EX-99.1 2 c95764exv99w1.htm EX-99.1 EX-99.1
Exhibit 99.1
         
(LORILLARD LOGO)
  Contact:   David Taylor
      Chief Financial Officer
      (336) 335-7668
       
      Investor Relations
      (866) 321-5418
LORILLARD, INC. REPORTS FOURTH QUARTER AND ANNUAL 2009 RESULTS
GREENSBORO, NC, February 8, 2010—Lorillard, Inc. (NYSE:LO) today reported results for the quarter and year ended December 31, 2009.
Highlights
  •  
Full Year 2009
  •  
Net sales were $5.233 billion for 2009, compared to $4.204 billion for 2008. 2009 included a significant increase in federal excise taxes. Net sales excluding excise taxes were $3.686 billion for 2009 compared to $3.492 billion for 2008, an increase of 5.6%.
 
  •  
Operating income increased 8.9% to $1.541 billion, or 41.8% of net sales excluding excise taxes compared to 2008.
 
  •  
Earnings per diluted share were up 11.8% to $5.76 compared to $5.15 in 2008.
 
  •  
Lorillard’s 2009 domestic wholesale shipments declined 3.9% compared to 2008 versus an 8.6% decline in total domestic industry shipments.
 
  •  
Newport domestic retail market share increased by 0.36 points over 2008 to 10.28%.
 
  •  
For the full year the Company repurchased approximately 12.3 million shares and paid cash dividends of $3.84 per share.
  •  
Fourth Quarter 2009
  •  
Net sales were $1.378 billion for the fourth quarter of 2009, compared to $1.088 billion for the fourth quarter of 2008. 2009 included a significant increase in federal excise taxes. Net sales excluding excise taxes were $932 million for the fourth quarter of 2009 compared to $912 million for the fourth quarter of 2008, an increase of 2.2%.
 
  •  
Operating income was $398 million compared to $414 million for the fourth quarter of 2008, a decrease of 3.9%.
 
  •  
Earnings per diluted share were $1.52 compared to $1.53 for the fourth quarter of 2008.
 
  •  
Lorillard’ fourth quarter domestic wholesale shipments declined 3.6% compared to the same period in 2008 versus a 7.4% decline in total domestic industry shipments.
 
  •  
Newport domestic retail market share increased by 0.46 points over the year ago period to 10.32%.
 
  •  
The Company repurchased approximately 5.2 million shares and paid a cash dividend of $1.00 per share.
“Given the challenges presented by an unprecedented increase in the federal excise taxes on cigarettes in April 2009, we are pleased to announce our fourth quarter and full year 2009 results were consistent with our long-standing strategic objective of balancing profitability and the improvement of the Newport brand’s market share performance,” stated Martin Orlowsky, Chairman, President and Chief Executive Officer. “For 2009, our operating income increased by 8.9% over 2008 and Newport’s 2009 domestic retail share reached 10.28%, as measured by the Company’s proprietary retail database, up 0.36 points versus 2008. Lorillard again outperformed the domestic tobacco industry as Lorillard’s domestic wholesale shipments declined 3.9% in 2009 compared to 2008 versus an industry decrease of 8.6%.”

 

Page 1 of 8

 

Fourth Quarter 2009 Results
Net sales were $1.378 billion in the fourth quarter of 2009, compared to $1.088 billion in the fourth quarter of 2008, an increase of $290 million. $270 million of that increase was the result of the April 1, 2009 increase in federal excise taxes on cigarettes. Net sales excluding excise taxes in the fourth quarter of 2009 increased $20 million, or 2.2% from the fourth quarter of 2008 as the result of higher average prices, partially offset by lower net unit sales volume and higher sales promotion costs accounted for as a reduction of sales. Gross profit was $481 million in the fourth quarter of 2009, or 51.6% of net sales excluding excise taxes compared to $493 million, or 54.1% of net sales excluding excise taxes in the fourth quarter of 2008. The decrease in gross profit reflects higher manufacturing costs, higher costs related to the State Settlement Agreements, higher pension expense and the assessment of Food and Drug Administration fees partially offset by higher net sales.
Total Lorillard wholesale shipment volume for the fourth quarter of 2009 of 9.047 billion units decreased 4.0% compared to the fourth quarter of 2008. Total domestic industry wholesale shipments decreased an estimated 7.4% for the fourth quarter of 2009 compared to the fourth quarter of 2008. Lorillard’s domestic wholesale shipments decreased 3.6% for the same period. This decrease in domestic wholesale shipments in the fourth quarter of 2009 reflects the impact on demand of the $0.62 increase in the federal excise taxes on cigarettes from $0.39 to $1.01 per pack on April 1, 2009. Newport’s domestic wholesale shipments decreased 6.5%, while Maverick’s domestic wholesale shipments increased 39.7% in the fourth quarter of 2009 compared to the fourth quarter of 2008. See attached table for details of Lorillard’s wholesale shipments.
Based on Lorillard’s proprietary retail shipment data, Newport continued to increase its domestic retail market share during the fourth quarter of 2009 by 0.46 share points to 10.32% from 9.86% in the fourth quarter of 2008. See attached table for selected retail share data.
Selling, general and administrative costs increased $4 million, or 5.1% in the fourth quarter of 2009 to $83 million compared to the fourth quarter 2008. The increase in the fourth quarter of 2009 is primarily due to a $2 million increase in pension costs and a $1 million increase in legal expenses due to the continuing defense costs associated with the Engle progeny cases.
Interest expense increased $9 million in the fourth quarter of 2009 compared to the fourth quarter of 2008 and the increase reflects interest on the Senior Notes issued in the second quarter of 2009, net of the effect of interest rate swap agreements.
Lorillard’s effective income tax rate was 37.9% in the fourth quarter of 2009 and 2008.
Net income in the fourth quarter of 2009 was $242 million, or $1.52 per share (basic and diluted), compared to $258 million, or $1.54 and $1.53 per share (basic and diluted respectively) in the fourth quarter of 2008. These results reflect the impact of the aforementioned factors and the effect on earnings per share of a lower average number of shares outstanding in the fourth quarter of 2009 than in the fourth quarter of 2008 resulting from the share repurchase programs authorized in August 2008, May 2009 and July 2009. The impact of the reduction in the average number of shares outstanding increased earnings per share by $0.09.

 

Page 2 of 8

 

See following table for additional information regarding the impact of excise taxes on reported results:
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
 
                                
Net sales
   $ 1,378     $ 1,088     $ 5,233     $ 4,204  
Less excise taxes
     (446 )     (176 )     (1,547 )     (712 )
 
                        
Net sales excluding excise taxes
     932       912       3,686       3,492  
 
                                
Cost of sales
     897       595       3,327       2,434  
Less excise taxes
     (446 )     (176 )     (1,547 )     (712 )
 
                        
Cost of sales excluding excise taxes
     451       419       1,780       1,722  
 
                                
Gross profit
     481       493       1,906       1,770  
Percentage of net sales excluding excise taxes
     51.6 %     54.1 %     51.7 %     50.7 %
 
                                
Selling, general and administrative
     83       79       365       355  
 
                        
 
                                
Operating income
   $ 398     $ 414     $ 1,541     $ 1,415  
 
                        
Percentage of net sales excluding excise taxes
     42.7 %     45.4 %     41.8 %     40.5 %
2009 Results
Net sales were $5.233 billion in 2009, compared to $4.204 billion in 2008, an increase of $1.029 billion. $835 million of that increase was the result of the April 2009 increase in federal excise taxes on cigarettes. Net sales excluding excise taxes in 2009 increased $194 million, or 5.6% from 2008 as a result of higher average unit prices, partially offset by lower net unit sales volume and higher sales promotion costs accounted for as a reduction in net sales. During 2009, Lorillard’s domestic wholesale unit shipments decreased by 3.9% versus an estimated industry decline of 8.6%. Gross profit was $1.906 billion, or 51.7% of sales excluding excise taxes in 2009, compared to $1.770 billion, or 50.7% of net sales excluding excise taxes in 2008. The increase in gross profit reflects an increase in net sales and the absence of free product promotions in 2009, partially offset by higher costs related to the State Settlement Agreements, higher federal excise taxes, higher manufacturing costs and higher pension costs.
Selling, general and administrative costs increased $10 million, or 2.8% in 2009 to $365 million compared to 2008, which included an $18 million charge related to the separation from Loews. 2009 results included a $8 million increase in pension costs and a $18 million increase in legal expenses due primarily to the continuing defense costs associated with the Engle progeny cases, partially offset by a $6 million decrease in marketing costs.
Investment income decreased $15 million in 2009, compared to 2008 and the decrease primarily reflects lower interest rates on investments.
Interest expense increased $26 million in 2009 compared to 2008 and the increase reflects interest on the Senior Notes issued in the second quarter of 2009, net of the effect of interest rate swap agreements.
Lorillard’s effective income tax rate was 37.6% in 2009 compared to 38.2% in 2008, which decreased income tax expense by $9 million. The lower tax rate was primarily due to the impact, in 2008, of the separation from Loews on the availability of the manufacturer’s deduction for the pre-separation period and the non-deductibility of certain separation expenses, and, in 2009, the favorable resolution of certain state income tax matters, partially offset by an increase in state tax rates.
Net income in 2009 was $948 million, or $5.76 per share (basic and diluted), compared to $887 million, or $5.15 per share (basic and diluted) in 2008. These results reflect the impact of the aforementioned factors and the effect on earnings per share of a lower average number of shares outstanding in 2009 than in 2008 resulting from the share repurchase programs authorized in August 2008, May 2009 and July 2009. The impact of the reduction in the average number of shares outstanding increased earnings per share by $0.25.

 

Page 3 of 8

 

Additional News
As of January 19, 2010, the Company completed its $750 million share repurchase program that was announced on July 27, 2009, after repurchasing an additional 1.1 million shares in January 2010 at an average purchase price of $78.36 per share. Cumulatively, we repurchased 9.8 million shares at an average price of $76.80 under this program.
On November 12, 2009, Lorillard, Inc. announced a quarterly dividend on its common stock, in the amount of $1.00, payable on December 11, 2009 to stockholders of record as of December 1, 2009.
Conference Call
A conference call to discuss the fourth quarter and annual 2009 results of Lorillard, Inc. has been scheduled for 10:00 a.m. EDT on Monday, February 8, 2010. A live broadcast of the call will be available online at the Lorillard, Inc. website (www.lorillard.com). Please go to the website at least ten minutes before the event begins to register and to download and install any necessary audio software.
Those interested in participating in the question and answer session of the conference call should dial (888) 713-4211 (domestic) or (617) 213-4864 (international). The passcode for this event is: 49681162. When participants dial into the call, they will be asked for a pre-registration pin and they can obtain one by pre-registering at the following link: https://www.theconferencingservice.com/prereg/key.process?key=P6EQ8WTUT. Those who do not pre-register for the call can press *0 to speak to an operator and provide the passcode: 49681162.
An online replay will be available at the Company’s website following the call. If you wish to listen to the replay of this conference call, please visit Lorillard's website at www.lorillard.com or dial (888) 286-8010 (domestic) or (617) 801-6888 (international) and enter passcode: 61144203. The conference call will be available for replay in its entirety through February 15, 2010.
If you wish to listen to the replay of this conference call, please visit Lorillard’s website at www.lorillard.com or dial (888) 286-8010 (domestic) or (617) 801-6888 (international) and enter passcode: 61144203. The conference call will be available for replay in its entirety through February 15, 2010.
About Lorillard, Inc.
Lorillard, Inc. (NYSE: LO) is the third largest manufacturer of cigarettes in the United States. Founded in 1760, Lorillard is the oldest continuously operating tobacco company in the U.S. Newport, Lorillard’s flagship menthol-flavored premium cigarette brand, is the top selling menthol and second largest selling cigarette in the U.S. In addition to Newport, the Lorillard product line has five additional brand families marketed under the Kent, True, Maverick, Old Gold and Max brand names. These six brands include 41 different product offerings which vary in price, taste, flavor, length and packaging. Lorillard maintains its headquarters and manufactures all of its products in Greensboro, North Carolina.
Forward-Looking Statements
Certain statements made in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain the words “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “will be,” “will continue,” “will likely result” and similar expressions. In addition, any statement that may be provided by management concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects and possible actions by Lorillard, Inc. are also forward-looking statements as defined by the Reform Act.
Forward-looking statements are based on current expectations and projections about future events and are inherently subject to a variety of risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those anticipated or projected. Information describing factors that could cause actual results to differ materially from those in forward-looking statements is available in our filings with the Securities and Exchange Commission (the “SEC”), including but not limited to, our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. These filings are available from the SEC over the Internet or in hard copy, and are available on our website at www.lorillard.com. Forward-looking statements speak only as of the time they are made, and we expressly disclaim any obligation or undertaking to update these statements to reflect any change in expectations or beliefs or any change in events, conditions or circumstances on which any forward-looking statement is based.

 

Page 4 of 8

 

Lorillard, Inc. and Subsidiaries
Consolidated Condensed Statements of Income
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
(Amounts in millions, except per share data)   (Unaudited)     (Unaudited)     (Unaudited)        
 
                                
Net sales (a)
   $ 1,378     $ 1,088     $ 5,233     $ 4,204  
Cost of sales (a) (b) (c)
     897       595       3,327       2,434  
 
                        
 
                                
Gross profit
     481       493       1,906       1,770  
Selling, general and administrative
     83       79       365       355  
 
                        
 
                                
Operating income
     398       414       1,541       1,415  
Investment income
     1       1       5       20  
Interest expense
     (9 )     —       (27 )     (1 )
 
                        
 
                                
Income before income taxes
     390       415       1,519       1,434  
Income taxes
     148       157       571       547  
 
                        
 
                                
Net income
   $ 242     $ 258     $ 948     $ 887  
 
                        
 
                                
Earnings per share:
                                
Basic
   $ 1.52     $ 1.54     $ 5.76     $ 5.15  
Diluted
   $ 1.52     $ 1.53     $ 5.76     $ 5.15  
 
                        
 
                                
Weighted average number of shares outstanding:
                                
Basic
     158.72       168.19       164.48       172.09  
Diluted
     158.89       168.29       164.62       172.21  
 
                                
Supplemental information:
                                
(a) Includes excise taxes.
   $ 446     $ 176     $ 1,547     $ 712  
 
                                
(b) Includes charges to accrue obligations under the State Settlement Agreements.
     280       263       1,128       1,117  
 
                                
(c) Includes charges to accrue obligations under the Federal Assessment for Tobacco Growers.
     23       23       100       100  

 

Page 5 of 8

 

Lorillard, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
                 
    December 31,     December 31,  
(In millions)   2009     2008  
    (Unaudited)      
Assets:
                
Cash and cash equivalents
   $ 1,384     $ 1,191  
Accounts receivable, less allowances of $3 and $2
     9       7  
Other receivables
     41       55  
Inventories
     281       255  
Deferred income taxes
     466       454  
 
            
 
                
Total current assets
     2,181       1,962  
Plant and equipment
     237       218  
Prepaid pension assets
     66       36  
Deferred income taxes
     48       71  
Other assets
     43       34  
 
            
 
                
Total assets
   $ 2,575     $ 2,321  
 
            
Liabilities and Shareholders’ Equity:
                
Accounts and drafts payable
   $ 23     $ 30  
Accrued liabilities
     318       255  
Settlement costs
     982       974  
Income taxes
     14       14  
 
            
 
                
Total current liabilities
     1,337       1,273  
Long-term debt
     722       —  
Postretirement pension, medical and life insurance benefits
     300       317  
Other liabilities
     129       100  
 
            
 
                
Total liabilities
     2,488       1,690  
 
            
 
                
Commitments and Contingent Liabilities
                
 
                
Shareholders’ Equity:
                
Preferred stock, $0.01 par value, authorized 10 million shares
     —       —  
Common stock:
                
Authorized — 600 million shares; par value—$0.01 per share Issued — 174 million and 174 million shares Outstanding — 156 million and 168 million shares
     2       2  
Additional paid-in capital
     234       222  
Earnings retained in the business
     1,282       965  
Accumulated other comprehensive loss
     (121 )     (158 )
Treasury shares at cost, 18 million and 6 million shares
     (1,310 )     (400 )
 
            
 
                
Total shareholders’ equity
     87       631  
 
            
 
                
Total liabilities and shareholders’ equity
   $ 2,575     $ 2,321  
 
            

 

Page 6 of 8

 

Lorillard, Inc. and Subsidiaries
Wholesale Shipments
Information regarding unit volume shipped by Lorillard Tobacco Company to its direct buying customers by brand follows:
                                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
(All units in thousands)   2009     2008     % Chg     2009     2008     % Chg  
 
                                                
Full Price Brands
                                                
 
                                                
Total Newport
     7,680,763       8,211,120       -6.5       31,021,252       33,335,809       -6.9  
Total Kent Family
     69,126       93,876       -26.4       295,098       398,190       -25.9  
Total True
     69,642       88,650       -21.4       292,386       369,582       -20.9  
Total Max
     4,464       5,988       -25.5       18,882       24,864       -24.1  
 
                                    
 
                                                
Total Full Price Brands
     7,823,995       8,399,634       -6.9       31,627,618       34,128,445       -7.3  
 
                                    
 
                                                
Price/Value Brands
                                                
 
                                                
Total Old Gold
     106,272       134,045       -20.7       445,883       549,526       -18.9  
Total Maverick
     956,262       684,665       39.7       3,486,204       2,312,303       50.8  
 
                                    
 
                                                
Total Price/Value Brands
     1,062,534       818,710       29.8       3,932,087       2,861,829       37.4  
 
                                    
 
                                                
Total Domestic Cigarettes
     8,886,529       9,218,344       -3.6       35,559,705       36,990,274       -3.9  
 
                                                
Total Puerto Rico and U.S. Possessions
     160,080       210,060       -23.8       724,860       759,996       -4.6  
 
                                    
 
                                                
Grand Total
     9,046,609       9,428,404       -4.0       36,284,565       37,750,270       -3.9  
 
                                    
Notes:
1.  
This information is unaudited and is not adjusted for returns.
 
2.  
Domestic unit volume includes units sold as well as promotional units and excludes volumes for Puerto Rico and U.S. Possessions.
 
3.  
Unit volume for a quarter is not necessarily indicative of unit volume for any subsequent period.
 
4.  
Unit volume is not necessarily indicative of the level of revenues for any period.
 
5.  
The year ended December 31, 2009 contained one less shipping day than the comparable period ended December 31, 2008.

 

Page 7 of 8

 

Lorillard, Inc. and Subsidiaries
Selected Domestic Retail Market Share Data (1)
                                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2009     2008     Pt Chg     2009     2008     Pt Chg  
Lorillard
     11.94       11.06       0.88       11.76       11.00       0.76  
Newport
     10.32       9.86       0.46       10.28       9.92       0.36  
Total Industry Menthol
     29.80       28.55       1.25       29.34       28.72       0.62  
Newport Share of Menthol Segment
     34.61       34.55       0.06       35.05       34.55       0.50  
     
(1)  
Unaudited information based on Lorillard’s Proprietary Retail Database

 

Page 8 of 8