Tobacco Documents Online

PHILIP MORRIS & C0, LTD,, INCORPORATED Financial Statements as of March 31, 1947 and for the fiscal year then ended LYBRAND, Ross BROS. &MONTGOMERY CERTIFIED PUBLIC ACCOUiNTANTS NEW YORK OrEIcE

a ~ / IYlI! ~e (~,It1e 1'<~.C7`c ~~l(>!/V/~'/~Jl7Pl•~, CERTIFIED PUBLIC ACCOUNTANTS I NCWTU"MPnILAOCLPNIA C"uCAnO eoSTON tl4LTiNOR! W.SFIINGTON PITTS9UROly DCTROIT D>L'LAS CLCVEI ANO NO131ON CINDINNA.1 SANIRMNCI9CO ROCKrOMD LO5 ANOCLCS LOUiSvILLC 4lATTL! STLOUIS LON]ON ATLANTA P.tR19 To the Board of Directors of Philip Morria & Co. Ltd., Incorporated: We have examined the balance sheet of PHILIP MORRIS & CO. LTD., INCORPORATED as of March 31, 1947, and the statements of in- come and surplus for the fiscal year then ended, have reviewed the system of internal control and the accounting procedures of the company and, without making a detailed audit of the transactions, have examined or tested accounting records of the company and other supporting evidence, by methods and to the extent we deemed appro- priate. Our examination was made in accordance with~generally ac- cepted auditing standards applicable in the circumstances and included all procedures which we considered necessary. In~our opinion, the accompanying balance sheet and related statements of income and surplus present fairly the position of Philip Morris & Co. Ltd., Incorporated at March 31, 1947, and the results of its operations for the fiscal year then ended, in con- formity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. New York, May 12, 1947. &A," 61y~.. 1

•,3~ q :'Current:, Demand deposits inbanks and= cash on hand United 3tate3.0overnment`-obligations at cost Accounts receivable from customere; less allowence for.discounts and doubtful accounts, $609,180 for 1947 and 4625,684 for 1946 0L}Accounts receivable from others Inventories, at average cost: Leaf tobacco (including imported leaf in bond subject to duty) Manufactured stock Stock in process, revenue stamps and operating supplies Total inventories Refund receivnble for federal excess profits taxes of prior years. Property, plant and equiFment, at oost: Land, buildings, machinery and equipment Less, Allowance for depreciation Other assets: Notes receivable from supplier,: Investment, at cost, in Philip Morris . & Co,,Ltd, (England) (Note 1) Other investnients Prepaid expenses and deferred , charges Good will, trade-marks and brands '5 ,583,334 807,236 109.227,074 93,750 `235,965 11,800 707,400 PHILIP MORRIS & CO. LTD,, INCORPORATED (Incorporated in Virginia) GOMPARATIVE BALANCE SHEET, March 31, 1947 and 1946 CAPITAL: 194 5,500,000~~~ $ ,44,000;000,i 1 464 486 , 966,863 .':2,401,822 1,607,781. 1,833,539 1,369,158 440 2,680,587 14.640,322 50.624,389 32.000.000 500,000 11,294,250 19,784,800 19;04;700 - ,954,300 1,954,300 8,336,3408,336,350 15,9~9,390 ,15,960,374 ; ~ 2~,574i~8 ~„23,o3~.1Q4 ~;..69,604.088 -62~ZZ ,2?8 . 1 1 186 I A116 4744,410 w~. LIABILITIES:. Current: Notes payable to bar,ks Dividends payable Accounts payable Accrued liabilities,- interest,.taxes (other than federal•income taxes), ' advertising, etc. Provision for federal income taxes Total current liabilities Funded debt: -~~ Twentp-year 3% Debentures,-lesa $205,750 sinking fund cash'held by trustee 2-5/8% Sinking-Fund Debentures , due April 1, 1966 (sinking fund payments r.ommence March 31, 1956) IReserve for claims, litigation and 1.. contingencies Capital stock: Cumulative preferred, par value $100 per share, authorized 350,000,ahares issuable,in series: 4% 9eries, authorized 199,847 shares; at March 31, 1947 redeemed 1,999 "shares and outstanding 197,848 shares (Note 2) . .3.60% 9eries, authorized 149,883 sha.res, outstanding 19,543 shares (Note 2) Common, par value $5 per ahare; authorized 3,000,000 ahares- outstand- ing at March 31, 1947, 1,996,468 shares (552,000 shares issued for equivalent of $2 per share) Capital surplus,statement annexed Earnea surplus, statement annexed (Note 3

COMPARATIVE STATEMEN7of INCOME for the fiscal years ended March 31, 1947 and 1946 Net sales Cost of goods sold~ Gross profit Shipping, selling, general and administrative expenjes Operating p:ofit before federal income taxes Other income Other deductions: Interest on debentures Other interest Miscellaneous Provision for federal income taxes Income for year before special items sot forth below Additions: Recovery of federal excess profits taxes of prior years Recovery in connection with Government contracts Excess provision in prior jears for fed~sral income taxes Premium rocoivqd on 9a1la of 2-5/8% Sinking Fund Debenturer, less expenses of issue Profit on sale of real estate Deductions: Losses arising fr=termination of war ($492,222), less $250,000 charged against reserve therofor Premium paid on retirement of Twenty Year 3% Debentures Settlement of claims in connection with canceled subscriptions to cumulative preferred stock, 3.60% series Provision for claims, litigation and contingencies Balance of income transferred to earned surplius 1947 1946 $170,905,550 $178,686,032 148,411,919 159,882,242 22,493,631 18,803,790 12,844 765 10,953 L363 _ 9,648,866 7,850,427 162,360 155Z842 _ 9~811,226 8,006,267. 830,725 345,500 219,669 452,161 151,747 160,912 1,202,141 958,573 8,609,085 7,047,694 31200,gqg 2,550,000 5009,085 4,497,694 1,867,528 310,000 300,000 133,865 77, , 200 5,930,150 6,665,222 242,222 472,000 ~A 275,000 C 502,000 972,000 517,222 $ 4,958,150 $ 6,148,000 3 ~.

STATEMENTS of SURPLUS for the fiscal year ended March 31, 1947 Balances, March 31, 1946 Balance of income transferred from: statement of income Transfer of common stock heretofore reserved against scrip certificates which expired during year Deduct: Premium on 1,999 shares of cumulative preferred stock, 4% series, redeemed during year Dividends declared: On cumulative preferred stock, 4% series 793,391 On cumulative preferred stock, 3.60% series 70.355 863,746 On common stock, $1.75 per share 3.497.340' 4,361,086 Write-off of cost of good will, trade-marks and brands Earned Capital Surplu~s Surplus $23,032,194 $15,960,374 4,958,150 10 27 .990 ,3'4'4 15 ,960~.384 10,994 50,000 ~A 4.411 036 10 , 994 C r,; Balances, March 31, 1947 (Note 3) 4 0 S ~ Cj J~ §23.579,258 ~15.949,39 x I'

1. 3'. NOTi:S to FINANCIAL STATwNL,NTS Net assets of this wholly owned English subsidiary are approxi- mately equal to the investment amount, on, the basis of the official rate of exchange. The Cumulative Preferred Stock is redeemable at any time, other- wise than through'the sinking fund's, at W102,50 per share for 4% Series (up to February 1, 1949) and $103.00 per share for ;.E0 Series (up to February 1, 1950), and at diminishing per share amounts after those dates but not less than M105.50 for 4% Series and'$100.00 for 3.60% Series; plus accrued dividends in each case. Holders of the shares of each serieQ are entitlied to such specified payments upon voluntar;,~ liquid :tion of the company and to $100.00 per share, plus accrued 31v'_3ends, upon involuntary liquida'tioni. The company is required to set aside, in sinking funds, amour.ts su2'ficient to redeem 1% of the maximum number of shares that have been issued of each series, at w105<50 per share for the 41t Series and $100.00 per share for the 3.60$ Series. Pre- ferred stock in treasury may be used in, connection with, such sinking fund requirements. The sinking, fu n3 F'a,;me nta to be made within one year from, March '31, 1947 ag.regate 22,01,49'.50• The terms of issue of the 2-5; ~;b Sinking Fund Det?::tures include certain restrictions with respect to the decl!aration or payment of dividends (lother than dividends payable in stock of the company)' on any shares of capital stock of the comra:ny. and to' payments on account of the purchase, rt>demption or other retire- ment of its capital shares. At March 31. 19'- ", apr:^cYi:-ately $4,836,000 of the earned surplus was free of su;.h restrictions. The terms of issue of the Cumulative Preferred Stoic"K, include certain restrictions with resPect to the ::ecln^ntio n or tay:cent of dividends (,other than dividends payable in stcck of the company) onithe common stock. The numount of earne :~::^. ?,'s free of such restrict~ion'9 w~lsini eYCeasot' the ~:~. ,000 ahowni above. The company has subrni tt~,~d iiAf ot.,m,'ttion tothe ,,:t concern- ing Its renegotiable contr:l'cts for t1110 t:iscxi y.ea.lr r.^d,a Tl~rch 31', 19,111) and f"or tht; iit:1c~ montt'i's c~,;.i~~.i D~~c~~rrb =~1 . 4 It is the opinion, of the m~ina's;etrt~ nt that :zny r~~^~,'~o•ist±on :^e- Q funds which may bf' re•qtt t t'etl w t 11 tot ; t~ir. Cz~ :~a1 . tonc;t tucottrtt t'ut' Clret' I':rts;tl yt,~lra "I::d 19'o' a tt , Prov 1 >lr t'ctt" t ~+{~ l~ +~~ f rl t l t lt t' to E l`rttC att~1 r l l ~::t ~ ~ c,.,e Cg :ll1't t'Xpf'119t? 3`l~l~!I't.'d'lt 4'•1 t'ot' t rtC+ A:A t'ol' fltt` t't'a;'•'tl Vc!ttt' l`l lo-