Tobacco Documents Online

2 3 4 5 6 7 8 9 to t, 12 ' 13 14 t5 16 17 t8 to 20 Mr. Fred A. Moss, Mr. W. S. Hargrove, 4 . John B. Lindsey, Virginia Robert S. Jeffress, --~- -_~~, ump W. W «C . r ~ PHILIP MORRIS & CO., LTD.7 INCORPORATED Annual Meeting of Stockholders Richmond, Virginia, July 8, 1947. 1 MR. CHALKLEY: The meeting will come to order and will be adjourned to room 604 Mutual Buildingo NOTE: ~Those who had assembled in Room 618 Mutual Bldg. ~. -~ - .4 proceeded to Room 604 where the following were present: } F. C. T I L G H M A N SHORTHAND REPORTER RICHMOND, VIRGINIA Mr. 0. H. Chalkley, Chairman of the Board, Mr. A. E. Lyon7 President, Mr. 0. P. McComass Vice President, Mr. L. G. Hanson, Vice President, Mr. Wirt H, Hatcher, --:Mr. G. P. Brauburger, - -~:T-,- r. Z}tto_ Markham, Grayqan---Dashiell, Trust Company,_ I

, 2 3 5 6 a 9 ~ 11 i2 13 14 1s 16 17 ts 19 21 F. C. TILGHMAN SHORTHAND REPORTER RICHMOND. VIRGINIA 2 Mr. James H. Scott of Scott & Stringfellow, Mr. Walter S. Robertson of Scott & Stringfellow, idr. James T. Parkinson, Jr., Miss Caroline L. Sparrow. f MR. HANSON: I wish to present to the meeting the notice of ineeting, management proxy, proxy statement and Annua Report, including financial statements for fiscal year ended March 31, 19t+7~ together with affidavit*of mailing of the notice of ineeting) management proxy~ proxy statement and Annu Report, including financial statements to holders of Common a ~ Stock, ~~ par value, and of the mailing of the notice of meet- ing, proxy statement and Annual Report, including financial statements, to all holders of the Cumulative Preferred Stock, 4% Series, the Cumulative'Preferred Stocki 3.60% Series, aiid-- the Co mon Stock, $10 Par Value, These were all mailed at -least ten days prior to this meeting. -MR. CHALKLEY: Will the Secretary file with the minute~ of the meeting copies of the Notice of Meeting, the Management Proxy, Proxy Statement and Annual Reporti including Financial • - - ~ ~-~ - -_ Statements, and the affidavit of mailing.. T he Bd of Dirt fid J 9.s the oarecorsxeune 191+7. a :-~ recordr c~ate- for the determinat~on of holders _of Common. STock, Valuei ehtitled to notice of this meeting$ and only holders orsuch stock of recor(:f at the close of business on w' - ~ ~ i ed to vote. AM -~-_ ~ that ; te sha_l be ent a ~ ~ 0 ~ ~ -~ ~ 4!2'

1 F. C. T(LGHMAN SHORTHAND REPORTER RICHMONO, VIRGINIA 3 , 2 3 4 5 s 7 8 9 ,0 „ 12 13 ,4 is ,6 17 ,s 19 20 Zt 22 25 MR. BRAUBURGER: I move the apDointment of 14,ir. R. Grayson Dashiell and P,ir. G. Thomas Taylor as Inspectors of Election. MR. CHALKLEY: I appoint.those gentlemen Inspectors of Election. They will come up and sign the oath. MR. HANSON: Are there any holders of Common Stock, $5 Par Value, appearing in person? MR. BRAUBURGER: We have a list of those in attendance at the meeting. MR. CHALKLEY: I announce that a majority of the Commo Stock, $5 Par Value, outstanding is represented at the meeting either in person or by proxy. MR. BRAtTBURGER: I move that the reading of the Minute of the Annual Meeting of the Stockholders of the Company, held on July 9, 1946, be dispensed with. rAR. LINDSEY: I second the motion. (The motion was unanimously adopted by viva voce vote) MR. CHALKLEY: The motion is carried. Mr. Secretary, will you present to the Inspectors of Election the list of holders of Common Stock, $5 Par Value, at the close of business on June 9, 19+7? f MR. HANSON; I present herewith copies of the Financia Statements as of March 311 1~+7, of the Company (unconsolidate ; the originalsof which financial£statements were certified Tto by Messrs. Lybrarid~ Ross Bros, &~ontgomery, independent =~

, 2 3 A g 6 s 9 10 F. C. T[LGHMAN SHORTHAND REPORTER RICHMONO, VIRGINIA 4 certified public accountants. The statements reflect only the operations of the parent company and the inclusion of the accounts of the English subsidiary, Philip "1orris & Company, L td., would make no significant change in the net results sho MR. CHALKLEY: The next business of the meeting is the election of ten directors in accordance with the by-laws. MR. BRAUBURGER: I nominate Messrs. 0. H. Chalkley) A. E. Lyon, 0. P. ",IcComas, J. J. Switzer, L. G. Hanson, W. B. Ryan, Jr., G. P. Brauburger, K. H. Rockey, H. E. Riddell and J. E. Archbell as directors. MR. CHALKLEY: You have heard the motion that has been made. Do we have a second to that motion? MR. HATCHER: I second it. MR. CHALKLEY: The minutes of the meetings of the Board of Directors since the last meeting of stockholders ; -~- = - - ~ available for inspection of any stockholders who wish to see '~le have a report made by Lybrand, Ross Bros. & Mont- gomery, Certified Public Accountants, outlining the scope of their examination of the inventories of the Company. If any- one would like to.see that, here it is. -Fish r Co ~ f A t e ti t th t m ons o on mpany e e op ra en s reflee x state are -tb ° ~ that you too~.over? MR. LINDSEY: I would like to ask whether the income MR. HANSON: Yes. The Axton-Fisher Company now is 0

, z 3 4 5 6 e 9 10 i1 12 13 14 15 16 17 ,3 1a 20 21 F. C. TILGHMAN SHORTHAND REPORTER RICHMONO. VIRGINIA 5 dormant company. 11R. BRAUL'IIRGE..R: I might say at that time we purchased the assets of the Axton-Fisher'Company so that plant is being operated by Philip :TOrris. MR. LINDSEY: And operations are reflectedd in the income statement? MR. HANSON: Yes. I MR. CHALKLEY: Gentlemen, Mr. Lyon, our president, has i a few remarks to make. MR. LYON: Madam and Gentlemen: You have received yo copy of the Annual Report which gives a complete picture of your Company's operation but there are a few remarks that I would like to make at this time. Beginning in 1943, and each year since, in the Annual Report to the stockholders, the management has reported that a minority stockholders' action had been brought against cer- tain present and former officers and directors of the company. These minority stockholders are owners of record of an aggre- gate of 196 shares of common stock and 4 shares of preferred stock. The claims made in that suit, allegedly on behalf of the company, were summarized in the January 1946 prospectus, a copy of which was sent to each stockholder. - _ The plaintiffs have made a proposal for the settlement of this suit, by changing the practice of computing any bonuse which may be earned in the future as follows:

F. C. TILGHMAN SHORTHAND REPORTER RICHMOND. VIRGINIA 6 , 2 3 a 5 ® 7 8 s 10 I, 12 13 14 15 16 ,7 18 19 20 21 22 23 24 25 There shall be excluded from bonusable income any dividends received by the Comcany or its subsidiar ies and any profits from the sale of marketable securi ties. Expenses on issues of capital stock shall be amortized at 10% per annum and deducted from bonusable income. In determining the difference between the inter- est on funded debt at the rate of 7% per annum and the interest actually accrued thereon there shall'be in- cluded in funded debt an amount equal to the average of the balances at the opening and closing of the fiscal year of bank loans maturing within one year. The aggregate bonus amount so computed is to be reduced by $10,000.00. Any rights of the parties to demand payment of their expenses and counsel fees by the Company are preserved.' The Company thereupon asked the advice of counsel who stated that in their opinion the law-suit was not justified on the facts; that the extent to which the settlement would benefit the Company, if at all9 was wholly speculative in amount; that prolongation of the suit would of necessity run up costs; that termination of the suit by settlement"would N permit executives to devote to Company affairs an enormous 0 431 amount of time and effort which otherwise would have to be

P. C. TILGHMAN SHORTHANO REPORTER RICHMOND. VIRGINIA 7 , 3 4 5 6 7 8 9 ,o 1i 12 13 14 1s 16 17 18 19 20 21 22 23 diverted to defending the suit; that a settlement at this time would probably save the Company additional expense; that the officers and directors, defendants in the suit, should not accept the settlement on behalf of the Company, but could appropriately join in submitting the proposed settlement to the Court for a judicial determination of its fairness and for acceptance or rejection by the Court on behalf of the, ComDany. The proposed settlement has been submitted to the Supreme Court of the State of New Yor~~ where the suit is pend- ing and has been referred to a Referee whose report';is expecte at an early date. However~ before the Court approves the settlement, full information concerning the suit and the settl - ment will be made available to the stockholders of the Company and a formal notice of the time and place of the hearing will be given. Any stockholder who wishes may come to Court and present his views. The management believes that in so submitting the proposed settlement to the Court it has acted in the best interests of the stockholders. I am going to say a few words about the sales of your Company. I-am not going to talk about the tremendous growth that your company had over the past ten years. You are well acquainted with that fact7 but I want to give you a short his- tory.

, 2 4 5 s 7 8 9 lo II 12 13 14 15 16 17 ,8 19 20 21 22 23 F. C. TILGHMAN SHORTHANO REPORTER RICHMOND. VIRGINIA 8 In our fiscal year ending March 311 1943, our domestic sales of Philip :.1:orris were 21.3 billion cigarettes. Our exports that year were 2.7 billion. In our fiscal year end- ing j:Farch, 1944, our domestic sales increased at an even greater rate than they had in the preceding year and we deliv- ered to our customers in the United States 26-1/2 billion cigarettes. The demands of the armed forces also were begin- ning to be felt that year and we sent overseas t+.l billion Philip ',Torris cigarettes. During the next year, our '1+5 fiscal year~ with millio of men already far from their homes and millions more ready to go, we were faced with a problem. Our capacity was about 32 billion cigarettes. 1,7e knew that if we continued to fully supply the demand of our domestic market we would rnot be able to send so large a~quantity to the men overseas. ,'de may have been wrong, but tite felt that fighting men far from home, want- ing American cigarettes, should be our first concern, and we decided to meet all demands made on us by the armed forces. The consequence was that in our '1+5 fiscal year we were able to deliver to our domestic customers only 21.9 billion Philip Morris cigarettes, far less than in the year before and less by an even greater amount than the demand reported to us by our distributors, but this enabled us to send overseas for the armed forces nearly 10 billion Philip Morris, that is, more than our total sales of Philip Morris cigarettes~ both domesti S 0 ~ aa 0 a -0 .~ a

, 2 3 4 5 8 8 9 to „ 12 13 14 1s 16 ,7 18 19 20 21 24 F. C. TILGHMAN SHORTHANDR2PORTER RICHMOND, VIRGINIA 9 and export, in 1939, only six years before. The war ended during our 1946 fiscal year and with it ended the purchases of the armed forces, so during that year we were able to supply a larger quantity of Philip Morris to our domestic consumers, the amount totaling 24.2 billion cigar ettes. For export that year vie delivered 3.8 billion. Our action in cutting down on domestic deliveries in the fiscal year ended in 1Q?+5, in order to supply our fighting forces, resulted in a temporary drop in our domestic business, and we sold in the United States last year 23.2 billion Philip Morris To help in the development of our export market, I travelled abroad and we were successful in selling in the post-war expor market 1+.2 billion cigarettes. Since that time difficulties of exchange and other problems in foreign countries with which you are all familiar have largely cut off this export market and this year our . export sales are about 32% of what they were last year. How- ever, what is of paramount importance is that our domestic deliveries of Philip Morris are holding steady in the total and the trend has been turned upward. S`de have, since the star of the present fiscal year, sold more Philip Morris cigarettes each month than the month before. - Your Company's financial strength today is greater than at any time in its past. Our working capital at the end -- - - - :- _ £ _ - ~ of May was $95, 339, ~t-6, more-than 15 times our currerit liabil-

, 2 3 4 5 6 7 a S 10 „ 12 13 14 15 18 17 ,a 1@ F. C. TILGHMAN SHORTHAND REPORTER RICHMOND. VIRGINIA 10 ities and we are able to meet the increases in our business which .;e hope to achieve without any additional permanent fin- ancing. At the present time our bank loans are hil and our inventory position is such that we can take.advantage of any favorable situation in the tobacco markets. In order to restore in these highly competitive times our position in the industry, rie are spending more money on sales promotion than we did last year. The results to date are very encouraging and I hope that by the end of the current fiscal year to be able to report to you that the trend to larger sales of Philip Morris has been maintained and reestab- lished. MR. CHALKLEYs Do you have any questions? MR. PARKINSON: Do you have the earnings for the three months of this fiscal year? MR. LYON: They are not ready yet. MR. LINDSEY: I would like to know how much your adver tising expenses were in the fiscal year ending in 1947 as com- pared with the preceding fiscal year? MR. LYON: The first part of the fiscal year? MR. LINDSEY: I notice the operating earnings went up MR. LYON:_ I=s your question the first quarter of the fiscal year as against the first quarter oP the last fiscal