Lorillard, Inc. Reports First Quarter Results

                Lorillard, Inc. Reports First Quarter Results

PR Newswire

GREENSBORO, N.C., April 24, 2013

GREENSBORO, N.C., April 24, 2013 /PRNewswire/ --Lorillard, Inc.(NYSE: LO)
announced today its results for the quarter ended March 31, 2013.

First Quarter Highlights

  oFirst quarter reported (GAAP) diluted earnings per share increased 50.9%
    versus last year to $0.86, including a $143 million MSA payment dispute
    settlement benefit that reduced the Company's first quarter tobacco
    settlement expense.
  oFirst quarter adjusted (Non-GAAP) diluted earnings per share increased
    13.8% versus last year to $0.66.
  oNet sales in the first quarter increased 3.3% over last year to $1.577
    billion.
  oTotal Lorillard retail market share of cigarettes increased 0.4 share
    points in the first quarter versus last year to 14.9%.
  oNewport retail market share increased 0.5 share points in the first
    quarter versus last year to 12.7%.
  oIn the first quarter of 2013, blu eCigs distribution expanded to a total
    of more than 80,000 retail outlets resulting in first quarter net sales of
    $57 million and over a 40% retail market share.
  oLorillard repurchased 3.8 million shares during the quarter at a cost of
    $149 million.
  oLorillard's Board of Directors approved a new $500 million share
    repurchase program during the quarter.

Lorillard Financial Results Summary*
(Amounts in Millions, Except Per Share Data)
                            Three Months
                            Ended March 31,
                            2013       2012       % Chg
Net sales                   $1,577     $1,526     3.3%
Operating income
 Reported (GAAP)           $561       $392       43.1%
 Adjusted (Non-GAAP)      438        399        9.8%
Net income
 Reported (GAAP)           $328       $223       47.1%
 Adjusted (Non-GAAP)      251        229        9.6%
Diluted earnings per share
 Reported (GAAP)           $0.86      $0.57      50.9%
 Adjusted (Non-GAAP)      $0.66      $0.58      13.8%
*See Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) results table
included with this release.

"Lorillard posted strong market share and financial results in the first
quarter of 2013 in the face of a difficult macroeconomic environment and
highly competitive cigarette market," stated Murray S. Kessler, Chairman,
President and CEO. "We are off to a solid start to the year, with good
topline growth, strong market share growth in cigarettes and electronic
cigarettes, and operating margin expansion, all translating to robust earnings
growth. Earnings per share were once again boosted by our ongoing share
repurchase program, and resulted in our highest level of quarterly EPS growth
since 2011. We are confident in our ability to continue to reward
shareholders with double-digit total shareholder returns as measured by EPS
growth and the dividend yield over the long term."

Net sales increased by $51 million, or 3.3%, to $1.577 billion in the first
quarter of 2013 due to net sales of electronic cigarettes of $57 million,
partially offset by a decrease in net sales of cigarettes of $6 million.

Reported diluted earnings per share increased $0.29, or 50.9%, to $0.86 in the
first quarter of 2013. Adjusted diluted earnings per share increased $0.08,
or 13.8%, to $0.66 in the first quarter of 2013, due primarily to improved
operating performance of the Cigarettes segment, the addition of the
Electronic Cigarettes segment and the impact of share repurchases.

The following is a discussion of first quarter 2013 performance of Lorillard's
two operating segments, Cigarettes and Electronic Cigarettes.

Cigarettes Segment Results*

                             Three Months
                             Ended March 31,
                             2013      2012      % Chg
Net sales                    $1,520    $1,526    -0.4%
Gross profit
 Reported (GAAP)            $692      $523      32.3%
 Adjusted (Non-GAAP)       549       530       3.6%
Selling, general and
administrative
 Reported (GAAP)            $138      $131      5.3%
 Adjusted (Non-GAAP)       118       131       -9.9%
Operating income
 Reported (GAAP)            $554      $392      41.3%
 Adjusted (Non-GAAP)        431       399       8.0%
*See Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) results table
included with this release.

First Quarter 2013

Cigarette net sales decreased $6 million, or 0.4%, to $1.520 billion in the
first quarter of 2013, compared to $1.526 billion in the first quarter of
2012. The decrease in cigarette net sales resulted primarily from lower
cigarette unit sales volume, partially offset by higher average net cigarette
selling prices.

Total Lorillard wholesale cigarette unit volume, which includes Puerto Rico
and U.S. Possessions, decreased 2.3% for the first quarter of 2013 compared to
the corresponding period of 2012. Domestic wholesale cigarette unit volume,
which excludes Puerto Rico and U.S. Possessions, decreased 2.6% for the first
quarter of 2013 compared to the corresponding period of 2012. During the
quarter, changes in wholesale inventory levels, changes in wholesale
purchasing patterns arising from varying holiday schedules and calendars and
the negative impact of one fewer shipping day in the first quarter of 2013
largely offset and are estimated to have had a minimal impact on the Company's
domestic wholesale shipment comparisons. Total cigarette industry domestic
wholesale shipments decreased an estimated 6.2% for the first quarter of 2013
compared to the first quarter of 2012.

Total wholesale unit volume for Newport, the Company's flagship brand,
decreased 1.3% for the first quarter of 2013 compared to the corresponding
period of 2012. Domestic wholesale cigarette unit volume for Newport, which
excludes Puerto Rico and U.S. Possessions, decreased 1.6% for the first
quarter of 2013 compared to the corresponding period of 2012. Domestic
wholesale shipments for Maverick, the Company's leading discount brand,
decreased 6.5% for the first quarter of 2013 compared to the first quarter of
2012.

Based on Lorillard's proprietary retail shipment data ("EXCEL"), which
measures shipments from wholesale to retail and is unaffected by wholesale
inventory changes, Lorillard's domestic retail market share once again posted
solid gains in the first quarter of 2013, increasing 0.4 share points to
14.9%. Newport's domestic retail market share reached 12.7% for the first
quarter of 2013, an increase of 0.5 share points compared to the first quarter
of 2012. Lorillard's domestic retail share of the menthol market reached
40.8% for the first quarter of 2013, an increase of 0.8 share points compared
to the first quarter of 2012. Gains in market share were largely attributable
to unit volume outperformance of Newport Menthol in response to increased
promotions in our core markets, and geographic promotional expansion of
Newport Menthol, and were achieved despite the heightened level of competitive
menthol activity that continued during the quarter.

Reported gross profit was $692 million, or 45.5% of net sales, in the first
quarter of 2013 and $523 million, or 34.3% of net sales, in the first quarter
of 2012. Adjusted gross profit was $549 million in the first quarter of 2013,
or 36.1% of net sales, compared to $530 million, or 34.7% of net sales, in the
first quarter of 2012. As detailed in the reconciliation table, adjusted gross
profit excludes the $143 million favorable impact on Lorillard's tobacco
settlement expense in the first quarter of 2013 of the reduction in
Lorillard's April 15, 2013 Master Settlement Agreement ("MSA") payment as a
result of the settlement to resolve certain MSA payment adjustment disputes
approved by the arbitration panel in March 2013. Adjusted gross profit for
the first quarter of 2012 excludes the unfavorable impact on tobacco
settlement expense of $7 million resulting from a competitor's adjustments in
that quarter to certain historical components of the calculation of the
industry Volume Adjustment Offset under the State Settlement Agreements. Such
adjustments related to the competitor's operating income for 2001 – 2005. The
increase in adjusted gross profit reflects lower costs related to the State
Settlement Agreements, partially offset by a decrease in net sales.

Reported selling, general and administrative costs increased $7 million to
$138 million in the first quarter of 2013 compared to the first quarter of
2012, primarily due to estimated costs to comply with or otherwise resolve the
U.S. Government Case judgment, offset partially by lower legal defense costs
related to Engle Progeny litigation. Adjusted selling, general and
administrative costs exclude $20 million in estimated costs to comply with or
otherwise resolve the U.S. Government Case judgment, and decreased $13 million
to $118 million in the first quarter of 2013 compared to the first quarter of
2012, primarily due to lower legal defense costs related to the Engle Progeny
litigation..

Reported operating income for the Cigarettes segment increased $162 million to
$554 million in the first quarter of 2013 from $392 million in the first
quarter of 2012. Adjusted operating income for the Cigarettes segment
increased $32 million to $431 million in the first quarter of 2013 from $399
million in the first quarter of 2012.

Electronic Cigarettes Segment Results*

                                    Three Months
                                    Ended
                                    March 31,
                                    2013
Net sales                           $57
Gross profit                        $21
Selling, general and administrative $14
Operating income                    $7

*Comparative results for the three months ended March 31, 2012 not provided
above as Lorillard purchased blu eCigs on April 24, 2012.

First Quarter 2013

Net sales for the Electronic Cigarettes segment contributed $57 million to
Lorillard's total net sales for the first quarter of 2013. Strong sales of
blu eCigs resulted from consumer marketing, expanded retail distribution as
the brand is now carried in more than 80,000 retail outlets and strong repeat
purchases.

According to Lorillard's proprietary EXCEL database which now includes
electronic cigarettes, blu eCigs domestic retail market share of the
electronic cigarettes market for the first quarter was over 40%.

Gross profit was $21 million in the first quarter of 2013, or 36.8% of net
sales.

Selling, general and administrative costs were $14 million in the first
quarter of 2013 and include marketing and administrative costs associated with
the blu eCigs' national retail roll-out.

Operating income for the Electronic Cigarettes segment totaled $7 million for
the first quarter of 2013.

"There is no doubt in my mind that electronic cigarettes have tapped into a
real consumer need, that this could be a very big category and that blu can
become a very big brand," stated Mr. Kessler.

Settlement to Resolve Certain MSA Payment Adjustment Disputes

On December 17, 2012, Lorillard Tobacco, along with other participating
manufacturers, agreed to settle with 17 states and the District of Columbia
and Puerto Rico disputes under the MSA involving payment adjustments relating
to nonparticipating manufacturers. One additional state joined the settlement
on April 12, 2013. The settlement had been under consideration by the
arbitration panel presiding over the pending arbitration relating to the
disputes. On March 12, 2013, the arbitration panel issued a Stipulated
Partial Settlement and Award, which directs the Internal Auditor under the MSA
to implement the settlement provisions involved, thereby allowing the
settlement to proceed.

The settlement resolves the claims for the years 2003 through 2012 and puts in
place a new method for calculating this adjustment beginning in 2013. Under
the terms of the settlement, Lorillard and other manufacturers will receive
credits against their future MSA payments over the next five years, and the
signatory states will be entitled to receive their allocable share of the
amounts currently being held in escrow resulting from these disputes.
Lorillard currently expects to receive credits over the next five years of at
least $205 million on its outstanding claims, with $164 million occurring in
April 2013 and the remainder over the following four years. The estimate is
subject to change depending upon a number of factors included in the
calculation of the credit.

Based on the terms of the settlement, during the first quarter of 2013
Lorillard Tobacco recorded a reduction to its State Settlements liability and
expense of $164 million and reduced its April 15, 2013 MSA Annual Payment by
the same amount. The reduction was partially offset by an increase of $21
million in the State Settlements liability and expense related to the industry
Volume Adjustment Offset associated with the increase in the industry
aggregate operating income. These amounts have been reflected in the
accompanying statement of income for the first quarter of 2013 as a $143
million reduction in Lorillard's tobacco settlement expense included in cost
of sales.

The arbitration proceeding will continue as to those states that have not
settled. As of April 15, 2013, eight states that have not joined the
settlement have taken action in state court to prevent the settlement from
proceeding or to seek other relief related to the settlement. Two of the
states also unsuccessfully sought to preliminary enjoin the implementation of
the award. There is no assurance that such attempts will be resolved
favorably to Lorillard.

Additional News

On March 11, 2013, Lorillard, Inc. increased its quarterly dividend on its
common stock by 6.5% to $0.55 per share, which was paid to shareholders of
record as of March 1, 2013.

In April 2013, the Company paid $900 million under the State Settlement
Agreements, primarily based on 2012 volume. The payment is net of the $164
million favorable impact of the reduction in Lorillard's April 15, 2013 MSA
payment as a result of the settlement to resolve certain MSA payment
adjustment disputes approved by the arbitration panel in March 2013 discussed
above. Included in the payment was $115 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.

As of January 30, 2013, Lorillard, Inc. completed its $500 million share
repurchase program that was announced in August 2012 by repurchasing 2.8
million shares at a cost of $109 million. On March 8, 2013, the Company
announced that the Board of Directors had approved a new share repurchase
program authorizing the Company to repurchase in the aggregate up to $500
million of its outstanding common stock. During the first quarter of 2013,
the Company repurchased approximately 1 million shares at a cost of $40
million under the $500 million share repurchase program announced in March
2013. As of March 31, 2013, the maximum dollar value of shares that could yet
be purchased under the $500 million share repurchase program was $460million.


Conference Call

A conference call to discuss first quarter 2013 results of Lorillard, Inc. has
been scheduled for 9:00 a.m. Eastern Time on April 24, 2013. 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: 34372138.

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 (855) 859-2056
(domestic) or (404) 537-3406 (international) and enter passcode: 34372138.
The conference call will be available for replay in its entirety through May
1, 2013.

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 is the oldest continuously operating tobacco company in the
U.S. Newport, Lorillard'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 product line has four additional cigarette brand
families marketed under the Kent, True, Maverick and Old Gold brand names.
These five brands include 39 different product offerings which vary in price,
taste, flavor, length and packaging. Lorillard, through its LOEC, Inc.
subsidiary, is also a leading electronic cigarette company in the U.S,
marketed under the blu eCigs brand. Newport, Kent, True, Maverick, Old Gold
and blu eCigs are the registered trademarks of Lorillard and its
subsidiaries. Lorillard maintains its headquarters and manufactures all of
its traditional cigarette 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," "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.



Lorillard, Inc. and Subsidiaries
Consolidated Condensed Statements of Income
                                                          Three Months
                                                          Ended March 31,
                                                          2013      2012
(Amounts in millions, except per share data)
Net sales (a)                                             $1,577    $1,526
Cost of sales (a) (b)                                     864       1,003
Gross profit                                              713       523
Selling, general and administrative                       152       131
Operating income                                          561       392
Investment income                                         1         1
Interest expense                                          (41)      (39)
Income before income taxes                                521       354
Income taxes                                              193       131
Net income                                                $328      $223
Earnings per share:
 Basic                                                   $0.86     $0.57
 Diluted                                                 $0.86     $0.57
Weighted average number of shares outstanding:
 Basic                                                   378.62    391.45
 Diluted                                                 379.42    392.40
Segment data:
 Net sales
 Cigarettes (a)                                    $1,520    $1,526
 Electronic Cigarettes                             57        -
                                                          $1,577    $1,526
 Operating income
 Cigarettes                                       $554      $392
 Electronic Cigarettes                             7         -
                                                          $561      $392
Supplemental information:
 (a) Includes excise taxes                        $455      $467
 (b) Cost of sales includes:
 - Charges to accrue obligations under
 the State Settlement Agreements        176       337
 - Charges to accrue obligations under the
 Federal Assessment for Tobacco Growers 27        28
 - Charges to accrue Food and Drug
 Administration user fees               17        16





Lorillard, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
                                                     March 31,  December 31,
                                                     2013        2012
(In millions)
Assets:
Cash and cash equivalents                            $2,057      $1,720
Accounts receivable, less allowances of $3 and $3    23          18
Other receivables                                    31          52
Inventories                                          446         410
Deferred income taxes                                556         557
Other current assets                                 32          20
 Total current assets                         3,145       2,777
Plant and equipment, net                             294         298
Goodwill                                             64          64
Intangible assets                                    57          57
Deferred income taxes                                47          48
Other assets                                         142         152
 Total assets                                 $3,749      $3,396
Liabilities and Shareholders' Deficit:
Accounts and drafts payable                          $23         $39
Accrued liabilities                                  419         356
Settlement costs                                     1,356       1,183
Income taxes                                         189         23
Total current liabilities                            1,987       1,601
Long-term debt                                       3,101       3,111
Postretirement pension, medical and life insurance   402         409
benefits
Other liabilities                                    55          52
Total liabilities                                    5,545       5,173
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 –381 million and 525 million
shares (outstanding
 378 million and 382 million shares)   4           5
Additional paid-in capital                           223         298
Accumulated (deficit)/retained earnings              (1,676)     2,351
Accumulated other comprehensive loss                 (237)       (241)
Treasury stock at cost, 3 million and 143 million    (110)       (4,190)
shares
Total shareholders' deficit                          (1,796)     (1,777)
 Total liabilities and shareholders' deficit      $3,749      $3,396





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)               2013       2012       % Chg
Premium Brands
Newport                                7,663,764  7,792,210  -1.6
Kent                                   36,978     42,270     -12.5
True                                   38,712     44,454     -12.9
Total Premium Brands                   7,739,454  7,878,934  -1.8
Price/Value Brands
Old Gold                               101,532    121,062    -16.1
Maverick                               1,203,329  1,286,856  -6.5
Total Price/Value Brands               1,304,861  1,407,918  -7.3
Total Domestic Cigarettes              9,044,315  9,286,852  -2.6
Total Puerto Rico and U.S. Possessions 178,356    154,230    15.6
Grand Total Cigarettes                 9,222,671  9,441,082  -2.3

 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.
 5. The three months ended March 31, 2013 contained one fewer shipping day
    than the comparable period ended March 31, 2012.





Lorillard, Inc. and Subsidiaries
Selected Domestic Retail Cigarette Market Share Data (1)
                                      Three Months
                                      Ended March 31,
                                      2013      2012    Pt Chg
Lorillard                             14.9      14.5    0.4
Newport                               12.7      12.2    0.5
Total Industry Menthol                31.3      31.1    0.2
Lorillard Share of Menthol Segment    40.8      40.0    0.8
Newport Share of Menthol Segment      37.6      36.8    0.8
(1) Based on Lorillard's Proprietary Retail Database ("EXCEL")





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 three months ended March 31, 2013 and 2012.
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 reduction in Lorillard's April 15,
2013 MSA payment as a result of the settlement to resolve certain MSA payment
adjustment disputes approved by the arbitration panel in March 2013 included
as an offset to tobacco settlement expense in cost of sales; (2) estimated
costs to comply with or otherwise resolve the U.S. Government Case judgment
included in selling, general and administrative expenses; and (3) the
unfavorable impact of adjustments to certain operating income data as reported
in the years 2001 through 2005 by RJ Reynolds Tobacco Company ("RJRT") in the
first quarter of 2012 on Lorillard's tobacco settlement expense included in
cost of sales.

                                          Three months ended March 31, 2013
                                          Gross  Operating  Net     Diluted
                                          Profit  Income     Income  EPS
Reported (GAAP) results                   $713    $561       $328    $  0.86
GAAP results include the following:
 (1) Favorable impact of the
reduction
 in Lorillard's April 15, 2013
MSA payment
 as a result of the settlement
to resolve certain
 MSA payment disputes approved
by the
 arbitration panel in March
2013 included as an offset to
 tobacco settlement expense in  (143)   (143)      (89)    (0.23)
cost of sales
 (2) Estimated costs to comply with
or otherwise resolve
 the U.S. Government Case
judgment included in
 selling, general and           -       20         12      0.03
administrative expenses
Adjusted (Non-GAAP) results               $570    $438       $251    $0.66
                                          Three months ended March 31, 2012
                                          Gross  Operating  Net     Diluted
                                          Profit  Income     Income  EPS
Reported (GAAP) results                   $523    $392       $223    $  0.57
GAAP results include the following:
 (3) Impact of RJRT adjustments
 to its 2001 - 2005 operating
 income and restructuring
 charges on Lorillard's
 tobacco settlement expense
 included in cost of sales      7       7          6       $0.01
Adjusted (Non-GAAP) results               $530    $399       $229    $0.58





Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Operating Income by
Segment
(Amounts in millions)
Lorillard manages its operations on the basis of two operating and 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 third largest
manufacturer of cigarettes in the United States. Founded in 1760, Lorillard is
the oldest continuously operating tobacco company in the United States.
Newport, Lorillard's flagship menthol-flavored 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,
2013 and 2012. In addition to the Newport brand, the Lorillard product line
has four additional brand families marketed under the Kent, True, Maverick and
Old Gold brand names. These five cigarette brands include 39 different
product offerings which vary in price, taste, flavor, length and packaging.
The Electronic Cigarettes segment consists principally of the operations of
LOEC, Inc. and related entities. LOEC is a leading electronic cigarette
company in the United States, marketed under the blu eCigs brand. Lorillard
acquired the blu eCigs brand and other assets used in the manufacture,
distribution, development, research, marketing, advertising, sale and service
of electronic cigarettes on April 24, 2012.

                                             Three months ended March 31, 2013
                                                           Electronic
                                             Cigarettes    Cigarettes    Total
Reported (GAAP) operating income             $554          $7            $561
GAAP results include the following:
 (1) Favorable impact of the reduction
 in Lorillard's April 15, 2013 MSA
payment
 as a result of the settlement to
resolve certain
 MSA payment disputes approved by
the
 arbitration panel in March 2013
included as an offset to
 tobacco settlement expense in     (143)         -             (143)
cost of sales
 (2) Estimated costs to comply with or
otherwise resolve
 the U.S. Government Case judgment
included in
 selling, general and              20            -             20
administrative expenses
Adjusted (Non-GAAP) operating income         $431          $7            $438



SOURCE Lorillard, Inc.

Website: http://www.lorillard.com
Contact: Robert Bannon, Director, Investor Relations, (336) 335-7665
 
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