Tobacco Documents Online

1961 ANNUAL REPORT T154230483

LEWIS GRUBER Chairman of the Board & Chief Executive Oj~cer HENRY E. ERICKSON Director o/Lea] Activities GEORGE W. DAWDS0N Ezecuti~e Vice President, Federal Tin Company, Lorillard Subsidiary MORGAN J. CRAMER President HAROLD X. SCHREDER Executive Vice President and Director Distributors Group, Inc. Treasurer and Secretary Twentieth MELYIN E. DAWLEY Pre~iden¢ and Director Lord & Taylor i~orpuration TIS4230484

contents Board of Directors ....................................... Page 1 Financial Highlights ..................................... Page 3 The Year in Review ...................................... Page 4 Sales ............................................................. Page 7 Research ..................................................... Page 9 Leaf .............................................................. Page 11 Advertising .................................................... Page 15 International ................................................ Page 17 Manufacturing .............................................. Page 19 Federal Tin Company .................................. Page 19 Consolidated Balance Sheets .......................... Page 21 Earnings ........................................................ Page 23 Ten-Year Financial Comparison .................... Page 24 Annual Meeting and Proxy .......................... Page 25 Accountants' Opinion .................................... Page 25 Lorillard Officers ........................................... Page 26 Other Corporate Information ........................ Page 2.6 I II I T!54230485

Sales ............. Net Earnings .......... Results per Common Share: Net Earnings ......... Dividends .......... Shareholders' Equity ....... Current ~4ssets ......... Current Liabilities ........ K/orking Capital ......... Long-Term Debt ......... Shareholders' Equity ....... Number of Shareholders ..... Number oJ Employees ...... 1961 1960 $492,930,882 28,419,o73 4.22 2.20 23.69 303,555,901 105,15o,381 198,405,520 80,706,014 165,513,986 42,000 6,694 $487,329,716 27,381,257 4.06 2.20 21.65 272,174,522 116,979,099 155,195,423 44,139,678 151,945,219 40,290 6,794 T!54230486

Fellow Shareholders: The year 1961 xvas a period of growth and expansion for your Company at every level of its operation--both sales and earnings reached new highs; international operations made substantial gains; subsidiaries' sales and earnings set new records: research and production expanded; our product line was enlarged. Thus, our third century ot: corporate life was launched on an auspicious and gratifying note. Sales for 1961 set a new record of $492,930,882, compared with $487,329,716 for 1960. The highest sales our Company had previously achieved were those for 1959, when they amounted to $490,873,749. Net earnings for the year also achieved record levels--S28,419,073, or $4.22 per common share, vs. last year's $27,381,257, equal to $4.06 per common share. These gains were achieved in the face ot~ charges involving development and launching of a new cigarette brand and start-up costs of a major new facility. Our earlier earnings high was recorded in 1959 with $28,265,157, or $4.20 per common share. Dividends for 1961 totalled $2.20 per common share. Short-term borrowings at year-end were $66,725,000 and it is antici- pated these will, as usual, be substantially reduced in the coming months. In this connection, it is pertinent to note that 1961 prices for the two major tobacco types--flue-cured and bufley--were the highest in history. Finastcial operations TI54230487

Brand advances International activities Our huge Greensboro, N. C., cigarette plant works 16 hoztrs daily, two lull shi[ts. During the year, a new Lorillard brand was introduced--York Imperial- size cigarette. The first Imperial-size cigarette, York features the first increase in cigarette length since king-size was introduced almost a quarter- century ago. Developed in blend, packaging artd concept as a luxury cigarette, but sold at popular prices, York is a non-filter brand, designed in response to market studies which indicated a clear-cut consumer readiness for a new longer-than-king-size, full-flavored cigarette. Sales of York in its initial markets were most encouraging and distribution to new markets was rapidly expanded. In the international area, Lorillard operations were enlarged and export sales increased more than twenty per cent over the previous year to a new record. In addition, your Company has the broadest array of foreign licensing agreements of any domestic tobacco company. Although foreign sales do not yet constitute a major factor in your Company's operations, they grow in importance year by year. Consumer preference for the "United States-type" of cigarette is almost universal. This fact, coupled with the growth (estimated at more than five per cent annually) of world-wide cigarette consumption, and Lorillard's position in the van of international operations, indicate that the outlook for steady and continued expansion of our international sales is very favorable. Federal Tin Company, wholly-owned Lorillard subsidiary, also pro- gressed substantially during the year, setting new sales and earnings records and expanding its operations on virtually all fronts--plant, personnel, product line and capacity. T!54230488

The most notable event of the year for your Company's production departments came with the officiaI opening last November of our new facility in Danville, Virginia. Designed, engineered and equipped to be the worlds largest, most efficient tobacco leaf processing and storage installation, the new Danville plant was built at a cost of $8 million and features pioneering produc- tion techniques and custom-designed equipment unique to the tobacco indus- try. The new facility increases our tobacco processing and storage capacity by some fifty per cent, is expected to effect substantial savings in our costs and should have a healthy effect on corporate progress for many years to come. Management is deeply grateful to Lorillard's 6,694 employees and 42,000 shareholders for their loyalty, cooperation and support of the Com- pany's programs and products during 1961. For those shareholders who cannot be present at the annual meeting. Management earnestly solicits them to fulfill their corporate responsibility by exercising their right to vote by proxy. For the coming year, it is your Management's earnest hope and belief that the growth patterns established during the recent past will be continued, solidified and expanded. Tobacco is America's oldest industry and Lorillard is the world's oldest tobacco company. However, both have the vigor of youth and we are confident that, in the years ahead, both will grow and prosper. It is to this proposition that your Management has dedicated itself. Danville opening PRESIDENT CHAIRMAN OF THE BOARD I-Iarold N'. Temple With profound regret and sorrow we note the untimely death last summer of a close friend and highly respected colleague, Harold F. Temple. President (from January 1, 1959) and Chief Executive Oflieer (from December 1, 1960), Mr. Temple had followed the traditional Lorillard up-from-the-ranks route to executive position. During his more than 30-year career with the Company, he had held virtually every key post in the Lorillard sales and marketing organiza- tion. His qualities of leadership, devotion to duty, and kindly vktue are sorely missed by all who knew him and, particularly, by those who were privileged to work with him. T!54230489

Sales of your Company's products in 1961 were the highest in corporate history, surpassing all previous records in both unit and dollar volume. To achieve this goal, the Sales Division, both in the field and at head- quarters, was enlarged during the year, with supervisory controls and personnel expanded and sales territories realigned to improve coverage of the nation- wide market. Geographical distribution of your Company's products was further improved and the number o~ retail outlets selling Lorillard brands increased. Intensified sales efforts in such specialized markets as Federal and State institutions and vending machines were eminently successful, with the result that our sales in both those areas were even higher than last :/ear's record levels. To supplement what we believe to be the finest merchandising pro- gram offered by any tobacco company, the Sales Division also developed permanent point-of-sale advertising displays made of metal (signs, counter display stands, change trays, etc.) which have proved superior to, and more effective than conventional paper and cardboard units. Our cigarette self- service merchandising fixtures and racks were further improved and the number of cartons of Lorillard brands displayed on such fixtures was the highest in Company history. A full schedule of promotions for our products was conducted at trade shows, medical conventions, county and state fairs and industry exhibits, and virtually every month of the year a special sales program for one or another of our major brands was held in conjunction with tobacco whole- salers throughout the country to widen distribution. KENT continues to be one of the country's best-selling filter brands (and was rated the leading seller in the high-filtration category by the 1961 Top Lorillard sales executives (left) periodically review new marketing strategy to expand distribution o/ Company's leading cigarette bratlds and give them more effective support via improved point of sale displays and merchandising techniques. Ti54230490

Wootten report on cigarette sales). During the year in review Kent king-size sales gained. Kent in the crusl~-proof box held virtually steady and the regular- size decreased in keeping with industry trends. NEWPORT, in both the crush-proof and king-size, showed substantial sales increases and the brand's sales continue to form a strong upward curve which is expected to continue during 1962. OLD GOLD is now available in three types--Old Gold Spin Filters, which continue to maintain their steady volume; Old Gold Straights king-size which also are holding their own; and Old Gold Straights regular-size which, in line with cigarette industry averages, registered a sales loss in 1961. SPRING sales did a turnabout in the second half of 1961 and responded to special selling campaigns with small but steady increases. YORK Imperial-size cigarette, introduced late in 1961, met with favor- able consumer acceptance in its preliminary markets and distribution was expanded as rapidly as production permitted. Now available in virtually every major market throughout the United States, York Imperial-size is expected to give your Company another solid contender in the non-filter market. In all three areas of our non-cigarette products--smoking and chewing tobaccos and little cigars--sales of your Company's products increased. Briggs, India House, Union Leader smoking tobaccos had sales gains sub- stantially higher than those registered by the industry as a whole. The Com- pany's chewing tobacco brands also increased, with our principal brand, Beech-Nut, continuing as the nation's largest seller. In little cigars, industry sales were of[ 2%, while Lorillard's little cigar sales increased approxi- mately 15 %. During 1961 a record ntlmber o] retail otttlets promoted the Lorillard brands. These displays ranged front the windows o.l leading department stores to mass sel]-service stacks at sttperraarkets and included the tho~sands of cotolters oJ retail tobacconists. TI54230491

During 1961 Lorillard's Greensboro, N. C. Research Center was virtually doubled in size. This fact points up the ever-growing importance of our research program which, in the last five years, has produced or improved every one of our major products today. The more our scientists discover about tobacco leaf, the composition of smoke, methods of filtration, tobacco blending, and the dozens of other qualities that make up a "good smoke," the more new avenues of scientific pursuit become apparent. To investigate these areas and to keep our products literally "first with the finest cigarettes-- through Lorillard research," is the function of our enlarged Research Center. Key addition to our research set-up is a newly-installed pilot production line. which permits us to actually manufacture, on a trial-scale, experimental cigarettes o1~ all kinds. Closely guarded and "off-limits'" to all but a handful of authorized scientific personnel, the pilot production line enables us to check out cigarettes with a wide variety of new tobacco blends, different kinds of filters, improved cigarette papers, experimental flavoring ingredients, etc. On it our engineers also test new production techniques and mechanical devices designed to improve product quality or reduce manufacturing costs. Thus, in addition to its purely experimental work in new product develop- ment, this latest addition to our Research Center is expected to play a key role in developing new mechanical ideas for making better cigarettes more efficiently. After a new product, product improvement, manufacturing tech- nique or production device has been proved on the pilot production line, it can be easily transferred to mass, full-line production with a minimum of expense and machinery down-time. Other additions to our Research Center include a well-equipped machine shop with trained machinists; a glass-blowing shop staffed by skilled crafts- men; the most sophisticated new scientific equipment available for each highly specialized task; even a vibration-proof, specially air-conditioned The pictures below and at right depict the scope and range o/ Lorillard's contbtaing research program. In the ttsttal order, they show: Microscopic stttdy of cigarette filter elements: Lorillard-designed smokbtg machine which collects ra~, material ]or basic research on smoke; Super~,'isors o] Company research constdt with laboratory scientists; T154230492