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OFFICERS HERBERT A. KENT - - GEORGE, D. WHITEFIELD - EDGAR S,, BOWLING* - TODD WOOL - WILLIAM J. HALLEY - - - FRANK HOPEWELL - - - * Resigned as of December 31, 1947. DIRECTORS CLAUDE W. BERKLEY EDGAR S. BOWLING JAMES A. GLASCOCK LEWIS GRUBER WILLIAM J. HALLEY DONALD A. HENDERSON President Execunive Vice President - - - Vice President Vice President and Secretary Vice President and Treasurer - Vice President FRANK HOPEWELL HERBERT A. KENT IRVIN H. PEAK F. GLADDEN SEARLE HAROLD F. TEMPLE TODD WOOL CiEORGE' D. WHITEFIELD GENERAL COUNSEL-PERKINS, DANIELS & PERKINS TRANSFER AGENT-THE NEW YORK TRUST CO., NEW YORK, N. Y. R'EGISTRAR-THE NATIONAL CITY BANK, NEW YORK, N! Y. Executiv~e Offic~e-1i19~~ West 40th~ Street, New, York 18', N. Y. Corporate Ofjice-15 Exchange Place, Jersey City, M J. ' 1 i

Q Annual Report-1947 v____•OO

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To the Stockholders. THE MANAGEMENT of your Company is pleasedl to submit to you this briEf' report of its activities and of its progress during the , year 1947 : ~ EGL1'rii11v,S-During the year 11947' the net income of the Com- pany available for Common Stock was the sum of'. 54,829,925.10, which is equal to $2.15 per share of the Common Stock outstand'- ing. The earnings per share in 1946 were $1.26 and in 1945 $1.27-so the 1947 figure is highly gratifying; as it represents the best earnings by the Company for more than ten years. The Company's sales have increased from $83,832,687.04 in 19411 to $1'27,919,654.86 in~ 1947. However,, 1947 is the first~ year in which the resulks of these greatly increased sales have been reflectedi in earnings applicable to the Common Stock. Excess profits taxes were in the main responsible for this adverse condi- tion in the years prior to 1946. In 1946 earnings were held d'own by inadequate profit margins and by the abnormal conditions exist- ing through the farst part of that year, which were pointed~ out. in the last report. The two increases in the price of cigarettes which took place in 1946~ were fully refl'ecte& in 1947, and so for the first time since before the war we had more nearly normal profit margins. ~W ~ a ~ 3 O~o ,a ~ 1

Dividends-During 1947 the Company continued its policy of paying four interim dividends of' 25 cents each: on its Cornmon Stock. In addition, a year-end extra dividend of 50 cents per share was also paidl We expect to continue this dividend policy during 1945': Of course, the amount of any extra dividend will! depend onn the result of the year's operations. PAID TO ~ GOVERNMENT Revenue Stamps, Federal, State and Local 'Taxes COST OF RAW' MATERIALS AND OTHER' EXPENSES 37'64 WAGES AND SALARIES UNDER $5,000 SALARIES OVER $5,000 DEPRECIATION CASH DIVIDENDS PAID TO OWNERS RETAINED IN BUSINESS FOR FUTURE NEEDS, 4

The fine flavor of all Loril- lard products is insuredb'y pro per aging of tobacco. SCl.les-Selling andl promotional activities during 1947 were car- riedl on with muchi less difficulty than was experienced in the pre- ceding year. Small tiail-end quantities of returnedl goods from Government warehouses were received and we now believe the fringe of unusual conditions born of wartime procurement activi- ties has been completely trimmed and is behind us Domestically, OLD GOLD is making progress. The unusually heavy migration of population so disturbing to sales and adVer- tising activities in recent years has subsided to x point where we now have available welli defined new appraisals of comparative territorial importance. As a result of these factors, our operations in 1948 willi require changesini budget allocations in, order to sustain effectively our nationwide industry standing.

~-- : ------~-.~.- Oneo f th'emany modern cigarette makingmachines. Each machine manufactures 1,200 cigarettes per minttte: T& maintain and improve our competitive position, greater advertising expenditures and shifted~ sales emphasis must be ap- plied if we are to make our sales charts reflect our new sales opportunities. Export sales of OLD GOLD were somewhat lower than in~ 1946, although over-a1D figures for the industry showed an~ in- crease. Our position in this field dbes not permit independent aggressiveness. This branch~ of our business (by terms of an~ agreement of the old American Tobacco Company approved by the decree of dissolution in 19111) clears through the British- American Tobacco Corrnpany in so: far as brand names then in use are concernedL Latein September we started' experimentingwit'h EMBASSY, ~,. 6 V G^ N G% ~ W C ~~~~

a new king-size cigarette. For test purposes we chose Buffalo, New York, and Indianapolis, Indiana. In January of this year Cleveland, Ohio, was added to widen the sample. It has not been our aim thus far to create volume but rather to make a syste- matic approach which wouldl give us consumer reaction to a new, quality product and to set the promotional guideposts for future expansion~ if progress dictates such a: move. I can at this writing report the acceptance to be satisfactory. ` Smoking tobaccos again showed a decline, a condition~ true of the industry. Price adjjustment is badly needed to correct an inade- quate profit and to permit consistent consumer advertising. Loose leaf! chewing tobacco is also off, but we have retained our high percentage of the total in a bran& of the industry where our brands represent leadership. In t~he process of reorganizing shapes and prices to fit present- day demands, the cigar industry tapered off quite a bit. In the light of a downward trend for the industry, we are happy to report a substantial increase on MURIEL and HEADLINE, brands which today constitute our business in large cigars. As a matter of fact, at the close of the year MURIEL SENATORS, selling for 90 and our 60 HEADLINE were in short supply. A very bright future is assured these products. We are also bringing back VAN BIBBER and ROYAL ' BENGALS little cigars. For some time to ccrne production willl represent our sales volume. BETWEEN THE ACTS are also in great demand. Again everything, is being done to fill the pipe lines of distribution. 7 ~-A 46Z:!

i Equally modern packaging machinescount'thecigrtrettes, wrap and seal each package and attach revenue stamps. ZO, ~ ~ Sales Promotion-Through 1947 our advertising continued! steadily to be built around the theme, "If You Want a Treat Instead of a Treatment ............... " A series of tests during the summer, combined with~ available reports from our own men in the Field as well as from Wholesale and Retail Tobacco Merchants, gave clear evidence of the selling power of this advertising idea. Continuous national support was obtained through four net- work radio programs. Two shows, which had been sponsored by us during 1946, were continued through the first five months of the year. Thens follbwing, a well accepted summer replacement program, we consolidated our entire network advertising into a s V