American Tobacco
Annual Report 1969, American Brands Inc
Fields
- Litigation
- 10004026
- Type
- Report/Study
- Report
- Request
- 16,
- (Set
- 2)
- 1
- (Set
- Date Loaded
- 23 Nov 1998
- Attachment
- 60074392
- Brand
- Pall Mall
- Tareyton
- Lucky Strike
- Silva Thins
- Carlton
- Montclair
- Bull Durham
- Herbert Tareyton
- Half and Half
- Blue Boar
- Paladin Blackcherry
- Roi-Tan
- Antonio Y Cleopatra
- La Corona
- Bock
- Tipton
- Cabanas
- Tareyton
Document Images
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NOTICE OF MEETING
Mal-ch ]9, 1970
The Annual Meeting of stockholders of American Brands, Inc. will he bold in tbe
Grand Ballroom of The Waldtlrf.Astoria, Park Avenue at 50th Street, N~w York City.
at l0 o'clock in the fore~ioon (Eastern Daylight Saving Time) on Wednesday, May (~,
1970, for the following purposes:
(1) To dect directors;
(2) To consider and vote on a proposal (designated Proposal 1 and set forth
in the following proxy statement), approved by the Board of Directors, to cb:~L
Lybrand. Ross Bro~. & Montgomery independent auditors ~or the Company f.r the
year I970;
(3) To tin,sider and vote on a proposal (designated Proposal 2 and set h,rth
in the foBowJng proxy statement), approved by the Board of Directors, to appr.w' thl'
e~sting Pj'ofit-Shaa'i~Jg Plan of American Brands, Inc.. which will be l~snlnl~iltcd ~n
the Annual Meetit~g pursuant to the Plan;
(4) To consider and vote on a proposal (designated Proposal 3 and set f~t'th
in the following proxy statement), approved by the Board of Directors, to apln'~vc and
adopt Ihe amendments described therein to the Retirement Pian fi~r Eraployce, :rod
Former Employees of American Brands, inc. and Desiunated M~liated CorpaHtimt-.
to be effective as of January l, 1970;
(5) To consider and vote on a proposal (designated Proposal 4 aJld set I'cnth
in the following proxy statement), approved by the Board of D~rectors, to anl~'lM
Article XII of the Company's By-Laws. constituting an ~ncenfive eoJrtpensatio. Idzm,
in the manner stated in Proposal 4;
(6) To consider and vote on a proposal relating to any new stock option plan
(designated Proposal 5 and ~et forth in the fuUowing proxy statement), expected
to be made by four stockholders;
(7) To eovsider and ~te on a proposal relating to cumulative voting (desigm~ted
Proposal 6 and set forth in the following proxy statement), expected to be made le.
four stockholders; and
(8) To transact such other business as Illay properly come before the meeting.
The stock trat~sfer books will not be closed bat holders of Common Stock. t. h,'
entitled to vote, n~u~ be holders of record at the do~e of business on March 9. lClT(I-
Joan W. H~,NLON, Secrett~r~
PROXY STATEMENT
The accompanying proxy is soiidted by the Management. It may be revoked by written notice given
to the
secretary of the meeting at any time before b~iug voted. Proxies in this form properly executed,
duly returned to the
Management and not revoked, will be voted for the election of directors (unless authority therefor
is withheld) and
on the numbered Proposals described in this proxy statement ~provided that, as to Proposals 5 and 6,
they are
batroduced at the meefil, g), and in accordance with any specifications made as provided in he proxy
The Management
is not aware at the date hereof of any matter to be presented at this meeting other than the
election of directors and
Propasals I through 6, If an)" othe~ matter is properl> presented, it is intended that tim persons
named in the proxies will
vote thereon according to thelr best judgment. Presence at the rnee6ng does not of itsdf revoke the
proxy,.
The only securities of the Company entitled to vote are shares of Comnmn Stock {$6.25 par
value), with o~e
vo~ pel share. There are 26,733615 shares outstanthng at the date of tbis proxy statement.
ELECTION OF DIRECTORS
The Board of Directors consists of ~eventeen members who a~e elected to hold office until the
next AnuuaI Meeting
or until their successors are duly elected and qualified, it i~ intended that proxies in the
accompanying form will be
voted for the nominees named below or, in the event any such nominee is not a candidate or is unable
to serve as a
director at the time of the deetinn'{whidl i~ not now expected), for any nominee who shaft be
designated by the present
Board of Directors to fill such ~aoaney. The nominees named below, with the exception o:[ Francis X,
Wbelan who
has been deeted a direetur effective March 31, 1970, are members of fi~e pre~ent Board and have
served as directors
o the Company for the periods commencing with the dates set after tfieir respective names. There are
set ~orth below
opposite the annie of each nousinee L1) under the heading "Common," the shares of Common Stock of
the Company
beneficially owned directly or indirecdy by he nora nee on Febr~a y 1, 1970, plus the number (!f
any) of shares of
such Common Stock beffi on December 3l, 1969 by the Trustee of the Profit Sfmrin8 Plans of the
Company and a
subsidiary a r bu able to ~oluntary deposits made through payrell deductions that is equivalent as
of that date to his
undivided proportlo.ate beneficial interest in all such shares, and (2) under the heading "Common
attributable to
profit sharing.," the numbr'r df any) of shares of such Common Stock held on December 35, 1969 by
the Trustee of
the Plans attributable to profit shaxlng that is equivalent a~ of that date to his undivided
proportionate beneficial
interest in a~ such share~. The infnrnmtiun ~ to ~eeurit1' holdings is based on information rece red
by the Compan~
from the nominees, from the Profit Sbarlng Plan Committee and from the Trustee.
/2)
Year first
, I / Cmnmoa
Positions and offices with Compan~ elected
Corn mc n attribmab/e to
N~me ar ~ther principaloccupati~n (el dim~u~r
,e) tdl profit sMring
Philip H. Cohen Director of Advertlsing(b) 19(>7 1,437
370
Horst G. Denk President and Chief Executive Officer. Sunshine 1970 100
--
Biscuits, Inc.
Henry G. French Vicc-Presiden~ Manufactmelb) 1966 3.,033
546
Boone Gross Retlred I formelly President, The Gil!ette Company ~ 1965 200
--
Robert K. Hdmann" President and Chief Operating O0ieer 1963 6,71,1
1,286
Cyril P. Hetsko* Senior Vice-President and General Counsel 1965 998
633
Donald M. Klook President and Ch ef Execu ve Officer, Duffy-Mott 1968 3.,000
--
Company, Inc.
Everett Kov]er Pres den James B Beam Distil]in~ Co. 1967 8,000
415
Julien B. McCarthy V ce-Pres den Mann a¢ ure and Leaf bl 1965 175
861
Charles A. Mehos~ Vice President and Treasurer 1967 1,700
490
Eugene F. Mooney Vice-Presidens~ales f h ) 1963 7.138
1,063
Mark R. Norman A Managing Director, Lazard Brothers & Co.. Lid, 1970 250
--
George J. Schramm~ Vice-President and Controller 1968 1,727
530
John B. Sparrow Director of Leaf Purchase~igarette and Smoking 1958 3,040
828
Tobaccos t b I
Robert B. Walker~ Chairman of the Board and Chief Executive Officer 1953 13.140
2,755
Francis X. Whelan Executive Vice.President and President.elect, 1970 2,266
586
American Cigar Division
George H. Woodard~ Chairman, Walling & Woodard, lnc. 1964 700
--
Management Consultants
• blember of Executive Commiltee ol the Company's Board of Di ec or~.
(a) The o~ces listed oplaosbe the name of a notttin~ ale his ~rineipal occupation and are corporate
off~ees ot the Company unless otheI"
wise indicated above or in note 'b) helzw.
(hi Positions in The American Tobacoo Company, a divis~n of American Brand~, inc.
7
Ic) The nulnber$ of shares attributable to voluntary deposits included in the nttm~oer* shown in
Goltlmn (1) are as [o]low~: PhiliI~ H.
Cohen, 15~ Betlry. G French, 28~; R bert K. Helmann. 474., Eugen F Moonev, 1,038 ; ~eorge $
hramn~ 73¸, J~hn B Spar ow,
~1¢0; and Francis X. Whei~t~ 266.
i d The ntu~bers shown in Column {1 do pot Include shares awned h~ the wives or mlno~ children of,
or other relatives sharin~ 0~e
• t~1~e h~slte as, tho loUowittg Ilonaltleeb Ul tht amolltll~ set a~ter their na~ll~; Bclor/c
Gro~s, 800; ~r~tt Kov]er. P~q~; Juti~li B.
5IcCarth~. 26; and Roh¢:t B. Walker, 24. Ia each ease the ~mlne~ discl~m~ that he is t~e
beneficial owner of such ~hares.
Horse G. Denk has been employed by Sunshln¢ Biscuits, Inc. since November 1967, successively as
Vice Presiden~
Oper~tioa~, Exeeutire Vice President and, since July 1969, Pre~id~t and Chief Exeoutis'e Officer.
From 1965 to
1967 he was a Vice President of Ward Foods, Inc. He became a director of American Braad~. lnc. on
January 1, 1970,
Mark R. Norman has been a Managing Director of Laaard Brothers & Co., Ltffi, bankers, since
April 19g0. He is a
director of other United Kh~gdom cerporation~, including the Company's ~absidiarp, Gafiaher Limited.
of which he
has also been Chairman since May 1963. He became a director of American B:ands, ln¢. on January l,
1970.
Francis X. Whelan has been employed by the Company since d948. After six years as Executive
Sales Manager of
the Company's cigarette operations, in 1969 he became Executive Vice Preddeat of the American Cigar
Division. He
/tas been elected Preslde~t of that dMslon a~d a director of the Company, effective March 31, 1970.
REMUNERATION
There is set ~ortfi in Column 41) of the folffiwing tabulation, on an accrual basi~, all dizeet
remuneration paid
by the Company and its subsidiarie* to the inlio':eing persons for servise~ in all eapacitie~ while
directors or officers
,~f the Company durin$ it~ last fiscal ye~tr: each director of the ComPany whose aggregate direct
r~munel~Bo~
exceeded $30,000, and ~ach of the three higkeat paid officers of the Company whose aggregate direct
remuneration
,xceeded that amount; and all directors and officers of eke Company as a group. The 1969 profit
shares of th~so
indivlguaI~ payable to the Trustee under the Profit-Sharing Hans of the Company or a subsidiary ar~
stated in
C:dumn (2). Estimated. annual retirement benefits to the same indlviduah at normal retirement date
under existing
r~tirement plans are stated in Colmnn (3). (2)
Profit share (3)
ll)
~Dr 1969 Estimated annual
A~egate
pit,able to ~et iremlln~ benefit
N ame tdi r~dix'id aat CglJaeitlo~ il~ which iremll~terat
Jot~ '~ru~Le~ at ll13r Rlal
urideatityof group remuaetaticmw~srece~ved (a) (d) {e) (B
(e) (f) (g) retiremotst date {h)
iambs L. Bauchat(i}/j) Vice President, and President and Chief $ 45,383(i)
--
Alfred F. Bowden
Philip H. Cohere
ttenry G. Preach
i,¢il D. H~r(1) (k)
R,~bert K. tteimann !i)
C!rll K Hetsko(i)
D,,nald M. Kloek([)
E'~rett Kovler(i)
J allen B. MeCar flap (1)
Charles A. Mebo~(i)
Eugene F. Mooney
GeorEe d. Schramm(i)
]-~hn B. Sparrow
}tohert B Walker(1)
8 Director~ and Officers
a~ ~ group(m}
Executive Officer, Suns fiine Bi~cuits~
Inc. ; President and. Chief Exeeufire
Officer, Sun~hlne Biscuit~, Inc.(e)
Viee-P~esldenh and President, Cigar
Dis~sion; President~ Ammlcan ~igar
DivMdn(c)
Director of Advertising(b)
Director 013/Ianufaeturing; Vice-
Pr esident--Mauafaeture ~ b) (c)
Execath'e Vice President
Executive Vice-President; President and
Chief Operating O~mer (c)
Vice-President and General C~ unsel ;
Senior Vice.President and Generffi
Coun~elle}
President alxd Chlef ~xecuti~.e O~icer,
Duffy.Mott Cmnpany, In¢.
President. Jalaes B. Beam Bisti31n$ Co.
Vice.President- Manulaetnre
and Leaf (b)
Treasllrer
Vice-President--Sales (b)
Controller; 3%e-Presldent and
Controller It)
Director of Leaf Pt~reilases--
Cigarette and Smoking Tobaceosib)
President a~d Chairixaan o~ the Board
of Directors; Chairman nt lhe Board
and Chief Exrcutive O~eer [c)
112,435 $ 16,897 $31,571 ($23,711)
77,524 11,526 7,440 (5,182)
73,077 10,842 18.633 (9,899)
~14,282 12,566 --
175,420 26,587 26,834 (20,844)
128,365 19,348 25,067 (18,452)
100,015 -- 22,032 417,817)
173,983 82.365 37,500 (26,213 }
92,988 13,906 19,951 (14,089)
67,647 10,007 18,439 (9,776)
106,418 15,972 24,013 (16,048)
72,077 11,611 15,755 (10,974)
76.458 11,362 19!374 (15,3951
273,414 ,11,663 37,500 (26,72~)
$1,727.986 $238.~3
(a) Capa¢it~s referred to ~er~ ~lb ~e Compauy unIes~ other~viBe indicate~ abaw 0r in ~otB ~b/ be[o~.
(b) Foli~i~n in C~m~an~ unt [ J'un~ ~. ~9~ a~d t~e eah~r ia The Am~iean Tubacco C0mpan~¸ Di ~ 1.
(ct C~n~e effective ~ul~ I. ~9.
(d~ In~lud~ u~deierr~d noneomln~ent po~6on of ine~mi~e cora~en~tion f~ i969 m~der Ardcle X~[ o~ the
By-La~ ~xe~p ~ t~
]~f~l~. F,J~ck and ~lee, who ~id z~t par~cipate cker~iJ], J~eIud~ a~ ~ e~ch o~ "~s. Kloe~ aiLd ~,ler
hi ~o on o n enh~e
eom~,~ ~0~ ~or 1969 ~r ~he Exec~li~ h c~ iv~ ~l~n ~f ~ ~b~idi~y ~l ~i~ ~e i h~ p~'~nc~.~l ¢~¢~-ut ~e
~f~c~r"
le) ~h~ deluxe6 0~Im~e~t ~ of lr~enti~ ~a~i~ ~der /,rI~e}e ~]| ot ~he ~ -L~w~ ac~ for all .e~ o ~a
tlci
~19~ bein~ the fi s ~esz for which ~a pro~ed) pa~ah ~ o e~h pa~ ~ant ~ b~ ~mp]~ meal ~y
the Corn ~at~n
i~ [~lal]m~t~ a~ ~ec~e~ 1~ ~eetle,~ ~ Ith~ t~ 0~ v.~ie~ 1~ L~l¢l~ded 1~ ~hl~l~ ~ to Ihl~ p~ox,
~lat~I . C~m~e~ n~ ~th he
ye~ i960, Articl~ Xr[ hab ]~ro~d~d tot the t~C~u~tion ~i th~ 3e~e~ed ~ozLio~ of ~a ~t ~e
~o~p~n ~t o~ ~ e~c]~ p~t~ipan ~r ~
~erJ~d~ t,~ ~Ie~r~ Bauehat a~d [~ag~ a~6 over ~-y~a~ ~i~dt to th~ ~th~r ~artil~lpa~t~) in ~'~s~ of
de~rr~.d in~enti~ e~l~:~af~u
~crued Io~ all ~ear~ ol par~[~ation i~eludin~ 1969. are ~ [o~low~: J~m~ L. Bauchat. $3,7~¢
151,0S9) ~ Alfred F. B~wden. ~]~,~
($~.30~t ; Phili~ H. Cohen, ~4.747 ($6,~) ; H~nr~ G. Fr~n~h~ $7.2~. /~.078) ; V~gi~ D. Ha~rl
S~1.~16 (~26.i~t Robe l K
B. ~alk~. ~3~7~2 151c~,073) ; ~d Di~ecl~r~ a~ O~e~ a~ a ~o~p~ ~750,424 t$~72~ ~ela~ Ih~ ~al
~n~la]lme~ pal~hle o~er
3 y~r period~ ~n~ ~ ~9~ h~in~ the an~[ In tallment ~ay~h]~ over 10 year pcrJohs .
(D As of Deee~he~ ~h 1969. Pro£t-Shari~ Plan ~al~s (otMr ~an ~alan~es ~.trillut~l~le to ~/uut~r!¸
d~o~it~ m~de I~ ~tr~
~.e~ctions) reprinted by the Pla~ "U~it~" ~tandl~ to the credit 0f tke participalt(s n~m~d in t~
above ~nble, ~n¢~i~ he
~et ~a[u~ o~ t~a~ d~t~ o{ t~ ~rc~b~ ~l ~har~ of G~ ~t~k o~ th~ (~o~pa~y held hy th~ Trn~te~ of
the Plan~ ~qulvalenl ~n
~r~t ~ ~I excl~di~l~.9~;l~'ir~ro~ ~hare~ ~o~ ~9 (~a~'~ lo the Tr~Ie~ ~ 1970>~ w~re ~s ~ollo~a~
.lam~ L. Bau~
0 ; Ali~e4 ~. ~o~. ~iLip 1~. G~he~ ~30,717; ~r~ G. F~n~h. ~1,691~
~r~[ D ~eL¸, ~ 0 ; Rohe~ F~ H~,
$1~0 ~6, ~ Clrl] P. ~e~k~. $52856, ; E ~It Ko~l~r $1K0%~ J~ien B. ~ cCarlh~•
~.'~¢ 258 ChAr's A .... ~ ~hos ~I~S. L~n, eF.
Mooney, ~10~308~ Geo g~ . S~h ~m~m, ~9~ 89; ]uhn ~. ~alTow, ~01~; Rober( B. W~ k~ ~ ~0,919;
a~4 Dlre~ or~ and O~r~
(g) TM ~me~ i~ Coil:an (2J ~e the ~oli~r ~aIue~ a~ 0~ De~h~ ~1. 1~6~ of ~e PIau ~UM~" eonslilulin~
the profit shar~ oi ~h~
n~med i~dlviduM~ ~r I~6~.
I J) ~ Ju~¸ 29. ~f~9. Ame~ ia CMum~ Q) ~s for ~9~9 th~ ~l~h thai ~ate,
(~) R~tlr~ ]~ 30. l~9. J~ in C~l~m~s /D a~d (2) ~e ~r 1~9 t~o~h thai &~.
~ml Th~ ~g~re~I~ ~e~r~r~li~ ~o~" t~ ~al 1~ ~9~ [m~ t~ ~r~F ~d iI~ ~*~d~. or~ ~ ~:r~l ~L~ o~ ~¢~ ~ll
At the Aunu~ ~ee~ing iu lgh~ the ~t~c~oLder~ a~opted ~ ~tock Option P[m~ under ~vh~h ~ptLon~
may ~e ~r~nted
te k~t' emplo)'ee~ of the Co~paay a~3 it~ *u~iarle~ fo~ ~ot more tha~ 6~)~0 sha~es of Common S~ock
of ~t~
Company. The followin~ Iah~lation show~ a~ to L~e dlr~t~ ~d o~r~ of ~ Co ~p~ y ~m~ aho~e and as ~o
~I/
dlrector~ at~ o~cers of th~ C~mpany a~ ~ group, (ll ~or t~e p~riod from inc~pti~ll ~f t~e plan t~ ~e
d~te ~¢~'~ll
(a) flao ~,umber aI z~aBr~s ¢ad]ed {or b? opfiou~ grante3, ih) ~he ~verage optlo~ price per share,
(¢1 the number o~ s]~att.~
purchased by exercise o{ o~ti~n~, {d) the aggr%~ale purchase price o~ such ~ha~s and (~ t}~e
aggregate markd
valuta o[ such sl~ares on the ¢t~ea o~ purchase an¢~ (2) the ~am~r an3 a~'er~ price i~; ~hare o~
shar~s ~ubj~et t~
unexer¢ seal op Ottt h~ld as of Fehrtmry 1~ 1970.
O~Iinn~ held
Ol~[iorts exereise~
OlJt ~nn~ ~ranted
~r~ge
aNaa~ o~ ~da~ Idtta] o~ A~ erug~ pl~ee
A~,~i'eg.;t e ~a~-~l i.er
i~entit~ ~i ~troup Share~ r, er ~h~ Sh~re~
.~ri~e val~e Sbare~ ~hare
J~ta~L.i~au¢]hll 4,000 $3S0~3 4,000 $
~3~q94 $ 1~.l~5 -- --
Fh~li~ H. Cohel~ 2.500 3225 1,000
2,2,230 3K000 ~,5~0 ~:~.~ ~
Henry G, Frendx ~.000 ~&¢vg~ 60¢*
19.3~a~ 2L56~ 3.i00 3a.2~3
Cyril F. 14etsk~ ~,000 32.70 --
-- -- ~000 ~27(~
Donald .XL Ki~ck ~.000 36.6~,~ -- --
-- 6,6~/ ,~.!~25
J¢/el~ B McC~r h! 4,0~ 32~/J ~ --
L 4¸000 ~
Char]es A. 3I~:ho~ 'kilO0 ~KBg] ]~500 48,37~
5L.~3 ~.5~1 ,~ 87~
~e~ F. XIoone!¸ 4,000 ~2.~ 4.000 1~9,000 ~
g6,3 ~ --
Ge~rlI~ ~'. Schramm 4,000 3&609 ~0~ 48.~.75
51.7S0 :~.~G 34.~2~
]ohrt B. Sparrow 2.~0 32.2~ -- ~ --
25~0 ~-~-~
lt~ert B. Walker 15,000 S~.0~ 10,000 ~2~500
3~8.~50 ~,000 34.~0
All Dk~Iot ~ ~nci Otik ~1,
a~ ~ Group gq.500 ~3~.(t4a ~6.~tO ~,L93~1~
$1,xgKoI4 47,100 ~3~.~)7
4
During the period employees other thgn e~cers and directors were granted upti~ns for 89,500 shares
at an average
,pdon pr~c~ per share of $53.795. Subsequ~t to the respeetlve te~m~:nafions oi their associafi0~
with the Compaz~y,
Mr, Ba~ehet sold ~0~0 shares and M~ W. FAIfot Bro~'ldee (~he received an option for 4,000 shere~
wh~lc a dlreefor)
soI~ ~30 shores of (~m~on Stock of t~ Corapany. The C~m~a~y is not i~rmed M any ot~er sale of its
Common
~tock during t~e period hy any uptionee who was a director or o~eer at the time he was gra~lted an
option or al the titu~
of ~al~.
Proposal~ I~LECTIO~ OF INDEPENDENT AUDITO!RS
The bianagemont recommends the election by the s~ckhold~rs of Lyhrand, Ross Bros. & lClontgomery
~s independent
au6itors for the Company ~or the year 1970, iu lth~ with fld~ recommen&atlon the Maua~ment intends
to inttcdae~e
~t the forthcoming Am~ual Meeting th~ following re~olutlo~ (d~slgnatec~ herein as P~oposal l) :
~SOLV~D, thai Lybra~d, ll~s Brco. & Montgomery he and ~ey hereby are ~eted in~ependen!
~dltors
~r the Company/or the year 1970.
Thi~ firm of cortical p~blJc sccountant~ has hcen ~or 58 yeats th~ indupe~dent auditors for the
C~mpany. In
a~cordance ~ith the Con~pauy's practice a m~z~er of the firm wi~ attend the Annua! iVleeBng and
respond to que~Bons
tha~ may b~ a~d by stock~olde¢~,
The a~rzna~i~e vo~ .f a ma'~eit, of the ~'ote~ earl b~ the holder* of Common ~toek
veiling_thereon is ~eee~at~
i',,1" the ado tlor~ of Proposal 1.
The M~uagemenl recommends that ~ou vote FOR Proposal 1,
I'roposal 2
RESUBMISSION OF PROFIT-SHARING pLA~
]hc Pr~fit-~hariug Plan of American Brands, Inc. wa~ adopted by the stockho~ers at the Anuuei
~¢l~tiug ia ~960
,,ud all, roved by them in amended ~orm upon res~hmission at the Annual Me~ting in 1965. Fro~ time
tc tithe s~nee
ihL~ last ~taekholder approva~ the Board of Directors, in the e~erclse of ire amendatory authority,
has i~a~ ~ number
,,t qha~e~. '~he principal changes are: (1) rethtegr~fien of the Plan with Social ~ee~rhy he~ei~t~
~ucees~ve]y at the
I,-~,]~ ~t S&600 ~nd $7.800; (2) amendmrm ~ the Plan definifio~ o~ 'J.~et Income Be~ Taxe~" Ithe
m~ure ~or
,~,ler~fizzin~ the amount of the Comp~ny'~ annua] contribution to the Plan) to Im~mk exel~eion ~rom
inoo~ ~f the
,,~¢~ruli~g r~suit~ of ~ny suheMiar~" ~he~ employee* are not e/iglhle for Plan rremhershil~; (3)
mothfcatio~ of the
~(,slh~g [lrovisieas so that i~ the event of partial termination of th~ Plan the accouats of a~
rnem~r whose employme~
i. d~erehy termiua~d become th]ly vested; (~) reeogalfiou of employme~t with an a~liated
eospc~ratloa in determi~ng
, ~i~ib~l;ty f~r Plan m~mhershlp und vesting; (5) extension of the Plan to seatoua[ employees
meeting e~:rtaln conditlons,
~Llld L6i pro~[dlng fur placing investm~,~t auth~eity over the Diversified Fund of the Plan Trtest
in the he~ds of an
,,,~t~hle Investment Manager in lieu of the plan Trustee. The Plan ~ resubmitted at this Annual
M~ing in accordance
~ith a provision calling for r~s~bmisslon to the stoekhalders within five years a{~r the last
stockhokler ~pprova~.
Summary o~ Plan
\ brief ~e~ripfion of the material features of the Plan a~ correnfiy ~t* effect appears below.
A cop), of the Plan
~i~] he sez~l to any stock&elder- upon t~luest to the ~e~tetary at the Compartp's o/~ce at ~4& Park
Avenue, New Y.rk,
\, Y. 10017, and copies will h~ available at the meeting. Stockholders are referred to the text of
the Plan, and the
/,,~l~%g summary is quali£ed by such reference.
I;,nployees Co~red. All r~u]~r full-time employees of th~ Co~ps.y ~nd one of its ~heidlarles. The
liath~'~i'-
~u.:m~. Corporatloa, ~ecome r~raher~ of the Plan on the Janaary 1 ~ollowing completion of one
calendar year of
' mlfi]llloas servh~. ~emhersh~p also ~bends to ~easoti~l employees of the Company wfio meet
certain condRfons.
\l~;,:~ximato[y 10,900 emidoyees participated in profit sflarin~ for 1969.
Employer Co~ttrlbutio~, Eash yea~ the partieip~tin~ empIoyer~ eo~ttShute a sum ~qua] to the
following peree~tage~
,d "~nsolidated .Net I~eome Before T~-x~ (as defined in the P]an): 31~,~. of the fret
$100,0Cfi.000, plus 5% ef the
...xt ~3u./)f/0,t~30, plus 6% of any excess, No eonteibution will he m~de. ho*ce~z. ~or any )~rr
(a) for vshich Net
Im'.m,~ Belore T~xe~ does zmt equM ~c exceed l&~o of ~et ~orth. (hi in which a cash dfoide~d is ~ot
p~id o~ the
~.:,,Inm.n Stock of the C~mpal~v, or (e) in excess of the amotmt deductihi© for that year by the
participa*in~ empioyer~
t,,r F-deral bteome tax purposes. The ~oard of Bireetor~ may (~ itt diser~tlon diseoatflme, suspend
or reduce
,,llt~ ih~leil~s.
5
Investment by Trustee, Employer ¢ontributlons are paid to the Trustee of th~ ProKt-Sharlttg Plan
Trust to be
credited by it one-thlrd to the American Stock Fund for i.~estJ~ent solely in Common Stock of the
Company and two.
th~rd~ to the Diversified Fund f~r investment itt such secur~tles and other property as be Trustee~
or a desig:nated
Irtv~stment ~¢la~.~r, in its th~cc~on may select, Effect/re at the cl~s~ of bUS/hess on February 2~,
1970, the Board o~
Directors de~i~mate~ Irving: Trust Company as successor Trustee oi Ide Trust and appointed heo~nis~
Sayles & Company~
fnco~orated, as In'cestm~at _Manal~er of the Divcrs~ed F~nd, wi~ ~o1~ investment authority fur thet
fund.
Apportfontnent oi Contributions to Members. Contr~utio~s arc app,3rtloned to Plan rnerabers ~ the
he~is of
each me~rb~r's Adjusie~t E~ti~gs for the year ~. r~la~io~ ~ the Ad~s~e~i E~rn~ of eli raernbers.
"Adiu~ Ear~i~gs"
for any year means earning:s ~or that year plus g:0% o~ ~uch ~arnings in exce~ o~ $7,800.
Distrlbtttiott and ~thdratva~s. A vaembar's Lalances in the Pro~t-Shering P~an Trnst arfsillg from
erepIoyer
con~ributlot~s b~olne distrthutab]e upon termination of ~mp[oyrnel~t. in csses ~f t~r~in~ttlon by
{]eath or r~tir~m~nt
(or u~o~n partial or complete termil~atfon ~ ~e Plan) the f~I amount is d~strthntab[e, In the case
of any ~ther tcrmlna-
tion a percenta~ v~xying wilh th~ olemher~s length of service mrd reaching 100% upon ccmpleti~n of
thirteen years~
contiltu~us service is ~stalbutabl~ except that upon termination of empluymcnt ~or seriou~
m~sconduct (thsch~rg:e for
cause, as defined in the Plan) the ~n~i~ amount of such balances is suSject to forfeiture.
D~strth~t{c~n is made by such
method of s~tt~emsntrs ~i~le dlstrthut~n in ~ash or partly in cash and p~rtly ~n Common Stock o~ the
Compatly,
periodic cas~ installments, purchase o~ annuity, or nthcr~i~e--as the Prol~t-Sharing Plan C~mmiRee
appointed }~y the
Board of Directors to a~]ntinist~r the Plan ~letermin~a. A member tnay w~ldraw a portion o~ his
Plo~t.sharin~ he~anc~s
durthg ~mpl~'ment, subject to certain r~s~rictions and .~vbject also to the penalty of a 10~
forfriture~ Thee and all
other [or~itures ar~ reapp~rti~ne~ among ~an ril~m~ers annually.
Vofttntary D~posfis. In addiiion to recelvi~l~ ¢ontrthut~on~ from th~ Colnpany, the Piton Trustee is
authorlzed t~
accept rolu~tar~ deposits from ~n~th~rs i~ reg, alsr ~l~-time crnployrnc~t~ Any e~igib~c mern}~er
may become a depositor
by electin~ to mahe del3oSlt~ of his own fund~ ]~y payroll deduction in anlount~ no~ re.re tha~ 10%
of hi~ bas~ pay.
~ch ~F+~al~or l~s the op~ion of g:irec~ing that ~s deposlts he all~c~t~ ~or J~,estr~e~t entirely in
d:e Ar~erican ~lock
Fund or un¢~ird in that fund and two.thirds in the Dive~i~ed Fund. D~osited ~ut~ds may be withdrawn
during
employment, subject to limhetiorts provided in the Finn. Depoalt balances become disLrihetable in
full upoll termthation
of the ~nemher's participation a~ a dcpos~tor~ Approximately 1,600 raembers had deposit hela:qcc~
~it l)~cemi~er 3i~ 1969.
1969 Employer Contributions under Plan and
1969 Incentive Compensation under ~4rticle XII
The ¢ont~ibutlons of th~ participating employers to the Eornpa~ly~s Profit.Sharing ]?[an
accrued for the year 1969
amount to $7,518,764 (equivalent to ~3,381.705 a~ter Federal a~d state taxe~ based on incor~), of
which $206~118 ~s
apportlonsb{e to the accounts of 13 directors at~d o~cers and $7,312,~46 to other employees.
For th~ same year incentive compen~atlon u~der Article XfI of the By-L~tws was accrued in the
follow[n~
amounts for the en~ploye~s partlc~pat~n~ l~crein: The undeterred t~oncontin~;ent portion
(c~n~ti~uthig one-l~alf of
such compensation) aggregated $685,169, o~ which $452,712 was acczued for 13 dircctors and officers.
The ~leferr~¢l
contingent a~rtion (constituting the other half ~f suc~ compcusationl, a~ter reduction by
prefiX.sharing in fl~ case
of persons parti¢[patlng in the Company's Profit.Sher~g Plan for that year, ag:~-reg:ated $~02~56,
of ~hich $2~0,424
was accrued for sllc~ ~,irectors an¢~ o~cers.
RESOLUTION CONSTITUTING PROPOSAL 2
The reso[utlon constituting Proposal 2 is as follow~:
R~SOLVED~ that the Profi~Sharlng Plan of Amealca~l Brands, Inc,, as resubmitted to this
Azmual Meeting
pur~'uant ~o See&o~ 7 of Arti~ XJ there~L ~e au~ ~t bcr~by is :~pl~d.
The a~lmaahv~ vote of a majority of the votes cast by the l~oId¢rs of Comrnon Stock voting
thereon fs necessary
for the adoptlor~ o~ Proposal 2.
~e Management r¢comme~s th~ ~ vote FOt~ Prop~aI 2.
6
proposal 3
PROPOSED A~MENDMENTS TO REVISED RETIREMENT PLAN
"l~e Retirement Plan for Employees ,~ld F~rm~r Employees of American Brands, ~e, and Designated
Alfilla~ed
Corporations, known as the Revived Retirement Plan, w~s adopted by th~ stockholders at the Manual
Meeting in 1960.
It has since bceu amended from fime to tim~ by the ff~,ard of Directors and at the Annual Meeting in
1965 by the
stockholders, Approxlmatcly 11.400 employees of the Company and The Haibeway,Sleane Corporation are
covere~
by the Plan. Of this number, 12 are directors or otficer~ o[ the Company,
The Board of Directors recemly adopted certai~s athlifional amendments, to fiecome effcctiv~ a~
of January 1, 1970,
suhject to tile receipt of e tavorkhle ruling of the Internal Revenue Service and subject also to
approval by the stock-
holders ot the Company. The Revenue rulh~ fi~ been received.
Summary el Proposed Amendments
The proposed ame~dment~ to the Play ebenge the formul~ by Ivhieh the amoun~ of retiremem
benefils is calculated,
introduce a r~nim~ benefit and increase the presertt maximwai benefit, and broaden eligibility for
severance bene-
fits. A brief &seription of tbe material features of the amen&heats appears belo,~. Tbe text of the
amendments will be
sent to a~y ttoekhMder upon written request to tfie Secretary at the Company's office, 245 Park
Avenue, New X0rk,
N. Y. i0017~ and copies will he available at the meeting. Stockholders ~a-e referred to the text and
the following
~uramary is qualified by such reference.
Benefit Formu/a. Under the Plan as now in effect, retirement, spouse's, severance and disability
benefits arc bs,~ed
on th~ employee's earnings througk0ut th~ period of his employrae~t aud are payable at an annual
rule equal to the
sum (or its actuarial equivalent) of (i) a "pats service" beneft b~sed on years of continuous
employment before 1960
multiplied by 4/5 of 1% of 1960-1964 average annual earnings up to $4800 and 1!~% of such carinngs
in ex~:ess
of $4,g00, plus (if} a "future service" benefi~ equal to I% of earningl after I959 The amendmenLs
(which apply
ouly to persons in service on or after January 1, 1970) would ~uhetitute a "final pay" gel tfiis
"career pay" formula
and base benefits on the average earning~ M the five bighes~ ~,omee~ti~e ),ears in the Fatal tea
year~ of eIa/dolment,
with the arn0unt of benefit equal to the sum (or its acmnriai equivaJsnt) of 1% of suck 'final
average" earnings
multiplied by the number oi years el continuous service up to 35, plu~ Y2 of 1% ~f final average
earulng~ in ez:cess ot
$'4,800 multiplied by the number of years of continuous service before 1960 within dee applicable
period. (In th~ ease oi
severance bei~efits, only service from age 30 is taken irae account, and iu the case of disability
benefits a portion of the
benefit is paid from elm genera/fronds of the Company.)
When an employee heeome~ entitled to benefits aff~r more than 35 years of eonthmo~us aervloe,
the amendments
would ba~e his benefitl on the last 35 years of such service, raffler than on the first or last 55,
wbishmcer produces
the higher benefit, as provided in the Plan a~ now in effect.
The proposed new formula is intended to provide larger benefits more in keeping with current
and antleipat~d
future pay l~veis. There are, however, certaha empioyee~ for whelxt the new formula would produce
~mail0r benefits
than the pre~ent fox'mule and therefore the proposed amenfiments also provide that benefits under
the Plan as now in
effect shall not he reduced for any employee ~s a result of the a~nendments,
Minimum and Maximum Benefits. Under th~ Plan as now in effect there is no minimum benefit
prescribed.
ql"ne pioposed amendraentt would provide a minimum benefit ~or employees retiring at or after age 62
and toe all
retirements for disabifity, regardle,,s of any ~naller amount produced by the benefit tormula, i~ au
aunual amount
equal to $36 multipfied by the recognized number of years of service in reguIar furl-lime employment
and $I8 mu[tlp[ied
by the recognized number of years of service in seasonal employment. The amendment~ would also
change the max~um
annual benefit from $37,~)0 ~ $7.5,90ffi
Severance Benefits. Under the Plan as now in effect severance benefits, i.e., pensions payable by
reason of
termination of service otherwise than by retirement, death or disahlllty, are payable only to
regular full.time employees
who are at least 5(J years of age (but net y~t 55) and who haw at least 20 years of service
immedi~te[y prior to
terminatio~ of service. The proposed amendments woubi broaden the allgififfffy for severance benefi~
so as in ir~elude
any ~eg~lar full-tim~ employee havizlg at least 20 )ears of s~rviee who~e age and years of service
total 70 or more.
Coat oy Plan and Proposed Amendments
It is the pre~ent inte~tlon of the Co~p~my to fund the Lm~unded past servlce co~ ~ ~e P;a~ o~r
lhe 81-~ar
period cammenclng on January l, 1970. According to the latest report of the Company's independent
actuary, this c~st
for the Plan a~ ~ow in effect is approximately 8~,530~000. The actuary he~ estimated (using, for the
~rst time with
this ~an~ a/eve~ funding method of vatuation, an ~sur~d interest rate of 5% and actuarial
assumptions for anticlpa~ed
PI~ wlthdrawa[s and ~uture w~e incre~ses~ that the a~lendiaen~ will produce a net increase in
unfunded past ~rviee
co~ o~ approximately $14,602,000. T~ pre~nt annual cost o| funding to the Cor~pany and its
parHalpati~ a~liatc.
mx~ the ~et add~onal cost by reasons of the amendments, are acco~in~y estimated as fol]ows:
Aetuary's
E011mate
Befor~ Taxe~
A~aual payYaent with respect to part service $2,603,000
A~nual pa~anent with respect to current
service .............................. $4,279,000
Totals ...................... $6,882,000
Plan as Nu'~ Addilional Cost of
~n Effect Amendments
A~ter Deducting ,After ])educting
"1" tt 2~es (at CttTrent A¢Iuttr} $ r~xes tat Cur~e~I
R,~tel) as ~sdmated Estimate RatesJ a~ E~timaled
h~, C~mlaar~y Before "r~xe~ by Company
$1,260,000 $1,26~,000 8612,000
82,071,0~)0 8 25,000 8 12,000
$8,331,000 $1,290,000 8624,130~
Estimated Retirement Benefits
Under the Plan as proposed to be amended, annual retirement benefits at normal retirement of
the ioI[owing
persons named in the ta~e under "Remuneration" on page 3 who are currently hi the employ of the
Company would
be a~ fol[ow~ (the figures in parentheses sh~wthg the reduction upon the actual or assumed election
by the employre
of an optional joint and survivor annuity) : Alfred F. Bowdon, $3a,13S ($28,6t4) ; Pl~iiip H. Cohen,
88,100 ($5,612~ ;
Henry G. French, $26,313 i$19,1(J6); Robert K. Heimann, $~639 ($31,569) ; Cyrit F. Hctskn, 830,342
(~22,334)
J~hen B. McCarthy, $30,876 (821,80~) ; Charles A. Mchos, $23,530 ($14,899) ; Eugene F, Mo~ney,
$35,240 ($23,551 i ;
George ~. Schramm, $2%857 ($19,403) ; John B. Sparrow. $27,291 ($21,686) and Rohert B. Walker,
$75.000 (~49,1411).
RESOLUTION CONSTITUTING P~tOPOSAL 3
The resolution constituting P~oposa[ $ i~ a~ foffew~:
R~SOLV~O. as e~nditionally adt~pted by the Board of Directors, that the amenthncnts to the
Retirement PlalL
for Employees and Former Employee. of American B~ands, Inc. ~nd Designated Affitiat~d
Corporations described
in the proxy statement accompanying the no~iee of this Annual Meeting be and they hereby are
appzoved, to be
effective as of January i. 1970.
The a~rmatlve ,~ote of a ~ne]orJ~ o~ the v~to~ ca~t by the ]raider's of Co~mo~ S~r~k young
the~-eon i~ necessary
for the adoption of P~oposal 3.
The Managemem reeornmends that you vote FOR Proposal 3.
Proposal 4
PROPOSED AMI~DMF2~TS TO AETICLE XII OF THE BY-LAWS
Article XIl of the By-Laws ~f the Company in ~ts original form was ado~ted by the sl~ukholders
in 1912. ti has
bad the same puzpose of fUZltlshing inctmtive compensation to key employees fr~r more than 55 ~ars.
As now in effect.
Article XII provides that of the amount available as incentive compensation ~or any year 1B% skall
be aliot~d to the
C]xairman of the ~o~d and Chief Executive 0fi%er a~d 12% to the Pre~idenL ~d Chief Operating Of~cer
q vihe together
eonsRtut~ the Incentive Compensation Committee), with the balance ~f 70% bei~3 available for
allotment to other key
employees constitutthg the Mzalagement Group. Of the 70% tffe~ available for allotment to the
~a~agomertt Group, 24%
is alloRe(1 by Article XI| to participants in that group in proportion to their fixed salaries arid
the balance (46%, plu~
a~.y amourds not allotted to die t~o o~cer~ re~erred to above a~ a re~dit of vacancies i~ httose
o/~e~) i~ a[lottable
by the lement~ve Compensation Committee within the Managemerd Group, entircly at its discretion as
to amounts and
individuals. Article XII also proiddes that or~o.he[i of the amount allotted to each p~Riclpant
shall be paid to hffe
in cas~ as soon a~ praetleable after a]lOtla~e~t and that the other one-bail, after red]action as
stated in the next seatence-
8
~ball be contingently payable to him in annual installments after his employ~nent by the Company
terminates. Since
1960. when the Company's Profit-Sharing Plan was adopted, Article XII has peovided that the deferred
portion 0£ a
participant's incentive compensation for any year be reduced by the mount credited to him under the
Profit-flharing
Plan for the same year.
Frona time to thne ~¢ianagexnent has considered various snggestiol~s for iaerea~thg the
attractiveness of the islcenffve
compeu*afion program under Article XII to participants and prospective participator and enhancing
its value to the
Company wlthoul, however, changing the basic formula fixing the amount to become available for
allotment each year.
Since the Annual Meeting of stockholdera in 1969 at which certain proposals of that nature were
approved, the Tax
fleform Act of 1969 has become law, with significant impaet on deferred compensation in general.
That evenb together
will1 the effect of continuing inflasion, has impaired the desirability of the deferred portion of
Article XII incentive
compen~atioln In order to maintain the value of the incentive program of the Company, the Board
therefore believes
that Section 4 of Article XII (the text of which is included in Exhibit A to this proxy statement)
should now he
amended to provlde that the d~ferred portion of allotments for years afteJr 1969 he made
eoi,tinsentiy payabis on
December 15 of the year in which the allotment is made~ instead of in annual installments beginning
after retirement
or other termination of empinyment~
The 1960 amendment providing lbat the deferred per tioi~ of ~a allotment for any year be reduced
by the participant's
t~rofit.sharlng credit for the same year b~.s proved inequitabla in operation. For some participants
it has meant reducing
the incentive compensation otherwise payable to them by 50% because the profit-sharing offset bar
equaled or exceeded
the deferred portion of their allotments. For others, it luas meant reducing their incentive
compensation by a profit
hare they would not in fact receive because their employment termthated before their profit-sharlng
credil~ became
fultv "v~ted." For all eBgible pealiclpants, the peoth-sharing offset has diluted discretionary
awards under Artiale Xll
arallo that extent diminished the value of the Company's incentive eompensaBon program. Tbe Board
believes that this
d~ficiency should be overcome by amending Article XII to eliminate the offset provJsinn hy deletin5
fieesiou fi (the
lext of which is incthded in Exhibit A to this proxy statement). If that provision had not been in
effect in 1969, the
deferred contingent portion of incentive compensation accrued for a]i employees participating under
Article XII
~,,~uld have been increased by gg89,g24, ol which $202,288 would have been for directors and
ol/~cers.
In accordance with the amendatory provisions of the Article, other amendments to Article XII
mar be made by
ihe board o~ Directur~ atrnm time to llme without stockholder aetlon~ provided that no amendment may
be made by the
[h~ard cbenglng the basic formula so as to increase the amount made available for aIlotment under
the Article each year.
RESOLUTION CONSTITUTING PROPOSAL 4
Tbe proposed resolution oonslisuting Proposal 4 is as inflows:
R£SOLVED, that Article XI[ of the By-Laws as now in effect he amended (1) with rezp~t to
paragraph (B)
ot Section 4 thereof by:
(a) inserting therein a new subdivision (i) reading as follows:
'~(i) With re~pect to abutments for any year after 1969~ on the fil~eenth day of
December next follow-
ing the close of the year for which the allotment was made. suhiect Io llte condition that
prior to such
fifteenth day of December the participant shall not, without the express approval o{ the
Board of Director a,
have accepted employment with. or rendered personal service to, a competitor as definell in
subdivision (iv)
of this para~aph (B).:'
(b) renmnberthg the remainin5 subdivisinns thereof as subdivisions (il), (iil) and (iv)
and nmking
appropriate changes in cross-references thereto; and
(e) flntitlng the applicability of the r~nurnbered subdivisions (if} thereof and (iii)
I~ allotment* made
for 1969 and prior years.
and (2) by deleting Section g in its eatlrety~ deisting all references to Seetiun 8 in othPr
Sections of Article XIl
and renumheling tile present Section 9 as fleetion g.
The affirmative vote of a ma]orlty of the voles cast by the holders o~ Common Stuck voting
thereon is necessary
f ,r tb~adeption of ProposaI 4.
Tde Management recornmendz tha~ you vote FOR Proposal 4.
9
Proposal 5
RESOLUTION" ON STOCK OPTIONS PROPOSED BY FOUR STOCKHOLDERS
The Corapany i5 informed that Lewis I). GiLbert, a record holder of 820 shares of Common Stock~
wht~ address
is 1165 Park Avenue, ~N¢~ York, N. Y. 10028, and/or John J. Gilbert, a record helder of 830 shares
of CQmmon Stock.
of the sam~ address, and representing an addltlonal family interes~ of 971 shares, aa~i,/or John
Carapbeil ~lenr!,
record holder ot 1.600 sheres of Co~lmon Stock, whose address is 5 East 93rd S~reet, _N~w York. N. Y
10028, and/or
David Brown, a record holder Qf 6 shares of Comrao~ Sto~k, whose address is 1901 8¢th ~tr¢~t,
Brooklyn, ,'~. y,, inten~l
to ~troduce at the Annual Meeting the following resolution (designated hereln as Propc~al 5)!
"R~SOLVED: That the stockhelders of American Brands~ Inc., a~emll~,ad in annual meeting in person
and b~'
proxy, hereby request that any ~ew stock option plans be made subject to the fo]/~ing ~ovisior~:
(a) That share~ to b~ optlonad ~ill be optio~ad in ye~[y installments as nearly equal a~
p~ible, and tha~
th~ rigl~t to purchase shares in each instalment will not be sumulati~e a~ will expire to
the extent not
ex~rci*ed during the a oplicak]e installment period!
(b) Tha~ the ag~eg~te purchase price of the shares cowrad by an option may not exceed in the
aggre~,ale
].50% of art ind~vldual'~ ann~a~ cash compensation:
(el No options will he ~ranted in any year to exo~utives who are within 18 m~ntl~ ot their
automatic retire.
ment da~e on ,Ma ~'ch 31 of such yea~:
(dl It shall be a negative factor in ~e~anting new c~ptions if an optionee has sold optio~lad
stock to pay oil ~t
]o0~, e~ak]Jn~ Ih~ opiionee to p~ck up new opfi~a.~."
The p~oposers of the res~lutlon here furnished ~he ~ollolring state~en~ ~ettin~, forth the
rea~on~ ad~cad by thera
in supp~rl of their proposal:
"Las~ year 10,500 owners of 1,52~4~7 sheres voted i~l favor of our similar resolution. Please
r~member, ~ a~
executive car~ be lu~ed 1"O a company ~rith ~toak-optio~xs, he c~ be lured AWAY ~'it}~ blg~,er
opti~ elsewhere.
if you agree~ please ~a~rkyour p~oxy FOR this resolution; otherwise it is automatically cast
against it."
Some o[ th~ ma~te~s referl'ecl to i~ the p~opo~ed re~olutien have~ in fa~l~ been taken into
co~ideralion by the
~oard of Directol.~ L~ its grantir~g of opt~on~ under the presell St~ck Option P an~ and undou]~
edly wil be fa~to~ that
~ill ~r on th~ B~ard'~ con~der~io~ ~ the f~tu~. Ho~'~e~, ~ ~he Bo~ad's ~i~on ~t is ~ot ~se t~ ~poso
~xad
~trictions on the me~hed of operation of a stock optlon plan such as those proposed by thi~
resolution. In some
~a~, the limitation set forth ralght de~ract from the incentive value o~ the option and hinder the
Management in it~
~i~orts to ~e~ure a~d retain key ~mpl~ye~ of outstandln~ a~ility. Compethion for expcrlencad per~ous
has in~rea~ed
rapidly and the ~oard helleves that the granting of opti~n~ u~lder the Plan ~trengthen~ the Comp~y'a
abili~y to hold
~ presen t key Fersonr~ a~d ~ttr~ct .~ ~'~.o~yees o~ ~ts~nd~ng ttb~/ty.
The Compa~,~s stock optlott pr%o~am has heert carefuI~y designed so as ~o benefit the C~mpa~y
by encoar~gln~
key erapIoyee~ ~ acquire a proprie~a~ interest in the Com.oany's future~ wi~h provlsion~ ~ the
p~eser~t Stock OptlOrl
Plan that ade~ate~y safeguard ~toakholder interests. Additional restrictions such as those proposed,
¢ou[d~ ~a ind~vlc~ual
ca~es~ work ag~i~ that purpose.
The ~oard c~f Directors, through its knowledge o~ Management per~0rraance, i~ ~n the best
pos~llon to alIocat~
stock options so as t~ obtain the greatest a~lvanta~e to lhe Company and it~ subsidiaries, and it
should not be hindcrad
by any ~ch rigid limltations. Acc~rdL~,ly, the re~olutlo~ ~hould be ~ajeclcd as not in the be~t
~nteres~s of ~h~
Company and it~ stockhelders~ A similar resQlu~ion was ~,ve~whelmlngly ~ejectad by th~ stockholders
at the 1~8
A~nll~l ?,~eetin~ ~he~ mor~ tha~ 92~ of he vo es ~'e~e ea~ ag~ ~ t~ au~l ~ n 19~9 whe~ ~ppr~matel~
921 ~
of the wtes wer~ cast again~ it.
The a~rma~i~re vote o~ a ~aiorit~' of the votes cast by the holders ~f Common Steak votln~
th~re~n WO~lld he
nece~ary for the adoption of Proposal 5.
The Manager~ent re¢o~m~n~ ~hal yo~ v~le ~GAINST Proposa~ 5.
10
Proposal 6
RESOLUTIO.NT FOR CI.~fULAT'IVE VOTING PROPOSED BY FOUR STOCKttOLDERS
The Company is ~ormed that the fou~ s~ockhelders who~ name~ addresses and r~ord heldi~ are set
for~
above with respect to Proposal S, intend fo introduce al the Atmual Meetin~ the fo|lowing re~0]utfon
(designated
he~e~ as Proposal 6) :
"RESOLVEV~ ~i~at t~ stoclcholders o~ American Brands~ Inc, assembled i~ anJlual meeting ~n person
and by
proxy, heral~y request that the Board o[ I)irectors take the steps necessary to provide for
e]ect~0ns of di~'ector~ ~y
curaulatlv~ votln~, which mean~ each ~to~khelder shall be entitled to a~ ma~y vote~ a~ shatl e~al
the number ot
v~e~ whlcl~ h~ would he enlitled to ¢a~t for the ~lectfon o~ di~e~tor~ with re~pect to hi~ ~here~
of ~to~k r~ult~plle~
by the number ~ dlrectors 1o he elected, an~ he may ~a~t all of such vote~ fo~ a aln~le ~andldatc
~r any two o~
more o~ thera a~ he may ~ee fit."
T~ ~ropo~r~ of the re~olutio~t have furnished the ~l[o~vi~ statem~:xt ~ettin~ forth the ~eason~
advanced by tivem
in 5~pp~rt o~ thalr proposal:
~C~mulati~'~ votin~ perralt~ rai~orlty ~herehel~er~ to have representation on th~ ~oa~d of
Directors. V/i~en
cumulative votin~ ~s r~ot permitted, the ho]ders o:~ a majority o~ the shares may elect al[ of
the directo~, in which
event the remoJnlz~ ~harehe]d~r~ may ~o~ eject any dJrec~or~. T~e a~e~dn~ent l~o~Jd pernlit a
person o~¸ a ~roup
o~ pe~on~ ~o~ing a ejgnifica~t block o~ she~es to hav~ represe~tatfon on the ~oard o~ ]blrector~.
Witheu~
curnu[at~v~ votln~ such a block might ~c u~a~le to ha~e any repre~ent~i~n on the Bo~rd~ ~al~ich
is the poli~y
nl~.kiug body o~ th~ Company--Ga:nbl~s mana~raent 1968 proxy ~tat~ment."
In the vlew o~ the Mana~emeaI, the function o~ a board o~ directors is to a~mlnister the
al~alrs o~ a co~po~atfon
~or the ~ene~t o~ al[ ~t~ ~t0ckholders. The ~a~a~emezt he]~eve~ that a dlrec~r ele¢Ied by a minority
through cumu~a-
tlve votfo~ migi~t real ~ound to act in what he conej~[er~ the iItt~rests of the minority even
rhenish ~uch action might
not he in the he~t intere~ of the corporation and the stockholders a~ a whole. It bej~eves that ~he
pre~n~ method
of e[ectfo~ directors, which i~ t]qe corpora~ equlvai~alt of majority ~ule~ he~ worked ~ucces~ulLy
a~ld ~hould not he
9~.8% o~ the "/ores were ~a~t a~afo~t ~t on e~ch occaslcn.
The al~rmative vote ~f a majority o~ ~he votes ca~t by t~ hoI~er~ o~ Common Sto¢~ vot~n~
thereon wou[J, be
necessary for t~ ado~ifo~ of Proposal 6.
MISCELL,LNEOUS
Promptly a~ter lhe ~nua[ Mcetfo~ ~tock~olders wiU be ~aailcd a return po~card on which they
will he able to
fodlcate their d~ir~ t~ receive a cvpy o~ the ~umrnary o£ the ~e~ejn~.
The e~pen~ o~ the solicitation o~ proxle~ ~or t~s meeejn~1 inaludi~ th~ cost of n1~il~n~, will
he he~nc by th~
Colnpany, In addltlon to n~aili~ ~o~ie~ o~ thi~ material to s~ckholder~, the Coropa~y ~[ rc~e~t
~er~o~ ~ho hol~
~tock ~ ~te~r r~am~ or c~tody or in the name~ o~ r~om~nve~ ~or ot~er~, to ~orward copies o~ ~uch
ir~aterial to t]~o~
persons for whera they ho1~ stock ~ the Company and to ~equ~ au~ority ~or the execushm o~ the
proxle~ To t~e
ext~nt r~ecessary ~i o~'der to a~sur~ ~clcnt r~]~re~tatfon at the meeting, o~ce~ and ~ome re~lal"
~rnp1oy~e~ o~ t]~
Compm~y wil[ r~quest the r~tur~ ol p~o~i~ by talephon~, tal~ram or i~ person. The amount ~f th~
e~pe~se to he
b~rne by the Coropany ~ill depend upon th~ volume ol sh~re~ repre~nted by the prox~e~ ~¢~ve~ ~ t~
re~pons~
to the ~ol~ce v~ Mevtln~. ]~ pr~xie~ are not ~elved promptly, it may be necessary for the Company to
send te]egraphlc
~ohe~tation to thes~ ~tock~h/er~ whe heve not ~e~ponded.
S~ockhe~der~ who do no~ ~tend to he pre~en~ at the m~tfo~ a~ urged to s~n~l fo thclr proxies
~i~hout dalai'.
Prompt re~po~se is helpfoL and your ~oop~ratfon will he opprealated.
~ar~It 2, 1970.
tl
EXHIBIT A
ARTICLE XII OF THE BY-LAWS
Sections 4 and 8 as now in effect
SECTION 4. (A) Payment to the Chairman of the Board and Chief Executive Officer and the
President and
Chief Operating O~cer of the amounts payable to them under SecTion lIBt hereof, and to each of the
alfott~es ~[
the _Management Group of the amount of his totaI allotment under Sections 2i B I, 21C ~ and 21 D J
hereof, with respect
to any year shall be made one.halt in cash as ~on as practicable and tde balance (~ubiecl to Scction
8 hercot~
on a deferred hasis as herelnaft~r ]provided.
(B) All deferred amounts payable ~o alI persons hereunder, s~ch per~on~ being hereinaiter
referred to a~ L'parti~
pants," shall be payable (subje~ to the conditions set forth ht this paragraph iB! and to paragraph
(CI oi thi~
Section) in cash as foIlows:
/~) With ~pect to albltment~ made to any participant who on January ]. 1970 was bl the
en~ph~ td
the Company, in three equal annual deferrcd installments, one such insLlllment 1o be paid ~n the
nexl io[lowing
~fdl husine~5 day of the January which i~ at least n~nety days after the da~ whelL the
participant's elnph~ynlellt
by the Company terr~inates, and annually thereafter and subject Io the condition that prior to
the fifteenth day
~f December. 1970 the participant .~hall nc~t, without the express approval of the Board of
B~rcctor~. have accepted
employment with, or rendered ~ervlce to, a eorapetit~,r as defined in ~uhdivislon (ii~) of this
paragraph !B).
qii~ With re~pe~t t~ a]lotrr~en~s made to any participant who on January 1. 1970 was ilo~ ~n
the c~ttploy
cd the Company, in ten equa~ annt~a] deferred th~allrnents, one ~u~h ill~tallment to he paid on
the tilth buslnes3
dev i~ January in each ¢i the ten yc~rs following the close ~i the ~ar il~ which the part~pant's
c~pieyrncnt
by the Company terminates, each such instaihnent being subject to the condition that, prior to
the expiration o~
f~ur full calendar years after the participant's employment by the Cempany tern~inatcs~ the
participant shah not.
wilh~ut the ~Xllress approval ~f the. Board o[ Director~, havre aceeptad employment wlth~ or
rendered p~r~onal
s~vi~c to~ a competitor as defined in sttbdivi~fon (Jill of this paragraph (B).
Idil As used here~n, a %ompedtor" shall mean a~ty corporation or other entity engaged i~ a~y
a~Bvi~
w~i,~l~ at the tin/c the applicable aUohnent was made, was compcBBve with lhe business of ~he
Company and
"the husin~ of the Company" at the time of allotment shall mean the types of business carried on
by the
Company and its sub~dlsrlc~ wbl¢it are deemed by th~ Board of Director~ t~ have been the
principal types
at tha~ time.
(C~ Suhie~t t~ Section 3 hel~oi, no such instal]men~ may be transferred by any participant in
any nlanner
what_~oever, ineludin~ transfer by operation oi law. If any participant is, in the opinion o~ the
Board of Directors,
ineapahl~ of handlln~ hi~ a~airs~ or makt~ ,3r sufblrs any attempted transfer, whether ~-uluntary
o~" invo~nta~'y, of
any ~ueh in~tallm~t~t, thett ~Tt the di~cretlen of the Board of ])ireetor~ payment thereof t~ ~ucB
participant shall cease
and paymenls ma) Be made ~lr applled 1~ or for the benefi~ of ~:ch participant or his spouse,
children, or othe3"
de]pendents, or any of them. ~n such manner and in ~ublt proportion a~ the Board of Directors shaB
from time to time
c]¢e~t p~oper, subject, howe~cr, to the other ]provi~ion~ hereoi.
(D) Any portion of a~¸ allotment which terminates by reaso~ of no~compliance with its
conditbl~s shall revert
to the Company.
SECTI03 8. Afler the amounts alloltable under Sections I(B), 2(B), 2{C) and 2(D) hereof with
respect to
al~y year have })eer~ determined ior all ilarticipant~ wlth~at reference t~ this Section, the amoun~
that, hut for this
Section, would be payable pursuant t~ subparagraph ~2i of Section 4(A) hereof to each partlcipa~t
for ~,~ch ye~tr
~all he r~ducec] hy a ~uln equal to the am~a~t app~rhioned to such participant for ~x~h year under
lee Profi~harlng
PIan of American Bra~ds, Inc.
12
American Brands, Inc., Annual Report 1969
Financial highlights <,o.,o..~.,,o,,o,, ....... ~,,,,. ....... ,,~ 1999 1968
Per common share
Net income
Without dilution ............... $3.55
$3.33
Fully diluted ................ 3.56 3,32
Dividends ................. 2.00 1.675
Net sales ..................
$2,661,478
income beforetaxes onincome end minority interest . . 235,926
Net income ................. 98,501
Dividends , I ..............
64,040
Current assets, December 31 ...........
1,109,237
Current liabilities, December 31 .......... 306,178
' Working capital, December 31 .......... 803,059
$1,897,852
205,612
92,911
50,931
1,131,059
342,523
786,536
Number of Common stockholders, December 31 ..... 136,798
145,392
Average number of shares outstanding during the year . 27,003,367 27,513,986
Operating results by product line c,. m,r.on~)
Net sales
1969 1968
Amount % Amount %
Operating income'`'
1969 1968
Amount % Amount %
Tobacco products
Domestic $1,066.9 40.1 $1,115.7
International 1,069.0 40.2 358.8
Distilled beverages 136.4 6.1 126.5
Food products 354.6 13.6 289.1
Other 50.3 1.9 22.9
Deduct
intracompany sales (16.7) (.6) (15.1)
$172.8 66.2 $167.1 74.6
50.7 19.1 27.7 12.4
19.0 7.2 16.6 7.4
16.7 6.3 9.8 4.4
5.7 2.2 2.9 1.2
68.6
18,9
6.7
15.2
1.2
(.s) ',
Total $2,661.5 100.0 $1,897.9 100.0 $264.9 100.0 $224.1 109.0
1
") Earnings before interest, other income and expense ilia T/3 Sr taxes 3lid minority inlerest.
Robert B, Walker
Chairman of the Board
and Chief Executive Officer
To our stockholders
On behalf of the Board of Directors, we are
pleased to report that American Brands, Inc.,
achieved record sales of $2,661,478,000 and
record income of $98,501,000. Each of our
six subsidiaries and divisions showed a profit
increase in 1969, with operating profits of
American Tobac6o, Beam, American Cigar
and Dutfy-Mott reaching all-time peaks.
Sales and operating profits by product line
are shown on page 1. Nontobacco sales for
the year increased to $525,599,000 and
represented 20% of 1he Company's business.
Of the Company's domestic sales, 32%
is nontobaeco.
Net income per Common share advanced to
$3.68, up 8% from f968. The quarterly
Common stock dividend was increased in
January 1969 from 47.5 to 50 cents, a yearly
rate of $2.00 per Common share. In January
1970, the dividend was raised to 52.5 cents
quarterly, an annual rate of $2.10 per share.
The dividend to Common stockholders has
been increased six times or 40% since 1963.
While consumer demand for nonfilter
cigarettes continued to slacken in 1969,
American Tobacco increased its volume of
filter cigarette business. The market for 100
millimeter brands, pioneered by Pail Mall Gold
in 1964, was identified by one independent
report as the "fastest-growing area of the
industry, representing armost 16% of the total
market, against 13% in 1988." Ame#ean
Tobacco has six 100 ram. brands in this field.
Gallaher Limited, second largest tobacco
company in the United Kingdom, which is
67% owned by American Brands, Inc.,
increased its filter volume and enlarged its
share of the cigarette market.
James B. Beam Disgfling CO. manufac-
tures and markets Jim Beam Kentucky
Straight Bourbon Whiskey, the world's
top-selling Bogrbon. Beam sales and profits
continued to ir~crease.
Sunshine Biscuits, Inc. increased sales and
profits, introduced a variety of new products,
and redesigned many of RS packages.
American Cigar, the nation's third largest
cigar manufacturer, markets a broad range of
cigars including Roi-Tan,:the largest-setling
cigar in the 10 cent price class. While dollar
sales of cigars were about even with 1968,
profits increased 14%.
Duffy-Mott Company, Inc. increased operating
income 31% on a sales increase of 11%.
Lord Mott's Clamato cocktail in its first year
of national distribution sold well.
Several executive changes were announced
in 1969: Robert B. Walker was elected
Chairman and Chief Executive Officer of
American Brands, Inc., and of The American
Tobacco Company. Robert K. Helmann
became President and Chief Operating Officer
of American Brands and of American Tobacco.
Cyril F. Hetsko became Senior Vice President
and General Counsel of American Brands.
George J. Schramm became Vice President
and Control;er of American Brands, and
Charles A. Mehos, Vice President and
Treasurer of American Brands. Horst G. Den k
became President of Sunshine Biscuits and a
Director of American Brands. Mark R. Norman,
a well-known business and financial executive
in the United Kingdom, and also Chairman of
Gallaher Limited, was elected a Director of
American Brands.
We are dedicated to enhancing the
stockholders' investment through internally
generated growth and through further
diversification. The pages that follow present
the operations of our six principal divisions
and subsidiaries, and our Financial Review.
Robert B. Walker
Chairman of the Board
and Chief B×eeutlve Officer
Robert K HeFmann
President and Chief Opecating Officer
February 17, 1970
Robert K. Heimann
President and Chief Operallng Officer
The American Tobacco Company
American Tobacco's operating income
reached a record high of $175,392,000 in 1969.
This figure includes income from cigarettes
and smoking tobacco, domestic and export.
Operating income has increased by
$31,166,000 in the last five years,
American TobaCco's major cigarette brands
are Pall Mail, Tareyton, Lucky Strike, Silva
Thins and Carlton. These brand names include
a variety of styles, including regular, king
size, filter king and 100 millimeter filter.
American's filter volume increased in 1969.
Tolai sales of its filter cigarettes on the
domestic market were $370,882,000, a new
high, and $21,744,000 over 1968.
Pall Mall, Tareyton and Lucky Strike were
among the top ten cigarette brands for 1969,
Pall Mall Gold 100"s achieved a sales increase
of more than 11%. Ta[eyton, with the
activated charcoal filter, is the largest-selling
of all charcoal filter cigarettes. Silva Thins,
our newest 100 ram. brand, nearly doubled its
volume in 1969. Carlton, the first cigarette to
print "tar" and n~cotine results on the label,
posted a substantial gain, The Division's
nonfilter cigarette volume continued down in
line with the industry-wide trend.
In the interest of greater manufacturing
efficiency, American Tobacco's 60-year-old
Louisville. Kentucky, cigarette factory and fear
stemmery were phased out early in 1970.
Ifyeu ~ pet~
~ hmte a ~t~er ciga~lle.
Leaf tobacco prices and manufacturing costs
continue to rise. In 1989 the average market
price per pound for flue-cured tobacco was
72.2 cents, compared to 66.6 cents per pound
in 1968. The average price per pound of Bu rley
leaf for the current crop through 1969 was
89.7 cents, compared to 74.1 cents in 1968.
Average prices do not reflect the Division's
actual leaf costs since most of our purchases
' areinhigh-quaety, higherpricecategories.
In 1969, prices of our cigarettes were
increased 35 cents per thousand.
Export sales of cigarettes declined in 1969 for
the industry and for American Tobacco, largely
as a result of decreased requirements for
armed services personnel overseas.
Again in 1969 American Tobacco's advertising
agencies operated on the incentive fee system.
In the last five years savings from this system
have totaled $10,407,000.
American Tobacco's national sales force was
strengthened in number and coverage of retail
outlets in 1969. These men played a vital part
in achieving increased sales for the filter
cigarette line.
In addition to the federal excise tax of 8 cents
per pack, the states levy cigarette taxes
ranging from 2 to 18 cents per package, The
average state tax per package is 10 cents.
In February 1970 Congress was still deliber-
ating legislation that would make changes
in cigarette labeling and advertising. Legisla-
tion may result in a change in the caution
notice on each cigarette package and cigarette
advertising on television and radio may be
prohibited beginning January 1, 1971. Many
reputable scientists dispute the widely-
propagandized anticigarette theory, American
Tobacco will continue to support objective
scientific research in the field of smoking and
health through The Council for Tobacco
Research-U.S.A., which spent $16,000,000 on
such research from 1954 through 1969.
An even greater sum has been spent by the
industry in direct grants for independent
studies in the health field.
Operating profit from pipe tobaccos was about
equal to the 1968 figure. Half and Haft, the
Division's leading smoking tobacco, remains
one of the largest-selling brands in the United
States; dollar sales were about the same as
in 1968, Paladin Blackcherry continued to
gain. The Division is testing other pipe
tobaccos as possible candidates for
national distribution.
American Tobacco's primary sales objective
in 1970 is to continue to increase its filter
cigarette volume, in recent years this has
been accomplished by new product
innovation, aggressive marketing and
adherence to our traditional policy, "Quality
of product is essential to continuing success."
MarkR. Norman
Chairman
Gallaher Limited
In September 1986 American Brands
increased its holdings to 67% of Ganaher's
Ordinary stock. Galiaher, second largest
tobacco manufacturer in the United Kingdom,
increased both sales and income in 1969.
Sales were $1,073,826,060, up 10% ; net
income was u p 6% to $24,220,090. Of this
figure, $15,663,009.is reflected in American
Brands' results and the remainder, or "minority
interest" of other stockholders, is not.
For 1969 Galraher Common dividends were
declared equal to 18% of the stated value of
Ordinary shares, an increase over the 16%
paid out of 1999 earnings.
Cigarette sales in the United Kingdom were
estimated to be up 2% for 1969 over 1968.
During the same period, Galraher's U.K.
cigarette sales increased by more than 3%.
While the industry's filter tipped sales
increased 9%, Gallaher's filter sales grew by
16%. Plain or nonfilter cigarettes continued
to decline in the British market.
In 1969 Gallaher successfully introduced
three new filter cigarette brands--Albany,
Sovereign and Gold Bond. Albany was
introduced nationally in February and by the
end of the year had won more than 1% of the
total cigarette market In April Sovereign, a
couponed entry, followed and by year-end
represented more than 4% of the total market.
Gold Bond filter tipped coupon cigarettes
were introduced in September.
Ga6aher's long-established cigarette brands
are Park Drive, Senior Service, Kensitas and
Benson and Hedges King Size. Gallaher's
cigarette products account for approximately
25% of the United Kingdom's cigarette market.
Gal]aher manufactures and sells a wide range
of cigar products, including Manikin and
Hamlet, the two largest-selling brands in the
United KingdOm. Benson and Hedge~ Special
Panatella showed sizable increases in the
Panatella category, an important segment
of the cigar market.
The company increased its share of pipe
tobacco sales in 1969. Condor Long Cut safes
increased and the brand is now the leading
pipe tobacco in the United Kingdom.
Gallaher maintains a large sales force which
was reorganized durfng the year with the
primary objective of gaining broader distri-
bution at grocery trade and gquor sales outlets.
In order to utilize manufacturing capacity
more efficiently, cigarette production in the
United Kingdom was concentrated into four
factories during the year. This involved closing
the company's Stratford, London. plant.
Gallaher's research and development
laboratories are located in Belfast where new
tobacco products are developed. In 1969 the
company's existing facilities were enlarged
with the addition of an Experimental
Department. Information derived from this
research is used in the modification of
smoking products to increase consumer
acceptability.
Gallaher is a member of the Tobacco
Research Council, composed of the tobacco
manufacturers in the United Kingdom. The
Council awards grants to medical researchers,
universities and others in the scientific field.
Results of this research are published
periodically in the scientific press.
Ga/laher is making every effort to increase
sales of its cigarettes outside the United
Kingdom and Eire, and is surveying opportu-
nities for investment in its own production
operations outside the United Kingdom.
Gallaher has also moved to diversify its busi-
ness within the U.K.: its Mono Pumps
subsidiary showed outstanding sales and
profit gains in t969, and Gallaher's new
Crest Cash and Carry wholesale centers at
Leeds and Hull are now trading with further
development planned. These nontobacco
enterprises accounted for more than
$37,000,000 of Galtaher's sales in 1969.
Uverett Kovler
President
James B, Beam Distilling Co,
Beam sales in 1969 again climbed to a record
high, marking the twenty-first consecutive
year of sales gain. Sales were up 6% and
operating income was up 22%, over 1968
results. Since 1966, the year American
acquired Beam, distilled beverage operating
profit rose from $14,500,000 to $19,000,000.
t
Bourbon continued to lengthen its sales lead
over blends and Jim Beam Kentucky Straight
Bourbon Whiskey, according to independent
industry reports, increased Jts share of market
in 1969 and continues as the largest-selling
Bou rbo n in the world. Measured by case sales
Jim Beam is the fifth largest-selling among all
brands and types of 6istilled beverages in the
country; sales exceeded $100,000,550.
Increased sales were again posted for Beam's
Choice, the 6-year-old charcoal filtered
premium Kentucky straight Bourbon whiskey.
The Beam's Choice Collectors Edition, Volume
IV, Holiday Decanter especially designed for
1969 was again very successful and enthusi-
astically received during the Holiday selling
period. The 1969 collection featured reproduc-
tions of paintings by famous artists, such as
Van Gogh, C~zanne and Manet.
Sales of Bonded Beam, the company's bottled
in bond t00 proof Bourbon whiskey, also
increased in 1969. Again, as in 1968, safes were
enhanced by the i~troduction of a specially
designed Holiday Decanter package.
PT~. uf the Beam fa~l, ~R ~
for 175 Sp~gtimes. ~.J
In the last quarter of the year Beam acquired
rights for the distribution and sale in the United
States ot BeYf's Scotoh Whiskies, in 8,12 and
80-year ages.
Demand continues to increase for Beam's
trophy series and in 1989 the company
introduced a special cpllection of Beam Birds
--three colorful handcrafted bottles depicting
a Bluejay, a Robin and a Woodpecker. Jim
Lockhart, a prominent natu re specialist, was
the design consultant for these bottles. D~ring
the year the company also commemorated
Kentucky Barley week by producing the
Churchill: Downs bottle. Regal China, a
wholly-owned subsidiary, manufactures most
of Beam's special bottles. Another subsidiary
markets Mr. & Mrs. "T" Bloody Mary Mix and
snack items; the Mr. & Mrs. "T" production
facilities are being enlarged to keep up with
growing sales,
Beam's International Division expods to over
10O foreign markets and export increases in
both bulk and Kentucky bottled whiskeys
were reporied in 1969. Bourbon is popular in
Europe and exceptionally so in Germany.
Demand is growing for Jim Beam Kentucky
Straight Bourbon Whiskey in SwitzerLand and
Japan, which only last year lifted their quota
system for imported spirits.
James B. Be~rn Import Corp. reported
increased business in 1969. Beam imports
and markets a varied assortment of liqueurs,
vermouths and sparkling wines.
175th Anniversary of Beam
In 1788 Jacob Beam, settling in Kentucky,
found an ideal location for the first distillery
to make whiskey. He rapidly gained fame as
a distiller and in 1795 devoted his entire
distillery operations to the commercial
production and sale of his own fine Kentucky
Bourbon Whiskey. Every barre~ of ~ourbon
produced had the name "Beam" on the barrel
head and was s~ught by growing numbers
of quality Bourbon buyers.
Over the years the tradition of producing fine
Bourbon was passed on from father to son
and today direct descendants of the Beams
are actively engaged in the company's
operations.
Beam Bourbon, in t 970, is made to the same
exacting formula, by the same methods, in
the same region, to 1he same standards, as it
was in Jacob Beam's day. While the q~a~ity
of Beam Bourbon owes much to the careful
preservation and adherence to Jacob Beam's
original formula, it owes as much to the fact
that today, as for 175 years, it is the Beams,
personally, who carefully watch over every
step in the distillation of what has come to
be known as "The World's Finest Bourbon
Since 1795"
10
Horst G, Denk
President
Sunshine Biscuits, Inc.
Sunshine Biscuits was acquired in 1966 and
since then has been reorganized to improve
profitability. Since 1966 operating income has
risen 30%, while sales have risen from
$209,327,000 to $259,464,006 or 24%. Most of
the improvement in operating income was
achieved in the year 1969.
About 60% of Bunshine's sales come from
biscuits and crackers. In 1969 Sunshine
increased its share of this market. Sunshine's
growth in this product category comes from
two sources--increased sales of old favorites,
such as Hydrox, and new products,
Sunshine's current marketing theme is "The
freshest ideas keep coming from Sunshine."
Sunshine Lemon Coolers, for example, scored
a success with consumers in 1966 and were
followed in 1969 by Cherry Coolers and Apple
Coolers. In the cracker field, Cheez-ft and
Cheez-Pix showed increases. Among other
new cracker products which gained wide
distribution in 1969 were Pizza-Pix, Talk
Turkey and V.LP, Snack Crackers. New
product introductions will continue in 197"0.
In addition to new product innovation,
Sunshine has undertaken e thorough
revamping of packaging and package design
to aid in the competitive battle for shelf space
and increased sales. A new package for
Sesarnee Bread Wafers was introduced on the
west coast in November and by year-end
nearly one million packages had been sold.
National distribution was achieved for Krispy
Crackers in its new and improved package
with the etay-orisp plastic pack, and as a
result movement of this important brand
increased. Sunshine's new package designs
highlight the brand name for quick identifi-
cation, add appetite appeal and aim for a
clean, modern look, Since American acquired
Sunshine, more than 150 biscuit and cracker
i3ackagee have been redesigned.
The Biscuit Division has been decentralized
in|o five operating areas, each headed by a
general manager wJth overall authority for
operations in his area. Th~s permits regional
management to deal with local situations
quickly and effectively.
The Milling Division, heretofore only a supply
arm for Sunshine, began selling flour for the
first time to other bakeries and to the U. S.
Government. The new venture added to profits
in 1969.
Sunshine's Snack Division makes and sells
pota.~,o chips, corn chips, corn snaGks, nuts,
popcorn and similar products in most areas of
the United States and Canada. This Division
now accounts for more than $100,000,000 of
Sunshine's sales or about 40%. Snacks are
sold under a variety of reglonal names but air
carry the Sunshine logotype as well.
These snack brands include Befl in California
and Arizona, Blue Bell in Oregon and
Washington, Old Wenna in the St. Louis,
Missouri area, Dickey's in the New Orleans,
Louisiana area, Drenk's in the Milwaukee,
Wisconsin area, Krun-chee in the Detroit,
Michigan and Chicago, giinois areas, Gordon's
in the Southeastern states, Schuler's in New
York State and the New England area,
Mrs. Ihrie's in the Baltimore, Maryland area
and Mann's in the Washington, D, C. area.
Sunshine's snack business in Canada, which
uses the Humpty Dunlpty brand name, posted
an impressive 20% sales increase in 1969.
The company has installed new equipment
especially desig ned for the extrusion of food
products that can be drawn automaticagy in a
variety of shapes and sizes. Sunshine is
continuing its program of replacing order food
processing machinery with the newest high-
speed equipment available.
Sunshine's research and development
activities are centered in the company's
Sayreville, New Jersey bakery, which also
contains a complete smat}-scale bak}ng
plant. Routine laboratory functions are
performed with rigid standards. These include
detailed examination and analysea of all raw
materials and packaging materials used }n
the company's manufacturing plant to insure
Sunshine's traditional association with quality
food products,
11
12
Alfred F. Bowden
President
American Cigar
American Cigar is now a Division of American
Brands with its own management group.
Earnings for 1969 were the highest in history,
14% above the previous year. Americail Cigar
accounted for $6,401,gg0 oi the Company's
operating income.
Roi-Tan is the Division's leading brand and
remains America's largest-selling cigar in the
10 cent price class. Its second ranking brand
is Antonio y Cleopatra in the medium price
field. The La Corona, Beck, Tipton and
Caba~as brands atso contribute to American
Cigar's position as the nation's third largest
cigar manufacturer.
While the cigar industry did not experience
sales growth in 1969, American Cigar
achieved some notable sales successes.
Antonio y Cleopatra Grenadiers, as an
example, is recognized as the fastest-growing
cigar in the industry today. Its performance
was a maior factor in the 11% sales increase
enjoyed by the entire Antonio y Cleopatra line.
In the last five years unit sales of A & C cigars
have nearly doubled.
Roi-Tan's traditional five 10 cent shapes --
Bankers, Perfectos, Fattens, Blunts and
Panatelas -- were augmented in 1969 with
Roi-Tan Straights. The new size, long and
slender, was very well received by the smoking
public and is now in national distribution.
ff R~ ~ the be~ ~elllng ~n e~n~ *sg~c
!il
illgl@lmm
Roi~Tan offers more shapes in the 10 cent field
than any other cigar at that price.
American Cigar also has a strong position in
the Fittle cigar market with its two filter tipped
brands, Roi-Tan Little Cigars and Antonio y
Cleopatra Little Cigars. The combined volume
of these two brands increased 94% in 1969,
estimated to be more than double tbe growth
rate for the rest of the little cigar segment.
The Division attempts to s'~rengthen its
business with sound advertising, sustained
selling effort and consistent product quality.
Advertising funds in 1969 were allocated to
four mai'or brands--Roi-Tan, Antonio y
Cleopatra, La Corona and Antonio y Cleopatra
Little Cigars. Media included television,
magazines and newspapers.
The cigar sales force was increased in 1969
to assure continuing ~mprovement in cigar
distribution and dlsplay. Competition for
display space at the point of sale requires
continuing prornotiona] effort. In 1969 a special
pocket-size cigar case was offered with
A & C Grenadiers and La Corona Rapiers at no
extra cost to the consumer.
In addition to comp]ebng distribution of A & C
Little Cigars, the Division introduced several
new sizes in the large cigar field. American
Cigar is continuing its program of new product
development and plans further introductions
during 1970.
American Cigar has traditionally used high
quality leaf tobacco in the manufacture of its
cigars• Much of its choice wrapper tobacco
is grown by the Division in New England.
Other tobaccos are purchased domestically
and in foreign countries. In both growing and
purchasing tobacco, the Division's leaf
organization is guided by the "quality"
principle. In keeping with this principle,
processed tobaccos have been perfected at
the Company's own facilities for use as
wrapper for litUe cigars and as a unique,
all-tobacco binder in many of its large cigars.
The Division's cost control and efficiency
program, featuring the effective use of modern
technology and research, continued in 1969
at all factories. New labor contracts were
successfully negotiated at year-end without
interruption in production schedules.
Modest increases in the prices of some
products were put into effect in mid-year to
offset higher labor and leaf costs.
TO strengthen American Cigar's management
team, Francis X. Whelan, formerly Executive
Sales Manager of The American Tobacco
Company's cigarette operation, was appointed
Executive Vice President of the Division.
Whelan has been named to become President
of the Division and a Director of American
Brands, Inc. upon the retirement of Alfred F.
Bowden in March of this year.
13
14
Donald M. KIock
President
Duffy-Mott Company, Inc.
In July 1968 American Brands purchased 76%
of Duffy-Mott Company, Inc.'s Common stock
and in 1969 acquired complete ownership.
Dufty-Mott reported record results for the
year with sales of $96,148,000, 11% over
1969. OpeTatin9 income advanced 31% above
the 1968 level.
Duffy-Mott's best known products are MotEs
Apple Sauce, Mott's Apple Juice, Sunsweet
Prune Juice and Sunsweet Prunes. During the
year the company's marketing, advertising
and sales effort centered on widening the
distribution of these brands. The apple and
prune product lines each accounted for about
a third of Duffy-Mett sales,
In 1969 new variations of apple sauce were
added: Mott's Chunky Style Apple Sauce and
Mott'~ Old-Fashioned Cinnamon-Flavored
Apple Sauce. Golden Deficious Chunky Apple
Sauce was introduced in eastern markets in
the last half of the year. This new apple
product was so successful that distribution
was expanded to the midwest and western
markets. Another new specialty, Mclntosh
Apple Sauce, helped raise total apple sauce
volume.
Recognizing the growing interest in easy-to-
make desserts, the company developed an
apple pie fill that caught on quickly in the
eastern region. Since introduction, several
types of pie filling have been developed,
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U
Products of
American Brands, Inc.
The American Tobacco Company
Filter ¢Igarettes
PaB Mall Gold 100's Longer yet milder. In the
distinctive gold p~ck~e.
Pall Mall Menthol 1@0'~ Longer, mirder, cooler.
Tareyton If you could put Tareyton's charCoal filter on
your cigarette, you'd have a better cigarette.
Lucky Filters Real tobacco taste made real mild. ollly
in Lucky Filters. King-size or 1 {)O's.
Silva Thins f00's Lowest in "tar" of all 1 (Jg's--lower than
most kings. Yet better taste. Get in on thin.
Silva Thins Menthol fl~'s The ~ame mild taste as Silva
Thina lGO'a but with a fresh m0nthol flavor.
Montolair Fora mild. menthol taste.
Carlton A whole carton has less "tar" than three packs
of the largest-selling filter king¸
Bull Durham Extra @Fze Smokes slower for a better
tests because it's thicker than other cigar@ttes.
Hall and Half Filter Cigarettes The same fragrant Half
a.~d Half blend pipe smokers have enjoyed for yeal's.
Non,tar cigarettes
Fall Mag--King Size The long cigarette that's long
on flavor. "Outstanding--and they are milbl"
t.ucky Strike--Regular Size Lucky StrJke Means Fine
Tobacco. The finest domestic ~nd Turkish tobaccos.
Herbert Tafeyton--Kthg Size wllh Tagored Tip A f~vorite
tot over fifty y@ars because of its dist lnetive mlid taste.
Sr~o king tobacco|
Half and Half The company's leading smoking tobacco.
Burley ~tnd Bright, with a wonderful aroma.
Blue Boar American Tobacco's leader among high-
grade prpe blends, now in p0uch-in-box packing.
Genuine "Bull" Durham Far and away the NO. 1 "r eli-
your-OWn" tobacco.
Patadin Blackct~ecry."it only tastes e~{)ensive." A
quar[ty pipe tobacco at popular price.
American Cigar
Cigars
RobTan Offers more shapes than arty other cigar in the
10/" price class. Aise Roi-7~n Tips, Cigarigos and
Trumps in the 5¢ class and Golfers in the 4~ cfas.~
Antonio y Cleopalra The mildest top-duality cigar,
featuring disPnctive shapes in light and dark wr~gpers.
La Corona "Supreme the World Over"--available in a
wide variety of shapes in either ~ight c r dark wrappers.
Beck The original panatela, created in 1888. Also
Beck Pan-A Ti/~. ~nd the mild tasting Beck Chancegor.
Tipton A slender ~lgar with the new "Leo k-On" tip and
light taste. Customarily sotd 5 for 2go.
Cabahal "The Aristocrat of Fine Cigars--since f795."
Little cigars (Filter tipped)
Roi-Tan The papular-priced Fittle cigar in the soft pack.
Antonio y Cleopatra The milder~ longer rittle cigar of
distinction in an elegant CrUsh-proof go×.
James B. Beam Distillin~ I Co.
,Jim Beam Kentucky Straigh~ Bourbon Whiskey, 86 proof
16
--enjoyed throughout America and in foreign larlds.
Beam's Choice Kentucky Straight Bourbon Whiskey,
charcoa~ tgl~red alter e~ght ~'ears of ~gi~g, 86 proof.
Beam's Pin Bottle Outstanthng mellowness in Beam's
premium Kentucky Straight Bourbon Whiskey,
86.8 proof•
Bonded Beam For those who enjoy the finest in 8-yearn
old lOG proof Kentucky Straight Bourbon Whiskey.
Riccadonna An honered name in fine quality Italian
Vermouths and Sparkling Wines enjoyed on
five continents.
G gbey's Spey Royal Scotch A distinctive S-year-old
premium fight Scotch,
Sterile Y~kshire Lk~eur Made with a f~ne brandy
base and rare spices--imported from England.
Chateaux Cordials and" Liqueurs Winner of th rue
Jnternadona[ awards; produced Jn thirty delicious
flavors.
Chateaux Cocktags In seventeen different types for the
finest in convenient ellter~alning.
Bell's Scotch The largest-selling Scotch Whi==ky in
Scotland. Available in 8, 12 and 20-year-old,
Lanson Champagne A French champagne famous in
Europe and served at many Royal and State occasions.
Tay fo~ Food Prod.4cts
Mr. and MrS. "T" Bloody Mary Mix A convenient
mixer to make the perfect Bloody Mary.
Mr. and MrS. "T" Sauces P, tasty treat to enhance
shrimps, barbecues and horu d'oeuvres.
Dufly-Mott Company, Inc.
Sunshine Biscuits Inc.
Sunshine Hrispy Crackers Flaky-thin, flavorful saltine
crackers Whthh "out-test • 'am all."
Sunshine Hydrox Cookies The originai creme-gfled
chocolate sandwich cookie. Also with a mint piling.
Sunshine Hi He Crackers The all-around, round cracker
that goes with anything.
Sunshine Cheez-tt Crackers ~ellclous, inch sq~aTe
cheese crackers which are "Goad Any Old Time!"
Sunshine Vienna Fingers Pastry flavored sandwich
cookies with creamy vanilla rifling.
Sunshine Fig Bars Filled with luscious fig jam.
Sunshine Orbit Creme Sandwich Two crunchy toasted
Ceconut cookies with a delicious, vanilla filling.
Sunshi,e Go[den Fruit The fruit sandwich biscuit filled
with choice raisins.
Sunshine Graham Crackers Nutritious graham crackers,
good for young and old arike.
S~nshine Hyde Park S~ven diflerent varieties of
Sunshine'== finest--plain, sandwich and sugar wafers.
Sunshthe Vantha Waters Tender, gerden brown wafers
made ,~ith pure creamery butter ar~ whole egg~.
Sunshine Cheez-PIx A new snack crackerI finger-
shaped, with a tangy cheese flavor.
Sunshine Cheez Pleez New, cheese snack c~aeker in
party shapes,. • distinctive cheddar cheese flavoL
Sunshine Lady Joan Shortbread cookies of
ineomgBrabie flavor and texture•
Sm~Mdr~e S~ar Wafers Sugar-crisp waffled conies
filled with frosty icing•
Sunshine Shredded Wheat Ready*t o-serve cereal made
from the whole kernel of wheat.
Sunshine Lemon Coolers A new taste of fresh squeezed
lemons with a powdered sugar coating.
Sunshine VJ.P. A new saltine irl four party Ithapes,..
baked to stay crisp with any spread•
Sunshine Pizza-Pix Light and crisp snac~ sticks with
that g~at pizza flavor.
Sunshine Tween Times Delicious, coconut pastries.
F~lsh, f~dl flave~. G~t ~he~ <~en°warmed.
Sunshine Snack Division: Products include potato
chips, corn chips, corn snacks, nuts and popcorn.
MoWs Apple Sauce Five kinds of appres make Mott's
apple sauce never too sweet, never too tart.
MoWs Apple Juice Fresh apple Paver so de[icious and
crisp it alnlost crackles.
Sunsweet Prune Juice The F;elaxati~ e• Only Sunsweet
offers the same laXative strength in every glass.
SunswIel Ready-to~-C:erve Prunes Plump, luscious
prunes packed in a sugar syrup.
Moll's Puddings Ready4o-serve Creamy Rice Pudding,
Tapioca Pudding and Cherry Vanilla Pudding.
Mott's Fruit Treats Chunky apples and other fruits made
tastefully and especialry for kids--and their parents.
MoWs Figure Control Meals Control your figure, not
your appetite, wJth 3-course meals under 300 calories,
MoWs A.M. and P.M. Fruit juices blended the Mort way
lot to~-~he-cloc~ enjoyment.
Lord Moll's Ciamato The [igh t, bright anytime taste of
deliciously seasoned clam and tomato fravored cocktail.
Lord MOWS Vegetables More than 10 of the tastiest,
tende rest vegetables ever.
Lord Mott's Steam4d Clams A clambake in a can.
Tender softshelr clams, still in their shells.
Lo~ Moll's Frotert Seafood Products Seleotabth
seafood products from Chesapeake Bay.
17
Other
Directors
18
S
Sales
(in millions)
20
How our 1969
sales dollar was used
American Brands. Inc
sales totaled $2,661,478 000
*includesm~orlty~ntete~t03~,
Financial Review
Earnings
Net income per Common share was $3,65 in
1969 compared with $3.38 in 1968, an increase
of 8%. EarnJngs per share are shown below
on a quarterly basis:
Quarter 1969 1968
March 31 ...... $ .73 $ .63
June 30 ........ : ......... 86 .83
September 30 .......... 1.05 ,93
December 31 1.01 .99
$3.65 $3.38
Dividends
Dividends paid to stockholders in 1969 totaled
$54,040,000 compared to $50,931,000 paid
in the previous year. Dividend payout
represented 55% of net income. The
remainder of net income or $44,461,000 was
reteined for generar corporate purposes.
Acquisitions
Beginning in 1966 the Company acquired
100% interests in Sunshine, Beam and
Duffy-Mett, and increased its interest in
Garlaher from 13% to 67%, for an aggregate
of about $427,000,000, including the market
value of Common shares used in the Sunshine
acquisition, In 1969 these subsidiaries
contributed $83,238,000 to operating income,
representing 91% of the total
Income before taxes and minority interesl
¢in millions)
25O
225
175
Net irlcom6 per common sbar@
m TaXes ~Netincome mmlMinofitylnterest
lRetain~de~mlngs ~l~Dividends
Debt Position
During 1969 additional long-term foreign
borrowings totaling nearly $67,000,669
enabled the Company to reduce the Eurodollar
loan§ incurred in 1968 to finance temporarily
the increased investment in Gallaher Limited.
Early in the year the Company borrowed by
means of a private placement 40,000,900
Swiss trancs ($9,264,000) at an interest rate
• of 6~/4%. In November 1969 the Company's
foreign subsidiary, American Brands
Overseas, N.V., sold $25,000,000 principal
amount of 8% ,Guaranteed Debentures due
in 1981. In December 1959 the Company
borrowed 120,000,009 German marks
($32,517,000) at an interest rate of 7%
through a private placement. These funds
were taken down following the revaluation ot
the German mark. These borrowings complied
with the U.S. Government's mandatory
restraints on direct foreigh investments.
Notes payable at the end of 1969 amounted to
$97,569,009 compared with $136,948,000 a
year earlier. Total long-term debt at
December 31, 1969, was $351,422,000 which
compares with stockholders' equity of
$744,296,000.
Since 1964 the Company spent a total of
$451,666,000 for the retirement o1 its Preferred
stock, for acquiring its own Common shares
for the treasury, and for acquisitions. During
the same period, long-term debt increased by
$282,287,009.
Treasury Stock
The Company continued to purchase its own
Common stock during 1969 and acquired a
total of 374,500 shares. Of the shares in the
treasury at December 31, 1969, 1,363,365
were held for the conversion of American
Tobacco International Corporation 5V4 %
Convertible Guaranteed Debentures due 1988.
In the last five years the Company has
reacquired 2,908,490 shares of its Common
stock at a cost of $97,461,500, or $33.51 per
share. This program was approved by the
stockholders at the 1954 Annual Meeting.
Taxes
in 1969 the Company incurred federal, foreign
and other taxes on income amounting to
$128,859,000, equal to $4.77 per Common
share, including tederal excise taxes and
United Kingdom tobacco duty totaling
$1,309,159,000, income taxes, social security
and other taxes, the Company's total taxes
for 1969 amounted to $11449,390,090.
Capital Expenditures
Capital expenddures for 1969 amounted to
$41,152,000 compared with $31,348,000 in
1968. A significant portion of these
expenditures was m ado to modernize and
improve manufacturing facilities.
21
American Brands, Inc. ~d ubsid[arles
Consolidated statement of income
For years ended December 31
1969 1968
(In thousands)
22
Net sales ................. $2,661,478
$1,897,852
Cost of sales ................ ,2,108,877 1,434,622
Gross profit ............... 652,601 463,230
Advertising, selling and administrative expenses .... 287,656 239,133
Operating income ............... 264,945 224,097
Other income ................ 2,416 3,832
267,361
227,949
Interest and related charges ........... 28,748 18,185
Other deductions ............. 2,687 4,152
31,436
22,337
Income before provision for taxes on income and
minority interest ............. 235,926 295,612
Federal, foreign and other taxes on income, including
deferred income taxes, 1969, $6,127,000; 1968, $981 ,O0O 128,859 108,817
Income before minority interest .......... 107,067 98,795
Minority interest in earnings of subsidiaries • 8,666
3,864
Net income ............. $ 98,501 $ 92,911
Net income per Common share:
Without dilution ..... $3.65
$3.38
Fully diluted .............. 3.56 3.32
~e~ accompanying notes.
Consolidated statement of retained earnings
For years ended December 31
1969 1968
(In thousands)
Balance beglnningofyear
Netincome
Cash dividends: 1969, $2toO per share; 1968, $1.875 per share
Excess of cost over par value of Treasury shares delivered
in connection with an acquisition, less amount apportioned
Zo
paid-in surplus ...............
Balance end of year .............
$541,877 $501,265
98,501 92,911
640,178 594,176
54,040 50,931
-- 1,568
$586,138 $541,677
See accompanying notes.
23
American Brands, Inc. o.d subsidiaries
Consolidated balance sheet
December 31 1969 1968
(In thousands)
Assets
Cash .................... $, 38,860
Accounts receivable, customers, less allowances for
discounts and doubtful accounts, 1969, $4,206,060; 1968
$4,210,000 ................. 198,307
inventories .................. 855,396
Other current assets .............. 16,674
$ 40,748
190,086
878,750
21,475
Total current assets .............. 1,109,237
Investments, at cost ............. 13,224
Property, plant and equipment, at cost, less accumulated
depreciation and amortization, 1969, $206,625,000; 1968,
$189,661,000 ................ 283,389
Cost in excess of net assets of businesses acquired .... 56,830
Brands and trademarks ........... 27,066
Other assets ................. 18,127
1,131,059
8,644
276,428
53,666
27,057
15,207
Total assets
..... $1,507,873
$1,512,061
24
See accompanying notcs.
December31 1969 1968
(Inthousands)
Liabilities
Notes payable ................ $ 97,569
$ 136,948
Accounts payable and accrued expenses ....... 101,041 97,956
Accrued taxes, including current portion of deferred
, incometaxes ........... 105,429 91,541
Current portion of long-term debt ....... 2,139 16,078
Tota] current liabilities ............. 306,178
342,523
Long-term debt ................ 351,422 352,421
Deferred income taxes and other deferred credits 17,924 14,359
Minority interest in consolidated subsidiaries ..... 88,053 90,658
763,577
796~961
Stockholders; equity
Common stock, par value $6.25 per share .......
Paid-in surplus . : ............
Retained earnings ...............
Less, Treasury stock, at cost ..........
Totalsteckholders'equity .............
179,352 179,352
39,276 39,205
686,138 541,677
894,766 760,234
60,470 48,134
744,296 712,100
c
Total liabilities and stockholders' equity ....... $1,507,878
$1,512,061
29
Notes accompanying financial statements
Principles of consolidation:
The consoffdated financial statements include the accounts of the Company and all domestic
and foreign subsidiaries.
In July 1968, a 76% interest in Duffy-Mott Company, Inc. was acquired through the purchase
of outstanding stock. This interest was increased to 78% as of December 31, 1968, and to 100%
during 1969, AS of September f, 1968, equity in the Ordinary Stock of Gallaher Limited was in-
creased, through the purchase of additional shares, from 13% to 67%. The operations of these
companies and their subsidiaries have been included in the consolidated financial statements
since dates of acqufsition of a majority interest, with provision for minority interest,
Cost in excess of net assets of businesses acquired and brands and trademarks are not
being amortized since, in the opinion of the Company, there has been no diminution in value
since acquisition.
Accounts of foreign subsidiaries have been translated at appropriate rates of exchange. The
consolidated financial statements include the following amounts related to operations outside
the Western Hemisphere:
Total assets ..............
Total liabilities (excluding minority interest) ....
Minority interest .............
Net income ...............
Inventories:
Leaftobacco ................
Bulk whiskeys ................
Other raw materials and supplies ..........
Finished products ...............
Total ..................
December 31
1969 1968
([nthousands)
$391,982 $878,822
154,958 145,879
88,053 85,038
15,653 6,850
December31
1969 1968
(In thousands)
$599,054 $826,906
58,656 56,786
52,673 52,031
145~013 143,027
$855,396 $878,758
Inventories are priced at the lower of cost (on various "'average," "firstqn first-out"
or "specific identification"
bases) or market. It is a generally recognized trade p~actice to classify the total
amount of leaf tobacco and bulk
whiskey inventories as a current asset, although part of such inventories, due to
duration of aging processes,
26 ordil3atily would not be realized within one year,
Property, plant and equipment:
December 31, 1969
Accumulated
Depreciation
Assets and Amortization Net
Land, improvements to land and leaseholds .... $ 22,679
Buildings ............... 142,398
Machinery and equipment ........... 319,327
Construction in process 5 611
Total ............. $490,015
(In thousands)
$ 2,469 $ 20,210
58,231 84,167
145,926 173,401
- 5,61!
$206,626 $283,389
Depreciation and amortization, which with minor exception is computed using the straight-line
method, amounted
to $29,898,000 in 1969 and $23,361,000 in 1968,
Long-term debt:
Payable in U.S. currency:
Debentures:
Twenty-five year 31/4 %, due February 1,1977 (a) . .
Twenty-five year 4%%, subordinated, due July 1, 1990
(sinking fund requirements begin in 1971) (a) , . .
Twenty-five year 57/8%, due July 1, 1992 (sinking fund
requirements begin in 1973) .........
'Twenty year 5V4 % convertible, guaranteed, due
August 1, 1988 (b) ............
Twelve year 8% guaranteed, due November 15. 1981
(sinking fund requirements begin in 1971) (c)
Eurodollar notes under revolving credit arrangements,
interest ranging from 11 ~% to 121/ls% (d) ....
Miscellaneous mortgages and notes .......
Payable in foreign currencies:
7% German mark borrowings, due December 31, 1979
(sit'king fund requirements begin in 1975) .....
6~/4% Swiss franc borrowings, due February 28, 1984 . •
6V4 % Guaranteed Swiss franc borrowings, due December
30, 1973 ................
6% Brgish sterling notes, due 1976 through 1985 ....
Principal Amounts at
December 31, 1969
(In thousands)
$ 19,326
7,235
100,008
49,081
18,700
27,900
21,852
54,375
9,264
11,628
43,200
353,561
2,139
$351,422
Less current portion ............
Total ..................
(a) Am~untssh~wnarene~fdebe~turesacquiredbythe~mpanythr~ugh~penma~ket~urchasest~c~versrnking
fund requirements• Such requirements have been met through 1970 for the 31/4 % debentures and
through 1972
for the 4% % debentures,
(b) These debentures sold by a subsidiary in August 1908, are guaranteed by the Company and are
convertible into
the Gem party's Co mmon stock at $36 a share. At December 31,1969, a total of 1,363,305 shares
of Common stock
at a cost of $42,574,000 were held in treasury and reserved for such conversions.
(e) These debentures sold by a subsidiary in November 1969, are guaranteed by the Company, Pursuant
to terms
of delayed delivery contracts, $6,300,009 of additional debentures were issued in January 1970•
(d) These notes represent borrowings under Eurodollar revolving credit arrangements with oertarn
banks aggre-
gating $80,000,O09. The maturity of the notes may range from 30 to 180 days and the interest
rate is fixed at the
time Of each borrowing, Of these lines of credit, $30,000,060 expire on September 2, 1970, and
the barance
on December 31, 1973•
27
Stockholders' equity:
At the Annual Meeting in May 1969, the shareholders approved an increase from 40,000,000 to
6g,00O,9O0 in the total authorized shares of Common stock and authorized 15,0go,000 shares of
Preferred stock, none of which has been issued. At December 31, 1969 and 1968, there were
28,696,253 Common shares issued, of which, respectively, 26,824,t 76 shares and 27,158,003 shares
were outstanding and t ,872,077 shares and 1,535,250 shares were held in the treasury.
Curing 1969 the treasury shares increased through additional purchases of 374,500 shares
at a cost of $13,652,00g, and decreased by 40,673 shares ($1,316,000) as the result of shares
delivered upon conversion of debentures and exercise of stock options.
Consolidated paid-in surplus for the year ended December 31, 1969, increased in the net
amount of $71,000 in connection with the conversion of 5V4 % convertible debentures and the
exercise of stock options.
Stock options:
Under the Company's qualiPed stock option plan, options may be granted to key employees to
purchase shares of the Company's Common stock at fair market values at dates 01 grant. Options
extend for a term of five years and may not be exercised until one year from date of grant.
Changes during 1969 in shares under option were as foPows:
Shares
Under option, December 31, 1968 .........
89,450
Options granted ...............
46,500
Options exercised (at $32.25 and $34.3125 per share) . .
(15,150)
Options lapsed ................
(2,700)
Under option, December 31, 1969 (at prices ranging from •
$32.25 to $38.25 per share) ...........
118,100
At December 31, 1969, options for 72,600 shares were exercisable and 439.700 shares were
available under the Plan for future options. Treasury shares were delivered on exercise of options
in 1969.
Pension plans:
The Company and its consolidated subsidiaries have a number of funded pension plans covering
substantially all of their employees. The total pension expense for the years 1959 and 1968 was
$11,916,0OO and $10,395,000, respectively, including provision for past service costs. Past service
costs are being amortized over periods ranging from 21 to 39 years.
The actuarially computed value of vested benefits for all plans as of the latest valuation date
exceeded the total of the pension funds at that date by approximately $38,000,000.
28
Earnings per share;
Net income per share without dilution is based on the weighted average number of shares of
Common stock outstanding in each year.
Fully diluted net income per share assumes that the 5~/4 % convertible debentures were con-
verted at their time of issuance (August 1965) and that outstanding shares and related interest,
net of tax effect, were adjusted accordingly. It also assumes that outstanding shares were in-
creased by shares issuable upon exercise of stock options (where market price exceeds exer-
cise price), less shares which could have been purchased with the related proceeds.
American Brands, Inc. nd,ob,id ,oo
Consolidated statement of source and application of funds
For years ended December 31 1959
(in thousands)
1968
Source of funds
Net income .............
Minority interest in earnings of subsidiaries, net of dividends
Charges to income not requiring current cash outlay:
Depreciation and amortization .....
Net book value of fixed assets retired or sold . . .
Net provision for noncurrent deferred income taxes and
other deferred credits .....
Increase (Decrease) in long-term debt .....
Minority interest in subsidiaries at dates of acquisitions .
$ 98,501 $ 92,911
3,096 2,331
29,898 23,361
4,783 3,140
3,565 (1,857)
(999) 176,135
88,313
$136,844 $384,334
Application of funds
Dividends to stockholders ............ $ 54,040
$ 50,931
Additions to property, plant and equipment ...... 41,152 31,348
Net noncurrent assets of businesses acquired ..... 10,608
Minority interest in Dufly-Mott acquired in 1969 ..... 5,701
Cost in excess of net assets in acquisitions of
businesses and minority interests ........ 3,164 42,482
Purchases of Treasury stock ........... 13,652 39,831
Increase in working c#pital ............ 14,523 211,584
Other, net ................. 6,612 (2,450)
$139,844 $384,834
See accompanying notes.
Report:of Independent Certified Public Accountants
The Board of Directors and Stockholders of
American Brands, Inc.:
We have examined the consolidated balance sheet of American Brands, Inc. and Subsidiaries
as of December 31, 1£69, and the related statements of income, retained earnings and source
and application of funds for the year then ended. Our examination was made in accordance
with generally accepted auditing standards, and accordingly included such tests of the account-
;ng records and such other auditing procedures as we considered necessary in the circum-
stances. We previously examined and reported upon the consolidated financial statements of
the Company for the year ended December 31, 1968.
In our opinion, the aforementioned financial statements present fairly the consolidated financial
position o1 American Brands, Inc. and Subsidiaries at December 31, 1969 and 1968, and the
consolidated results of their operations and the source and application of their lunds for the
years then ended, in conformity with generally accepted accounbng principles applied on a
consistent basis.
Lybrand, Ross Bros. & Montgomery
2 Broadway, New York, N. Y.
Feb ruary 2, 1970
29
American Brands, Inc. and subsidiaries
Ten-year financial review
(rn thousands except per share amounts)
1969 1968 1967
Sales, Income, Dividends
Net sales ............ $2,661,478 $1,997,852
$1,493,535
Income before taxes on income and minority interest • 235,526 205,612
173,769
Taxes on income ............. 128,859 108,817 84,542
Income applicable to minority interest ...... 8,566 3,884
Net income
Amount ................ 98,501
92,911 89,227
Available per Common share
Without dilution ............ 3,65 8.38
3.15
Fully diluted ............. 3.56 3.32
DivJdends
Common
Amount ............... 54,040
50,931 50,996
Per share ..............2.00 1.875 1.6g
Preferred (retired as of June 30, 1965} ..... --
Added to retained earnings ......... 44,461 41,980 39,231
Assets, Liabilities, Stockholders' Equity
Inventories ............... $ 855,396 $ 878,750 $
695,751
Current assets .............. 1,109,237 1,131,059 608,289
Working capital .............. 803,059 785,536 576,952
Property, plant and equipment--net ....... 283,369 276,428 205,957
Total assets ............... 1,507,873 1,512,061 1,073,848
Long-term debt .............. 351,422 352,421 127,700
Short-term debt .............. 99,700 153,026 108,544
Stockholders' equity ............ 744,296 712,100 706,294
Book value per Common share ......... 27.75 26.22 25.13
3O
Miscellaneous
Capital expenditures ............ 41,152
31,348 30,820
Number of stockholders ........ 137 145 145
Average shares outstanding during year ..... 27,003 27,514 28,320
Note! Per share amounts reflect the two-for-one stock splits in 1962 and 1960, Dividends per Common
8tlare are bssed on amounts paid by American B~ands, Inc
1966 1965 1964 1963 1962
1961 1980
$1,427,572 $1,432,637 $1,404,225 $1,391,869 $1,379,526
$1,356,236 $1,320,070
161,192 167,729 161,679 160,483 157,479
158,797 143,229
75,173 81,724 81,220 89,881 83,511
85,492 77,860
86,019 86,005 80,459 76,602 75,959
73,915 65,369
8.01 2,88 2.63 2.49 2.51
2.38 2.11
61,287 46,321 47,152 44,516 44,315
41,724 40,768
1.80 1.65 1.60 1.50 1.50
1.49 1.39
1,583 3.167 3,167 3,167
3,167 3,187
94,732 , 96 191 30,140 28,919 29,477
25,424 21,434
$ 716,877 $ 587,549 $ 669,106 $ 680,664 $ 715,276 $
741,030 $ 696,718
924,994 781,755 759,299 772,931 811,155
834,368 792,905
544,049 583,977 634,726 634,984 634,049
614,951 528,191
193,630 156,729 , 144,914 126.764 107,317
105,702 105,897
1,076,349 955,975 920,467 916,630 937,208
959,581 917,658
108,350 75,507 70,902 79,748 90,067
100,199 135,740
158,044 97,969 32,250 42,001 87,243
131,057 88,556
679,312 674,396 719,861 693,286 664,367
634,626 607,272
23.68 23.94 22.74 21.76 29.78
19.77 18.82
50,106 23,631 26.969 30,682 12,173
11,274 15,396
141 119 125 119 107
97 97
29,603 99,325 29,403 29,435 29,435
99,426 29,456
31
II
Directors
Robert B. Walker*
Chairman of the Board
Alfred F, Bowden
Philip H. Cohen
Horst G. Denk
Henry G. French
Boone Gross
Robert K. Heimann*
Cyril F. Hetsko"
Donald M. Klock
Everett Kovler
Julien B. McCarthy
Charles A. Mehos*
Eugene F, Mooney
Mark R. Norman
George J. Schramm*
John B. Sparrow
George H. Woodard*
• E×eoutive committee
Officers
Robert B. Walker
Chairman of the Board
and Chief Executive Officer
Robert K. Heimann
President and Chief Operating Officer
Cyril F. Hetsko
Senior Vice President
and General Counsel
Charles A. Mehos
Vice President and Treasurer
George J, Schramm
Vice President and Controller
John W. Hanfon
Secretary
Richard H. Stinnette
Assistant to the Chairman of the Board
Charles R. McKeever
Assistant to the President
Zeno B. TeeL Jr.
Assistant Controller
Frederick W. Kenny
Assistant Secretary
Kenneth L. Beck
Assistant Treasurer
William H. Burke
Assistant Treasurer
32
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