SUMMARY OF OPERATIONS

COMPANY OPERATIONS

Per Cent
1948 1941
Increase

Sales _______-__-__-_---_-------------- $170,696,037 $130,426,839 31

Total lncomec ---- ____ - --____--_c_-____-- 174,353,190 132,787,648 31

Net Income -__--_--_-__- _____ -- --____-- 2 1,066,646 12,729,990 65

Dividends-Preferred Stock ----_--__--____ 2,461,296 1,215,476 102

Net Income Applicable to Common Stock --_-- 18,605,350 11,514,515 62

Earnings per share, Common Stock on 4,994,824

shares ___-_-_--__-__-__-____________ 3.72 2.3 1 61

Dividends-Common Stock _____ -__- _______ 4,994,824 4,058,295 23

Stockholders’ Investment -_-__- ___________ 172,9 12,545 1 19,43 1,265 45

Number Stockholders Preferred and Common __ 18,669 12,615 48

FINANCIAL INFORMATION

Current Assets --- ____ - ____ -___--___--___ $ 83,154,448 $ 59,876,21 1 39

Current Liabilities -- _______ -__.-_---___--- 29,064,150 26,778,874 9

Other Investments, Property and Deferred

Charges ___--_____-__________________ 188,3 18,933 153,761,665 22

Long-term Debt __- ____ --___---__--___--- 67,206,250 65,000,OOO 3

NOTE : In the following pages will be found a complete consolidated income

and surplus statement, consolidated balance sheet and notes.
 ----I-_--_--_.- 1. -.----.-- _I__- - _ ~- - .--
11

/i ~MPLOYIMIENT-OWNERSHIP /ji
I -,-~-~~-
----_--.L--.-_-
--.-- 1 /

The spread in ownership of The Dow the four-for-one split of Common stock
Chemical Company has maintained a healthy which served to bring the market price with-
pace in step with the growth of the business. in the range of many more individual invest-’
aver the past ten years we have averaged ap- ors and ‘thus spread Dow Common stock
proximately one owner for each employee, among 25 per cent more people.
greatest differences being in 1943 when there
In reviewing the employment figures, the
were three employees for every two stockhold-
growth in importance of Dow’s various divi-
ers and at the present, there now being about
sions and subsidiaries from year to year is per-
three stockholders for every two employees.
haps more interesting than the increase in to-
The considerable change in ownership be- tal personnel. The growth chart shows that
tween 1947 and 1948 reflects two impor- whereas ten years ago the Midland division
tant moves made during the past fiscal year. accounted for three-fourths of all Dow em-
First, the issue of the new Second Preferred ployees, today it accounts for but little more
stock, which added some 4,000 new mem- than half of the total of 14,564 men and
bers to our Preferred stockholder list. Second, women.

EMPLOYEES STOCKHOLDERS

-MIDLAND DIVISION

16.000

6.000 6,000

‘42 / ‘43 ‘46 ‘47 ‘40 ‘41 ‘42 ‘44 ‘45 ‘46
 ACCdUNTANTS’ CERTIFICATE

HASKINS & SELLS THE NATIONAL BANK BUILDING

CERTIFIED PUBLIC ACCOUNTANTS DETROIT

The Dow Chemical Company:

We have examined the consolidated balance sheet of The Dow Chemical Com-
pany and its subsidiary companies as of May 3 1, 1948 and the related statements
of consolidated income and surplus for the year ended that date. Our examination
was made in accordance with generally accepted auditing standards and included
such tests of the accounting records and such other auditing procedures as we consid-
ered necessary in the circumstances.

In our opinion, the accompanying consolidated balance sheet and statements of

consolidated income and surplus present fairly the financial condition of the com-
panies at May 3 1, 1948 and the results of their operations for the year ended that
date, in conformity with generally accepted accounting principles applied on a basis
consistent with that of the preceding year.

H&skins & Sells

July 20, 1948

 THE DOW CHEMICAL COMPAI

CONSOLIDATED
I

MAY 31, 1948 A

ASSETS
May 31
1947
Current Assets: ~-1948
Cash ---------_----_------------------------------- $ 10,378,446 $ 73692 15
United States Government securities-at cost _ - - - - - - - - -_ _ _ _ - _ $ 12,403,572 -$ 3,270,OOO
Notes and accounts receivable :
Customers-------____-___-------------------------- $ 22,;4670g $ 15,241,37 1
A,ssociated companies --------_------___------------ 8 1,243
Employees ----------___--_-_--____________________ 105176 1 84,922
Sundry ---_------________--____________________--- 732.316 1.195.401
Total -_-------------____---------------- $ 24,046,1 11 $ 16,602,937
Less reserves for doubtful receivables - - - - - - _ - _ ----- ----_- 447,267 280,58 1
Net receivables _-_____------------------ $ 23,598,844 $ 16,322,356

Inventories:
Finished goods and work in process (at lower of cost or market) $ 2 1,797,697 $ 18,147,267
Materials and supplies (at cost-approximately market) :
Raw materials -----------_--_---_________________ 4,125,840 4,473,697
Supplies _------------_--__-_____________________ 9,882,504 9,487,323
Materials and supplies in transit ------ ________________ 967,545 606,252
Total -------------__--_-------------- $ 36,773,585 $ 32,7 14,539
Total current assets _-------_-----_-__- $ 83,154,448 _$ 59,876,21 1

Investments and Non-Current Receivabks:

Notes receivable and capital stock (at cost) of associated com-
panies (at May 3 1, 1948, approximately $1 ,OOO,OOO less than
the equity in net assets as shown by unaudited balance sheets
of companies) ---__-_- ____ ---------_-_--- ____ - _____ $ 2,965,OOO $ 3,565,OOO
Non-current notes and accounts receivable (including employees’
receivables, 1948, $45,092; 1947, $43,680) _ _ _ __ ___ __ _ __ 287,026 3 19,954
Sundry securities (at cost) _____ -_---_- _________________ 666,804 619,601
Claims for refund of prior years’ Federal taxes on income __ __ __- 4,773,723 4,957,549
Total investments and non-current receivables $ 8,692,553 $ 9,462,104

Property:
Plant properties (exclusive of facilities acquired under certificates
of necessity) (at cost) :
Land ___-___________--__------------------------- $ 2,379,229 $ 1,843,603
Depreciable property (less reserves for depreciation, 1948,
$49,405,273; 1947, $38,734,396) ______________-___ 166,045,046 130,937,138
Facilities acquired under certificates of necessity (at reinstated
values, less reserves for depreciation since reinstatement, 1948,
$1,219,838; 1947, $609,919) _____ - _____ -_--_------- 8,370,405 8,980,324
Housing properties (exclusive of facilities acquired under certifi-
cates of necessity) -at cost (less reserves for depreciation, 1948,
$345,883; 1947, $284,291) ___________________ -_---- 1,360,673 1,5 19,405
Total property --------__----_-----___ $178,155,353 $143.280.470
Patents -at cost or nominal value (less resewes for amortization,
1948, $1 13,374; 1947, $1 11,l 11) ________ -___-------- $ 284,062 $ 306,164
Deferred Charges-Unexpired insurance premiums, unamortized dis-
count and expense on funded debt, and sundry -- __-------_ - $ 1,186,965 $ 7 12,927
Total --------_----- _______ -__ $271,473,381 $213,637,876

See notes to fine

 AND SUBSIDIARY COMPANIES
_ _..- --- - - ~~ .~

BALANCE SHEET ~
D MAY 31, 1947 .

LIABILITIES

May 31
Current Liabilities: 1948 1947
Accounts payable-Trade and sundry -- _____ _-___ _ ___ ___ __ $ 11x583 $ 13,338,756
Federal and Canadian income taxes ---_------__----____--- 1 1,273,56 1 8,145,833
Dividends payable __-- ____ --__-----__---___-_-________ 1,877,575 1,552,575
lnstalments on long-term indebtedness payable within one year _- 285,000
Accrued liabilities:
Payrolls ------------------------------------------ 1,482,978 1,2 12,198
Taxes-Social security, property, state income and franchise
and sundry -------------------------------------i 2,458,12 1 1,889,444
lnterest_____-____--_--__-__----------------------- 483,528 453,2 19
Sundry __----_-----_----_______________________--- 196,804 186,849
Total current liabilities --_--_-___---__-_-- $ 29,064,150 $ 26,778,874

Long-Term Indebtedness:
Fifteen year 2.35% debentures, due November 1, 196 1 -- --- -- $ 30,000,000 $ 30,000,000
Promissory notes, due January 1, 1972 - _______ __- ______ _-- 35,000,000 35,000,000
Mortgage note, due January 1, 1958 (instalments due within one
year included in current liabilities) -----___----------_- 2,056,250
Lease purchase contract, due March 1, 1952 (instalments due
within one year included in current liabilities) __----__----- 150,000
Total long-term indebtedness _____- ____- - - - $ 67,206,250 $ 65,000,OOO

Reserves for Fire and Accident Losses, Damage Claims, Electrolytic

Cell Replacements (1947), and Sundry _________ --__---- $ 1,305,717 $ 1,470,494

Minority Interests in Subsidiary Companies _ _ _ _ __ _ _ _ - _ _ _- _ - - - $ 984,7 19 $ 957,243 -

Capitol Stock:
Cumulative Preferred Stock, Series A (authorized, 600,000 shares
without par value; outstanding, 303,869 shares) --cumulative
annual dividend $4 per share ________ --- ____ ---_---___ $ 30,386,903 $ 30,386,900
Second Preferred Stock (convertible) (authorized and outstanding,
400,000 shares without par value) -cumulative annual divi-
dend $3.25 per share __________-______-____ - _____ --- 40,000,000
Common Stock ( 1948, authorized, 12,000,OOO shares of $15 par
value each; reserved for conversion of Second Preferred Stock,
842,106 shares; outstanding, 4,994,824 shares) -See Note A 74,922,360 37,293,909
Total capital stock _____ --___-~--~_~-~~-- $145,309,260 $ 67,680,809

Surplus:
Capital surplus ________________ -__---__------ ____ ----- $ 407,098 $ 1,030,191
Earned surplus __-- _______ - ____ -----__------__--__--- 27,196,187 50,720.265
Total surplus ______ - ______ ---- _____ ---- $ 27,603,285 $ 51 v750.456

Total _--__-_----___-----_-------- $271.473,381 $2 13.637,876

ial statements.
 THE DOW CHEMICAL COMPANY.
STATEMENT OF

CONSOLIDATED INCOME
FOR THE YEARS ENDED MAY 31, 1948 AND 1947

Year Ended May 31

1948 1947

Sales and Other Revenue:

Sales___------------------------------- $170,696,037 $130,426,839
Dividends received from an associated company 500,000 250,000
Interest from associated companies --____---- 75,128 177,010
Other interest income __---_-_-_- __________ 322,798 166,809
Fees received in connection with operation of
government owned plants ___--------____ 406,022 1,154,45 1
Reversal of reserve for electrolytic cell replace-
ments no longer required ___-____------_- 1,170,778
Other income -- _____ ----------__--_--_-_ 1,182,427 6 12,539
Total __------- ______________ $174,353,190 $132,787,648
_____-----

Costs and Other Charges:

Cost of sales (excluding provision for deprecia-
tion and contributions under pension and
profit-sharing plan) __---_--_---__- _____ $1 10,986,394 $ 92,485,432
Provision for depreciation --_-- ________ - ____ 14,178,366 8,595,259
Contributions under pension and profit-sharing
plan ------_------------------------- 1,810,218
Selling and administrative expenses __--__-__ 10,686,476 9,508,597
Interest and amortization of discount and ex-
pense on funded debt __________ - ____ --__ 1,672,759 757,843
Provision of reserve for product damage claims - 1,ooo,ooo
Other income charges --__-_------_-----__ 374,493 337,466
Minority interests in income of subsidiary com-
panies --------------------__________ 132,474 164,668
Total --------------_--_-____ $140,841,180 $111,849,265

Income before Provision for Federal and Canadian

Income Taxes ------- __________ -------__ $ 33,512,OlO $ 20,938,383

Provision for Federal and Canadian Income Taxes 12,445,364 8,208,393

Income for the Year --------------_-________ $ 2 1,066,646 $ 12,729,990

See notes to financial statements.

AND SUBSIDIARY COJvlPANIES
STATEMENT OF

CONSOLIDATED SURPLUS
FOR THE YEARS ENDED MAY 31, 1948 AND 1947

CAPITAL SURPLUS Year Ended May 31

1948 1947
Balance at Beginning of the Year ____________ $ 1,030,191 $ 1,030,191
Credit-Premium received on sale of Second Pre-
ferred Stock - ____ ---_---___-- ____ ---___ 200,000
Total _-__----_----------____ !$ 1,230,191 $ 1,030,191
Charges:
Transferred to Common Stock account in connec-
tion with merger (See Note A) __-----_--- $ 623,093
Expenses in connection with merger and sale of
Second Preferred Stock (portion equivalent to
premium received on sale) _________ --_-- 200,000
Total -___----_-_-__---______ $ 823,093
Balance at End of the Year _--___---__---_--_ $ 407,098 $ 1,030,191 -

EARNED SURPLUS
Balance at Beginning of the Year __--___----_- $50,720,265 $43,264,046
Credit-Income for the year ______--__------- 2 1,066,646 12,729,990
Total ___-__--__--------__--- $7 1,786,9 11 $55,994,036
Charges:
Cash dividends :
CommonStock------------------------ $ 4,994,824 $ 4,058,295
Cumulative Preferred Stock-Series A _--___ 1,215,476 1,2 15,476
Second Preferred Stock _______ -_-----_-- 1,245,820
Transferred to Common Stock account in connec-
tion with merger (See Note A) -------_--_ 37,005,358
Expenses in connection with merger and sale of
Second Preferred Stock (portion not charged
to capital surplus) __________ --___---__- 129,246
Total --__-__-_----_-- _______ $44,590,724 $ 5,273,77 1
BalanceatEndoftheYear ________ --__--__-__ !$27,196,187 $50,720,265

NOTES TO FINANCIAL STATEMENTS

A-On July 2;, 1947 pursuant to an Agreement of Merger approved by its stockholders, The Dow Chemical
Company (a Michigan corporation) was merged into. The Dow Chemical Company (Delaware), a
wholly-owned subsidiary organized for that purpose. The name of the new corporation was thereupon
changed to “The Dow Chemical Company” and the Michigan corporation dissolved. In connection
with the merger and the attendant conversion of each share of common capital stock without par
value into four shares of Common Stock of a par value of $15 a share, $623,093 of capital surplus
and $37,005,358 of earned surplus was transferred to the common stock account.
B-The Company’s Federal income and excess profits tax returns have been examined by the Treasury Depart-
ment through the year ended May 3 1, 1945. An examination of the returns for the years ended May
31, 1946 and 1947 is now in progress and, in connection with this examination, an agent of the Treas-
ury Department has questioned the propriety of depreciation rates used for a plant in Velasco, Texas,
which the Company purchased from the Government in 1947, and is making a review of other depreci-
ation rates used by the Company. It is possible that there may be additional assessments of Federal
income tax resulting from revision of depreciation rates and from other adjustments arising from the
examination. The Company may protest the findings of the agent. It is not possible at this time to
determine the amounts of resulting assessments, if any, and no provision has been made therefor in
these financial statements.
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 RA-NDOM COMMENT

Source of the sales dollar, from the various industry. The paper used in this report, ex-
groups of products, was approximately the cept for cover, is Latex 5 12 coated.
same as last year except that plastics account-
ed for a slightly larger, and magnesium for a
Operations of our Canadian subsidiary are
slightly smaller, proportion. The break-
expanding rapidly. The first Dow-owned
down in revenue was about as follows: In-
plant there (polystyrene) was placed in pro-
dustrial Chemicals 54%) Plastics 20%) Ag-
duction in February, 1947. During the
ricultural Chemicals 10 $?j, Pharmaceuticals
1947-48 fiscal year facilities were completed
10 % , Magnesium 6 96.
for manufacture of glycols and their by-prod-
xxx ucts, as well as shops and offices, and a size-
On December 3 I,1947 we purchased from able chlorine and caustic soda plant is now
WAA the Ludington, Michigan, facilities under construction.
which we had built and operated during the xxx
war for production of magnesium cell feed,
Since the war Dow Corning Corporation
and had been operating under lease since
has introduced a number of new silicone
shortly after the end of hostilities. This unit
products that have found sizeable industrial
is now producing lime and brine products.
markets. At the same time a consumer
xxx product, silicone-treated tissues for cleaning
Brazos Oil and Gas Company, a wholly- eye glasses, has secured national distribution
owned subsidiary organized during the 1946- and acceptance under the trade name “Sight
47 fiscal year has during the past fiscal year Savers.” Silastic products for household use
carried on extensive exploratory and develop- strengthen Dow Corning’s entry into the field
ment operations to insure a long range gas of consumer products.
supply for our Texas operations.

After a substantial curtailment immediate-

,
Products springing from styrene are stead- ly following the war, Ethyl-Dow’s bromine
ily becoming more numerous. During the and ethylene dibromide facilities at Freeport
past year we successfully introduced a new were again operating near capacity during the
product-Styrene Latex 5 12-to the paper 1947-48 year.
 DIRECTORS

E. 0. Barstow R. L. Curtis* C. A. Gerstacker*

E. W. Bennett L. I. Doan N. D. Griswold*

A. P. Beutel” A. B. Dow M. E. Putnam

C. A. Campbell” W. H. Dow C. J. Strosacker

J. S. Crider W. R. Veazey

OFFICERS

President - - - - - - - - - . . - W. H. Dow
Vice President and Treasurer - - - . - - - E. W. Bennett
Vice President and Secretary - - - - - - - - L. I. Doan
Vice President - - - - - - - . . - E. 0. Barstow
Vice President - - - - - - - . - - M. E. Putnam
Vice President - - - - - - - - . - C. J. Strosacker
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
Auditor - - - - - - _ _ - _ - - Chas. Penhaligen

FINANCE COMMITTEE

E. W. Bennett, Chairman C. A. Campbell H. S. Kendall

F. H. Brown C. A. Gerstacker Chas. Penhaligen

*By action of the Board of Directors June 1, 1948, membership of the Board was
increased from nine to fourteen and five new members appointed to fill the chairs
thus created.

Transfer Agents Stock Registrars

Guaranty Trust Company of New York Common The New York Trust Company

The National City Bank of New York Preferred Guaranty Trust Company of N. Y.
The Cleveland Trust Company Common and The National City Bank of Cleveland
Preferred
 DOW-ACROSS THE COUNTRY

EXECUTIVE and GENERAL SALES OFFICES

MIDLAND, MICHIGAN

SALES OFFICES

Boston 16, Massachusetts Houston 2, Texas St. Louis 8, Missouri

20 Providence Street 2205 Commerce Building Continental Building
3615 Olive Street
Chicago 3, Illinois Los Angeles 14, California
San Francisco 4, California
135 S. LaSalle Street 634 S. Spring Street
310 Sansome Street

Cleveland 13, Ohio New York 20, New York Seattle 1, Washington
Terminal Tower 30 Rockefeller Plaza 1702 Textile Tower

Detroit 2, Michigan Philadelphia 2, Pennsylvania Washington 5, D. C.

Fisher Building 1400 South Penn Square 915 Shoreham Building

MANUFACTURING OPERATIONS

Freeport, Texas Bay City, Michigan Pittsburg, California

Velasco, Texas Ludington, Michigan Seal Beach, California

Midland, Michigan

SUBSIDIARY COMPANIES

Cliffs Dow Chemical Company - - - - - - - Marquette, Michigan

Dow Chemical of Canada, Limited: General Office - - - - Toronto, Ontario

Plant - - - - - Sarnia, Ontario

Dow Magnesium Corporation - - - - - - - Midland, Michigan

Midland Ammonia Company - - - - - - - Midland, Michigan

Brazes Oil and Gas Company - - - - - - - - Houston, Texas

Dowel1 Incorporated - - - - - - - - - Tulsa, Oklahoma

ASSOCIATED COMPANIES

Dow Corning Corporation - - - Midland, Michigan

Ethyl-Dow Chemical Company - - - - Freeport, Texas

The Saran Yarns Company - - - Odenton, Maryland