Tobacco Documents Online

included a cigarette factory pilot plant located in the engi- neering area of the new wing of the Center. It contains all of the operations of cigarette manufacturing, including the processing of tobacco, the making, wrapping and packaging of cigarettes. This pilot plant enables the Company's research staff to investigate all of the variables in tobacco processing and cigarette manufacturing under controlled conditions. It serves to improve the manufacturing operations as well as cigarette quality control, and to test all changes that are incorporated into the production line. The Research Department's program contributes mate- rially to the highest standards of quality for our present products and provides a continuous scientific effort to pro- duce even better products for consumers to enjoy. Disposition of Total Earnings for 1961 The Company received for goods sold to customers and from dividends and interest a total of $517,725,000. This is how it was used or set aside. 42.3% Federal and other excise taxes $219,227,000 33.9 "o Leaf tobacco, wages, other manufacturing costs and freight $175,277,000 12.5 °o Selling, advertising, administrative, interest and other expenses $64,596,000 6.2% Federal and State income and franchise taxes $31,864,000 ~R\ 4.0 % Dividends $20,918,000 ~--- 1 .1 %'o Earnings retained $5,843,000 12 TIMN 446150

Assets 1961 1960 CURRENT ASSETS: Cash (including, for 1961, negotiable time certifi- cates of deposit, $5,000,000) . . . . . . . . . $ 13,923,707 $ 11,059,994 U. S. Government securities - at cost plus accrued interest (quoted market value, $-1,999,750 ) . . . 4,998,055 Accounts receivable, customers . . . . . . . . . 21,708,701 23, 223,150 Accounts receivable, others . . . . . . . . . . . 1,152,322 1,151,657 Leaf tobacco, at average cost . . . . . . . . . . 298,454,565 282,169,184 Manufactured stock and operating supplies, at average cost . . . . . . . . . . . . . . . 32,690,037 32,243,932 TOTAL CURRENT ASSETS . . . . . . . . . . 367,929,332 354,845,972 PROPERTY, PLANT AND EQUIPMENT - AT COST: Land and buildings . . . . . . . . . . . . . . 20,722,849 20,578,094 Machinery and equipment . . . . . . . . . . . 59,214,150 58,170,734 Total . . . . . . . . . . . . . . . . . . 79,936,999 78,748,828 Less accumulated depreciation . . . . . . 46,799,429 43,626,750 NET PROPERTY, PLANT AND EQUIPMENT ... 33,137,570 35,122,078 OTHER ASSETS: Brands, trade-marks and good will . . . . . . . . 1 1 Investments in unconsolidated subsidiary companies: 1961, at equity in net assets; 1960, at cost (Note 1) . . . . . . . . . . . . . . 1,631,396 919,004 Investment in foreign tobacco company, at cost .. 4,000 4,000 Foreign currency deposits subject to withdrawal restrictions . . . . . . . . . . . . . . . . . 946,731 1,005,034 Prepaid expenses and deferred charges .. .... 1,253,644 1,183,911 TOTAL OTHER ASSETS . . . . . . . . . . 3,835,772 3,111,950 TOTAL . . . . . . . . . . . . . . . $404,902,674 $393,080,000 14 TIMN 446152

With respect to each person nominated for election as a Director for the ensuing year, the following information is supplied: Principal Occupation Period served (with the Company as Director Name unless otherwise noted) (Since Year) Shares of Common Stock Beneficially Owned December 31, 1961 J. B. Anderson .................. Vice President and Treasurer (a) 1958 400 W. A. Blount ...................Cliairman of the Board 1941 3.000 and Chief Executive Of}?cer (a) L. W. Bruff .................... Vice President and 1953 225 Director of Advertising F. R. Darkis .................... Vice President and Director of Research 1956 1,050 M. E. Harrington ................T'ice President_and Leaf 1955 410 Department 1tlanager F. H. Horan ................... Vice President and General Counsel (a) 1954 400 J. C. Hundley ................... Branch Manager 1947 825 G. B. Leake .. ...................Vice President and Sales Manager (a) 1959 500_ C. G. McMullan ................. Branch Manager 1960 700 E. J. Parrish ................... Export Department Manager 1960 311 Frederick Sheffield ............... Partner in the law firm of Webster 1961 100 Sheffield Flrischmrnnz Hitchcock & Ch ryst ic L. D. Thompson .................T'ice President, tllanufacturing 1951 500 and Leaf (a) Zach Toms ..................... President and Chairman 1945 3.000 of Executive Committee (a) Samuel White .................. T'ice President and 1961 100 Director of alarketing (a) Member of the Executive Committee. Effective September 1. 1961 Messrs. J. B. Anderson (Treasurer). L. W. Bruff (Advertisin~), G. B. Leak~~ (Sales) and Samuel White (Marketing) were elected Vice Presidents respectively on August 30. 1961. Mr. White, an employee of the Sales Department since 1951. became a Director on September 1. 1961. Mr. Sheffield is and for more than the last five years has been a partner in the law firm of Webster Sheffield Fleischmann Hitchcock & Chr}-stie and a predecessor firm. He was elected a member of the Board of Directors on August 16, 1961. Remuneration and Other Transactions with 1Vlanagement and Others. For the calendar year 1961, the Company and its subsidiaries paid directly to each of its Directors and Officers, where the same exceeded $30,000, the following amounts: Name of Individual Capacities in or Identity Which Remuneration of Group was Received Direct Aggregate Remuneration (a) Estimated Annual Benefits Upon Retirement J. B. Anderson .................. Treasurer and Vice President $ 55,000 $25,000 W. A. Blount ................... President and Chairman of the Board 180,000 25,000 L. W. Bruff .................... Director o f Advertising and 80,000 25,000 Vice President F. R. Darkis .................... Vice President and Director o f Research 60,000 9,663 M. E. Harrington ................ Vice President and Lea f 60,000 19,827 Department Manager F. H. Horan .................... Vice President and General Counsel 135,000 25,000 J. C. Hundley ................... Bran,ch Manager 50,000 15,322 G. B. Leake ..................... Assistant to Vice President, 53,333 23,708 Vice President and Sales Manager W. B. Lewis, Jr . ................. Vice President and Sales Manager 45,000 (b) 25,000 C. G. McMullan ................. Branch Manager 38,000 14,820 W. L. Perry .................... Vice President 96,000 (c) 25,000 L. D. Thompson ................. Vice President 100,000 25,000 Zach Toms .....................Vice President and President 144,000 25,000 Directors and Officers as a Group 1,155,333 (a) Does not include the deferred portion of rompensation for 1961 provided for five of the senior officers, as ex- plained hereafter. (b) Retired April 30, 1961. (c) Retired August 3.1, 1961. TIMN 446135

Liggett & Myers Tobacco Company The following pa-es present soine of the uccompli.tihneuts of %'our Companv for the year 1961, giving an over-all picture of its activities as well as audited financial statements crnu- parin~ 1961 results with those of 1960. 300 200 !ca 6 Net Sales Net Earnings '55 56 "57 '58 59 60 '61 ~ \et sales for 1961 were 5516,705,0-12 compared to $54.3,1 7?,5$ 7 for the previous vear, representing a decline of about 1.9 '-C'. The lower sales are largelN' accounted for b%- the continuing decline in CHESTERFIELD Regular Size ship- nlents. Sales of CI-IESTERFIELD King Size and L & N [ King Size, two of the Compan~'s principal brands, continue d to show an increase in the year. Consolidated net earninbs for the veai 1961 vvere 826,760,120 compared to $?S, i 05,895 for 1960. Based on 3,9-19,435 shares outstanding at the end of the year, net earn- ings amounted to $6.-17 per share as compared with $6.96 in 1960. Of the loss in earnings, 31c per share occurred in the first quarter and the balance of 1S4• in_the last three quarters. The percentage of net earnings after preferred dividends to net sales decreased from 5.05 % in 1960 to 4.95 % in 1961. 1961 ,vas the 50th consecutive y-ear in which common divi- dends have been paid by' N-our Company•. Total pa\~inents for the vear amounted to $5.00 per share consisting of four du~u~- terh' dividends of $1.25 each. The total amount of dividends paid in 1961 on both coin- mon and preferred stock was $?0,917,553. The balance of the vear's earnin~s amollnting to $0,842,56 i~ras retained f~~r use in the business. There was declared on January• 17, 1962 the usual qilar- terly- dividend of S1.?5 per share on common stock, paN-able on March 1, 196•2 to stockholders of record Februar\' 16, 196?. TIMN 446142

During 1961 tlte firm of Web~ter Sheffield Fleisclunann Hitchcock & Chry•stie, of which Frederick sheflield is a partner. was paid $93.115.00 for legal services plus $4,852.40 for disbursments. Under employment contracts with the Company, Messrs. W. A. Blount, F. H. Horan, W. B. Lewis, Jr., \V. L. Perry and Zach Toms will each be entitled, contingent upon their compliance with certain conditions, to receive annual post retirement compensation in varying amounts, payable to each participant in sixty equal monthly installments over a period of five years, the first thereof to be payable in the month next succeeding his retirement or termination of employment. The respective amounts of contingent compensation for 1961, payable to them during each of the five years after termination of employment and constituting, in each case, one-fifth of the contingently payable part of compensation for such year, and, in parentheses, the total respec- tire amounts contingently payable to them during each of the five years after termination of employment as a result of all contingent remuneration for years prior to 1961, constituting one-fifth of the total of all such amounts, are: W. A. Blount, $4,000, ($26,000) ; F. H. Horan. $3.000, ($21,000) ; W. B. Lc«6z. Jr., $3,000, (821,000) ; W. L. Perry, $2,133. ($22.-100) ; Zach Toms. $3.200. ($22,-}00) ; and Directors and Officers as a group, $15,333, ($112,800). Pursuant to the Incentive Stock Option Plan for Key Employees, the Company granted options on March 15. 1961 to Directors and Officers named in the preceding tabulations to purchase shares of common ~tock of the Company at a price of $913j per share as follows: L. W. Bruff. 100 shares: F. R. Darkis, 100 shares; M. E. Harrington, 100 shares; G. B. Leake, 100 shares; Samuel White, 100 shares and Directors and Officers as a group, 500 shares. For each such option the option price is the closing market price on the dav the option was granted and the duration is ten years from such date. Since the be=inning of the last fiscal year and up to Februarv 1, 1962 Directors and Officers exercised options to purchase, 7.709 shares of the common stock of the Company. Of this number 405 shares were pur- chased at $625/g per share, 100 shares were purchased at $82%' per share and the balance were purchased at $67% per share. The name of each such person, the number of such shares purchased by him and the market value per share (the mean between the high and low prices on the New York Stock Exchange) on each date of purchase are as follows: F. R. Darkis, 100, $90.63; 250, $91.50; M. E. Harrington, 300, $95.25; F. H. Horan, 1.000, $91.88; J. C. Hundley, 750, $94.88; G. B. Leake, 305, $108; W. B. Lewis, Jr., 3,000, $109.88; C. G. McMullan, 104, $82.69; E. J. Parrish, 100, $104.25; W. L. Perry, 1,000, $95; L. D. Thompson, 100, $109.13; Zach Toms, 600, $108.75; and Samuel White, 100, $94.88. Directors and Officers as a group purchased 1,204 shares of common stock of the Company during the first calendar quarter of 1961 when the price range per share on the New York Stock Exchange was $94.875- $81.375; 250 shares during the second calendar quarter when such price range was $94.50-$85.125; 2,150 shares during the third calendar quarter when such price range was $97.375-$89.25; and 4,105 shares during the fourth calendar quarter when such price range was $111.75-$96. Other 1Vlatters. As of this date the Management knows of no business which will come before the meeting other than the election of a Board of fourteen Directors, but if any other matters properly come before the meeting, the per- sons named as proxies will vote on them in accordance with their best judgment. The •Company's financial statements for the year 1961 and for many prior years have been examined by Messrs. Haskins & Sells, independent public accountants. They are appointed each year by resolution of the Board of Directors. A member of that firm will be present at the Annual Meeting and will be available to answer such questions as may properly be asked of him. Upon written request to the Secretary of the Company, there will be furnished to any Stockholder a report of the Annual Meeting which will he prepared as soon as practicable after the meeting has been held. The Stockholders are urged to send in their proxies without delay. Prompt response is helpful and your cooperation will be appreciated. New York, N. Y., February 23. 1962 By Order of the Board of Directors, R. DZ. CHENOWETH. Secretary TIMN 446136

Liggett & Myers Tobacco Company 3alance-- SDheet as of December 31 `!?CDti:ti3f?S CURRENT LIABILITIES: Accounts payable . . . . . . . . . . . . . . . Dividend payable on preferred stock ...... Accrued interest on debentures . . . . . . . . . Funded debt payable within one year ...... Taxes payable and accrued (less, for 1960, U. S. Treasury tax anticipation notes, $9,934,413 ) . . . TOTAL CURRENT LIABILITIES . . . . . . . FUNDED DEBT: 2j/ °Jo Sinking Fund Debentures, $5,750,000 pay- able annually during the years 1963 and 1964, $23,750,000 payable in 1965, and $37,500,000 pay- able in 1966 . . . . . . . . . . . . . . . . RESERVE: For deferred contingent compensation (net of esti- mated future income tax reductions )..... STOCKHOLDERS' EQUITY: Preferred stock 7% cumulative, par value $100 - authorized, 341,398 shares; issued, 225,141 shares; in treasury, 1961, 55,660 shares, and 1960, 47,280 shares . . . . . . . . . . . . . . . . . . . Common stock, par value $25-authorized, 5,000,000 shares; issued, 1961, 3,949,438 shares, and 1960, 3,939,053 shares (Note 2 ) . . . . . . . . . . Paid-in capital in excess of par values of capital stocks (Note 3 ) . . . . . . . . . . . . . . . . . . Retained earnings (Note 4 ) . . . . . . . . . . TOTAL STOCKHOLDERS' EQUITY . . . . . . . TOTAL . . . . . . . . . . . . . . . 3st 1960 $ 5,340,328 $ 3,167,198 297,817 311,607 628,906 675,391 5,750,000 5,750,000 20,991,916 11,559,209 33,008,967 21,463,405 72,750,000 78,500,000 256,940 248,160 16,948,100 17,786,100 98,735,950 98,476,325 20,987,493 20,534,676 162,215,224 156,071,334 298,886,767 292,868,435 $404,902,674 $393,080,000 15 TIMN 446153

Liggett & Myers Tobacco Company St-------:~,temGnt of ('onsQl1dated Ec'`~ r1'"1 i hl gS(f or years ended December 31) 1960 NET SALES , , , , , , , , , , , , , , , , , , , , , , , , $516,708,042 ; $543,172,587 OTHER EARNINGS: ! Interest and dividends received (Note 1) . . . . . . . . • 846,920 889,330 Equity in net earnings of unconsolidated subsidiary companies ( N'ote 1) . . . . . . . . . . . . 169,587 ' - TOTAL EARNINGS . . . . . . . . . . . . . • • . . 517,724,5-19 ; 544,061,917 COSTS AND EYPENSES: Cost of goods sold, selling, administrative and general expenses . . . . . . . . . . . . . • • • . 452,867,835 Provision for depreciation . . . . . . . . . . . . . . . . 3,977,215 Interest and amortization on funded debt . . . . . . . . . 2,188,223 Other . . . . . . . . . . . . . . . . . . . . . . . . 67,156 Provision for Federal income tax . . . . . . . . . . . . . 28,703,000 Provision for State income and franchise taxes ... .... 3,161,000 TOTAL COSTS AND EXPENSES . . . . . . . . . . . . 490,964,429 NET EARNINGS FOR THE YEAR . . . . . . . . . . . . . . . . . 26,760,120 DIVIDENDS ON PREFERRED STOCK . . . . . . . . . . . . , , 1,205,092 NET EARNINGS APPLICABLE TO COM3,ION STOCK . . . . . . , , , $ 25,555,028 474,847,617 3,909,369 2,341,504 250,532 31,573,000 2,431,000 515,353,022 28,708,895 1,301,255 $ 27,407,640 4

Liggett & Myers Tobacco Company 59 1958 1957 1956 1955 1954 1953 1952 4,936 $556,046 $570,385 $564,966 $546,965 $548,862 ; $586,499 $603,081 5,075 67,912 61,895 58,367 56,678 47,835 ~ 51,964 46,295 5,036 ~ 36,689 33,621 31,916 29,957 25,634 28,985 24,846 0,039 31,223 28,274 26,451 ?6,721 22,201 22,979 21,449 7.28 i 7.60 6.85 6.39 6.46 5.30 : 5.50 5.11 2,585 i 19,571 19,564 19,561 15,646 19,558 19,558 19,558 5.75 (b) j 5.00 5.00 5.00 ; 4.00 , 5.00 ; 5.00 ~ 5.00 1,430 1,461 1,461 1,461 1,461 1,461 1,461 ~ 1,461 6,024 10,191 7,249 j 5,429 9,614 ; I 1,182 f 1,960 I I 430 5,750 i 5,750 ' 5,750 5,750 2,000 I • 0,394 341,318 381,029 409,071 389,014 423,439 431,342 421,281 5,064 369,974 416,458 444,693 425,252 459,146 467,549 460,754 2,157 333,054 327,417 328,922 332,798 330,112 333,412 333,598 6,201 35,582 36,215 33,667 30,634 28,692 26,789 25,003 4,391 409,103 456,440 481,671 458,592 491,309 497,229 488,288 4,250 90,000 95,750 101,500 107,250 113,000 115,000 115,000 5,750 7,456 59,060 83,750 57,750 97,220 99,000 96,000 7,234 282,182 271,649 264,400 258,888 249,275 248,092 246,132 8.08 66.70 64.09 62.24 60.85 58.39 58.09 57.58 19 19 55 6 3 3 2 TIMN 446157

Ten Years in Review (Dollars expressed in thousands except per share figures) Year Ended December 31 1960 :'361 14 Operating Results Net Sales $516,708 1 $543,173 Earnings before taxes 58,624 62,713 Taxes on income 31,864 34,004 ~ Net earnings 26,760 28,709 ~ Per share of common stock (a) 6.47 6.96 Common dividends 19,712 19,686 Per share(a) 5.00 5.00 er share ) Preferred dividends ($7 1 205 1 301 p , , Earnings retained 5,843 7,722 Sinking fund requirements 5,750 5,750 Financial Position (1earEnd) Inventories 331,1-I5 314,413 Current assets 367,929 354,846 Working capital 334,920 333,383 (a) Based on number of shares outstand- Plant and equipment (net) 33,138 35,122 ing at end of each year. Total assets 404,903 393,080 (b) Commencing June 1, 1959 regular Funded debt 72,750 78 500 quarterly dividends of $1.25 per share have been paid. Short-term debt ( c ) 5,750 , 5,750 ' Stockholelers e•ql litv 298,887 292,868 (c) Includes notes payable to banks and funded debt payable within one year. Per share of common stock(a) 71.39 69.83 18 TIMN 446156

the Coinpaiiy's business. The friciicll\, and fine business rela- tionship with oi_ir nlan%- loyal and well established c:ustomers t11rOUyllc)itt the world has CUI1tPil)Lltt'd much to this success. During the \-ear ad~'ertising and sales promotion programs were strengthened in foreign markets, «,hich we expect to improve further our export sales. The Go\-ernment has controlled for inanti' vears the grow- ing and marketing of flue-cured and btrlev leaf tobacco which are used in making cigarettes. This control restricts the acres a farmer can plant and supports the price on the auction market. The crop of flue-cured tobacco in 1961 totalled 1,563,- 000.000 pounds compared «•ith 1,365,000,000 pounds in 1960. The a\'erage selling price was 6~. ~ e per pound, the highest on record and about -lc• per pound abo`~e the 1960 average. The GoN'erzlment price support le~•el for the 1961 crop was 55.5r per pound. The 1961 burley tobacco crop is estimated at approli- matelv 550,000,000 pounds or about 155 above the previous crop. Approximately 90`(* of the 1961 crop had been sold by the end of the year compared with S0 'C' at the same time in 1960. Auction market prices through the end of the year averaged 66.84' per pound «Iiich was higher than last year. The price support le~•el for the 1961 crop was 57.2c per pound. Inventorv value,of our leaf tobacco at the end of the N-ear was $298,454,565 compared with $282,169,184 at the end of the previous year. The increase of $16,?55,381 is due prin- cipallv to a larger stock of leaf tobacco. This additional in- ventory is deemed advisable to insure a well rounded stock of properly aged tobaccos to take care of your Company's requirements. Following a long established custom of the Companv, inv-entorti• of leaf tobacco is carried at average cost, new averages being established each month as purchases are added and usings deducted. The Liggett c~ 'Myers Research Center in Diirhaiil. North Carolina was further expanded during the t•ear In tlic adcli- tion of scientific personnel and new equipmeiit. Among the varied facilities in the research IaIrrrr,&rr\ is k - - rr t the laboratory pilot plant slwu irr, , .pri.rrr, rrt for processing tobacco. 10