Tobacco Documents Online

ON 1 _N ) V The amounts of net a sse ts per sha re of common stock at March 31, 1945 and March 31, 1944 are indicated in the following, tabula tion : Total assets Total liabilities Less, Amount equalto per va lue of cumulative preferred stock out- standing Not asavts a1located to common stock Number of ghcro® of common stock outstanding Net assets per share of common stock 1245 1944 $106,908,033 $90,400,858 41,844,189 27.040.367 65,063,844 65,360,491 12z2~`~..700 520 1LLI-91 $ 45,079,144 . $43,840,991 999,235 9.99,235 $45-11 A.~3187 In the above amounts per share of common stock, no effect has been given to any premiums which may be paid~on preferred stock redeemed through sinking fund operation or through~any voluntary liquidation of the company. An increase of $1,703,353 in capital during the past fiscal year is accounted for in the following summary: NBt income (after provision of $250,000~for post-war and other conting(incies) for the fiscal year ended March 31, 1945 Less, Cash dividends declared during the period $6,803,625 5,363,098 $1,440,527 Net proceeds from the sale, exch~inku or redemption of cumuldtive preferred stock credited to capital accounts during the fiscal year ended March 31, 1945 262,826 Tncreast.: incbpita.l $1,703_,3'>3. 9

BALANCE SHEET COMMENTS h Demand Deposits in Banks: The cash on deposit with banks, as shown by statements received, from the depositaries of the company, was confirmed to us by such depositaries and reconciled with the related balances appearing on the books. Investments: Tho invostments in U. 5. Treasury Bonds and other securiti;es listed on stock excha,nges were as follows at March 31, 1945: Excess of Par Value Amounts of Bonds at Market or Number At Quotations of Shares Ledger Market Over Ledger Securities of Stock Amounts Quotations Amounts . United States 3 Per Cent Treasury Bonds, 1951-1955 $25,000 $ 24,414 United Stores Corporation: $6 preferred stock 9'~5$8~' 974,454 Class A stock 2,1~50 ~ Totals .98,868 ~ 27,953 ~ 3,539 987,259 12,805 ~1zo15,212 t1~O44 The total amount of the above securities at market quotations on March 31, 1945 was $171,854 more than the comparable amount at March 31, 1944, eliminating from consideration those securities which were sold during the past fiscal year. The above listed securities were counted by us in the safe deposit vault of The National City Safe Deposit Company at 42nd Street and Madison Avc;nuo, Now York, N. Y. Securities sold during the period under review and the profits derived from such sales are shown in the following summary; c._ . ~. rv~ ?U 10

Number Ledger Proceeds Profits Securities of Shares Amounts from Sales on Sales 11 r United Stores Corporation: $6 preferred stock 3 300 Class A stock , 700~ $333,132 $341,259 $ 8,127 Imperial Tobacco Company of Canada, ordinary shares 5,250 32,266 58.691 26,425 United Cigar-Whalen Stores Corporation, common stack 28,000 ~-68 5L10 b 212 4~1?O.r~6 ~1~;3,1;20 010,764 Accounts Receivable z Customers: Statements of approximately 99 per cent of the dollar amount of customers' accounts (exclusive of certain receivables from United States Government departments) at March 31, 1945 wore mfziled by us to the customers with requests that we be advised directly of any discrepancies. Minor differences indi- cated in certain of the replies received were satisfactorily accounted for by us. Confirmations of the aforesaid receivables from United States Government departments, amounting to approximately $4,000,000, were not obtained by us but, subsequent to March 31, 1945, we examined checks and/or United States Government public vouchers as evidenco withrespect to the collection of approximately 80 per cent of such accouilty. We also reviewed copies of bills of lading and purchase orders in support of a major portimof these balances. A summary of the changes in the allowance for doubtful counts during the past fiscal year is shown hereunder: Lnlance, Murch 31, 1944 Add: Amount provided from incomo for the fiscal year ended March 31, 1945 Recoveries on accounts previously written off Deduct: Poubtful accounts written off Mercantile agency cxpc:nse Balance, March 31,, 1945 ac-- N 4 4`l,R 760 ~ ZJ $31,781 ~ 4 . 2 97 36 ~078. V) 514,838 4 13.~18 1 . b20 1 4 83g~ $r,(10 , 000 11

,'N An allowance of $116,799 for cash discounts is approxi- mately 2 per cent of the domestic accounts receivable at March 31. 1945, exclusive of United States Government and other accounts not subject to cash discounts. Accounts ReceivabLQ, Others: The principal items of other current receivables, which we tested by such procedures as we deemed appropriate in each instance, are indicated in;the following summary: Stephano Bros. $, 86,036 Ecusta Paper Corporation (notes due September 1, 1945 and March 1, 1946) 62,500 Claims against carriers 58',27.4 Tobacco Products Export Corporation 49,156 Receivable from broker for sales of securities 30,940 Sales of scrap, etc. 17,832 Claims for refund on revenue stamps attached to damaged stock 16,558 Italian Regie 16,023 Advances to salesmen 13,331 Deposit with United States Government 8,000 Permanent contingent funds 4,527 Miscellaneous 57,533 $420,710 0 Inventories: The scope of our examination with respect to inventories is outlined in a separate report submitted to you under the date-of June 18, 1945. 12

\ Notes Receivable from Supplier s The notes receivable from the Ecusta Paper Corporation, aggregating $281,250, were conf3rmed to us by that company. Of this total, 462,500 matures prior to March 31, 1946, arld has therefore been included with other current receivables as hereinbefore listed. The balance of the notes receivable, amounting to $21&,750, has been excluded from current assets on the accompanyicg balance sh;:ut i.nxsmuch as they mature subsequent to March 31, 19-~~6. Estimated Post-War Refunds of Excess Profits Tax: The composition of the estimated post-war refunds of excess profits tax for the past three fiscal years is shown by the following summary: Fiscal year ended March 31, 1943 $370,000 Less, Adjustment with respect to renegotiation of billings on government contracts for that year 7,900 342,100 Fiscal year ended March 31, 1944 165,000 Fiscal year ended March 31, 1945 245,000 $752,100 14 Fixed Assets: Fixed assets increased $2,083,104 during the past fiscal year and reserves for depreciation increasud $444,722, so that the net book amount of fixed assets was $1,638,382 highcr at March 31, 1945 thun at March 31, 1944. Practically all of the additior.s to fixed assets during the year under review were purchased from The Axton-Fisher Tobacco Compu.ny. The cost of such additior.s. was determined Total cost of all assets acquired from The pxton-r'isher Tobacco Company, as hereinbefore stated~ Less, Aggregate of values a ss igned to other than fixed assets, as estilm+ited by the munagumtnt Balance applied to fixedassets as follows : $8,941,362 6,907,154 $2,034,208 13

Of the $2,034,208 applied to fixed assets, $68,227 was charged to automobiles and trucks and $5,251 was'charged to furnitura and fixtures based upon (a) estimtztod valuos by the management with respect to automobiles and trucks,and (b) sales amounts or esti- mated values by the management with respect to furniture and fixtures subsequently sold or transferred to other offices of the company. The remaining balance, or $1,960,?30, was charged to the various fixed asset accounts in accordance with the allocation made by an independent appraisal co;npany, which allocation was based upon the relative appraised values of the fixed assets so acquired, An independent appraisal by the same company in 1943 shows an appraised value substantially in excess of the aforestated $2,034,208 recorded on the books as the cost of the fixed assets acquired from The Axton-Fisher Tobacco Company. A summary of the fixed~assets acquired from The Axton- Fisher Tobacco Company, as allocated on the books, is shown here- under: Land Buildings Building equipment Machinery and equipment Railroad sidings Automobiles and trucks Furniture and fixtures 98,000 743,010 159 o135 924, 532 1,198 # 68, 227 40,106 t2, 034,_?08. Vouchers in support other charges to the fixed asset of accounts during the past fiscal year were submitted to us and it appears that such charges were prop3rly capitalized, $ 14

\ Allowances for depreciation for the fiscal year ended March 31, 1945 amounted to $470,790, as compared with $317,967 in the preceding fiscal year. The portion applicable to the fixed assets acquired from The Axton-Fisher Tobacco Company was established by the afore-mentioned independent appraisal company based upon an investigation and inspection of such assets which~took into con- sideration expired life, condition at the time of appraisal, utility, and normal obsolescence. Prepaid Expenses and Deferred Charges: Based upon our reviews and the tests applied by us, we are of the opinion that the following prepaid expenses and deferred items, as of March 31, 1945, represent proper charges to operations subsequent to that date: Federal capital stock, state and local taxes: -, , Prepaid at March 31, 1945 $ 6.49'7 Portion of tax liability at March 31, 1945 applicable to periods sub- sequent to that date 299.975, 306,472 Machine parts at factories 124,222 Advertising materials, office and sundry supplies 33,462 Insurance premium9. 79,749 Megazine and other advertising expense 31,49'7 Freight from factories and other expenses related to manufactured stock at depots at March 31, 1945 52,829 Interest 28', 504 Miscellaneous 3,, $q4 Total $660,629 Liabilities: All liabilities of the company at March 31, 1945, of which we have knowledge, are reflected in the accompanying balance sheet. Notes payable to banks were confirmed to us by the re spec tive loaning banks and a c onf irma tion was received from J. F. Morgan & Company, Trustee, with respect to the Twenty Year 3% DcbEntures outstanding. Stat:;rr,vnts submitted to .is by the prin,.ipal 15

~-\ 1k I ti.i -ti 141V .1 ~1 1 suppliers were compared with the related accounts payable as shown by the books. Our audit procedures for the substantiation of ac- counts payable also included a review of the transactions recorded on the books subsequent to March 31, 1945. From our examination of the various provisions for accrued liabilities, it appears that the total of such provisions, as re- flected imthe appended balance sheet, was adequate. A summary of these provisions is shown hereunder: Total t8,847,391 Reserve for Post-War and Other ContinAencies: During the past fiscal year a reserve of $250,000 was provided for post-war and other contingencies which was charged to income. No corresponding provision was made for the preceding fiscal year ended March 31, 1944. Federal taxes on income Other accruals: State, local and miscellaneous taxes, including 4299,975 to be charged against operations of the subsequent fiscal year Additional compensation to officers and employeos Accruod storage charges Allowances to customers for advertising, etc. Redemption of premium certifi- cates and coupons Salaries and wages Accrued interost on debentures Miscellaneous 876,421 210,835 220,000 141, 733 74,093 147,805 87,250 • 96,938 01,855~075 Capital Stock: Shares of capital stock issued and out- standing as of March 31, 1945 were confirmed to us by the registrar and transfer agent for each class of stock. A summary follows showing the changes which occurred in the cumulative preferred capital stock accounts during the fiscal year i ended March 31, 1945: IU644332G35 16

."1 PIS , 01 4 j% 3eries: Balances, March 31, 1944 Deduct: Redeemed through sinking fund in~1944 Exchanged for 4% Series during January, 1945 Redeemed or ce,ll~ed for redemption on March 5, 19415 Balances, March 31, 1945 40 Series: Balances, March 31, 1944 Deduct: Redeemod through sinking fund in 1944 Exchanged for 4% Series during January, 1945 Redeemed or called for redemption on March 5, 1945 Balances, March 31, 1945 4% Series: Issued during January, 1945 in exchange for 14 ~6 and 4?-% Scries, as follows: 4 ~ Series 42% Series Issued for cash during January, 1945; pursuant to subscriptions by holders of common stock Balances, March 31, 1945 Shares Outsts.nding 146,026 1,461 70,770 _7_3,795 14L426 49 492 25,189 23,488 49',.169 Total Par Value A_14,.602,600 146,100 7,077,000 7,379, 500 $14,642,600 $ _a.916,900 49,200 2,518,900 2,348,800 916,90,0 70,770 ~ 7,077,000 25,189 2,518,900 103,888 10,388',800 199r847 19,984,700 As stated in Note 2'to the balance sheet, the company had a balance of approximately $396,000 on deposit with a rcdemptien agent relative to certain shares of cumulative preferred stock, 44% and 4'3% Series, which had not yet been redeemed as of March 31, 1945. No changes occurred in the outstanding common stock during the past fiscal year. very truly yours, ~j ~--a.a..it nS._,-,r /a,-*-4 . 1tGZ3,32(;36 17

ARCHIVE LOCATION VARIANCE SHEET THE NUMBER (RANGE) IS LOG-TED: ( IN THE AUDIO G18INET IN THE VIDEO CABINET ON THE OVERSIZE SHELF IN THE MICROFORY-S CABINET AT THE WAREHOUSE IN THE TRANSLATION/TRANSCRIPTION FILES 0VERSi2E 2jcccJ,~FA'T IN CotLECTioq