Tobacco Documents Online

81215781 .C

To Manage Wisely... To Inspire Steadily... To Look Ahead 'Clearly These precepts guide your Board of Directors in administering the affairs of your company IIIE'RBERT A. KENT (1939), Chairman oj'tJie Board WILLIAx J. Hsl.l.r;vr49k1 i Fxecutire Vice Presidenl' JcnSr.PxiJL 13iAckv:aLL tQ9b6i Director ol' Mnnu1acttirinr ROBERT M. GANGER (1950), President L.EWIF GRCBER (1946) . Vice President and Dire,torot~Sal'es Frz_sN K HbeBSCFLL (19-4U') Vice 1'resrdent andGeneral' Manager, C:igarD'iz,ision JIu:LxI\` E. UA«'Le.Y (1950)', Vice Presidentand Director, I:I)rfI & ln,l"lor .aLDe.J.a znis (1950) Director ol Advertising llON~ALD~.A. H6SUk:fis0\", (1916) '.-~.T'eR.\nrer nnd~. Director, TlcentiethuCentrcrr'Fox~Film Corp. DB. H.axr,IS li. P.altxr:LL (1930) ,Director of ' Research F. GLA'DDF\-S};aRLE (1913) Ihdustrialist Iks-I., H. PeAr; r19;It311 1'ice President andDirector o), I eajPurchases TODD WOOL.(193a )~. Vice~President and Secretary. The Year sholcn in, parentheses is the Year of first election as a Director

ANNUAL PROGnE,s REPORT for the Year Ended December 31, 1952 zr~ `lair~G COomfzMI O Maker of OLDGoLD, EMBASSY andl KENT Cigarettes, ML-RIEL Cigars„and other Tobacco Products OFFICERS HERBERT A. KE\T . . . . . . . . . . . ROBERT 11'I. GA\GER . . . . . . . . . . W'ILLIARti J. 11ALLEY . . . LE WTS' GRUBER FRANK HOPEWELL IRVIi\ H. PEAK TODD WOOL ., GEORGE 0. DAVIES JOH\ Ji. DARBY . Chairman, of the Board . . . . . President ExecutiR-e NicePresident ...... Vice:President and Director of Sales Vice President and'Generat \Ianager of Cigar Divisioni V'icePresident and Direct'or of Leaf Purchases Vice President, Secretary and Director of Legal Department . . ., . . . . . . . . . . . . . . . Treasurer . . . . . . . . . . . . Compt'roller Other Corporate Inforniation General Counsel . . . . . . . . . . . . .. . . . . . . . . . . . . . . . Perkin:- Daniels & Perkins Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Haskins& Sells Transfer Agent . . . . . . .. . . . . . . . . . .. . . Thc New Iork Trust Company. New Iork. N. Y. Registrar. . . . . . . . . . . . . . . . . The latiional'CityBankofl\ewYork. NewYork; N. I: Adver6isingA-encies . . ., . . . . . ., LenneniSN'ewel1. Inc. (OLD GOLD. EaiBASSY; b4tiRIEL)~; Nour14 & Rubicam, Inc.(KENT) ; Albert Frank-Guenther Law. Inc. IiFinanci'al ii Executive Offices . . . . . . . . . . . . . . . . . . • . . . 1'i19 '11Ccst-l0th Street';'_\ew York 18, N. Y. Corporate Offices . . . . . . . . . . . . . . . . . . • • . . 15 Exchan~e Place, Jersey City, N. J. b'lanufacturina Plants . . . . . . . . . . . . . . Jersey Cit'1-, N. J.; Louisville, Kv.; Richmond. Va. Leaf-Storage Warehouses .. Louisville, Ky.; Richmond, Va.; Lexington„Ky..; Danville, Va.; Llancaster_ Pa.; Madison, Wis.; La Crosse. Wis.: Evansville. XX'is,: Windsor. Conn. St'earmeries . . .. . . . . . .. . . . . . . . . . .. . . Louisville. Ky.: Lexington. Ky.: Danville. Va. Fieldland'DivisionSales Offices . . . . . . . . . . . . . . . . . . . . . .. . In All Principal Cities Subsidiary . . . . . . . . .. . . . . . . . . . .. . . . . Federal Tin Company. Ilnc., Baltimorc. Md.

Our 1952 Results at a Glance 1902 1951 PERCE\ T INCREASE Tt''e received: From sales of our products . . . . . . . . . . $2114,508,-182 $188,447,430 14 io Our costs zvere: Federal' Internal! R'evenuest~amps . . . . $100;213;951 $ 84;464;807,6 19;c Leaf tobacco; other materials and services; and miscellaneous costs . . 79,257 349 72 340 41'r 1!0 % , Wages and'salaries . .. . . 18,317,437 , , 16,380,37 $ 1'2;0 Depreciation . . . . . . . . . . . 950,870 815,827 17% Interest paid to banks and bondholders . 2,026;607 1,377,536 47 ~7c Federal and State taxes on income and other taxes . 8.0-11,323' 7,941,924 1`0 These costs totaled . . . . . . . . . . . . . . 5208',807.5-10 $183;320;958'. I 1-1 `7, Leai ing us net income o f ........... $ ', 5,700.942 '. S 5,126,472 11 j'o" Whic izoas allocated asf'ollozos: Cash dividends . . . . . . . . . . . . . . . . . $ 4,130;307 8 4,355,-12 7 Retained for future growth . . . . . . . . . . . . 1,270,635 771,045 Our shareholders'investment at year-end zcas .. S ' 67,820,51'2 "~ 66,549,877 Which belonged to our shareholders as f'olloccs: Preferred shareholders . . . . . . . . . . . . . . . . 14 ;o 15 Common, shareholders(includina retained earninas). . . . . Andbenefitsthese mernbers of the Lorillard familx: 86~0 85~0 Preferred shareholders (year-end!) . . . . . . . . . . . . 2;0U9 2,096 Common shareholders (year-end) . . .. . . . . . . . . . 26.320 26,243 Salaried employees (',year-end) . . . . . . . . . . . . 11,322 1,340 Wage-earninb employees ( year-end ) . . . . . . . . . . . Results per comnton share: 5,179 4,984 Net income . . . . . . . . . . . . . . . . . . . . . ~ 2.01 S 1.78' Dividends . . . . . . . . . . . . . . . . . . . . . . ~ 1.50 S ' 1.50 Book value . . . . . . . . . . . . . . . . . . . . $23.24 $22.73 Annual Meeting and Proxy TheAnnualATeeting of Lorill'ard shareholders will be held on April 7; 1953. Notice of this Meeting isen« closed with this Report, along with proxy and' proxy statement. Approximately 74%, of our shareholders own 100 shares or less. As we said ini a previous Annual. Report: "This means we are financed by R1ain Street. N1"e like this situation because it makes small holders imporUant. It makes each proxy, for however few shares, spokesman for an individual who works, saves and invests in his future security." Your proxy is thus your way to approve or dis- approve of Manaaement's stewardslrip: Your vot'e is therefore important personally to 11lanagement. If you are unable to attend our Annual Aleetinb iniNew York on Aprill 7~, 1953', please sign and return your proxy before you put it aside. It will let us knonvof your continued interest.

A YEAR OF PROGRESS Signi ficant 1952 developments as seen by our Management ANOTHER YEAR of work has been added to Lorillard's long history, and' to Management now comes the privilege of giving, an accounting, of its stewardship to the owners of our Company. This we always look upon as an opportunity. For we sincerely believe that only when share- holders are fully informed- in as clear and con- cise a manner as possible - can they share wit6 us in Management a real: understanding of what makes our Company tick - and what will make it tick better in the days to come. Trends in 1952 The past year was no ordinary one. On the contrary, 1952 turned out to be a year of almost revolutionary change in the tobacco industry. and - we are happy to say - a year of progress for Lorillard under these challenging conditions. It was a year in which NIanagement served our shareholdersw-it'h the greatest sales volume in his- tory - and a year in which Lorillard' did better than industry averages in volume and earnings and also increased its share of the market. It' was a year in which the Government again took more than half ofl our earnings in income taxes - and a year in which there was no relief from its hold on leaf costs and selling prices. It was also a year in which kina sizecigarettes surged from 12 o to more than 18;'0 of total con- sumption - and filter types took on d'ramat'ie new- stature as a cibarette of emerging importance. Of many accomplishments, outstanding, was the gratifying performance of OLD GOLD, our principal brand. Its sales rose once again to mark its fifth vear of consistent growth - in the face of! an~ industrydechrae in the total sales of regular- lenath cigarettes. Over-all, the Company's net sales in 1952 reached 521-1.50$J82, or 14`,0ahead ofl 1951. to set a new high record in our 193-year history. Of the increase in sales of $26,061',052, ap- prosimately $16,000,000 resulted from gains in volume and the remainder from higher costs for Internal Revenue stamps, passed on in our selling prices since November 1, 1951. After paying all manufacturing cost's and other expenses, including Federall and State income t'axes, we had left as net! income f'or 1952 an amount of $S„700,9d2„ equivalent, after pre- ferred dividends, to S2:01 per common share. This was13'`,'c' more than the corresponding $1!.:i.d earned per share in 19511. Other steps ahead Bringing sales volnme to a record high was not the only achievement of Lorillard people in 1952. Another outstanding accomplishment was that of our Research and llanufacturing Divisions in perfecting the world s first cigarette of high filtra- tion - ournew KENT with the Nlicronite filter; int'rodlrced last March. KEVT's acceptance by smokers, we are de- lighted to report, has continuously run well ahead of usual norms for a new cigarette; and to meet consumer demand, we were able to double - and! At Annual'Jleeting,lastl•.ear, allofficensanddirectors of the Compano• n-ere onliandto drscussLorillord's operatdons and progress zciNz shareholilerspresent and, to ansuer qtiestdons. 3

redouble - our originall production~ capacity. In still another direction, we moved forward. As,a result of a two-year study of ourplant'h expansion needs, our Board of Directors last December authorized the acquisition of an~ 80- acre tract at Greensboro, NortL Carolina. Heree we expect to erect new warehousing and process- ing facilities this year to meet an urgent and immediat'e need'. In 11954, as part of a~ long-range expansion, we plan, to start construction on this site of al modern, highly efficient cigarette factory. The penalty of growth Inevitably, as any company pushes forward,~ it faces the reality of financing its enlarged opera, tions. Short-term bank Ibans ($49',700;000' at 1952 year-end) historically have met, in part, our leaf purchases during crop-buying seasons. With expanding operat'ions„ however, short-term bor- rowings tend to increase until, replaced periodi- cally with more permanent capital. For some time now, your directbrs have given this paramount question their closest attention. That additional permanent capital, to replace cur- rent borrowings, is needed is clearly evident. What f'orm the new financing should take, its amount and tiniing, are still under consideration. What lies ahead The significant shifts in cigarette demand that occurred in 1952 are now, well-known. In particu- lar, king-size and filter types confronted the indus- try with the fact of their very important growth. Today there is every indication that these trends will accelerate in 1953, bringing even greater changes - and challenges. Such changes always bring with them a: greatly intensified pro- motion activity. It may well be that 1953 will see the heaviest competitive :cigarette advertisingthe industry has ever witnessed. Whatever thetrends,, we have prepared our- selvestorneet them with aggressive action. In adv.ertising. in merchandlsing, and in manufac- tiuring our plans constitute the most realistic and scientific approachwehaveever developed for any year - tiet' they are flexible. too, tomeet de- velopments. Weheiieve they give us the soundiest basis vet for increasing our share of the market. This year, too. may see develbpments of ~ti'ide interest to ourindustrvin otherdia-ections. Price controls are due to exlpi're on April 30. 19-33'. if 4

YPe receired 455.93: pex s6am trom safes j$3.93 per comrrtem ahare was received in 1952 from sales of products (1951$75.49). 5.81 per common share or 09's went for interest'payments to banks and bondholders (1951: $,55); REYERUE STAMPS ~ l ~ ,Ys F / ~~ $40.15 per common share ou 46.7% $31.75 per common share or 37:0% went to the, Federal gpvernment'for I went fortleafitoba¢co, other pur Revenue Stamps'(1951: $33.84). chases and costs (1951: $28.98), r $3.22 per common shaoe or,3.8R went for taxes on incame, and other business taxes (1951: $3:18). f.17 or0.3% went to pay dividends on our 7% Cumulative I Preferred Stock(19511,$ 27)1 57.34 per common shane or,8.5 1 waspaid'out in wages and salaries tm our emplmyees 1951: $6.56). CBMMOR'.mvIDERBS' ~ $1,50 per common share' or 181. went as dividends'to Lbrillard cmmmon shareholders (1951: $1150) OUR 1952' PERFORMANCE - EACH' COM'MON! SHARE BEPRECIATrBR' >t~ $.38 per common share or 0.4R'was provided for wearout of plants andeqpipmemt (1951: $33). --~ I $.51 per commmn share or0.6S was left im the busness for, future growth needs (1951: $.28); not sooner, and present' excess-profit levies also die ou~~June'30i1953' unless extended. 1sand when these controls and imposts come off„ it should not onli~ remove obstructions to better operations but also permit'~ a: greater exercise of free enterprise in business. Diridertds The importance of dividends to our shareholdi ersis:something we never~ minimize. In declaring, them, our Boardlof Directors endeavors to make them as large as possible; consistent with the needs of our business. Although our 1952 income available for common shares exceeded that of 1951 by 13%, the prudence of retaining more resources to meet the needs of our gro~.ing,busi- ness seemed evident. With this in mind, our Board declared total dividend payments for the year ofl $1.50 per, common share - the same as in 1951. Shareholders will' be interested to know that. on this score, dividend payments to tliem~for the: five, past years, through 1952;,represented a 71 °1average payout of'net earnings available for com- mon stock: one of the highest in our industry. By contrast. Covernment figures for the last fiv-e years available I 1917-51 1 show that the average' pav- out for manufacturing corporations is only 38!';0. :d sineere tYibuteJ'lanyerirlences ofshareholder support andl understanding have come to us in the past'~},ear_ for ~shiehse'are sincerely grateful. NCe ~~elcomeat all times the acti~-einterest of the Company's owners in. our a$aiis and ice hope for a continu- ing expresc.ion of shareholder sentiment hv:letters. visits, and attendance at our annual meetings. Should you have any questions after study,ing this lieport. it is your right to ask them, either at'~ our Annual Jleeting on April i, 1953 or by maill We shall be delighted'' to ansv.en them. And, as is our custom, subsequent to the Meeting, alll shareholdorswill receii-e:a post-]IeetingReporrt. Andl now a word about our outlook. Perhaps our greatest asset'~is the fact that.although P Loril- lard Compan~-: may be old'and honorel in years, it is young andalert in id'eas and'action. 1'Iore- over, \lanagement has a stake ini Lorillard's gro~cth, because each director and nearly every officer owns some shares of stock. The past has been encoura,ing, andlprospects ahead give us reason for optimism. 1~~i tb resources greater than ever before.andlour corporate health andlvig.or at alllt'~imc hig~hs. n e looli forward to the futuren-ith confidence iiiour abilitg' to~make the most ofl ecery- opportunit} it sill bring. ~_ I V ~ -~U- TOBACCB PURCHASES } . . CHAIRIL4S'.OF TIIE RQ.aRnnRESIUE\T February ?7;19,i3

® B`UILDING- OUR BUSINESS- I N 1952, A brief review of activities and accomplishments- First... About Our People In teamwork and results, they made many real contributions P EOPLE make a company. And their ideas and enterprise make a company's progress. In 11952especially, Lorillard people demonstrated this. They produced an& sold more Lorillard products than in, any previous year. To achieve this record result„ they brought to their jobs new ideas, and new and better ways of doing things: In selling, in leaf buying, in man- ufacturing - in research, advertising, and finan- cial operations - their efforts and their quest for efficiency brought many important advancements. New officers Ini Management changes, Robert M. Ganger, formerly our Executive Vice President, was elected President on NIay 1, 1952, becoming our chief executive officer as Herbert A. Kent assumed' the Chairmanship of our Board. In his tenyearsn as President, Mr. Kent's magnificent guidhnce, his ableloadership; and long-range vision built great strength for tlie Company. He will continue actively to counsel' and inspire: us as we work to foster our growing business. On May 1, 1952, our Board also made William J. Halley, f'ormerly Vice President and Director of Finance, our new Executive Vice President, and elevated Lewis Gruber, Director of Sales, to Vice President. Both~ men have had long, prac- tical'experience in the affairs of our Company, and have made notable contributions to its progress. New depth of management In almost every company's development, it ar- rives at a point where it feels that an appraisal of its executive assets would be helpful in furthering its growthL Usually this is done by independent management' engineers, whose ob j ective viewpoint is especially valuable in such evaluations. Over three years ago, as a long-range step, our Company had such a survey made - to find' out how we could best capitalize on the executive abil: ity and' experience already in the organization;; and to determine in what areas we needed new talents not available from within the Company. As a result, we are today utilizing the over-alll executive ability of our top managerial staff with. greater efficiency. And, adding to our depth of management, we have attracted to our organiza- tion a new group of'~ younger men with specialized skills - in financialladmini'stration and budgetary control; in treasury operations, in public relations, in market researchy in industrial relations and' in manufacturing. Their average age is 39. Meanwhile, our new President, as one of his first steps, initiated a review and audit by the same management engineers of our progress in~ executive development since they made their orig- inal recommendations. As a consequence, further steps to broaden this activity are now under way. Moving, ahead with Lorillard Promotion from within the ranks is a basic Lorillard policy. Perhaps there is no better ex- ample of this than our Sales Department. There, as elsewhere, we operate ani active per- sonnel-advancement program, based on modern~ job evaluation~ and merit ratinga; which system- atically recognizes and rewards individual tal- ents. During 1952alone, 45 merit promotions in our Sales Department advanced men of qualified abilityt~olarger responsibilities. Each, gained! his basicLorillardiexperience by starting inthe ranks: At Lorillard factories, too, trainee programs are fittina,younger men to move up as need arises. They are taken into our plants from sehool~ and there rotated from one operation to another. Afterwards, they are assigned'to the aetivitiesforwhich they have shown the most aptitude. There, under the experienced eye of our factory managements; they have the opportunity to pre- pare for advancement to supervisory responsi- bilities as need and their own abilities determine. 6

SamplingofL'orillardbrandswinsfriersds and Lorillard,carlonfixtures.acta,sretailer's,cig-Promotiontie•insatspecialecentskeep,Larillard. buyers-arnong publieand Services. Heree tank' arette'store,'.'dispense all,leading brands, put' brands in public eye. This fdoatat Sfiss.4mericamengetOt.n('iot.nhn-aoeurersaFt.Hood,Tez. ours.one¢uaGbasisuith'largrrcompetitors`:, Pageant featured'OLD GOLD Dancing Pack, Our Sales Continued to Grow In 1952, we achieved the largest volume in our history ORILLARD SALES iwthe aggregate for 1952 not only set a new, record high. In peroentage of increase, our major brands also did better than industry averages, on~the basis of published esti- mates, widely accepted as reliable. For example: Industry sales of regular-Ibngth cigarettes de- clined nearly 3% from the preceding year, due largely to kiing-size encroachment. Against this trend„O0 LD GOLD; our principal brand, showed the highest percentage gain ofl alll standard sizes. King size units as a whole advanced 54`,ro. Here again, our brand''~EhtenssY recorded an advance of better than 80`d. Industry unit sales of alllcigars in our classes increased about 4%. By contrast, MURIEL, our leading cigar brand, ran ahead of 1951 by better than 18%. HEADLINE and VAV BtBBER, other Lorillard cigars, also showed strength after drops which followed price increases. Again in 1952, as in prior years, industry sales of smoking and chewing tobaccos fell off~ in a con- stantly narrowing market. But BEECx-NLT,, our chief brand in this field and the industry's leader.d show•ed a small sales gain counter to the trend. Our export sales,whiohare small'andigo largely to U.S:,forces abroad, turned up;,too, at a rate considerably faster than the industry average. Sales progress of Kent Last but' by no means least; sales of our new KENT filter cigarette, although still smalli moved up gratifyingly in the nine months following its introduction in March, 1952. As a new brand, noo comparison, of course, is possible with the i1`/o increase over 1951 for filter types in total. But as one index, KENT in these nine months attained a: volume even greater than Exisassy did in any of its first four years. Shareholders will be interested to know;,too, GROwrH OF OLD GOLD VS. OTHER 70-MM. BRANDSx s~~.. wot oiHLY 70- EP a sw.a.. oa cad. r; ,...~xa.d b~.wi Pw+ Faw«. ~ OrA.. b~d+. n'. M h'wmn enmwl pydi W.d wrimo 'sx •I I I I I I I ~ I OLD GOLD cigarette sales rose again in 19•i2 for the fi fthcan-secatire year: This.10-year chart depicts OLD Goao's growth in relation to other popular standard'si:e ('0-mm.)) cigarettes,. 7

that this result was achieved despite the fact'that KevT's initial distribution was confinedl to three cities New,York„Chicago, andlLos Angeles. Not for several months, such was the resulting de- mand, could KsNr be introduced in more cities. By year-endj however, production had in- creased sufficiently to expand KENT to high-spot, selectii•e distribution in more than 40 cities. At this writing, there are, of course, many localities where KENT is stillunavailable. We expectito~be in a position, production-wise„to fill all orders by this coming summer. Meanwhile, the Lorillard sales organization has absorbed KENT into its full-line activities in thee cities where it has been introduced. Also, duringg the year just closedj in line with industry trends, our sales force put increasing,drive behind king- size EntBnssY. These two brands,were energeti- cally promoted with our leader, OLD GOLD, using the effective tactics that our salesmen-merchan- disers have perfectedlso well. Progress in self sercice field Today, in a dramatic change ofl distribution patterns, cigarettes are the No. 1 packaged prod- ucUof supermarket! operators - yield us our great- est volume of carton sales: In fact, food stores now share more than 30% of the market. In this field of cigarette self-service, the record shows, Lorillard has been particularly alert. We early developed - and have since further im- proved - several types of ingenious merchandis- ing devices. These serve self-service food, drug and other tobacco outlets as a kind of "store withiwa store" for cigarettes. From the retailers' point' of view; they have proved particularly productive in increasing sales and profits per sqpare foot. From Lorillard's point of view, they accomplish aw all-important aim - they put our brands under the hands of smokers on at least' an equal basis withi the biggest com- petitors, in the vital zone of impulse buying. Another noteworthy aspect of the cigarette business are sales through vending machines which account for 16~/'0 of the industry's volume. Here„too, Lorillard~ foreseeing this trend, began four years ago to equip thousands of machines with merchandising devices to draw smokers to the QLDGOLD row. Oursalesorg¢nization In our sales work, great emphasis is placed on supporting the merchandising activities of the 1,300,000: retailers that selll cigarettes in this country - and the 6;000 jobbers that distribute them. The more we can help them sell Lorillard brands, the more it benefits them - andlus. For that reason. we train members ofiour field sales force;not as salesmen intheusualisense, but~ as merchandising specialists whose job it is to in- crease the profits of'those who handle our brands. This concept, intensified in 1952;,hasbeen, ac- tivated even more in our plans for the present year. For the challenges 1953 may bring, our promotion has been strengthened: with enlarged' programs for sampling and for KENT product demonstrations; with new poinGof-sale material for the duaP promotion of OLD GOLD and! Em- BASSY; with improved merchandising equipment for the better sales support of our jobbers and retailers; with special educational' activities di- rected to the medical profession and other groups; and with specific, balanced workplans for more intensive coverage oflterritories and brands. StoredualPromotions, on.Estsrsst'an.lOin Atmedical-conrentionexhibits,.KetvT'shiqhZy WindowdisplavsareanotheraspectofLoribGOLD;w arranged by Lorillard merchandisers, popular smoke demonstrationss impress doctors lard's energetic mere/m.ndi.sing. This one on, . help retailersselloar brands.atpoint-of.sales adthrisual proofof'tar-and-nicotine remosal:. MURIEL tled'in withsalesdrive.inside.store..