Lorillard (LO) 10-K 25 Feb 10 2009 FY Annual report Financial data

Document and Company Informatio

Document and Company Information (USD $)
In Billions, except Share data	12 Months Ended Dec. 31, 2009	Feb. 19, 2010	Jun. 30, 2009
Document and Company Information [Abstract]
Entity Registrant Name	LORILLARD, INC.
Entity Central Index Key	0001424847
Document Type	10-K
Document Period End Date	2009-12-31
Amendment Flag	false
Company Fiscal Year End Date	--12-31
Entity Well Known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			11.3
Entity Common Stock Shares Outstanding		154,810,465

Consolidated Balance Sheets

Consolidated Balance Sheets (USD $)
In Millions	Dec. 31, 2009	Dec. 31, 2008
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, net	237	218
Prepaid pension assets	60	36
Deferred income taxes	48	71
Other assets	49	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	0
Postretirement pension, medical and life insurance benefits	300	317
Other liabilities	129	100
Total liabilities	2,488	1,690
Shareholders' Equity:
Preferred stock, $0.01 par value, authorized 10 million shares	0	0
Common stock:
Authorized - 600 million shares; par value-$.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 stock 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

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions	Dec. 31, 2009	Dec. 31, 2008
ASSETS:
Allowance for doubtful accounts	$3	$2
Shareholders' Equity:
Preferred stock, par value	0.01	0.01
Preferred stock, shares authorized	10	10
Common stock:
Common stock, par value	0.01	0.01
Common stock, shares Authorized	600	600
Common stock, shares Issued	174	174
Common stock, shares Outstanding	156	168
Treasury stock at cost, shares	18	6

Consolidated Statements of Inco

Consolidated Statements of Income (USD $)
In Millions, except Per Share data	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
Consolidated Statements of Income [Abstract]
Net sales (including excise taxes of $1,547, $712 and $688)	$5,233	$4,204	$3,969
Cost of sales	3,327	2,434	2,313
Gross profit	1,906	1,770	1,656
Selling, general and administrative	365	355	382
Operating income	1,541	1,415	1,274
Investment income	5	20	109
Interest expense	(27)	(1)	0
Income before income taxes	1,519	1,434	1,383
Income taxes	571	547	485
Net income	$948	$887	$898
Earnings per share:
Basic	5.76	5.15	5.16
Diluted	5.76	5.15	5.16
Weighted average number of shares outstanding:
Basic	164.48	172.09	173.92
Diluted	164.62	172.21	173.92

1_Consolidated Statements of In

Consolidated Statements of Income (Parenthetical) (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
Consolidated Statements of Income [Abstract]
Excise taxes	$1,547	$712	$688

Consolidated Statements of Shar

Consolidated Statements of Shareholders Equity (USD $)
In Millions	Previously Reported	Previously Reported Additional Paid-in Capital	Previously Reported Earnings Retained in the Business	Previously Reported Accumulated Other Comprehensive Loss	Common Stock	Additional Paid-in Capital	Earnings Retained in the Business	Accumulated Other Comprehensive Loss	Treasury Stock	Total
Beginning Balance at Dec. 31, 2005					$2
Par value adjustment, Lorillard common stock - 1.7 million to 1 stock split					2	(2)
Cumulative effect from adoption of new accounting for income taxes							(25)			(25)
Comprehensive income:
Ending Balance at Dec. 31, 2006	1,295	215	1,179	(99)	2	213	1,154	(99)		1,270
Comprehensive income:
Net income							898			898
Other comprehensive gains, pension liability, net of tax expense of $6 for 2007, net of tax benefit of $38 for 2008 and net of tax expense of $20 for 2009								11		11
Comprehensive income										909
Dividends paid							(1,170)			(1,170)
Share-based compensation						4				4
Ending Balance at Dec. 31, 2007					2	217	882	(88)		1,013
Comprehensive income:
Net income							887			887
Other comprehensive gains, pension liability, net of tax expense of $6 for 2007, net of tax benefit of $38 for 2008 and net of tax expense of $20 for 2009								(70)		(70)
Comprehensive income										817
Dividends paid							(804)			(804)
Shares repurchased									(400)	(400)
Share-based compensation						5				5
Ending Balance at Dec. 31, 2008					2	222	965	(158)	(400)	631
Comprehensive income:
Net income							948			948
Other comprehensive gains, pension liability, net of tax expense of $6 for 2007, net of tax benefit of $38 for 2008 and net of tax expense of $20 for 2009								37		37
Comprehensive income										985
Dividends paid							(631)			(631)
Shares repurchased									(910)	(910)
Share-based compensation						12				12
Ending Balance at Dec. 31, 2009					$2	$234	$1,282	($121)	($1,310)	$87

Consolidated Statements of Equi

Consolidated Statements of Equity (Parenthetical) (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
Comprehensive income:
Pension Liability, Tax expense/benefit	$20	$38	$6
Comprehensive Income (Loss)
Comprehensive income:
Pension Liability, Tax expense/benefit	20	38	6
Accumulated Other Comprehensive Loss
Comprehensive income:
Pension Liability, Tax expense/benefit	$20	$38	$6

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
Cash flows from operating activities:
Net income	$948	$887	$898
Adjustments to reconcile to net cash provided by (used in) operating activities:
Depreciation and amortization	32	32	40
Deferred income taxes	(9)	72	(62)
Share-based compensation	5	3	2
Gain on investments	0	0	(34)
Amortization of marketable securities	0	0	(22)
Pension, health and life insurance benefits expense	46	21	24
Pension, health and life insurance contributions	(37)	(32)	(31)
Excess tax benefits from share-based arrangements	(1)	0	0
Changes in operating assets and liabilities:
Accounts and other receivables	12	(38)	6
Inventories	(26)	(32)	(40)
Accounts payable and accrued liabilities	56	28	(20)
Settlement costs	8	43	102
Income taxes	0	5	(44)
Other assets	(4)	9	(9)
Litigation accrual	0	0	66
Other	7	(18)	6
Net cash provided by operating activities	1,037	980	882
Cash flows from investing activities:
Purchases of investments	0	(1,050)	(4,916)
Proceeds from sales of investments	0	545	1,934
Proceeds from maturities of investments	0	750	3,400
Additions to plant and equipment	(51)	(44)	(51)
Net cash provided by (used in) investing activities	(51)	201	367
Cash flows from financing activities:
Dividends paid	(631)	(804)	(1,170)
Shares repurchased	(910)	(400)	0
Proceeds from issuance of long-term debt	750	0	0
Debt issuance costs	(5)	0	0
Proceeds from exercise of stock options	2	0	0
Excess tax benefits from share-based arrangements	1	4	3
Net cash used in financing activities	(793)	(1,200)	(1,167)
Change in cash and cash equivalents	193	(19)	82
Cash and cash equivalents, beginning of year	1,191	1,210	1,128
Cash and cash equivalents, end of year	1,384	1,191	1,210
Cash paid for income taxes	563	514	598
Cash paid for interest, net of interest rate swaps	$28	$0	$0

Significant Accounting Policies

Significant Accounting Policies
	12 Months Ended Dec. 31, 2009 USD / shares
Significant Accounting Policies [Abstract]
Significant Accounting Policies	1. Significant Accounting Policies Basis of presentation Lorillard, Inc., through its subsidiaries, is engaged in the manufacture and sale of cigarettes. Its principal products are marketed under the brand names of Newport, Kent, True, Maverick and Old Gold with substantially all of its sales in the United States of America. The consolidated financial statements of Lorillard, Inc. (the Company), together with its subsidiaries (Lorillard), include the accounts of the Company and its subsidiaries after the elimination of intercompany accounts and transactions. The Company manages its operations on the basis of one operating and reportable segment through its principal subsidiary, Lorillard Tobacco Company (Lorillard Tobacco). On May7, 2008, the Company amended its certificate of incorporation to effect a 1,739,234.29 for 1 stock split of its 100shares of Common Stock then outstanding. All common share and per share information has been retroactively adjusted for the periods presented. On June10, 2008, Loews Corporation (Loews) distributed 108,478,429shares of common stock of the Company in exchange for and in redemption of all 108,478,429 outstanding shares of Loews Carolina Group stock, as described in the Registration Statement (File No.333-149051) on FormS-4 filed with the Securities and Exchange Commission (the SEC) under the Securities act of 1933 as amended (the Separation). Pursuant to the terms of the Exchange Offer, described in the Registration Statement, on June16, 2008, Loews accepted 93,492,857shares of Loews common stock in exchange for 65,445,000shares of the Companys Common Stock. As a result of such distributions, Loews ceased to own any equity interest in the Company and the Company became an independent publicly held company. Prior to the Separation, Lorillard was included in the Loews consolidated federal income tax return, and federal income tax liabilities were included on the balance sheet of Loews. Under the terms of the pre-Separation Tax Allocation Agreement between Lorillard and Loews, the Company made payments to, or was reimbursed by Loews for the tax effects resulting from its inclusion in Loews consolidated federal income tax return. In September 2009, Loews reimbursed Lorillard $14million, which was recorded as a receivable in 2008, related to pre-Separation tax benefits and payments. Subsequent to the issuance of the Companys 2008 consolidated financial statements included in Form8-K, filed on June11, 2009, the Company determined that immaterial errors existed in the footnote disclosure containing the condensed consolidating statement of cash flows for the year ended December31, 2008. The Issuers statement of cash flows for the year ended December31, 2008 has been corrected to reflect $150million return of capital, previously reported as a financing inflow, as an investing inflow. In addition, the statement of cash flows for All Other Subsidiaries for the same period has been corrected to properly include the $150million payment to the Issuer, previously reported as return of capital outflow within financing activities, as a component of dividends paid also within fina

Inventories

Inventories
	12 Months Ended Dec. 31, 2009 USD / shares
Inventories [Abstract]
Inventories	2. Inventories Inventories are valued at the lower of cost, determined on a LIFO basis, or market and consisted of the following: December31, 2009 2008 (In millions) Leaf tobacco $ 236 $ 208 Manufactured stock 41 42 Materials and supplies 4 5 $ 281 $ 255 If the average cost method of accounting was used, inventories would be greater by approximately $189million and $155million at December31, 2009 and 2008, respectively.

Plant and Equipment

Plant and Equipment
	12 Months Ended Dec. 31, 2009 USD / shares
Plant and Equipment [Abstract]
Plant and Equipment	3. Plant and Equipment Plant and equipment is stated at historical cost and consisted of the following: December31, 2009 2008 (In millions) Land $ 3 $ 3 Buildings 87 87 Equipment 563 532 Total 653 622 Accumulated depreciation (416 ) (404 ) Plant and equipment-net $ 237 $ 218 Depreciation and amortization expense was $32million, $32million and $40million for 2009, 2008 and 2007, respectively.

Other Assets

Other Assets
	12 Months Ended Dec. 31, 2009 USD / shares
Other Assets [Abstract]
Other Assets	4. Other Assets Other assets were as follows: December31, 2009 2008 (In millions) Other investments $ 15 15 Restricted cash 13 13 Debt issuance costs 5 Other prepaid assets 16 6 Total $ 49 $ 34

Accrued Liabilities

Accrued Liabilities
	12 Months Ended Dec. 31, 2009 USD / shares
Accrued Liabilities [Abstract]
Accrued Liabilities	5. Accrued Liabilities Accrued liabilities were as follows: December31, 2009 2008 (In millions) Legal fees $ 21 $ 21 Salaries and other compensation 16 21 Medical and other employee benefit plans 30 27 Consumer rebates 86 62 Sales promotion 21 23 Excise and other taxes 78 56 Other accrued liabilities 66 45 Total $ 318 $ 255

Commitments

Commitments
	12 Months Ended Dec. 31, 2009 USD / shares
Commitments [Abstract]
Commitments	6. Commitments Lorillard leases certain real estate and transportation equipment under various operating leases. Listed below are future minimum rental payments required under those operating leases with noncancelable terms in excess of one year. December31, 2009 (In millions) 2010 $ 1.8 2011 1.4 2012 0.8 2013 0.2 2014 0.0 Net Minimum lease payments $ 4.2 Rental expense for all operating leases was $6million, $6million and $6million for 2009, 2008 and 2007, respectively. At December31, 2009, Lorillard had contractual purchase obligations of approximately $47million. These purchase obligations include agreements to purchase machinery. Future contractual purchase obligations at December31, 2009 were as follows: 2010 2011 2012 2013 2014 (In millions) Contractual purchase obligations $ 46 $ 1 $ 0 $ 0 $ 0

Fair Value

Fair Value
	12 Months Ended Dec. 31, 2009 USD / shares
Fair Value [Abstract]
Fair Value	7. Fair Value Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level1, as these are the most transparent or reliable: Level1 Quoted prices for identical instruments in active markets. Level2 Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable directly or indirectly. Level3 Valuations derived from valuation techniques in which one or more significant inputs are unobservable. Lorillard is responsible for the valuation process and as part of this process may use data from outside sources in establishing fair value. Lorillard performs due diligence to understand the inputs used or how the data was calculated or derived, and corroborates the reasonableness of external inputs in the valuation process. Assets and liabilities measured at fair value on a recurring basis at December31, 2009 were as follows: (In millions) Level 1 Level 2 Level 3 Total (In millions) Cash and Cash Equivalents: Prime money market funds $ 1,384 $ $ $ 1,384 Total cash and cash equivalents $ 1,384 $ $ $ 1,384 Derivative Liability: Interest rate swaps fixed to floating rate $ $ 28 $ $ 28 Total derivative liability $ $ 28 $ $ 28 The fair value of the money market funds, classified as Level1, utilized quoted prices in active markets. The fair value of the interest rate swaps, classified as Level2, utilized a market approach model using the notional amount of the interest rate swap multiplied by the observable inputs of time to maturity and market interest rates. See Note9 for additional information on the interest rate swaps.

Long Term Debt

Long Term Debt
	12 Months Ended Dec. 31, 2009 USD / shares
Long Term Debt [Abstract]
Long Term Debt	8. Long Term Debt In June 2009, Lorillard Tobacco issued $750million of 8.125% unsecured senior notes due June23, 2019 (the Notes) pursuant to an Indenture, dated June23, 2009, and First Supplemental Indenture, dated June23, 2009 (the Supplemental Indenture). Lorillard Tobacco is the principal, wholly-owned operating subsidiary of the Company and the Notes are unconditionally guaranteed on a senior unsecured basis by the Company. The interest rate payable on the Notes is subject to incremental increases from 0.25% to 2.00% in the event either Moodys Investors Services, Inc. (Moodys), Standard Poors Ratings Services (SP) or both Moodys and SP downgrade the Notes below investment grade (Baa3 and BBB- for Moodys and SP, respectively). In September 2009, Lorillard Tobacco entered into interest rate swap agreements, which the Company guaranteed, with a notional amount of $750million to modify its exposure to interest rate risk by converting the interest rate payable on the Notes from a fixed rate to a floating rate based on LIBOR. See Note9 for additional information on the interest rate swap agreements. Upon the occurrence of a change of control triggering event, Lorillard Tobacco will be required to make an offer to repurchase the Notes at a price equal to 101% of the aggregate principal amount of the Notes, plus accrued interest. A change of control triggering event occurs when there is both a change of control (as defined in the Supplemental Indenture) and the Notes cease to be rated investment grade by both Moodys and SP within 60days of the occurrence of a change of control or public announcement of the intention to effect a change of control. The Notes are not entitled to any sinking fund and are not redeemable prior to maturity. The Notes contain covenants that restrict liens and sale and leaseback transactions, subject to a limited exception. At December31, 2009, the carrying value of the Notes was $722million and the fair value was $826million. The fair value of the Notes was based on market pricing.

Derivative Instruments

Derivative Instruments
	12 Months Ended Dec. 31, 2009 USD / shares
Derivative Instruments [Abstract]
Derivative Instruments	9. Derivative Instruments In September 2009, Lorillard Tobacco entered into interest rate swap agreements, which the Company guaranteed, with a total notional amount of $750million to modify its exposure to interest rate risk by effectively converting the interest rate payable on the Notes from a fixed rate to a floating rate. Under the agreements, Lorillard Tobacco receives interest based on a fixed rate of 8.125% and pays interest based on a floating one-month LIBOR rate plus a spread of 4.625%. As of December31, 2009, the variable rate was 4.856%. The agreements expire in June 2019. The interest rate swap agreements qualify for hedge accounting and were designated as fair value hedges. Under the swap agreements, Lorillard Tobacco receives a fixed rate settlement and pays a variable rate settlement with the difference recorded in interest expense. That difference reduced interest expense by $6million for 2009. For derivatives designated as fair value hedges, which relate entirely to hedges of debt, changes in the fair value of the derivatives are recorded in other assets or other liabilities with an offsetting adjustment to the carrying amount of the hedged debt. At December31, 2009, such adjustments decreased the carrying amount of debt outstanding by $28million and increased other liabilities by $28million in the consolidated condensed balance sheet. If our debt rating is downgraded below Ba2 by Moodys or BB by SP, the swap agreements will terminate and we will be required to settle them in cash before their expiration date.

Earnings Per Share

Earnings Per Share
	12 Months Ended Dec. 31, 2009 USD / shares
Earnings Per Share [Abstract]
Earnings Per Share	10. Earnings Per Share Basic and diluted earnings per share (EPS) were calculated using the following: Year Ended December31, 2009 2008 2007 (In millions) Net Earnings $ 948 $ 887 $ 898 Weighted Average SharesOutstanding Basic 164.48 172.09 173.92 Stock Options and Stock Appreciation Rights 0.14 0.12 Weighted Average SharesOutstanding Diluted 164.62 172.21 173.92 Options to purchase 1.1million shares and 0.4million shares of common stock were excluded from the diluted earnings per share calculation because their effect would be anti-dilutive for the years ended December31, 2009 and 2008, respectively. Loews distributed its interest in the Company to holders of Loews Carolina Group stock and Loews common stock in a series of transactions which were completed on June10, 2008 and June16, 2008, respectively. The Company had 173,923,429shares outstanding as of the Separation from Loews. All prior period EPS amounts were adjusted to reflect the new capital structure of the Company.

Income Taxes

Income Taxes
	12 Months Ended Dec. 31, 2009 USD / shares
Income Taxes [Abstract]
Income Taxes	11. Income Taxes Prior to the Separation, Lorillard was included in the Loews consolidated federal income tax return, and federal income tax liabilities were included on the balance sheet of Loews. Under the terms of the pre- Separation Tax Allocation Agreement between Lorillard and Loews, Lorillard made payments to, or was reimbursed by Loews for the tax effects resulting from its inclusion in Loews consolidated federal income tax return. As of December31, 2009, there were no tax obligations between Lorillard and Loews for periods prior to the Separation. Following the Separation, Lorillard and its eligible subsidiaries filed a stand alone consolidated federal income tax return. The Separation Agreement imposes restrictions on Lorillards ability to engage in certain significant corporate transactions, for a period of two years, that could cause the Separation to become taxable to Loews. Lorillard, however, may undertake any such action if it first obtains a supplemental ruling from the IRS or an unqualified tax opinion of a nationally recognized law firm, in either case in form and substance reasonably acceptable to Loews, to the effect that the proposed transaction would not adversely affect the tax-free nature of the Separation. The Separation Agreement also requires Lorillard (and any successor entity) to indemnify Loews for any losses resulting from the failure of the Separation to qualify as a tax-free transaction (except if the failure to qualify is solely due to Loewss fault). This indemnification obligation applies regardless of whether the action is restricted as described above, or whether Lorillard or a potential acquirer obtains a supplemental ruling or an opinion of counsel. The Separation Agreement further provides for cooperation between Lorillard and Loews with respect to additional tax matters, including the exchange of information and the retention of records which may affect the income tax liability of the parties to the Separation Agreement. Lorillards 2006 consolidated federal income tax return is subject to examination by the IRS. For 2007 and 2008, the IRS has invited Loews and its eligible subsidiaries to participate in the Compliance Assurance Process (CAP) which is a voluntary program for a limited number of large corporations. Loews and Lorillard, as an eligible subsidiary, agreed to participate. Under CAP, the IRS conducts a real-time audit and works contemporaneously with Lorillard to resolve any issues prior to the filing of the tax return. Lorillards participation in the CAP will end when the IRS approves Loews 2008 consolidated federal income tax return as filed. During 2008, the IRS completed its examination of the 2007 Loews consolidated federal income tax return resulting in no changes being made to the reported tax on the return. Lorillard adopted the uncertain tax provisions of ASC 740, Income Taxes, on January1, 2007. As a result of this adoption, Lorillard recognized a decrease to beginning retained earnings on January1, 2007 of $25million. At December31, 2009, 2008 and 2007 there were $18million, $19million and $21million, respectively, of tax benefits that,

Retirement Plans

Retirement Plans
	12 Months Ended Dec. 31, 2009 USD / shares
Retirement Plans [Abstract]
Retirement Plans	12. Retirement Plans Lorillard has defined benefit pension, postretirement benefits, profit sharing and savings plans for eligible employees. Pension and postretirement benefits The Salaried Pension Plan provides benefits based on employees compensation and service. The Hourly Pension Plan provides benefits based on fixed amounts for each year of service. Lorillard also provides medical and life insurance benefits to eligible employees. Lorillard uses a December 31 measurement date for its plans. Lorillard also provides certain senior level management employees with nonqualified, unfunded supplemental retirement plans. While these plans are unfunded, Lorillard has certain assets invested in an executive life insurance policy that are to be used to provide for certain of these benefits. Weighted-average assumptions used to determine benefit obligations: Other Pension Benefits Postretirement Benefits December31, December31, 2009 2008 2009 2008 Discount rate 6.0 % 6.3 % 6.0 % 6.3 % Rate of compensation increase 4.8 % 5.0 % Weighted-average assumptions used to determine net periodic benefit cost: Other Postretirement Pension Benefits Benefits Year Ended December31, Year Ended December31, 2009 2008 2007 2009 2008 2007 Discount rate 6.3 % 6.0 % 5.8 % 6.3 % 6.0 % 5.8 % Expected long-term return on plan assets 7.5 % 7.5 % 7.5 % Rate of compensation increase 5.0 % 5.0 % 5.5 % The expected long-term rate of return for Plan assets is determined based on widely-accepted capital market principles, long-term return analysis for global fixed income and equity markets and the active total return oriented portfolio management style. The methodology used to derive asset class risk/return estimates varies due to the nature of asset classes, the availability of historical data, implications from currency, and other factors. In many cases, where historical data is available, data is drawn from indices such as MSCI or G7 country data. For alternative asset classes where historical data may be insufficient or incomplete, estimates are based on long-term capital market conditions and/or asset class relationships. The expected rate of return for the Plan is based on the target asset allocation and return assumptions for each asset class. The estimated Plan return represents a nominal compound return which captures the effect of estimated asset class and market volatility. Other Postretirement Benefits Year Ended December31, 2009 2008 Assumed health care cost trend rates for other postretirement benefits:

Share-Based Compensation

Share-Based Compensation
	12 Months Ended Dec. 31, 2009 USD / shares
Share-Based Compensation [Abstract]
Share-Based Compensation	13. Share-Based Compensation Stock Option Plan On June10, 2008, Lorillard separated from Loews, and all of the outstanding equity awards granted from the Carolina Group 2002 Stock Option Plan (the Carolina Group Plan) were converted on a one-for-one basis to equity awards granted from the Lorillard Inc. 2008 Incentive Compensation Plan (the Lorillard Plan) with the same terms and conditions. In May 2008, Lorillards sole shareholder and Board of Directors approved the Lorillard Plan in connection with the issuance of the Companys Common Stock for the benefit of certain Lorillard employees. The aggregate number of shares of the Companys Common Stock for which options, stock appreciation rights (SARs) or restricted stock may be granted under the Lorillard Plan is 3,714,825shares, of which 714,825 were outstanding Carolina Group stock options converted to the Lorillard Plan; and the maximum number of shares of Lorillard Common Stock with respect to which options or SARs may be granted to any individual in any calendar year is 500,000shares. The exercise price per share may not be less than the fair value of the Companys Common Stock on the date of the grant. Generally, options and SARs vest ratably over a four-year period and expire ten years from the date of grant. The fair value of the awards immediately after the Separation did not exceed the fair value of the awards immediately before the Separation, as measured in accordance with the provisions of ASC Topic 718, and no incremental compensation expense was recorded as a result of the modification of the Carolina Group awards. A summary of the stock option and SAR transactions for the Carolina Group Plan from January1, 2008 through June10, 2008 follows: 2008 Weighted Average Number of Exercise Awards Price Awards outstanding, January 1 628,328 $ 49.78 Granted 111,000 79.03 Exercised (24,503 ) 34.78 Awards outstanding, June10, 2008 714,825 $ 42.93 Awards exercisable, June10, 2008 307,303 $ 32.51 Shares available for grant, June10, 2008 249,500 A summary of the stock option and SAR transactions for the Lorillard Plan for the post-separation period from June11, 2008 to December31, 2008 and from January1, 2009 to December31, 2009 follows: 2009 2008 Weighted Weighted Average Average Number of Exercise Number of Exercise Awards Price Awards Price Awards outstanding at January1, 2009 and June11, 2008 814,950 $ 57.21 714,825 $ 42.93 Granted 810,421 70.59 111,000 69.94 Exercised (100,186 ) 37.74 (10,875 ) 31.00

Share Repurchase Programs

Share Repurchase Programs
	12 Months Ended Dec. 31, 2009 USD / shares
Share Repurchase Programs [Abstract]
Share Repurchase Programs	14. Share Repurchase Programs In July 2008, the Board of Directors authorized the repurchase of up to $400million of the Companys common stock, which was completed on October10, 2008. The number of shares repurchased under this program were 5.9million shares. In May 2009, the Board of Directors authorized the repurchase of up to $250million of the Companys common stock, which was completed on July28, 2009. The number of shares repurchased under this program were 3.7million shares. In July 2009, the Board of Directors authorized the repurchase of up to $750million of the Companys common stock. Purchases under this program were made from time to time at prevailing market prices in open market purchases, privately negotiated transactions, block purchases or otherwise, as determined by the Companys management. The repurchases were funded from existing cash balances, including proceeds from the Companys June 2009 issuance of the Notes. See Note8 for a description of the Notes. As of December31, 2009, the Company repurchased 8.6million shares of its common stock for $660million at an average price of $76.59 per share with $90million the maximum remaining dollar value of shares that could be purchased under the program. As of January19, 2010, the Company completed this repurchase program after repurchasing an additional 1.1million shares at an average price of $78.36 per share. The total number of shares repurchased under the above programs were 19.3million shares.

Related Party Transactions

Related Party Transactions
	12 Months Ended Dec. 31, 2009 USD / shares
Related Party Transactions [Abstract]
Related Party Transactions	15. Related Party Transactions Lorillard was a party to individual services agreements (the Agreements) with Loews through June9, 2008. Under the Agreements, Loews performed certain administrative, technical and ministerial services. Those services included internal auditing, cash management, advice and assistance in preparation of tax returns and obtaining insurance coverage. Under the Agreements, the Company was required to reimburse Loews for (i)actual costs incurred (such as salaries, employee benefits and payroll taxes) of the Loews personnel providing such services and (ii)all out-of-pocket expenses related to the provision of such services. Those Agreements were terminated on June10, 2008 with the Separation from Loews. The Company was charged approximately $100,000 and $800,000 for the support functions during the years ended December31, 2008 and 2007, respectively. The Company believes, if these services were provided by an independent third party, the cost incurred would not differ materially.

Quarterly Financial Data

Quarterly Financial Data (Unaudited)
	12 Months Ended Dec. 31, 2009 USD / shares
Quarterly Financial Data [Abstract]
Quarterly Financial Data (Unaudited)	16. Quarterly Financial Data (Unaudited) December31 September30 June30 March31 (In millions) 2009 Quarter Ended Net sales $ 1,378 $ 1,419 $ 1,519 $ 917 Gross profit 481 488 552 383 Net income 242 235 286 184 Net income per share $ 1.52 $ 1.44 $ 1.71 $ 1.09 Basic weighted average number of shares outstanding 158.72 163.58 167.66 168.07 Diluted weighted average number of shares outstanding 158.89 163.72 167.79 168.18 2008 Quarter Ended Net sales $ 1,088 $ 1,125 $ 1,070 $ 921 Gross profit 493 470 441 365 Net income 258 237 217 174 Net income per share $ 1.54 $ 1.38 $ 1.25 $ 1.00 Basic weighted average number of shares outstanding 168.19 172.37 173.92 173.92 Diluted weighted average number of shares outstanding 168.29 172.49 173.92 173.92

Consolidating Financial Informa

Consolidating Financial Information
	12 Months Ended Dec. 31, 2009 USD / shares
Consolidating Financial Information [Abstract]
Consolidating Financial Information	17. Consolidating Financial Information In June 2009, Lorillard Tobacco issued Notes, which are unconditionally guaranteed by the Company, as primary obligor, for the payment and performance of Lorillard Tobaccos obligation in connection therewith. The following sets forth the condensed consolidating balance sheets as of December31, 2009 and 2008, condensed consolidating statements of income for the years ended December31, 2009, 2008 and 2007, and condensed consolidating statements of cash flows for the years ended December31, 2009, 2008 and 2007 for the Company as parent guarantor (herein referred to as Parent), Lorillard Tobacco (herein referred to as Issuer) and all other non-guarantor subsidiaries of the Company and Lorillard Tobacco. These condensed consolidating financial statements were prepared in accordance with Rule3-10 of SEC RegulationS-X, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. Lorillard accounts for investments in these subsidiaries under the equity method of accounting. Condensed Consolidating Balance Sheets December31, 2009 (In millions) All Total Other Consolidating Parent Issuer Subsidiaries Adjustments Consolidated Assets: Cash and cash equivalents $ 130 $ 719 $ 535 $ $ 1,384 Accounts receivable, less allowances of $3 9 9 Other receivables 35 6 41 Intercompany receivables 50 (50 ) Inventories 281 281 Deferred income taxes 466 466 Total current assets 130 1,510 591 (50 ) 2,181 Investment in subsidiaries (20 ) 581 (561 ) Plant and equipment 237 237 Prepaid pension assets 60 60 Deferred income taxes (5 ) 49 4 48 Other assets 34 15 49 Total assets $ 105 $ 2,471 $ 610 $ (611 ) $ 2,575 Liabilities and Shareholders Equity: Accounts and drafts payable $ $ 23 $ $ $ 23 Accrued liabilities 18 300 318 Intercompany payables 50 (50 ) Settlement costs 982

Legal Contingencies

Legal Contingencies
	12 Months Ended Dec. 31, 2009 USD / shares
Legal Contingencies [Abstract]
Legal Contingencies	18. Legal Contingencies Tobacco Related Product Liability Litigation As of February22, 2010, approximately 11,235 product liability cases are pending against cigarette manufacturers in the United States. Lorillard Tobacco is a defendant in approximately 10,275 of these cases. Lorillard, Inc. is a co-defendant in approximately 710 cases. Approximately 7,600 of these lawsuits are Engle Progeny Cases, described below, which include approximately 4,400 Engle Progeny claims initially asserted in a small number of multi-plaintiff actions that were severed into separate lawsuits by one Florida federal court during 2009. The pending product liability cases are composed of the types of cases listed below. Pending cases are those in which the Lorillard, Inc. or Lorillard Tobacco have been joined to the litigation by either receipt of service of process, or execution of a waiver thereof, and no final, non-appealable judgment has been entered. Conventional Product Liability Cases.Conventional Product Liability Cases are brought by individuals who allege cancer or other health effects caused by smoking cigarettes, by using smokeless tobacco products, by addiction to tobacco, or by exposure to environmental tobacco smoke. As of February22, 2010, approximately 140 cases are pending against cigarette manufacturers, including approximately 30 cases against Lorillard Tobacco. Lorillard, Inc. is a co-defendant in three cases. Engle Progeny Cases.Engle Progeny Cases are brought by individuals who purport to be members of the decertified Engle class. These cases are pending in a number of Florida courts. Lorillard Tobacco is a defendant in approximately 7,600 Engle Progeny Cases. Lorillard, Inc. is a co-defendant in approximately 700 cases. Some of the cases have been filed on behalf of multiple class members. The time period for filing Engle Progeny Cases expired in January 2008 and no additional cases may be filed. West Virginia Individual Personal Injury Cases.West Virginia Individual Personal Injury Cases are brought by individuals who allege cancer or other health effects caused by smoking cigarettes, by using smokeless tobacco products, or by addiction to cigarette smoking. The cases are pending in a single West Virginia court and have been consolidated for trial. Lorillard Tobacco is a defendant in approximately 50 of the 700 pending cases that are part of this proceeding. Lorillard, Inc. is not a defendant in any of these cases. The first phase of an anticipated three-phase trial of these consolidated cases is scheduled to begin on June1, 2010. Flight Attendant Cases.Flight Attendant Cases are brought by non-smoking flight attendants alleging injury from exposure to environmental smoke in the cabins of aircraft. Plaintiffs in these cases may not seek punitive damages for injuries that arose prior to January15, 1997. Lorillard Tobacco is a defendant in each of the approximately 2,600 pending Flight Attendant Cases. Lorillard, Inc. is not a defendant in any of these cases. The time for filing Flight Attendant Cases expired during 2000 and no additional cases in this category may be filed. ClassAction Cas

Valuation and Qualifying Accoun

Valuation and Qualifying Accounts of Lorillard, Inc. and Subsidiaries
	12 Months Ended Dec. 31, 2009 USD / shares
Valuation and Qualifying Accounts [Abstract]
VALUATION AND QUALIFYING ACCOUNTS OF LORILLARD, INC. AND SUBSIDIARIES	Schedule Of Valuation And Qualifying Accounts Disclosure SCHEDULEII VALUATION AND QUALIFYING ACCOUNTS OF LORILLARD, INC. AND SUBSIDIARIES Column A Column B Column C Column D Column E Additions Balance at Charged to Charged Balance at Beginning Costs and to Other End of Description of Period Expenses Accounts Deductions(1) Period (In millions) For the Year Ended December31, 2009 Deducted from assets: Allowance for discounts $ $ 175 $ $ 174 $ 1 Allowance for doubtful accounts 2 $ 2 $ 2 $ 175 $ $ 174 $ 3 For the Year Ended December31, 2008 Deducted from assets: Allowance for discounts $ $ 145 $ $ 145 $ Allowance for doubtful accounts 2 $ 2 Total $ 2 $ 145 $ $ 145 $ 2 For the Year Ended December31, 2007 Deducted from assets: Allowance for discounts $ $ 138 $ $ 138 $ Allowance for doubtful accounts 2 $ 2 Total $ 2 $ 138 $ $ 138 $ 2 (1) Discounts allowed.