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CONSENT JUDGMENT I)ATED &W% IN STATE OF AjjMNESOTA, ET AL. V. PMLIP MOROW, ET AL. CASE No. Cl-9441565
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B.A.T INDUSTRIES P.L.C. - MINNESOTA DEposrrORY COPY - PRODUCED PuRsuAw To I VILD. OF
CONSENT JUDGMENT DATED 5/8W IN STATE OF AQNNESOTA, ET AL V. PNILF UORM ET AL CASE No. Cl-94-8565
red
1111M
The BATUS Group of Companies
BATUSO
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RETAILGROUP
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Tobwcoomp 9 GMUP of COMPUMS 48
S.A.'T IMMISTRIES P-LC- MINNESOTA DEPOSITORY Copy PRODIXED PURSIJANr To VII.D. OF
CoNsExT JuoGmEw DATEo 518M IN STATE OF MINNESOTA ET AL. V. PMLV MORM, ET Al- CAsE No. CI-944MS
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B.A.T INMPaTRIES P.LC. - MINNESOTA DEPOSITORY COPY - PAMCED PUnSuANT To I VILD. OF
CONSENT JUDGMENT DATED 5/8/98 IN STATE OF ANNNESOTA, ET AL. V. P#VLIP MORRIS, ET AL. CASE No. CI-944US
For the Year:
1980
l9sl
1982
19113
1984
Irr Ch
Sales
S4.161
S4.592
S5.50'7
S6.064
$6.211
2%
Opcrjun; Income
S 412
S J19
S 590
-S 698-
S - 729
4%
Net Income
S 19-1
S ISO
S 214
S 259
S 314
21%
Rcium on Sale, 5@1 4(-t 4% 4% S 16%
Retum onAveralt Capital l2ri I V'r 10% 10% 12 15%
Capital Expendiiums S I-0 S-200 S- -268 S 190 S 294 35%
Working Capital $ -'0a S 693 S 678 S 941 $ 944 12%
cum-ni Ratio 2.0101 1.9101 1.6to 1 1.7 to 1 1.3 to 1 6%
ToW .44sets; S2.786 S2.930 S3.745 S3.953 $4.U.; 8%
Capitalization SI.730 $1.92% S2.493 $2.490 52.M3 11%
Sol" by opwaft income by
kmkkwy segment I"duwY Segm"t
Tapeace SL214
teat AM00ft
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B.A.T INDUSTRIES P.L.C. - MINNESOTA DEposrroRy Copv PRODUCED PURSUANT To WI.D. OF -944MS
CONSENT JUDGMENT DATED 5/8/98 IN SrATE OF Af1ffl6SOTA, ET AL V. P##Lp MORRIS, ET AL., CASE No. C1
marked the
@ompleiion of the fifth full %car of
business acti%iiies for BATUS Inc.. -Ahich %as
formed in January 1980. During these fi% e
years. the Grou has prospered under both favorable and unfa%oriblc
economic conditions. ThiN iucces% can be attributed. in pm. to the
strength of our ,rcanization and to the divenc nature of our
businesses.
The BATL*S Group set ne%t records in both saleN andearnings
for 1984 as (he Comparq continued to concentrate on internal trowth
and improved producti% it%. The BATUS Group also made significant
progress in imp!ementing ne1A programs focusing on peopie and
business sysierrii.
Net income for 198-1 was S114 million. a 2)17r increase over
1983. Sales utre S6.2 billion. representing a S147 million. or 21'r
increase.
Operating income increased 6% for the Tobacco busincss and
3 V't for the Paper business. In an intensely competitive cn% ironment.
Me Mead Group's operating income declined 105k. This followed a
record-setting 1983. and still, the 1984 performance marLed the second highest level
of operating income in the Retail Group's histM.
The financial performance of the BATUS Group over the past five years has been
excellent. Sales from continuing operations and net income have grown at a
compound rate of 14% and 18% respectively. arrid return on net assets averaged 2
The BATUS Group is well positioned for future growth.
Throughout the five-yew period. the Retail Group continued its plan of
expansion. The acquisition of Marshall Field & Company. coupled with the opening
of neu stores. particularly in the Salks Fifth Avenue. Kohl's Department Stores and
Thimbles businesses, inmased the number of stores in the Retail Group from 8 1 on
Januar@ 1. 1980. to a current 247.
In the Tobacco Group. measures have been taken to unify Brown & Williamson
Toba,co*s manufacturing and leaf processing functions and to consolidate its position
as one of the world*s most efficient producers of cigarettes.
Also during the past five ycars. the Tobacco Group continued its tr2difion of
marketing innovative tobacco products -A ith the introduction of several neA products.
including BARCLAY. and other brands which utilize the revolutionary -Actroft"
filter. In 196-1@ the Tobacco Group entered the generic cigarette market. and plans to
continue its new product efforts as market opportunities arise,
The Paper Group has enjoyed exceptional grow-th as a member of the BATUS
Group. Over the post five years. significant expenditures have been made to enable
Appleton Papers to strengthen its dominant position in the cartionless paper market,
Mattis in Pennsylvania and Wisconsin have been expanded and modernized to increase
-oaung and palicir-making capacity. In 1984. the comparty took two significant steps to
position itself for further growth as facilities -Avre purchased is Ohio and Canada. The
Ohio paper mill A ill.gmatly increase the compiafty*s base paper-making capacity and
thereb% reduce dependence on outside suppliers.
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B.A.'T INDUSMIES P.LC. MINNESOTA DEPOSITOny Copy pFtODUcEo PuRwAW To I IVII.D. OF
V. pHtip "M, ET AL, CASE NO. CI-94-M5
CONSENT jUOG#AKT I)ATEID 51M IN STATE OF AIMESOTA, ET L V. r?Mw MEX"
Chairman*s Statement
Nboagement Changes
Gerald L. Dennis. Deputy Chairman. B-A-T Industries p.l.c.. was elected a
Dirwor of the BATUS Board effective Januarv 1984. Mr. Dennis succeeded Brian
P. Garraway. who is also a Deputy Chairman of B-A-T Industries p. I.c.
E. John Worlidge, Chairman of The Wiggins Teape Group. was elected to the
BATUS Board of Directors in November 1984. He succeeds Patrick G. M. Best, who
retired as Chairman of The Wiggins Teave Group.
The Board of Directors. at the Dec.-mber 1994 meeting. elected BATUS Inc.
President Henry F. Frigon to the additional position of Chief Operating Officer. Mr.
FriSon joined the Company in 1981 as Executive Vice President and Chief Financial &
Administrative Officer. and was elected President of the BATUS Group in 1993.
John A. McDonough was named a Senior Vice President of BATUS. He had
previously been a Senior Vice President of Brown & Williamson Tobacco and. prior to
that. a Vice President of BATUS.
John D. Tyson was named Vice President of Public Affairs. replacing Robert
A. Pitman. who retired following 34 years of service.
Tony G. Hill was named Vice President of Human Resources. replacing Francis
R. Kiernan. who retired following -10 yews of service.
Outlook
While sales in all three of our business Groups am pmjected to expand in 1985.
they an: likely to reflect the generally lower growth rates predicted in the economy,
Employment and personal income am expected to continue to rise however. uW these
factors should kwivase consumer purchasing power and confidence.
Our operating companies am well positioned within their industries to benefit
from ft upward trend in the economy. and we can "- forward to another good year
in 1983.
Otur accomplishments in,1984 would not have been possible without the
patronage. support, and cooperation of our customers and vendors and the
productivity. dedication. and loyalty of our employees. For this. I am most
appreciative. I am also confident that the strategic programs we have put in place
dating the past rive years will result in continued growth and opportunity for the
BATUS Group of Companies in 1985 and in the years ahead.
LAstly, I wish to pay tribute to the memory and contribution o(Dt. Ivor Wallace
Hughes. it member of the BATUS Board of Directors and Ch4rmm & Chief
Rxect ve Officer of Brown & Williamson Tobacco Corporation at the time of his
death Match IS. 1995. Wally Hughes wis a consummate businessman. whose pursuit
of excellence. devotion to duty. and capacity for work was Legendary. lbs presence
will be atissed by all who worked with him.
Charles 1. McCarty
Chairman & Chief Executive Officer
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B.A.T INDUSTRIES P.L.C. - MINNESOTA DEPOSITORY COPY PRODUCSD PURSUANT To VILD. OF
CONSENT JUDGMENT DATED SI&IN IN STATE OF A&WSOrA, ET AL. Y. PHIIP AIORM, ET AL., CASE NO. C1-944105
BATUS INC. 1984 Business Review
r
ATUS Inc. azhieved record sales and earnings in 19S4.
Consclidated @ales from continuine businesses rose VC
to S6.: billicn@ This growth reflected an improvement
in consumer spending nd the success of aggressive and
1%
innovative mark-etin- s-
, rate-its implemented by the BATUS Inc.
Group of Comp:inies. The substantial growth in net income of
21% to S31-4 million %%_@i due to increased sales throughout the
BATUS Group of Companies and to increased efficiencies and
productivity. pariicular;% from the Tobacco and Paper Groups.
Return on _@veracecapitaJ increased to 121@r. This represents
a sienificani increase n- productivity over the 10.4% return
achieved in [W'.
The Tobacco Group made a significant contribution to net
k" Now"
income with operating income of S423 million based on sales of
52.3 billion. an increase of 6% over the prior year's sales.
The Retail Group achieved sales of S3.4 billion. an increase
of 7%. Operating income. howener. was down at S196 million.
reflecting an industry-,% ide increase in markdowns and heavy
promotional activities necessary to maintain sales growth in a
highly competitive retailing environment.
The Paper Group reported a sharp rise in operating income
of 31 % or S105 million. on sales of S573 million. This excellent
improvement in performance was due to an 18% increase in
Oros tonnage. reflectire market growth and expanded market
share. Productivity at Appleton Papers also rose significantly in
new. an
1984. reflecting the important contribution of many major
capital investments made bN Appleton during the past five years.
In 1984, the BATUS Group continued to aggressively
position itself to meet the challenges of the future. Capital
expenditures for new stores. renovations and expanded
manufacturing capacities and efficiencies totaled S294 million.
Specifically. Appleton Papers acquired two additional
manufacturing facilities. and the Retail Group added 13 new
stores, At Brown Wifliamson Tobacco. the compan%
.U
B.A.T INDUsTRIES P.L.C. MINNESOTA DEpO9ffDRy Copy PRODUCED pURSUAW To @nl.D. OF 944156
& IN STATE OF A*MESOTA ET AL. V, p#&Ip AfORRX ET AL, CASE NO, Cl- 5
CONSEW JUDGMENT DATED 51"
77-
B.A.T INDUSTRIES P.LC. - MINNESOTA DEposrropty COPY - PRODUCED PURSUANT To VILD. OF
CONSENT JuDamENT DATED 6/8/98 iN STATE OF AINNESOTA, ET AL V. PMXIP MORRn, ET AL. CASE No. CI-944MS
V 4
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B.A.T INMWMIES P.LC. mmEsoTA DEposrroRy Copy - PRODUCED PUFISUANT To VILD. OF
CONSENT JUDGMENT DATED SIWW N STATE OF NNNESOTA, ET AL. V. PHXIP UORfW, ET AL CAsE No. C1-94-Ws
FIR
continued its investment to consolidate production at the highly
efficient Macon. Georgia, facilit%.
TOW" Saw$
FDIIO%k'ing is a brief description of the progress and
activities of the BATUS Inc. Group of Companies.
Tobacco Group
34
rown & Williamson Tobacco produced record sates and
operating income in 1984. and successfully maintained
B
its market position in the face of an intensely
competitive operating environment.
Sales rose to S2.3 billion and operating income was S428
1. L; W
illio
6% i
a
1983
M
k
t
h
11
3%
se over
.
m
n, a
ncre
ar
e
are was
.
s
,
continuing Brown & Williamson Tobacco*s standing as the third
largest manufacturer of ci
garettes in the United States.
Te"C"
OPM"
In 1984. Brown & Williamson Tobacco's strategy was to
compete aggressively in all major existing and emerging
segments of the tobacco market. Actions to support this strategy
requimd strengthening and refining the marketing approaches to
existing brands and the selective testing of new products.
7be company's strategy included a new advertising
campaign for its largest selling brand, KOOL, and a new
creative approach fbr marketing BARCLAY, the company's
leading ultra-low "tar" product. The business also strengthened
$
its unique couponinj program to support RALEIGH and
BELAIR. further strengthened the 25s concept with a new 10-
pack carton for RICHLAND and entered the generic cigarette
market.
Brown & Williamson Tobacco's manufacturing plant in
*
Le
Macon, Georgia, one of the world
s most modem cigarette
factories, achieved new levels of productivity. Continued
reduction of manufacturing costs at Macon makes Brown &
Williamson Tobacco one of the most efficient producers of
cigarettes in the industry. A joint recognition by management
and employees at Macon of the need for long-term planning for
I
j
expenses and operations also led to the signing of a nine-yew
-
labor agreement with production workers.
In 1983. Brown & Williamson Tobacco announced that in
the interest of improved productivity. it planned to shift the
4
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B.A.T INDUSTRIES P.LC. MINNESOTA DEpOSITORy Copy PRODUCED PURSUANT To VII.D. OF
6 IN SrATE OF ANOWESOTA, ET L. V_ LIP MORM.. ET AL. CASE No. CI-94-M5
CONSFNT JUDGMENT DATED 5/"
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B.A.T INDUSTRIES P.LC. - MINNESOTA DEPOSITORY COPY PRODUCED PURSUANT To VILD. OF
CONSENT JUDGMENT DATED 5/8W INSTATE OFAIIAMSOTA, ETAL. V. PhYLP MORRIS, ETA CAsENo.Cl-94-M5
manufacture of export brands from its P.-!;-r,.,bur,,. Virginia, plant
to the Macon facilitv. The traniition is %%ell underua% and %\ill be
completed in 1985.
Domestic
rot% n & Williamson
Tobacco is well poit-
tioned to respond to a
changing and challenging opera-
tima environment - Innovation will
remain the cornerstone of Bown
& Williamson Tobacco's str-,,.-e%
as it did with the menthol civa- '&If(
C4
rette popularized by the compan%
in the 19' O's: the fiber dizarete
filter. which it made popular in
the MO*s; and the "Actron"
filter. a technological break-
through designed to offer rich.
full taste at ultra-low "tar- levels.
introduced on the BARCLAY
cigarette in the t980s.
KOOL. the fourth largest selling cigarette brand in the
A recent Broum & 11-Marnson
United States. and the company's flagship brand. introduced a
marketing campaign
new advertising and promotional campaign in the last quarter of
introduces a new name
1994 which features the theme -Come Up To KOOL ". The
BARCLAY ULTRA LIGHTS
campaign. which signifies an "escape from the ordimry.- is
- to reinforce the brand's
designed to speak more directly to the J garette ', tara:n
ultra-low -tar" positioning.
audiences about the unique qualities of KOOL.
BARCLAY recorded a share performance consiztent -- ith
that of the ultra-low "mr** seement of the market. In September.
Brown & Williamson Tobacco began testing a nev marketing
campaign for BARCLAY. The program includes charges in
three areas: an improved product: a neu name-BARCLAY
ULTRA LIGHTS-to reinforce the branJ*,., ultra-lo%k "tar"
positioning: and. new product-focused advertising. lt@ purpo,@e is
to build greater awareness of the BARCLA)* brand. maintain
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B.A.T ImousTRiEs P.LC. - MINNEsoTA DEPOSITORY COPY - PRODUCED PuRstiAmr To VILD. OF
CoNsENT JuDGmEw DATED 5/11198 IN STATE OF AONWSOTA, ET AL V. PHLIP MORRO, ET AL CAsE No. CI-94-M5
Brown &,Williamson is
exploring the potential of the
branded economy segment of
the market with RICHLANI).
strong retail distribution and display presence. and generate trial
of the improved product,
The use of coupons to promote cigarette sales was a
marketing innovation pioneered by Brown & Williamson
Tobacco in 1932. These coupons. which am redeemed for free
gifts. remain an important element in the promotion of
RALEIGH and BELAIR cigarettes, In 1984, the company
Writemporized its couponing program with the new "Coupons-
Plus-Cash- concept. This new program creates added
inducements for smokers to switch to RALEIGH and BELAIR
and to become long-term smokers of these brands -
In 1983. Brown & Williamson Tobacco began exploring the
potential of the branded economy segment of the market with
the introduction of RICHLAND, This full-sized. full-flavored
cigarette. available in quantities of 25 to the package, was sold
in 20% of the market through the end of the yew. To emphasize
price advantage. Brown A; Williamson Tobacco put in test in late
1984 a new 10 pack carton containing 250 cigarettes.
In addition to the -!Iqs. Brown & Williamson Tobacco also
began production of generic cigarettes to capitalize on its highly
efficient manufacturing facility at Macon. Georgia. The
company was also more aggressive in the testing of new product
opportunities in 1984.
MINNESOTA DEPOSITony Copy pRoomm PURSUANT TO VII.D. OF
13.A.T INDuMIEs P.LC. V. pNLip MoRm, ET At- CAsE No. Cl-94-MS
MMESO ET AL.
COMENT JuDGMENT DATED 5OSS IN STATE OF MINNESO
4A
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wichiand
ill.. 93-
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B.A.T 1NDusTwEs P.L.C. MINNESOTA DEPOSITORY COPY - PRODUCED PURSUANT To VILD. OF
CONSENT JUDGMENT DATED 5/8M IN STATE OF MNWSOTA, ET AL. V. PfflLf MORRIS, ET AL CASE No. C1-944=5
International
Aggressive marketing peratinc.-, in.:ome from Brown & Williamson Tobacco*s
strategies increased international busincss increased in 1984asa result of
Bro,.%m & %Vdliamson*s markerinc stratevics and lowered expenses.
volume and share of i!*:r7,@%,,m;.,n:.,-. operating income was achieved despite the
the international I,` -- @rron- U.S. dollarand increased trade barriers.
brand market. S- --.t n & W`iam.%on Tobacco also succeeded in increasing
un@ @::re of the U.S. international brand market.
:.,nininutinz factor was the dramatic growth of o%erseas
-7:MarilV in the SignifiCant Western, European
nn.:,ke, Brok% n i: Williamson Tobacco's international brands
,I,,, r.-:.-:%,j :Imne market-Inc and advertising support. as many
Cnacre-4 markets and others saw market share increases in
,\istin.
market4
BARCLAY is fast becoming
a major international brand. Its
introduction into Western European
countries is proving to be extremely
successful with 1984 sales in excess
of 2 billion units.
BARCLAY accounts for 5% of
the cigarettes sold in Switzerland. It
has captured almost 2.5% of the mar-
ket in Belgium, Holland and Finland,
and is well positioned fbr further
ro
wth. Sales in Norway, where it
g
=-1- was launched at the close of 1993.
have been highly successful. growing
to over 4% of the market in less
than a vear. The brand was launched
in west German@ in October 1984,
and shows signs of becoming a success.
LUCKY STRIKE, which com-
petes in the full-flavor segment of
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U. S. style brands. continued to build sales
volume in both new and existing markets. Strong
growth continued in Spain. Lebanon and
especially in Italy. where LUCKY STRIKE has
exhibited the potential of becoming a major
brand. It also performed well throughout the year
in the new markets of Indonesia and Iceland. and
was test-marketed in Malaysia at year's end.
KE,N`T is Brown & %% Illiamson Tobacco's
largest selling international brand. A revitalization campaign in
1994, which included modified packaging and a new advertising
campaign. was designed to reinforce the brand's image abroad. As
a result. KENT has experienced growth in major markets including
Hong Kong. Paraguay and -Malaysia.
In the Far East, a more favorable Japanese trade policy has
increased the sale of K00L. Brown & Williamson Tobacco has
worked closelywith U.S. trade negotiators to mduce Japanese
trade barriers and to improve access to theJapanesc consumer.
B.A.T INDUSTRIES P.I-C. - MINNESOTA DEPOSITORY Copy - PRODUCED PURSUANT To VII.D. OF
ComsEw JuDomm DATED SI&IM IN STATE OF Aftwsom ET AL V. PHILIP MORRO, ET AL CASE No. C1-9"W5
Retail Group
ith 12 operating companies. the SATUS ReWl
Group has businesses in four seements of the U.S.
retail industry. Saks Fifth Avenue leads the hich-
quality specialty store segment. Kohl's Department Stores operate
in the value-oriented spccialry store segment, while both Breuners
and 'Mimbles are characterized as focused specialty stores.
Marshall Field's, Frederick & Nelson, Ivey's-Carolinas. Ivey's-
Florida. Gimbels-East. Gimbcls-.*Aidwest* Gimbels-Pirtsburgh
and The Crescent are traditional department stores.
In 1984. the BATUS Retail Group achieved record sales of
S3.4 billion while operating income of 5196 million reached the
second highest level in the Retail Group's history. Following a
5"n" vw@ recotd-sening 1983, the decline in operating income was due
primarily to reduced gross margins and increased promotional
expenses created by in intensely competitive retail environment.
Headquartered in New York City, the BATUS ReWl Group
corporate office is responsible for overseeing the broadly based
operations of some 247 retail stores. Tbe Retail Group office
also provides centralized support services in store planning and
construction, real estate evaluation. site and consumer research,
I data processing. accounting and financial guidance, systems
design. legal counsel and human resource development.
The Retail Group's Corporate Merchandising Office.
formed in 1983, played a significant role throughout 1984 in the
RHO merchandising programs of each BATUS Retail Group operating
company. 7be Corporate Merchandising Office has also
expanded programs to assist the operating companies in
improving gross margins through the joint purchase of
merchandise with other operating companies. and by developing
special inerchandise items exclusive to the BATUS Retail Group.
Saks Fifth Avenue strengthened its position as one of the
most distinctive and successful quality specialty stores in the
nation in 1994 as sales reached a record high. Two new stores were
opened. the first in Cincinnati, Ohio. and the second in the
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coNsENT JuDamENT DATEo 5/8/98 IN SrATE oF MNw9orA, ET AL V. PWP MORRIS, ET AL CASE No. Cl-94-8565
Dadeland,Mall. South.Nliami. The DadelandMall store is the
Saks Fifth Avenue plans to
fourth Saks Fifth Avenue location along Florida*s **Gold Coast-.
expand Into new market
This brings the total number of Saks Fifth Avenue stores to 40
areas for the balance of the
nationwide.
decade, while renovating
Progress continued un a multi-phased renovation and
many of Its older stores.
modernization plan for many older stores. and Saks Fifth Avenue
plans to continue expansi.on into new market areas as projected for
the balance of the decade.
In December 19S4. the Fifth Avenue store was official[%
designated a landmark by the New York City Landmark
Preservation Commission. In teaching its decision. the
Commission found that **Saks Fifth Avenue is one of the grand
flagship department store buildings that identify Fifth Avenue as
the citv's and country's best known shopping street. * *
7@he Fifth Aven@e Club. which provides personal consultation
and shopping services for Saks Fifth Avenue clientele. has been
one of the most successful and innovative customer service
operations ever begun by a retail store. Since opening in 1980 in
the Fifth Avenue store. this shopping convenience has been
extended to IS stores -
Marshall Field's. with 21 traditional full-line stores, now
serves four major metropolitan markets: Chicago, Milwaukee,
Dallas and Houston. As the dominant quality department store in
Chicago, Marshall Field*s showcases an array of merchandise
ranging from fashion designer apparel to top quality home
furnishings. gifts and private label foods.
With the new management team solidly in place, both
sales and operating income from Marshall Field's reached record
levels in 1984. 'Me company continues to strengthen its traditional
image of fine quality and service and to prove that its marketing
concepts are viable @nd highly transportable as it moves
successfuliv into new markets.
Construction has been completed on 50.000 square feet of
additional selling space for the company's Chicago Water Tower
Place store. and renovation of approximately one million square:
feet of selling space at Chicago suburban stores is underway.
I
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B.A.T lNousTRiEs P.LC. - MINNESOTA DEPOSITORY COPY - PRODUCED PURSUANT To VII.D. OF
CONSENT JUDGMENT DATED 5/8/98 IN STATE OF AIINNESOTA, ET AL V. PHXF MORRM ET AL CASE No. C1.944Ws
lmr4-trtant improvements are also being
in mam ofMarshall FieWs merchandising jreas. For
example. certain classic line, of nictchandise been
au menied h, the iniroductior ofmore conien-.rorarv
9
'
lines. The flaftship store tin Swic Street has a,!
:,,! in
c,-clu%i%c leathct boutique\% hi,:h features renouned
L dcsh,ner@ such as Bouezza. Lout@ Vuitton. Fens@t. Gucci
VA i
)
and Chinel. kk hile viriuA it% has beer. @..:hievcdf
in Chii:j-,,(, and Texas u ith in-tor. opieninos of:@-e
internationalk recogniz@d Ar.-.:;.,!a Cumminp F:-,e
)e%w)r% Shops,
'
KAI'% Dep
artmeni Slows, %\;,h tore%. is unijL:."*.
po@lm.,ned in thL BATLS Retail Groupa!,a % ilue-oricMt.:
%:hoin. and ot:@upie,;h;, miarke:
Ns:
MMMOMA DWIOWORV Copy PRoO0jCED PURWAW To I V11,J). OF
*TnIES P.L-C ET Al
INDL RIS_CT A
MW IN STATE so ET AL. V. pWjV AfOR__j __@ CAsE No. C144405
COMENT jUC)GLIENT C)ATED I
discount and traditional stores. Headquu-nered in Milwaukee and
operating in Wisconsin. Illinois and lndiana. Kohl's features
personal customer service and offers wl@.17 has proved to be a
highl% su,:cc.,sful merchandising mix fo.@:scd on moderately
priced apparel. hou.,cwarcs and home te\:;Ics. In 19S4. Kohl's
Deparimeni Storcs reached record lc%'e!s ;n sales %olume and
operating income. Kohl's plans to continue exparibion for the
remainder of the decide. as the Kohl's -.Lrchandising concept
continues to cain enthusiastic customer -=-cpiance.
Gimbel; Department Stores is comprised of three operating
companics-Gimbels-East. Girnbels-P;nsburgh and Gimbels-
Nlid%%est. The units function independent1% of each other. and
have distinctly unique operational stratepes desiened to achieve
targeted objectives in their respective inarket areas.
Gimbels-East serves the im o Large metropolitan areas of Nc%%
York and Philadel hia with 20 stores. Tine business faced many
p
new and difficult challences in 19134 as i, entered its first full year
of consolidation of the New York and Philadelphia businesses and
Kohl*s plans to continue
encountered an intensely competitive local retailing environment.
expansion for the remainder
Gimbels-Pittsburgh has seven stores in the greater Pittsburgh
of the decade, as the Kohl's
area. Its operations also suffered during 1984 as a locally
merchandising concept con-
depressed economic climate. coupled A ith one of the most com-
tinues to gain enthusiasdc
petitive retailing environments in the U.S.. forced Gimbels-Pitts-
customer acceptance.
burgh into heavy promotional activities.
Gimbels-Nfid%vest. with nine stort@
in Milw2ukee and surrounding areas. had
a most successful vcar. Both sales and
operating income reached new levels as
the business continued to streni6then it@
dominance in the market area.
Gimbels-.*%Iid%% est also divested
itself of two stores in the MiN 3ukee area.
satisf% ing a requirement of the IM
consent order entered into bv BATUS
Inc. and the Federal Trade Commission
follim ing the acquisition ofMarshall
Field& Eompam. All emplo%cesofthe
Ri
J
Moslorcs%%cre rovided employment at
M
I M
B.A.T INDuSTRiEs P.LC. - MINNESOTA DEPOSITORY COPY - PMMCED PURSIJANT To VILD. OF
CONSENT JummENT DATEo 5181M IN STATE OF AONNESOTA, ET AL. V. PHXIP MORRIS, ET AL., CASE No. Cl-944=s
E. 1.
other Gimbels-M idwest locations.
Frederick & Nelson. which
operates 15 stores in Washington and
Ore-on. also encountered a his!hl\
*
competitive environment in li84
0
following a record year for sales and
1
profits in 1983. As the leading full-
line quality department store in
continues to
Seattle. the compan%
strengthen its position through
essive marketin- 5tratevies
despite the difficult economic
-hich prevail in the
conditions %
Pacific NorthWCSE. Plans for reno-
ation and redesign of several older
izores were announced in 1984.
Breuners is a high-quality
Sales and operating income
furniture and home furnishings chain which currently has 17
for Breuners, the leading fur-
retail stores and 40 rental locations in California. Arizona
niture retailer on the West
and Nevada. Founded 125 years ago in San Francisco,
Coast@ reached record levels in
Breuners has become the leading furniture retailer on
1984, as the company con-
the West Coast and ranks among the three largest in the
tinued its successful stmtegy
United States.
of offering one-stop shopping
Sales and operating income in 1984 reached record
for the home.
Itvels as Breuners continued its successful strategy of
offering one-stop shopping for the home. The company plans
to continue its program of store expansion to accommodate
textiles and home accessories that complement its present
furniture lines.
Ivey* s-Carol inas anL-' Ivey* s-Florida both provide the
Retail Group with access ta the affluent Southeastern
segment of the United States.
Ivey's-Carolinas. with 13 stores throughout North and
South Carolina. is located in the heart of one of the most
rapidly growing regions in the country. Improved sales
and profits in 198-9 strengthened the company's position
considerably asa leading quality department store offering
moderate and better-priced fashion apparel. decorative home
accessories. domestics an d housewares.
C.7
B.A.J INIXWTRIES P-1-c- MMESOTA DEPOSITORY Copy - PRODUCED PURSUANT TO V11.1). OF
CONSENT JUDOWNT ()ATFD $18M IN STATE W -.sOr&ETAL.VpHXjpMORR@6ETA CASE NO- CI'944"5
--Ij
-4
i
N
(3`0
B.A.T INDUSTRIES P.LC. - MmEsou DEposrToRy COPY - PRODUCED PURSUANT To I VILD. OF
CONSENT JUDGMENT DATED 5t8= IN STATE OF AIINASSOTA, ET AL. V. PHXV MORRIS. ET AL CASE NO. CI-944US
.6
-71
its
10i
7- 7*:.'--@.":Z.77.
rv
-@j
B.A.T lHousmEs P.Lc. - WNESOTA DEposffoRv Copy - Mow= PuRwANT To VILD. oF
CoNsENT JuDomEw DATED 5/M IN STATE OF A&MIESOTA, ET AL. V. PMLIP MORRIS, ET AL. CASE No. CI-94-MS
Ivey's-Florida. with 12 stores. increased its sales volume in
1984 and further positioned itself as a leader in one of the fastest
growing states in the nation. Despite the fierce competitive
atmosphere in its marketplace. the business is experiencing
considerable organic growth through the intensification of
existing marketing strategies.
The Crescent. with three stores and selling space of
4W
62 1.000 square feet. is located in Spokane. Washington. In )984.
the business achieved record sales. The Crescent continues to
175
be the leading full-line, family-oriented department store in its
market area.
Thimbles was introduced by the BATUS Retail Group in
1980. Its merchandise mix offers moderate -priced. classic
clothing which is selected to appeal specifically to the caner-
oriented. upwardly mobile woman. Since this target market is
opo" Ift"s
now expeacd to grow very rapidly over the next decade, the
BATLIS Remit Group plans to aggressively pursue the Thimbles
concept in new markets. Thimbles currently operates 16 stores in
mail locations throughout the Northeast and Midwest.
Paper Group
ppleton Papers posted another record year in sales and
profits in 1984.
8, u I b.
The 23% increase in sales revenues to $573
1 37 Im e a
million reflected a 15% improvement in sales volume of
carbonless copy paper.
The 3 1 ocic rise in the Paper Group's opemting income to S 105
million resulted from the beneficial effects of increased carbonless
tonnage and improved manufacturing productivity and efficiencies.
Appleton Papers positioned itself for long-term gmwth
through the acquisition of two additional manufacturing facilities
in Ohio and Canada. In total, the company spent more than S 152
million for acquisition. expansion and modemization in 1984.
Strategically positioned within the paper industry. Appleton
Papers'key product - carbonless copy paper - is designed to seirve
a *4 w 31- US ell
B.A.T INDUSTRIES P.LC. MINNESOTA DEpoSITORY COPY - PRODUCED PURsuAwr To VILD. OF
CONSENT JuDGmEmT DATED 5WW IN STATE OF UNAIESOTA, ET AL v. PH&V MORRIS, ET AL CASE No. CI-94-8565
the ero%% ine business forms and
information-processing industries. z.
the world's largest producer of this
ecialty product. Appleton
unique sp.
Papers possesses a strength and a
A capacit% for growth that reflect ib
leadership in this industry.
Appleton Papers is also a leader
0
in the manufacture of heat-sensiti%e
thermal paper. used extensive[y in
information-processing equipment.
Additionaliv. the company is a maior
supplier of coated enamels to the
graphic arts industry and is a spe. ialt%
co2ter for converted products.
With seven manufacturing
facilities located in Wisconsin. Ohio.
Appleton Papers positioned
Pennsylvania and Canada. Appleton Papers possesses
itself for long -term grouilt in
integrated manufacturing capability that embraces
1984 with the acquisition of
pulpmaking. papermaking. the manufacture of microcapsules,
tivo additional manufacturing
for carbonless copy paper. and the conversion of base
facilities.
materials into finished products.
In 1984. Appleton Papers greatly increased its capacity
to produce base paper for production of the company*s NCR
Paper* brand of carboniess copy paper with the S84-million
purchase of a mill in West Carrollton. Ohio. The three-
machine mill. purchased from the P. H. Glatielter Company.
has a manufacturing capacity in excess of 110.000 tons a year
After modifications. the mill will serve as abase paper
supplier to the company*s converting plants in Appleton.
Wisconsin. and Harrisburg. Pennsylvania.
Appleton Papers also owns and operates pulp and paper
mills. in Combined Locks. Wisconsin. and Roaring Spring.
Penrt@ylvania. which manufacture base paper forconversion
into carbonless copy paper. 11w carbonless capsules. % ith
v, hich the paper i-@ coated. are produced at facilities located
Harrisbure. Pennsylvania. and Poriage. Wisconsin.
'NCR PjM t,,uu&--.urk a(-CRCurporat%%n ficened to Appleton Nicr. 1r;
B.A.T INDUSTRIES P.L.C. MINNESOTA DEPOSITORY COPY PP40UCED PURSUANT To VILD. OF
CONSENT JuDG#AENT DATED 5MM IN STATE OF ANNWSOTA, ET AL V. PHILIP MORFM, ET AL CASE No. CI-944MS
The converting plant in Peterborou.-h. Ontario.
purchased in April 1994. greatly strengthens the company's
ability to further penetrate the growing Canadian carbonicss
copy paper market. Prior to this acquisition. Appleton
Papers' Canadian subsidiary. Appleton Papers Canada Ltd..
marketed Appleton Papers products manufactured in the
United States. Production at this new facility began in
September 1984.
In May 1984. Appleton Papers announced a S-18
million expansion at its Harrisburg. Nnnsylvania.
converting plant. The expansion is expected to increase the
plant*s capacity for production of carbonless copy paper by
50%. Increased production from the expanded facility is
scheduled to begin in late 1985.
A S30 million expansion and modernization of
Appleton Papers' pulp and paper mill at Combined Locks.
Wisconsin - scheduled for substantial completion in the
third quarter of 1995 - will eventually achieve a 20%
increase in mill output. In combination with that project is
construction of a muld-fuel boiler facility. also scheduled for
third-quarter completion.To be fueled by low-sulfur coal,
bark and wood fiber residue from the Combined Locks
B.A.T INDUSTRIES P.LC- - MINNESOTA DEPOSITORY COPY - PRODUCED PURSUANT To VILD. OF
CONSENT JUDGMENT DATED 518M IN STATE OF ANNNEstom Er AL V. PHILF UORRIS, ET AL CASE NO. C1-94-M5
mill's water treatment plant. the new boiler facility will Appleton Papers is a major
reflect the company's continued energy and environmental supplier of eciated enameLs to
consciousness. A 250-foot stack will also provide the best the gmphk arts induistr@v
available control technology for boiler emissions. and Is a specialty coater for
Too capital improvement program for the two projects converted products.
As the worid*s largest pro-
ducer of carbonless cop@
paper. Appleton Papers
possesses a strength and a
capacity for growth that
reflect its leadership in the
paper industry.
exceeds S52 million. the largest outlay in the 96-year history
of the mill.
In December 1984. the Federal Trade Commission
(FrCi ruled in favor of B-A-T Industries and Appleton
.Papers Inc. on an FTC staff appeal of a December 19S' ,
decision by an Administrative Law Judge. The Judge had
held that the June 30. 1978. purchase of Appleton Papers
Division of NCR Corporation by B-A-T Industries did not
% iolate the federal anti-trust laws. The Commission's final
order to dismis,@ the complaint formally ended the &IL:7-
:@Car-%Wld case.
B.A.T INDUSTRIES P.L.C. - M*MESOTA DEPOSITORY COPY - PRODUCED PuRSUANT To $ VII.D. OF
CoNsEmT JuDamENT DATED 5/8/98 iN STATE oF AltAwsorA, ET AL v. Pmxp Moggis, ET AL CASE No. CI-94-8W5
BATUS Inc. Financial Review
Management's Responsibility for Financial Reporting TaIde o(Contmu
The following consolidated firiancial statements of BATUS Inc. were Coawwaw F*UWKLW Suawtu
prepared by management which is responsible for their integrity and
saft"Wimi of Jr.,WK W4
objectivity. The financial statements have been prepared in conform-
RemiaW Emmiko .30
slkim= Shan 32
iry with generally accepted accounting principles and necessarily
statwou of Ounces in
include mounts which represent the best estimates and judgments
FW&-xW Posit,on 34
'
of manaLement.
m3nagewan
s Mmacs
suftamm *Uworm 31
Management is further responsible for maintaining a system of
RAW" Shm 3)
itemal accounting controls, designed to provide reasonable 3ssur-
sument 0(cbmil" in
FLUMial Position 3S
--ance that assets am safe
guarded. established policies and procedures
Swmwy of Acte"uns fti;WS 3&V
are followed and transactions are properly execuredand reported.
Now W co"kiaw Fin=231
The system is continually reviewed for its effectiveness and is aug-
mented by written policies and guidelines. the careful selection. and.
Repm o(Catifod PW&t Aercaum 47
training of quWified personnel
, and a strong program of intemal audit.
.
Arthur Young & Company. certified public accountants, am
engaged io exitnine the consolidated financial statements of BAtUS'.
"
Inc. mW ism a report ther6oti. 7beir examination
Is conducted in
accordance with generally accepted auditing standards and includes
an objective review'and evaluation of interna accounting controls to
the &ient deir@ed necessaiy by them.
The Boa' Com mince of the
rd of Directors. through the Audit
Board, @ ii46i@ibli i@@ *0) issitring"that
management fulfills its
resp ons ibilkies. in the pie@ of the fit nancial statemenis;'i@d
(2) eupsink dii certified public iccountants with whom the Corninifte'.
reviews the scbpe of the aidits and the accounting principles to be
-Ypliid in financial reporting. *The Audit Committee rr@eits reS larly
-(separately and jointly) with the certified public accountants, iripre
'
review the'
sent"ves orininagemeiit, and internal auditors to
acti@itiei of isich and lo um that each is'propeilidischarging its
com i -6 ittlepe _nj@ii A@tbiir Young&"..-t
ode
respxiibldti@s.tb insu'
ple:
i
'
i
-
'
bai; Ml aiid OW mi-c
c
ess to a w
t w ith
the Audit Can-
Compa,
y unittee,
i
without marigement represiiiiatives present, to discuss the ri@iitlt
s
*
:
'
A
t e
of their examination and their jopittions on the adequacy of in
rnw
accounting controls and the quality of financial reporting.
Henry F. FriSon
Pre-d4ent A Chie
f Operating Officer
t
13.A.T INDUMIES P.L.C. - MINNESOTA DEPOSITORY COPY - PPA=cED PuRst.;Uff To I VILD. OF
CONSENT JuDamm DATED 5/8W IN STATE OF &*NWSOTA, ET AL. V, PHLIP "FM ET AL CASE No. Cl-944MS
BATUS Inc. Consolidated Statements of Income and Retained Earnings
'YejEndedD er jl*
1984 1993
Net sales ........................................... 1C211,0711
Costs soa
Costofialci, .:.3,456,949
3@@,4 31
.............
540,329
Selling. jenual and a"nisnUve expenses .............. lMw 1,429.609
Intemst expense. net of intemst inconie:
1984-S9.545; 1983-34.168. IM-$2'-' ... .. ---164,563
696 153.043 17
ToW costs and upenses; ............................ S,"S 373 5.591.450 51A26
Income before provision for Income taxes ................ 472.070 390
Provision for income taxes ......................... ... 252.182 213.514)
Net Income ......... ............ .......... 13.955-
........ X3,523 2SSJ60
Retained andap, bqMnft efy"r * ................... .1,140,111 981.551 V11.696
Dividends dedarcid ......................
.,.130.000 100.000 '.tlu
Retained eww"p, isw oryear,
of
-Ymsnm accoundpS pollcies;
see accomp 'Mmy
And now to comolklated financial
AM
L
Lei
B.A.T IMMISTRIES P.L.C. MINNESOTA DEPOSITORY COPY PRODUCED PURWANT To VILD. OF
CONSENT jUDGMENT DATED SWU IN STATE OF MWESOTA, ET AL v. PHXIP MORRIS, ET AL. CASE No. C1 -94-8565
Statement of income Commentary @ i
4
N12111111tilernent's Discussion
Sales increases %ere achieved in both
Tobacco marketing costs and improved
and Analysis
the specialty (I I %) and department
Retail expense productivity. which more
The Company*s Statement of Income
saire (5%) groups during 1984. A
than offset the effect of production
reflects growth in Wes and profitability
significant portion of the specialty store
realignment expense.
in each of the last three vears. In 1994.
increase was the msuft of new stores:
Results of 1984 operations in the
'
the Company continued its trend of
dim by Kohl's, two by Saks Fifth
s three industry sagments
Company
significant growth in net income by
Avenue and eight by Thimbles. The
were mixed. Tobacco Group operating
we of I @%. This
achieving an incre .1
department store group benefited from
income increased 6ric in 1984 following
follows similar growth of 21 Ir in 1983
continued renovation of existing stores
increases of 11% in 1983 and 45% in
and 19% in 1982.
and the contribution of two stores
1982. ReWl Group profits declined by
Net sales in 1984 increased by 2%
opened in 1933.
10% following record )ezs in 1993 and
over 1983. It is important to note,
The Paper Group contributed 9% of
1982 when the Group reported 31% and
howevcr. that net Saks increased 8%
rural revenues in 1984, up from 8% in
36% increases, rcspccti%t!y. The paper
of the
fter considering the impact
1983. Sales for 1984 exceeded 1983
Group continued its trend of significant
-disposition of Kohl's Food Stores,
sides by 23%. This follows a very
to-year improvement with an
yew-
which operated for nine months in
ww& 1983 performance %hen sales
increase of 31% in operating income.
1983. Despite the absence of Kohl's
were 13% higher than 1982. Unit
which follows increases of 26% in 1933
Food Stores. the Company set a new
volume increased IS% in 1984
and 73% in 1982.
record for sales following an excellent
followinS a 13% increase in 1983. The
Interest expense was reduced in 1934
yem in 19113. when act Wes. from
increased volume occurred as
a result of
by $7 million or 4%. The decline
continuing operations, increased
good economic conditions in the U.S.
'
ruflectit lower average borrowing levels
by 15%.
ad Canada. increased market
during 1994, particularly shart-termi
which con-
The Tobacco Group.
penetration of the multiple put business
borrowings. In 1994. average short-term
tributerl 37% of total sudes mvtnua -
firms market and growth in low and
borrawinp we S37 million versus
in 1984, Increased sales by 6% in 1984.
-4- priced carbonless Pruducts-
..SI29 million in M and $195 million
'. Sales in t983 increased by ten d ,tan -
Also, an acquired manufacturing
in 1992. This firviamble trend
'
1%. The 1934 increase mmiud ftm
hcHiry to Ohio contributed to the
s increasing
dersonsintia; the.Company
higher prices a domestic unit sales
stror Wesperfirimussee.
ounda
ability to fund working c
wet makimined at 68 billion units or
Cost of Wes as a percentage of sales
Internally, includiiAll 6= of Marshiall
'
11.3% of the domestic marlm on,,
was S7.S%. 57% and 59.2% in 1954,
Field & Company following the
pared.to 11.5% in 1983.
L993 ad 1992. tespectivisly.'In 1964.
aquisid" In 1982. In 1993 and IM,
volume increased by .6% 1 1994. The
do ratio was higher doe to increased
floarichij; cow Increased by $9 million
. I -.I
Grow's shut of the U.S.:
L[F0 exicuse (W million). priminfly
.4ndIS61million.mpeirtivelyasir
brand market Increased .3% to it).W -
in the Tobacco Group. and lower
result of the acquisition of Marshall
The Retail Group concributed 54% of
strairg'" at Rem" due to increased
Flew &Company.
total ado in 1964. Saks incritruarl by
'Pormedisurd oc6vrf- The 1993 ratio
The provision for income taxes. as a
' 7* during 1994 fallowing an hictriese
decreased due 10 lower LIFO costs in
percentage of income belbre provision
of 27% in 1993. the fim NO yew @f - -
ftTobaccoGreaspruidimpgoyndRewl
for income taxes, was 44.6% in 1984
operationsformershailrum&'.7"'
-it Pui- Group MCF81111111.
coaripared to 45.2% in 1983 and 43.7%
Company a a member of
the C-p-"
Selling, general and admintsizative
in 1992. Ila kraci mses in 1934 and -
.
In 1982. sales incitmied S11%, ithiclb
Operates 0 & licircrintrip of sal" were
J962amdoetobigberievelsof
includes the isnpaut of Mar"t Field
22%. 23.6% asid 24.9% in 1984. 1983
invenmeat in credit associated with
'
Company. acquineil on May 1. 1?82.
WA 198Z iispectively. Expense
higher c
upital expindituris.
Sales growth was
adversely dkw in
productivity improved in 1994 due go
1954 by a highly competitive aviron-
the effirtel of a $46 million charge In
ment and unusually high markdowns in
1983 Motive to phasing out production
Mspow to discount pricing strategies
at do Tobacco GtoWs Petersburg.
of competitors.
Virginia. martufacturivij; facility and the
'
absence of Kohl
s Food Stores in IM.
b 1983. the ratio declined due to lower
1
B.A.T INDUSTRIES P.LC. - MINNESOTA DEPOSIPDRY Copy - PRODUCED PURSUANT To VILD. OF
CONSEwr JuDamm DATED 5/8190 IN STATE OF MwESOTA, ET AL. V. PHX1P NORM ET AL CASE No. C1-94-M5
BATUS Inc. Consolidated Balance Sheets
r
,
l*
1984
ASSETS
(/A rhosa@di
canvot Mau:
cash ................................................................
$ 40,820 s 9
Short-term invements .................................... .......
-44counts receivable, less allowance:
1994 - $38.324; 1983 - $33,570 ...... ........ ......
1,128,07,
inventories .........
071-A 4
950,113
other ................................. ..........................
250
Current useu ..................................................
2.141,S40
F."esty, plant and equipment. act ........... ........................
1,524,163 Yi 71'
lot- Isla amis ............. I ............. .........................
316,11,
Other assets, pdndp&Hy Investments .......... ...................
301.203 -'A 72,
LL4BKXMS AND SHAREHOLDER'S EqUiTy
@Sbort-wrrnborr9wmjs ... ............. .....................
..
$1061,"7 S
.
Lang-ttim "due within one -;.* -,
...............
. 31
13"
................... ...... I .................
331
Arcrued liabilities .... .................... .....................
444,1103
.0
Iliatedcompanies ......................................
Wito AT
* ' * * I *
22,"? 10
I
'
...................
Income taxes payable ...................... .......
MS..
211.602 19.83S..
Cwmt liabilities ..................................................
1.198.919
LAmg-tem debt:
Affilmed company. subordinated ....................... .............
782,2"
other ...........................................................
436.449
1.218,718
Other Iong4erm flabliftles ..................... .....................
473,949
Shamballder's equity:
Common shaues. S I par value, 1.000 sham
authorized. imW oW outstanding ..................................
Paid-incapital ....................................................
69.376
Retainedeamings .......................... ......................
jJ;3,W_
__j.!40.I ?I
1.393.4
-
54.283,697
13.9S2.S16
Ste accomparq ing summary of accounting policies
and noti. to comolidwwd financial staccments.
3:
B.A.T ftumss P.L.C. - MmEsorrA DEPosttoRY Copy - PRooucED PuRstjANT To VILD. OF
CONSENT JUDGMENT DATED 5/8W IN STATE oF ANNNEsom Er AL. V. PHX1P MORRO, ET AL. CASE No. Cl-944MS
7
Balance ShedComm!#@!7
_X --=7-
-7 4: .:1
Management's Discussion equity interest in Imasco Ltd. for S 119
and Analysis million. 77ic purchase was funded with
Worimg Cavils]
The Company's financial position. as a subordinated loan from a subsidiary
reported in the balance sheet. has of B.A.T. 7besc additional obligations
remained strong during 1934. During were offset by a reduction to
the year steps have been uk-tn to further short-term borrowings to fund
position the company to meet the operating cash requirements. IU net
challenges of the future while increase in short-term borrowings at
maintaining substantial financial December 31, 1994 was due to
refinancing S85 million of long-term
flexibility to Mid funire expansion.
ebt with short-rem borrowings.
i Current assets exceeded current d
1abilitics by a ratio of 1.8 to I at A key element of the capital structure
7-- L)ecember 31, 1934, compared with 1.7 of the Company is the subordination.
to I in 1933. Working capital increased by B-A-T, of S782 million of lonji-terni
-6 e. 3 i; 93
from S841 million in 1983 to S944 debt; S663 million is subordinate in
million in 1994. The increased payment to external debt up to S I
investment in working capital was billion anid $1. 19 million is subordinate
in payment tri all external loog-tem
funded by operations and was required
to support the expanded operations of debt. 71w rado of unsubordinated debt
to
totil Capital is 20.8% in 1984,
the Retail and Paper Gmups. In the
Retail Group, inventories were S31 compaired with 23.9% in 1983.
The Company has continued to huid
million higher in conjunction with new
P stores. broadened product fines and. maJW capital expansion Wild improve- 35
iniphatis on higher quality merchandise meat @n@iirams itb Arods generated
in Certain stores. Retail receivables by operitioni (see also statement
required S101 million of working Of Chan" in finsmew position
During 1994, S294 million pf
capital during 1984 as a consequence Of. commentary)
higher sales levels mad continually was a* for capital is
Moooof
hiSharqvilitsalesasalimportionor atittexpansion with only S93
tow Saks. In the Paper G new external barmwints.
mup. a
m1i company has maintained a high
portion of working capital generated by
level of Artanciall flexibility and liquidityz
Verations was reinvested in receivables
_@nd inventories to support during 19$4. as evidenced by its suring
higher sales
levels aW two additional manufacturing financial position. This flexibility is iV 1IN',
facilities. .:,MtWenlmWbyS145ininionofunuseid
ftive"I of coat
Total debt as a percm of @rxl Capital row of as& aft battles. a = utillion to Copilot
47M
decreased during 19S4 from 51.2%, in credit AVVerient with B-A-T
1983, to 49.3% w growth ..and an billbirmal agreement with B-A-T
in
sharcholder*s equity exceeded the Witter wYrb an additional SM milhod"
growth in debt capitalintion by 2.2 to may be bomwed from in affiliate to C.,-
provide for short-rem financins needs.
I - The increase in debt occurred in
conjunction with finatic The Company's cub Dow from
ins two
acquisition during 1934. Appleum operations, strong finsicial position and
Papers acquired a paper mill located sources of am=ing we
neasr Dayton. Ohio. which was financed adequate to meet its foreseeable
obligations.
with a noninterien hearing now with a
discounted value of S94 million. In
addition. the Compan) ...... 40
ktr
purchased an
'33
B.A.T INDUSTRIES P.L.C. MINNESOTA DiEposrroRy COPY - PRODUCED PURSUANT To VILD. OF
CONSENT JuDGmENT DATED 5/8M IN SrATE OF A*AMSOTA, Er AL. V. PHLP MORR6, ET AL CASE No. CI-94405
BATUS Inc. Consolidated Statements of Clianges; in Financial Position
Yeats Ended Dece VI
,
1984
1983
M
!
R.- -
Cub provided by operiadow:
Net income ...............................................
$313,S23
S 25 8-.5W.
S213
, p,
hem not dketing working capital,
Depreciation of pmperty. plat and cquiprnea@ .................
.
136,426
128.
-.5109
Amortization of intangible assets ... I ..
........... I ..........
2ApJJI
26,
..9 12
Deferted income UUM ............................. ......
toolo"
3 .511
Other .................................................
3,709
4
Wo*ing capital peovided by opemdons ....................
ST7,934
565,113
Changes in components of operating working capital:
@
Accounts receivable ......................................
(97,162)
(9121M)
(2 1
41 .1
tavemorin on fust-in, fust-oat basis ........................
(69,156)
(7.240)
97414
Last-in, first-M inventory reserft ..........................
40,629
(20,944)
19.476
Otha curtent assets ......................................
4,631
11119,
3.956
Accounts payable. accnied liabilities and due to
affiLiated companies ....................................
01@w)
104.582
.,;-7(8.479.
locame taxes payable ................ ....................
(7=)
46.534
-(139.653)
31,161
Cub psovided by operations .............................
438,ni
5%.274
Coati aped for invatas"L.
lavestment in Imasco Lintited ................... ...
(119,030)
Acquisition of paper mill ....................
.......
(93,949)
Acquisition of Marshall Field & Company ............... I ......
P6
Additions to pmperry. plant and equipment .....................
(210,472)
(189,884)
(M
Acquisition of tax tramfer AM levemSed leam, act ..............
J35,M)
(72.542)
Other ...................................................
41,175
(407,705)
(239.11116)
(689.325)
Cub used (or dividends ......................................
(130,000)
(100,OOD)
(111,100).
Cub provided by anisecing witivides:
Additions to long-Wrat debt ...........
216,675
23,160
393@33
--
Ptyment of long-term debt ...................................
(154,175)
(91,986)
(138.T@:-
payment or obligation under trademark and tiadc name
acquisition agreements ....................................
(1914118)
(15.182)
(26.397)
Increase (dectease) in short-term bonowings ....................
23,M
(101:.717)
;3.5J 2
64,471
(1 .725)
251.622
locniase (decrease) in cash and short-term investments ...........
S (34.9$3)
3 59.663
S(l 11.436)
See accompanying summan. of accounting policies
end now to consolidated financial statements.
3j
B.A.T INDUSTRIES P.L.C. - MINNESOTA DEPOSMORY COPY PRODUCED PURSUANT To VILD. OF
ComsENTJUDGMMT DATED SMWIN STATEOFAIIINNESOTA, ETAL. V. PHXIPMORRIS, ETA CAsENO-Cl-94-8565
Statement of Changes In FinanciaJ Position Commentary
Management's Discussion
Company to fund expansion internally
and Analysis
arid, at the same time. strengthen its
Waftii
,
Working cap.-W provided by
financial position.
o...
.- 5
Operations increased 2% in 1984
Cash used for investment increased
f0owing increases of 21 % in 1983 vA
by 70% over 1983. no most significant
261-r in 1982. Ito decline in growth is
capital expenditures Acm made in t
he
due primarily to lower growth in
I
Paper Group to pro-ide further vertical
operating income. Operating income
integration and to expand its presence
17
gre-a ky 4t,'r in 1984 compared with
in Canada. Paper-making capacity was
growth rates of 13% in 1983 and 41% in
expanded thmugh the purchase of a
t-1. The exceptiorial growth in 1983
three-machine mill for $84 million.
z- 198: was due. primarily. to the
Canadian operations %ere expanded to
impact of Marshall field & Company
include the Group's first manufacturing
on the year-to-yw compairi sons and
facifirv located outside the United
lo%er LIFO expenses. LIFD expenses
States.
during 1983 and 1992 were signill-
Retail Group capital expenditures
cantly lower than 1984 due mainly to
were S98 million in 1984. The Group
reduction in inventories in the Tobacco
continued its aggressive expansion
Cwh V"d Pw Mvavvemi
Group timing those years (see also
provarn by opening 13 new stores
& Adaftans to
LOWTWM Dow
statetne. of income Commentary).
in the specialty store group. Tbe
si
Net income growth. in 1984.
department store Foup continued to
exceeded the growth in worWS cspigW
nortavate existing stores by eqxuidinS
pmvww by opemdong a& a Ma of the
selling space and increasing ft
nonrecurring charge made in 1983. for
PWucdvitY Of existing Space.
production realignmerd. !
In addition to the operating group
Cash provided by opittradons -
Capital expenditures. the Company
30
decreased by 26% in 1984 follooring
irivesited W two levemled losses (M
increases of 36% in 1983 and IW% In '
million) and acquired an equity interea
-
1982. The decrease in 1984 accurred as
in IMMSW Lid. (SI 19 atillion). As a
"i
a Msult of iscreasins the company"s
result *(this purchase. die S-A-T
ir- -sonent in operatial; worUnS capital
Group's equiry interest in Imesco
t_- W million. primarily in accoullits
Inema to44%.
receivable (S97 million). The increase
As noted in the accompanying
in accounts receivable occurred in the
staternerA, dxn were significanit
Retail Group as a consequence of s
financing activities during 1994. Metv
C40W &
higher . cc total
proportuars of cmdk mks
debt was intaurred to fund the purchase
SACS. In 1983. operid"s @vvlsitig
of the Imasco, sbam (SI 19 million) wA
c2piW was decreased by $31 million'lls
On Paper Group's Ohio mill (334
4 result of financing a greater *
million). Thew increases in long-term
proportion of cament operating assets
debt were offset. in part. by prepayment
5i
with accounu payable vid accrued
of $85 million of long-term debt. which
liabilities.
. was subsequently refinanced with lower
As the accampartying statement
interest rat short-term bormwinp.
illustrates. the Company continued to
demonstrate its ability to gettenue
signiricarit cash flow firorn its
operations. This has enabled the
N.A
B.A.T INDUSTRIES P.L.C. MINNESOTA DEPOSITORY COPY PRODUCED PURSUANT To VILD. OF
CONSENT JUDGMENT DATED &SM.IN STATE OF AIINWSOTA, ET AL V. PH&P MORM, ET At- CASE NO, CI-944"5
'
'
"
ollcies
O
Inting P
BATUS Inc. Summary 41ce
Basis of Presiriitlon..
.,'out (LIFO) method. Leaf tob
B4TUS Inc, (@Cornpany'), t,hrough another
tories, which are not uiedvvi
4.6wriedsubsidix
company, Is A. 1 0 1 of
due to the dumtiofi of theA Ing
B.A.T
1W
9
claisified Ricurrent asse
.
incorporated III Enezaa.:Thi "m
partying
'wiiiiiri@ac' 'ti
prac ce.
coakfidaiiii statements; include
"bom;ii@y iind all -
the accound o the
Depredation and Amortizatloin't"
.
..
'
sip;ificaiii s""is.investm ents in 50%
'
"
The cost
of property, plant andt e
-quip
or less @a@`e-n
iitjes am accounted for
.j@. , 'A
is generally depreciated on a strai t-PI
using C'
the"Wity" thod.
Me..
basis over the estimated ful 11
use 0.
@@
assets. The depreciation rates 'm
d
Sbort-tervii Iiii9ti6nis' I
and improvements range froxii,2% to3W.
;:
Short-term Investments consist primarily
`
'
uiip
and on store ri iturmes mach i@i,
_q
r'&hd bank term deposits'
P"ape
Or cOMmerq1f@I
meat from 3% to WA.
and
Property rights u nder cap W
Improve
meats to leased piopa@
amortized on a itmight-line bets
% Accounts
or useful fife Of ft,
term of the lease
'ifient kab%mu due
Rua difiiiaWpay
b ''0
whic ever is shoiter.
'assets
one year am c -fi
ISAI e as current
in ac@@ wtig trade practice. Soles'and
Intangible Assets
-related cost
o
odes 4k customer purchases
Intangible assets am being
.
..
made on de&t=d'p-a'y%m@_ent accounts am
st
might4ine basis as follows:
recorded in luil"a"t the time of the sale.
.
and trade names, over 25 years; pil
Finance Charjj@3 on customer accounts are
over their remaining useful lives with 4
recorded as inc=ne when tamed and used
mmimurn life of Is Years; excess Of cost
to reduce sclliiij.@ Sineral and administrative*.
over fair value of net assets of sciluuti
9-,-p9nWs-
businesses. over periods ranging no
10 to 40 years.
Inventories
Inventories am stated at the lower of cost
or market with ci@st, for substantially all
r
inventories, determined by the last-in, first-
B.A.T INMTRIES P.LC. - MINNESOTA 1DEpOSrTORy Copy - PRODUCED PuRsuANT To I VILD. OF
CONSENT JUDGMENT C)ATED 5/8W IN STArE OF ANNNESOTA, ET AL. v. PmLAP MoRgs, ET AL. CASE No. CI-944=5
Income Taxes
Tax Transfer Leases
Investment tax credits reduce the
Ile Company's investment in tax transfer
provision for income taxes in the year the
leases under the "safe harbor" leasing
related assets are placed into service.
provisions of the Economic Recovery Tax
Act of 1981 represents the unamottized cost
Pension Plans
of tax credits and tax depreciation deduc-
The Company has several plans which
tions. Income on the taxivedit component
cover substantially all employees. Ile
is recognized over the periods that the bene-
Company makes annual contributions to the
fits am realized at a constant rate of return
plans which generally equal the amounts of
on the unrecovered cost. The cost allocated
accrued pension cost. Pension cost includes
to the depreciation deductions is amortized
amorization of unfunded past service costs
on the interest mtthod, over the portion of
over periods ranging from 10 to 30 yeai-s.
the lease term during which the tax tciiiiit@
Mwizej exceed the allocated cost. g
*'
'
*
i
-
Federal Excise Taxes
the amo
rtitidn
n
bai
period the ComP a
Y
Excise taxes billed to customers on
.
f ielated.tern tax,*,
the use* 0 porary savin
95-
tobacco products am included in ai
et 6; es -
.
J-
..:and deducted separately as part of total cbsts '-.
Reclaufficadons
Ft.,
and expenses.
'
Certain amounts in the DeceMW
3.
,
,
1983c6nioditedbalance'sheeths,ibe6
Buying and Occupanc.v Costs. '"
reclanirlej,6 c ionform with December 3l,--7.
Puyinj and occupancy costs i6curred ...'-
...............
4984 classifications.
by retail operations are classified as co'st
v,@
Of sales.
4@-
Store Pre-opewag Costs
Expenses associated with the ol)e@
of new stores we deferred and charged to
income in the yvar of the store
B.A.T Moumm P.L.C. - MMESOTA DEPOSITORY COPY - PRODUCED PURSUMT To I VII.D. OF
CONSENT JuDauw DATED SIM iN STATE OF AftwsOTA, ETAL. V. PH&P MORRN, ETA CaEW.Ci-94-81145
BATUS Inc. Notes to Consolidated Financial Statements
Investment in Imasco Limited Transactions with AMBated Com o.
In December. 1984. the Company In 1980, the Company entered
acquired a 6% interest in Imasco Limited, a agreements with B-A-T to acquire C.,
Canadian company with operations in the trademarks and trade names misted to
tobacco, restaurant and retailing industries, cigarettes sold outside the United S
for S 119,030.000. 7he purchase was funded 7be agreements provide for payrnpots,
with proceeds of a loan from B-A-T.
through 1987, which are contingent u
B-A-T holds a 44% interest in Imasco, the sales volume of cigarettes be
. I
including the Company's interest. As a trademarks and trade names.1.15.
t.
result. the investment will be accounted for estimated that the remaining con ingent -
w
using the equity method. payments due beyond one year, hic am*
'me shams am not registered under included in "Other long-term fiabi des 41
Canadian securities laws; as a result, the will be at least $77,943,000. Current
Company is restricted as to the way in liabilities include $18,079,000 due in 1985
111_@
which it may sell the sham. B-A-T Capital Corporation, a
subsidiary of B-A-t. is the principal foaicF
Paper NIM Acquisition of short-term financing for the Compiny:'As
During 1984, the Company purchased a discussed in the long-term debt am? thi.
Paper mill, located near Dayton, Ohio, Company also has long-term boff 6winisms
valued at $83,949,000. Vic purchase price due to an affiliated company.
V*
was fWanced by the seller with a 71te Company incurred intemma ex
$158.000,000 noninterest bearing note of S104,930.000. S1 12,553,000 sad
payable five years from the purchase dam. S 10 1,760,000 in 1994, 1983 and I
See also long-term debt footnote. respectively. on short and long-
borrowings from affiliated companies
AcqWddon of Marshall Field & '.*7
Company Inventories
During 1982. the Company acquired Inventories at December 31 comns
Marshall Field & Company (Marshall Field) following (in thousands):
3"A' LW_
for S367,626,000. The results of operations NOW owdWhibe S 473A3 S
and changes in financial position of
Marshall Field have been included in the i0clefts WdW tom ... 1"J14 lei
Ledi'l - _ ........... MAW
Company's consolidated financial MWN(Scraft
statements since May 1, 1982. If the &W "Prks ............
'raw a FIFO cm ..... 1.53") IAW jo
acquisition had taken place on January 1.
L%ft" of FM CW
1982. pro forma net sales and net income UPO -got ............. (SWULft
for 1982 would have been $5,821.512.000
and S201.002,000, respectively,
3
PRoDUCED pURWpXT To VILD. OF
B.A.T INDUSTRIES P-Lc- MINNESOTA DEPOS'Tol" Copy pHXV "RD. ET AL, CASE NO. CI-944MS
CONSENT jUDGMEmT DATED NOW 114 9TAIX OF 0NNESOTA, ET AL. V. -
The effect, on income before provision for
Short-tem Borrowings
income taxes. of using the LIFO method is
Short-term borrowings at December 31
summarized as follows (in thousands):
consist of the following (in thousands):
1"4- .- 1"3 --j"2.
to!! 191q-
Iftmast tdocrasser
Loaris (mas company ...... 90.7" S711.419
MM fiqWdVAN of
Bank [am .. ...................
W-@s MW
MMIn UFO
in,trnor) quansisses ... 1641-M) $159.22751 SiO.Mi
Effect of 1,quAwan of
cenun Upo
The weighted average interest rate on
inwvaar@ 4sanuums:
2
borrowings outstanding at December 3 1.
.95 43."3
odser ............. 743 66.
S* of KM's Focd
1984 and 1983 was 8.8% and 9.8%.
stom .... .. .
rcspecd%-c!v
S140AM S 3D.==..R1jtjj6L
A sun=ary of certain data related to
short-tenn borrowings follows (in
Property, PL=t and Equipment, at cost
thousands):
Property. plant and equipment at
11414 - 1"3 -
December 31 consists of the following
A%=Bs " Ly
(in thousands):
bowmwings ......... 3 37,475 511.9.4211 $185.140
Maumuse ba"waiats
12H 12U
SUMAWMI 2 any
1AW Wd Ww"NUM ...... S 77.435 5 7LI23
mosah ad durias
sy"ar MW hwomam add.334 773.724
dar ym ............ 111.11JO S2WM3 11313-11194
Sim Assimses. and
We'llumol -W
sqwp@ 1.131AM
law" ske M
cmMucs!" Is ropmess ..... 84.1122 46-"4
daily bacrawialls
I,,- prop"',siff c1pigal
--a&$ dwrist
kam VIJ" IM,712
she yw.
2.377AM
L@ 10143
affilistall
Le"MmandossiftwWMM
1
md
..........
11.0% .
2.6s
Unused Linn of Credit
At December 31, 1984, the Company has
angible Asselb
$145,000
000 of unused lines of cmilit for
Intangible assets at December 31 consist
,
short-4enn rmancing with banks. Fee and
Of dw following rin thlyusandi;
Compensating babince requiiMments are not
820
Thilemirb and Vista isam
UK"$ SM
sipificlint and blifilkliM are.'= restilcted
as
.......
.
......................... 112xi imm
-
to w16@wal- In &MtioiI,'d3c ConVany
has an infbimal'agreerneit with B-A-T under
-q.W bwAlossm ............. 4LM 4I.M
which it maj borrow up to $350.000,000
40,10 45J.M
from B-A-T Capital Corpoctiltion;
Los amummulasod sammsift ...... U1,10" 1011,1007
$250,203.000 of this amount is unused and
available at December 31, 1984.
B.A.T INDUMIES P.L.C. - MINNEsoTA DEposrroRy Copy - PRODUCED PURSUANT To VILD. OF
CoNsENT JuDamm DATED 5/8M IN STATE OF ANNAIEsom ET AL. v. PHILIP MORIM, ET AL CASE NO. CI-944US
n-
.1.6ng-4im Debt
(c) Subordinate in payment w all
Long-term debt at December
31,
future camal debt having a stated
As
exchdive of amounts due within one year
excess of one year. Imemg is ad &at
,
ollowing (in thousands):
toniststs oi the fl
Me$.
the Com
During 1993 pony low
7
S30.000.000 myo vins credit arument
aNim. Lmn viistan4ing 11ho
1993 and ire
due October 1.
to all eXternal debl. Iniemst.
-L4
300
000 200
000
.....
.
,
'tk r
(ej This note was ac
q
-
W(b) ......... 1"'M 20
1M
t
000
under pwcbm -ouWmg
f
.
.
0116
comm rateofintesmon May 1, 1982 15
25,
25,000
Kmd rw of interist is 9%16.
"All
(f) During 1994, the C-V-y purdia"d a
dw 11002(c) ..... ......... 119.0"
....... - 23.00D
&M and, In cormecdon therewith, ismad a b?k
. ..... - 14.1-44
. ...........
$158.000.000 non-inurest bearing now
702
been discounted at an imputed interest me
Wr niumcm statement purposes.,
(g) prepaid during 1984
.I IYA% 006i. &W 1997 .... 711,0110 .73
The awriximate am'ounts 0 payipe
f
5
;;;1@1"Sw JI.M 'W2oi
loirterin debt,excluding obligations
030 .............
is:, f6, the jL@ j,
tal le Xt r
capi U. Ive y"amn.
7
follows (in
thousands)
6 ....... S.M JOAD
. ....... ..... . ..
W.
.................
...... .........
i@ ......... .
V 1: jo foal W ...... 60.000
......................
HA19 ............... .......
bmim. 10.2%
Certain
debt agreements impose
.
dons on, among odwr things,
....... POST 9X9V
of cash dividends by the Com
omp W. cow
tions and investmerds, wortin capital
10.4% ............. Win "."3
funded inftbtedness@ as defined:
000r. Y WkqWW
jijim
earnings of approximately $409.000,000-it
is ...... 711"t ".773
December 31
1984 were not
4MAM 435
,
rider these'provisions.
u
J
cul-rdimmin psymme to all exiemal debt up
to a mulnumn of 51 billion.
Histe's interest
0) ham charged at %.s% ova aT
nNe.
BAT INDUSTRIES P.LC. - MINNESOTA DEPOSITORY COPY - PRODUCED PURSUANT To VII.D. OF
CONSENT JUDOIANT DATED 518W IN STATE OF AIIIAWSMA, ET AL. V. PHIP AfORNIS, ET AL CASE No. Cl-944MS
Lucome Taxes Components of the provision for deferred
Income m.xes payable, included in current income taxes am as follows (in thousands):
Wilities. at December 31 consist of the 19114 1983 1":
Ew- chu am
following (in thousands): rlwdal =mom
M- depmadw Md
can= Ww"indo ..... ;.. $34.810
Fvdwd ................ 5 A ZACM Of
4Gri s 17.153
Sim Mid 10cli .......... 612j" "vim  rAWWW
W.413
41JO 32.224 15AN
C
V-082 0.111 medlad (W
Sm wd locid .......... 11.167 11.00 PSYMN W" 6.449 1_5,V
93.1" 80.133 Fonin and
-0.3%) 0.305)
$219-135 cvk-FAM W
1AV 9.446 3.1612
ftodmian nwhp@ I.W (13.357) 15,300
':'!,The componenti of die provision for SWi wd IaW '@ffajRln 16."Z) 4116:1)
odiff. ow 1 7.437 (4.361)
income ti@ei ire as follows (in thousands):
'"M =.M S71M7
1064 IOU IND
r
WNW d; retail stores,
--iliftidind i- 20 07 . V.317
afid r @i:
134.M 93,100
...... ... 91,610 73.77
7190 -A,%- @*.Z7
oks" * =32
sit3ito S166.331 contain matp to" which
am-yew pen
%
7k bible belwoi ici6wilcis the U.S.. to 9@ V "7 ' ' ia '.:,
pen 6.
beauty incolnic tu hft Of 46% to the'-@-
'tal I af
q ease$
..'-C4qp=y-s piuiri" for i1i6mi taxii (in
tboiLiin&)-
rove-
p6marily of I&K b
,j.d..W
X -, i .,; . ., . :jpj*jrip i
Im aV=.A.Cq'Cu c. .1 alnorti
A%v
"-zation $31.3 and $37,422,000
*Ae,W0
12U 11217,02 S174,934
1984 and 199%..k spw- tWek.3-
t -
ave.
17 Ads 67A"
I or
terms in
6
PC a
1F
are a
10
"s Yew
thtmunds
(12.126 . ......
s IU17 3 28
..:9.737 U.:42
.,11%102 __s21J-$10_51ddJ37
@7 0.154 30342
11118c" in 1W ...... ".6% 43.:%
Im ...
......... . .8.731 17.M
1W..." ............ BA13 14,".
............ 102.5" '155
.673
B.A.T INDUSTRIES P.LC. - MINNESOTA DEPOSITORY COPY - PRODUCED PURSUANT To VILD. OF
CONSENT JUDGMENT DATED 5/8M IN STATE OF ONNES07A. ET AL. V. PHILIP MORRO, ET AL. CASE No. C1-9"W5
7 k
Future capital lease payments include
@'Pension PIm
executory costs of S6,955,000, interes.i. of
Costs of the Company's paiiam p
$74,907,000 and principal pa yments o f
charged to income were S315,41i
S67,148.000, including S3,639,000 due in
$39,293,000 and $3 692,
1985.
1983 and 1982, re tive
@ent expense was S44,483,000 in. 1994,
nt
r!ng 1994, i
$46,548,000 in 1983 and $39,43 1,000
asiits
pe $ion were paid by
pal
in 1982. including contingent rental pay- '-'-i
'trust. Here ri, such coiii
tofo
=nts of S8,958,000. S10,364,000 and in Pension nse. The e
of
expe
S7,800.0W. respectively. C ontingent ,r@@taj":.
,
was to reduce " ftndon ex
payments are based primarily upon SaleSat
approximately $3,600,000.
various retail store locations:
A mul
comparison of Kcu
Other LonVterm Liabilities
:
fits and plan net assets fbiffie
Dec:
Other long-term liabilities a ember'-.@-
t
as 16
defined benefit plans of
31 con'
sist of the following (in thouiands),
tion date is iii
fb
1.1ows (in III
,
.-Z
............... .'S 77,M',* .S103.IW4
acowalmd
..
D*MW WCOM tUdS. am ...... MUM 1".79
lie no
RUVW 1kW rwamm
kniam ad *knW
IF
=WWWAMd" ............... 3ijW 3
-%, - - :- :
CW- iwq- , I , a * .... . 4 ;=.No e
, for beieft
odw ................ ...... 11A9 am
i'@ Q
_The assumed MAW of re
J= jaft
cletermining the actuarial W
j
Obliptions under bade
was
accumulated plan benefits -N4@C
name acquisition agreements aj@e payable to
years.
on affiliated company.
During 1983. y announced a
the Compan
Finance CMMe Income
plan for Me realignment of cirtiin-tobacco.'.*@
Finance charge income on Me
related production from ii older plant
'
-
accounts, which reduced sellinge.
to a more effic ty aikd,`jn'c
ient facili
o
n-.
.
and administrative ex Iiii th,
nection therewith, prov. ided a reserve
of
WCOMpanying Con I ed s
$45.586,000 (S23,139,000 after income
income, was $97,994,000, 3
tiixes) to cover the estimated costs of
$63,130,000 in 1984. 1983 d. 1982,
implementing the plan. The plan is
proceeding on schedule and is expected
respectively.
to be complete in 1986.
4j
BAT INDUSTRIES P.L-C. - MINNESOTA DEPOSITORY COPY - PRMCED PURSUANT To VII.D. OF
CONSENT JUDaMENT OATED 5/"B IN STATE OF 40MAESOTA, ET AL V- PHLE MORRM ET AL. CASE NO. Cl-9"565
V
Sale of Kohl's Food Stores
Industry Segment Information
During 1993, the Company sold the
The Company has operations in three
c+
assets of its Kohl's Food Store division.
principal industry segments: Tobacco, Retail
The proceeds of the sale, including related
and Paper. Tobacco operations consist of the
income tax benefits. were approximately
production and marketing of cigarettes and
equal to the net book value of the assets
other tobacco products and processing of
sold.
leaf tobacco. Retail operations consist of
The food store results of operations and
department and specialty store retail
changes in financial position for 1983
merchandising. The Retail amounts include
a- 4 1982, which are not significant, are
Manhall Field since May 1. 1982. In 1983,
irt-uded in the accompanying consolidated
the Retail segment was redefined to exclude
financial statements. Food store net sales
food operations. Paper operations consist
were S319,803,000 and $500,053,000 for
primarily of the manufacture and sale of
1.983 and 1982, respectively.
carlbonless and other specialty papers. Net
Wes oy InGUSITY segment Inclucle siucs to
Subsequent Events
B-A-T and its affiliates and intirsegment
In March, 1985, die Company sold its
sales, both of which am immateriiii.
5 0% equity interm in the Water Tower
O@eraiizIg income is defined as.-net sales
Place real estate joint VeAMM, an urban
'
'
less opeiating expenim. general corporate.
which consists
center
in Chicago, 111inois,
expenst@, -act interest expense, Inon-
of retail facilities, offices and condomin-
opaaftg @xpeinses and inconiciaxes bavi
'
`
itims. The sale msulted in a S32,000,QOO
not been deducted in
rmirting operating
det@
after-tax gain, which will be recorded
income by industry segment
in 1985.
Total assets am those asscts used in die
On January 15, 1.985. B-A-T conipleted
operations of the ies*tiyi indu try
s
the sale of its cosmetics operations" which
*
ments. Corporate assets consist Finally
es
i ided Germaine Monteil Cc@sm@tiqu
of cub, short-term laveistmentl and
e4i@ty
Company (GMCC), an unconsolidated
.
.
investrients in' 50% or less owned entides.
division of the Company. inconju6i;tion
Thecoliwouls
no significa.
.ts
Iisse
with the disposition cittain
bisiriesses. @:z
of GMCC wen sold iiibecemi@r.4984
V.
January. 1985. The fmanclit] ef&ts' 6f the-
mansaction am not signif icani.
74-
B.A.T mousrms P.L-C. - MINNESOTA DEPOSITORY COPY PRODUCED PURsuANT To I VILD. OF
coNsENT JuDomENT DATED 5/8M IN STATE OF MAINESOrA, Er AL. V, PHIP MORRIS, ET AL CASE No. C1 -94-SM
Fuiancial information for the Company's Inflation and Cbsinging Prices
operations by industry segment for 1984, (Unaudited)
1983 and 1982 is as follows (in thousands): The Company $consolidated financial
11004 1983 M2 smiements are p!epared on a historical cost
Na Wes: basis, therefore, they consist of monetary
Tabnec ........... SW.".105 $2.113.341 $2.121.7r,
115ml ............. 3.3744611 3.345.0-40 1,467.135 transactions at varying levels of purchasing
Iver ............. M.M. 465.3:5 411,773 power. The current cost/constant ptu@hasinj
o6a ............. 319.1-to3sw OS3
power basis o reporting utilizes recent
Camaikimed ..... SLIJI.r.11 S6.063.!-'O SS.306.698 . f
prices for production costs and 'purchases,
operuies hwo=:
Tobacca, ........... S 4"JIS S 410.07 S 365.3W external and internal price indices, appraisals
Row .... M.", 2111260 166.459 and functional pricing techniques to'.
INJI55 - VD.454 63.9"
Od . ............. estimate the effects of chan ing price levels.
TOW a"mou .... 729a4 6"..ID6 390.4w The Company estimates that the effect
GeneW ampom
nFeaso ........... (19.0-90) (17.675) (16.442) of eliminating differences in levels of
his* the 1994 historical
urc, ing
p
(UPIMM) .......... 133§11 (43J") (38,49t) statement o= is to decreas .e11n et
I L449 L 11 !:L.L631 A A. 1731
town I I rmisia@ income by $37,995,000 or 12%. The
for Income own ..... so s deireasWisdw-msulto high '.iiioii
f tr deptec
lead Asaw
Taboo S S1.134.M -e-xpenwaplud y*offsitby
if sales. Deoreciaticifi has bied
111.611 3374n 360.0 cw er to ii@ Ord
ft disu on M
net incorne caused by matching pnor years
ToWai*mmo..... 3,964128 3.734.03 3.713,9Q - - - ; - Are I - . .. . ... . I - -
.. . . . .2" flied iiia' ctitts 111@@
CA@ -,L ........ -3@1@11 __rre
-_@MAM _ 7- 10.1 -e .4
_6 LW Rre@
S3.9MA16 S3,70 F9 x0venues. been d
to Mven 6f r@ 4
ducti
le ft ova -qucii 0
T02ai - s Q.M S ','4@,162 S63AII
9717" 113>7 M7.40 mvea&oir= wisich, ib the
M093- 29,0309 3DA2.1 stmernents, am own In cost
cow ...
Wei ii @i "r
She. pnq@ year c9sts,
bJX1 1".276 :20."7
........ e unrealized gain the decline M.,
m x7 Th
. @ -, C, @ w"
A
UM21 S IWA4 5 2681
Pitichasing power or net AM1011 6Q"- i@V--
DWafivio and Awaimike"-
-tbi betat ii i: 2-
Ik" skm S, VA" s Am@ t6
....... boldfitS 60petarye M excess
X.104 'ax 70
....... -.111max durtzig Octiods bf
y
othur
Tool awasom .... Ift213 154jo 137.01
61111001", ........
M
ba-aw-M ...... In. 2"
SMWIS Mquilskim arpopw Min 0183.949)
M.)
13.A.T 1MRWRIES P-Lc- - MMESOTA DEpOSrrORV Copy - PAWMED PURSUANT To VILD. OF
CotGENT jUDGMENT DATE[) S/SM IN STATE OF A*NWSOTA, ET AL. V. PHILIP WROW, ET AL CASE No. C1 4M-M5
I ILL
.,,;'This amount is effectively an offset to S 17,799,000 (6%) higher than int income
historical interest expense, -&'portion of reported on a hist6r" cost bails fi:iI984.
which is a cost of inflation'. If this amount The f0tj
owing ihf or-th
e ycq.
had been used to reduce interest expense in ended Decembc'r)1*",:*1'4j4" as
the computation of..cu t.
fren cost net income. an estimate a a4c@ci of j@fce-ihj6ges on W.
Inflation adjustid results %@6uld have been the Compa@y
As"
........... ..............................
MONIM
whk Udbdog dipwkwo A@d wnwWmim .......................
01 34*
Dqwcuim md murdamin *(pmpem
.....................
........................................................ .
Sdkp.juwd and adm6iwww expense4 awbAng depwiniae wW
1.39 9"
..............................
5n.
.............................................
6 ........ ...........................
. :@ . - ... I " .1.
............................ .........
-313 .134
............. .........
R
sow .............. ...
A.:
0, rwu
S
7,
'@i k7 4,
VNh U
0
l
0411
-
P
r
"
it.
e"I
7
i Z.:
4
cc;
B.A.T INDUSTRIES P.L.C. - MINNESOTA DEPOSITORY Copy - PRODUCED PURSUANT To I VILD. OF
CONSENT JuDamENT DATED 51M IN STATE OF MAINESOTA, ET AL V. PHXV MORRIS, ET AL CASE No. C1-9"565
The b1lowing is a five-year comparison
for all years, is prmesent
terms
of historical and current costiconstant average. 1984 "purchasi
power
w
purchasinS pcrh-er data. Current cost data, (dollars in thousands):
IM M3 IM. I I
N" Salm
H60ww CM ................. I S6.21I.M $6.063.5:0 ss-Vib" J"
1,335
CwTm cam ............................... 641103 6.32
Md IYAWK:
Hibw&-36 ........... ............... s 313= s 236-W s 26.955
........ 2751" 130.436 132.5M 1
C.Mcw.. ...............
Ma ana a ywttA: M
..................... ....... 31=9.448 $1.030.93 s
J@M?0 2.271.370 2.170 2.1 IL437 tAI 60
Comm coo ............................ J"
Lu-g= of WRmwe in FMW Pwr IMI oftr
. . ................ SU.M 3 (4 A 62) 4 (37A6) S (b .01) s
Usawaw PM fmin &cum is PwCh=41 Pw-W
of ra MWAM Q-W .......... .............. S0,734 1 $6406 S 46.990 S
AveMe cumumv pia kAm .................. 311.1 294.4 299.1
?a-up e-w -w 1M'Mww PrM is" 321% 6.1% t@U%
owgw USUMM awAum for Abibdio's aphy hr
"kinsvoefdMbblorkwr
ofin, m wAwp,ty vkmaoid t-% 1V*CwftwC0Mb&*.
4 - 2-'t
4-@
B.A.T INDUSMIES P.LC. - MINNESOTA DEPOSITORY COPY - PRODucEo PuRsuAmT To I VILD. OF
CONSENT JUDGMENT DATED 54198 IN STATE OF MMMSOTA, ET AL. v. PH&P Aloggo, ET AL. CASE No. CI-944WS
Report of Certified Public Accountants
The Board of Directors and Shareholder
SAWS Inc.
We have eX2Mintd the accompanying consolidated balance sheets
of BATUS Inc. at December 31. 1984 and 1983, and the related
consolidated statements of income and retained earnings and changes
in financial position for each of the three years in the period ended
December 31, 1984. Our examinations were made in accordance
with generally accepted auditing standards and, accordingly,
included such tests of the accounting records and such other auditing
procedures as we considered necessary in the circumstances.
In our opinion, the statements mentioned above appearing herein
an pages 30. 32. 34 and 36-46 present faWy the consolidated
fmancial position of BATUS Inc. at December 31,.1984 and 1983,
and the consolidated results of operations and changes in rutiacial
position for each of the three years in the period ended D=mber 3 1.
1994, in conformity with
genmuy accepted accounting princip
'
petiods.
applied on a consistent basis during the
1.@uisvllle, Kentucky
Much 15,1985
rQ
4:7.
C--
C@-
B.A.T lwumm 13.1-C. - MwwEsoTA DEPosrroRY Copy - PRODIXED PuRstiANT To VILD. oF
ConEw JutoomEwr DATED 5MM iN STATE oF Alumsom ET AL V. PHXP UORM. ET AL CASE No. CI-94-Bas
The BATUS Group of Companies (As of wk i. i"j)
Corporate Headquarters
2000 Clowns Pl=
I.Avisville. KenwAcy 402M
=
I@ somin vah and Souik"Ius;
i E
(502)5814K=
127
arth T
l,-* Sweet
Chadofte,*N*nbCxo1iaa23Z)0
he S-Rorwa
TOBACCO
Mai. in ilo@w
L-
I
OfLvwo Ayeaue
Browo & WIllarnsoo Tubwco C 11041
0
7bild 111,1114014 "a. c
co
in U.S -
I
SE
g
WUKWpWk.Rorida32789,---'
Brands: BARCIAY. REL KOOL
m
G
T TRIC
HLAN D.
1cohl's Depaikaest Stem 7,
VICEROY-famnad" Brands. BARCLAY. KEW KOOL
LLTKY STRIKE
?ALL WIL
VICEROY
34 Y"
"
;'
'y in
-
X
l
.
.
. RALEIGm,
'
.
,
2315
r
1
24th
sum
BELOkM.FALCO,%;-.%IamdwwringFkilities-Macon.GA; @..
:"BrookmWWd. 5
Wisconsin 3=
Winuon-Salem. NC; Petersburg. VA-Expon Led Tobacco
*
*
t
Processin Fac
1
1
s: U ilson. NC
u""'
Toud
58W
9
.
.
.
-9_
=
4
x 35M. 15M Brown & YAW-
C==
:
2=
111' .
21 deparunern stores i
a
Texas
n
I I I N
h S
1
0
T L LoWsville. Kermucky 402DZ
w
teve sum
Chicap allsob 60M
M2) MS-70DO
.IQ
RETAIL Flodds. Ocoq* Kaseas, Louisiana. Maryland.'.-
.-Mnucbusaai'M= Nerrada, Now Jaricy. New
RATUSRftlGg=p Y ks
.. ark. Ohio I=
Consolidated ansual sea ofovw S3 billion
Tj
33.000 -
New yak New y
Executive :1270%@o(lbeAmericaa 12di Floor@ 1,4@ 1
New Veit. Now York 1002D
(212) 399-M
am stores In W
774
0
B
17 qWq boini Ibri@ ia@ ind 40 finhave, vental
asores k Arizona. California and Nmdx
3201 Famoria W fisbioi*
1114 ly ii.;bod
M and1ra
15 depeausuce mrst is Orepo aid Washic
W.
56 a Fine v tnf- New Yak, N, 47
W
Santa. Wuldiston I I I
!;n-
Ginabels-East,
30 deparumase. asom in ComecaL
cv4 New kney.'
New York and Pennsyhmedic -
1273 Broadway
New YOW. Now veirk lowl
*am
JIM Cc*
(NC!R
j;flnbAi
IM "Im
IN Wisconsin:
W_ acousan Avow -i@5= @2s,
vr
10, Paper); r
Milwaukee. Vracorain 331.01
WA
@Rowiiq!I PA.
M 0 - 8 W.; ;Q Pim"a in R PA. 'Wliw*
Peterborvagit, 00
7 deperaness stores in pmuyblni,6 in
339 66 Am= UI ad Appian Papvvs':@
IAL, T
Piusburo, Pawylvania IS=
"..'T 3..
and
and employment
General orrAm. x9. Esit Wisconsin A;c6i,
Appiesuip. W S4912
4
L&
c:*
B.A.T INDusTRiEs P.L.C. MINNESOTA DEposffoRY Copy - PRODUCED PURstiANT To VII.D. OF
CONSENT JuDaPAENT DATED 5/8W IN Sum oF Wwsom Er AL. V. PHILP MORRIS, ET AL.p CASE No. CI-94-8565
rN.:
B.A.T INDUSTRIES P.LC. - MINNESOTA DEPOSITORY Copy - PRODUCED PURSUANT To VILD. OF
CONSENT JuDGmENT DATED 5/8= IN Sun OF A*NNEsoTA, ET AL V. PHALIP MORRM ET AL CASE No. Cl-94-MS
The BATIUS Group
of Companies
W-
TOBACCOGROUP
Ze@
BrO96*n & WilliaBLUM
Tobacco Corporation
Expon Led Tobacco
RCTAIL GROUP
l3rcuners
-k &N
l
r
d
F
fe
em
e
so
w
z
Gimbels-East
Gimbd3-.%fidwt:st
Gimbels-Pittsburgh
Kohl's Dc
snmcnt Stores
p
Ma
MaeshaLl Field*s
vw
Saki FM A%vnue
The Crescent
Thimbles
FAPFR GROUP
AWlewn ftpers ln@-
J
g Egg 11
RATUS0
2000 Olluns Plan
louisville. KY 40202
B.A.T INDusTR*s P.LC. - MINNESOTA DEPOSITORY COPY PRODUCED PuRsuANT To I VILD. OF
CoNsENT JuDawwr DATED 5/8M IN SrATE OF AmmsoTA, ET AL. v. PNxv Aloggs, ET AL, CASE No. Cl-944MS