Tobacco Documents Online

Beginning in 1943, and each year since, in the r'nnual Report to the stockholders, the manager.~ent has reported that a minority stockholders' action hadbeen brouCht against certain present and former of ficPrs and directors of the oompcny. These minority otookholdors are otivncrr of record of an aggro~ate of 196 sharos of Common Stock ond 4 shares of Proferred Stook. The claims made in that suit, allegedly on behalf of the company, wore sumx:uirized in the January 1946 prospeetus, a copy of which was sent to each stookholder. a 0 The plaintiffs have made a proposal for the settlement of this suit, by ohanging the practice of eomputing any bonuses which may be aarnod in the future as follows: There shall be excluded from bonusable income any dividends received by the Company or its subsidiaries and any profits from the sale of marketable securities. Expenses on issues of capital stock shall be amortized at 14 v per annua and deducted from bonusable income. In determining the d ifferenoe between the interest on funded debt at the rate of 7i per annum arrl the interest actually accrued thereon there shall be included in funded debt an amount equal to t he average of the balanees at the opening and closing of the fiscal year of bank loans maturi:g within one year. The aggregate bonus amount so computed is to be reduced by $10,000.00. Any rights of the p arties to demand payment of their expenses and counsel fees by the Company are preeerved. The Company thereupon asked the aivioe of counsel who stated that in their opinion the law-suit was not justif ied on the facts; 5. I k'

6. that the extent to vhieh the eettlemont wauld benefit the Company, if at all, was wholly specule+tive in amountJ that prolongRtion of the suit would of necessity run up costsj that termination of tho suit by settlement •,vould permit eaeoutives to devote to Company affairs an ©norTous a.~ount of ti:na ~ and effort ~ioh othern•rise would have to be diverted to defonE'`.no tne suitf that a settlement at this tims tisrould' probably save the Cor.:pany addit ional ezpense; that the officers and directors, defendants in the suit, should not 0 accept the ssttlement on behalf of the Company, but could appropriatoly join in submitting the proposed settlanent to the Court fbr a judicial determination of its fairness and for acceptance or rejection by the Court on behalf of the Company. The proposed settlement has been submitted to the Suprerce Court of the State of New York where the suit is pemding and has been referred to a Referee whose report is expeeted at an early date. However, beforo the Court approves the aettlement, full infbrmation concerning the suit and the settlement will be made available to the stockholders of the Company and a formal notioe of the time and place of the hearing vrill be given, hny stookholder who wishes may corae to Court and presazt his views. The mann6ement beli9ves that in so submitting the proposed eettlement to the Court it has acted in the best interests of the stookholders. I am going to say a fevr worde about thA eales of your CoMpany. I am not goino to talk about the tremendous grovrth that your compeny had over the paat tan yeara. You ore woll aoquainted with that faet, but I went to give you a short history. In our fiscal year end ing ~daroh 31, 1943, our dom©atio sales of Philip Marris were 21.3 billion oigarettes. Our exports that year Were 2.7 I billion. In our fisoal year ending ITaroh, 1944, our domestia •ales increased g1 at an even greater rate than t!^r~y had in the ~r ecoding year and •,ve delivered N C C ~ C.,7 Ca CJ O C1! ~

8. ,°0 foroign countries with tilUoh you are all tamilinr have ltirl;ely out off this export markot end this year our export sales are about 3Z;~j of wh,at t hey were last year. Flowever, what is of paramount importanoe is that our domestio deliveries of Philip 1!orris are holding steady in the total and the t rencl has been turned upward. We have, since the start of the present fiscal year, sold more Philip 2:3orris oigarettes eaoh month than the month before. Your Company's finAncial strength today is groater than at any time in its past. Our working capital at the end of May v,-as 595,339,546, more than 15 times our current liabilities and we are able to me2t the increases in our business Ah2oh we hope to achieve w3thout any additional permanent finanoing. At the present time our bank loans are nil and our inventory position is suoh~ that we can take a3vantage of any favorable situation in the tobacco aiarkiBts. In order to restore in these highly competitive times our position in the industry,, we are spending more money on sales promotion then we did last year. The results to date are very enoouraging and I hope that by the end of the current fiscal year to be able to report to you that the E t ~ trend to larger sales of Philip `.dorris has bem maintained and reestablished. c ~ ~ ?M. CIiALKL~~'Ys Do you have any questions? F M. PAR'KINSONs Do you have the earnin;s for the three mots' :hs of fi l thi ? C I C year sca s LT%. LY011 t They ar e not r e ady y et . h I cO: I. DSR. LINDS1;Y: I would like to knovv how much your advertising C.~ ~ I expenses were in the fiscal year ending in 1947 as compared -with the preceding fiscal year? ~: A t'7 Mi. LYON: The first part ofthe fiscal yeur?

J, . Y.ffl. LItJDSt,"fs I notil.,zc the operatin;; eart:.alFs .vsnt up vdi•;; nicoly, about 25 per cent . F.!.T1. LY0:1: Is your question tho first quart-.r of the fi3aal ycar as aSainst the first quarter of the liast fiscal year? Ylt. LI'.,DS:.Y: I,y question •,vas how nuch lArE;er •,veru t:v3y in the fiscal year endirG `:Iaroh 31, 1947, than in the preoedinr- year? Lfft. :i1d.T50Yd: Acivert is ing expense fo r the ye ar e ndizZ 1'arch 31, 1947, $6,988,000. For the same period, 1946, it was ^16,328,593. IR. LIfiDSr1': About ~650,000 more. Do you expect the prices of leaf tobacco to decline? I notice your Annual Report says that the prices laat year were higher then in any of the preooding years. 2.''~. LYON: 11r. Lindooy, we are hoping that they zvon't increase. We believe that they wontt increase. How much lower they will go is difficult to tell because there is a Governm9nt floor under tobaoco. IR. LINDS.:Y: But isn't that floor very much 1ovror than the ourrent market? MR. LYON': I would say not. W. Nt1TCEMs The floor that i s est ir,at ed f or the next crop i s around forty oents. The floor last year was about thirty-three or thirty-four cents, but the bright crop laat yeE:r sold for 47 cents against a floor of 33. So no one kno,vs how much above the floor this current crop ririll sell. 1.'IR. LYON: It is a little early to tell. ~,.'. 1i11TCHTR: The size of the crop and Dng1 ish buying will have effect on it. biR'. LYON: The rnglish tirill out doti,n their buying this year end a good crop will make more of the bright available for the American market which may have eom effect on the price. C C ~ W W GJ ~ Ga ~ 1 ~~

11. r E ,., a. E . l.Yo N LIr. 0, II, Chalk13y,^'.:r. 0. P, LoCoiyag, w.r. J, J. Svi:Lnr, Yr. L. G. Hanson, h"lr. J. E. Aro;iboll, B. Ryan, Jr., and i'r. G. P, Braubur~er ;voro eloated by an affirnative vote of 1,273,916 votes by proxy and 18,667 in porson. Mr. Riddell and I4r. Rockoy got the sano numb3r or votes in person but by proxy Yr. RiddolL got 1,278,8Xand h:r. Rockey Zot 1,278,796. In every case 50 shares wero voted against the directors. Mt'. CFI11LI2IY: I announAe the election of A. E. Lyony 0. P. '1ScConas, L. G, Hanson, J. E, r.rcnbell, J. J, Switzer, 'J. B. Ryan, Jr., J ~ , G. P. Brauburger, K. H'. RocCey, H. E. Riddiell and 0, 1i, Chalkley as directors of the company to hold offioe until the next annual meeting, of the stockholders or until their suooessors shall be duly eleoted, and I direct the Secretary to insert in the Minute Book the following papers and documents; Inspectors ' oath and roport, ballots oast, and report made by Lybrand, Ross Bros. & Z.`.ontgonery outlinping soope of their examination of invontorioa, !.'lt. BRAL'BURGMIs I move that the meeting e.djourn. (The motion was adopted by viva vooe vote).