Tobacco Documents Online

44b TIMN 440485

CO_ LTD_~ SNO_~ NEW YORK THE COVER: A new generation of Philip Morris smokers demanded a King Size cibgarette, and one was created using the Special Blend N+'hich men and women have shared in comfortable comp:,nionship for twenty years. ~~~ 4404g6 ~

CONTENTS NARRATIVE PAGE PAGE Philip Morris in 1953 ................................ 6 Prices .......................................................... 16 Sales and Advertising ................................ 8 Leaf ............................................................ 18 Manufacturing and Distribution ................ 12 Research and Development ...................... 19 Finance ...................................................... 16 Management and Board of Directors........ 20 Philip Morris Team .................................... 21 TABLES Highlights of the Year ................................ 4 Working Capital ........................................ 15 Comparison with Industry ................Inside 14 Philip Morris Operations ..................Inside 15 Audited Statements ................................24-28 CHARTS How We Used Our Sales Revenue............ 9 Borrowed Funds, Leaf Inventory Benefits to Share Owners and and Excise Taxes .................................... 14 Government .......................................... 14 A Price Rise was Overdue ........................ 17 Ten Years of Payments and Benefits.......... 20 OTHER FEATURES Share Owners' Benefits .............................. 22 Philip Morris Products ..........................29-31 TIMN 440487 1

DIREC'I'ORS C. T. Ames, Jr. Vice President in Charge of Production G. P. Brauburger Conboy, Hewitt, O'Brien & Boardman, Attorneys-at-Law O. H. Chalkley Retired L. G. Hanson Vice President & Treasurer W. H. Hatcher Vice President in Charge of Leaf Tobacco Alfred E. Lyon Chairman of the Board and Chief Executive Officer O. Parker McComas President H. E. Riddell Wickes, Riddell, Bloomer, Jacobi & McGuire, Attorneys-at-Law K. H. Rockey President, The Arma Corporation W. B. Ryan, Jr. Retired z TIIVIN 440488

~JF'F'IC~R ~ Alfred E. Lyon, Chairman of the Board and Chief Executive Officer O. Parker McComas, President L. G. Hanson, Vice President and Treasurer C. T. Ames, Jr., Vice President H. W. Chesley, Jr., Vice President W. H. Hatcher, Vice President G. J. Henn, Vice President Ray Jones, Vice President W. E. Liebetrau, Vice President George Weissman, Vice President C. H. Kibbee, Secretary and Assistant Treasurer H. R. Blum, Controller Cornelia Craig, Assistant Secretary TRANSFER AGENTS Guaranty Trust Co. of N. Y., 140 Broadway, New York REGISTRARS The National City Bank of New York, 55 Wall Street, New York Bankers Trust Company, 16 Wall Street, New York COUNSEL Conboy, Hewitt, O'Brien & Boardman, 39 Broadway, New York AUDITORS Lybrand, Ross Bros. & Montgomery, 90 Broad Street, New York TIMN 440489

HIG1_3:LICi_HTF=" The oustandina event of our vear was the introduction on January 31, 1953 of our new Philip Morris King Size cigarette simultaneously in all domestic markets. Basic improvements were made in our sales, research and manufacturing departments to operate more efficientlv under chan2in(y conditions. Earnings distributed to Common Share Oxvrers in Diridends ................ Earnings retained for futwre operation and risk ........................... Taxes on income ...................................................... Profit-sharing payments to Emploti•ees (bonus) ............................. Pension costs ........................................................ Payments to Employees for salaries, irages and other benefits ............... Sales .............................................................. Excise taxes paid (Revenue Stamps) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leaf inventories ..................................................... Working Capital .................................................... Investment in Philip Morris of ......................................... iras represented bY ... Unsecured loans ................................................ Funded debt ................................................... InterestofPreferredShareOhners.................................. Interest of Common Share O"ners........................ ......... TIMN 440490 4

OF THE YmAR TOTAL l953 PER COMMON SHARE 1952 TOTAL PER COMMON SHARE $ 7,342,462 $ 3.00 $ 7,341,313 $ 3.00 2,771,171 1.13 4,041,516 1.65 10,883,000 4.45 15,720,000 6.42 - - 570,044 0.23 761,851 0.31 686,391 0.28 13,838,757 5.65 12,520,084 5.11 314,894,718 128.63 306,698,324 125.28 157,266,405 64.24 148,812,213 60.79 172,008,022 70.26 198,803,705 81.21 134,996,438 55.14 134,599,804 54.98 218,449,492 89.23 241,051,408 98.46 60,000,000 24.51 85,000,000 34.72 32,000,000 13.07 32,000,000 13.07 31,005,000 12.66 31,385,000 12.82 95,444,492 38.99 , 92,666,408 ' 37.85 TIMN 440491 5

PI_IILII= MORRIE__5 IN 11053 Sales in 1953 fiscal year totaled $315 million compared to $307 million in the preceding period of which sales for export were $11,900,000 as compared to $10,800,000 in the previous year. The dollar increase was affected by the greater excise tax and the increased sales price applicable in the last month of the fiscal year. Our net deduction of taxes on income was $10,883,000 as compared to S 15,720,000 in 1952. Net income was S11,345,200 compared to $12,627,140 in 1952. After payment of $1,232,000 for pre- ferred dividends, we earned $4.13 per common share and paid dividends of $3 per share; $2,771,171 was retained to provide for future needs as compared to $4,041,516 in the preceding fiscal year. We have increased the variety of our products in order to maintain our competitive position and to keep pace with new demands on the part of the smoking public. We gained national recognition for our Dunhill brand during the fiscal year and in January 1953, after months of planning and preparation, we introduced the new Philip Morris King Size overnight throughout the nation, making Philip Morris quality available for the first time to smokers preferring this size. Last year we put into effect changes in our manu- facturing and marketing programs which had been planned to meet the fast-changing conditions brought about by the shifting tastes of the smoking public. 6 TIMN 440492

Leaf inventories were reduced during the year and amounted to $172 million at the year end compared to $199 million at March 31, 1952. Bank loans at the end of our fiscal year were $60 million. Current assets totaled $217 million against $82 million current liabilities, giving net current assets of $135 million. Investment in plant during the year of approximately $1,871,500 and in machinery and equipment of approximately $1,623,500 reflected the far-reaching improvements made to our facilities at Louisville and in Richmond. Due to the rising costs everywhere, our sales, advertising and promotion expenses increased during the year. Selling messages were intensified and surveys indicated that our programs of public entertainment on TV and radio were attracting record audiences. We continued our efforts to reduce expenses through lower manufacturing costs. The benefits derived from the improvement and expansion program discussed in our annual report last year were realized in part during the 1953 fiscal year. Our green leaf stemmery in Louisville commenced operating with gratifying results. Constant improvements in the methods of making and packing cigarettes have brought about savings and improved quality control. During the coming year we expect to enjoy these benefits more fully. The enlarged research activities were helpful. Better control over qualitative and quantitative standards was established and processes improved. During February, price controls for the Tobacco Industry ended and we obtained relief through increased prices to offset in part the increased cost of materials, tobacco and labor. The higher prices were not in force long enough in the fiscal year just closed to give us much benefit but it should have an important influence on our earnings for the current year. Last year the teamwork of all personnel, Management, and Union Representatives made our operations effective in spite of unusual problems. This fine spirit made possible the production, distribution and sales achievements of the past year. With its continuation and our more efficient productive facilities, improved organization, and our multiple brand appeal to the smoking public, we look forward to a successful year ahead. wr~...-.~ President Chairman of the Board May 22, 1953 TIMN 440493

:.:~_W~L Twenty years ago we offered a premium quality cigarette at a popular price when we introduced the Philip Morris Special Blend for the first time. Since then exten- sive changes have taken place in the distribution and marketing of tobacco prod- ucts. At that time the tobacco store and the tobacco counter of drug stores and restaurants and other similar outlets gave us the greatest volume of sales. Today it is estimated that as high as forty per cent of the retail sales of cigarettes is in supermarkets and groceries, while vending machines account for more than fifteen per cent. Both of these types of outlets were minor factors twenty years ago. Another important and significant change that has taken place is shown by the increasing number of brands sharing the total domestic production of American made cigarettes, a change which has paralleled the development of popularity for the 85 mm. or king size products. The table on the facing page points this out: Sales strategy is planned in Vice President Chesley's office prior to the introduction of our Philip Morris King Size. (L.R.) R. S. Larkin, Sales Promotion Director, Ray Jones, Vice President, Harry Chesley, Vice President, Roger Greene, Advertising Manager.