Attached files
| file | filename |
|---|---|
| 8-K - LORILLARD, LLC | v210123_8k.htm |
 |
Contact:
|
David
Taylor
Chief
Financial Officer
(336)
335-7668
Robert
Bannon
Director,
Investor Relations
(336)
335-7665
|
LORILLARD, INC.
REPORTS FOURTH QUARTER AND RECORD ANNUAL 2010 RESULTS
GREENSBORO,
NC, February 7, 2011 – Lorillard, Inc. (NYSE:LO) announced today
results for the quarter and year ended December 31, 2010.
Highlights
|
|
·
|
Fourth
quarter earnings per diluted share increased 14.5%, versus year ago, to
$1.74.
|
|
|
·
|
Annual
earnings per diluted share increased 17.7%, versus year ago, to a record
$6.78.
|
|
|
·
|
Annual
net sales reached a record $5.932
billion.
|
|
|
·
|
Annual
domestic wholesale shipments increased 5.3% in 2010 compared to a 3.8%
decline in industry domestic wholesale
shipments.
|
|
|
·
|
Total
Lorillard retail market share for 2010 reached an all-time high of
12.9%.
|
|
|
·
|
Annual
net income exceeded $1 billion for first time in the Company’s
history.
|
|
|
·
|
Share
repurchases totaled $285 million in the quarter and $716 million in
2010.
|
|
|
·
|
2010
dividends and share repurchases resulted in $1.361 billion cash returned
to shareholders.
|
“Lorillard
continued to fire on all cylinders during the fourth quarter leading to record
annual results in net sales, net earnings, earnings per share and retail market
share.” said Murray S. Kessler, Chairman, President and Chief Executive
Officer. “Based on our current strategic review process, which is
well under way, I remain confident in the Company’s future and its ability to
deliver a double digit shareholder return over the long-term.”
Fourth
Quarter 2010 Results
Net sales
increased $108 million to $1.486 billion in the fourth quarter of
2010, compared to $1.378 billion in the fourth quarter of 2009, an increase
of 7.8%. The increase resulted from higher unit sales volume,
higher average prices and lower sales promotion costs accounted for as a
reduction of sales. Gross profit was $538 million in the fourth
quarter of 2010, or 36.2% of net sales, compared to $481 million, or 34.9%
of net sales, in the fourth quarter of 2009. The
increase in gross profit reflects an increase in net sales, partially
offset by higher costs related to the State Settlement Agreements and the
Federal Assessment for Tobacco Growers and higher Food and Drug Administration
user fees.
Total
Lorillard wholesale shipment volume for the fourth quarter of 2010 of 9.456
billion units increased 4.5% compared to the fourth quarter of
2009. Total industry domestic wholesale shipments (which exclude
Puerto Rico and U.S. Possessions) decreased an estimated 4.7% for the fourth
quarter of 2010 compared to the fourth quarter of 2009. Lorillard’s
domestic wholesale shipments increased 4.6% for the same
period. Newport’s domestic wholesale shipments increased 2.2%, while
Maverick’s domestic wholesale shipments increased 25.2% in the fourth quarter of
2010 compared to the fourth quarter of 2009. The Company launched
Newport Non-Menthol in the fourth quarter of 2010, which significantly
contributed to the increase in Newport domestic wholesale shipments during the
quarter, slightly offset by the effect of trade inventory fluctuations as
compared to the fourth quarter of last year. 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 2010 by 0.8 share
points to 11.2%, an all-time high, from 10.4% in the fourth quarter of
2009. Newport Non-Menthol accounted for 0.5 share points of this
increase. See attached table for selected retail share
data.
Selling,
general and administrative costs increased $22 million to
$105 million in the fourth quarter of 2010 compared to the
fourth quarter of 2009 primarily as a result of higher legal and
compensation costs.
Page 1 of
8
Interest
expense increased $19 million in the fourth quarter of 2010 compared to the
fourth quarter of 2009 and reflects interest on the Senior Notes issued
in the second quarter of 2009, net of the effect of interest rate swap
agreements, and interest on the Senior Notes issued in the second quarter
of 2010.
Lorillard’s
effective income tax rate was 36.3 % in the fourth quarter of
2010 compared to 37.9% in the fourth quarter of 2009.
Net
income in the fourth quarter of 2010 was $259 million, or
$1.74 per share (basic and diluted), compared to $242 million, or $1.52 per
share (basic and diluted), in the fourth quarter of
2009. The 14.5% increase in earnings per diluted share for the fourth
quarter includes the benefit of the Company’s share repurchase program which
resulted in lower outstanding shares, and contributed $0.11, or 7.2 percentage
points, to the increase in earnings per share.
Lorillard’s
reported results are impacted by excise taxes which are included in the
Company’s cost of sales. The following table provides additional
information regarding the impact of excise taxes on reported
results:
|
Three
Months Ended
December
31,
|
Year
Ended
December
31,
|
|||||||||||||||
|
(Amounts
in millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
Net
sales
|
$ | 1,486 | $ | 1,378 | $ | 5,932 | $ | 5,233 | ||||||||
|
Less
excise taxes
|
(466 | ) | (446 | ) | (1,879 | ) | (1,547 | ) | ||||||||
|
Net
sales excluding excise taxes
|
1,020 | 932 | 4,053 | 3,686 | ||||||||||||
|
Cost
of sales
|
948 | 897 | 3,809 | 3,327 | ||||||||||||
|
Less
excise taxes
|
(466 | ) | (446 | ) | (1,879 | ) | (1,547 | ) | ||||||||
|
Cost
of sales excluding excise taxes
|
482 | 451 | 1,930 | 1,780 | ||||||||||||
|
Gross
profit
|
538 | 481 | 2,123 | 1,906 | ||||||||||||
|
Percentage
of net sales excluding excise taxes
|
52.7 | % | 51.6 | % | 52.4 | % | 51.7 | % | ||||||||
|
Selling,
general and administrative
|
105 | 83 | 398 | 365 | ||||||||||||
|
Operating
income
|
$ | 433 | $ | 398 | $ | 1,725 | $ | 1,541 | ||||||||
|
Percentage
of net sales excluding excise taxes
|
42.5 | % | 42.7 | % | 42.6 | % | 41.8 | % | ||||||||
2010
Results
Net sales
increased $699 million to a record $5.932 billion in 2010, compared to $5.233
billion in 2009, an increase of 13.4%. $287 million of that increase
was the result of the April 2009 increase in federal excise taxes on
cigarettes. Net sales excluding excise taxes in 2010 increased
$367 million, or 10.0%, from 2009 as the result of higher net unit sales
volume, higher average unit prices and lower sales promotion costs
accounted for as a reduction in net sales.
Gross
profit was $2.123 billion, or 52.4% of net sales excluding excise taxes in 2010,
compared to $1.906 billion, or 51.7% of net sales excluding excise taxes in
2009. Excise taxes have been excluded from this annual
comparison due to the April 1, 2009 increase in the federal excise
tax. The increase in gross profit reflects an increase in net sales,
partially offset by higher costs related to the State Settlement Agreements and
the Federal Assessment for Tobacco Growers and higher Food and Drug
Administration user fees. See attached tables for wholesale and
selected retail share data comparing 2010 and 2009.
During
2010, Lorillard's domestic wholesale unit shipments increased by 5.3% versus an
estimated industry decline of 3.8%. Newport's domestic wholesale shipments
increased 2.5%, while Maverick's domestic wholesale shipments increased 31.5% in
2010 compared to 2009. See attached table for details of Lorillard’s wholesale
shipments.
Page 2 of
8
Selling,
general and administrative costs increased $33 million, or 9.0%, in 2010 to
$398 million compared to 2009 as a result of higher legal and
compensation costs incurred in the current year.
Interest
expense increased $67 million in 2010 compared to 2009 and reflects
interest on the Senior Notes issued in the second quarter of 2009, net of the
effect of interest rate swap agreements, and interest on the Senior Notes
issued in the second quarter of 2010.
Lorillard’s
effective income tax rate was 37.1 % in 2010 compared to 37.6%
in 2009.
Net
income in 2010 was $1.029 billion, or $6.78 per share (basic and
diluted), compared to $948 million, or $5.76 per share (basic and diluted)
in 2009. 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 2010 than in 2009 resulting from share repurchase
programs. The impact of the reduction in the average number of shares
outstanding increased earnings per share by $0.53 compared to 2009.
Additional
News
On
November 1, 2010, the Company launched a non-menthol variety of its flagship
Newport® brand to markets across the U.S. Newport® Non-Menthol is a premium
product with broad competitive appeal that delivers the high quality tobacco
taste that adult smokers have grown to expect from Newport.
On
November 17, 2010, Lorillard, Inc. announced that its Board of Directors
approved a quarterly dividend on its common stock of $1.125 per
share. The dividend was payable on December 13, 2010 to stockholders
of record as of December 1, 2010.
As of
December 31, 2010, the Company had repurchased approximately 4.5 million
shares of its outstanding common stock under the $1.0 billion repurchase
program announced on August 20, 2010 at a cost of approximately $376
million. The maximum dollar value of shares that could yet be
repurchased under this program as of December 31, 2010 was approximately
$624 million.
On
January 5, 2011, the Board of Directors of Lorillard, Inc. announced the
election of Dianne Neal Blixt to the Board of Directors to serve as an
independent director. Ms. Blixt was also appointed to the Company’s
Audit Committee.
Conference
Call
A
conference call to discuss the 2010 results of Lorillard, Inc. has been
scheduled for 9:00 a.m. EST on Monday, February 7, 2011. 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) 239-6824 (domestic) or (706) 902-3787
(international). The passcode for this event is:
38327446.
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 (800) 642-1687 (domestic) or (706) 645-9291 (international) and enter
passcode: 38327446. The conference call will be available for replay
in its entirety through February 14, 2011.
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 four additional brand families marketed under the
Kent, True, Maverick and Old Gold brand names. These five brands
include 43 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.
Page 3 of
8
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,” “may,” “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 Lorillard, Inc.’s 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
December
31,
|
Year
Ended
December
31,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||||||
|
(Amounts
in millions, except per share data)
|
||||||||||||||||
|
Net
sales (a)
|
$ | 1,486 | $ | 1,378 | $ | 5,932 | $ | 5,233 | ||||||||
|
Cost
of sales (a) (b) (c)
|
948 | 897 | 3,809 | 3,327 | ||||||||||||
|
Gross
profit
|
538 | 481 | 2,123 | 1,906 | ||||||||||||
|
Selling,
general and administrative
|
105 | 83 | 398 | 365 | ||||||||||||
|
Operating
income
|
433 | 398 | 1,725 | 1,541 | ||||||||||||
|
Investment
income
|
1 | 1 | 4 | 5 | ||||||||||||
|
Interest
expense
|
(28 | ) | (9 | ) | (94 | ) | (27 | ) | ||||||||
|
Income
before income taxes
|
406 | 390 | 1,635 | 1,519 | ||||||||||||
|
Income
taxes
|
147 | 148 | 606 | 571 | ||||||||||||
|
Net
income
|
$ | 259 | $ | 242 | $ | 1,029 | $ | 948 | ||||||||
|
Earnings
per share:
|
||||||||||||||||
|
Basic
|
$ | 1.74 | $ | 1.52 | $ | 6.78 | $ | 5.76 | ||||||||
|
Diluted
|
$ | 1.74 | $ | 1.52 | $ | 6.78 | $ | 5.76 | ||||||||
|
Weighted
average number of shares outstanding:
|
||||||||||||||||
|
Basic
|
148.49 | 158.72 | 151.59 | 164.48 | ||||||||||||
|
Diluted
|
148.76 | 158.89 | 151.79 | 164.62 | ||||||||||||
Supplemental
information:
|
(a) Includes
excise taxes.
|
$ | 466 | $ | 446 | $ | 1,879 | $ | 1,547 | ||||||||
|
(b) Includes
charges to accrue obligations under the State Settlement
Agreements.
|
300 | 280 | 1,212 | 1,128 | ||||||||||||
|
(c) Includes
charges to accrue obligations under the Federal Assessment for Tobacco
Growers.
|
27 | 23 | 111 | 100 |
Page 5 of
8
Lorillard, Inc. and
Subsidiaries
Consolidated
Condensed Balance Sheets
|
December
31,
2010
|
December
31,
2009
|
|||||||
|
(In
millions)
|
(Unaudited)
|
|||||||
|
Assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 2,063 | $ | 1,384 | ||||
|
Accounts
receivable, less allowances of $3 and $3
|
9 | 9 | ||||||
|
Other
receivables
|
68 | 41 | ||||||
|
Inventories
|
277 | 281 | ||||||
|
Deferred
income taxes
|
503 | 466 | ||||||
|
Other
current assets
|
15 | - | ||||||
|
|
||||||||
|
Total
current assets
|
2,935 | 2,181 | ||||||
|
|
||||||||
|
Plant
and equipment, net
|
243 | 237 | ||||||
|
Prepaid
pension assets
|
66 | 60 | ||||||
|
Deferred
income taxes
|
6 | 48 | ||||||
|
Other
assets
|
46 | 49 | ||||||
|
|
||||||||
|
Total
assets
|
$ | 3,296 | $ | 2,575 | ||||
|
|
||||||||
|
Liabilities
and Shareholders’ Equity (Deficit):
|
||||||||
|
Accounts
and drafts payable
|
$ | 27 | $ | 23 | ||||
|
Accrued
liabilities
|
333 | 318 | ||||||
|
Settlement
costs
|
1,060 | 982 | ||||||
|
Income
taxes
|
6 | 14 | ||||||
|
|
||||||||
|
Total
current liabilities
|
1,426 | 1,337 | ||||||
|
|
||||||||
|
Long-term
debt
|
1,769 | 722 | ||||||
|
Postretirement
pension, medical and life insurance benefits
|
284 | 300 | ||||||
|
Other
liabilities
|
42 | 129 | ||||||
|
|
||||||||
|
Total
liabilities
|
3,521 | 2,488 | ||||||
|
|
||||||||
|
Commitments
and Contingent Liabilities
|
||||||||
|
|
||||||||
|
Shareholders’
Equity (Deficit):
|
||||||||
|
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 – 147 million and 156 million shares
|
2 | 2 | ||||||
|
Additional
paid-in capital
|
242 | 234 | ||||||
|
Earnings
retained in the business
|
1,666 | 1,282 | ||||||
|
Accumulated
other comprehensive loss
|
(109 | ) | (121 | ) | ||||
|
Treasury
stock at cost, 27 million and 18 million shares
|
(2,026 | ) | (1,310 | ) | ||||
|
Total
shareholders’ equity (deficit)
|
(225 | ) | 87 | |||||
|
Total
liabilities and shareholders’ equity (deficit)
|
$ | 3,296 | $ | 2,575 | ||||
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
December
31,
|
Year
Ended
December
31,
|
|||||||||||||||||||||||
|
(All
units in thousands)
|
2010
|
2009
|
%
Chg
|
2010
|
2009
|
%
Chg
|
||||||||||||||||||
|
Full
Price Brands
|
||||||||||||||||||||||||
|
Newport
|
7,851,049 | 7,680,763 | 2.2 | 31,803,651 | 31,021,252 | 2.5 | ||||||||||||||||||
|
Kent
|
56,928 | 69,126 | -17.6 | 250,290 | 295,098 | -15.2 | ||||||||||||||||||
|
True
|
57,678 | 69,642 | -17.2 | 253,139 | 292,386 | -13.4 | ||||||||||||||||||
|
Max
|
0 | 4,464 | -100.0 | 11,268 | 18,882 | -40.3 | ||||||||||||||||||
|
Total
Full Price Brands
|
7,965,655 | 7,823,995 | 1.8 | 32,318,348 | 31,627,618 | 2.2 | ||||||||||||||||||
|
Price/Value
Brands
|
||||||||||||||||||||||||
|
Old
Gold
|
135,060 | 106,272 | 27.1 | 529,536 | 445,883 | 18.8 | ||||||||||||||||||
|
Maverick
|
1,197,318 | 956,262 | 25.2 | 4,585,062 | 3,486,204 | 31.5 | ||||||||||||||||||
|
Total
Price/Value Brands
|
1,332,378 | 1,062,534 | 25.4 | 5,114,598 | 3,932,087 | 30.1 | ||||||||||||||||||
|
Total
Domestic Cigarettes
|
9,298,033 | 8,886,529 | 4.6 | 37,432,946 | 35,559,705 | 5.3 | ||||||||||||||||||
|
Total
Puerto Rico and U.S. Possessions
|
157,980 | 160,080 | -1.3 | 674,083 | 724,860 | -7.0 | ||||||||||||||||||
|
Grand
Total
|
9,456,013 | 9,046,609 | 4.5 | 38,107,029 | 36,284,565 | 5.0 | ||||||||||||||||||
|
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.
|
Page 7 of
8
Lorillard,
Inc. and Subsidiaries
Selected
Domestic Retail Market Share Data (1)
|
Three
Months Ended
December
31,
|
Year
Ended
December
31,
|
|||||||||||
|
2010
|
2009
|
Pt
Chg
|
2010
|
2009
|
Pt
Chg
|
|||||||
|
Total
Lorillard
|
13.2
|
12.0
|
1.2
|
12.9
|
11.8
|
1.1
|
||||||
|
Total
Newport
|
11.2
|
10.4
|
0.8
|
11.0
|
10.3
|
0.7
|
||||||
|
Total
Industry Menthol
|
30.2
|
29.8
|
0.4
|
30.0
|
29.3
|
0.7
|
||||||
|
Newport
Menthol Share of
Menthol Segment
|
35.3
|
34.8
|
0.5
|
36.1
|
35.1
|
1.0
|
||||||
(1)
Unaudited information based on Lorillard’s Proprietary Retail Database
(“EXCEL”)
Page 8 of
8