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B.A.T INDusTRIES P.LC. - MW#MOTA 09,(WoRy Copy pROOUCED To VILD. OF
Co"UNT JUDOMENT DATED Swu iN srArE OF ANWSOTA, ET AL V. P#ap Afog PWMAKr
gA Er CASr
NM C14M.MS
EROW-': 4 WILLIAMSON TOBACCO CORPORAT.7--i
1987-1989
PREVIEW
TABLE OF CONTENTS
I. management Overview
IL Sales Fc:ecas"
111. Financial Assumptions/Implications
IV. Capital Expenditure Plans
V. Sensitivities
VI. Sumnary of the LIFO Decrement PosLtLon
tb/n6ain (Ij
CD
-i
B.A.T INDtWRES P.LC. - MIMMMA DEJKMTORY COPY - PFAMcED PuRwmT To VII.D. OF
commiummmT DATED 54MIN SrATE0FA*mff$0TA, EIAL v. PmLVAkRRX, ETA CASENO.C14M-SM
"M'
'4'rWe
I Manaoene-: Overview
The 1987-1989 Preview su7marizes f.-nancial prclections for es,ils business in
line with historical sa-*es volume trends and ariticiPatec res@.;:ts based on
assumed s;enoing levels.
Over the Preview period, a decline in total incustry ccnsumpt!zn, which has
accelerate!! sInce the IFE3 doubling of the Fete:al Excise Tax, is expected to
continue. Driven by anti-smoking activities, higher state anc local axes, and
increased regulation, Domestic Industry Ciga-re:te volume is an;icipated to
decline by app:oximately 1.5% per year over the preview pericc. Concurrently,
growth In the Value- for-money segment is expected to continue, based an growth
of discounted 25's and 1cw list branded 20's. This situat-4cn Is expected to
pose significant challerces to cigarette manufacturers in mainzaining the high
profit and cash flow levt1s of previous years. Growth in ope:ating income is
expected to c--re from ccntinued aggressive pricing, marmfactu:!ng cost
containment/recuctions and reduced marketing s:ending, of'rse::!.na_ the impact of
the lower sales volumes.
Based on volume assumpt!cns that represent a simple extrapolation of historical
trends; and tnerefore, cc not consider results of various proq:ans currently
being developed and te3teL, the following hignlights FAW's financial
performance. Tobacco Gr---jp Trading Profit is projected to Increase 7% in 1987
from the estimated 19S6 level and to be relatively flat 1988 tirough 1989
contingent In part to the assumed Investment In New Products as outlined in the
Financial Assumptions (section III). Operating cash flow is =ajected to grow
from $450 milli-on in 19a6 to $590 million in 1989. RONA increases from 64.2X
in 1966 to 69.5%. in 1989. Domestic sales volume is projectec -a decline by
more than -7X over the 19-27-1989 period, causing market share tz shrink from
11.8% In 1986 to 10% in 1969. Commensurate with the forecaste: declining
volumes, inventory liquications (LIFO decrements) are assumed zo occur each
year 1986-1989.
Although Wof's Preview reflects a loss In market share, it cortinues to provide
signifLcent performance irprovement in profit to sales margins, cash flow and
RONA based on pass-throu;-i of price increases. Additionally, tne preview
represents a mare tightly focused management of limited marketing spending
through balanced allocaticn of resources between franchise bui-ding, regional
marketing and distributi:n maintenance activities. it is envisloned that
competition for in-store display and promotional space will escalate throughout
the period. In order to remain competitive, Saw will need to allocate a
greater portion or its resources In these activities. This w!:l result In a
continued shift from advertising media towards in-store promct!zn.
30691/5
PQ
C)
C-1
a-
A.*T lWousTRES P.LC. UWAWTA DEPOWTOW COPY ppAMCED pUMWANT To VILD. OF
S. Er A_" CAsE No. C1444MG
CONSENT JUDGMENT DATED W&W IN STATE OF UNNEto ET A(- V. PWP "Wo
A Alf NT -:5,
Q
7dato '-Ika-
Throughout the p:eview period, 8&W's New Product strategy will be to cevelop
and launch new ::ands for emerging market segments or tnose segments %nere S&W
is underdeveic:ed. This strategy includes new offerings in the 11"Ilo%inq
segments:
Full Flavor/Lights Non-Menthol
Female
Box
Extra Length
Value-for-Money
All New Product marketing activities are targeted to high opportunity markets.
80's phased rollout strategy minimizes financial risk to the corp:ny(through a
gradual expansion of new offerings into strategic geographical are s only
after demonstrated success) supported by regional marketing prograns. Two New
Product launclies are assumed In the Preview - one beginning in April 1967 and a
second new Product launch occurring April 1989.
In summary, the 1987-1989 Preview represents stricter management of
controllable expenses and more tightly focused allocation of limited resources
and is based on a continuation of historical volume trends. However, despite
projected volume decreases (i.e., not including benefits from new marketing
programs) and required investments for New Product launches; trading profit,
opeiating cash flow and RONA all reach record levels during the preview years.
100691/4
r.3
CD
B.A.'T IWOU9MRS P-LC, - MV0100TA DL9OS1TORY COPY - PROWCED PURSUAmT To I VILD. OF
CONSENT JUDGWNT BATED SIM 114 ArATE OF A*WSOrA. Er At- K PWP AfORMS LE CASE No. C14W4M5
7 J.
11. SALEti FCAECAST
BRW4 TOBACCO C[PPORATI
1W - 1989
P.--Z%l I E
ASSL&TIONS TO VOLUME FORECAST
INIMY
FORECAST TO DECLINE AT AN ANNUAL RATE OF 13 (ADJUSTED FOR BILLING DAYS)
Assums 114MEASING YEAR-END LOADS AND BEGINNING OF YEAR UNLOADS
ESTABLIM
KOOL TO MAINTAIN LEVEL SHARE IN THE 19 IMPACT MARKETS
KOOL SHARE TO CONTINUE DECLINE (HISTORICAL TREND) IN THE REMAINING CORE MARKETS
INCREMENTAL KOCL voLumE NERsus TREND) :;ERivEo Faom KOOL MILDs BOX LAUNCH
r CAr N
4 OF KOOL MILDs Box VOLUME itxREmEnAl- (5% 4NIBALIZATIO
VICEROY. RALEIGH AND BEIAR corTiNuE rA;LKET SHARE DECLINES
BARQAY SHARE TO DECLINE UNTIL CORE FRA-41-NISE OF SMOKERS IS ACHIEVED IN IM,
SHARE IS THEN HELD LEVEL
RICHM
. MODERATE SHARE AND VOLUME GR(A-l-iri IS FC;i---CASTED EAC-f YEAR
GENERIC/PRIVATE LABEL
VOLUIES TO BE CONSTANT AT 12.1B FOR EAC.4 OF THE FOqECAST YEARS
M PROUXTS/TEST MWETS
NEw PRODUCT A TO BE LAUNCHED APRIL aP
NEw PRODUCT B To BE LAUNCHED APRIL 198r'
INTRODUCTION INTO 9:, IM,'I% AND 2M oF U.S. RESPECTIVELY
INTRCCUCTIONS AT SIX-MONTH INTERVALS
3OG91/1
B.A.'T INDIWMW P.L.C. - MMUMA WWM Copy - PW=CED ftMMT TO 1 VILD- OF
CoNsEmT JuDammT DATED 54M IN STATE OF ANOW801A, Er AL Y' PHIP No"21116 IT CASE NO. C14K4=5
?
Brown & 7,'::@'crnsor, Tobocco Corporollon
1987 - 1989
Preview
Forecasted Volumes
I ig" 1997
Ism
1919
KOO.,
37J
3LI
4.7
3,7
2.5
2.0
&1
1
4.0
L8
1.7
32
2.5
1.2
1.2
TMA
1.9
1.31
1.1
41
_!7.1 1 41.21 ail
lochcnd
4.1
- '.5
&0
G*n4,4=
it,
1
12.1
111
12]1
x*1
2
L3
-
FT-te 3 &
W 0.61
Ulf
.4.41
Sul
589.01
577.81
M2.6 I
7
-
W241
forecested Morket Short Ptrant
I IM
057
1909
ital
Koo*
I &
V,
U
VkGrey
I g!
1
3
.4
'
px-ig.i 1
J
.7
.5
.3
B,i&
-8
.4
1
.3
1
.2
Tal
A!
.3
1
2
ITO.:: UWxWW I
L', 1
-7
&21 7.21 o4l
JW':Md
.71
GL-L':m
2.11
2.1
T
Nn ProducU
0.01
_0.0
__q.o
0.2
_
0.4
Nft WOM" bow INMEW sum we b=W M a I I I of WOW bw&
C=)
L?61
IQN
B.A.T INDUSTRIES P.LQ - Was= DEposffoRy Copy - PRODUCED PURMANT To VILD. oF
CoNsEw JummENT DATED 5/848 IN Sum oF Wwsorx rr AL v. Pmup Afmgn, ET CASE No. C14M415"
ni
4e
cn.
V-7:EAGY STICKERING PROGRAM
VZXU,k4E IMPACT
A $2.00 off a carton stickering program for
the VICEROY Family Is
currently being
tested.
The potential volume Impact of such
a program
extended on a national basis
effective
January 1, 1987 is outlined in the
following
table.
1986E
1967
19so
1989
4.7
VICEROY Volumes - Preview
3.7
-2.8
2.0
4.7
VICEROY Volumes with Stickering
4.7
A.7
4.7
-
Incremental Volume
1.0
-f-.9
.8%
VICEROY Share - Preview
.6%
.51
.4%
.8%
VICEROY Share with Stickering
.8%
.8%
-8X
Incremental Share
.2%
--7-31
-4%
Note: Compared with Preview assumptions, this program will produce a positive
contribution by year three with breakeven in the second quarter of year four.
1987 1985 1989
Impact on Preview Contribution TO76) -T4-0) =0. 0
30661/13
C:)
B.A.T INDUMIES P.I-C. - MWESOTA DEPOSITOW COPY - PRMcEo PuRquAuT To I ALD. OF
CONSENr jUDGMENT DATED SAM IN STATE OF A*MWSOTA, Er AL V. PHXP U01WRIL ET A CASS NO. C1-"-M6
3@
KOOL 1MPR--*.,E!-tENT
Volume lr.%za--t
In the Preview, the KOOL brand family forecast is based on an extrapolated
underlying historical trend which approximates an 8.0% decline each year. An
i-orovement in the underlying trend of one percentage point each year would impact
volume and contribution as follows;
1986E
37.8 KOOL Volumes - Preview
6.4 KOOL Share - Preview
Slower Decline (1% Der Year, cummulative)
37.8 KOOL Volumes
- Incremental Volumes
Incremental Share
1987 isrse 1989
35.1
32.4
29.6
6.1 -
5.7
5.4
35.5
33.3
30.6
.4
.9
1.0
.1
.2
.2
Compared with Preview assumptions, a 1% improvement in KOOL's decline rate would
im-rove the Preview Variable Margin/Brand Contribution as follows (S millions):
TOTAL
1987 1988 1987 1987-89
Impact on Preview Contribution -97 2=0 U-5 -35-.0
3C--M/l4
3.A. IMUSMIES p.Le. _ MINNESOTA DEpOSITORy Copy - PWMICED PWMANT TO VII.D. OF
&A.
CONSENT JUDGaIENT DATED SAW IN -STATE OF ANINNESIDIA ET AL v. Pmxv MORRIS, ET CASE No. C14M4M5
mv
@@SSLPPT ION5V IWL !CAT
BROW1 9 WILLIA,"W., TOPACCO CORPORATiO)'
1987 - 1989
PRE11E
KkM FINANCIAL ASSUTTIONS
INEWS7
. FoR---:AST TO DECLINE AT AN ANNUAL RATE OFF 1.% (ADJUSTED FOR BILLING DAYS)
VARIABLE WGIN
SELLING PRICE FOR ALL PRODUCTS (EXCLUDING DlscoLwmD 25's) To INCREASE $1.25 PER M
EAC)q JANUARY I AND JULY I OF EACH YEAR
Disvurrm 25's WILL BE AT 8(% OF FULL REVENUE PRODUCTS
FEDERAL EXCISE TAX PROJECTED TO REMAIN AT $8.00 PER M THRCUc+mrr PREVIEW PERIOD
1966 FLUE CUREB/BURLEY AUCTION PRICES SAME AS 1985 CROP WITH 29 INCREASE FOR
SUBSEQUENT YEARS CROPS
WIWE-i SPEND
*ESTASLISHED BRANDS
MANAGING MARKET SUPPORT DOKW VIA CONCENTRATING KOOL SPENDING IN Twt 19 IMPACT
tV,RKETS WITH REDUCED SPENDING IN THE REMAINING CORE MARKETS
*R I C.4-40
. SFEEPIDING PER M ON A REDUCING RATE
NEW P"RoDucTs
Ir;-.RODUCTIO1lS AT SIX-MOM INTERVALS 114TO %, 1(9, 1% AND 2M OF TrE U.S.
NEW PRoDucT A, A DISCO(NMD 25's PRODUCT, TO BE LAUNCHED APRIL 1987, WITH
P,k--.KETjNG suppoRT OF $10, $35, AND S732 MILLIVI FOR THE FIRST THREE YEARS
Nz-w PRODUCT B, A FULL REVENUE PRODUCT, WITH INITIAL LAUNCH APRIL 1M, WITH
N,;KETING SUPPORT OF S18 MILLION THAT YEAR
SELLiNG FIELD/NoN-SpEcIFIC
It.'--REASED 114 1W TO REFLECT HIGHER PENETRATION FOR C014'TRACT SHELF SPACE,
INFLATED THEREAFTER
07-0 MNSE
GENSERALLY FOLLOW CPl-U OR ARE ADJUSTED IN RELATICN TO DECLINING VOLtnES
L I FO XCREKNT
IFASE'47ORY LICUIDATIONS OCCUR IN EACH YEAR (M-1989) UTILIZING "LIFO POSITIEV
2
PAP-c. SCENARIO 111".
Ns
B.A.T lNmxmms P.Lc. - MmumA DEPosffoRy Copy - PWWCED PURMANT To I VILD. oF
CowamT JuoomEw DATEo 5MM IN STATE oF AJINNEsoyA, Er AL V. PHILP UORR6, ET A CAsE No. CI-94-MS
I N'. MIN A rzti:,J,r
Itas
Do-'r-estic un4t volume been projected to decline at a rate of -7.t% :e: year
cu.-ing the preview pe.-iod. Total industry volume has been projectec -: ceclile at
the rate of -2.1% (-l.i% ae:jsting for billing days). International's : ro-ieczez
grcwth per year is 2.5% (to-si quantities). Tobacco Group volume is Z:ojectec to
decline 4.2% oer year.
TOBACCO GROUP
PROJECTED UNIT VOLUME
(BILL-I-O-N-ST-
- CGR
1985A 1986E 1987 1988 9 1596-89
70.7 69.6 Domestic 63.9 59.4 !5.3 - 7.4
International
8.8 9.1 Export/Contract/Import 10.0 10.6 ILI * 6.8
l?.9 20.5 Licensee 20.2 20.5 2CM 4 .5
0-4 -9.-2 Total :--WT -9 4-. T -90-5 -7-72 '":-4 - 2
Due to the decline of Domestic Sales Volumes, Tobacco Group Sales Revenue is
projected
to decline
1.3%. 7ne following Table outlines
sales reverx:e through the
Preview periods:
TOBACC
O GROUF`
SAUS REVE
NUE SUMWRY
(DOLLARS I
N MILLM)
CGk%
REAL Wi-TH
1985A
1956E
1987 1986
1989
1966-89 1986-89
2,CE8.6
2,130.7
Domest!c 2,093.2 2,063.7
2,022.9
- 1.7 - 5.5
136.0
142.2
International 160.6 173.8
186.2
9. it + 5.6
81.5
134.0(A)
ELT 101.5 104.46
107.2
7.2 11.0
2,306.1
Y-,Z"
Total SoT 2,355.3 7",T4T.-9
2,319.3
----T.-3 =-.
(A) Pre consideration of Sales Deferrals directed at minimizing LIFO :ezrevaent.
3062-7/2
WSS
BLAJ INDUSTRIES P.L.C. - M046SOTA DEMITORY COPY - PRMCED PUFMANt To I VILD. OF
CONSENT jUDGMENT DATED "M IN STATE OF ntwsorA, ET AL v. PHxV AftnRe. Er CASE No. CI-944MS
C:-eSti
: 143rke: spe!@zlnc -:z- projected to decline .2% ove:
:!@e T:evia-
as
Es:aolis- Conc
d are rz-aTeo down via entrating KOCL
s.Den---ing ".7e
-9 lnpa:t
ith :esuce.- soenzilig in KOOL's Care mar-Kets offse
rr,s:Kets *
: ir :)a::
*.-e.
Product
t
i.-%:roduc::ons Aor-`! of and April 1987.
TOBACCO GROUP
DOMESTIT-M-ARKETING
($ MILLIONS)
CGRX
REA-L-L'WO=WH
1925A
1987 1988
1986E
1969
1986-89
1936-89
I'ledia/Prol"Otion
.
219.5
180.6 Pre New Products 131.5 108.5
93.5
- 19.7
- 23.5
132.6
149.1 Non-Specific/Selling Field 162.9 170.6
1:79.8
+ 6.4
+ 2.6
21.7
20.1 All Other 24.2 23.8
24.6
+ 7.0
+ 3.2
37-3.8
349-8 Total Pre New Products T1 -86 -3U-.-9
797-9
--5.2
9-0
- New Products 10.4 34:8
49.6
KI/M
N/m
373.8
N, 9 -.8 Total 329.0 3-3-7-7
3Zr-5
:-2
4.0
Trading Profit will grow at a higher rate than sales revenues over
trwe Prev
iew period,
with a
declining real groath of approximately 2.0% per year.
TOBACCO GROUP
TRAOfFZ PROFIT SUPY
CGRX
RM-MMN
lcawM
1986E 1987 1988
1989
1986-89
1956-89
637.1
701.1 Domestic Profit Contr. 717.3 719.2
707.3
+ .3
- 3.5
"4..l
Int'l. Profit Contr. 30.0 32.0
30.6
N.0
+ 3.4
- .4
9.0
12.1(A) ELY Przfit Contr. 8.6 8.7
8.7
- 10.4
- Ih. 2
235.5
208.9 Cwmon Cost 202.9 201.7
197.1
- 1.9
- 5.7
Trading Profit
L-0.7
334.9%'A) Pre L:73 Decrement 553.1 558.2
552-9
+ l.' I
- 2.7
-
8.1 LIFO Decrement 26.8 21.3
23.1
- 4!.8
+ 38.0
=3.7
343-0 Total Trading Profit 379-9 ri -9.5
3US --0
':-2-3
---r-.3
(4) 17
SLQULD BE NOTED rKAT ELY SALES DEFERRAL IN 1986 (TO
MINIMIZE
LIFO CECREMENT)
WOV%..:) NEGATIVE: Y IMPA:T ELY CONTRIBUTION BY APPROXIMATELY $3.2
MILL@13.%,
FROM T@=-
AWOLNT STATED :kk.
3:68113
I@J
C:)
B.A.T lw=Rms P.LC. - MINNNOTA DEPOWM Copy PRODUCED PURSUANT To It VILD. oF
CoNsENT JuDavwr DATED SIM IN BrATE OF AfIANKSoTA, Er AL V. PHXV Mog#W Er CASE No. CI-944US
n'
-A@
New -1-r-astnents are profe:ted to decline 32.2,)L cL@r-`-g- tne Preview period pr-i,-.&:-;Iv
due t: -echning fixed -@set accillons and tne cec:ease in inventories as a res-.*-
a- -1 -.6
of de:--**ning Domes:ic sales volumes.
TOCZACCO V-10UP
ZW @F, -
($ MILLIONS)
CM%
REA=,'@;'A-Th
1985A
1986E
1957
1988
1989
.1986-89 1986-S9
51.6
71.8
Fixed Assets Additions 85.7
68.1
55.5
- 8.2 - 12.0
Inc./(Cec.) Operating
18.6
97.4
working Capital (le.5)
(8.3)
42. 7
N/M N/M
-In
TZ"
Total New Investment -76"
75n
-3"
773" ---T6-C
RONA is expected to impreve each year during the Preview period, reaching 69.5% by
1969. '-*-t Assets are pzcjected to decline .7% primarily the to declining
Invent::Ies and the continuing amortization of the Trademarks. Fixed Asset
expen:!tures, while exceeling depreciation in 1987 and 1988, approximate annual
depre:Lation in 1989.
70BA= GROLP
IWESTKNT PERFORMAME
(OOLLARS IN MILLMS)
CGFM
REAL-@;@M
1985A 1986E 1987 1986 1989 1986-89 19ei-99
749.1 845.4 Net Assets $50.4 843.7 828.2 - .7 - A.
59.2 64.2 RONA 68.2 68.7 69.5 -
Proje:-.ed Operating Cash exceeds S500 million each year during the Preview perLod,
growi-: 9.8%, or a real g:owth of 6.0%.
TOBACCO GROLP
O'durfW-CAW-FLOW
(MARS IN MIXTM)
1985A 1986E
443.7 543.0
39.7 40.6
11.6 11.6
51.6 71.8
18.6 97.A
(51.C: (20-5)
77=5E r4 6-7
1967
Trading Profit 579.9
Depreciazion 45.5
Amortization 11.6
Fixed Asset Additions 85.7
Inc./(Ce--.) Operating
Working Capital (18.5)
Other Clanges in
Net Assets (5.3)
(berat.-no Cash Flow 3 A"
IM 1989
579.5 576.0
'CI.4 56.2
1.1.6 11.6
68.1 55.5
(8.3) (2.7)
13.6) (.4)
8=2 MM
(507.:.' (492.0) memo: LYO Reserve (473.9) (463.6) (463.4)
3D68.':;-
CUM
REAL Z:%Jwln
1986-89 IM-59
+ 2.0 1.5
+ 9.9 6.:
r1j
C)
M.3
B.A.T IMXMTRIES P.L.C. - MomoTA DEPOSMDRY COPY - PRODUCED PURSUANT TO I V11-D- OF
comsEmrjuoGmNTOATEiD$MMiNSrA,rEoFilgEs-OTA-ErAL.v.PMtipAfORRAErA CAsal4o.C144-SMS
.50
4-0-
Jet,
We
TC=-;:CD --OL,= 1987-1989 PREVI-Ed
ExECul',vE S@,,44ARY SCHEDUL;-'
C:"-MPAR1'_-Z,'1 TG PLAN PROPOSED IN M CH 19-=6
IN MILLIONS)
C@R%
1985A
19 Vc E
1987
1988
1989
ggs-89
UNIT VOLLK (Excludes Licensee Volumes)
79.6
62.4
RMFE-e-g-rc-Wlan
81.2
82.2
82.8
.2
79.6
7!.7
Preview
73.9
70.0
-66.3
5.6
-
__r,777)
Difference
(12.2
(16.5)
=5. 8
NET SALES
2306.1
2477.1
Strategic Plan
2527.4
2649.0
2763.8
+ 3.7
2306.1
2404.9
Preview
2355.3
2341.9
2316.3
- 1.3
-
7:.i)
Difference
(172.1
TRUT T)
T -44 7-5 )
=5-d
TRADITNG PROFIT
443.7
55C.3
Strategic Plan
338.3
573.6
602.5
+ 3.1
443.7
541.0
4
Preview
579.9
579.5
576.0
+ 2.0
-
_
t@t
Difference
4176
5.0
726-5)
1.1
TRADINC PRCFIT X
OF NET SALES
19.2
22 2
strategIc Man
21.3
21.7
21.8
19.2
22:6
Preview
24.6
24.7
24.9
.4
Difference
3_7
30681/7
Cr.
B.A.T INDUSTRIES P.L.C. - MININESOTA DPOSITOW COPY P"MCED INIMANT To I VII.D. OF
CoNsENT JUDGWNT DATED S/M IN STATE OF MININESOTA, ET AL Y. PNLF MORRIS, ET A CASE NO. CI-941MG
CPCIL:= 1987
J'- -1989 P;EVIEs
-,tr'-UTIVE-@Z @,MARY SC@-,-EWLE
TO P--;:;. 3PCPOSE-) IN MARCH 1986
(C)CLLARi 171 MILLIGNST-
CGR%
1985A
1986E
1987
1988
1989
1986-89
NET ASSET4Z
-
749.1
865.9
St:stegic lan
915.1
925.6
911.8
+ 1.7
749.1
845.4
Preview
850.4
843.7
828.2
.7
T2-05)
Dil"erence
U-477)
r8 -19 )
T8 3-6
SALES TO NET ASSETS
3.1
2.9
St:a:egi Plan
2.8
2.9
3.0
3.1
2.8
Preview
2.8
2.8
2.8
-
TT)
Difference
-
RONA' CENDIN'@ @IET ASSETS)
59.2
63.6
Strategic Pian
58.8
62.0
66.1
59.2
64.2
Preview
68.2
68.7
69.5
-
.6
Difference
--T4-
6.7
3.4
CUM
cum
OPERATING CASH. FLOW
1986-69
1987-89
475.8
433.5
St:ategic Plan
489.1
563.1
616.3
--27 =0.O
-r-,698-5
475.8
446.7
Preview
576.9
586.2
591.5
21199 3
1
752.6
=3.2
Difference
--83-.S
--2n
T2-4-1)
- 97:3
.
al,.l
30661/8
B.A.T INDusTams P.Lc. - MmEsoTA DmKmroRy CoPY - PRODUcEo PuRsuAmT To I VILD. OF
CoNsEw JuDommT DATEo SAM iN SwroFAIRAmsom, Erm- v. Pmtp"m. ErA CASENO.Cl-944M
Proposed Preview ::eriod majlc.- cao:,,al expenditures are directec at cuaiity
improvements, e=;--:-ient fc: unique New Products (VISA), Droduc:jvity
improveqents arc ::st reciction pr:.*ecr-s. Excluded from propcsed ca:--'tal
expenditures Is a-.., spenc-Ing for c::mtri projects.
A summary of ma.4c: projects to be su--mitteo for approval durirc. the talance of
1986 and during itz".7 are! as follows:
Cold Starao.e Fac..**:;.ty-'4a--:n (capital $6.0 million)
The pu:pose of tn-:s project is to c-instruct a cold storage wa:enouse on the
Macon eranch site :o allcw t.,ie flexitility to hold vp to 3.5 b--Ilicn units of
finisned product in a fresh condit--'cn for future ose. The pr%ect was not
Included In the Ic-26 Cao!tal Budget tut was included in the 152.6-1990 Firm
Pi7an (S5.5M) with spending to begin in 1987.
Fourteen Lasers Fnase I! (ca3ital $2.1 million)
Seventeen lasers were initially purchased to provide for ventilation of all
domiestic non-Act::--- brands. Subsecuently, Actron-Plus has been developed for
BARCLAY. This is a lase: ventilated product. Two other lase: candic4ates,
RICHLANO LIGHTS a-.-- KIM, have been subsequently developed. Th's pr.ject is to
purchase and lns"&:l lasezs to meet the new product requirements and
scheduling r1exit--lity.
Hiah Soeed Fabrica:ion-Machinery For Development Center (capital $3.0 million)
This p.-3ject will -3rovide high speec equipment and other improvements for
sample menu fact ur! ng along with high speed equipment for machinery
develooment. The e:Zulpnent and Improvement's will make manufacturing
orerations more cz7patible with Macon and will provide for a rare efficient
transfe-r of techr-.-ogy.
Reconstituted Toba=co Plant (capital S24.5 million)
It is being stud!el to determine if a band cast reconstituted tobacco process
or the RCS type is more aavantageous than the currently used.E=29 pve-,
process. By late 1986, we will be in a position to determine if the optimum
utilization or rec--nstituteo tobacco Is all barid cast, all Pape: type, or
mixtures of the "A-z. A band cast facility would have a required cau:ity of
between 3 million :3 15 million pounds or reconstituted tobacco per year
depending upon the desire,. tvpe ano mixture. Construction of cur own plant to
make V%at product could tieg!n in 1987, with start-up early in 1989.
306?119
C:)
7Z
U*A
N-1
cc
B.&T ImuFMIES P.L.C. - VMMOTA 00"ffORV COPY - PRMCED RMWANr TO I VILD. OF
coNsENrjuoomEmTOATEoS/GUiNSFATEoF&tmwsoTA-ErALv.PmtvAfoggx.rrA CASENO-C14M-M5
Se:Dnd 113 Share Point VASA (caoital $6.9 m!llicq)
Th's project will provice the capability for increasing VISA manufacturing
ca:aoility from 2 B/Yr. to 4 B/Yr and includes conversion or four packers to
the VISA size.
Fa=rication 2000 Plant-Wide(canital $2.0 million)
ThLs project consists of the design and Implementation of a plant-wide
Fatrication Quality Assurance Information and Control System. This phase will
consist of a minicomputer per group that will comrunicate with quality sensors
on each module (both off-line and on-line) and provide the operator with vital
quality data per a CRT display at each module.
Pro:;osed capital spending by major project is defined on tt*e succeeding
scliedule.
3C691/10 CD
S.A. .T IMUSTRM p.L_C. MWMWA Dg*3ffoFty Copy PRootico PuF=AKr To I MLD. OF
CONSEW JUDGWNr DATgo 5/8/90 IN SrATE OF MAINESOTA, ET AL V- PHIP AkRX& Er CAsE No. C14M-UU
C- w
r
4
C)
-.!k
p
L
MTAL TORAM CAMP
;Elm @%O W
Irt r MIMP 1"VAT
11 MILLIUM)
FIXED ASS"
l"d
57.6 FROXCTS AFtTAPIED
Palo" to M
1.2 fmIrs &A-P11"
.2 2. Fourteen L&SerS Phase It
3- M 111401 !OMIJ I-Ab KN-11f'w1rY
1.4
59.0
SLA-Tatal Prior to M Approvals
1"7-1"9
NEW MEN
=
r cc 100=8 Plant
22rd I/) wre FbInt. VISA
3: Ten tAsers Rose 111
A.Fab 2nm Plant Wide
17.0
S. Regoluce"Xit vehicles
6. All 0tvar
12.6
swa-fatel Raw Projects from 1"7-1"9
?1.4
total fixed Asset Spendino - Preview
72.8
Total fixed A3set Stwnd - Plan Proposed In Furch I"G
11.0)
Inmase (Decrease) From Plan
(I) Total Sperwing Fat lift Projects IM wd fleyoo
X)721
10 7
FIXFf) ASMI SPEMIM
am.
StAISEattmi
1987
Me
igag
1"7-1"9
YEARS SFUI)ING
33.6
.7
34.3
4.8
-
4.8
1.6
.3
1.9
3.0
M
9.4
.3
9.7
-
43.0
1.0
44.0
3.9
14k.6
6.0
24.5
-
4.4
2.5
6.9
.3
1.3
.2
1.8
5
1 0
5
2
"
It:9
0:9
14:9
,
4n:
26. 1.
31.9
31.4
eq.4
37.7
42.7
67.1
55.S
165.3-
37.?
_n.7
69.1
55.3
209.3
37.1
103.5
75.0
$3.2
231.7
(17.11)
(6.9)
(2.3)
(22.4)
101AL
511.1411"r
5
'64:9
1.11
7.11
40.1
127.1
(1)
@@,Z U@ 1.@.
SE'. S" T :V IT T 1 ES
SENS!7 :yT T 7;:5
Ocr7estiz: Pricino imoact
The Preview assumes that domestic prices ill increase at an ag;:ess!-.-e rate of
S1.25 per M each January 1 and July 1 of each year. Sensitivit!es reflecting the
im-ca--t of lower pricing commensurate with one dollar increases :Snua:,, and July of
eacn year and lower pricing at the general inflation rate follcw.
Totacco Grow Parormance Imoact
($ millions)
1987 1988 1989 15FI-59.
Pr!:!ia at $1.00/S-1.00
Sales
(22.7)
(49.0)
(71.2)
(-113.0)
Tra=-'ng Profit
(22.0)
(47.5)
(69.1)
(11-5.7)
Ope:ating Cash Flow
(22.0)
(47.5)
(69.1)
(135.7)
CP!-U Pricing IncludLN
Excise Tax (Averace Inc. Per Year $L-.30 Per m)
Sales
(82.,c)
(145.7)
(197.1)
(k25.3)
TratIng ProfIt
(80.0)
(141-3)
(191-2)
(412-5)
Opersting Cash Flow
(80.0)
(141.3)
(191.2)
(,U!2.5)
NWORT Copy pW=CE0 PUMAW TO VII.D. OF
B.A.T INDusma$ P.LC, Mq*WMTA DEI &W ET AL pWV UMM, ET M@ CASE NO. C144-MG
COMSEW jUoamEprr DATED SWU w STATE OF
..7
Irzact of Not Intr3oucirc new Brands
The Preview calls for t@oo new brand introductions in April 1987 ar.-- April 1969
reszectively. The critical impact to performance expectations is ze7ond the Preview
per,od as the second new product is still in its introductory per,'--:. T@A imo&=: of
not launching the two nex b:ands over the Preview period would be aS follows:
Tobacco Grouo Performance Impact
(5 millions)
Cum.
1987
1988
1989
1557-89
VoWme (Billioms)
New Product A
(.2)
(1.1)
(1.9)
(3.3)
No-* P:oduct 8
(.3)
(.3)
Tctal
_r2_2)
-,3.6)
Sales
New Product A
(4.7)
(24.7)
(52.8)
OEM)
New Product 8
(10.6)
(,n.6)
Total
74-.7)
T2-4.7)
N 3-3
Tr2-7
Trading Profit
New Product A
8.2
23.9
8.6
&0.7
New Product 8
-
-
Total
8.2
23.9
9.
M
3063.@110
I%j
4
NJ
MW#ESGTA DEMffORY COPV ppoWat) pU"UAKr To VILD. OF
B.A.T INDUSTRIn P-LC- V. Pm&F UORM& Er A" CAN NO- CI,94,U"
Cot4sEmr JuDGMEW DATED SM" im SrATE OF Aft ET AL
...... . .....z
Brand Se--Tent Performance
The following sensitiviti es indicate the relative imoact an Sales Revenue and
Variable Ma:gin of any SAW price segment decreasing/increasing volumes by I billion
units e2cli yea: F:cm 1987 througn 1989.
-
Cum.
1987
1988
1989
1987-89
Full Revence
Sales Revenue
35.5
37.9
40.4
113.8
varisole marg-,*n
20.9
22.9
25.0
68.6
DiscounteO 25's
Sales Revenue
26.6
26.4
30.3
85.3
Varianle Marg-4n
11.3
12.8
14.3
38.3
GENERICS
Sales Revenue
23.0
25.5
27.9
76.4
Varia!71e margin
5.3
7.3
9.2
21.8
3068111:
k.%d
13.A.T INMMMIES P.LC. - MINUMMA DIFOSITM COPY - PROIXICED PURSUAMr TO I VILD' OF
CONSEW jUDGMENT OATED 5/&M IN SrArE OF A*NNESOTA, Er AL v. Pmup Afmga Er CA9E No. CI-94-MS