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i #. wxiiLaxn coMPAxz bUDGET TEAR 1953 ill Operating Budget Consolidation of the detailed budgets, submitted by the various divisions and departments, into the company operating budget results in a forecast of the following financial re sultss Sales are expected to be $266,800,356.00, an increase of $51,943,356.00 or 24.18s over 1952. This increase can be mainly attributed to three products; Old Gold (increase of 122,350,000.00 or 12.38%); Embassy (increase of $5,574,000.00 or 90.83%) and Kent (increase of $21,819,000.00 or 444.25%). After application of forecast Cost Of Sales a Manufacturing~ Profit of $48,674,846.00 results. This is an increase of $9,620,838.00 4 over 1952. Cost of Sales, considered on a percentage to sales basis are estimated at 79,78%, approximately the same as in 1952. (This is based on the assumption that the greater profit spread on Kent cigarettes xill off- seti increased leaf, labor and overhead expenses.) Department Expenses (Traneportation Expense, Advertising Expense, Sales Promotion Expense, Selling Expense and Administrative Expense) have been budgeted at $32,260,870.00 an increase of $7,315,610.00 over 1952. The major portion of this increase results from the stepped up program of Advertising, Sales Promotion and Selling on the Kent and Enbassy brands. The balance of the increase ia main3,y attributable to salary increases (general and Merit). J N .1 ~ ~ ~

2 I I Profit before State and Federal Taxes is estimated at $13,812,552.00 an increase of $1,726,313.00. After application of the estimated State and Federal Taxes (we assumed that the Excess Prof its Tax would end at June 30) an estimated Net Income of $5,592,552.00 results, an increase of $626..607.00 over 1952. This Net Income represents $2.24 a share as comp ared to $1.99 in 1952. Capital Budget Budgeted at $1,367,127.88, a decrease of $1,163,361.12 from 1952. The 1952 budget included approximately $1,000,000.00 of expendi- tures for machinery and equipment required to produce the Kent cigarette which principally accounts for the difference between the two budgets. Three major items; (1) the Installation of Threshing Equipment at Danville and Lexington ($400,000.00) (2) the Purchase of 12 Cigarette Making Machines at Jersey City ($216,000.00) and (3) the normal Replacement of about 1/3 of the Salesmens automobiles plus 82 additional cars for the increase in the selling force ($347,800.00) constitute about 71% of the total budget. The remainder covers necessary maintenance, replacement of old or obsolete equipment, the acquisition of certain equipment necessitated by better production methods, working condition improvements and office furniture and fixtures.