Tobacco Documents Online

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L//IC ~r/I1tC~l(('U Il C~'(~~ll'L:'C'~ l~)71/)f1711,~ A1f~ M\Sn1.11~ATlai ~1'L~in~ai;its - ---- ---- ----- --- - - - -- - --- -- V - -(, ---- ------ --- sum.»zary of sales and income (subjccl to ycar-cnd adju.ctrncnt and audit) Ql'AItTl;lt 1:\I11NC AtAli('il 31 1962 1961 Sales . . . . . . . . . . . . . . . $271,982,000 $270,358,000 Net Income . . . . . . . . . . . . . 15,158,000** 14,673,000 Net Income per share of CommonStock* . . . . . 55¢** 53~ Taxes on Income . . . . . . . . • . . . 17,792,000 17,211,000 *statcd in terms oJ the new stoch., after 2-/or-I split voted on April 4, 1962. k'"inclurles nonrecurring income credit equivalent to If per Common share. Note: 1961 Tfigures adju.ctcd to c.rchrrrc J. Wix & Sons, Ltd., /ormcr subsidiary exchanged c/Jcrtivc January 1, 1962 for an intcrest in Gallaher, Ltrl.

Annual lieport f or the year ended . December 31, 1961 l ; a Q a ~o a~~a~ F,xecxtire Office, 150 East 42nd Street, New 1'orL-17 CONTENTS Niglrl ights . . . . . . . . . . . . . 2 President's Letter . . . . . . . . . . 3 Operations at a Glance . . . . . . . . . 14 Consolidated Statements of Income and Retained Earnings . . . . . . . . 15 Consolidated Balance Sheets . . . . . . . 16 Notes to Statements . . . . . . . . . 18 Supplenzentary Finanuial Inforniation . . . 19 Auditors' Cert i ficat e . . . . . . . . . 20 Directors and Officers . . . . . . . . . 21 Ten-Year Fiirancial Rei•iew . . . . . . 22 Your Company's Principal Products . . . . 24

(/1lf .."fi12G11C-Ctl2 C/Ui•CtCCCK.Ch77lJl1)1!i AND WHOLLY-OWNED SUBSIDIAORIE OS ...Iliglrliglrts a. I 1961 1960 Per Common Share Net operating income . . $5.01 $4.62 Provision for possible loss in 1960 (credit adjust- ment in 1961 for partial recovery) of leaf inven- tory in Cuba, less applicable federal income tax .02 .06 Net income . . . . . . . . . . . . . 5.03 4.56 Dividends paid . . . . . . . . . . . . 2.80 2.721h Net sales . . . . . . . . . . . . . . $1,288,398,735 $1,215,342,819 Operating income, before taxes on income ... 148,070,315 135,843,166 Net income (after provision in 1960 for possible loss of leaf inventory in Cuba and credit adjust- ment in 1961 for partial recovery) ..... 68,734,046 62,522,313 Dividends paid (common and preferred) . . . . 39,637,109 38,660,244 Portion of net income invested in assets used in the business and to provide for debenture sinking fund requirements . . . . . . . . . . 29,096,937 23,862,069 Current assets, December 31 . . . . . . . 827,902,278 771,818,513 Current liabilities, December 31 237,905,218 175,829,476 Net working capital, December 31 . 589,997,060 595,989,037 Number of stockholders, December 31: Common . . . . . . . . . . . . . 89,534 89,440 Preferred . . . . . . . . . . . . . 7,079 7,105

FEBRUARY 7, 1962 The President's Lef tc>>• i TO OUR STOCK I I OLl)F.RS THis xf•'ToxT covers operations of The American Tobacco Company, including wholly-owned subsidiaries, for 1961. Dollar sales in 1961 were $1,288,398,735, an increase of $73,055,916 over the 1960 figure, $1,215,342,819. This was the third successive year in which dollar sales gained in excess of $50,000,000. Unit cigarette sales were higher in 1961 than in 1960, both in the United States and abroad. Net income in 1961 was the highest in the history of the Com- pany, $68,734,046 compared with $62,522,313 in 1960. Net income has set new records in six of the last seven years. Sales Again in 1961 the Company's cigarette volume increased in both the filter and the non-filter fields. PALI, MALL, the Company's largest-selling brand, added sub- stantially to its unit volume. Comments from the smoking public c•onfirm that PALL NIAL1,'s Wide popularity rests on the intrinsic quality and good taste of its tobacco blend. DUAL FILTEx TAREYTON Cigarettes increased in sales during 1961, continuing the sales rise which began with the brand's intro- duction in July 1958. The D1tA1, Fn,TFx TAxM-'ror Cigarette offers the dual filter with activated charcoal for mildness of taste, and a tobacco blend of the high quality traditionally associated with the Company's products. Again in 1961 king-size and filter-tip cigarettes attained ]arger shares of the total cigarette market, while standard-size cigarettes accounted for a smaller share. In keeping Avith this trend unit sales of LtrCxY Sj•lflj.j; Cigarettes declined, but at a lesser rate than in 1960. Export sales of the Company's cigarettes manufactured in the United States increased in 1961, as did sales of cigarettes manu- factured and sold abroad by the Company's former British subsidi- ary, J. Wix & Sons Limited. Unit sales of Rol-TAr• Cigars, which account for most of the Company's cigar sales revenue, increased in 1961. Pol-TAN sizes in the 10~- price class achieved a very satisfactory increase, and the brand continues to be America's largest-selling cigar in this class. 3

Sales at Record High F,arnings at Record High Mllliom of Doflan . Mfllion+ of Dollun 1,300 ~ 1,300 150 1JS 1•700 1,400 1,100 1,100 A00 1000 9"Wo 900 Soo aoo 120 105 1937 '37 '31 '33 '36' '37' 'SB' '39' '60• 'dl• *Indud.s oll wholly-ew..d wibddim{a Net Income, Dividends and Income Reinvested ANHon of Dollars d00 - 'Mduda oll whoIly-own.d wb.Wbr{.s Financial Position Stronger ' ~' NCO E REIN EfTED ' NET INCOME 300 100 0 •Induda oll whoflyown.d wb0d{ori.l 4 1952 '33 '54 '53 '36• •370 '3!• '39• '60' 'd1• • Induda ell wholly.own.d wbddioAq U N D (

Roi-TAI. offers more sizes / five 1 than any other cigar in this field. A sixth size, ROI-TAN Fresh Blunt Tips, is now being introduced in this price class. RoI-TAN also offers Golfers in the 4~~ class and Cigarillos and Trumps in the 5~ class. The Company's higher-priced cigars, which include LA CoKONA, ANTONIO y CLEOPATRA and I30cI{ y CA, continue to comprise the ]argest-selling line in the fine cigar field. Two new aluminum-tube packings-LA CORONA Americans and LA CORONA Naturals-were introduced in 1961 and met with excellent consumer acceptance. Combined sales of smoking tobaccos were lower in 1961 than in 1960. However, sales of our principal smoking tobacco brand, HALF ANll HALF, increased. Design improvements in the HALF AND HALF pocket size were made, and the larger size hacki,ngs Nvere com- p]etely redesigned. Page 24 of this report lists the Company's principal products --cigarettes, cigars and smoking tobaccos. Each is a quality leader in its own field, distinguished by fine tobacco and precision manu- facture. Stockholders are urged to enjoy these quality products themselves, to use them as gifts, and to c•all them to the attention of their friends who smoke. By so doing, stockholders can greatly assist the Company's efforts to increase sales and profits. Earnings Reach ~Netc, Iliglt Earnings in 1961 were the best in the history of the Company. Higher sales combined with continued improvement in operating efficiency produced an increase of $6,211,733 or 10 ';~ . in net income, from $62,522,313 in 1960 to $68,734,046 last year. In 1960 a nonoperating charge of $797,292 or 6 cents per Com- mon share was deducted from net income to provide against possible ]oss of leaf inventory in Cuba owned by The American Tobacco Company which ,ve Nvere unable to have shipped to the United States. Early in 1961 Nve received delivery of a portion of this leaf inventory. The net amount of this recovery, $237,622 or 2 cents per Common share, is included in 1961 net income. An additional de- livery of such leaf inventory was received in 1962 prior to the em- bargo on importations from Cuba. The net amount of this recovery, $184,464, Nvill be reflected as a nonoperating credit in 1962 net income. Earnings per Common share, based on 13,025,044 shares out- standing, amounted to $5.03 in 1961 compared Nvith $4.56 in the previous year. ~

I "Q?tiet I'lease! Tobacco Asleep." Leaf inre>itory wortli $661,,680,31,1, is kept priizcipally in 270 storayc sheds near,fartories. Dividends Last year marked the 57th consecutive year in which Common divi- dends «'ere paid by your Company. Total payments in 1961 amotmtec] to $2.80 per Common share, consisting of four quarterly dividends of 70 cents each. Four quar- terly dividends of $1.50 per share were also paid on the Preferred stock. The regular quarterly dit•idend on the Common stock payable on 111arch 1, 1962, has been increased from 70 cents per share to 75 cents per share, which is equivalent to $3.00 on each of the presently outstanding shares on an annual calendar basis. This is the third consecutive year in which Common stock divi- dends have increased. The annual pa}-ment per present Common share increased from $2.50 in 1959 to $2.72?~, in 1960, $2.80 in 1961, and to the rate of $3.00 in 1962. Total dividends paid in 1961 on both Common and Preferred stock amounted to $39,637,109. The remainde1• of net income, or

$29,096,937, was retained for use in the business, compared with $23,862,069 retained in 1960. Sloc•k Split Kec'(pnnnien(led The Board of I)irectors has recommended to stockholders that action be taken to split the Common shares on a 2-for-1 basis. This recom- mendation is to he considered at the Annual Stockholders' Meeting on April 4, 1962. If the 2-for-1 stock split becomes effective, the number of Com- mon shares outstanding on the next dividend payment (late, June 1, 1962, will be double the present number. The increased quarterly dividend rate above-mentioned, applied to twice the number of shares, N~Tould be 377~,( per share, which on an annual basis would be $1.50 per share. I'lllllli('('s Coll/ITlile Slrong The princihal amount of debentures outstanding was reduced by $13,760,000 during 1961 through operation of the Sinking Funds. Total debentures outstanding at December 31, 1961, amounted to $132,536,000, which reflects a reduction of $132,350,000 compared Nvith February 1952 when such debt was at its peak. In April of 1962, $25,1 t)5,000 of the $100,000,000 3 j~ Deben- tures issued in 1942 will become due and payable. This represents the amount of debentures which will not have been redeemed through the operation of the Sinking Fund. Barring unforeseen developments it is anticipated that this maturity can be met out of Nvorking capital, and no new financing is presently contemplated. Notes Payable increased to $98,000,000 at the end of 1961 com- pared Nvith $78,000,000 a year earlier. Notes Payable Nvere gen- erally lower in the earlier part of 1961 and there Nvere no Notes Payable outstanding at several times during the summer months when working capital requirements Nvere at a minimum. However, purchases of leaf tobacco during 1961 Nvere greater than in 1960, resulting in a higher level of Notes Payable in the last half and at the end of the year. Taxes Federal and other taxes on 1961 income including tax applicable to recovery of Cuban leaf totaled $79,831,315 which amounts to $6.13 per Common share compared with net income of $5.03 per Common share. i