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flelen Hayes, President of ANTA, pins medal on Robert Culp, winner of the Intercollegiate Aetirr; Competition ruuler the sponsorship of the "Philip Morris Plcrvhorrse." We sponsored "The Strange Romance of Evelyn Winters" (below) and "Against The Storm" for daytime radio entertainment. Everybody loves "Lucy"! Behind the scenes of the television show. Johnny pays ofJ in "Break the Bartk." A dramatic moment in the "Philip MorJ-is Playhouse." TIMN 440535

~ JOHNNY MAKES A DELIVERY IN PEORIA, ILL. 22 2 SALES TAXES ARE COLLECTED. 22~- ,' I'./•'sa I N V ESTM ENT AN D T.AXES Ow- Louisville plant (rear vieu•). The right-hand portion - which appears to be lighter in shade - is the new addition. 3 JOBBER, DEALER AND RETAILER EARN A LIVING. Our investment in property, plant and equip- ment totaled $19,916,142 after depreciation at March 31, 1952, representing an increase of $9,556,608 durina the fiscal year. This invest- ment includes the major portion of the program of expansion and improvement undertaken more than a year ago. When completed the progranl will account for approximately $12,000,000. Our investment in leaf tobacco is $198,803,- 705 as against $200,151,303 at the end of fiscal 1950-51. This clean, redried tobacco, packed in hogsheads and in the process of aging is one of the most liquid and least perishable of all business inventories. Aging mellows and im- proves the smoking quality of tobacco for up to two or three years after which it maintains its condition without deteriorating. There is no quoted market on leaf in storage, its book value being the accumulated costs of purchase, ship- ping, redrying, storage and other incidental costs averaged by grade each month. Its true value is measured only as the principal ingredient of cigarettes for whose manufacture it has been set aside. . The sale of ciQarettes has a high dearee of sta- bility. The direct cost of manufacturina ci(larettes is onl~a small fraction of the cost of the tobacco thev contain. and it ma\ be safeh, concluded that all the tobacco aging in storane against the manufacture of popular cigarette brands will be consumed r\'the puhlic xithin a short time of its TIMN 440532

SHAr',E OWNERS' REWARD. AND BUILDING FOR THE FUTURE. ESSENTIAL ASSETS RELATED TO SALES ~ PLANT INYESTMENT ;MillionsofDollarsi 30D -- 7 LEAF 1NVENTORY,Miilions of Dollars) 250 - SALES (Mil[ions of Dollars) _ - 200 L E A F T O B A C C O Our domestic and imported leaf departments have broadened this past year both here and in the Orient. The importance to our operations of tobacco of Philip Morris quality is further re- flected in our increased leaf storage capacity. In addition to the thirty-four new warehouses in Louisville, three. have been built in Richmond. Others will be erected in Richmond on land ~ EMPLOYEES (Thousands) which we own there when our building program is completed. These warehouses will give suit- able room for care of our tobacco in our own premises while the aging process brings out the bouquet and character of the tobacco leaf to be used in the Philip Morris blends. Our investment in tobacco this year at $198,- 803,705 is ample, although somewhat smaller than last year, when we bought heavily of the exceptionally good 1950 crop. Philip Morris men visit a leaf market in 1951. Much tobacco is examined in selecting leaf of quality for our blends. From left to right: Mr. M. D. Robertson; Mr. Robert Clark (with back to camera); Mr. E. W. Tucker of Philip Morris; Mr. Wirt H. Hatcher, head of the Domestic Leaf Department of Philip Morris; Mr. 0. P. McComas, President of Philip Morris; Mr. James P. Covington, Universal Leaf Tobacco; Mr. John Poloncak of Philip Morris.

In reviewing export operations, our Board of Directors deemed it wise to cancel our running contract with Tobacco Products Export Cor- poration, formerly sales agents for Philip Morris in a number of foreian countries. The balance of this current contract, drawn up in 1946 to run until 1961, was canceled for its commuted value at January 1, 1952, by agreement with Tobacco Products. We are now in the course of building our sales and advertising forces in some of the areas previously operated by that company. In Paris, Mr. Lyon examines the report of our representatives there, Messrs. Michel Landau (left) and Henri Chevrier (right). Cigarette Factory, General Office, and Domestic Leaf Department Offices -in our original building 20th and Main Streets, Richmond, Va. Cigarette Factory -built in 1937 Stockton Street, Richmond, Va. Smoking Tobacco Factory 19th and Cary Streets, Richmond, Va. The Archbell Warehouse for Imported Leaf and Imported Leaf Department Office Building 15th and Dock Streets, Richmond, Va. Green-Leaf Stemmery and Storage Warehouses Maury Street, Richmond, Va. Cigarette Factory -bought in 1945 and enlarged in 1951 Maple Street, Louisville, Ky. Green-Leaf Stemmery and Storage Warehouses Miller's Lane, Louisville, Ky. TIMN 440545 18

5 TOBACCO AND OTHER COSTS. fi SHARE OF THE PHILIP MORRIS TEAM. ! ,1:EAF 1NVENTORY, :BO RRflWED FUNDS AN0 SALES IN-~NftEt1ONS OF DOLLARS ~ NET SALES ~ NET SALES LESS REVENUE STAMPS ~ Fl1idDED'DEf3T AnD 'BANK LOANS LEAF {NVEWOR(ES 1946 : 1947 1948 1949 :;. 7 INCOME TAXES ARE COLLECTED. ® 11 'TIMN 440536

The new,green-Ieaf stem- 'mery . nearing xompletion in Louisville. A hogshead of.fine tobac- co `Wrips" entering one of our,Louisvllle.warehouses for its long sleep.

35 30 25 20 15 10 5 ln addition to the factory extension, a green-leaf stemmery (upper right) and 34 leaf storage warehouses were erected and equipped in Louisville. This picture, taken last winter, shows the stemmery near- ing completion. All.of the buildings are now completed and in use. CASH DIVIDENDS AiiDfEIIERALTAXES D!t INCOME (MtttlOBS OF DOtilltS) Earnings Retained Cash Dividends  Federal Taes on Income (Above) Mr. C. T. Ames, Jr., Production Vice President (seated) discussing plans for the Louisville factory addition in the spring of 1951. Mr. W. N. McFadden, Louisville plant manager, stands beside him. (Below) Mayor Charles Farnsley of Louisville watches President McComas lay the cornerstone of the Louisville factory addition last July 31. TIMN 440531

MA.NU FACTU R1 NG ~L ith completion now in sight of the factory cxtension at Louisville, the Company's one-shift capacity will be 40%, greater than it was two years ago when the pro~ram was first planned. Factory space was being added while production proceeded, and entire production teams with their equipment were being established in the nevver and more efficient floor areas. Mr. S. T. Jones, Factory Super- intendent, shows a visitor how the new machines at Louis- rille farm cartons 40% faster. This team in Louisville can make your month's supply of Philip Morris in a rrtinrete. W. E. Coffman, maintenance engineer, watches a blending team in operation. Packages of Philip Morris cigarettes come from the packing tnachines with rapid-fire speed and precision. The operator of this fork-lift truck swiftly moves a half-ton of tobacco at a time. TIMN 440539 15

1 I ottr l)ircctor of Research and Develop- nient brings many years of experience in the development and improvement of prodtects through scientifzc research. Dr. DuPuis iras formerly in charge of research and development of S. C. Johnson and Son, Inc. During the war lie x•as engaged in research on vital military materiel. He is a Fellow of the American Instittue of Chemists, and a menrRc•r of the American Chenucal So- ciety and other associations of men in- terested in the advancement of science. When the present Philip Morris cigarette was launched in 1933, it represented a radical de- parture from the current practices in the tobacco industry. The pioneering keynote set by the Company has been followed continuously. The Company has consistently used science and re- search, not only in maintaining the high quality of its products, but in the development of better products. Continuing research makes possible new and better methods of manufacture from the standpoint of quality and efficiency with attendant savings in cost of production. Research is an important factor in all industry today and the Company utilizes research to the fullest ex- tent. A new research laboratory is being planned in Richmond to carry out expanded activities. An increased staff of chemists, physicists, biolo- gists and botanists is being organized. The Com- pany is fortunate in securing the services of Dr. Robert N. DuPuis who will be in charge as Director of Research and Development. The Company is also fortunate in retaining the services of Mr. Willard F. Greenwald, who for many years past has been in charge of our studies of the physiological effects of smoking. He will work closely with Dr. DuPuis. Fine equipment increases research effectiveness. TIMN 440547 19

Vice President W. C. Foley talks to Philip Morris truck driver Earl Hinton. T H E P H i L I P M O R R 1 S T E A M This account would not be complete without acknowledgment of the wholehearted coopera- tion given by the people who make up the Philip Morris Team. Each segment of the Team worked Dieticians prepare superior meals to be served at modest prices in cafeierias maintained for the health and convenience of the Pltilip Morris Team. The purchase of everything but leaf tobacco is controlled from the New York Office of the Purchasing and Distribution Department. The same department expedites the distribution of cigarettes and smoking tobacco to wholesale dis- tributing points, and is closely linked with pro- duction and sales demands. The controlled inventories and systematic ro- tation of our stocks at more than 50 distribution warehouses assurey factory freshness at all times. out its adjustments, whether in sales, administra- tion, accounting, or in the factories where we made the chanae from a two-shift manufacturing routine to a one-shift daytime operation. Our factory unions recognized our problems and ac- tively helped and supported us in our efforts to make the changes as smoothly as possible. TIlVil% 440548