Tobacco Documents Online

N .e ..~.,~.,...7:wt^'.'^~~ .l!'?t,vY7,---y"."JA~_• -,fP ~m-~~ . - Dld &,:@ claims whlng but the Compan"ip d' F'rneTeD$ccot ` , ~. T'r, iTwt :~.'n.d ef aTa+e.r t . a.~w wip . ..w.e r-4o OLD oornR~ ® WdOm@ 4W.. ~ !he year of " gmd ~ 0l(i (;old-Rtmh ~. ~ tm I

A TEN YEAR COMPARISON OF INVENTORY WITH SALES MILLIONS OF DOLLARS 125 100 75 - 50 - 25 - . GROSS SALES ' TOTAL INVENTORIES 1939 1940 1941 1942 rl, 1943 1944 1945 1946 1947 1948 applied in collaboration with our EMBASSY advertising agency; Geyer, Newell & Ganger, Inc. Resulting sales volumes in markets were most carefully watched. Our decision to introduce EMBASSY Cigarettes on a nationaU basis of which you were informed on page 5 was based on results of these operations in local markets. In the foreign language press in this country, advertising of both, OLD GOLD and EMBASSY Cigarettes is handled by Louis Krams Inc. Leaf Costs and Inventories . . . . Our purchases of domestic cigarette tobaccos (Burley and' Flue- cured) of! the past crop year were at higher prices due to the fact that the Government decreased the acreage and raised the support I 12

i pric: s. Because of these planned': factors the cost of tobacco going into our man.ufactured products continues at very high levels, and' there is: no indication of lower prices in the foreseeable future. In spite of increased purchases by us during the past crop year our inventory of leaf tobacco remains about the same. In our opinion it is adequate for our requirements after allowing for a substantial vol- ume increase in our sales. . . Employee and Management Relations We enjoyed~ splendid' relations with our employees and! with the unions with whom we dealt during the year 1948. Every endeavor is being made to maintain harmonious and cooperative labor relations. At the present time the Company has about 6,000 employees. Since 1940 ~ total wages and salaries paid to all empl'oyees of the Company and~ its subsidiary have increased': by about 77.8 per cent. The break- down of the Company sales dbllar for the year 1948' shows that out of each dollar received by the Company 8.50 were paid in wages an& salaries up to $5,000 (those directly concerned wi& production ) and' 8/10ths of one cent in salaries of $5,000 and' over (managerial and alI officers ) . The high cost of living still remains the chief concern~ in connection with our liibor problems. In recent months there has been some decline in the cost of living, and a continuation of this decline should tend to alleviate this problem. We feel confident that we will continue to receive the cooperation of our employees and of the unions representing them in solving this and other problems. . . . . Incentive Compensation At the Stockholders Meeting held! on April 6, 11948 the stockholders by a very large majority amended Article XII of the By-1aws, entitled "Incentive Compensation for Officers and Key Personnel." Briefly, the l

W15CONSIN ro ituNOfs 0 Sp.mg(iell' 5' /NpIANA~ ONIp I I I I I 11 1 1 Cdnmb,.5 1 I r O: I O Ind;nm,pul;s ! F.mnkfe Louis~l6la lb.fnyfom ~ PENNSYLVANIA 1 ~ ~,pnC,O51M W.VA. i T{'/ .~ VIROrN1A Chorlesfan - KENTUCM~ punvl le_ _ _ _ _ _ _ MANE ~ ~ 'I A69"s1o. Vt r O NEW~YORN~ O'~ 'N:H.! ~ onf~pd~er~ rr ~ Albemy~. 0 - A MASS. L yw,-T - L N.u 0, p~Bcslon LORILLARD'S MANUFACTURING NETWORK * Headquarters . Executive Offices A Processing ..,. Manufacturing Plants • Leaf Handling Facilities... curing, storing, etc. plan provides that 10 per cent of net income above $1.20 per share on each share of Common Stock outstanding should be paid as incentive compensation to officers and key personnel. ~ The plam adopted by the stockholders was by its terms limited to officers and key personnel, as it was felt that such a partnership between stockholders and management would be most beneficial to ~ the stock- holders. Those selected to receive incentive compensation are, in our opinion, those whose initiative and leadership can best promote the progress of' the Company. In making the selpction, responsibility, merit and length of service were all given considerationl On the above basis, incentive compensation for 1948 amounting to $251,435.66 was distributed. M.dd4eb.m Richro6nd 14 1

. Proxies. Whv do we urze ou to return vour 0 roxies romptl ~ Frankl f we like to have the feeling that all shareholders, members of our corporate family, are sufficiently interested in Company affairs to want us to have a substantial: proxy return. It offers you a meeting ground for expression, one where constructive criticism is most welcome. Whether we have grave problems affecting, your Company's future or merely the annual election of DD irectors, it makes for a better meeting. It also serves as a vote of confidence in~Management. Regardless of how small you consider your holdings, to us and to you they are important. Remember always that ours is a free economy, giving youa privilege not enjoyed by all peoples of the world: The right to make free decisions is reserved exclusively to free people. Let us alli do everything possible to preserve this freedomL A stamped and addressed envelope is enclosed with the proxy state- ment for your convenience. Outlook for 1949 k Notwithstanding the general business uncertainties associated with our rapidly changing times and continued high raw material and! manufacturing costs, 11 feel we have built and are maintaining an~ effective momentum~ behind! a program designed' to improve our posi- tion with consumers and employees. From this work come encourage- ment an& reasonable assurance of another good year. Respectfully submitted; President 15

Jersey City, N. J., February 28, 1949 To the Stockholders o f P. Lorillard Company: Statements showing the results of' the operations of your 'Company and its subsidiary for 1948, the financial position at December 31, 1948, and' comparative figures for the pre- ceding year, are set forth on the following pages. Respectfully submitted, W. J. HALLEY, Treasurer I

P. LORILLARD COMPANY and SUBSIDIARY COMPANY CONSOLIDATED STATEMENT OF INCOME AND EARNED SURPLUS FOR THE YEAR ENDED DECEMBER 31i, 1948 With Comparative Figures f or the Preceding Year f 1948' 1947 Sales, less Discounts, Returns and Allowances........ $140,279,236,56 $127,919,654.86 Cost of Goods Soldj Selling, Generali and Administrative Expenses .................. 130,276,521.18 1118;031,939.08 Operating Income ................................. .. $ 10;002,715.38' $ 9,887,715.78 Other Income ................................ 165,474.95 169,835.83 $ 10;168,190!33 $' 10,057;$51.61 Interest on Funded Debt ................,...... $ 868,972:50 $ 878,572.50 Amortization of Debenture Expense ............ 13,318:64I 13;547:29 Other Interest ............................... I 142,059:96 218;806.72 $ 1,024,351.10 $ 1,110,926.51 Income before Federal and State Income Taxes ....... $ 9J43,839:23 $ 8,946,625.10 Provision for Federal Income Taxes ........... $ 3,353,000.W $ 3,270;000.00 Provision for State Dncome Taxes ............. 145,900;00 160;700.00 $ 3,498,900A0 $ 3,430;700:00 \et Income for year................................ . $ 5,644,939.23: $ 5,515;925.10 Earned Surplus at beginning of' year ................. 21,680,980135 20,220'950:78 $ 27,325,919~58' $ 25;736,875.88 . l Dividends on Preferred Stock-$7 per share.... $, 686,000~00 $: 686,000.00 Dividendsoni Common, Stock-$L50 per share:.. 3,369,898;97 3,369;$95:53 $ 4;055,898.97 $ 4,055;895.53' Earned Surplus at end of year ....................... , $ 23,270,020.61 $ 21y680;980:35 De¢recintion prozYided-1948 $501,946.45 1947 407,935.30 17

P. LORILLARD COMPAN~ ~ CONSOLIDATED BALANCE I With Comparative ASSETS CURRENT ASSETS: 1948' f, 1947 Cash in banks and on handi ......................... $ 5,632,438.89 $ 6,61i3,300:53 Accounts receivable-trade (less reserves 1948 $630,073:28; 1947 $587,900!24) ................... 6,300,8911.00 5,290,536.68 Other accounts and notes receivable ................ 146,935.33 263,325.56 Inventories, at cost : Leaf tobacco .................................. 64,269,906:99' 64,309,906.09 ',Manufacturedu stock and revenue stamps.......... 5,390,534.52 6,069,178.50 Materials and supplies .............,............. 2,877,831.66 2,858,162.64 { Special' deposits-contra .......................... 631,921.16 654,574.83 Total current assets ........................ $ 85,250,459.55 $ 86,058,984.83 PROPERTY, PLANT AND EQUIPMENT, as ad- justed December 31, 1932 by authorization of stock- holders, plus subsequent additions at cost, less retire- ments .......................................... 16,726,561.13 15,291,608.29 Less: Reserves,for depreciation .................... 6,217,154.74 6,138,457.61 Total property, plant and equipment......... $ 10)509,406.39 $ 9,153,150.68 BRANDS, TRADE MARKS AND GOODWILL..... $ 1.001 $ 1.00 DEFERRED CHARGES: Prepaid insurance, advertising an&taxes............ $ 473,362.32 $ 380,349.07 Unamortized~ debenture expense .................... 70,905:85 79,424.49 Miscellaneous .................................... 1i77,975:08 149,150.58 Total deferred charges ..................... $ 722,243125 $ 608,924.14 $ 96,482;110:19 $ 95,821,060.65 1i8

and SUBSIDIARY COMPANY SHEET - DECEMBER 31, 1948 Figures f or 1947 LIABILITIES CURRENT LIABILITIES: 1948' 1947 Irlotes payable -banks ............................ $ 8,000,000.00 $ 9,000,000m Accounts payable-trade ......................... 1,777;829.27 966;761.37 Twentq Year 3% Debentures (due withimone year) . 600,000.00 320;000:00 Accrued taxes ................................... , 3,877;103.60 4,366,445.30 Accrued payrolls ................................ 409,505.91 165;737:18 Accrued interest ................................. , 267,071.87 269,471.87 Other accrued liabilities ........................... 149,358:86 297,790.84 I Dividends, etc.-funds on deposit, contra........... 631,921.16 654,574.83 Total' current' liabilities .................... $ 15,712,790.67 $ 16,040,781.39 FUNDED DEBT: 5% Gold'Bonds, maturing August 1, 1951i..........,. $ 6,195,450;00 $ 6,195,450.00, Twenty Year 3% Debentures, due October 1, 1963 17,800,000;00 18,400,000.00, (the indenture requires the retirement of $600,000 annually 1949=62) Total funded debt ......................... $ 23,995,450.00 $ 24;595,450.0W CAPITAL STOCK AND SURPLUS: Capital Stock : 7% Cumulative Preferred Stock,,par value $100 per share: Authorized 99,576 shares ; issued 98;000 shares 9;800;000.00 9,800,000:00 Common Stock, par value $10 ~ per share : Authorized 5,000,000 shares Issued 2,246,681189 shares ................... 22;466,818.90 22,466;818:90 Paid-in Surplus ................................. 1,237,030.01 15237,030.01 Earned Surplus, as per statement .................. 23)270,020.61 21,68%980:35 (i$12,541,469:88'not available for cash dividends on common stock under provisions of debenture in- denture) Total capital stock and surplus ............. $ 56,773,869:52 $ 55,184,829.26 $ 96,482,1',10.19 $ 95,821,060.65 19

ACCOUNTANTS' REPORT To the Board o f' Directors and Stockholders o f P. Lorillard Company: We have examined'the consolidated balance sheet of P. Lorillard Company and its subsidiary company as of December 31, 1948, and the related consolidated statement of income and earned sur- plus for the year then ended; Our examination was made in accor- dance with generally accepted auditing standards and included such tests of! the accounting record§ and such other auditing procedures as we considered necessary in~ the circumstances. In our opinion, the accompanying consolidated balance sheet and consolidated statement of income and earned surplus present fairly the financial position of P. Lorillard Company and its sub- sidiary company at December 31, 1948,, and the results of their operations for the year then~ ended; in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. DELOITrE, PLENDER, GRIFFITHS & CO. Certi fied Public Accountants 111 Broadway, New York, N. Y. February 11, 1949 Printed in U. S. A.