365,30 1.30
Federal income and excess profits taxes ___________ - _______ 20,078,138.67 10,336,621.85
Serial debentures maturing within one year ----------------- 7 50,000.00 750,000.00
Accrued liabilities:
Payrol Is ------------------------------------------ 1,123,227.3 1 76 1,562.98
Taxes--social security, property, Federal capital stock, state
income and franchise, and sundry -------------------- 1,3 16,505.23 1,042,074.29
Interest ------------------------------------------ 7 1,229.25 95,47 1.26
Rents -------------------------------------------- 1 16,657.55 167,032.86
Sundry --------------------__________3_________--- 153,785.8 1 124,936.09

Total current liabilities _- _________ $ 3 1,098,048.92 $ 19,643,000.63

FUNDED DEBT:
Ten year 21/d % debentures, due September 1, 1950 __________ $ 7,500,000.00 $ 7,500,000.00
Serial debentures maturing in the amount of $750,000.00 on
September 1, 1944 and annually thereafter until September 1,
1950 (debentures maturing within one year included in cur-
rent liabilities) ------------------------------------- 5,250,OOO.OO 6,000,000.00

Total funded debt -------__---__ $ 12,750,OOO.OO $ 13,500,000.00

RESERVES FOR FIRE AND ACCIDENT LOSSES, DAMAGE CLAIMS,

ELECTROLYTIC CELL REPLACEMENTS, AND SUNDRY -_---__ $ 1,636,049.07 $ 734,820.3 1

MINORITY INTERESTS IN SUBSIDIARIES -_-_-___c----__-___ $ 1,202,278.06 $ 1,073,655.1 1

CAP ITAL STOCK:

Preferred capital stock- 5% cumulative (authorized and out-
standing, 60,000 shares of $100.00 par value each) m----s- $ 6,000,000.00 $ 6,000,000.00
Common capital stock (authorized, 2,000,OOO shares without par
value; outstanding, 1,248,706 shares) --w---------------- 37,293,908.83 37,293;908.83
Total capital stock ______________ $ 43,293,908.83 $ 43,293,908.83

SURPLUS:
Capital surplus --------------------------------------- $ 36,539.Ol $ 36,539.Ol
Earned surplus - ____----- --- -_____-__ -- _____ - _________ 28,99 1,490.17 24,8 12,306.8 1
Total surplus ------__---_______ $ 29,028,029.18 $ 24,848,845.82

TOTAL _- _- _- - __- - - ___ $1 19,008,3 14.06 $103,094,230.70

----

s transactions which are subject to the provisions of war

right under certain conditions to renegotiate contracts and
ng of profits realized. Renegotiation proceedings have
determination of the effect, if any, that such proceedings
 THE -DOW CHEMICAL COMPANY
AND SUBSIDIARY COMPANIES

STATEMENT OF CONSOLIDATED INCOME

FOR THE YEARS ENDED MAY 31, 1943 AND 1942
/

Year Ended May 31

1943 1942

NET SALES __-_-------------------------- $105,427,854.78 $78,359,997.24

LESS :
Cost of sales ______ -- ____ -_-- _______---- $ 77,19 1,286.26 $56,338,933.18
Selling and administrative expenses ---------- 4,472,485.30 3,929,984.30

Total --------------- ______-- $ 81,663,771.56 $60,268,9 17.48

PROFIT FROM SALES --__------- ____------- $ 23,764,083.22 $18,09 1,079.76

OTHER INCOME:
Dividends received from associated company -_- $ 800,OOO.OO $ 1,350,000.00
Interest from associated company ------_---- 155,610.OO 155,610.97
Fees received for construction and operation of
government owned plants _----_- ___--_-- 1,877,804.59 268,375.06
Miscellaneous _--_---------_------------ 504,275.64 252,126.83

Total --------___------------ $ 3,337,690.23 $ 2,026,l 12.86

GROSS INCOME ------____---_------------ $ 27,10 1,773.45 $20,1 17,192.62

INCOME CHARGES:
Interest and amortization of discount and
expense on debentures ------------------ $ 283,790.88 $ 289,964.16
Miscellaneous ----__-- ____ -_-___--__-_--- 190,625.49 284,980.47

Total __- ______ ------__-__--_ $ 474,416.37 $ 574,944.63

NET INCOME BEFORE PROVIDING FOR FEDERAL

INCOME AND EXCESS PROFITS TAXES ---_-- $ 26,627,357.08 $19,542,247.99

PROVISION FOR FEDERAL INCOME AND EXCESS

PROFITS TAXES:
Normal tax and surtax ----____----------- $ 3,542,153.66 $ 3,948,067.35
Excess profits tax (less, in 1943, post-war
refund, $1,645,819.84) --__------_------ 14,706,279.1 1 6,13 1,058.48

Total _________ -------------- $ 18,248,432.77 $10,079,125.83

NET INCOME BEFORE DEDUCTING MINORITY

INTERESTS IN INCOME OF SUBSIDIARIES _-- $ 8,378,924.3 1 $ 9,463,122.16
MINORITY INTERESTS IN NET INCOME OF
SUBSIDIARIES ------ ________ - __________ 153,622.95 24 1,636.40

NET INCOME FOR THE YEAR ______--------- $ 8,225,301.36 $ 9,221,485.76

NOTE : Provisions for depreciation and amortization over a period of sixty months of emer-
gency defense facilties were as follows:
Year Ended May 31
1943 1942

Provision for depreciation ___________ $3,722,973.48 $3,628,103.12

Provision for amortization of emergency
defense facilities -- ______________ 5,387,679.25 3,075,568.39
 THE DOW CHEMICAL COMPANY
AND SUBSIDIARY COMPANIES

STATEMENT OF CONSOLIDATED EARNED SURPLUS

FOR THE YEARS ENDED MAY 31,1943 and 1942

Year Ended May 31

1943 1942

BALANCE AT BEGINNING OF THE YEAR _____ $24,812,306.81 $18,933,844.35

CREDITS:
Net income for the year -_--_--_------_-_- 8,225,301.36 9,22 1,485.76
Adjustments to net income of prior years (less
provision for additional Federal income and
excess profits taxes thereon, $238,787.81 1 -- 617,955.45

Total ____ ---------_----_-___ $33,037,608.17 $28,773,285.56

CHARGE-Cash dividends:
Common capital stock ----_------_---_--_- $ 3,746,1 18.00 $ 3,660,978.75
Preferred capital stock --___-__--___--___- 300,000.00 300,000.00
Total _____ -__------__------_ $ 4,046,1 18.00 $ 3,960,978.75
BALANCE AT END OF THE YEAR -_-_---_---_ $28,99 1,490.17 $24,8 12,306.8 1
________~
HASKINS 8c SELLS
THE NATIONAL BANK BUILDING
CERTIFIED PUBllC ACCOUNTANTS
RESIDENT ?ARTNERS
DETROIT
HAROLD W. SCOTT, C.C.A.

CYRIL N. BULLOCK. C.?.A.

ACCOUNTANTS’ CERTIFICATE

The Dow Chemical Company:

We have examined the consolidated balance sheet of The Dow Chem-

ical Company and its subsidiary companies OS of May 31, 1943 and the
related statements of consolidated income and earned surplus for the year
ended that date, have reviewed the accounting procedures of the companies,
and have examined their accounting records and other evidence in support
of such financial statements, Our examination was made in accordance
with generally accepted auditing standards applicable in the circumstances
and included all auditing procedures we considered necessary, which proced-
ures were applied by tests to the extent we deemed appropriate in view of
the systems of internal control; it was not practicable to confirm receivables
from United States Government departments and agencies but we have
satisfied 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 earned surplus fairly present the financial
condition of the companies at May 3 1, 1943 and the results of their opera-
tions for the year ended that date, in conformity with generally accepted
accounting principles and practices applied on a basis consistent with that
of the preceding year.

HASKINS C SELLS

July 15, 1943.