Tobacco Documents Online

89300349 ! G

875-P. LorIDard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 Registration No. 2-23521 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 POST-EFFECTIVE AMENDMENT NO. 3 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 P. Lorillard Company

875-P. Lorillard Company-P. E Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 PRELIMINARY PROSPECTUS DATED MAY , 1967 P. Lorillard Company 35,640 Shares Common Stock (Par Value $5 Per Share) This Prospectus covers a portion of the shares of Common Stock of P. Lorillard Company (the Company) issued to Usen Canning Co., a Massachusetts corporation, and subsequently distributed by such corporation to its sole stockholder in connection with the acquisition by a wholly-owned sub- sidiary of the Company of substantially all of the assets, business and goodwill of said Usen Canning Co. and the assumption of substantially all of its liabilities, as described herein under "Business". All or part of such shares may be sold from time to time by such stockholder or certain of his charitable donees on the New York Stock Exchange at prices current at the time of sale. See "Price Range of Common Stock" herein. The Company will receive no part of the proceeds of any such sale. THESE SECURYTIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURI- TIES AND EXCHANGE COMMISSION NOR HAS THE COMHIISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Tlie date of this Prospectus is , 1967. W cd w 0 0 w w t~+

I 875-P. Lorillard Company-P. E. Amend. No. 3-Pantfick Press, Inc.-May 8, 1967 No person has been authorized to give any information or to make any representations, other than those contained in this Prospectus, and if given or made, such information or representations must not be relied upon as having been authorized. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy Common Stock in any State to any person to whom It Is unlawful to make such offer or solicitation in such State. The delivery of this Prospectus at any time does not Imply that the information herein is correct as of any time subsequent to the date hereof. TABLE OF CONTENTS Page The Company _ ............ ......... ............................... . _ ...... . ... 2 Capitalization ......... . .. .... ............................... _ ...... ........................... 3 Dividends on Common Stock ........................................................................ 3 Price Range of Common Stock .......................................................... ........ 3 Statement of Consolidated Eansings .............................................. ............. 4 Business ......... _ ........................................................... Property . ........................................ ... ........................................ ................... 9 Management ..................... .. ................................. ..... .. ............................. .... 10 Directors and Officers .. ........ ..... _ _ ... . . ......... .. _ _ _ ..... .. 10 Remuneration ........................................................................ .............. 11 Options ................. ........................... ....................................... ... ......... ........ 13 Legal Proceedings .... ............. . . . ......... ..... .. . . . . . . . . ..... .... . .. . . . . . . . .......... . . . . . ...... . . . . . 15 Description of Common Stock ...................................................................... 15 Selling Stockholder_. ......... _ .... ........ .. ..... . ......... ........................ . _...- 16 Experts ...... ........... . ..... . . ......... ... ............. . ....................... ........... ..... .......... . ..... 16 Legal Opinion ................................................................................................ 16 Additional Information .................................................................................. 16 Opinion of Independent Certifled Public Accountants .................... ........... 17 Financial Statements . .................................................................... ............ . . . . . 18 THE COMPANY The Company, the executive offices of which are located at 200 East 42nd Street, New York, New York 10017, was incorporated under the laws of New Jersey on November 24, 1911. Its principal business is the manufacture and sale of cigarettes, smoking and chewing tobacco and little cigars. In addition, its subsidiaries are engaged in the production and sale of pet food, candy and industrial packaging. 2

875-P. Lorillartf Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 CAPITALIZATION The capitalization of the Company as of March 31, 1967 is summarized below. The sale of the shares of Common Stock offered by this Prospectus will not affect the capitalization of the Company as these shares are already issued and outstanding. Authorized Outstanding Long-Term Debt: (1) Twenty-five year 3% debentures due March 1, 1976........ $ 15,000,000(2) $ 9,750,000 Twenty-five year 3V4 % debentures due April 1, 1978 (less $156,000 held by Company) ......... ............ ..... 22,500,000(2) 14,244,000 4% % sinking fund debentures due June 1, 1986. ...... 40,000,000(2) 36,800,000 Total Long-Term Debt..................... .................. $60,794,000 Short-Term Debt(3).................................................. ................. $31,400,000 Capital Stock: 7% Preferred Stock, par value $100 per share (cumulative) 99,576 shs. 98,000 shs. Common Stock, par value $5 per share ................................ 10,000,000 shs.(4) 6,504,557 shs. (5) (1) Excluding an aggregate of $2,625,000 due within one year, of which $2,618,000 is held for sinking fund purposes by the Company. (2) 'ilte sum stated represents the original principal amount of the debentures. (3) The interest rates payable on such debt were not in excess of the prime rate in effect at the time of issuance, which presently is 5%56. (4) Includes 46,100 shares reserved for issuance under the Restricted Stock Option Plan and 302,387 shares reserved for issuance under the Stock Purchase, Option and Incentive Plan. (See "Options" herein and Note 9 to the financial statements.) (5) Excludes 174,987 shares held in treasury. DIVIDENDS ON COMMON STOCK The Company has paid consecutive cash dividends on its Common Stock in each year beginning in 1932. The amounts of such dividends for the five years ended December 31, 1966 are set forth under "Statement of Consolidated Earnings". Since July 1, 1963, such dividends have been paid at the annual rate of $2.50 per share. See "Description of Common Stock" herein for information concerning priorities and restrictions on payment of dividends. PRICE RANGE OF COMMON STOCK The following table indicates the high and low sales price of the Common Stock of the Company on the New York Stock Ex change from January 1, 1962 through May 4, 1967, inclusive. The closing price on May 4 1967 was 60t/s , Year . High Low 1962 .................................................... 6334 36% 1963 .................................................... 54b'e 42bi 1964 .................................................... 50% 40bi 1965 ... . . ............................................. 49 t/a 41 5A 1966 .................................................... 56%s 40~fz 1967 through May 4 .......................... 63% 41 3

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 STATEMENT OF CONSOLIDATED EARNINGS The following statement of consolidated earnings of P. Lorillard Company and its subsidiaries (which includes amounts applicable to Usen Canning Co. and Reed Candy Company prior to their combination with Lorillard in 1965 and 1966, respectively, in poolings of interests-see Note 1 to financial statements) for the five years ended December 31, 1966 has been examined by Haskins & Sells, independent certified public accountants, whose opinion with respect thereto appears elsewhere herein. This statement should be read in conjunction with the other consolidated financial statements of Lorillard and the related notes included elsewhere herein. 1962 REVENUES: -Year Ended December 31 1963 1964 1965 1966 Net sales (a) ............................ _ $524,263,344 $525,850,104 $478,810,027 $483,855,477 $510,434,780 Other ....._ ....................... ... 919,159 1,208,917 1,531,306 2,670,936 1,669,783 Total revenues.... ... . ...... .. . .... 525,182,503 527,059,021 480,341,333 486,526,413 512,104,563 COSTS AND EXPENSES: Cost of goods sold (a) ......... .... ........ .. 386,307,622 382,227,076 343,932,585 346,899,751 360,924,710 Selling, advertising and administrative expenses ........................................ 77,233,998 78,365,629 79,150,142 81,824,845 87,649,424 Interest on long-term debt....._..... ...... 3,366,660 3,207,608 2,913,843 2,796,857 2,573,851 Other interest (principally on bank loans) ....... ._ .................... ....... _ 2,040,154 1,945,167 1,791,000 2.007,788 1,746,273 Federal income taxes: Current ...__. ......... ...... ... _ 26,483,851 29,784,249 24,167,607 22,901,440 27,062,125 Deferred ... ...................... ......_ .. 735,825 833,226 348,386 549,560 499,875 State and foreign income taxes... 2,059,291 2,254,828 1,884,755 2,700,000 2,333,000 Total costs and expenses.......... 498,227,401 498,617,783 454,188,318 459,680,241 482,789,258 NET EARNINGS ..... _ .. ............................. .. 26,955,102 28,441,238 26,153,015 26,846,172 29,315,305 DIVIDENDS ON PREFERRED STOC%.......__......... 686,000 686,000 686,000 686,000 686,000 EARNINGS APPLICABLE TO COMMON STOCK..-. S 26,269,102 $ 27,755,238 $ 25,467,015 $ 26,160,172 $ 28,629,305 PER SHARE OF COMMON $TOCK: Earnings (b) ..... ........... _.......... $3.86 s4.07 $3.74 $3.89 $4.35 Cash dividends-actual $2.40 $2.4744 $2.50 $2.50 $2.50 (a) Includes excise taxes on products sold: 1962, $219,359,171; 1963, $217,113,355; 1964, $191,661,319; 1965, $192,056,514; 1966, $198,290,082. (b) Based on the average number of shares of common stock outstanding during each year adjusted, for periods prior to the poolings of interests described in Note 1 to the financial statements, for shares issued in such poolings of interests. For the three months ended March 31, 1967, consolidated net sales were $130,993,773 and con- solidated net earnings were $6,159,811 ($.92 per common share), as compared with $115,925,297 and $5,271,286 ($.76 per common share), respectively, for the three months ended March 31, 1966. These comparative figures are unaudited, but the Company believes that all adjustments (comprising only normal recurring accruals) have been made which are necessary to present fairly the results of operations for such periods. Such interim data are not necessarily indicative of the results of operations which might be expected for the fiscal year ending December 31, 1967. 4 Cb ~ ~ ~ Q W (J1 w'~

875-P. Lorillard Company-P. E. Amend. No. 3-Pandick Press, Inc.-May 9, 1967 Products BUSINESS Cigarettes-Cigarettes represented approximately 90% of consolidated net sales in 1966. The principal filter cigarette brands of the Company are KENT. NEWPORT (menthol), TRUE and TRUE (menthol) OLD GOLD Filters, SPRING (menthol) and YORK and the principal non-filter cigarette brand is OLD GOLD Straights. Other Tobacco Products-The Company's more important smoking tobacco brands are BRIGGs, UNION LEADER, FRIENDS, INDIA HOUSE, LUXEMBOURG and BURGUNDY. Its chewing tobacco brands are BEECH-NUT, BAGPIPE and HAVANA BLOSSOM. The Company's little cigar brands are BETWEEN THE ACTS, MADISON and filter-tipped OMeGA, and it also markets a small cigar brand, ERIK. The Company's wbolly-owned subsidiary, Federal Tin and Paper Products, Inc., manufactures metal and paper packaging for a variety of products. Recent Acquisitions On February 24, 1965, a wholly-owned Delaware subsidiary of the Company, now known as Usen Products Company, acquired substantially all of the assets, business and goodwill of Usen Canning Co., a Massachusetts corporation, and assumed substantially all of its liabilities in exchange for 156,250 shares of the Common Stock of the Company. For accounting purposes, the transaction was accounted for in accordance with the "pooling of interests" concept. The acquired corporation was a leading producer of canned cat food with a national distribution of its Tabby and 3 Little Kittens brands. Pursuant to the agreement and plan of reorganization under which the transaction was effected, the Massachusetts corporation immediately changed its name and distributed in liquidation the shares of the Company's Common Stock which it received to its sole stockholder, Irving Usen (see "Selling Stock- holder" herein). Mr. Usen subsequently transferred some of these shares to the Robert D. Usen Family Trust, established by his son, Robert D. Usen, who became President of the subsidiary, a position he held with the predecessor corporation. On November 8, 1965, a wholly-owned Delaware subsidiary of the Company named Golden Nugget Candy Company acquired for cash certain of the assets and the business and goodwill as a going con- cern of Golden Nugget Sweets, Ltd., a California corporation. The acquired corporation principally produced five-cent nougat candy bars with distribution of its BIG Hurttc and Loog bars in eleven Western states. On April 5, 1966, a wholly-owned Delaware subsidiary of the Company named Reed Candy Com- pany acquired substantially all of the assets, business and goodwill as a going concern of Reed Candy Company, an Illinois corporation, and assumed certain of its liabilities in exchange for shares of the Common Stock of the Company. For accounting purposes, the transaction was accounted for in accordance with the "pooling of interests" concept. The acquired corporation produced packaged hard candies and rolls under the REEn's label. 5 GD W LJ 0 0 W ~ CJt

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 9, 1967 Competition All of the Company's products are sold in highly competitive markets. The following table, which sets forth the total unit production of all cigarettes in the United States and the total unit sales of all cigarettes by the Company, indicates the relative position in the industry of the Company: Calendar Year Industry* (000) Company (000) Comopant Indastry 1962 ............. ............. 535,495,698 57,140,415 10.7% 1963 ......... .................. ... 550,558,727 57,168,726 10.4%'0 1964 ................................ 540,906,845 50,941,646 9.4% 1965_ .......... ............... 556,806,053 51,211,701 9.2% 1966 .......................... .... 567,264,483 - 9.4% * Source: Reports and bulletins of Commissioner of Internal Revenue. The Company for many years has occupied a leading position in the scrap chewing tobacco field. The Company's little cigar brands, MADISON, BETWEEN THE ACTs, and filter-tipped OMEGA, accounted for a substantial share of the total little cigar market in 1966. The Company believes that ERIK similarly accounts for a substantial share of the total small cigar market. On the basis of information currently available, the Company ranks among the major producers of tobacco products in the country. Advertising The Company's principal brands are advertised and promoted extensively. Advertising and sales promotion expenses, accordingly, have been substantial during the past years, and the policy of the Company is to continue substantial expenditures for these purposes. The advertising media used by the Company include television, radio, magazines, newspapers, outdoor advertising and point-of-sale display materials. [Possible reference to Gift Stars] Sales pro- motion activities are carried on by the Company through salesmen by distribution of samples, point-of- sale display advertising and personal contact with distributors, retailers and consumers. The Company's as well as the industry's sales of cigarettes declined following the publication in January 1964 of the report of the Advisory Committee to the Surgeon General, which purported to associate smoking with a number of diseases. (See "Statement of Consolidated Earnings" herein.) Pursuant to Federal legislation, effective January 1, 1966, packages of cigarettes are required to bear the following statement: "Caution: Cigarette Smoking May Be Hazardous to Your Health." The same legislation also provided that no statement relating to smoking and health would be required in cigarette advertising, if the packages of such cigarettes were labelled in conformity with its provisions. Such regulation of cigarette advertising will terminate on July 1, 1969. The Secretary of Health, Educa- tion and Welfare is directed by such legislation to transmit a report to Congress not later than July 1, 1967 and annually thereafter, concerning (A) current information on the health consequences of smoking and (B) such recommendations for legislation as he may deem appropriate. The Federal Trade Commission is also directed to submit a report to Congress at the same time concerning (A) the 6 ~ ~ W O O W N ~

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 9, 1967 effectiveness of cigarette labeling, (B) current practices and methods of cigarette advertising and pro- motion and (C) such recommendations for legislation as it may deem appropriate. The nine leading manufacturers of cigarettes in the United States, including the Company, volun- tarily established a Cigarette Advertising Code, effective January 1, 1965, which imposed uniform stand- ards for cigarette advertising for the member companies. Under the Code, no advertising may be used unless it has first been submitted to an independent Code Administrator and determined by him to comply with the Code standards which relate primarily to such matters as health representations and advertise- ments directed towards persons under twenty-one years of age. On March 25, 1966, the Federal Trade Commission announced that a factual statement of the tar and nicotine content in cigarette smoke on cigarette labels and advertising would not violate its Cigarette Advertising Guides provided no collateral representation is made as to reduction or elimination of health hazards. As the Company believed that the Commission's policy as expressed in such announcement provided a greater opportunity to develop and market cigarettes low in tar and nicotine content for those consumers who desire such products, the Company resigned from the Code. In so resigning, the Company stated that it still intended to adhere to the principles underlying the Code's limitations on advertising to youth. It is the intention of the Company to utilize data regarding tar and nicotine content in cigarette smoke wherever appropriate in future advertising. [Possible reference to proposed bill regarding tar and nicotine content] It is not possible to predict the effect of the foregoing developments on the Company's sales and earnings. Distribution Methods The Company secures its products distribution through direct sales to jobbers who in turn service retail outlets, and through chain store organizations and vending machine operators who purchase their requirements directly. The Company's tobacco products are stocked in public warehouses throughout the country to provide for quick distribution to customers. International About 8% of the Company's total unit sales of cigarettes in 1966 were manufactured in the United States and exported. Such export sales were made directly by the Company and through two wholly-owned subsidiaries, P. Lorillard Pan American, Inc., a Western Hemisphere Trade Corporation, which services marketing areas in Central and South America and Canada, and P. Lorillard International S. A., Zug, Switzerland, which primarily services the marketing areas of Europe and Africa. License agreements have been entered into with thirteen cigarette manufacturers in foreign countries for the manufacture and sale of the Company's products on a royalty basis. P. Lorillard Limited, owned jointly by P. Lori.llard International S. A. and the stockholders of the Company's former licensee and manu. facturer in Hong Kong, manufactures certain of the Company's brands and other cigarettes for markets in Southeast Asia, the Middle East, and parts of Africa. P. Lorillard s.a r.l., a Luxembourg corporation jointly owned by P. Lorillard International S. A. and the Company's former licensee and manufacturer in Luxembourg, also manufactures certain of the Company's brands for markets in the Benelux countries, France and Italy. For further information concerning P. Lorillard s.a r.1., reference is made to material 7

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc -May 8, 1967 appearing under the caption "Management". In 1966, the number of cigarettes manufactured abroad by such affiliates and by other licensees exceeded the export unit sales from the United States. In several countries ownership of some of the Company's brands is claimed by others and in several other countries prior registrations of the name "KENT", or a variation thereof, are claimed by others. Tobacco and Tobacco Prices The two main classes of tobacco grown in the United States are flue-cured tobacco, grown mostly in Virginia, North Carolina, South Carolina, Georgia and Florida; and burley, grown mostly in Kentucky and Tennessee. The Company purchases flue-cured tobacco primarily for use in cigarettes and purchases burley tobacco for use in cigarettes and smoking tobacco. The Company also purchases Maryland tobacco for use in cigarettes and cigars. Most of the tobacco of these classes used by the Company is purchased by its own buyers and commission buyers at tobacco auctions. The Company also purchases various types of Near Eastern tobacco, most of which is grown in Turkey and Greece. [Possible reference to other sources] In addition, the Company uses seed leaf tobacco, which is grown mostly in Wisconsin, Ohio, Pennsylvania and Connecticut, in the manufacture of various brands of chewing tobacco and cigars. These tobaccos are largely purchased directly from the growers by Company representatives. Due to varying size and quality of the annual crops and other economic factors, tobacco prices have in the past been subject to wide fluctuations. Among those economic factors are government control of acreage-poundage in the flue-cured producing areas and acreage control in the burley areas. These controls together with support prices substantially affect the market prices of tobacco. In the five years ending 1966, the average market price per pound for flue-cured tobacco increased from cents to cents or %. Over the same period, the average market price per pound for burley leaf increased from cents to cents or %. The flue-cured tobacco crop in 1966 was about 1,102 million pounds as compared with 1,059 million pounds in 1965. The government support price increased from 57.7 cents per pound to 58.8 cents per pound, and the average market price increased to cents per pound compared with 64.7 cents in 1965. The burley crop in 1966 was about 550 million pounds compared with 586 million pounds in 1965. The government support price increased to 60.6 cents per pound from 59.5 cents in 1965, and the average market price was increased to cents per pound, compared with 66.8 cents in 1965. In addition to purchases at auction warehouses, the Company purchased in each of the years 1962 through 1966 substantial quantities of aged tobacco from various sources, principally cooperatives financed under the Commodity Credit Corporation program, to supplement tobacco inventories during those years. The Company believes that its current leaf inventories are adequately balanced for its present production requirements. In view of the fact that the process of aging tobacco normally requires approximately two years, the Company at all times has on hand large quantities of leaf tobacco. In accordance with generally recognized trade practice, the Company averages the cost of tobacco in inventory and charges to the cost of current production the tobacco used from inventory at the then average cost. Accordingly, increases or decreases in prices paid for tobacco currently purchased are reflected only partly in current production costs. 8 GO W W O O W W X

875-P. Lordlard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 Borrowings The cash requirements of the Company are usually at a maximum between September and March, because of heavy leaf buying during this period, and at a minimum in the summer, prior to such buying season. It is customary in the industry to borrow short term funds in order to finance these seasonal purchases of leaf tobacco. During 1966 short-term borrowings ranged between a minimum and maximum of $10,900,000 and $49,900,000, respectively. Such short-term borrowings on March 31, 1967 were $ 31,400,000. Prices Sales The list price of the Company's filter and non-filter king-size and 100 mm. filter cigarettes is $9.20 per thousand and of non-filter regular size is $9.00 per thousand. Such figures reflect a price increase of $.20 per thousand effective March, 1966. The prices include Federal excise tax at the rate of $4 per thousand and are subject to the usual 2% cash discount if paid within ten days. State and Local Taxes At April 30, 1967, excise taxes on cigarettes, which are levied upon and paid by the distributors, were in effect in forty-nine States, the District of Columbia and a number of municipalities. Such taxes, many of which have been increased in recent years, range from two cents to fifteen cents per package of twenty cigarettes. Employees On April 30, 1967, the Company had approximately employees, of whom approximately .. were hourly rated production and service employees covered by collective bargaining agreements with affiliates of the AFL-CIO and some independent craft unions. The remaining .... employees are other hourly rated personnel or are salaried employees serving in executive, administrative, engineer- ing, supervisory, production and clerical capacities. On January 1, 1965, a three-year contract relating to cigarette operations was entered into with the Tobacco Workers' International Union AFL-CIO. [Refer to employee benefits with possible reference to notes in financial statements regarding pension plans.] PROPERTY The properties of the Company are employed generally in the processing and storing of tobacco and in the manufacture of the Company's tobacco products and storage of such manufactured products. Its principal properties are owned in fee and are located as set forth below. With minor exceptions, all machinery used by the Company is owned by it. All properties are in good condition, and the cigarette-making machinery and the cigarette-wrapping and packing machinery are of modern design and of high-speed type. The Company has plants for manufacture of its tobacco products at Greensboro, North Carolina, and Louisville, Kentucky. The Greensboro plant is devoted exclusively to the manufacture of cigarettes and is a modern, one-story air-conditioned building covering thirteen acres of a plot of approximately eighty acres. The Louisville plant, which is a multi-storied building occupying approximately twelve acres of a plot of about twenty-four acres, is utilized for the manufacture of cigarettes, as well as little cigars, chewing tobacco and smoking tobacco. 9 .__ ./np-.___.. IV

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 The Company also has facilities for receiving, processing and storing leaf tobacco at Lexington, Kentucky; Danville, Virginia; and Lancaster, Pennsylvania. The plant and facilities of Federal Tin and Paper Products, Inc., are located in Baltimore, Mary- land. Usen Products Company has its plant and facilities on a twenty-acre plot it owns in Woburn, Massachusetts and has recently begun operations in a 45,000 square foot processing and canning plant on a five-acre plot in Golden Meadow, Louisiana. Reed Candy Company has its plants and facilities in Chicago, Illinois. Reed Candy Company recently acquired a tract of land of approximately 50 acres in Campbellsville, Kentucky and is proceeding to construct a facility occupying square feet. Golden Nugget Candy Company leases a plant in San Francisco, California. The Company leases executive offices at 200 East 42nd Street, New York, New York 10017. MANAGEMENT Directors and Officers The directors and executive officers of the Company and the positions and offices held by them are: Name Positions and Offices Manuel Yellen*.. Director, Chairman of the Board and chief executive officer J. Edgar Bennett*...... .... Director and President George O. Davies* .. ...... _.... ... Director and Executive Vice President William A. Jordan* .,..... .. Director and Executive Vice President Henry E. Erickson* .. ... .. ...... Director and Vice President William D. Okerson• .................... Director and Vice President Peter G. Levathes* . ....... ........... Director and Vice President Anna F. Woessner* ...................... Director and Secretary Robert Z. Post*. .. .. __ . Director and General Sales Manager Lewis Gruber* ................... ..... Director Donald A. Henderson ............... . Director Melvin E. Dawley ..................... .. Director Harold X. Schreder ...................... Director Harold E. Stassen . ................ . .... Director Robert Meyer. .... ... ............... .... Director B. Lowell Jacobsen ...................... Vice President Walter M. Aikman ........................ Vice President Philip R. Grant.... .__ .... Vice President and General Counsel John J. Darby ............. _ Comptroller Edward G. Kontos ........................ Treasurer * Member of Executive Committee. All of the executive officers of the Company have been actively engaged in the business of the Company for more than five years except the following: (a) Mr. Jacobsen was a Vice President of Pepsi Cola Co. from 1961 until he joined the Company in 1963; (b) Mr. Levathes, before joining the Company in 196..., served Twentieth Century-Fox Film Corporation in various capacities, including Vice President, and was Executive Vice President of the advertising firm of Clyne-Maxon Inc.; 10 ,

875-P. Lor0lard Company-P. E Amend. No. 3 -Pandick Press, Inc.-May 9, 1967 (c) Mr. Aikman, who joined the Company in 1964, was for more than the preceding two years a Senior Associate with Arthur D. Little, Inc.; (d) Mr. Grant was a partner in the law firm of Perkins, Daniels & McCormack or its predecessor firm for more than the preceding five years before joining the Company in 1966. As of May 8, 1967, the directors and officers of the Company did not own beneficially, directly or indirectly, any shares of Preferred Stock of the Company. As of such date, these persons as a group may, under interpretations of the Securities and Exchange Commission, be deemed to have owned beneficially shares (... .%) of the outstanding shares of the Common Stock of the Company, including ___ _ shares (_ _.%) as to which such persons have disclaimed beneficial ownership. Included in such total are shares transferred by the Company to certain directors and officers in payment of contingent awards of incentive compensation and placed in escrow to be released over a ten-year period (in the case of contingent awards for years prior to 1960) and a fifteen-year period (in the case of contingent awards for 1960 and subsequent years), subject to compliance with the applicable earning-out, non-competition and other continuing conditions to the receipt of contingent awards set forth in the Company's incentive compensation plan. (See "Remuneration" herein.) The number of shares to be released annually to such directors and officers as a result of such transfers during the ten-year period and, where applicable, during the fifteen-year period following termination of employ- ment are, respectively, as follows: Mr. Bennett. 32 and 174; Mr. Darby, 43; Mr. Davies, 437 and 246; Mr. Gruber, 699; Mr. Jordan, 29; and Mr. Yellen, 437 and 246. The information as to beneficial ownership of the persons indicated above was received from, and rests peculiarly within the knowledge of, such persons, and the Company disclaims responsibility for the accuracy and completeness of such information. Remuneration The following table sets forth all direct remuneration paid by the Company and its subsidiaries for the fiscal year ended December 31, 1966 to (1) each person who was a director of the Company at any time during such year and whose aggregate direct remuneration for such year exceeded $30,000; (2) each person who was one of the three highest paid officers of the Company during such year and whose aggregate direct remuneration for such year exceeded $30,000; and (3) all persons as a group who were directors or officers of the Company at any time during such year. \eme of tndi.ldn.l C.p.e/ty in wF1eF rationwa.reeelved S.I.ry C,.rreni ineentlve ompen.aion(1) J. Edgar Bennett . . _ _ _ . President $ 65,000 $ 57,632 John J. Darby.. .. .. .... _ Comptroller 28,320 13,978 George O. Davies. ._ Executive Vice President, Finance 50,000 29,817 Henry E. Erickson _. .... Vice President, Leaf 40,000 40,000 William A. Jordan ...... _... . Executive Vice President and Vice President, Sales 40,301 39,568 Peter G. Levathes_ __ Vice President, Advertising 50,000 41,232 William D. Okerson Vice President, Manufacturing 36,250 36,250 Anna F. Woessner.. .. Secretary 20,000 15,000 Manuel Yellen ... Chairman of the Board and chief executive officer 75,000 54,815 Directors and officers as a group (2)_ ............. .......... ..._ _... 685,734 428,044 (1) Incentive compensation is paid under Article XII of the By-Laws of the Company which providea for such payment to officers and key personnel in an amount equal to stated percentages of net operating Income (ranging from 11 m CD W O O W ~ Fr

875-P. lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 3% of the first $50 million thereof to 6% of net operating income in excess of $58 million), defined, in general, as consolidated earnings before Federal taxes on income, incentive compensation awards and capital gains and losses. Such Article provides for the allotment of such incentive compensation, as current and contingent awards, ranging from 10% to the Chairman of the Board, Chief Executive Officer, 8% to the President, 6% to not more than four Vice Presidents and not in excess of 4% each to other officers and key personnel. (2) The Company has an agreement which, as renewed, terminates on November 30, 1967, with Mr. Gruber, who retired November 30, 1964, and whose retirement payments started as of that date. Under such agreement, payments at the rate of $25,000 per year are being made to Mr. Gruber for consulting services. On retirement, Mr. Gruber commenced to receive contingent compensation awarded over a period of prior years consisting of the annual release of escrowed shares referred to on page and the payment of $2,512 a month. The foregoing table reflects all current awards for 1966 to directors and officers under the Company's incentive compensation plan. Contingent awards of incentive compensation for 1964 and subsequent years under an amendment to the plan approved by the stockholders in 1966 are contingently payable in three equal annual instalments, commencing with the second year following the year for which the awards are made, if earned out by continued services and, in the event of retirement or other approved termination of employment, if requirements as to non-competition and conduct not prejudicial to the Company are complied with. Contingent awards for 1966 to the directors and officers referred to in the foregoing table, payable in annual instalments in each of the years 1968, 1969 and 1970. if earned out, were as follows: Mr. Bennett, $29,976; Mr. Darby, $3,394; Mr. Davies, $22,065; Mr. Erickson, $25,398; Mr. Jordan, $25,298; Mr. Levathes, $12,077; Mr. Okerson, $26,648; Miss Woessner, $3,333; Mr. Yellen, $39,553; and directors and officers as a group, $194,406. Contingent awards for years prior to 1964 were contingently payable following termination of employment over a period of fifteen years (ten years in the case of contingent awards for years prior to 1960). The amounts so contingently payable to the directors and officers referred to in the foregoing table during each of the fifteen years following termination (and, in parentheses, where applicable, any additional amount payable during each of the ten years following termination of employment) are as follows: Mr. Bennett, $4,682; Mr. Darby, $1,571 ($500); Mr. Davies, $4,682; Mr. Erickson, $5,015; Mr. Jordan, $1,835 ($388); Mr. Okerson, $250; Mr. Yellen, $4,682; and directors and officers as a group, $45,747 ($9,176). All the remuneration set forth was received by, or is contingently payable to, the persons named in their capacities as officers or employees of the Company. The Company has applied for an insurance policy, to be paid for by it, indemnifying it in respect of its liabilities and expenses arising under by-law or statutory provisions pursuant to which directors and officers are indemnified against liabilities and expenses, and for an additional insurance policy, to be paid for by the directors and officers, indemnifying them against certain other liabilities and expenses. The following table illustrates the estimated normal annual retirement allowances payable under the Employees' Retirement Plan of the Company upon retirement at age sixty-five to employees in the earnings classifications and with the years of service shown: Em"lo.ea•. A...... Annnd E.r„ina Dvrln. tl,. Ai.h.a S oI1R. 1 tt Y..re Tet.l Annn.l aennBt. Yrnrr w1 (:eed/lwd 9ee.1e- iLw. Pr.cedln. Aetiremanl 20 Y..r. 25 Y.... tn Y..r. 35 .r.r. $ 25.000.. _ $ 6,980 $ 8,680 $10,370 $12,070 50,000__ _ 14,480 18.050 21,620 25,190 75,000 21,980 27,430 32,870 38.320 100,000 _........ 29,480 36,800 44,120 50.000 125,000 ....... ... 36,980 46.180 50,000 50,000 150,000 . _ .... 44,480 50,000 50,000 50,000 [Describe briefly the Company's profit sharing plan] 12 I f

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 Transactions with Directors and Officers Mr. Meyer, a director of the Company, is President of Heintz van Landewyck, s.a.r.1., a Luxem- bourg tobacco manufacturer, all of the share capital of which is owned by Mr. Meyer and members of his family. P. Lorillard International S.A., a wholly-owned subsidiary of the Company, and Heintz van Landewyck s.a.r.l. each own a one-half interest in P. Lorillard s.a.r.l., a Luxembourg corporation, which, since April, 1964, has manufactured and sold under license certain of the Company's brands for several of the Common Market countries. On August 21, 1964, the Company purchased 4,600 shares from Mr. Gruber, a director of the Company, at a purchase price of $46.125 per share, which were used as a part of the consideration given in connection with the acquisition of the business of Usen Canning Co. (See "Business" herein.) On such date, the mean between the highest and lowest selling prices on the New York Stock Exchange was $46.75 per share. The law firm of Stassen, Kephart, Sarkis & Kostos, or predecessor firms (of which Mr. Stassen, a director of the Company, was a partner) were paid $35,975, $39,300 and $33,825 for legal services in international matters in 1964, 1965 and 1966, respectively. OPTIONS Restricted Stock Option Plan In October, 1957, the Company adopted a Restricted Stock Option Plan (the 1957 Plan), which provides for the granting to key employees of the Company, including officers, of restricted stock options (as defined in Section 421 of the Internal Revenue Code of 1954) to acquire shares of Common Stock of the Company. The 1957 Plan specifies a maximum term for options granted thereunder of ten years from the date of grant and all outstanding options are for a term of ten years. Each outstanding option agreement contains a provision under which the employee agrees to remain in the employ of the Company for at least two years. Except under specified circumstances, an employee is not permitted, within two years after the date upon which an option shall have been exercised with respect to any share, to make a sale or other disposition of such share within the meaning of Section 425(c) of the Internal Revenue Code of 1954, as amended by the Revenue Act of 1964. The Company believes that, under such Revenue Act, certain changes will be required in any option hereafter granted under the 1957 Plan if such options are to be treated as "qualified stock options". As of April 25, 1967, 31 key employees, including 13 officers, held options to purchase an aggregate of 33,100 shares of Common Stock of the Company. Of these, options for 2,100 shares were granted on September 18, 1959, at the price of $39.50 per share and options for 31,000 shares were granted on June 20, 1962, at $43.50 per share. In each case the option price was not less than 95% of the fair market value of the Common Stock at the time the option was granted. Included in the options granted in 1959 were options for a total of 2,100 shares to persons who were officers or directors, including an option for 900 shares held by Mr. Jordan and an option for 1,000 shares held by Miss Woessner. Included in the options granted in 1962 were options for a total of 17,500 shares to persons who were officers or directors, including options held by the following: Mr. Bennett, 3,000 shares; Mr. Darby, 1,000 shares; Mr. Erickson, 3,000 shares; Mr. Jordan, 1,000 shares; Mr. Okerson, 2,000 shares; and Miss Woessner, 500 shares. 13 W Cd W O O W ~ W

875-P. Lorillard Company-P. E. Amend. No. 3-Pandick Press, Inc.-May 8, 1967 Stock Purchase, Option and Incentive Plan In April, 1963, the Company adopted a Stock Purchase, Option and Incentive Plan (the 1963 Plan) under which the Company's Common Stock may be sold through stock purchase or subscription arrangements or through stock options to key employees, including officers, of the Company. The stock option provisions under the 1963 Plan are generally similar to those in the 1957 Plan except that, among other things, the option price must be equal to 100% of the fair market value of the Common Stock on the date of grant. As of April 25, 1967, 47 key employees, including 16 officers, held options under the 1963 Plan to purchase an aggregate of 83,400 shares of Common Stock of the Company. Of these, options for 30.200 shares were granted on July 31, 1963 for a period of ten years at the price of $44.75 per share and options for 53,200 shares were eranted on December 1, 1965 for a period of five years at the price of $45 per share. In each case the option price was not less than 100% of the fair market value of the Common Stock at the time the option was granted. Included in options eranted in 1963 were options for a total of 15,400 shares to persons who were officers or directors, including options held by the followine: Mr. Bennett, 3.000 shares; Mr. Darby, 1,000 shares; Mr. Erickson, 3,000 shares; Mr. Jordan, 2,000 shares; and Mr. Okerson, 1,000 shares. Included in the options granted in 1965 were options for a total of 46,600 shares to persons who were officers and directors includin, options held by the following: Mr. Bennett, 7.500 shares; Mr. Darby, 1,000 shares; Mr. Davies, 6,000 shares; Mr. Erickson, 3,000 shares; Mr. Jordan, 5,000 shares; Mr. Levathes, 5.000 shares; Mr. Okerson, 5,000 shares; and Mr. Yellen, 10,000 shares. Under the 1963 grants, the stock purchase arrangement provides for the immediate sale and transfer of shares, with ten per cent of the purchase price (but not less than $5 per share) to be paid forthwith, annual instalments of approximately two and one-half per cent to be paid thereafter, the unpaid balance to be paid in July, 1968 (with right of prepayment) and simple interest payable to the Company on the unpaid balance of the purchase price. The employee is entitled to all dividends on the stock. The stock is held as collateral, subiect to being returned to the Company if the purchase price is not paid before the end of the period in July, 1968, without refund of any payments made or release of shares equivalent to such payments, but with no further liability on the part of the employee. If employment is terminated under certain circumstances within two years after the purchase agreement is made, the Company is entitled to repurchase all shares for the amounts paid by the employee exclusive of interest. Thirty-two employees agreed to purchase a total of 17,950 shares at $44.75 per share under this arrangement during 1964 and such shares were all sold and transferred upon receipt by the Company of the required down payment of $5 a share. Included among the employees agreeing to purchase shares under the stock purchase arrangement were the following directors and officers: Mr. Bennett, 500 shares; Mr. Davies, 3,500 shares; Mr. Erickson, 500 shares; Mr. Okerson, 500 shares; Mr. Yellen, 3,500 shares; directors and officers as a group, 9,900 shares. Miss Woessner was granted and exercised a stock purchase right on December 1. 1965 for 500 shares at $45 per share under an arrangement similar to those granted in 1963, except that principal payments of approximately four per cent per annum must be paid, with the unpaid balance due in November, 1970. The approximate amounts of the purchase price remainine unpaid as of February 1, 1967 were as follows: Mr. Bennett, $18,500; Mr. Davies, $130,000; Mr. Erickson, $18,500; Mr. Okerson, $18,500; Miss Woessner, $19,000; and Mr. Yellen, $130,000. The market price of the Company's Common Stock as of a recent date is shown under the caption "Price Range of Common Stock". 14 GD CO W O O W ~ »'b

875-P. Lorillard Company-P. E. Amend. No. 3-Pandick Press, Inc.-May 8, 1967 LEGAL PROCEEDINGS By decree dated November 16, 1911, of the Circuit Court of the United States for the Southern District of New York, in a suit entitled United States of America vs. The American Tobacco Company and others, under the Sherman Act, each of fourteen corporations, including the Company, was prohibited from taking specified action, including (1) making transfers of its property to any other of those cor- porations, (2) making any agreements of specified types with any other of those corporations, including agreements relative to the control or management thereof, relative to the price or terms of purchase or sale of tobacco or tobacco products and relative to the apportionment among those corporations of trade or business either as to customers or localities, (3) holding stock in a corporation whose stock is also held by another of those corporations and (4), with stated exceptions, requiring a jobber to buy another brand or brands from such corporation in order to be able to buy a p9rticular brand. The Company is a defendant, along with one or more other tobacco manufacturers, in four cases which involve claims that the respective plaintiff or plaintiffs' decedents contracted cancer or other involvement of the lung or throat as a result of the use of tobacco products. Damages which range from $9,999 to $1,820,000 in three of such cases and $6,000,000 in the fourth are alleged, none of which has yet been tried. DESCRIPTION OF COMMON STOCK The following statements are brief summaries of certain provisions contained in the Certificate of Incorporation and By-Laws, as amended, and certain provisions contained in indentures of the Com- pany. Such statements do not purport to be complete, are subject in all respects to the full provisions of the documents mentioned, and, except as otherwise stated, do not relate to or give effect to provisions of statutory or common law. Dividend Rights. Dividends may be declared and paid on the Common Stock after all accrued dividends on the Preferred Stock have been paid, if in the judgment of the Board of Directors the surplus or net profits are sufficient for such purpose after deducting such sum, if any, as shall have been reserved as working capital and the amount of dividends to accrue on the Preferred Stock during the current year. The holders of the Preferred Stock, in preference to the holders of the Common Stock, are entitled to receive cumulative dividends at the rate of 7% per annum of the par value thereof. Restrictions on Payment of Dividends. Certain restrictions on the payment of dividends on the Common Stock are contained in the Indenture dated March 1, 1951, the Indenture dated April 1, 1953 and the Indenture dated June 1, 1961, under which Debentures were issued. Such restrictions prevent the Company from making certain payments, including cash dividends upon its Common Stock, if the aggregate of such payments made after a date specified in the applicable document would exceed by more than an amount specified in such document the aggregate of (a) the consolidated net income of the Company and its subsidiaries during the period from such date to the making of such payment and (b) the proceeds of the sale of capital stock (other than, in the case of each Indenture except the last- mentioned, Common Stock which was being sold at the time such Indenture was being entered into). At December 31, 1966, retained earnings available for dividends on Common Stock, under the most stringent of those restrictions, was approximately $74,000,000. 15

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc -May 9, 1967 Voting Rights. Each holder of Common Stock is entitled to one vote for each share of Common Stock held. Each holder of Preferred Stock is entitled to one vote for each share of Preferred Stock held. Liquidation Rights. In the event of any liquidation or dissolution or distribution of the assets of the Company (whether voluntary or involuntary), after payment to the holders of the Preferred Stock of par of $100 per share plus unpaid accumulated dividends, the holders of the Common Stock are entitled to receive pro rata al] the remaining assets of the Company. Other Rights and Provisions. Neither the Certificate of Incorporation, as amended, nor the By-Laws contain any provisions with respect to preemptive rights. In the opinion of New Jersey counsel, the holders of Common Stock have preemptive rights with respect to the authorized and unissued shares of Common Stock issued and sold for cash; provided, however, that preemptive rights may be denied with respect to shares issued pursuant to a duly approved plan for the sale or issuance of Common Stock to employees and those actively engaged in the conduct of the Company's business if such plan is in accordance with the laws of the State of New Jersey. The shares of Common Stock issued under the 1957 Plan and the 1963 Plan (see "Options" herein) may be issued exempt from existing preemptive ri-hts. The Common Stock has no conversion rights or redemption or sinking fund provisions. There is no restriction on the repurchase of shares by the Company while there is an arrearage in the payment of dividends. The Common Stock, when issued for full consideration, is fully paid and nonassessable. SELLING STOCKHOLDER The shares to which this Prospectus relates were acquired by Irving Usen in connection with the acquisition by a subsidiary of the Company of the business of Usen Canning Co., a Massachusetts corporation. (See "Business" herein.) Since October 1, 1965, Mr. Usen sold 2,000 shares and made gifts of 1,360 shares to private persons. He also donated 3,800 shares to the Irving Usen Charitable Trust, a charitable foundation, which may sell all or part of such shares from time to time on the New York Stock Exchange at prices current at the time of sale. After giving effect to the sale of the shares hereby offered by Mr. Usen, his ownership of the outstanding Common Stock of the Company will be reduced from 126,868 shares to 95,028 shares. EXPERTS The financial statements included in this Prospectus have been examined by Haskins & Sells, independent certified public accountants, as stated in their opinions appearing herein and in the Regis- tration Statement. and have been so included in reliance upon such opinions given upon the authority of that Firm as experts in accounting and auditing. LEGAL OPINION Legal matters in connection with the Common Stock of the Company offered by this Prospectus are being passed upon by Perkins, Daniels & McCotmack, 30 Rockefeller Plaza, New York, New York, outside general counsel to the Company. ADDITIONAL INFORMATION This Prospectus omits certain information in the Registration Statement (Form S-1) on file with the Securities and Exchange Commission. The information omitted may be obtained from the Commis- sion's principal office at Washington, D. C., upon payment of the fee prescribed by the Rules and Regulations of the Commission. 16 GD CD W O O W ~ ~

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 OPINION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS P. LORILLARD COMPANY: We have examined the consolidated balance sheet of P. Lorillard Company and subsidiary companies as of December 31, 1966 and the related statements of consolidated earnings and consolidated surplus for the five years then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying consolidated balance sheet and statements of consolidated earnings and consolidated surplus present fairly the financial position of the companies at December 31, 1966 and the results of their operations for the five years then ended, in conformity with generally accepted accounting principles applied on a basis consistent in all material respects. New York, N. Y. February 1. 1967 HASKINS & SELLS 17 00 CZ W O O W ~ ~

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 P. LORILLARD COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET, DECEMBER 31, 1966 ASSETS CURRENT ASSETS: Cash S 14,304,301 Accounts receivable-customers (less $994,026 for cash discounts and doubtful accounts) 29,348,710 Other accounts receivable 1,615,723 Inventories (at average cost) (Note 2): Leaf tobacco . .._ ._..... ... 209,281,952 Manufactured stock ..._ ............ .... ........ ........ 24,867,483 Materials and supplies...... ...._ 7,241,177 Total current assets..... ._.,.__._ ._ ........... . .._ . . .._.. ..... _.. . . ............................... ...._...... $286,659,346 INVESTMENTS IN ASSOCIATED COMPANIES (at cost plus equity in undistributed earnings) ............................ 3,845,870 PROPERTY, PLANT, AND EQUIPMENT (at cost): Land ............... ........ ...... .... ......... $ 948,836 Buildings and building equipment... ....___ _ ................ . .. ........ ..... .... .. 23,349,698 Machinery and equipment. ......... .......... ...... . ...... ............. ... ........ ... ......... .. 51,843,739 . Total _ _ _ _ .. ...... . ....................... ...... . ...... $ 76,142,273 Less accumulated depreciation (Note 3) . ... .......... 29,609,070 Property, plant, and equipment-net..___ 46,533,203 OTHER ASSETS: Prepaid expenses and deferred charges... .._ S 2,617,853 Unamortized debenture discount and expense (being amortized over the lives of the respective issues) . ............. ..... .... .. . ........ ... ........ ......... _ ... .. ... 976,167 Trade-marks and goodwill (Note 1). 2,157,422 Total other assets._. ... ... . . ..... 5,751,442 TOTAL ........ ............ $342,789,861 See the accompanying Notes, which are an integral part of the financial statements. 18 ~ ~ W 0 0 G,7 cp~ GD

815-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 P. LORILLARD COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET, DECEMBER 31, 1966 LIABILITIES CURRENT LIABILITIES: Notes payable-banks $ 26,900,000 Accounts payable-trade 8,486,261 Accrued taxes (Note 4) 29,461,558 Accrued payrolls 2,614,978 Accrued interest 396,728 Other accrued liabilities 3,895,345 Total current liabilities $ 71,754,870 LONG-TERM DEBT (Note 5): Twenty-five year 3% debentures, due March 1. $693,000) _ _ 1976 (less held by Company, $ 9,757,000 Twenty-five year 33/n% debentures, due April 1. $801,000) _ _ 1978 (less held by Company, 14 274 000 4~/s% sinking fund debentures, due June l, 1986 (less held by Company, $1,600,000 ) , , 36,800,000 Total long-term debt _ 60,831.000 RESERVES FOR EMPLOYEE BENEFITS (Note 7). . ................ ........ 4,280,147 SHAREHOLDERS' EQUITY: 7% cumulative preferred stock (par value $100 per share)-authorized 99,576 shares: issued 98,000 shares...... $ 9,800,000 Common stock (par value $5 per sbare)-authorized 10.000.000 shares: issued 6,678,254 shares (Note 9)_ 33,391,270 Additional paid-in capital..... ._ 28,623,370 Earnings retained for use in the business (Note 5)... 141,824,285 Less 174,987 shares of common stock in treasury (at cost)... . (7,715,081) Total shareholders' equity 205,923,844 COMMITMENTS AND CONTINGENT LIABILITIES (Note 6) TOTAL .. ........... . . $342,789,861 See the accompanying Notes, which are an integral part of the financial statements. 19

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 P. LORILLARD COMPANY AND SUBSIDIARY COMPANIES STATEMENT OF CONSOLIDATED SURPLUS For the Three Years ended December 31, 1966 ,-----Year Ended December 31~ 1964 1965 1966 Additional Paid-in Capital: Balance at beginning of period......... _ . ............... ... .... $ 30,112.799 Excess of proceeds received from sale of common stock upon exercise of stock options over par value of stock issued . __ . ...... .__.. .. ........ _ .......... .... ............... _.. 16,570 Excess of par value of unissued shares plus the cost of treas_ ury shares issued in poolings of interests over the stated value of the capital stock of the pooled companies (exclu- sive of portions charged to retained earnings) (Note 1).. (999,280) Balance at end of period... .... . .. . ...... ... S 29,130,089 Earnings Retained for Use in the Business: Balance at beginning of period ............ . .... ............... .... $116,147,983 Net earnings ._._ 26,153,015 TotaL_... __.. ._ ..... ........ ..._ _... . .. ........ . ...,. 142,300,998 Deduct: Cash dividends declared: Preferred stock (at annual rate of $7 per share)........... 686,000 Common stock (see statement of consolidated earnings for dividends per share paid by the Company)........ _. 16,507,585 Portion of excess of cost over par value of common treasury stock issued in poolings of interest (Note t) 2,514,461 Total. ......... ............... ............. _ .. ................... ......... 19,708,046 Balance at end of period (Note 5)....... _._ ............................ $122,592,952 $ 29,130,089 35,423 - S 29,165,512 469,874 (1,012,016) S 29,165,512 $ 28,623,370 $122,592,952 $132,114,016 26,846,172 29,315,305 149,439,124 161,429,321 686,000 686,000 16,639,108 16,439,502 - 2,479,534 17,325,108 19,605,036 $132,114,016 $141,824,285 See the accompanying Notes, which are an integral part of the financial statements. 20 :;{i- .

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 P. LORILLARD COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS For the Three Years ended December 31, 1966 ( 1) PRINCIPLES OF CONSOLIDATION AND ACQUISITIONS The financial statements include the Company and its subsidiary companies all of which are wholly-owned. The financial statements of the Swiss subsidiary were translated into United States currency at the approximate rate of exchange prevailing on the date of the balance sheet, there having been no material fluctuation in such rate since organization of the subsidiary. At December 31, 1966 the net assets of the subsidiaries exceeded the amount at which the investments are carried on the books of the Company by $13,965,944, which amount represents undistributed earnings since date of acquisition or organization and has been included in earnings retained for use in the business. On February 24, 1965 and April 5, 1966, respectively, wholly-owned subsidiaries of the Company acquired the business and substantially all the assets and assumed substantially all the liabilities of Usen Canning Co. (Usen) and Reed Candy Company (Reed). In consideration, the Company issued to Usen 156,250 of its common stock (of which 74,056 were unissued shares and 82,194 were treasury shares) and to Reed 74,913 shares of its common treasury stock. These transactions have been accounted for as poolings of interests and, accordingly, in the accompanying financial statements the accounts of Usen and Reed have been combined with those of the Company. The excess of the cost of the treasury shares issued plus expenses of pooling over the stated value of the capital stocks of the pooled companies has been charged in part to additional paid-in capital and in part to retained earnings as shown in the accompanying statement of consolidated surplus. On November 8, 1965, a wholly-owned subsidiary of the Company purchased the business and certain assets of Golden Nugget Sweets, Ltd. Of the total cost, $2,157,421 was allocated to trade-marks and goodwill. (2) INVENTORIES The entire inventory of leaf tobacco has been classified as a current asset in accordance with a generally recognized trade practice although, due to the duration of aging processes, the tobacco on hand includes requirements beyond the period of one year. It is not practicable to determine the amount not realizable within one year. Inventories at the beginning and end of each of the years 1964-1966, inclusive, priced at average cost, were as follows: December 31, 1963, $253,999,259; 1964, $256,802,654; 1965, $252,458,806; 1966, $241,390,612. (3) DEPRECIATION It is the policy of the companies to provide for depreciation based on the estimated useful lives and cost of the various classes of property. With the exception of certain equipment (cost at December 31, 1966 approximately $4,900,000), depreciation on which is provided on a unit of production basis, the provisions for depreciation have been computed on a straight-line method at, with minor exceptions, the following annual rates: Buildings and building equipment-principal items, 2%, other items, 5%; machinery and equipment-principal items, 5%, other items, 10% and 20%; office machinery-10% to 25%; automobiles, 25%. Upon the retirement or other disposition of property, accumulated depreciation is charged with the amount therein applicable to such property, and profit or loss is taken up in earnings. Maintenance, repairs, and renewals are charged to earnings as incurred. Betterments are capitalized. 21 T CD W O O W ~ M+

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 P. LORILLARD COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS-(Continued) For the Three Years ended December 31, 1966 (4) FEDERAL INCOME TAXES For Federal income tax purposes, alternative methods of computing depreciation are used for certain assets. The Federal tax reduction resulting from the use of such alternative methods has been compensated in the accom- panying statement of consolidated earnings by charges for deferred Federal income tax. At December 31, 1966 the accumulated reserves for deferred Federal income tax (arising from the use of alternative methods of com- puting depreciation for tax purposes for the years 1957-1965) amounted to $4,664,080. From this amount the prepaid Federal income tax applicable to the reserves for employee benefits has been deducted, leaving a net credit balance of $1,187,900 at December 31, 1966 which has been included in accrued taxes in the consolidated balance sheet. The Federal income tax liabilities of the companies have been settled up to and including 1958. While the liabilities for subsequent years are subject to final determination, the amount provided in the consolidated balance sheet is believed to be adequate to cover any additional assessments which may be made by the Treasury Department. The companies have followed the practice of reducing their provision for Federal income tax by the estimated permanent tax saving resulting from the investment credit, the amounts of which have not been material. The amount ($224,041) deferred at December 31, 1963, because under the Revenue Act of 1962 the credit reduced future years' depreciation for tax purposes, was included in 1964 earnings since under the Revenue Act of 1964 future years' depreciation is no longer reduced for tax purposes. (5) LONG-TERM DEBT The sinking fund requirements under the debenture indentures during each of the next five years, less debentures held by the Company for sinking fund purposes, are as follows: 1967, none; 1968, $2,156,000; 1969, 1970 and 1971, $2,625,000 in each year. Covenants limiting the payment of dividends on common stock and the purchase, redemption, or retirement of such stock are contained in the debenture indentures. Under the most restrictive of these covenants the amount which could have been expended for the foregoing purposes was limited to approximately $74,000,000 at December 31, 1966. (6) COMMITMENTS AND CONTINGENT 1.IABILITIES Outstanding commitments for the purchase of property, plant and equipment amounted to approximately $1,110,000 at December 31, 1966. The Company is a defendant, along with one or more other tobacco manufacturers, in four cases which involve claims that the respective plaintiff or plaintiffs' decedents contracted cancer or other involvement of the lung or throat as a result of the use of tobacco products. Damages which range from $9,999 to $1,208,800 in three of such cases and $6,000,000 in the fourth are alleged, none of which has yet been tried. (7) RETTREMENT PLANS Under the non-contributory Employees' Retirement Plan of the companies, retirement allowances are being provided for eligible salaried employees. The assets of the Plan are held by First National City Bank, as Trustee. The 22 Q!) (d W O O W ~ ~

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 P. LORILLARD COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS-(Continued) For the Three Years ended December 31, 1966 contributions of the companies to the Plan for 1966 approximated $1,367,000, including $602,000 for past services. An independent actuary has estimated that the unfunded past service cost of the Plan at December 31, 1966 approximated $6,200,000. The Company and a subsidiary also have non-contributory retirement plans providing for the payment by the companies of retirement allowances to full-time hourly or piece_work employees based on length of credited service. The companies maintain reserves equal to the estimated present worth, actuarially calculated, of the future retirement allowances payable to eligible employees who have attained retirement age. Additions to such reserves during 1966 approximated $255,000. An independent actuary has estimated that the amount that would be necessary to provide for the past service cost in respect of employees who had not attained retire- ment age at December 31, 1966 approximated $5,880,000. (8) INCENTIVE COMPENSATION Incentive compensation for officers and key personnel payable under the By-Laws, based on consolidated income (as defined), was as follows: 1964, $1,448,534; 1965, $1,519,668; 1966, $1,884,825. (9) RESTRICTED STOCK OPTION PLAN AND STOCf: PURCHASE, OPTION, AND INCENTIVE PLAN The following information relates to the Restricted Stock Option Plan for Employees which was approved by the shareholders on April 8, 1958: ,----Option Priee- --F.Ir M.rket V.l- Numher Per Per of Share. Sha.,, Totrl Sh.re Tot.l At dates of p.nt Shares of common stock under option at December 31, 1966.._.. _ .. 33,600(a) $1,451,200 $1,526,306 Options exercised: At d.tr. r,arrl.,u 1964... ... .. 300 $43.50 13,050 $45.67 13,700 1965 1966 9,800 419,900 468,138 Shares available for the granting of addi- tional options at December 31, 1966. . 13,000 (a) Options for 2,600 shares granted in 1959 exercisable at $39.50 per share at any time up to September 18, 1969 and options for 31,000 shares granted in 1962 exercisable at $43.50 per share at any time up to June 20, 1972. 23

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 P. LORILLARD COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS-(Continued) For the Three Years ended December 31, 1966 The following information relates to the Stock Purchase, Option and Incentive Plan adopted by the shareholders on April 2, 1963: \,.mhcr r--Opt/on Prl-~ Pcr -Fa/r Market V.lue~ Per of Share. Share Total Fhare Tot.l Shares of common stock under option at At dat°a °t sra°t December 31, 1966 under stock pur- chase and option arrangements ... 84,000(a) $44.91 $3,772,425 $44.91 $3,772,425 Options exercised under stock purchase and option arrangements: At dasea ezere/aed 1964_ __ 17.950 44.75 803,262 47.31 849,215 1965 500 45.00 22,500 45.00 22,500 1966 __ 100(b) 44.75 4,475 52.69 5,269 Shares of common stock reserved at December 31, 1966 for sale to employ- ees under stock subscription rights granted in 1963 and exercised in 1964 (shares issuable after full payment up to July 1968).. ......_ 16,895 44.75 756,051 46.00 777,170 Shares of common stock available at December 31, 1966 for the granting of additional options or rights to subscribe 202,282 (a) Options for 30,300 shares granted in 1963 exercisable at $44.75 per share at any time up to July 31, 1973 and options for 53,700 shares granted in 1965 exercisable at $45.00 per share at any time up to December 1, 1970. (b) Not including options for 6,000 shares as to which the Company elected to pay the holders the option price plus $28,219, being the excess of the market price at the dates of exercise over the option prices, instead of issuing the shares. On the exercise of options, or the purchase of shares under stock purchase arrangements, common stock is credited with the par value of the shares issued and the remainder of the purchase price is credited to additional paid-in capital as received. On the issue of shares, when fully paid, under stock sub- scription arrangements, common stock will be credited with the par value of the shares issued and the remainder of the purchase price will be credited to additional paid-in capital. 24 ~ CD W O O W ~ tA

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 P. LORILLARD COMPANY AND SUBSIDIARY COMPANIES NOTES TO FINANCIAL STATEMENTS-(Concluded) For the Three Years ended December 31, 1966 (10) SUPPLEMENTARY PROF7T AND Loss INFORMATION Maintenance and repairs: 1964 1965 ....... 1966 CharFed Dtreetly -to Prafit and Lo..---------- f,ae,s Other Tot.1 $ 2.775,409 $ 106,933 $ 2,882,342 3,131,568 110,631 3,242.199 3,404,812 123,953 3.528,765 Depreciation : 1964 _. 1965 1966 Taxes other than income taxes(a): 1964 ... 1965 ..... 1966 . . _. ...... _ ........... ....._ Rents: 1964 __ 1965_ _ . . .. ......... . . .. ........ ..... 1966 (a) Comprises: Excise taxes. Import duties... . .... ... ........ __ Payroll taxes.... Property taxes.. _._...,. .__ ...._ .. .. Total. .._..... ....._..... 3.025.386 652,963 3,678.349 3,075,337 665,798 3,741,135 3,135,607 656,995 3,792,602 195.296.014 905,654 196,201.668 195,705,945 941,508 196,647,45 3 201,973,788 1,110,660 203,084,448 411,806 787,289 1,199,095 377,084 846,739 1,223,823 361.208 824,791 1,185,999 1964 1965 1966 $192,009,288 $192,443,758 $198,725,665 1,600,039 1,728,377 1,753, 387 1,520,917 1,407,890 1,832,987 1,071,424 1,067,428 772,409 $196,201,668 $196,647,453 $203,084.448 No management or service contract fees were paid during the above periods. Royalties paid amounted to $1,350 (in 1964). 25 T CD w 0 0 w ~ ~

875-P. Lorillard Company-P. E. Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Post-Effective Amendment No. 3 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, and State of New York, on the day of May, 1967. P. LORILLARD COMPANY (Registrant) By MANUEL YELLEN - ---------------------------------- -------- (Manuel Yellen) Chairman of the Board Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 3 to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date Chairman of the Board of Directors (Principal Executive MANUEL YELLEN Officer) May , 1967 ------- -_,_-------------- ------- ----------------- -_ (Manuel Yellen) Executive Vice President and Director (Principal GEORGE O. DAVIES Accounting Officer) May , 1967 .. _ _ _ _ _ _ _----_-_ __ _ _ _ _ ______ _ _ _____ _ __---_ _ _ _--_ _ _ _------_ _ _ (George O. Davies) J. EDGAR BENNETT, GEORGE O. DAVIES, MELVIN E. DAWLEY, HENRY E. ERICKSON, LEWIS GRUBER, DONALD A. HENDERSON, WILLIAM A. JORDAN, ROBERT MEYER, WILLIAM D. OKERSON, HAROLD X. SCHREDER, HAROLD E. STASSEN and MANUEL YELLEN. A Majority of the Directors May , 1967 GEORGE O. DAVIES, by signing his name hereto, does hereby sign this document on behalf of himself, on behalf of the registrant and on behalf of each of the other above-named persons pursuant to powers of attorney duly executed by the registrant and such other persons, filed with the Securities and Exchange Commission as supplemental information. - - - - --------- ----------- George O. Davies, Attoraey-in-fact II-1

875-P. Lorlllard Company-P. E Amend. No. 3 -Pandick Press, Inc.-May 8, 1967 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS P. LORILLARD COMPANY: We hereby consent (a) to the use in the foregoing Prospectus of our opinion dated February 1, 1967 relating to the financial statements in the Prospectus and (b) to the references to us in the Pro- spectus under the headings "Statement of Consolidated Earnings" and "Experts". HASKINS & SELLS New York, N. Y. May , 1967 CONSENT OF COUNSEL We hereby consent to the reference to us under the heading "Legal Opinion" in the Prospectus forming part of Post-Effective Amendment No. 3 to Registration Statement No. 2-23521. PERKINS, DANIELS & IVICCORMACK 11-2