Tobacco Documents Online

T HE ANNUAL STOCKHOLDERS' MEETING will be held at 43 Park Avenue, Flemington, New Jersey, at 2:00 P.M., Monday, March 14, 1955. Proxies will be mailed to stockholders February 11, 1955. Stockholders who are unable to attend the meeting are urged to sign their proxy and return it promptly to the Company so that the stock of the Company will be represented as fully as possible at the meeting. L I G G ET "[ ~ i\i Y E R S ~~ U N E O F TIMN 446318

HIGHLIGHTS 1954 1953 Net sales ..................................... Profit from operations ......................... Percentage of net sales ......................... Profit before taxes ............................. Income, excess profits and franchise taxes ........ Profit before preferred dividends ................ Net income after preferred dividends ............ Percentage of net sales ......................... Net income per share of common stock .......... Dividends paid per share of common stock....... $548,861,959 53,592,624 9.76 0 47,835,364 25,634,000 22,201,364 20,740,177 3.78 c7o $5.30 $5.00 $586,498,727 57,225,791 9.76 rc 51,963,576 28,985,000 22,978,576 21,517,389 3.67 c"e $5.50 $5.00 Current assets ................................. $459,145,998 $467,548,656 Current liabilities ............................. 129,034,362 134,136,776 Ratio ........................................ 3.6to 1 Funded debt ................................. 113,000,000 Capital stock ................................. 118,662,125 Paid-in surplus end of year ..................... 19,364,550 Earned surplus end of year ....................... 111,247,861 (Further details on pages 14, 15, 16 and 17) Approximate number of stocldiolders ............ 40,900 L I G G E T T & M Y E R S .r. 3.5 to 1 115,000,000 118,662,125 19,364,550 110,065,289 37,900 O N E O F TIMN 446320 2

TO THE STOCKHOLDERS This is your company's 44th Annual Report to its stockholders. The following is intended to give you a picture of the company's overall financial position and other information regarding its operation and policies. E ARNINGS Earnings per share of Common Stock were slightly lower than for the previ- ous year. They amounted to $20,740,177 compared with $21,517,389 for 1953. Total earnings after taxes were fifteen times dividend requirements on Preferred Stock. The ratio of profit from operations to net sales remained the same, or 9.76 7o. SALES --- ~ Net sales f or the year 1954 amounted to $548,861,959 compared to $586,498,- 727 for the previous year. The L&M Filter cigarettes, both regular and king size, made a substantial contribution to this sales volume. Export (tax free ) sales were down. This was due primarily to smaller orders from our diminished overseas armed forces and to the increased difficulty in doing a profitable business in countries where we are handicapped because of dollar or commodities limitations. Millions 700 600 500 400 300 200 100 0 This chart shows a record of the Company's sales for the past ten years. 1945 1946 1947 1948 1949 TOBACCO'S MOST 1950 1951 1952 1953 1954 R E ti P E C T E D N A M E S TIMN 446321 3

RESEARCH The Research Department of Liggett & Myers, in Durham, North Carolina, is considered to be the most modern, best equipped, and best staffed in the tobacco industry. Its work is of prime importance to almost every phase of the Company's operation. Our consultants include eminent scientists from leading universities, and Arthur D. Little, Inc., of Cambridge, Mass., "one of the largest and most reputable industrial research organizations in the country." Through searching analyses of our own and competitive cigarettes and of many thousands of pounds of tobacco, we have found ways to help the individual farmer grow a better grade of leaf tobacco. Day after day, week after week, our laboratories make a continuous study of tobacco taken from all over Tobaccoland. In this way we are able to know in advance of auction time the exact location of the best tobaccos of the present year. The result-the present Chesterfield and L&M cigarettes are the best made in the world today... cigarettes which, in test after test with other leading brands, have shown superior merits - highest in quality and natural flavor-with low nicotine content. L&M Filters -with the "Miracle Tip" were introduced just over a year ago. They were the result of a three year research program in our laboratories. The team of scientists who undertook this operation had at their disposal all the latest facts on tobacco, filters, and smoke filtering. Conducting thousands of tests on every known type of filter and hundreds of new designs, these scientists after three years found our "Miracle Tip", distinctive to L&M and protected by exclusive patent rights. The result-L&M stands out for flavor, for effective filtration, for highest quality tobaccos. The smoker gets a light, mild smoke, with much more flavor-much less nicotine. 'OBACCO'S MOST R E S P E C T E D N A M E S TIMN 446325 7

DIVIDENDS For the seventh consecutive year, $5.00 was paid on each share of Common Stock. The payments were four quarterly dividends of $1.00 each plus an extra dividend of $1.00 per share paid on December 1. Total dividends paid in 1954 were $21,018,7192 or 94.67, C . of the earnings for the year. TAXES Taxes of all kinds are becoming increasingly burdensome from year to year. Provision for Federal and State income and franchise taxes alone amounted to $25,634,000 for 1954, equal to $6.55 per share of Common Stock. This means that such taxes required an outlay of 31 ~ more money than the entire amount paid out in dividends on the Common Stock during the year. As a further illustration of the magnitude of the Federal and State income and franchise taxes, the following chart has been prepared to show a graphic comparison of them with net income after taxes for the past eight years. r 1947 1948 1949 1950 1951 1952 1953 1954 This chart shotcs the Federal and State Incon2e and Franchise Taxes (dark area) eomFared tcith Net Ineome after Taxes (light area) 1947-1954. L I G G E T T & M Y E R S ~~. O N E O F TIMN 446322 4

r , `clfiLt A ~ .'_i~ ~ - ~ .. :~.h. p~ . ~ ~..~._ LIGGETT & MYERS TOBACCO CO. INC. 630 Fifth Avenue New York 20, N. Y. 44TH ANNUAL REPORT December 31St, 1954 TOBACCO'S M OST R Eti P F.CTED NAMES TIMN 446319

all cigarette sales were through self-service stores or vending machines. No per- sonal selling was involved. The buyer was pre-sold, largely by promotion. Company profits are increased if sales can be increased at the lowest possible cost. The cost of selling covers personal selling, promotion and advertising. All are necessary to the job of producing and retaining smokers' goodwill. The least expensive, when employed effectively, is advertising, and, therefore, it can be the best means of increasing company profits. The development in advertising techniques within recent years has been carried on at a pace which makes it possible for your Company to reach vast markets with our sales messages. For some time in our country's history the techniques of production were so spectacularly successful that they brought about basic changes in our entire economy. The development of selling tools to match these new production facili- ties has been outstanding, especially within the last twenty-five years. Since that time we have seen personal selling brought out from behind the coimter and into the homes of millions of people-first through the great medium ' of radio and now, in a completely new dimension, with television. Your Company strives to make the most efficient use of these new techniques. Product person- alities have been developed in the minds of millions through association with our personal salesmen, who regularly come into the homes through television, radio, newspapers and magazines, and also make new customers at point of sale through the medium of promotional display material. Your Company's sales promotion has one aim: To make sure that our prod- ucts move off the dealer's shelf into the customer's pocket or purse. We are con- stantly looking for ways to improve our sales messages to the smoking public, just as we are always looking for ways to convey these sales messages to the public at the lowest cost. LIGGETT & iviYE RS ,..~, O N E O F TIMN 446324

i DISTRIBUTION & PROMOTION The mass distribution so essential to the sales success of the products manu- factured by your Company has been achieved through the efforts of our six thousand distributors and our own sales force working with them. Now, more than one million three hundred and fifty thousand retail outlets in the United States, from the city supermarket to the country store, carry products made by Liggett & Myers. Abroad, some of the Company's brands enjoy wide distribution, Chesterfield in particular. This cigarette is sold in eighty-six foreign countries, and in many of them it is the leading American-made cigarette. Surprisingly, L&M is already distributed in 43 countries. Your Company promotes its products to the public through sampling, mer- chandising and continuous and extensive promotion in newspapers and magazines, on television and radio, in motion pictures, and at point-of-sale. These promo- tional activities are designed to support the work of the distributors and the sales force. All media is carefully selected to help widen the market by attracting smokers through advertising and sampling. It has been said that ours is an economy based on innovation and invention. Sales are not necessarily caused by the wearing out of goods physically but often by the wearing out of goods psychologically. They become "out of style." In the past few years, the cigarette business has had a number of psychological changes in consumer preferences: the growth of the king size cigarette, the filter tip cigarette, and finally, the king size filter. In such an ever-changing market, continuous promo4on must be done to keep our business and attract more business. In this highly competitive era, loyalty to any one particular brand does not always remain constant, and advertising seems more than ever necessary to cultivate and recultivate established families, to keep their present patronage and increase their loyalty. More particularly so, in view of the rapid growth of the self-service store and the gradual disappear- ance of personal salesmanship at the retail level. In 1954, approximately 35 % of TOBACCO'S MOST RE tiP E C T E D NAMES TIMN 446323 5

OFFICERS President Vice President Vice President Vice President & Treasurer Vice President & Secretary Vice President J. Bowling Anderson Russell M. Chenowet h Frederick J. Graeff Assistant Treasurers Assistant Secretaries Henry A. Petry I Benjamin F. Few William A. Blount William B. Lewis, Jr. William L. Perry Zach Toms James N. Wellman Robert H. Henshaw Rufus H. Hosea Charles B. 'Morgenthaler William A. Blount Lawrence W. Bruff James E. Farley Benjamin F. Few Francis H. Horan J. Camden Hundley William B. Lewis, Jr. William L. Perry Eugene C. Ringler Loy D. Thompson Zach Toms James N. `Vellman GENERAL COUNSEL Francis H. Horan DIRECTOR OF RESEARCH Dr. Frederick R. Darkis EXECUTIVE OFFICES 630 Fifth Avenue, New York 20, N. Y. TRANSFER AGENT The Hanover Bank 70 Broadway, New York 15, N. Y. TOBACCO'S MOST AUDITOR Eugene C. Ringler REGISTRAR . The National City Bank of New York 55 Wall Street, New York 15, N. Y. R E S P E C T E D N A M E S TIMN 446331 13

ASSETS LIGGETT & MYERS TOBACCO COMPANY CONSOLIDATE( CURRENT ASSETS 1954 1953 Cash ......................................... $ 11,592,982 $ 11,996,787 Accounts receivable, customers ................. 23,131,291 23,234,014 Accounts receivable, others ..................... 982,339 975,732 Leaf tobacco, at average cost ................... 393,193,579 400,084,953 Manufactured stock and operating supplies, at average cost ............................. 30,245,807 31,257,170 TOTAL CURRENT ASSETS .................. 459,145,998 467,548,656 PROPERTY, PLANT AND EQUIPMENT-AT COST Land and buildings ............................ 20,024,589 20,014,236 Machinery and equipment ..................... 41,054,224 37,576,620 61,078,813 57,590,856 Less reserves for depreciation ............... 32,386,362 30,801,668 NET PROPERTY, PLANT AND EQUIPMENT .... 28,692,451 26,789,188 OTHER ASSETS Brands, trade-marks and goodwill ............... 1 1 Stocks in unconsolidated subsidiary companies..,; . 627,004 439,005 Stocks in foreign tobacco companies, less reserve of $4,473,163 ...................... 4,001 4,001 Deferred charges .............................. 2,839,443 2,447,889 TOTAL OTHER ASSETS .................... 3,470,449 2,890,896 TOTAL .............................. $491,308,898 $497,228,740 L I G G E T T & M Y E R S O N E O F TIMN 446332 14