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INTERNATIONAL HARVESTER COMPANY

INTERNATIONAL HARVESTER COMPANY (A NEW JERSEY CORPORATION)

RALPH BUDD SYDNEY G. MCALLISTER CYRUS MCCORMICK TERM EXPIRES 1940 HAROLD F. McCORMICK ADDIS E. McKINSTRY ALBERT A. SPRAGUE

THOMAS E. DONNELLEY MAURICE F. HOLAHAN DIRECTORS ARNOLD B. KELLER • TERM EXPIRES 1941 HAROLD F. McCORMICK, Chairman CHAUNCEY McCORMICK FOWLER McCORMICK JUDSON F. STONE

JOHN A. CHAPMAN WILLIAM S. ELLIOTT JAMES R. LEAVELL TERM EXPIRES 1942 GEORGE A. RANNEY JOHN STUART JOHN P. WILSON

ADDIS E. McKINSTRY SYDNEY G. MCALLISTER HAROLD F. McCORMICK EXECUTIVE GEORGE A. RANNEY COMMITTEE JOHN P. WILSON ADDIS E. MCKINSTRY, Chairman JUDSON F. STONE MAURICE F. HOLAHAN iALBER T A. SPRAGUE SYDNEY G. MCALLISTER President MAURICE F. HOLAHAN First Vice-President FOWLER McCORMICK Second Vice-President WILLIAM S. ELLIOTT Vice-President and General Counsel CHARLES R. MORRISON Vice-President JOHN MORROW, Jr. Vice-President OFFICERS GEORGE E. ROSE Vice-President LEON P. THAYER Vice-President ALBERT W. SCARRATT Vice-President ARNOLD B. KELLER Treasurer SANFORD B. WHITE Secretary CHRISTIAN E. JARCHOW Comptroller

GUARANTY TRUST COMPANY OF NEW YORK, New York TRANSFER OFFICES < INTERNATIONAL HARVESTER COMPANY, Chicago

THE NEW YORK TRUST COMPANY, New York REGISTRARS FOR STOCK CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY, Chicago

GENERAL OFFICES •\^ Harvester Building, 180 North Michigan Avenue, Chicago 1939 REPORT TO STOCKHOLDERS OF INTERNATIONAL HARVESTER COMPANY

Sales in the United States during 1939 were 6.4% less than in 1938. This decrease was due primarily to two reasons, the lower prices which our farmer customers received for their products during the greater part of the year including the principal selling seasons, and the change-over to a new line of tractors and related implements involving interruptions in production and lag in sales. Motor truck sales increased about 12% during 1939. Collections in the United States were good. Sales in foreign countries, including Canada, during 1939 were 7.5% less than in 1938. This decrease was partially due to poor crops and low prices in a few countries, but was principally due to the unsettled political and economic conditions that prevailed during much of the year in many of the countries in which the Company conducts business. Numerous foreign countries have increasingly restricted the volume of their imports and the amounts of exchange to be used in payment therefor.

A comparison of 1939 and 1938 sales follows:

In the United States: 1939 1938 Tractors $ 49,985,000 $ 60,668,000 Farm implements 47,653,000 60,249,000 Motor trucks 70,426,000 62,899,000 Steel, binder twine, etc 19,714,000 16,814,000 Total United States $187,778,000 $200,630,000

In Foreign Countries: All products 79,249,000 85,661,000 Grand Total $267,027,000 $286,291,000

NOTE: 193,8 sales (and selling expenses) have been revised to conform to 1939 reclassification of certain retail operations.

PROFITS AND DIVIDENDS: The net income for 1939 was $12,980,000 compared with $18,472,000 in 1938, a reduction of 29.7%. The total dividends for 1939 were $12,509,000, leaving a net surplus for the year of $471,000. The net income for 1939 was equivalent to $1.71 per share of common stock after providing for preferred dividends, as compared to $3.00 per share in 1938. Dividends were paid at the regular rate on preferred stock and at the rate of $1.60 per share on common stock. The reduction in profits in 1939 as compared with 1938 was due to decreased sales volume, lower selling prices on many of the Company's products, and higher unit costs of manufacture due to reduced factory operations.

THREE FINANCIAL POSITION:

A comparison of the Company's financial position at the close of the last fiscal year with that of the previous year is as follows: Increase Working Capital: 1939 1938 Decrease* Cash and marketable securities $ 82,034,000 $ 59,490,000 $22,544,000 Receivables (less reserve) 87,760,000 101,122,000 13,362,000* Inventories (less reserve) 109,790,000 123,890,000 14,100,000* Total current assets $279,584,000 $284,502,000 $ 4,918,000* Less current liabilities 36,114,000 33,946,000 2,168,000 Working capital $243,470,000 $250,556,000 $ 7,086,000*

Property: Real estate, plants, branch houses, etc $230,091,000 $222,016,000 $ 8,075,000 Less reserve for depreciation 113,854,000 106,992,000 6,862,000 Net property $116,237,000 $115,024,000 $ 1,213,000 Other assets and deferred charges less deferred credits $ 3,898,000 $ 3,653,000 $ 245,000 Net assets $363,605,000 $369,233,000 $ 5,628,000*

Deduct: Reserves (special maintenance, development and extension, fire insurance, and foreign losses) 31,668,000 37,762,000 6,094,000* Minority interest in affiliated companies. . . 594,000 599,000 5,000*

Net worth represented by preferred and com­ mon stock outstanding and earned surplus $331,343,000 $330,872,000 $ 471,000

The decrease in receivables of $13,362,000 and in inventories of $14,100,000 is largely reflected in the increase in cash and marketable securities. These changes are the result of the reduced volume of business and rate of manufacturing activities during the past year. At October 31, 1939 the working capital in the United States was $1,561,000 more than at the close of the previous year; and in foreign countries $8,647,000 less, largely due to lower exchange rates—a net decrease of $7,086,000.

FOREIGN ASSETS:

Of the total net assets of $363,605,000 at October 31, 1939, $61,831,000 was located in countries outside the United States, as compared with $69,515,000 at October 31, 1938. The location and division of these net assets at October 31, 1939 were as follows:

FOUR Other Assets and Deferred Working Charges less Capital Property Deferred Credits Total Europe $10,585,000 $ 5,882,000 $ 302,000 $16,769,000 Canada, Australia, New Zealand, South Africa 21,218,000 5,648,000 147,000 27,013,000 South America 9,167,000 1,947,000 3,130,000 14,244,000 Other Foreign Countries 3,175,000 616,000 14,000 3,805,000 Total $44,145,000 $14,093,000 $3,593,000 $61,831,000

Foreign net current assets were valued at the exchange rates prevailing at October 31, 1939, or lower. The revaluation resulted in a decrease of $5,831,000 which was charged to Reserve for Foreign Losses and Exchange Fluctuations, thereby reducing the balance in this reserve from $14,056,000 at October 31, 1938 to $8,225,000. This balance was increased by a charge to Income Account of $2,500,000, representing approximately that portion of the 1939 net income of foreign subsidiary companies and branches which is not readily remittable to the United States, principally because of exchange restrictions. In order to provide further for the increased hazards abroad, a rearrangement of the general reserves of the Company was made whereby $9,500,000 was transferred from Special Maintenance Reserve through the Surplus Account to the Reserve for Foreign Losses and Exchange Fluctuations, bringing the balance in the latter account at October 31, 1939 to $20,225,000. The foreign business has frequently been subject to uncertainties and at times severe losses have actually occurred. However, the operating profits of this business have absorbed these losses and have shown a reasonable net return over the years. Moreover, the Company's export trade has absorbed its portion of the overhead costs of domestic factories, thereby lowering the cost of producing goods for the domestic trade, and has provided additional employment in this country.

CAPITAL ADDITIONS:

Capital expenditures during the fiscal year ended October 31, 1939, amounted to $8,984,000 compared with $13,436,000 for the previous year. Depreciation amounting to $7,604,000 was provided out of 1939 income at regular rates. This compares with $7,581,000 for 1938.

TAXES:

The amount of taxes for 1939 and 1938 was as follows:

1939 1938 Federal income $ 1,646,000 $ 3,784,000 Other federal, state, local, and foreign 7,245,000 7,399,000 Social Security: Federal old age and survivors insurance. 750,000 775,000 Unemployment insurance 2,370,000 2,271,000 Total $12,011,000 $14,229,000

FIVE DEVELOPMENT AND IMPROVEMENT OF COMPANY PRODUCTS:

The Company has continued its activities in engineering development in its endeavor to improve its existing products, to introduce new products, and to make them available at attractive prices. Some of the new lines introduced in 1939 are illustrated on pages 16 and 17 of this report.

EMPLOYMENT AND COMPENSATION:

Employment in the United States during the first part of 1939 continued on the levels of the closing months of 1938. Although the average employment for 1939 was lower than the average for 1938, there was an improvement in the number of employes in the latter months of the year, which has continued into 1940. In October 1939, the average number of employes in the United States was 46,900 compared with 33,500 in October 1938. Total compensation received by employes in the United States and abroad (exclusive of executive officers) was $92,000,000 for the fiscal year 1939, compared with $96,000,000 for the previous year. Total compensation received by the fourteen executive officers of the Company amounted to $512,000 in 1939 compared with $520,000 in 1938. For a number of years the management has given study to the development of a plan to encourage savings by employes for their own security and providing for extra compensation to employes in years of good profits. The Board of Directors at a meeting on January 13th of this year considered this subject and authorized the President to advise employes in the United States and Canada that a definite plan of this character would be formulated and announced before the end of March 1940.

GENERAL:

The results of the first quarter of the present fiscal year beginning November 1,1939, have shown a gratifying increase in business, the new lines are helping to stimulate sales in an encouraging manner, and the prospects for the remainder of the year now seem favorable. The Directors and Officers again express their appreciation for the wholehearted cooperation of members of the Harvester organization during the past year.

SYDNEY G. MCALLISTER, President.

Approved by the Board of Directors, Chicago, February 15, 1940.

The next annual meeting of stockholders will be held Thursday, May 9, 1940, at 51 Newark Street, Hoboken, New Jersey.

si x INTERNATIONAL HARVESTER COMPANY AND AFFILIATED COMPANIES

I SUMMARY OF INCOME AND SURPLUS For the Years ended October 31, 1939 and 1938

1939 1938 Net Sales $267,026,728 $286,291,612

Deduct: Cost of goods sold including freight and duty $204,684,166 $207,236,625 Selling, collection, administrative and general expenses .... 41,690,991 41,833,146 Depreciation 7,604,519 7,581,856 Provision for losses on receivables 2,675,140 4,725,333 Total $256,654,816 $261,376,960

Net income from sales $ 10,371,912 $ 24,914,652 Interest on receivables, securities, etc 4,774,822 5,444,276 Net income from sales and interest $ 15,146,734 $ 30,358,928

Miscellaneous losses (less miscellaneous earnings of $443,928 in 1939 and $1,009,754 in 1938) 2,520.125 2,353.705 Income from operations before provision for federal income tax $ 12,626,609 $ 28,005,223 Provision for federal income tax 1,646,550 3,783,500 Net income from operations $ 10,980,059 $ 24,221,723

Other Credits and Charges: Provision for foreign losses and exchange fluctuations.... $ 2,500,000 $ 5,000,000 Reduction of reserve for losses on receivables (estimated excess of reserve applicable to receivables of prior years) 1,500,000 2,250,000 Provision for development and extension 3,000,000 Reversal of 1938 provision for development and extension (program authorized in 1938, expenditures charged to cost of goods sold) 3,000,000 — Net credit or charge $ 2,000,000 $ 5,750,000 Net Income $ 12,980,059 $ 18,471,723

Deduct cash dividends: Preferred stock at $7.00 per share $ 5,717,068 $ 5,717,068 Common stock at $1.60 per share in 1939, and $1.92J^ per share in 1938 6,792,376 8,172,102 Total $ 12,509,444 $ 13,889,170 Surplus for the year $ 470,615 $ 4,582,553

Surplus adjustments: Transferred from reserve for special maintenance (credit).. 9,500,000 Transferred to reserve for foreign losses and exchange fluctuations (charge) 9,500,000 Surplus at beginning of the year 79,370,654 74,788,101 Surplus at end of the year $ 79,841,269 $ 79,370,654

NOTE: 1938 net sales and selling expenses have been revised to conform to 1939 reclassification of certain retail operations.

SEVEN INTERNATIONAL HARVESTER COMPAN

CONSOLIDATED BALANC

ASSETS

CURRENT ASSETS: Cash $ 56,786,252

Marketable securities, at lower of cost or market 25,247,957

Receivables: Notes of dealers, farmers, and motor truck users, etc $ 91,908,741 Accounts receivable 21,515,230 $113,423,971 Deduct reserve for losses 25,663,549

Net receivables (including employes, $143,083) 87,760,422

Inventories: Raw materials, work in process, finished products, etc., at lower of cost or market. . . $139,789,519 Deduct inventory reserve 30,000,000 109,789,519 $279,584,150

PROPERTY: Land $ 15,962,494 Buildings, machinery, equipment, etc $214,128,855 Deduct reserve for depreciation 113,854,306 100,274,549 116,237,043

OTHER ASSETS 5,595,209 (Including $573,663 investments in associated companies)

DEFERRED CHARGES 1,017,235 $402,433,637 NOTE: See pages 4 and 5 as to foreign assets

EIGHT AND AFFILIATED COMPANIES

SHEET OCTOBER 31, 1939

LIABILITIES

\ CURRENT LIABILITIES: Current invoices, payrolls, taxes, etc. (including $3,895,959 payable to banks in foreign countries) $32,986,267 Preferred stock dividend, declared October 19, 1939, payable December 1, 1939 1,429,267 Common stock dividend, declared November 16, 1939, payable January 15, 1940 1,698,094 $ 36,113,628

DEFERRED CREDITS 2,714,287 (Including net gain of $363,287 arising from transactions in the Company's capital stock, principally in prior years)

RESERVES: Special maintenance $ 3,006,535 Development and extension 2,015,657 Fire insurance 6,420,881 Foreign losses and exchange fluctuations 20,225,169 31,668,242

MINORITY INTEREST 594,651 (In affiliated companies)

PREFERRED STOCK 81,672,400 Authorized, 1,000,000 shares, $100 par value. Issued, 823,325 shares, less 6,601 shares in treasury.

COMMON STOCK 169,829,160 Authorized, 6,000,000 shares, no par value. Issued, 4,409,185 shares, less 163,456 shares in treasury.

EARNED SURPLUS 79,841,269

$402,433,637

NINE PROPERTY

Balance at October 31, 1938 $222,015,873

Deduct: Property sold, dismantled, etc $1,154,709 Depletion of iron ore and coal 73,961 1,228,670 $220,787,203 Add: Capital expenditures during 1939: Farm implement works and twine mills $1,265,257 Motor truck and tractor plants 6,728,508 Branch houses and service stations 821,457 Mines, furnaces, steel mills, etc 169,239 8,984,461 Sundry reclassifications 319,685 Balance at October 31, 1939, before deducting reserve for depreciation $230,091,349

RESERVE FOR DEPRECIATION

The annual deductions from earnings for depreciation provide for the impairment and consumption of the capital assets utilized in production and distribution. Such depreciation is based on rates confirmed by experience in this industry.

Balance at October 31, 1938 $106,991,834

Deduct depreciation on properties sold, dismantled, etc 742,047 $106,249,787

Add provision for 1939 7,604,519 Balance at October 31, 1939 $113,854,306

TEN RESERVES LOSSES ON RECEIVABLES: This reserve provides for losses which may ultimately be sustained in the collection of notes and accounts receivable.

Balance at October 31, 1938 $25,100,720

Deduct: Uncollected receivable balances at October 31, 1939, originat­ ing during the year 1934, written off in accordance with the policy of charging off receivable balances over five years old.. $ 218,013

Other receivables charged off, etc 1,916,075 2,134,088 $22,966,632 Add: Provision for estimated losses on 1939 sales 2,675,140 Recoveries during 1939 of receivables previously written off 1,521,777 $27,163,549 Deduct amount of reserve in excess of estimated requirements for receivables of prior years, restored to income 1,500,000 Balance at October 31, 1939 $25,663,549

SPECIAL MAINTENANCE: This reserve provides for relining of blast furnaces, open hearth furnaces, maintenance of docks and harbors, and other extraordinary renewals and replacements.

Balance at October 31, 1938 $12,459,107

Deduct: Relining, renewal and other charges during 1939 $ 382,272 Amount provided in prior years for extraordinary renewals and replacements at manufacturing plants no longer required, now transferred to surplus 9,500,000 9,882,272 $ 2,576,835

Add provision for 1939 429,700 Balance at October 31, 1939 $ 3,006,535

ELEVEN RESERVES DEVELOPMENT AND EXTENSION: This reserve is maintained for extraordinary programs involving large expenditures for tooling and pattern equipment and engineering research.

Balance at October 31, 1938 $5,015,657 Reversal of 1938 provision (program authorized in 1938, expenditures charged to cost of goods sold) 3,000,000 Balance at October 31, 1939 $2,015,657

FIRE INSURANCE: The Company carries a reasonable portion of its own fire insurance risks at branch houses and motor truck sales and service stations. Modern methods of fire prevention and protection are rigidly enforced at the Company's properties.

Balance at October 31, 1938 $6,231,353

Deduct losses by fire, etc., during 1939 40,161 $6,191,192

Add credit for 1939 from regular charges to operations 229,689 Balance at October 31, 1939 $6,420,881

FOREIGN LOSSES AND EXCHANGE FLUCTUATIONS: In view of the widespread foreign interests of this Company and the general uncertainties which affect many of its foreign operations, this reserve is essential for the protection of the business.

Balance at October 31, 1938 $14,056,336 Deduct adjustment necessary to reduce foreign net current assets at October 31, 1939, to a valuation based on exchange rates at that date 5,831,167 $ 8,225,169 Add: Provision from 1939 earnings $2,500,000 Special provision transferred from surplus 9,500,000 12,000,000 Balance at October 31, 1939 $20,225,169

TWELVE HASKINS & SELLS CERTIFIED PUBLIC ACCOUNTANTS HARRIS TRUST BUILDING CHICAGO

International Harvester Company:

We have examined the consolidated balance sheet of International

Harvester Company (a New Jersey Corporation) and affiliated companies

as of October 31, 1939 and the summary of consolidated income and

surplus for the year ended that date, and, as to the companies other

than eleven foreign affiliated companies, have reviewed the systems of

internal control and the accounting procedures and have examined or

tested accounting records and other supporting evidence by methods and

to the extent we deemed appropriate. Our examinations of inventories

included physical tests of quantities. As to the eleven foreign

affiliated companies not examined by us, we reviewed the companies'

annual reports (supplemented by reports of other public accountants on

the six principal companies), and the accounts of these companies are

included in the accompanying statements on the basis of such reports;

the total assets, sales, and net income of these companies amount to

approximately 8%, 11%, and 11%, respectively, of the consolidated totals.

The accompanying summary of consolidated income and surplus

includes the earnings of the companies operating in the southern

hemisphere for a fiscal year ended June 30, 1939, and the estimated

THIRTEEN earnings of such companies from June 30 to October 31 are classified as

deferred credits in the accompanying balance sheet.

In the preparation of the consolidated balance sheet at October

31, 1939 the foreign net current assets in three countries imposing

severe exchange restrictions were included at rates which were sub­

stantially lower than quoted rates.

In our opinion, based upon our examination and upon the annual

reports of foreign affiliated companies not examined by us, the

accompanying consolidated balance sheet and related summary of consoli­

dated income and surplus fairly present the financial condition of the

companies at October 31, 1939 and the results of their operations for

the fiscal year, in accordance with generally accepted accounting

principles followed by the companies on a basis consistent with that

of the preceding year.

HASKINS & SELLS

Chicago, February 15, 1940.

FOURTEEN ms»

CHICAGO AERIAL SURVEYS A Connecticut farmstead-—On such land American agriculture had its beginning. Small farms such as this are now being more highly mechanized, as smaller machinery units become available. NEW MODELS F

The year 19391 and products by tl the changing praci customers. Foremost of th new tractor models and four new Tra| with the new trad placed in producti production during TracTor models 1 fiscal year 1940. was a stainless-ste machine coming ii stainless steel. Photographs of: The Internatioi type of agricultunj

New McCormick-Deering stainless-steel cream separator, manufactured at Richmond Works, Richmond, Ind.

A powerful quartet—-(Right) The four new Diesel-powered TracTraclors, developed during 1939. R NEW BUSINESS

The new Farmall family—Left to right, the Farmall Models M, H, B and A.

nt of active development of new models tractor for the farms. The new 1939 Farmall models have ternational Harvester Company to meet carried forward the original Farmall design to fit today's farm requirements of farm and industrial needs. In its new Farmall line the Company has two small achines developed in 1939 were eight tractors, the Farmall-A and the Farmall-B, designed to serve •ofthem of the Farmall all-purpose type, small farms of 80 acres or less. The other new Farmall models, tuli: models of the crawler type. Along Farmall-H and Farmall-M, are for the medium-sized and large- 1 related farm tools to fit them were sized farms. The four new Farmalls were placed in The new TracTracTor models, the TD-6, TD-9, TD-14 and fecal year 1939, while the new Trac- TD-18, are Diesel-powered, and are built to serve both the rolling off the assembly lines early in the industrial and farm markets. These models provide a range in nkher new product developed during 1939 power from 30 horsepower in the case of the smallest, to above am separator, in which all parts of the 70 horsepower in the case of the largest. Except for a few let with the milk are fabricated from special operations, this range of size and power covers the entire field of American agricultural and industrial power requirements. A products arc shown on these pages. In the perfection of its stainless-steel cream separator, the -ster Company pioneered the Farmall Harvester Company achieved an outstanding fabrication result :tor, designed and built as an all-purpose in the use of stainless steel.

. ,••-., A glutton for work—Its nose tilted upward, its smoothly functioning motor unleashing a steady flow of power, the TD-14 International TracTracTor is silhouetted against the sky. GENERAL COMMENTS

TRENDS IN FARM MACHINERY

The decade of the 1930s brought two important and significant trends in farm machinery. The first was a pronounced trend toward smaller machines. The second was a similarly pronounced trend toward the substitution of the small combine for the older grain binder. Both of these trends have had an important bearing on agricultural operations, and on the manufacturers of farm machinery. For the small farmer these trends are bringing the advantages of power farming formerly enjoyed only by the larger farmers. For the manufacturers they have necessitated the designing of smaller tractors, combines and related farm implements, the equipping and enlarging of plants and the adoption of many new manufacturing methods. These methods became necessary in order to obtain low production costs, so that the selling prices of the smaller machines would come within the purchasing range of the largest number of farmers. For the manufacturers, it has meant, also, the gradual decline of formerly important machinery lines, such as the binder and stationary thresher, and others affected by the adoption of the new machines. The trend, as it applies to three groups of machines, is given below in more detail.

TRACTORS

In 1924 the International Harvester Company pioneered the first all-purpose tractor, and called it the Farmall. The popularity of this type of tractor has influenced all subsequent tractor designing, and has made all-purpose tractors standard for the industry. By 1933, our Company had a line of three improved Farmalls, known as the Farmall-20, Farmall-30 and a new small tractor, called the Farmall-12, which was the smallest all-purpose farm tractor made by the industry up to that time. While the Farmall-12 was introduced as a one-plow tractor, its power was sufficient for two-plow work in many soils. The development of a smaller, strictly one-plow tractor for small farms has been a major objective of our Company's experimental program for a number of years. The two new small models introduced in 1939—Farmall-A (4 wheels) and Farmall-B (3 wheels)—are the result of this experimentation and prolonged tests to achieve low costs and sturdy models fitted to give good service under the many varied soil conditions throughout the country. In the meantime, the sales of small models introduced by competitors have demonstrated that there is a good market for tractors of this size.

SMALL TRACTOR IMPLEMENTS

Smaller tractors call for various smaller-sized implements designed for use with such tractors. During 1939 our Company developed and placed on the market a considerable number of such smaller implements, including cultivators, plows, planters, harrows, etc.

wmmmmammmmmam*mmmmmmmmmmmmmmmmam^*mmmmmmmammtmmmmmmmmmmmmmmmBBMm NINETEEN The fertile fields at planting—In a rich valley of the West, a Farmall tractor pulls a planter, placing the seeds that make the harvest. COMBINES The growing popularity of small combines has resulted primarily from the fact that they can be substituted for the binder and stationary thresher in the harvesting and threshing of grain, but the fact that other crops such as soybeans, can also be harvested with the combine has been an additional factor. The figures on combine sales, as compared with binder sales, emphasize the trend toward smaller farm units, as well as the extent to which combines have been displacing binders. The growth in the sale of small combines—of 6-foot cut or less—for the last three years, is shown by the figures of the United States Bureau of the Census in the following table:

Combines sold in the United States: 1937 1938 1939 Small 15,292 26,584 25,787* Large 13,187 14,976 5,189* Total 28,479 41,560 30,976* "1939 figures per Preliminary Report.

In 1938, for the first time in history, more combines were sold in the United States than grain binders. In that year 41,560 combines were sold, against 30,649 grain binders. Figures are not yet available on grain binder sales for 1939, but the differential in favor of the combine is thought to have been even greater for that year. The decline in binder sales can be more readily appreciated when it is recalled that in the early years of the present century the farm implement industry made and sold more than 150,000 binders annually. International Harvester has had a 6-foot combine on the market for two years, and for 1940 will also have a new 4-foot model—the smallest combine it has ever made. While the growth of this business will probably be reflected by a further decline in binder demand, there is a growing demand for small combines for the harvesting of many crops, which makes this a promising field for the future.

MOTOR TRUCK SALES The motor truck business of the Company continued to improve during 1939. The volume of motor truck sales in the United States increased about 12%. The objective of the Company has been to have a truck for every job, suitable in design and power for every requirement. This has resulted in an increased number of our motor truck models, so that today we have the most complete truck line of any manufacturer. In 1939, as in the past several years, International trucks continued to lead all other makes in the heavy-duty classifications, that is, of two-ton capacity and over. An important addition to our motor truck manufacturing and testing facilities was made during 1939, with the completion of the new Fort Wayne proving grounds. This new proving grounds, equipped with features for the testing of trucks possessed by no other proving grounds, affords us with facilities for the most thorough testing of every truck requirement except hill-climbing, which tests are carried on elsewhere. The year 1939 also showed a continuation of the favorable trend of sales to the larger fleet owners, who have accounted for an increasing and substantial part of our total motor truck sales.

TWENTY-ONE Power for the oil fields—An International truck performs rugged, exacting work in the oil fields. INDUSTRIAL POWER MACHINERY SALES The year 1939 brought a further increase in the sales of the Company's industrial power machinery lines. Over a period of years the Company has developed and placed on the market numerous machines suitable for industrial utilization, including the production of industrial power. During 1939, an increased number of power units and other industrial equipment went into use in such industries as highway construction, sawmill and logging operations, electric power generation, cotton ginning, oil well drilling and pumping. During the year, as pointed out elsewhere in the report, four new Diesel-powered TracTracTors of the crawler type were developed, suitable for industrial usage in a wide variety of work. Several new stationary power units, both Diesel and gasoline-powered, also were developed and placed in production. The objective has been to provide the Company with a complete line of power machinery for use in industry. The results of the past year further confirm our belief, expressed a year ago, that power machinery will become a steadily more important division of our business. Not only has a promising market developed in the United States, but export sales of such machinery have been increasing in the past several years.

FARM INCOME As a matter of interest to stockholders, a summary is given here of the cash farm income in the United States for the last four calendar years. Figures are those of the United States Department of Agriculture. 1936 1937 1938 1939 (In Thousands of Dollars) Crops: Wheat $ 450,859 $ 604,640 $ 396,082 $ 396,677 Corn 264,918 224,316 269,395 326,039 Other grains 159,542 185,493 144,171 154,809 Cotton and cotton seed 904,879 883,776 646,921 608,805 Tobacco 243,169 320,518 294,333 263,979 Potatoes 252,636 208,127 149,493 178,409 Truck crops 358,261 388,631 345,673 367,282 Fruits and nuts 434,266 519,223 375,663 413,056 Sugar crops 88,640 83,631 86,664 80,986 Soybeans 28,745 30,753 32,313 49,651 Hay and hayseed 114,329 127,861 97,941 102,073 Other crops 274,868 300,818 287,575 296,230 Total crops $3,575,112 $3,877,787 $3,126,224 $3,237,996

Livestock and livestock products: Meat animals $2,232,843 $2,329,917 $2,179,606 $2,262,136 Poultry and eggs 798,561 831,763 777,173 722,166 Dairy products 1,459,182 1,531,510 1,398,246 1,354,760 Wool 96,824 117,270 71,378 85,196 Other livestock products 49,519 55,878 46,815 48,727 Total livestock $4,636,929 $4,866,338 $4,473,218 $4,472,985 Government payments 287,252 366,899 482,221 807,065 TOTAL CASH FARM INCOME.. $8,499,293 $9,111,024 $8,081,663 $8,518,046

TWENTY-THREE INTERNATIONAL HARVESTER PRODUCTS MOTOR TRUCKS HAYING MACHINES Standard 4-wheel trucks Mowers Standard 4-wheel trucks with 2-speed axles Rakes 6-wheel trucks with trailing axles Tedders 6-wheel trucks with dual drive Side rakes and tedders 6-wheel trucks with 2-speed axles Loaders, all types Cab-over-engine trucks Sweep rakes Diesel-powered models Stackers 49 models in 161 wheelbases Baling presses Alfalfa threshers FARM TRACTORS Clover threshers Standard tractors General-purpose tractors Crawler tractors GRAIN HARVESTING MACHINES Orchard and grove tractors Binders INDUSTRIAL POWER AND EQUIPMENT Push binders Wheel tractors Headers Crawler tractors Harvester-threshers Power units Windrow-harvesters Coolers Reapers Threshers TILLAGE IMPLEMENTS Rice binders Tractor plows Rice threshers Riding plows Walking plows Middle busters CORN HARVESTING MACHINES Eccentric-disk plows Binders Listers Ensilage cutters Basin listers Ensilage harvesters Disk harrows Ensilage blowers Tractor harrows Pickers Orchard harrows Huskers and shredders Harrow-plows Shelters Spring-tooth harrows Peg-tooth harrows Field cultivators GENERAL EQUIPMENT Rod weeders Engines Rotary hoes Potato diggers Cultivators, row-crop Beet pullers Lister cultivators Stone burr mills Beet and bean cultivators Feed grinders Soil pulverizers Hammer mills Subsoilers Cane mills Land packers Farm wagons and trucks Plow packers Tractor trailers Weeder mulchers Manure spreaders Cotton choppers Lime spreaders Cane plows and cultivators Fertilizer distributors Crop dusters PLANTING AND SEEDING MACHINES Stalk cutters Corn planters and drills Knife grinders Cotton planters Tractor hitches Potato planters Binder twine Grain drills Broadcast seeders Alfalfa and grass drills DAIRY EQUIPMENT Beet and bean seeders Cream separators Corn listers Milkers Cotton listers Milk coolers

TWENTY-FOUR i i

• :' ... • *••••:: ::•>.„•••. •''• ••«••*•*•• •"

Where wealth meets the horizon—A wheat harvest scene in the Northwest. An Inter­ national TracTracTor pulls a McCormick-Deering combine through the ripened grain. LOCATION OF MANUFACTURING PLANTS AND TWINE MILLS

MANUFACTURING PLANTS McCORMICK WORKS Chicago, 111. MILWAUKEE WORKS Milwaukee, Wis. TRACTOR WORKS Chicago, 111. FARMALL WORKS Rock Island, 111. FORT WAYNE WORKS Fort Wayne, Ind. SPRINGFIELD WORKS Springfield, Ohio WEST PULLMAN WORKS Chicago, 111. UNITED STATES INDIANAPOLIS WORKS Indianapolis, Ind. AUBURN WORKS Auburn, N. Y. CANTON WORKS Canton, 111. CHATTANOOGA WORKS Chattanooga, Tenn. HUNTINGTON PARK WORKS Huntington Park, Calif. EAST MOLINE WORKS East Moline, 111. RICHMOND WORKS Richmond, Ind. ROCK FALLS WORKS Rock Falls, 111.

CHATHAM WORKS Chatham, Ontario CANADA HAMILTON WORKS Hamilton, Ontario

CROIX WORKS Croix, France MONTATAIRE WORKS Montataire, France EUROPE NEUSS WORKS Neuss, Germany NORRKOPING WORKS Norrkoping, Sweden

AUSTRALIA GEELONG WORKS Geelong, Victoria

TWINE MILLS McCORMICK TWINE MILL Chicago, 111. UNITED STATES NEW ORLEANS TWINE MILL New Orleans, La.

CANADA HAMILTON TWINE MILL Hamilton, Ontario

CROIX TWINE MILL Croix, France EUROPE NEUSS TWINE MILL Neuss, Germany NORRKOPING TWINE MILL Norrkoping, Sweden

LOCATION AND DESCRIPTION OF RAW MATERIAL PROPERTIES

Mesaba Range, Minnesota: Agnew Mine, Hibbing; Hawkins Mine, IRON ORE MINES: Nashwauk; Sargent Mine, Keewatin.

/-/~v A I MINFQ Benham, Kentucky: 6,507 acres of coal lands, Harlan County, ^-^/%L MINED: Kentucky, producing coking coal.

BY-PRODUCT COKE PLANT: South Chicago, Illinois: producing coke and by-products. rnnn A/-cf Akin eTCCi kill I C South Chicago, Illinois: blast furnaces; open-hearth furnaces; FURNACES AND STEEL MILLS: blooming milfs. merchant mills pip A I pi A KIT ATI OKI Cardenas, Cuba: 4,679 acres of land and decorticating plant in the DID/NL fLAVINI/MI^N: Province of Matanzas, Cuba, producing sisal fiber.

TWENTY-SIX >

A drama of steel—A charge of molten metal is placed in one of the open hearth furnaces at Wisconsin Steel Works in South Chicago. LOCATION OF BRANCH HOUSES AND TRANSFER HOUSES, MOTOR TRUCK SALES AND SERVICE STATIONS IN THE UNITED STATES

Aberdeen, S. D. East Hartford, Conn. Mankato, Minn. San Antonio, Texas Akron, Ohio Eau Claire, Wis. Mason City, Iowa San Diego, Calif. Albany, N. Y. Elizabeth, N. J. Memphis, Tenn. San Francisco, Calif. Allentown, Pa. Elmira, N. Y. Milwaukee, Wis. Savannah, Ga. Altoona, Pa. El Paso, Texas Minneapolis, Minn. Schenectady, N. Y. Amarillo, Texas Erie, Pa. Minot, N. D. Scranton, Pa. Moline, 111. Seattle, Wash. Atlanta, Ga. Evanston, 111. Mt. Vernon, N. Y. Shreveport, La. Auburn, N. Y. Evansville, Ind. Nashville, Tenn. Sioux City, Iowa Aurora, 111. Fargo, N. D. Flint, Mich. Newark, N. J. Sioux Falls, S. D. Baltimore, Md. Fort Dodge, Iowa New Orleans, La. South Bend, Ind. Billings, Mont. Fort Wayne, Ind. New York, N. Y. Spokane, Wash. Binghamton, N. Y. Fort Worth, Texas Norfolk, Va. Springfield, 111. Birmingham, Ala. Gary, Ind. Oakland, Calif. Springfield, Mo. Bismarck, N. D. Glendale, Calif. Oklahoma City, Okla. Springfield, Ohio Boston, Mass. Sweetwater, Texas Grand Forks, N. D. Omaha, Nebr. Bridgeport, Conn. Syracuse, N. Y. Grand Island, Nebr. Parkersburg, W. Va. Brooklyn, N. Y. Paterson, N. J. Tacoma, Wash. Grand Rapids, Mich. Buffalo, N. Y. Peoria, 111. Terre Haute, Ind. Great Falls, Mont. Burlington, Vt. Philadelphia, Pa. Texarkana, Ark. Green Bay, Wis. Pittsburgh, Pa. Toledo, Ohio Camden, N. J. Greensboro, N. C. Portland, Me. Topeka, Kan. Cedar Rapids, Iowa Harrisburg, Pa. Portland, Ore. Trenton, N. J. Charlotte, N. C. Houston, Texas Pottsville, Pa. Tulsa, Okla. Chattanooga, Tenn. Hutchinson, Kan. Poughkeepsie, N. Y. Utica, N. Y. Cheyenne, Wyo. Indianapolis, Ind. Providence, R. I. Washington, D. C. Chicago, 111. Jackson, Mich. Quincy, 111. Waterbury, Conn. Cincinnati, Ohio Jacksonville, Fla. Racine, Wis. Waterloo, Iowa Cleveland, Ohio Jersey City, N. J. Reading, Pa. Watertown, N. Y. Columbus, Ohio Kankakee, 111. Richmond, Va. Watertown, S. D. Council Bluffs, Iowa Kansas City, Mo. Rochester, N. Y. West Haven, Conn. Dallas, Texas Knoxville, Tenn. Rockford, 111. West Springfield, Mass. Lansing, Mich. Davenport, Iowa Sacramento, Calif. Wichita, Kan. Lexington, Ky. Dayton, Ohio Saginaw, Mich. Wilkes-Barre, Pa. Lincoln, Nebr. Decatur, 111. St. Cloud, Minn. Williamsport, Pa. Little Rock, Ark. Denver, Colo. St. Joseph, Mo. Wilmington, Del. Long Island City, N.Y. Des Moines, Iowa St. Louis, Mo. Winona, Minn. Detroit, Mich. Los Angeles, Calif. St. Paul, Minn. Worcester, Mass. Louisville, Ky. Dubuque, Iowa Salina, Kan. York, Pa. Madison, Wis. Duluth, Minn. Salt Lake City, Utah Youngstown, Ohio

TWENTY-EIGHT On this page, new branch houses built in 1939, typical of distribution outlets now being constructed. Above, new motor truck branch at Long Island City, N. Y.

Recently completed farm implement branch house at Harrisburg, Pa., serving rich farming counties of Eastern Pennsylvania. LOCATION OF PRINCIPAL FOREIGN DISTRIBUTING POINTS CANADA BULGARIA NORWAY NORTH AFRICA Brandon, Man. Sofia Oslo Algiers, Algeria Calgary, Alta. Bourgas Casablanca, Morocco Edmonton, Alta. PORTUGAL Cairo, Egypt Fort William, Ont. CZECHOSLOVAKIA Lisbon Oran, Algeria Hamilton, Ont. Bratislava Tunis, Tunisia Lethbridge, Alta. Prague London, Ont. POLAND EAST AFRICA Montreal, Que. DENMARK Warsaw North Battleford, Sask. Tanga, Tanganyika North Bay, Ont. Copenhagen r\ 1 1 h A A h 1 • A Nairobi, Kenya Ottawa, Ont. RUMANIA Zanzibar, Zanzibar Quebec, Que. ESTONIA Bucarest Lourenco Marques, Moz. Regina, Sask. Tallinn Saint John, N. B. SPAIN SOUTH AFRICA Saskatoon, Sask. FINLAND Bilbao Bulawayo, Rhodesia Toronto, Ont. Helsingfors Madrid Cape Town, Cape Province Vancouver, B. C. Tammerfors Pamplona Durban, Natal Winnipeg, Man. East London, Cape Province Yorkton, Sask. FRANCE SWEDEN Johannesburg, Transvaal Amiens Malmo Port Elizabeth, Cape Province MEXICO Bordeaux Norrkoping Salisbury, Rhodesia Chihuahua Bourges Guadalajara Croix SWITZERLAND WEST AFRICA Matamoros Lyon Zurich Accra, Gold Coast Mexico D. F. Marseilles Abidjan, Ivory Coast Monterrey Montataire Dakar, Senegal Vera Cruz Nancy YUGOSLAVIA Lagos, Nigeria Torreon Nantes Belgrade Paris BELGIAN CONGO Toulouse IRAN CENTRAL AMERICA Tours Leopoldville Panama City, Panama Teheran Stanleyville Guatemala, Guatemala GERMANY Managua, Nicaragua Berlin IRAQ AUSTRALIA San Jose, Costa Rica Breslau Bagdad Adelaide San Salvador, Salvador Hamburg Brisbane Koenigsberg PALESTINE Geelong CUBA Leipzig Jerusalem Hobart, Tas. Havana Munich Jaffa Melbourne Neuss Perth Vienna Sydney WEST INDIES TURKEY Ciudad Trujillo, Dom. Rep. GREAT BRITAIN Adana NEW ZEALAND Kingston, Jamaica Edinburgh Istanbul Auckland Port-of-Spain, Trinidad Glasgow Christchurch Port-au-Prince, Haiti Liverpool CHINA Dunedin San Juan, Puerto Rico London Hongkong Palmerston North Shanghai Wellington SOUTH AMERICA GREECE Asuncion, Paraguay Athens MANCHUKUO EAST INDIES Bahia Blanca, Argentina Volo Hcirbin Batavia, Java Bogota, Colombia Thessaloniki Kuching, Borneo Buenos Aires, Argentina Medan, Sumatra Caracas, Venezuela HOLLAND FRENCH INDO-CHINA Concepcion, Chile Hague FIJI ISLANDS Georgetown, British Guiana Haarlem Saigon Suva Guayaquil, Ecuador Rotterdam Lima, Peru SIAM Montevideo, Uruguay PHILIPPINES La Paz, Bolivia HUNGARY Bangkok Cebu Porto Alegre, Brazil Budapest Davao Rio de Janeiro, Brazil MALAY Iloilo Rosario, Argentina IRELAND STATES Manila Santa Fe, Argentina Dublin Singapore Santiago, Chile JAPAN Sao Paulo, Brazil ITALY Valparaiso, Chile INDIA Sakai Grosseto AND CEYLON Tokyo Milan Bombay Yokohama BELGIUM Calcutta Antwerp LATVIA Colombo HAWAII Brussels Riga Madras Honolulu

THIRTY