Tobacco Documents Online

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Philip Morris has more than one hundrediand seventeen million dollars invested in fine I~af tobacco stored'in warehouses like this. As the years pass, the condition ofl aging tobacco is regu- larly checked. This bale of one of: the finest grades of bright flue-cured toba.cco is being examined by ~he head of our Domestic Leaf Department. The map on page 12 sh~ws I'ocaJl- ties where Philip Morris' domestic tobacco is grown. 1

P H I LI P M O R R I S & CO. LT INCORPORATED OWNED BY 16,1'23 STOCKHOLDERS--OPERATED BY 3,554 EMPLOYEES EXECUTIVE OFFICES- 119 FIFTH AVENUE, NEW YO,RK 3, N. Y. directors J. Eo ARCI-IBELL GEO'. P. BRAUBURGER: Oo H. CHALKLEY WILLIAM C. FOLEY L. Go HANSON ALFRED. E. LYON, O. PARKER MCCOMAS H. E, RIDDELL K. IL ROCKEY" W.. B. RYAN., JR. of fleers ALFRED E. LYON, Chairman W: tL HATCHER, Vice-Pre.~ident O. PARKER M¢CO,MAS, President: L. C. HANSON, Vice.President &' Treasurer c~ T. AMES, JR., Vice.President E. w. D[NWIDDIE, Vice-President WILLIAM C. F.O:LEY~ Vice-President 6; J. HENN, Vice-President RAY JONES, Vice-President w; Eo LIEBETRAU~ Vice-President H. R. BLUM, Controller L. C. blETZGER, Secretary CORNELIA CRAIG, ,4ssistant Secretary TRANSFER AGENTS Guaranty Trust Co, of N~. Y., 140 Broadway, New York REGIST'RARS The National City Bank of New York The Commercia| National Bank & Trust Co. of New York COUNSEL Conboy, Hewitt, O'Brien & Boardman, 39 Broadway, New York: AUDITORS Lybrand, Ross Bros. & Montgomery, 90 Broad Street, New York

[ore~ord In this.report to our stockholders, onr organization Summar and ~e public, we present a view o~ the whole period order to give perspective we include in tables and: " ' " '~"'~ ;' ~'~. " -. ehaas s[~ificant data on our operations from 1~933, • ..... Ma,maeme~ and ..:.~:.~.~-~-~ P~ysie~l and financial c~anges ~ave naturally ac- .~. companied our gro~ but: our basic policies have not ~ :~:"~'~Bse o1 S~es Income . -Varied. ~e report of our year just ended is presented against this background. . ?:]~~ 1M~, Cost, Price.

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Computed per Share of Common Stock Previous Years for Compari~lon Fiscal years li 949 11948 * 19:36 SALES of ........................................................................................ $114~27 $ 85~70 $ 21.56 Provided for- Tobacco and other costs of manufacturing and distributing Philip Morris products ....................................... 41 ..51 32.88 6.87 Revenue taxes and income taxes for support of U~ S. Government ................................................................. 60.35 4~,.79 11.42 Income taxes for support of State Governments ............. .20 .08: .04 Interest on borrowed money and other financial' casts ...................................................................................... .59 .49 .10 Payments to employees an,;' insurance, hospitafi- zation, pensions and~ other benefits ................................. 5+37 4.44 1.20 Payments of dividends to shareKolders Pi'eferred ................................................................... Common ........................................................................ Future operatian and risk ................................................ .41 .42 NOne 2.62 1.75 .33 3.22 .85 1.60 Investment in Phi~li'p Morri+s of' ............................................... Was supplied People who loaned us money ............................................. Owners of Preferre stock ........................................................ $ 69+30 $ 51.29 $ 6.20 31.03 16.01 None 10.23 10.48 None Owners of Common ~tock ....................................................... • (adjusted to present cop|lolizatioe.; 28.04 24i80 6.20 Total investment used in the operation of Philip Morris was ................................................................ $138,49t,000 For each job in the Company this amounted to ............. "38,968 Insurance of Personnel, Pensions, Hospitalization and other benefits provided by Philip Morris ............. 560,126 $102,573,000 $7,726,000 31,210 4,105 468,017 1,075

193,6 1937 1938 1939' 19'40 1941: 1942 1943 1944 194,5 1946, 1947 1948 1949 % I , I , I ~ I 0 10 20 30 (MILLIONS OF DOLLARS) NOW PHILIP MORRIS USED ITS SALES INCOME 1936 1937 1938 1939 I940 1941 1942 1943 1944 li945 1946 1947 1948 1949 0 I / I I I I t I I 50 I00 150 Row Materials and o,the~ Manufacludng, Distribution and Finondol Costs Payments to Personnel Dividend Payments to Stockhol,ders C

SUMMARY Sales increases continued throughout our fiscal year at a rate reminiscent of our pre-war growth. The number of our cigarettes sold in the domestic market exceeded by a substantial margin any previous peak in our history. Do- mestic sales value amounted to $22'1,664,000, an increase of .$57,696,000 over the 1948 fis- cal year. Export sales amounted to $6,708,000 giving total sales of $228,372,000; a net in- crease of $57,114,000 over the preceding year. Net earnings were $12,498,058 after all taxes, compared to $6,035,278 for fiscal 1948. The resumption of our pre-war growth in the in- dustry justifies, we believe, our unvarying policy of making high quality products backed by intelligent advertising and sales promotion. We have planned our finances for many years to allow for growth and at the present time our bank loans of $30,000,000' stand' at a reasonable relationship to our leaf inventory and our sales volume. Current assets at March 31,1949 totaled $146,881,23.0, more than three times current liabilities of $47,5.71,286 and working capital amounted to $99,309,944, an increase o~ $4,325,188 over the preceding fiscal year. . ,Out of the year's net earnings $6,063,686 was distributed to the stockholders. In March- the regular dividend on the common stock was raised from $1.50: to $2.00 per annum and an extra dividend of $1.00 was paid. $6,434,372 has been retained in the business to help pro. vide for additional company needs. Under the incentive payment plan the net earnings, of last year resulted in a fund of $468,818. This was distributed widely with no officer or employee receiving more than 5%. Convinced that we had resumed the above- average upward trend which characterized our early growth, at the end of 1947 and in early 1948 we instructed our Leaf Department to buy extra stocks of old crop tobacco in antici- pation of further increased sales. We now hold the largest stocks in our history of aged tobacco of fine Philip. Morris quality. Demands of the war had depleted our manpower and handicapped'our plan to expand the management group to: keep abreast of our growth. However, with the war's end' we further developed our program for broadening our management group, through the training and advancement of jiuniors in the Company and the recruiting and training of other men of proven ability, as reported in 1947. This enlarged team assisted last year's smooth and effective operation. We opened new distribution warehouses during the year to maintain prompt delivery service and our total stocks of manufactured cigarettes were held to. the lowest quantity con- sistent with business volume. In folIowing sections of this report we give an account of the ways, means and people that have .brought about the year's results. charts and tables within these pages are in- cluded so that our stockhoIders may trace with ease the financial developments of our business.

SALES Under Mr. Ray Jenes, Vice President, the sales organization increased its effectiveness as demonstrated by larger sales. Our sales efforts are bent toward describing the quality which differentiates our products: from others. Most valuable in the development of our sales is the friendly relationship, existing between our sales personnel and distributors and retailers o~ tobacco products. Our salesmen are aided by. merchandis- ing ideas developed by the promotion division of the Sales Department~ They pass along posters, window displays.and related material! of eye-catching value to more than a millilon tobacco retailers all over the country. They are kept: posted on the advertising programs and their team work helps to create interest in the local appearances of our radio shows. In July we increased the selling price of our cigarettes.by: about seven-tenths of a cent a package to take care of increasing costs in labor, tobacco, and other raw materials. The relationship between the money we have re- ceived for our prodUcts during the years and the cost of tobacco is illustrated by the chart on page 13. DISTRIBUTION Three new warehouses were opened to meet the requirements of our growing sales volume and others will be opened soon. Dis- tribution under the guidance of Vice President W. C. Foley is now served by 31 warehouses. These are maintained to facilitate quick delivery and each is periodically sold out to the last package before a new shipment is taken in, This insu.res that our products reach the re- tail counter factory fresh. 1936 1939 1944 SALES OF PHILIP MORRIS (MILLIONS OF DOLLARS) I , " --..~.~-.~ ..... ..-, ..- / I PRODUCTS ~CIGARETTES SMOKING TOBACCOS I I 150 200 230 I IOO

i i i 4,00 300 2OO 100 EXPORT q'he lack of available dollars abroad again hand@apped our efforts to expand our sales in foreign countries. The' foreign demand for our products is far in excess of the quantity we export. Our export sales were $6,708,000. No major improvement seems likely until l~arger dollar balances can be obtained by foreign, buyers.