Tobacco Documents Online

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ANNUAL REPORT • 1960 T!54210523

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ANNUAL REPORT For the year ended December 81, 1 9 6 0 Executive Office, 150 East 42nd Street, New York 17 CONTENTS 2 HIGHLIGHTS 3 PRESIDENT'S LETTER 14 OPERATIONS AT A GLANCE 15 CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS 18 CONSOLIDATED BALANCE SHEETS 18 NOTES TO STATEMENTS 19 SUPPLEMENTARY FINANCIAL INFORMATION 20 AUDITORS" CERTIFICATE 21 DIRECTORS AND OFFICERS 22 TEN-YEAR FINANCIAL REVIEW 24 YOUR COMPANY'S PRINCIPAL PRODUCTS T154210525

HIE~HLIGiHTS AND WHOLLY-OWNED SUBSIDIARIES Per Common Share Net operating income .......... Less= Nonoperating charge to provide for possible loss of leaf inventory in Cuba, less applicable federal income tax .......... Net income ............. Dividends paid ............ Net sales ............. Operating income, before taxes on income Net income (in 1960 after provision for possible loss of leaf inventory in Cuba) ...... Dividends paid (common and preferred) .... Portion of net income invested in assets used in the business and to provide for debenture sinking fund requirements .......... Current assets, December 31 ....... Current liabilities, December 31 ...... Net working capital, December 31 ...... Number of stockholders, December 31: Common ............. Preferred ............. $4.62 .06 4.56 2.721/2 $1,215,342,819 135,843,166 62,522,313 38,660,244 23,862,069 771,818~513 175,829,476 595,989,037 89,440 7,105 1959 $4.61 4,61 2.50 $1,161,376,858 136,071,270 63,248,270 35,729,596 27,518,674 728,028,304 140,403,931 587,624,373 87,772 7,172 2 T!54210526

THE PRESIDENT'S LETTER To Our Stockholders .... FEBRUARY 14, 1961 THIS report covers operations of The American Tobacco Company, includ- ing wholly-owned subsidiaries, for 1960. Dollar sales in 1960 reached an all-time high at $1,215,342,819 compared with $1,161,376,858 in 1959, an increase of $53,965,961. This was the second succes- sive year in which dollar sales showed a gain of more than $50 million. The Com- pany's unit cigarette sales in 1960 were higher than-~n 1959, both in this country PALL ~J:ALL, the largest-selling brand made by the Company, recorded substan- tial and consistent increases throughout 1960. It has been_est_i_mated that_PALL MALL Cigarettes account for about one- seventh of all cigarettes consumed in the United States. The outstanding success of PALL MALL is attributed to the out- standing quality of its tobacco blend, re- flecting the Company's high standards of leaf purchase and precision manufacture. and abroad. Net income in 1960, before deducting nonoperating charge of $797,292 to pro- vide against possible loss of leaf inven- tory in Cuba, was $63,319,605, slightly higher than the record $63,248,270 for 1959. The 1960 fourth quarter was the fifth successive quarter to show a record high in dollar sales. Despite the provision against possible Cuban leaf loss (charged to fourth-quarter earnings), net income during that period also set a new record for a fourth quarter. S~les Again in 1960 the Company's cigarette volume increased in both the filter and non-filter fields. DUAL FmTER TAREYTON Cigarette sales continued to increase in 1960. Since its introduction in July 1958, DUAL FIL- TER TARI~YTON has shown a steady up- ward sales curve. In addition to the tra- ditional TAREYTON tobacco blend., this brand offers the exclusive dual filter with an inner component of activated charcoal, definitely proved to make the taste of a cigarette mild. Increasing acceptance of both king-size and filter-tip cigarettes again resulted in a contraction of the market for standard- size cigarettes. Unit sales of LUCKY STRIKE Cigarettes, however, showed a lesser rate of decline in 1960 than in 1959. Export unit sales of your Company's cigarettes manufactured in this country, as well as unit sales of cigarettes manu- T154210527

SALES AT RECORD HIGH /~i|llons of Ddl=rs 1200 1100 , 1951 ',52 '53 '54 '55 756~ '57~ '58~" '59~ 1960'~ ~'lncludes all wholly-owned subxid~ar~os 1200 1100 I000 900 800 700 0 factured and sold abroad by the Com- pany's English subsidiary, J. Wix & Sons Limited, were higher in 1960 than in 1959. Estimated industry cigar sales in the 10¢ price class and RoI-T,~N sales in this class were lower in 1960 than in 1959; however, RoI-TAN continues to be Amer- ica's largest-selling 10¢ cigar. The brand's new Sta-Firm head, advertised beginning at midyear, was reflected in improved sales performance during the second half. RoI-TAN also offers Golfers at 4¢ and Cigarillos and Trumps at 5¢. Combined sales of the two 5¢ shapes were higher in 1960 than in 1959. The Company's higher-priced cigars-- including LA CORONA, ANTONIO y CLEO- -P-A-T~nd-BocK~C-CA~ag~in~shawed~n increase in combined unit sales. These brands comprise the largest-selling cigar iine in their field. Sales of smoking tobaccos were lower in 1960 than in 1959. Improvements in packa~ging continued in 1960. A new package design for HER- BERT TAREYTON Nonfilter King-Size Cig- arettes was introduced early in the year. A new carton was designed for LUCKY STRIKE Cigarettes and introduced in Jan- uary 1961. The Company's principal products are listed on page 24 of this report. Stock- holders are urged to use these quality products themselves, to use them as gifts, and to promote them among their friends and acquaintances who smoke. By pro- moting the Company's brands, stockhold- ers can materially contribute to sales and to the value of their own investment. Earnings Net income in 1960, before dedLlcting 4 Ti54210528

nonoperating charge of $797,292 to pro- vide against possible loss of leaf inven- tory in Cuba, was $63,319,605, slightly higher than the record $63,248,270 for 19~9~_After_t~n~_1fi6.0-netAn - come was $62,522,313. Based on 13,025,044 shares of the Com- pany's Common stock now outstanding, per share earnings in 1960, before pro- viding against possible loss of leaf inven- tory in Cuba, were $4.62 against $4.61 in 1959. After this provision, per share earnings in 1960 were $4.56. Per share figures are in terms of the present Com- mon stock, after the 2-for-1 split effective April 7, 1960. Common Dividend Increased 1960 was the 56th consecutive year in which Common dividends have been paid by your Company. An increased regular quarterly divi- dend of 57z~ cents per Common share was paid on June 1, September 1 and Decem- ber 1, 1960. Previous regular quarterly paymentshad been equivalent to 50 cents per share on the present Common stock. The total amount of dividends paid in 1960 on both Common and Preferred NET INCOME, DIVIDENDS AND INCOME REINVESTED NET "INCOME ! i • ; • i 1951 1952 1953 1954 1955 1956" 1957" 19~8e 1959e 1960" *Include, all wholly.owned lubsh~lorle$ FINANCIAL POSITION STRONGER M~llon, of Dollorl 6OO 600 500 400 400 300 300 200 200 100 100 0 0 1951 '52 '53 '54 '55 '56" '57" '58" '59" '60~ NET WORTH LONO-TERM DEBT *lnclude~ oll wholly-owned sublldloriel T154.210529

stock was $38,660,244. The balance of 1960 earnings amounting to $23,862,069 was retained for use in the business. New Dividend Policy On January 31, 1961, a regular quarterly dividend of 70 cents per Common share was declared, payable on March 1, 1961, to stockholders of record February 10, 1961. This action carried out the previ- ously announced intention of the Board of Directors [o equalize quarterly divi- dends on the Common stock in 1961. For the past several years, an extra dividend equivalent to 50 cents per share on the presen~ Common stock was paid on , • th~ n~.w !:ml- icy, subject as always to business condi- tions at the time, regular quarterly divi- dends will be increased 12!-, cents per share in place of paying the extra divi- dend of 50 cents on March 1. Stockholders in 1961 will, under this plan, receive four regular quarterly divi- Lc~f A. ct ion Rcscarch Cigarette 3laki~zg T154210530

dend payments of 70 cents per Common ing Fund. It is the present intention of share, or a total of $2.80 per share for the your Management to meet this maturity full year. Dividends (including extras) out of working capital provided other de- were equivalent to a total, on the present mands for working capital do not indicate ~:krmznxrn--xTock;-oT-$2.~ ~2~?~--~ p-ev-sh-a-re-~--~h-e-~-~g~dToY-nww--financing. However, no 1960 and $2.50 per share in 1959 and the three previous years. Continued Improvement in Financial Position The Company's over-all financial position continued to grow stronger last year. Long-term debt was $14,913,000 lower at the end of 1960 than at the end of 1959, as a result of retirement of debentures through operation of the Sinking Funds. This reduction, together with the addi- tion of $23,862,069 of retained earnings to net worth, further improved the ratio of funded debt to net worth. Thus funded debt was 25 % of net worth at the end of 1960 as compared with 70% ten years ago. In April 1962, approximately $26,000,- 000 of the $100,000,000 3~ Debentures issued in 1942 will become due and pay- able. This represen[s the amount of de- bentures which will not have been re- deemed through the operation of the Sink- new financing is presently contemplated. Notes Payable were higher during most of 1960 and amounted to $78,000,- 000 at the end of the year compared with $56,000,000 a year earlier. Heavier pur- chases of leaf tobacco accounted for the increase in this type of indebtedness. However, at times during the summer months there were no Notes Payable out- standing. Increased sales volume of our English subsidiary, necessitating increased work- ing capital, was the cause of the increase in the loans payable by this subsidiary. Net working capital at the end of 1960 amounted to $595,989,037 compared with $587,624,373 a year earlier. Taxes Federal and other taxes on income in 1960 amounted to $71,659,828, or $5.50 per Common share. This compares with net income of $4.56 per Common share. The Company's total tax bill for 1960, T!54210531