Tobacco Documents Online

Stockholders' Annual Meeting The annual meeting of stockholders will be held on Tuesday, April 30, 1968, at the Company's Operations Center, Durham, North Carolina, at 2:30 P.M. Eastern Daylight Time. A formal notice of this meeting, to- gether with the proxy and proxy state- ment, will be mailed to stockholders on March 29, 1968. Stockholders who are unable to attend the meeting are urged to sign their proxies and return them promptly so that the stock of the Com- pany will be represented as fully as possible at the meeting. Today the Company is owned by ap- proximately 49,400 stockholders. About 77 per cent of the total common and preferred stock was voted by person or proxy at the last annual stockholders' meeting on April 25, 1967. Liggett & Myers Tobacco Company 1967 Annual Report Contents Officers and Directors Inside Front Cover Letter to Stockholders Page 2 Domestic Cigarettes 5 Smoking and Chewing Tobaccos The Pinkerton Tobacco Company 7 International Cigarettes 9 Alcoholic Beverages The Paddington Corporation Carillon Importers Ltd. 11 Allen Products Company, Inc. Irradiated Foods, Inc. 13 National Oats Company 15 New Operations Center 16 Financial Review 17 Highlights of Operations 18 Disposition of Total Earnings 19 Consolidated Balance Sheet Consolidated Earnings and 20 Retained Earnings Consolidated Source and 22 Application of Funds 23 Notes to Financial Statements Opinion of Certified Public 23 Accountants 24 Trn Years in Review Inside Back Cover TIMN 446040 I

Liggett & Myers Tobacco Company Executive Offices: 630 Fifth Avenue, New York, N.Y. 10020 Executive Personnel On August 15,1967, Frederick P. Haas was elected Vice-President. Mr. Haas has served as General Counsel and a member of the Board of Directors since 1965, when he came to the Company from the law firm of Webster Sheffield Fleischmann Hitchcock & Brookfield in New York, where, as a partner, he was active for a number of years in the legal affairs of Liggett & Myers. O f f icers MILTON E. HARRINGTON President and Chief Executive Officer JONATHAN W. OLD, JR. Executive Vice-President and Chairman Executive Committee J. BOWLING ANDERSON Senior Vice-President, Finance FREDERICK P. HAAS Vice-President and General Counsel JAMES G. HUCKABEE, JR. Vicr-President, Manufacturing EDWARD J. PARRISH Vice-President, International SAMUEL WHITE Vice-President, Marketing RALPH P. MOORE Treasurer RUSSELL M. CHENOWETH Secretary R. HAYWOOD HOSEA Comptroller. RUSSELL G. CUTTER Auditor JAMES J. MORAN Assistant Treasurer and Assistant Secretary ERNEST W. BALDASSARE Assistant Treasurer CHARLES B. MORGENTHALER Assistant Secretary DONALD G. NYREEN Assistant Secretary JOSEPH F. TAYLOR Assistant Secretary Directors J. BOWLING ANDERSON WILLIAM W. BATES, JR. WILLIAM A. BLOUNT S. BACON FULLER FREDERICK P. HAAS MILTON E. HARRINGTON JAMES G. HUCKABEE, JR. ROBERT F. HUNSICKER HOWARD W. McCALL, JR. C. GRICE McMULLAN RALPH P. MOORE JONATHAN W. OLD, JR. EDWARD J. PARRISH ABRAHAM ROSENBERG FREDERICK SHEFFIELD ROBERT L. TAYLOR EDGAR M. WALLER, JR. SAMUEL WHITE TIMN 446039 Transfer Agent: Chemical Bank New York Trust Co. 20 Pine Street, New York, N.Y. 10015 Registrar: First National City Bank 55 Wall Street, New York, N.Y. 10015 ~

0-i

11,11 ~ ~! - LM ~ I& N ® ® ® 93 :mcwsnnuunu ~ 0 m ® ® 0 ® m 68[BC(Jejd MfNINOt TIMN 446043 ® LFJM

the Department of Health, Education and Welfare also endorsed and to which reference is made below. During 1967, legislation was introduced in the Congress which, if enacted, would require, among other things, (1) listing of "tar" and nicotine con- tent of cigarettes on packaging and in advertising, (2) a change in the wording of the caution notice on all packaging. Proposed legislation also would remove the present statutory moratorium against regulation of cigarette advertising by the Federal Trade Commission. Hearings on these and related bills may take place during 1968. Another development was the ruling by the Fed- eral Communications Commission in June that all licensed broadcasting media carrying paid cigarette commercials must under its "Fairness Doctrine" allow significant free time to anti-smoking propo- nents to disseminate anti-smoking messages. His- torically, the "Fairness Doctrine" has afforded free time to those differing with a station's announced editorial policy, to political opponents, or state- ments on controversial issues. Never before has the "Fairness Doctrine" been applied to commercial messages. The ruling met with widespread criti- cism, and proceedings have been commenced, in which the industry has intervened, to test the legality of this administrative mandate. The Federal Trade Commission undertook to test a selected number of cigarette brands for "tar" and nicotine content and published the results of its initial tests in November, 1967. It is expected that the testing and periodic reporting will continue on a broader basis. The results are being monitored by a testing laboratory set up for the purpose by the industry in Washington, and the industry from the outset has made every effort, with some but not entire success, to persuade the Commission to adopt accurate and proved testing procedures. On behalf of the Board of Directors, I express our sincere appreciation for the cooperation and loyalty of our employees, and for the continued support of our stockholders. Milton E. Harrington President March 11, 1968 Executive Committee; left to right: Samuel White, Vice-President, Marketing; \tilton E. Harrington, President and Chief F:rerutive Officer; Jonathan W. Old, Jr., f:.rcutive Vice-President and Chairman F:xc(;utive Committee; J. Bowling Anderson, tienior Vice-President, Finance; and Frederick P. Haas, Vice-President and General Counsel. TIMN 446042 ~

-,S . ,Y .. To the Stockholders: Net earnings for 1967 were $23,932,383, equal to $5.96 per share of common stock. This is an in- crease of 7.4 per cent over the 1966 earnings of $22,276,920, equal to $5.52 per share. Net sales for 1967 were $575,221,446, slightly below the 1966 total of $577,476,258. Sales for the first six months of 1967 were higher than in 1966, primarily because they included sales by The Paddington Corporation and Star Indus- tries, Inc., control of which was acquired on May 26, 1966. Sales for the second half of 1967 were lower than in 1966, primarily because they did not include the sales by Star Industries, Inc., which ceased to be a subsidiary on May 15, 1967. The sales by National Oats Company have been in- cluded since September 29, 1967, the date of its ac- quisition. The increase in earnings was favorably affected by the rise in cigarette prices and by increased sales of J&B Rare Scotch Whisky and ALPO dog food, but was adversely affected by the introductory costs of three new cigarettes: L&M Menthol 100 and L&M Golden 100 in the first half of the year and 101 CHESTERFIELD in the third quarter. In 1967 we continued to strengthen our domestic and international marketing operations, expanding our program of licensing the manufacture and sale of our cigarettes in foreign countries and further diversifying our business with the acquisition of the net assets of National Oats Company. According to the United States Department of Agriculture, total cigarette production and con- sumption increased about 2 per cent to record high levels in 1967, while cigars and smoking tobaccos continued their declines from 1964 highs. Ship- ments of tax-free cigarettes to overseas military forces increased almost 18 per cent, and 1967 ex- port shipments were about the same as in 1966. The increases in consumption were attributed to more people reaching smoking age, high levels of consumer income, and greater shipments to over- seas armed forces, the same factors which are apt to contribute further to modest sales gains in 1968. Our leaf tobacco inventories totaled $224,992,911 on December 31, 1967. Production of flue-cured tobacco was estimated to be 1,268 million pounds, according to the United States Department of Agri- culture, compared to 1,108 million pounds produced in 1966. The average price per pound declined from 66.7 cents to 64.2 cents. Based on sales of approximately 78 per cent of the 1967 burley crop, the Department estimated total production at 559 million pounds, compared to 587 million pounds produced in 1966. The aver- age market price increased to a record high of 71.8 cents per pound, 7.3 per cent above the 66.9 cent average in 1966. Inequitable and punitive state and local excise taxes are a serious problem to the cigarette indus- try. The weighted average rate of state cigarette taxes, now almost equal to the Federal rate of eight cents per pack, increased approximately 10 per cent in 1967. During 1967, these taxes were raised in ten states by amounts ranging from one cent per pack in Tennessee to seven cents in California, but similar bills failed passage in twenty states. Tax increases are being considered, and enacted, despite the deplorable bootlegging situation in New York. Here state sales were off almost 14 per cent in fiscal 1967, and city sales were off about 23 per cent. In fiscal 1967, sales were off more than 3 per cent in the twenty-three states which increased taxes in 1965, and up almost 4 per cent in the twenty-six states which did not enact increases. North Carolina continues as the only state with no cigarette tax. Federal, state, and local excise taxes on tobacco climbed to a record total of approximately $3.8 billion in fiscal 1967. Although this is a substantial portion of the $9.4 billion consumer expenditure for tobacco products, it does not include income and franchise taxes, state and local sales taxes, and many other direct and indirect taxes. On or about July 1, 1967, both the Department of Health, Education and Welfare and the Federal Trade Commission filed reports with the Congress, as required by the Federal Cigarette Labeling and Advertising Act. The Federal Trade Commission recommended further restrictive legislation which TILMN 446041 2

International Cigarettes Our leading cigarette brands are exported to more than 100 countries and are manufactured locally in: Argentina Austria Belgium Bolivia Ccsta Rica Holland Mexico Philippines Switzerland Exports of L&M, CHESTERFIELD, and LARK continued to contribute importantly to corporate sales and earnings. Export sales of CHESTERFIELD Filter and CHESTERFIELD Menthol, introduced in 1966, increased in 1967. Non-filter CHESTERFIELD declined in line with the international trend from non-filters to filters, but continued to be a major export cigarette. New 101 CHESTERFIELD was introduced in some export markets in late 1967. Our L&M Filter export business was expanded with the introduction of L&M Menthol 100 and L&M Golden 100 into many export countries in the latter half of the year. These new L&M brands in 100-millimeter size will be introduced in additional countries in 1968. The volume of our cigarette brands manufactured under license in foreign countries in 1967 was ap- proximately double that of 1966. In March, CHES- TERFIELD was added to several other brands manufactured under license in the Philippines. In May, LARK was added to L&M and CHESTER- FIELD in Switzerland, and CHESTERFIELD Filter was added to L&M in Costa Rica. New agreements were negotiated in other coun- tries where locally manufactured brands have sales advantages over imported cigarettes. In May, L&M was introduced in Bolivia, and in July, L&M and CHESTERFIELD were introduced in Austria. Our brands are also manufactured locally in Argentina, Belgium, Holland, and Mexico; and licensing agreements have been signed in Italy and Peru. Although our expanding foreign manufacturing operations do not increase corporate sales, royal- ties account for a growing share of our international cigarette earnings and are making an important contribution to corporate earnings. In every coun- try where our brands are manufactured locally, the sales of our cigarette brands are greater than they would otherwise be. TIMN 446048 9

Smoking and Chewing Tobaccos Factory Locations Fhe Company has a smoking 3nd chewing tobacco factory '.n St. Louis, Missouri. The Pinkerton Tobacco Company, a wholly-owned subsidiary, has a chewing tobacco plant in Toledo, Ohio. Smoking Tobaccos 3UCKHORN 3UFFALO 'OCKADE CORN CAKE COUNTRY GENTLEMAN DINNER BELL DUKE'S GRANGER GROWLER HOME RUN KENTUCKY LONG CUT KING BEE MASTERPIECE MOUNTAIN ROSE OLD STYLE PLOW BOY S&M SUMMERTIME SWEET TIP TOP VELVET VIRGINIA EXTRA Chewing Tobaccos Plug CLIPPER DRUMMOND NATURAL LEAF EVERY DAY SMOKE FISH HOOK HORSE SHOE J.T. KING PIN MASTERPIECE PICK NATURAL LEAF SPARK PLUG STAR TINSLEY'S THICK UNCLE SAM UNION STANDARD W.N.T. NATURAL LEAF Twist GRANGER HONEY DIP PICNIC Fine Cut RED BELL STERLING SWEET BURLEY Scrap PAY CAR RED HORSE RED MAN UNION STANDARD In the Smoking and Chewing Tobacco Division, headquartered in St. Louis, Missouri, the sales and marketing functions were reorganized during 1967. Also, in May, Weightman, Inc., an advertising agency in Philadelphia, was appointed to handle the advertising for VELVET, GRANGER, MASTER- PIECE, and other brands. Sweepstake promotions for GRANGER and VEL- -VET were run in St. Louis, Kansas City, Philadel- phia, and Boston with the use of newspapers, radio, and endorsements from leading baseball stars. GRANGER was introduced in a 7-ounce canister as a companion product to the pocket-size pouch and the 14-ounce canister. Both VELVET and GRANGER featured in-pack pipe offers. The Pinkerton Tobacco Company Pinkerton, a wholly-owned subsidiary of Liggett & Myers, located in Toledo, Ohio, is a large pro- ducer of scrap chewing tobaccos. In 1967, Pinkerton introduced new packaging for its four principal brands: RED MAN, its leading seller, RED HORSE, PAY CAR, and UNION STANDARD. The new foil- laminated pouches give the products longer shelf life, improved graphics, more effective brand iden- tification, more consumer convenience, and more merchandising appeal. ,riMS 446046 7

The Paddington Corporation The year 1967 was an excellent one for Scotch whiskies, and sales and earnings by Paddington rose to record highs. The increase in sales was due primarily to the popularity of J&B Rare Scotch Whisky, which, according to published reports, continues to be the largest selling Scotch in the United States. 'roducts &B Rare Scotch Whisky :RAND MARNIER ~OMBAY English Gin 'OMBAY French Vermouth :HERRY MARNIER :OLD LEAF French Cognac '~ARDINET NAPOLEON French Brandy )OPFF, RIQUEWIHR Alsatian Wines ~CHAIA CLAUSS Greek Liqueurs and Wines tHUM NEGRITA Carillon Importers Ltd. Sales and earnings by Carillon in 1967 climbed to record levels with significant increases in the sales of GRAND MARNIER and BOMBAY Gin. Carillon also imports and distributes BOMBAY Vermouth and a variety of wines, brandies, and cordials. Changes in Ownership On May 15, 1967, the Company exchanged all of its 792,369 shares of Star Industries, Inc., for 933,812 shares of Paddington and 101 shares of Carillon, formerly owned by Star. As a result, Lig- gett & Myers ceased to own Star but retained an equity in Carillon of 50.5 per cent. As a result of the above acquisition of Padding- ton shares from Star, and of purchases by Pad- dington of 317,244 shares of its own stock, Liggett & Myers' equity in Paddington at December 31,1967, was increased to 92.8 per cent, Star's equity was 6.4 per cent, and the public stockholders' equity was 0.8 per cent. Formerly a New York corporation, Paddington is now a Delaware corporation, and its shares are no longer listed on the American Stock Exchange. TIMN 446050 11

Domestic Cigarettes Because of the continued trend to filter cigarettes, and the new trend to 100-millimeter cigarettes, we introduced three new filter cigarettes in the 100- millimeter category in 1967. L&M Menthol 100 was introduced in February, and national distribution was completed in April. Following consumer acceptance of L&M Menthol 100, L&M Golden 100 was introduced in forty states in June and the remainder of the states in August. The L&M 100 package design is distinc- tively different from the traditional L&M red-and- white package design. L&M Menthol 100 has a modernized, white L&M monogram on its green pack, and L&M Golden 100 has a matching white L&M monogram on its gold pack. Our newest cigarette, 101 CHESTERFIELD, was introduced in ten major markets in August; and after a good response from wholesalers, retailers, and consumers, it was moved swiftly into national distribution a month later. The unique 101 name, the superior tasting prod- uct, the striking gold-and-plum packaging, and the lively advertising make 101 one of the most appeal- ing cigarettes on the market. As the name indicates, 101 is one millimeter (39/1000ths of an inch) longer than the 100-millimeter cigarettes. As the advertis- ing indicates, 101 is "a silly millimeter longer ... It isn't much. But wait 'til you taste it. It's one better." actory Locations he Company has two igarette factories, one in urham, North Carolina, and ne in Richmond, Virginia, rid leaf tobacco processing lants and storage rarehouses in Durham and ocky Mount, North ;arolina; Danville, Virginia; exington and Paris, :entucky;and Stoughton, Visconsin. The Gary Tobacco ompany, a wholly-owned ubsidiary, has plants in :mir, Turkey, and in Cavalla nd Xanthi, Greece, for uying and processing romatic Turkish-type leaf )baccos. Products C[-IESTERFIELD (King, Regular) CHESTERFIELD FILTER CHESTERFIELD MENTHOL 101 CHESTERFIELD DUKE FILTER FATIMA HOME RUN LARK L&M FILTER (King, Box, Regular) L&M GOLDEN 100 L&M MENTHOL 100 OASIS MENTHOL PICAYUNE PIEDMONT This third strong entry in the new, longer ciga- rette category, together with the two new L&M 100's, is contributing importantly to our total filter sales. Our third major filter brand, LARK, continued to receive favorable publicity in 1967. As a leading national magazine stated: "The gases have been shown to inhibit defense mechanisms that protect the lungs of animals.... The program at Arthur D. Little, directed by Dr. Charles J. Kensler* and fi- nanced mainly by Liggett & Myers, has led to devel- opment of improved 'activated' charcoal filters. Charcoal is specially treated to enhance its ability to adsorb gas molecules and the filters remove one- half to two-thirds of certain irritant gases in ciga- rette smoke. It was this Arthur D. Little research that led Liggett & Myers to market its LARK brand." The Company continued to expand its cigarette marketing during 1967 with special programs to in- crease military and vending sales, a comprehensive merchandising program for retailers, and extended services to wholesale distributors. *Copies of Dr. Kensler's testimony before Congressional hearings held in August, 1967, by the Subcommittee on Con- sumer Affairs of the United States Senate Committee on Commerce are available on request. Write: Liggett & Myers Tobacco Company, Box 21, 90 Church Street, New York, N.Y. 10008. TINgN 446044 fi