GREENSBORO, N.C., April 17, 2015 /PRNewswire/ -- Lorillard,
Inc. (NYSE: LO) announced today its results for the quarter
ended March 31, 2015.
First Quarter Highlights
- First quarter net sales increased 4.8% to $1.668 billion behind a 3.1% increase in
wholesale cigarette unit volume.
- First quarter 2015 reported (GAAP) diluted earnings per share
increased 2.7% over first quarter 2014 to $0.76.
- First quarter 2015 adjusted (Non-GAAP) diluted earnings per
share increased 18.8% over first quarter 2014 to $0.82.
- First quarter 2015 Cigarettes adjusted operating income
(Non-GAAP) increased 18.6% over first quarter 2014 and adjusted
operating margin increased 3.4 percentage points.
- Total Lorillard retail market share of cigarettes for the first
quarter of 2015 was a record 15.5%, increasing 0.3 share point
compared to the corresponding period of 2014.
- Newport retail market share
for the first quarter 2015 was a record 13.3%, increasing 0.3 share
point versus first quarter 2014.
- The Company still expects to close the merger with Reynolds
American in the first half of 2015, subject to regulatory approval
and other customary closing conditions.
Financial Results
Summary*
|
|
(Amounts in
Millions, Except Per Share Data)
|
|
|
|
|
|
Three
Months
|
|
|
Ended March
31,
|
|
|
2015
|
|
2014
|
|
% Chg
|
|
Net
sales
|
$1,668
|
|
$1,592
|
|
4.8%
|
|
Operating
income
|
|
|
|
|
|
|
Reported
(GAAP)
|
$487
|
|
$472
|
|
3.2%
|
|
Adjusted
(Non-GAAP)
|
518
|
|
447
|
|
15.9%
|
|
Net
income
|
|
|
|
|
|
|
Reported
(GAAP)
|
$275
|
|
$271
|
|
1.5%
|
|
Adjusted
(Non-GAAP)
|
296
|
|
252
|
|
17.5%
|
|
Diluted earnings
per share
|
|
|
|
|
|
|
Reported
(GAAP)
|
$0.76
|
|
$0.74
|
|
2.7%
|
|
Adjusted
(Non-GAAP)
|
0.82
|
|
0.69
|
|
18.8%
|
|
|
|
|
|
|
|
|
*See Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP)
results table included with this release.
Consolidated Results
Net sales increased by $76
million, or 4.8%, to $1.668
billion in the first quarter of 2015 due to a 6.4% increase
in net sales of cigarettes, partially offset by a decrease in net
sales of electronic cigarettes.
Reported diluted earnings per share increased $0.02, or 2.7%, to $0.76 in the first quarter of 2015 compared to
the first quarter of 2014.
Adjusted diluted earnings per share increased $0.13, or 18.8%, to $0.82 in the first quarter of 2015, due to the
strong operating performance in the Cigarettes segment and the
impact of share repurchases in prior quarters. As detailed in
the reconciliation table, adjusted diluted earnings per share
excludes accrued costs related to Engle Progeny cases,
accrued costs related to the Zippo litigation and other special
items.
"During the first quarter, Lorillard continued its strong
momentum from 2014 by once again delivering industry-leading
cigarette operating profit growth and record high retail market
shares," stated Murray S. Kessler,
Lorillard Chairman, President and CEO. "Increased unit
volumes, robust pricing realization and continued tight cost
controls in our Cigarettes segment drove double-digit increases in
first quarter adjusted operating income and EPS. Notably, these
outstanding results were achieved despite continued domestic and
international investments in our Electronic Cigarettes category and
without the benefit of ongoing share repurchases, which were
discontinued as a result of our pending acquisition."
"All in all, we are extremely pleased with the first quarter
performance of our Cigarettes segment and our flagship Newport
brand, as well as with the position of our Electronic Cigarettes
segment as blu eCigs continues to deliver a unique and innovative
product portfolio to adult consumers seeking alternatives to
traditional tobacco products," Mr. Kessler continued.
"Finally, the Company continues to believe its
previously-announced combination with Reynolds American will close
in the first half of 2015. Once completed, the transaction
will deliver significant and immediate value to Lorillard
shareholders," Mr. Kessler concluded.
The following is a discussion of first quarter performance of
Lorillard's two operating segments, Cigarettes and Electronic
Cigarettes.
Cigarettes Segment Results*
|
Three
Months
|
|
|
Ended March
31,
|
|
|
2015
|
|
2014
|
|
% Chg
|
|
|
|
|
|
|
|
|
Net
sales
|
$1,640
|
|
$1,541
|
|
6.4%
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
|
|
|
|
Reported
(GAAP)
|
$661
|
|
$603
|
|
9.6%
|
|
Adjusted
(Non-GAAP)
|
658
|
|
572
|
|
15.0%
|
|
|
|
|
|
|
|
|
Selling, general
and administrative
|
|
|
|
|
|
|
Reported
(GAAP)
|
$142
|
|
$120
|
|
18.3%
|
|
Adjusted
(Non-GAAP)
|
122
|
|
120
|
|
1.7%
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
|
|
|
|
Reported
(GAAP)
|
$519
|
|
$483
|
|
7.5%
|
|
Adjusted
(Non-GAAP)
|
536
|
|
452
|
|
18.6%
|
|
|
|
|
|
|
|
|
*See Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP)
results table included with this release.
First Quarter 2015 - Cigarettes
Cigarette net sales increased $99
million, or 6.4%, to $1.640
billion in the first quarter of 2015, compared to
$1.541 billion in the first quarter
of 2014. The increase in cigarette net sales resulted from
higher average net cigarette selling prices as well as higher
cigarette unit sales volume.
Total Lorillard wholesale cigarette unit volume, which includes
Puerto Rico and U.S. Possessions,
increased 3.1% for the first quarter of 2015 compared to the
corresponding period of 2014. Puerto Rico and U.S. Possessions increased
6.5% compared to the year ago period. Domestic wholesale
cigarette unit volume, which excludes Puerto Rico and U.S. Possessions, increased
3.0% for the first quarter of 2015 compared to the corresponding
period of 2014. The Company estimates total cigarette
industry domestic wholesale shipments increased approximately 0.5%
for the first quarter of 2015 compared to the first quarter of
2014, marking a meaningful improvement in trend versus the first
half of 2014.
Total wholesale unit volume, including Puerto Rico and U.S. Possessions, for
Newport, the Company's flagship
brand, increased 3.9% for the first quarter of 2015 compared to the
corresponding period of 2014. Domestic wholesale cigarette
unit volume for Newport, which
excludes Puerto Rico and U.S.
Possessions, also increased 3.9% for the quarter versus year
ago. Domestic wholesale shipments for Maverick, the Company's
leading discount brand, decreased 1.1% for the first quarter of
2015 compared to the first quarter of 2014, a sequential
improvement over the 3.1% decline experienced in the fourth quarter
of 2014.
Based on Lorillard's proprietary retail shipment database
administered by Management Science Associates, Inc., which measures
shipments from wholesale to retail, Lorillard's first quarter 2015
domestic retail market share increased 0.3 share point versus year
ago to 15.5%, its fifth consecutive quarter over 15%.
Newport's domestic retail market
share was 13.3%, an increase of 0.3 share point compared to the
first quarter of 2014. Lorillard's domestic retail share of
the menthol market for the first quarter of 2015 was flat versus
the corresponding quarter of 2014 at 40.7%. Gains in
Newport's domestic retail market
share were primarily attributable to the continued strengthening of
Newport Menthol in its core geographies, continued success in
expansion markets and the volume impact from the growth of Newport
Non-Menthol.
"Exceptional first quarter volume growth of almost four percent
on our Newport brand allowed it to reach its highest level of
retail market share ever during the first quarter. We believe
the brand continued to benefit from its highly differentiated
consumer base, unique positioning and superior product quality but
in this quarter also benefited from an improved overall cigarette
industry performance tracing to improved economic conditions for
the U.S. consumer and lower gasoline prices," said Mr. Kessler.
Reported gross profit was $661
million, or 40.3% of net sales, in the first quarter of 2015
and $603 million, or 39.1% of net
sales, in the first quarter of 2014. Adjusted gross profit was
$658 million, or 40.1% of net sales,
in the first quarter of 2015 and $572
million, or 37.1% of net sales, in the first quarter of
2014. As detailed in the reconciliation table, first quarter 2015
adjusted gross profit excludes the $3
million favorable impact on Lorillard's tobacco settlement
expense of the Engle settlement. First quarter 2014 adjusted
gross profit excludes the $31 million
favorable impact on Lorillard's tobacco settlement expense of the
2003 non-participating manufacturer award. The increase in
adjusted gross profit for the first quarter of 2015 is due to the
absence of $28 million of charges to
accrue obligations under the Federal Assessment for Tobacco Growers
which expired in the third quarter of 2014, higher average net
cigarette selling prices and higher cigarette unit sales
volume.
Reported selling, general and administrative costs increased
$22 million to $142 million in the first quarter of 2015
compared to the first quarter of 2014. Adjusted selling, general
and administrative costs increased $2
million to $122 million in the
first quarter of 2015 compared to the first quarter of 2014
primarily due to higher litigation related expenses. As
detailed in the reconciliation table, adjusted selling, general and
administrative costs exclude certain special items.
Reported operating income for the Cigarettes segment increased
$36 million, or 7.5%, to $519 million in the first quarter of 2015 from
$483 million in the first quarter of
2014. Adjusted operating income for the Cigarettes segment
increased $84 million, or 18.6%, to
$536 million in the first quarter of
2015 from $452 million in the first
quarter of 2014. Higher gross margins resulted in a 3.4
percentage point increase in adjusted operating income margin to
32.7% for the segment. Significant increases in operating
income and operating margin for the Cigarettes segment in the first
quarter of 2015 versus the comparable period of the prior year were
primarily due to the expiration of the Federal Assessment for
Tobacco Growers in the third quarter of 2014, cigarette price
increases and higher unit sales volume.
"The powerful combination of increased cigarette shipments,
strong net pricing realization of 4.6% in the quarter, continued
cost controls and the expiration of federal tobacco growers
payments resulted in robust adjusted operating income growth of
almost 19 percent and a 340 basis point increase in operating
margin during the first quarter. Clearly, our Cigarettes
segment is hitting on all cylinders as we enter 2015," Mr. Kessler
remarked.
Electronic Cigarettes Segment Results*
|
Three
Months
|
|
|
Ended March
31,
|
|
|
2015
|
|
2014
|
|
% Chg
|
|
|
|
|
|
|
|
|
Net
sales
|
$28
|
|
$51
|
|
(45.1)%
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
|
|
|
|
Reported
(GAAP)
|
$5
|
|
$16
|
|
(68.8)%
|
|
Adjusted
(Non-GAAP)
|
5
|
|
16
|
|
(68.8)%
|
|
|
|
|
|
|
|
|
Selling, general
and administrative
|
|
|
|
|
|
|
Reported
(GAAP)
|
$37
|
|
$27
|
|
37.0%
|
|
Adjusted
(Non-GAAP)
|
23
|
|
21
|
|
9.5%
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
|
|
|
|
Reported
(GAAP)
|
$(32)
|
|
$(11)
|
|
n/m
|
|
Adjusted
(Non-GAAP)
|
(18)
|
|
(5)
|
|
n/m
|
|
|
|
|
|
|
|
|
*See Reconciliation of Reported (GAAP) to Adjusted
(Non-GAAP) results table included with this release.
First Quarter 2015 – Electronic Cigarettes
Net sales for the Electronic Cigarettes segment were
$28 million for the first quarter
ended March 31, 2015, compared to
$51 million for the first quarter
ended March 31, 2014. The
decline in sales of blu eCigs in the U.S. versus year ago reflects
a decrease in unit volume, partly offset by the launch of the blu
PLUS+ product line described below. The decrease in unit
volume is attributed to competitors' national product launches
accompanied by aggressive promotional programs.
During the first quarter of 2015, blu eCigs launched the new blu
PLUS+ Xpress rechargeable kit to retailers nationwide. The
PLUS+ Xpress kit features the same innovative improvements as the
PLUS+ Rechargeable kit that was launched during the fourth quarter
of 2014. blu PLUS+ Xpress offers consumers the PLUS+ experience at
a competitive price including batteries that last twice as long as
before, enhanced proprietary flavors, and a new advanced closed
'tank' system designed to provide more consistent and enhanced
vapor production. As with all of blu eCigs' consumer-focused
product innovations, the new blu PLUS+ kit, Xpress kit, and tank
system is designed to increase user satisfaction without adding
complexity.
Based on the Nielsen ScanTrack Database, blu's domestic U.S.
all-outlet dollar market share of electronic cigarettes was 23.4%
for the 13 weeks ending March 28,
2015, compared to 43.9% in the comparable period of
2014. The decline in blu's market share versus the year ago
13 week period was the result of significantly increased
competitive activity during the past three quarters beginning in
the second half of last year. While down significantly versus
year ago, blu market share increased 0.4 points sequentially from
23.0% in the fourth quarter of 2014 to 23.4% in the first quarter
of 2015 as a result of the blu PLUS+ introductions.
"We are pleased that blu eCigs' share stabilized in the quarter
as the brand introduced a full line of innovative next-generation
disposable and rechargeable e-cigarettes, starter kits and tank
products and did so while maintaining its premium positioning and
avoiding discounting."
blu (U.K.), formerly known as SKYCIG, was acquired on
October 1, 2013 and generated
$2 million in net sales during the
first quarter of 2015. The product offering in the U.K. was
re-branded as "blu" and launched at retail during the second
quarter of 2014. The launch and retail rollout has been
accompanied by introductory levels of advertising and promotional
spending. Net sales are expected to increase significantly
during 2015 as a result of continued marketing of blu and expanded
retail distribution.
"Internationally, our recent U.K. distribution agreement with
Imperial Tobacco's electronic cigarette subsidiary is off to a good
start and will provide the opportunity to significantly expand blu
U.K.'s presence and product visibility over the course of the
coming year," stated Mr. Kessler. "With the additional scale
from Imperial's U.K. sales force, we believe blu U.K.'s innovative
product portfolio will position the brand well for continued long
term success."
Based on Nielsen ScanTrack data in the U.K., blu (U.K.)'s
all-outlet dollar market share of electronic cigarettes was 8.3%
for the 12 week period ending March 28,
2015 – after successfully re-branding the Company's
e-cigarette product offerings as "blu" in the second quarter of
2014.
Gross profit for total electronic cigarettes was $5 million, or 17.9% of net sales, for the first
quarter ended March 31, 2015.
This compares to gross profit of $16
million, or 31.4% of net sales, for the first quarter ended
March 31, 2014. Gross profit
and gross profit margin for the first quarter of 2015 were
negatively impacted by an increase in retail promotion costs and
lower U.S. volume, partially offset by the favorable impact of new
blu PLUS+ product launches.
Reported selling, general and administrative costs were
$37 million for the first quarter
ended March 31, 2015, compared to
$27 million for the first quarter
ended March 31, 2014. Adjusted
selling, general and administrative costs were $23 million for the first quarter ended
March 31, 2015, compared to
$21 million for the first quarter
ended March 31, 2014 and reflect
incremental costs to launch the blu brand in the U.K. As
detailed in the reconciliation table, adjusted selling, general and
administrative costs exclude amortization of the SKYCIG brand
totaling $5 million and accrued costs
related to the Zippo litigation of $9
million. The fair value ascribed to the SKYCIG brand
in connection with the acquisition of £20 million (approximately
$30 million at March 31, 2015 exchange rates) was amortized over
an estimated life of 18 months beginning October 1, 2013, and amortization ceased as of
March 31, 2015.
Reported operating loss for the Electronic Cigarettes segment
was $32 million for the first quarter
of 2015, compared to $11 million for
the first quarter of 2014. Adjusted operating loss for the
Electronic Cigarettes segment was $18
million for the first quarter of 2015, compared to
$5 million for the first quarter of
2014. blu (U.K.)'s reported and adjusted operating loss was
$15 million and $10 million, respectively, for the first quarter
of 2015, and $9 and $3, respectively, for the first quarter of
2014.
Additional News
In April 2015, the Company paid,
or will pay, $1.133 billion under the
State Settlement Agreements, primarily based on 2014 volume.
Included in the payment is $93
million deposited in an interest-bearing escrow account in
accordance with procedures established in the MSA pending
resolution of a claim by the Company and the other Original
Participating Manufacturers that they are entitled to reduce their
MSA payments based on a loss of market share to non-participating
manufacturers.
The previously-announced combination with Reynolds American
remains subject to regulatory approval and the additional customary
closing conditions contained in the merger agreement. Although no
assurance can be given if and when the transaction will be
completed because it remains subject to regulatory approval and
additional customary closing conditions, the transaction is
expected to close in the first half of 2015.
About Lorillard, Inc.
Lorillard, Inc. (NYSE: LO), through its Lorillard Tobacco
Company subsidiary, is the third largest manufacturer of cigarettes
in the United States. Founded in 1760, Lorillard Tobacco is
the oldest continuously operating tobacco company in the U.S.
Newport, Lorillard Tobacco's
flagship premium cigarette brand, is the top selling menthol and
second largest selling cigarette in the U.S. In addition to
Newport, the Lorillard Tobacco
product line has four additional cigarette brand families marketed
under the Kent, True, Maverick and Old Gold brand names. These five
brands include 45 different product offerings which vary in price,
taste, flavor, length and packaging. Lorillard, Inc., through
its other subsidiaries, is also a leading global electronic
cigarette company, marketed under the blu eCigs brand in the U.S.
and U.K. Newport, Kent,
True, Maverick, Old Gold and blu eCigs are the registered
trademarks of Lorillard and its subsidiaries. Lorillard
maintains its corporate headquarters and manufactures all of its
traditional cigarette products in Greensboro, North Carolina.
Forward-Looking Statements
This report contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995
which represent the current expectations and beliefs of management
of Lorillard, Inc. ("Lorillard") concerning the proposed
transaction involving Reynolds American Inc. ("Reynolds American")
and Lorillard (the "transaction") and other future events and their
potential effects on Lorillard, including, but not limited to,
statements relating to anticipated financial and operating results,
the companies' plans, objectives, expectations and intentions, cost
savings and other statements, including words such as "anticipate,"
"believe," "plan," "estimate," "expect," "intend," "will,"
"should," "may," and other similar expressions. Such statements are
based upon the current beliefs and expectations of Lorillard's
management, are not guarantees of future results and are subject to
a significant number of risks and uncertainties. Actual results may
differ materially from the results anticipated in these forward
looking statements. Those factors include, without limitation: the
ability to obtain governmental approvals of the transaction or to
satisfy other conditions to the transaction on the proposed terms
and timeframe; the possibility that the transaction does not close
when expected or at all, or that the companies may be required to
modify aspects of the transaction to achieve regulatory approval;
the ability to realize the expected synergies resulting from the
transaction in the amounts or in the timeframe anticipated; the
ability to integrate Lorillard's businesses into those of Reynolds
American's in a timely and cost-efficient manner; the impact of
regulatory initiatives, including the regulation of cigarettes and
electronic cigarettes and a possible ban or regulation of the use
of menthol in cigarettes by the Food and Drug Administration, and
compliance with governmental regulations; the outcome of pending or
future litigation; health concerns, claims, regulations and other
restrictions relating to the use of tobacco products and exposure
to environmental tobacco smoke; the effect on pricing and
consumption rates of legislation, including actual and potential
federal and state excise tax increases, and tobacco litigation
settlements; continued intense competition from other cigarette and
electronic cigarette manufacturers; the continuing decline in
volume in the domestic cigarette industry; changes in the price,
quality or quantity of tobacco leaf and other raw materials
available for use in Lorillard's cigarettes; reliance on a limited
number of suppliers for certain raw materials; and other risks and
uncertainties, including those detailed from time to time in
Lorillard's periodic reports filed with the Securities and Exchange
Commission (the "SEC"), including Lorillard's Current Reports on
Form 8-K, Quarterly Reports on Form 10-Q and Annual Report on Form
10-K. In particular, we refer you to "Item 1A. Risk Factors" of
Lorillard's 2014 Annual Report on Form 10-K, which was filed with
the SEC on February 12, 2015 for additional information
regarding the risks and uncertainties discussed above as well as
additional risks and uncertainties that may affect Lorillard's
actual results. The forward-looking statements in this report are
qualified by these risk factors. Each statement speaks only as of
the date of this report (or any earlier date indicated in this
report) and Lorillard undertakes no obligation to update or revise
any forward-looking statements to reflect subsequent events or
circumstances. Investors, potential investors and others should
give careful consideration to these risks and uncertainties.
Lorillard, Inc. and Subsidiaries
Consolidated
Condensed Statements of Income
|
Three
Months
Ended March
31,
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
(Amounts in millions,
except per share data)
|
|
|
|
|
|
|
Net sales
(a)
|
$1,668
|
|
$1,592
|
|
Cost of sales (a)
(b)
|
1,002
|
|
973
|
|
Gross
profit
|
666
|
|
619
|
|
Selling, general and
administrative
|
179
|
|
147
|
|
Operating
income
|
487
|
|
472
|
|
Investment
income
|
1
|
|
8
|
|
Interest
expense
|
(45)
|
|
(45)
|
|
Income before income
taxes
|
443
|
|
435
|
|
Income
taxes
|
168
|
|
164
|
|
Net income
|
$ 275
|
|
$ 271
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
Basic
|
$0.76
|
|
$0.75
|
|
Diluted
|
$0.76
|
|
$0.74
|
|
|
|
|
|
|
Weighted average
number of shares outstanding:
|
|
|
|
|
Basic
|
359.23
|
|
362.12
|
|
Diluted
|
359.91
|
|
362.71
|
|
|
|
|
|
|
Segment
data:
|
|
|
|
|
Net
sales
|
|
|
|
|
Cigarettes (a)
|
$1,640
|
|
$1,541
|
|
Electronic
cigarettes
|
28
|
|
51
|
|
|
$1,668
|
|
$1,592
|
|
|
|
|
|
|
Operating
income (loss):
|
|
|
|
|
Cigarettes
|
$ 519
|
|
$ 483
|
|
Electronic
cigarettes
|
(32)
|
|
(11)
|
|
|
$ 487
|
|
$ 472
|
|
|
|
|
|
|
Supplemental
information:
|
|
|
|
|
|
|
|
|
|
(a) Includes excise
taxes.
|
$458
|
|
$445
|
|
|
|
|
|
|
(b) Cost of sales
includes:
|
|
|
|
|
|
|
|
|
|
- Charges to accrue
obligations under the
|
|
|
|
|
State Settlement Agreements
|
339
|
|
286
|
|
|
|
|
|
|
- Charges to accrue obligations under the
|
|
|
|
|
Federal Assessment for Tobacco Growers
|
-
|
|
28
|
|
|
|
|
|
|
- Charges to accrue Food and Drug
|
|
|
|
|
Administration user fees
|
20
|
|
19
|
|
Lorillard, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
|
March 31,
2015
|
|
December
31,
2014
|
|
(Unaudited)
|
|
|
(In millions, except
share and per share data)
|
|
|
|
Assets:
|
|
|
|
Cash and cash
equivalents
|
$ 1,920
|
|
$ 1,308
|
Short-term
investments
|
329
|
|
324
|
Accounts receivable,
less allowances of $2 and $2
|
25
|
|
13
|
Other
receivables
|
29
|
|
35
|
Inventories
|
455
|
|
404
|
Deferred income
taxes
|
517
|
|
522
|
Other current
assets
|
33
|
|
28
|
Total current
assets
|
3,308
|
|
2,634
|
Plant and equipment,
net
|
298
|
|
308
|
Long-term
investments
|
154
|
|
167
|
Goodwill
|
98
|
|
100
|
Intangible
assets
|
58
|
|
63
|
Deferred income
taxes
|
140
|
|
142
|
Other
assets
|
98
|
|
94
|
Total
assets
|
$ 4,154
|
|
$ 3,508
|
|
|
|
|
Liabilities and
Shareholders' Deficit:
|
|
|
|
Accounts and drafts
payable
|
$ 36
|
|
$ 31
|
Accrued
liabilities
|
454
|
|
357
|
Settlement
costs
|
1,525
|
|
1,187
|
Income
taxes
|
158
|
|
8
|
Total current
liabilities
|
2,173
|
|
1,583
|
Long-term
debt
|
3,567
|
|
3,561
|
Postretirement
pension, medical and life insurance benefits
|
472
|
|
473
|
Other
liabilities
|
76
|
|
73
|
Total
liabilities
|
6,288
|
|
5,690
|
Commitments and
Contingent Liabilities
|
|
|
|
Shareholders'
Deficit:
|
|
|
|
Preferred stock,
$0.01 par value, authorized 10 million shares
|
-
|
|
-
|
Common
stock:
|
|
|
|
Authorized – 600 million
shares; par value – $0.01 per share
|
|
|
|
Issued – 383 million and 383
million shares (outstanding
|
|
|
|
360 million and 360 million
shares)
|
4
|
|
4
|
Additional paid-in
capital
|
295
|
|
287
|
Accumulated
deficit
|
(1,103)
|
|
(1,140)
|
Accumulated other
comprehensive loss
|
(260)
|
|
(263)
|
Treasury stock at
cost, 23 million and 23 million shares
|
(1,070)
|
|
(1,070)
|
Total shareholders'
deficit
|
(2,134)
|
|
(2,182)
|
Total liabilities and
shareholders' deficit
|
$ 4,154
|
|
$ 3,508
|
|
|
|
|
Lorillard, Inc. and Subsidiaries
Wholesale
Cigarette Shipments
Information regarding unit volume shipped by Lorillard Tobacco
Company to its direct buying customers by brand follows:
|
|
Three
Months
Ended March
31,
|
|
(All units in
thousands)
|
|
2015
|
|
2014
|
|
% Chg
|
|
|
|
|
|
|
|
|
|
Full Price
Brands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newport
|
|
7,844,592
|
|
7,550,721
|
|
3.9%
|
|
Kent
|
|
27,174
|
|
31,554
|
|
-13.9%
|
|
True
|
|
31,032
|
|
34,662
|
|
-10.5%
|
|
|
|
|
|
|
|
|
|
Total Full Price
Brands
|
|
7,902,798
|
|
7,616,937
|
|
3.8%
|
|
|
|
|
|
|
|
|
|
Price/Value
Brands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Old Gold
|
|
85,524
|
|
90,054
|
|
-5.0%
|
|
Maverick
|
|
1,119,138
|
|
1,131,162
|
|
-1.1%
|
|
|
|
|
|
|
|
|
|
Total Price/Value
Brands
|
|
1,204,662
|
|
1,221,216
|
|
-1.4%
|
|
|
|
|
|
|
|
|
|
Total Domestic
Cigarettes
|
|
9,107,460
|
|
8,838,153
|
|
3.0%
|
|
|
|
|
|
|
|
|
|
Total Puerto Rico and
U.S. Possessions
|
|
125,598
|
|
117,972
|
|
6.5%
|
|
|
|
|
|
|
|
|
|
Grand Total
Cigarettes
|
|
9,233,058
|
|
8,956,125
|
|
3.1%
|
|
Notes:
|
|
|
1.
|
This information is
not adjusted for returns or the impact of wholesale trade inventory
fluctuations.
|
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.
|
Lorillard, Inc. and Subsidiaries
Selected Domestic
Retail Cigarette Unit Market Share Data (1)
|
Three
Months
Ended March
31,
|
|
|
2015
|
|
2014
|
|
Pt Chg
|
|
|
|
|
|
|
|
|
Lorillard
|
15.5%
|
|
15.2%
|
|
0.3
|
|
Newport
|
13.3%
|
|
13.0%
|
|
0.3
|
|
Total Industry
Menthol
|
32.1%
|
|
31.8%
|
|
0.3
|
|
Lorillard Share of
Menthol Segment
|
40.7%
|
|
40.7%
|
|
0.0
|
|
Newport Share of
Menthol Segment
|
37.5%
|
|
37.5%
|
|
0.0
|
|
(1) Based on Lorillard's proprietary retail shipment
database, administered by Management Science Associates, Inc.
blu Domestic Retail Electronic Cigarette Dollar Market Share
Data (2)
13 Week Reporting
Periods Ended:
|
|
|
|
March 23,
2013
|
35.3%
|
June 22,
2013
|
42.0%
|
September 28,
2013
|
44.7%
|
December 21,
2013
|
45.0%
|
March 15,
2014
|
43.9%
|
July 5,
2014
|
39.3%
|
September 27,
2014
|
28.3%
|
December 27,
2014
|
23.0%
|
March 28,
2015
|
23.4%
|
(2) Based on Nielsen, ScanTrack Database – All
Outlets Combined.
Reconciliation of Reported (GAAP) to Adjusted
(Non-GAAP) Results
(Amounts in millions, except per share
data)
The reconciliation provided below reconciles the non-GAAP
financial measures adjusted gross profit, adjusted operating
income, adjusted net income and adjusted diluted earnings per share
with the most directly comparable GAAP financial measures, reported
gross profit, reported operating income, reported net income and
reported diluted earnings per share available to Lorillard common
stockholders, for the quarters ended March
31, 2015 and 2014. Lorillard management uses adjusted
(non-GAAP) measurements to set performance goals and to measure the
performance of the overall company, and believes that investors'
understanding of the underlying performance of the Company's
continuing operations is enhanced through the disclosure of these
metrics. Adjusted (non-GAAP) results are not, and should not be
viewed as, substitutes for reported (GAAP) results.
The adjustments to reported results summarized below remove the
following items: (1) the favorable impact of the Engle settlement
on Lorillard's tobacco settlement expense in cost of sales; (2)
amortization of the SKYCIG brand included in selling, general and
administrative expenses; (3) costs related to the RAI merger
agreement included in selling, general and administrative expenses;
(4) accrued costs related to certain Engle Progeny cases included
in selling, general and administrative expenses; (5) accrued costs
related to the Zippo litigation included in selling, general and
administrative expenses; and (6) the favorable impact of the 2003
non-participating manufacturer award as a result of the
September 2013 arbitration panel
determination that six states failed to diligently enforce escrow
provisions applicable to non-participating manufacturers included
as an offset to tobacco settlement expense in cost of sales.
|
Three months ended
March 31, 2015
|
|
|
Gross
|
|
Operating
|
|
Net
|
|
Diluted
|
|
|
Profit
|
|
Income
|
|
Income
|
|
EPS
|
|
|
|
|
|
|
|
|
|
|
Reported (GAAP)
results
|
$666
|
|
$487
|
|
$275
|
|
$0.76
|
|
|
|
|
|
|
|
|
|
|
GAAP results include
the following:
|
|
|
|
|
|
|
|
|
(1) Favorable impact
of the Engle settlement on
tobacco settlement expense
|
(3)
|
|
(3)
|
|
(2)
|
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
(2) Amortization of
SKYCIG brand
|
–
|
|
5
|
|
5
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
(3) Costs related to
RAI merger
agreement
|
–
|
|
5
|
|
3
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
(4) Accrued costs
related to Engle
Progeny cases
|
–
|
|
15
|
|
9
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
(5) Accrued costs
related to Zippo litigation
|
–
|
|
9
|
|
6
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
Adjusted (Non-GAAP)
results
|
$663
|
|
$518
|
|
$296
|
|
$0.82
|
|
|
Three months ended
March 31, 2014
|
|
|
Gross
|
|
Operating
|
|
Net
|
|
Diluted
|
|
|
Profit
|
|
Income
|
|
Income
|
|
EPS
|
|
|
|
|
|
|
|
|
|
|
Reported (GAAP)
results
|
$619
|
|
$472
|
|
$271
|
|
$0.74
|
|
|
|
|
|
|
|
|
|
|
GAAP results include
the following:
|
|
|
|
|
|
|
|
|
(6) 2003
non-participating manufacturer
arbitration
award
|
(31)
|
|
(31)
|
|
(24)
|
|
(0.06)
|
|
|
|
|
|
|
|
|
|
|
(2) Amortization of
SKYCIG brand
|
–
|
|
6
|
|
5
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Adjusted (Non-GAAP)
results
|
$588
|
|
$447
|
|
$252
|
|
$0.69
|
|
Reconciliation of Reported (GAAP) to Adjusted
(Non-GAAP) Operating Income by Segment
(Amounts in
millions)
Lorillard has two reportable segments, Cigarettes and Electronic
Cigarettes.
The Cigarettes segment consists principally of the operations of
Lorillard Tobacco Company and related entities. Lorillard
Tobacco is the second largest manufacturer of cigarettes in
the United States. Founded in
1760, Lorillard Tobacco is the oldest continuously operating
tobacco company in the United
States. Newport, Lorillard Tobacco's flagship premium
cigarette brand, is the top selling menthol and second largest
selling cigarette overall in the United
States based on gross units sold during the quarters ended
March 31, 2015 and 2014. In addition
to the Newport brand, the Lorillard Tobacco product line has four
additional brand families marketed under the Kent, True, Maverick
and Old Gold brand names. These five cigarette brands include
45 different product offerings which vary in price, taste, flavor,
length and packaging.
The Electronic Cigarettes segment consists of the operations of
LOEC, Inc. (d/b/a blu eCigs), Cygnet U.K. Trading Limited (t/a blu
(U.K.)) and related entities. blu eCigs is a leading electronic
cigarette company in the United States. Lorillard acquired
the blu eCigs brand and other assets used in the manufacture,
distribution, development, research, marketing, advertising and
sale of electronic cigarettes on April
24, 2012. Lorillard acquired all of the assets and
operations of SKYCIG (now known as blu (U.K.)), a United Kingdom based electronic cigarette
business, on October 1, 2013.
|
Three months ended
March 31, 2015
|
|
|
|
|
Electronic
|
|
|
|
|
Cigarettes
|
|
Cigarettes
|
|
Total
|
|
|
|
|
|
|
|
|
Reported (GAAP)
operating income (loss)
|
$519
|
|
$(32)
|
|
$487
|
|
|
|
|
|
|
|
|
GAAP results include
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Favorable impact
of the Engle
settlement on tobacco settlement
expense
|
(3)
|
|
–
|
|
(3)
|
|
|
|
|
|
|
|
|
(2) Amortization of
SKYCIG brand
|
–
|
|
5
|
|
5
|
|
|
|
|
|
|
|
|
(3) Costs related to
RAI merger
agreement
|
5
|
|
–
|
|
5
|
|
|
|
|
|
|
|
|
(4) Accrued costs
related to Engle
Progeny cases
|
15
|
|
–
|
|
15
|
|
|
|
|
|
|
|
|
(5) Accrued costs
related to Zippo litigation
|
–
|
|
9
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted (Non-GAAP)
operating income (loss)
|
$536
|
|
$(18)
|
|
$518
|
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31, 2014
|
|
|
|
|
Electronic
|
|
|
|
|
Cigarettes
|
|
Cigarettes
|
|
Total
|
|
|
|
|
|
|
|
|
Reported (GAAP)
operating income (loss)
|
$483
|
|
$(11)
|
|
$472
|
|
|
|
|
|
|
|
|
GAAP results include
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) 2003
non-participating manufacturer
arbitration award
|
(31)
|
|
–
|
|
(31)
|
|
|
|
|
|
|
|
|
(2) Amortization of
SKYCIG brand
|
–
|
|
6
|
|
6
|
|
|
|
|
|
|
|
|
Adjusted (Non-GAAP)
operating income (loss)
|
$452
|
|
$(5)
|
|
$447
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/lorillard-inc-reports-first-quarter-results-300067839.html
SOURCE Lorillard, Inc.