Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Oct. 21, 2013 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | FALSE | |
Document Period End Date | 30-Sep-13 | |
Document Fiscal Year Focus | 2013 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | LO | |
Entity Registrant Name | LORILLARD, INC. | |
Entity Central Index Key | 1424847 | |
Current Fiscal Year End Date | -19 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 368,364,363 |
Consolidated_Condensed_Balance
Consolidated Condensed Balance Sheets (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | ||
In Millions, unless otherwise specified | ||||
Assets: | ||||
Cash and cash equivalents | $1,490 | $1,720 | ||
Short-term investments-available for sale securities | 145 | |||
Accounts receivable, less allowances of $2 and $3 | 33 | 18 | ||
Other receivables | 56 | [1] | 52 | [1] |
Inventories | 464 | 410 | ||
Deferred income taxes | 555 | 557 | ||
Other current assets | 120 | 20 | ||
Total current assets | 2,863 | 2,777 | ||
Plant and equipment, net | 313 | 298 | ||
Long-term investments-available for sale securities | 88 | |||
Goodwill | 64 | 64 | ||
Intangible assets | 57 | 57 | ||
Deferred income taxes | 51 | 48 | ||
Other assets | 119 | 152 | ||
Total assets | 3,555 | 3,396 | ||
Liabilities and Shareholders' Deficit: | ||||
Accounts and drafts payable | 35 | 39 | ||
Accrued liabilities | 430 | [1] | 356 | [1] |
Settlement costs | 1,098 | 1,183 | ||
Income taxes | 3 | 23 | ||
Total current liabilities | 1,566 | 1,601 | ||
Long-term debt | 3,571 | 3,111 | ||
Postretirement pension, medical and life insurance benefits | 397 | 409 | ||
Other liabilities | 63 | 52 | ||
Total liabilities | 5,597 | 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 369 million and 382 million shares) | 4 | 5 | ||
Additional paid-in capital | 239 | 298 | ||
Accumulated (deficit)/Retained earnings | -1,518 | 2,351 | ||
Accumulated other comprehensive loss | -238 | -241 | ||
Treasury stock at cost, 12 million and 143 million shares | -529 | -4,190 | ||
Total shareholders' deficit | -2,042 | -1,777 | ||
Total liabilities and shareholders' deficit | $3,555 | $3,396 | ||
[1] | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. |
Consolidated_Condensed_Balance1
Consolidated Condensed Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, except Per Share data, unless otherwise specified | ||
Accounts receivable, allowances | $2 | $3 |
Preferred stock, par value | $0.01 | $0.01 |
Preferred stock, shares authorized | 10 | 10 |
Common stock, par value | $0.01 | $0.01 |
Common stock, shares authorized | 600 | 600 |
Common stock, shares issued | 381 | 525 |
Common stock, shares outstanding | 369 | 382 |
Treasury stock, shares | 12 | 143 |
Consolidated_Condensed_Stateme
Consolidated Condensed Statements of Income (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Millions, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | ||||
Net sales (including excise taxes of $517, $498, $1,488 and $1,491, respectively) | $1,827 | $1,661 | $5,208 | $4,919 | ||||
Cost of sales (including excise taxes of $517, $498, $1,488 and $1,491, respectively) | 1,158 | 1,059 | 3,148 | 3,181 | ||||
Gross profit | 669 | 602 | 2,060 | 1,738 | ||||
Selling, general and administrative | 211 | [1] | 122 | [1] | 501 | [1] | 382 | [1] |
Operating income | 458 | 480 | 1,559 | 1,356 | ||||
Investment income | 1 | 2 | 3 | |||||
Interest expense | -45 | -38 | -128 | -114 | ||||
Income before income taxes | 413 | 443 | 1,433 | 1,245 | ||||
Income taxes | 155 | 160 | 535 | 455 | ||||
Net income | $258 | $283 | $898 | $790 | ||||
Earnings per share: | ||||||||
Basic | $0.69 | $0.72 | $2.39 | $2.02 | ||||
Diluted | $0.69 | $0.72 | $2.38 | $2.01 | ||||
Weighted average number of shares outstanding: | ||||||||
Basic | 371.01 | 390.21 | 375.13 | 390.75 | ||||
Diluted | 371.77 | 391.05 | 375.93 | 391.65 | ||||
[1] | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. |
Consolidated_Condensed_Stateme1
Consolidated Condensed Statements of Income (Parenthetical) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Excise taxes | $517 | $498 | $1,488 | $1,491 |
Consolidated_Condensed_Stateme2
Consolidated Condensed Statements of Comprehensive Income (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Net income | $258 | $283 | $898 | $790 |
Other comprehensive income, net of tax: | ||||
Defined benefit retirement plan gains, net of tax expense of $2, $2, $2 and $7 | 4 | 4 | 3 | 13 |
Comprehensive income | $262 | $287 | $901 | $803 |
Consolidated_Condensed_Stateme3
Consolidated Condensed Statements of Comprehensive Income (Parenthetical) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Defined benefit retirement plan gains, tax expense | $2 | $2 | $2 | $7 |
Consolidated_Condensed_Stateme4
Consolidated Condensed Statements of Shareholders' Deficit (USD $) | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock |
In Millions | ||||||
Beginning Balance at Dec. 31, 2011 | ($1,513) | $5 | $263 | $2,059 | ($228) | ($3,612) |
Net income | 790 | 790 | ||||
Other comprehensive income, net of tax expense of $7 for 2012 and $2 for 2013 | 13 | 13 | ||||
Dividends paid ($1.55 per share for 2012 and $1.65 per share for 2013) | -608 | -608 | ||||
Shares repurchased | -274 | -274 | ||||
Share-based compensation | 28 | 28 | ||||
Ending Balance at Sep. 30, 2012 | -1,564 | 5 | 291 | 2,241 | -215 | -3,886 |
Beginning Balance at Dec. 31, 2012 | -1,777 | 5 | 298 | 2,351 | -241 | -4,190 |
Net income | 898 | 898 | ||||
Other comprehensive income, net of tax expense of $7 for 2012 and $2 for 2013 | 3 | 3 | ||||
Dividends paid ($1.55 per share for 2012 and $1.65 per share for 2013) | -621 | -621 | ||||
Retirement of treasury shares | -1 | -82 | -4,146 | 4,229 | ||
Shares repurchased | -568 | -568 | ||||
Share-based compensation | 16 | 16 | ||||
Excess tax benefit on share-based compensation | 7 | 7 | ||||
Ending Balance at Sep. 30, 2013 | ($2,042) | $4 | $239 | ($1,518) | ($238) | ($529) |
Consolidated_Condensed_Stateme5
Consolidated Condensed Statements of Shareholders' Deficit (Parenthetical) (USD $) | 9 Months Ended | |
In Millions, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Defined benefit retirement plan gains (loss), net of tax expense | $2 | $7 |
Dividends paid per share | $1.65 | $1.55 |
Consolidated_Condensed_Stateme6
Consolidated Condensed Statements of Cash Flows (USD $) | 9 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Cash flows from operating activities: | ||
Net income | $898 | $790 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 33 | 30 |
Pension and other postretirement benefits contributions | -41 | -41 |
Pension and other postretirement benefits expense | 27 | 34 |
Deferred income taxes | -3 | -1 |
Share-based compensation | 14 | 14 |
Excess tax benefits from share-based payment arrangements | -7 | -9 |
Changes in operating assets and liabilities, net of amounts acquired: | ||
Accounts and other receivables | -50 | -13 |
Inventories | -54 | -124 |
Accounts payable and accrued liabilities | 69 | 54 |
Settlement costs | -85 | -84 |
Income taxes | -79 | -17 |
Other current assets | 8 | 6 |
Other assets | 5 | 2 |
Net cash provided by (used in) operating activities | 735 | 641 |
Cash flows from investing activities, net of cash acquired: | ||
Purchase of investments | -236 | |
Business acquisition | -135 | |
Additions to plant and equipment | -48 | -51 |
Sales, maturities and calls of investments | 3 | |
Net cash (used in) provided by investing activities | -281 | -186 |
Cash flows from financing activities: | ||
Proceeds from issuance of long-term debt | 500 | 500 |
Dividends paid | -621 | -608 |
Shares repurchased | -568 | -274 |
Debt issuance costs | -4 | -6 |
Proceeds from exercise of stock options | 2 | 5 |
Excess tax benefits from share-based payment arrangements | 7 | 9 |
Net cash (used in) provided by financing activities | -684 | -374 |
Change in cash and cash equivalents | -230 | 81 |
Cash and cash equivalents, beginning of year | 1,720 | 1,634 |
Cash and cash equivalents, end of period | 1,490 | 1,715 |
Cash paid for income taxes | 619 | 471 |
Cash paid for interest, net of cash received from interest rate swaps of $18 and $18 | $95 | $84 |
Consolidated_Condensed_Stateme7
Consolidated Condensed Statements of Cash Flows (Parenthetical) (USD $) | 9 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Cash received from interest rate swaps | $18 | $18 |
Basis_of_Presentation
Basis of Presentation | 9 Months Ended | |
Sep. 30, 2013 | ||
Basis of Presentation | 1 | Basis of Presentation |
Overview. Lorillard, Inc., through its subsidiaries, is engaged in the manufacture and sale of cigarettes and electronic cigarettes. Its cigarettes 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. On April 24, 2012, Lorillard acquired blu eCigs, an electronic cigarette brand in the U.S. Newport, Kent, True, Maverick, Old Gold and blu eCigs are the registered trademarks of Lorillard, Inc. and its subsidiaries. | ||
The consolidated condensed financial statements of Lorillard, Inc. (the “Company”), together with its subsidiaries (“Lorillard,” “we,” “us” or “our”), include the accounts of the Company and its subsidiaries after the elimination of intercompany accounts and transactions. | ||
The Company conducts its business through two operating and reporting segments – Cigarettes and Electronic Cigarettes. The Company’s Cigarettes Segment is managed through the Company, Lorillard Tobacco Company (“Lorillard Tobacco” or “Issuer”) and related entities. The Electronic Cigarettes Segment is managed through LOEC, Inc. (“LOEC”). | ||
Basis of Presentation. The accompanying unaudited consolidated condensed financial statements reflect all adjustments necessary to present fairly the financial position as of September 30, 2013 and December 31, 2012 and the consolidated income, comprehensive income, shareholders’ deficit and cash flows for the three and nine months ended September 30, 2013 and 2012. | ||
Results of operations for the three and nine months for each of the years reported herein are not necessarily indicative of results of operations of the entire year. | ||
These consolidated condensed financial statements should be read in conjunction with the Consolidated Financial Statements and related Notes to Consolidated Financial Statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on February 19, 2013. | ||
Stock Split. On November 13, 2012, the Company’s Board of Directors declared a three-for-one split of the Company’s common stock effected in the form of a 200% stock dividend. The record date of the stock split was December 14, 2012 and the additional shares were distributed on January 15, 2013. Treasury shares were not treated as shares outstanding in the stock split. All shares and per share amounts in these financial statements have been adjusted for prior periods presented for the stock split. | ||
Retirement of Treasury Shares. Effective January 16, 2013, the Company retired all of its 143.9 million common stock shares held in treasury, which resulted in decreases in treasury stock, common stock, additional paid-in capital and retained earnings of $4.229 billion, $1 million, $82 million and $4.146 billion, respectively. | ||
Short-term and Long-term Investments. Our short-term and long-term investments consist of investment grade debt securities, all of which are classified as available for sale. Available for sale securities are recorded at fair value, and unrealized holding gains and losses are recorded, net of tax, as a component of accumulated other comprehensive income. Available for sale securities with remaining maturities of less than one year and those identified by management at the time of purchase to be used to fund operations within one year are classified as short-term. All other available for sale securities are classified as long-term. Unrealized losses are charged against net earnings when a decline in fair value is determined to be other than temporary. We review several factors to determine whether a loss is other than temporary, such as the length and extent of the fair value decline, the financial condition and near term prospects of the issuer, and whether we have the intent to sell or will likely be required to sell before the anticipated recovery of the securities, which may be at maturity. Realized gains and losses are accounted for using the specific identification method. Purchases and sales are recorded on a trade date basis. | ||
Recently Adopted Accounting Pronouncements. Lorillard adopted ASU 2011-04 “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” ASU 2011-04 clarifies certain areas of the fair value guidance, including application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, and quantitative information about unobservable inputs used in a Level 3 fair value measurement. Additionally, ASU 2011-04 contains guidance on measuring the fair value of instruments that are managed within a portfolio, application of premiums and discounts in a fair value measurement, and requires additional disclosures about fair value measurements. The amendments contained in ASU 2011-04 are to be applied prospectively, and ASU 2011-04 is effective for public companies for interim and annual periods beginning after December 15, 2011. ASU 2011-04 did not have a material impact on Lorillard’s financial position or results of operations. | ||
Lorillard adopted ASU 2011-05 “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” ASU 2011-05 requires presentation of comprehensive income in either a single statement of comprehensive income or two separate but consecutive statements. ASU 2011-05 does not change the definitions or the components of net income and other comprehensive income (OCI), when an item must be reclassified from OCI to net income, or the calculation or presentation of earnings per share. The entity still has the choice to either present OCI components before tax with one line amount for tax, or net of taxes. Disclosure of the tax impact for each OCI component is still required. ASU 2011-05 is effective for public companies for reporting periods beginning after December 15, 2011 and must be applied retrospectively. ASU 2011-05 did not have any impact on Lorillard’s financial position or results of operations, but resulted in the presentation of a separate statement of other comprehensive income. | ||
In September 2011, the FASB issued ASU 2011-08 “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment.” ASU 2011-08 gives an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that it is not more likely than not, then performing a two-step impairment test of goodwill is not necessary. ASU 2011-08 is effective for public companies for reporting periods beginning after December 15, 2011. The adoption of ASU 2011-08 did not have a material impact on Lorillard’s financial position or results of operations, but may impact the manner in which Lorillard assesses goodwill for impairment. | ||
In July 2012, the FASB issued ASU 2012-02 “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Asset for Impairment.” ASU 2012-02 gives an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances indicates that it is more likely than not that indefinite-lived intangible assets other than goodwill are impaired, before being required to complete a quantitative impairment test. If an entity concludes, after assessing the totality of qualitative factors, that it is more likely than not that the indefinite-lived intangible assets are not impaired, then it is not required to complete a quantitative impairment test whereby the fair value of the indefinite-lived intangible asset would be determined and compared with the carrying amount of the intangible asset. The amendments in this update are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, and early adoption is permitted. The adoption of ASU 2012-02 in the first quarter of 2013 did not have a material impact on Lorillard’s financial position or results of operations, but may impact the manner in which Lorillard assesses indefinite-lived intangible assets for impairment. | ||
In February 2013, the FASB issued ASU 2013-02 “Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income.” ASU 2013-02 requires an entity to provide information about amounts reclassified out of accumulated other comprehensive income. An entity is also required to present either on the face of the financial statements or in the footnotes, significant items reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety. For other items that are not required under U.S. GAAP to be reclassified to net income in their entirety, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. This standard is effective for public entities prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU 2013-02 did not have any impact on Lorillard’s financial position or results of operations, but resulted in disclosure of additional information about amounts reclassified out of accumulated other comprehensive income. For additional information, see Note 17, “Accumulated Other Comprehensive Loss.” |
Acquisition
Acquisition | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Acquisition | 2 | Acquisition | |||
On April 24, 2012, Lorillard, Inc., through its 100% owned subsidiary, Lorillard Holdings Company, Inc. (“LHCI”), and its subsidiaries acquired blu eCigs and other assets used in the manufacture, distribution, development, research, marketing, advertising, and sale of electronic cigarettes (the “Acquisition”) for $135 million in cash. The Acquisition was made pursuant to an asset purchase agreement (the “Agreement”) with BLEC, LLC, Intermark Brands, LLC and QSN Technologies, LLC (the “Sellers”). The Agreement contains customary representations, warranties, covenants and indemnities by the Sellers and LHCI. The Acquisition provided Lorillard with the blu eCigs brand and an electronic cigarette product line. | |||||
The results of operations of blu eCigs are included in our consolidated financial statements beginning as of April 24, 2012. Lorillard’s consolidated revenues include $63 million and $177 million of sales of blu eCigs during the three and nine months ended September 30, 2013, respectively. blu eCigs had operating income of $0 and $9 million during the three and nine months ended September 30, 2013, respectively. Lorillard’s consolidated revenues included $14 million and $22 million of sales of blu eCigs during the third quarter and first nine months of 2012, respectively. blu eCigs incurred operating losses of $5 million and $6 million in the third quarter and first nine months of 2012, respectively. Lorillard incurred $6 million of acquisition-related expenses during the first nine months of 2012. | |||||
The fair values of the assets acquired and liabilities assumed at the date of acquisition are summarized below (in millions): | |||||
Assets acquired: | |||||
Current assets: | |||||
Accounts receivable | $ | 2 | |||
Inventories | 15 | ||||
Total current assets | 17 | ||||
Goodwill | 64 | ||||
Intangible assets | 58 | ||||
Total assets | 139 | ||||
Liabilities assumed: | |||||
Current liabilities: | |||||
Accounts and drafts payable | 4 | ||||
Purchase price | $ | 135 | |||
Inventories
Inventories | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Inventories | 3 | Inventories | |||||||
Cigarette inventories (including leaf tobacco, manufactured stock and materials and supplies) are valued at the lower of cost, determined on a last-in, first-out (“LIFO”) basis, or market. Electronic cigarette inventories of $70 million and $41 million included in manufactured stock as of September 30, 2013 and December 31, 2012, respectively, are valued at the lower of cost, determined on a first-in, first-out (“FIFO”) basis, or market. Inventories consisted of the following: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(In millions) | |||||||||
Leaf tobacco | $ | 307 | $ | 311 | |||||
Manufactured stock | 149 | 94 | |||||||
Material and supplies | 8 | 5 | |||||||
$ | 464 | $ | 410 | ||||||
If the average cost method of accounting was used for inventories valued on a LIFO basis, inventories would be greater by approximately $265 million and $245 million at September 30, 2013 and December 31, 2012, respectively. |
Other_Current_Assets
Other Current Assets | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Other Current Assets | 4 | Other Current Assets | |||||||
Other current assets were as follows: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(In millions) | |||||||||
Prepaid income taxes | $ | 108 | $ | — | |||||
Appeal bonds | 7 | 7 | |||||||
Deposits | — | 7 | |||||||
Other current assets | 5 | 6 | |||||||
Total | $ | 120 | $ | 20 | |||||
Plant_and_Equipment_Net
Plant and Equipment, Net | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Plant and Equipment, Net | 5 | Plant and Equipment, Net | |||||||
Plant and equipment is stated at historical cost and consisted of the following: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(In millions) | |||||||||
Land | $ | 3 | $ | 3 | |||||
Buildings | 95 | 95 | |||||||
Equipment | 695 | 657 | |||||||
Total | 793 | 755 | |||||||
Accumulated depreciation | (480 | ) | (457 | ) | |||||
Plant and equipment, net | $ | 313 | $ | 298 | |||||
Goodwill_and_Intangible_Assets
Goodwill and Intangible Assets | 9 Months Ended | |
Sep. 30, 2013 | ||
Goodwill and Intangible Assets | 6 | Goodwill and Intangible Assets |
On April 24, 2012, Lorillard completed the Acquisition of the net assets of blu eCigs from Sellers. For additional information, see Note 2, “Acquisition.” The purchase price allocation includes $64 million of goodwill and $58 million of intangible assets, $57 million of which was an indefinite lived intangible asset consisting of trademarks and trade names. All goodwill and intangible assets have been recorded as a part of our Electronic Cigarettes reporting segment. | ||
We evaluated our goodwill and indefinite lived intangible assets for impairment as of November 1, 2012. Based on the results of our impairment analysis, no impairment of goodwill or the blu eCigs trademark or trade name was determined to exist. | ||
There were no changes in goodwill during the nine months ended September 30, 2013. |
Other_Assets
Other Assets | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Other Assets | 7 | Other Assets | |||||||
Other assets were as follows: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(In millions) | |||||||||
Debt issuance costs | $ | 27 | $ | 26 | |||||
Interest rate swaps | 71 | 111 | |||||||
Other prepaid assets | 21 | 15 | |||||||
Total | $ | 119 | $ | 152 | |||||
Accrued_Liabilities
Accrued Liabilities | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Accrued Liabilities | 8 | Accrued Liabilities | |||||||
Accrued liabilities were as follows: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(In millions) | |||||||||
Legal fees | $ | 39 | $ | 23 | |||||
Salaries and other compensation | 25 | 19 | |||||||
Medical and other employee benefit plans | 29 | 33 | |||||||
Consumer rebates | 88 | 87 | |||||||
Sales promotion | 24 | 26 | |||||||
Accrued vendor charges | 5 | 19 | |||||||
Excise and other taxes | 16 | 63 | |||||||
Accrued interest | 60 | 33 | |||||||
U.S. Government Case accrual | 20 | — | |||||||
Evans Case accrual | 79 | — | |||||||
Other accrued liabilities | 45 | 53 | |||||||
Total | $ | 430 | $ | 356 | |||||
Commitments
Commitments | 9 Months Ended | |
Sep. 30, 2013 | ||
Commitments | 9 | Commitments |
At September 30, 2013, Lorillard Tobacco had contractual obligations to purchase leaf tobacco between October 1, 2013 and September 30, 2014 of approximately $104 million and between October 1, 2014 and September 30, 2015 of approximately $5 million. | ||
At September 30, 2013, Lorillard Tobacco had other contractual purchase obligations of approximately $60 million. These purchase obligations related primarily to agreements to purchase machinery between October 1, 2013 and September 30, 2014. | ||
At September 30, 2013, blu eCigs had contractual purchase obligations of approximately $57 million. These purchase obligations related primarily to agreements to purchase inventory between October 1, 2013 and September 30, 2014. |
Fair_Value
Fair Value | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Fair Value | 10 | 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 Level 1, as these are the most transparent or reliable: | |||||||||||||||||
• | Level 1 — Quoted prices for identical instruments in active markets. | ||||||||||||||||
• | Level 2 — 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. | ||||||||||||||||
• | Level 3 — 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 estimating 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 as of September 30, 2013, were as follows: | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
(In millions) | |||||||||||||||||
Cash and Cash Equivalents: | |||||||||||||||||
Prime money market funds | $ | 1,490 | $ | — | $ | — | $ | 1,490 | |||||||||
Total cash and cash equivalents | $ | 1,490 | $ | — | $ | — | $ | 1,490 | |||||||||
Short-term investments: | |||||||||||||||||
Corporate debt securities | $ | — | $ | 72 | $ | — | $ | 72 | |||||||||
U.S. Government agency obligations | — | 44 | — | 44 | |||||||||||||
Commercial paper | — | 16 | — | 16 | |||||||||||||
International government obligations | — | 13 | — | 13 | |||||||||||||
Total short-term investments | $ | — | $ | 145 | $ | — | $ | 145 | |||||||||
Long-term investments: | |||||||||||||||||
Corporate debt securities | $ | — | $ | 70 | $ | — | $ | 70 | |||||||||
U.S. Government agency obligations | — | 18 | — | 18 | |||||||||||||
Total long-term investments | $ | — | $ | 88 | $ | — | $ | 88 | |||||||||
Derivative Asset: | |||||||||||||||||
Interest rate swaps – fixed to floating rate | $ | — | $ | 71 | $ | — | $ | 71 | |||||||||
Total derivative asset | $ | — | $ | 71 | $ | — | $ | 71 | |||||||||
Assets and liabilities measured at fair value on a recurring basis at December 31, 2012 were as follows: | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
(In millions) | |||||||||||||||||
Cash and Cash Equivalents: | |||||||||||||||||
Prime money market funds | $ | 1,720 | $ | — | $ | — | $ | 1,720 | |||||||||
Total cash and cash equivalents | $ | 1,720 | $ | — | $ | — | $ | 1,720 | |||||||||
Derivative Asset: | |||||||||||||||||
Interest rate swaps – fixed to floating rate | $ | — | $ | 111 | $ | — | $ | 111 | |||||||||
Total derivative asset | $ | — | $ | 111 | $ | — | $ | 111 | |||||||||
The fair value of the money market funds, classified as Level 1, utilized quoted prices in active markets. | |||||||||||||||||
The fair value of the interest rate swaps, classified as Level 2, utilized a market approach model using the notional amount of the interest rate swap and observable inputs of time to maturity and market interest rates. See Note 13, “Derivative Instruments,” for additional information on the interest rate swaps. | |||||||||||||||||
Available for sale securities include corporate debt securities, U.S. Government agency obligations, commercial paper and international government obligations. The fair value of corporate debt securities, U.S. Government agency obligations, commercial paper and international government obligations, classified as Level 2, for which a quoted market price is not available for identical assets, utilized quoted market prices of similar assets. | |||||||||||||||||
There were no transfers between levels within the fair value hierarchy or Level 3 purchases, sales, issuances or settlements for the nine months ended September 30, 2013 or the twelve months ended December 31, 2012. | |||||||||||||||||
Proceeds from sales of available for sale securities were $3 million for the nine months ended September 30, 2013. There were no proceeds from sales of available for sale securities for the nine months ended September 30, 2012. For the nine months ended September 30, 2013, realized gains and losses on sales and maturities of available for sale securities were not material. There were no realized gains and losses on sales and maturities of available for sale securities for the nine months ended September 30, 2012. |
Credit_Agreement
Credit Agreement | 9 Months Ended | |
Sep. 30, 2013 | ||
Credit Agreement | 11 | Credit Agreement |
On July 10, 2012, Lorillard Tobacco, the principal, 100% owned operating subsidiary of the Company, terminated its three year $185 million credit agreement (the “Old Revolver”), dated March 26, 2010, and entered into a $200 million revolving credit facility that expires on July 10, 2017 (the “Revolver”) and is guaranteed by the Company. The Revolver may be increased to $300 million upon request. Proceeds from the Revolver may be used for general corporate and working capital purposes. The interest rates on borrowings under the Revolver are based on prevailing interest rates and, in part, upon the credit rating applicable to the Company’s senior unsecured long-term debt. | ||
The Revolver requires that the Company maintain a (i) ratio of debt to net income plus income taxes, interest expense, depreciation and amortization expense, any extraordinary losses, any non-cash expenses or losses and any losses on sales of assets outside of the ordinary course of business (“EBITDA”) of not more than 2.25 to 1 and (ii) ratio of EBITDA to interest expense of not less than 3.0 to 1. In addition, the Revolver contains other affirmative and negative covenants customary for facilities of this type. The Revolver contains customary events of default, including upon a change in control (as defined therein), that could result in the acceleration of all amounts and cancellation of all commitments outstanding under the Revolver. | ||
As of September 30, 2013, Lorillard was in compliance with all financial covenants and there were no borrowings under the Revolver. |
LongTerm_Debt
Long-Term Debt | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Long-Term Debt | 12 | Long-Term Debt | |||||||
Long-term debt consisted of the following: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(In millions) | |||||||||
2016 Notes - 3.500% Notes due 2016 | $ | 500 | $ | 500 | |||||
2017 Notes - 2.300% Notes due 2017 | 500 | 500 | |||||||
2019 Notes - 8.125% Notes due 2019 | 821 | 861 | |||||||
2020 Notes - 6.875% Notes due 2020 | 750 | 750 | |||||||
2023 Notes - 3.750% Notes due 2023 | 500 | — | |||||||
2040 Notes - 8.125% Notes due 2040 | 250 | 250 | |||||||
2041 Notes - 7.000% Notes due 2041 | 250 | 250 | |||||||
Total long-term debt | $ | 3,571 | $ | 3,111 | |||||
In August 2011, Lorillard Tobacco issued $750 million of unsecured senior notes in two tranches pursuant to the Indenture, dated June 23, 2009 (the “Indenture”), and the Third Supplemental Indenture, dated August 4, 2011. The first tranche was $500 million aggregate principal amount of 3.500% Notes due August 4, 2016 (the “2016 Notes”) and the second tranche was $250 million aggregate principal amount of 7.000% Notes due August 4, 2041 (the “2041 Notes”). The net proceeds from the issuance were used for the repurchase of the Company’s common stock. | |||||||||
In August 2012, Lorillard Tobacco issued $500 million aggregate principal amount of 2.300% unsecured senior notes due August 21, 2017 (the “2017 Notes”) pursuant to the Indenture and the Fourth Supplemental Indenture, dated August 21, 2012. The net proceeds from the issuance were used for the repurchase of the Company’s common stock. | |||||||||
In May 2013, Lorillard Tobacco issued $500 million aggregate principal amount of 3.750% unsecured senior notes due May 20, 2023 (the “2023 Notes”) pursuant to the Indenture and the Fifth Supplemental Indenture, dated May 20, 2013. The net proceeds from the issuance will be used for general corporate purposes, which may include, among other things, the repurchase, redemption or retirement of securities including the Company’s common stock, acquisitions, additions to working capital and capital expenditures. | |||||||||
Lorillard Tobacco is the principal, 100% owned operating subsidiary of the Company, and the $750 million aggregate principal amount of 8.125% senior notes issued in June 2009 and due 2019 (the “2019 Notes”), $750 million aggregate principal amount of 6.875% senior notes due 2020 and $250 million aggregate principal amount of 8.125% senior notes due 2040 and issued in April 2010 (the “2020 Notes” and “2040 Notes,” respectively), 2016 Notes, 2017 Notes, 2023 Notes and 2041 Notes (together, the “Notes”) are unconditionally guaranteed on a senior unsecured basis by the Company. | |||||||||
The interest rate payable on the 2019 Notes is subject to incremental increases from 0.25% to 2.00% in the event either Moody’s Investors Services, Inc. (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”) or both Moody’s and S&P downgrade the 2019 Notes below investment grade (Baa3 and BBB- for Moody’s and S&P, respectively). As of September 30, 2013, our debt ratings were Baa2 and BBB- with Moody’s and S&P, respectively, both of which are investment grade. | |||||||||
Upon the occurrence of a change of control triggering event, Lorillard Tobacco would 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 Indentures) and the Notes cease to be rated investment grade by both Moody’s and S&P within 60 days 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 September 30, 2013 and December 31, 2012, the carrying value of the Notes was $3.571 billion and $3.111 billion, respectively, and the estimated fair value was $3.804 billion and $3.512 billion, respectively. The fair value of the Notes is based on market pricing. The fair value of the Notes, classified as Level 1, utilized quoted prices in active markets. |
Derivative_Instruments
Derivative Instruments | 9 Months Ended | |
Sep. 30, 2013 | ||
Derivative Instruments | 13 | Derivative Instruments |
In September 2009, Lorillard Tobacco entered into interest rate swap agreements, which the Company guaranteed, with a total notional amount of $750 million to modify its exposure to interest rate risk by effectively converting the interest rate payable on the 2019 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%. The variable rates were 4.807% and 4.840% as of September 30, 2013 and December 31, 2012, respectively. 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 $6 million and $18 million for the three and nine months ended September 30, 2013 and 2012, respectively. | ||
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 September 30, 2013 and December 31, 2012, the adjusted carrying amounts of the hedged debt outstanding were $821 million and $861 million, respectively, and the amounts included in other assets were $71 million and $111 million, respectively. | ||
If our debt rating is downgraded below Ba2 by Moody’s or BB by S&P, the swap agreements will terminate and we will be required to settle them in cash before their expiration date. As of September 30, 2013, our debt ratings were Baa2 and BBB- with Moody’s and S&P, respectively, both of which are above the ratings at which settlement of our derivative contracts would be required. |
Earnings_Per_Share
Earnings Per Share | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Earnings Per Share | 14 | Earnings Per Share | |||||||||||||||
Basic and diluted earnings per share (“EPS”) were calculated using the following: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
(In millions, except per share data) | |||||||||||||||||
Numerator: | |||||||||||||||||
Net income, as reported | $ | 258 | $ | 283 | $ | $898 | $ | 790 | |||||||||
Less: Net income attributable to participating securities | (1 | ) | (1 | ) | (2 | ) | (2 | ) | |||||||||
Net income available to common shareholders | $ | 257 | $ | 282 | $ | 896 | $ | 788 | |||||||||
Denominator: | |||||||||||||||||
Basic EPS- weighted average shares | 371.01 | 390.21 | 375.13 | 390.75 | |||||||||||||
Effect of dilutive securities: | |||||||||||||||||
Stock Options and SARS | 0.76 | 0.84 | 0.8 | 0.9 | |||||||||||||
Diluted EPS- adjusted weighted average shares and assumed conversions | 371.77 | 391.05 | 375.93 | 391.65 | |||||||||||||
Earnings Per Share: | |||||||||||||||||
Basic | $ | 0.69 | $ | 0.72 | $ | 2.39 | $ | 2.02 | |||||||||
Diluted | $ | 0.69 | $ | 0.72 | $ | 2.38 | $ | 2.01 | |||||||||
No options to purchase shares of common stock were excluded from the diluted earnings per share calculation because their effect would be anti-dilutive for the three and nine months ended September 30, 2013. |
Retirement_Plans
Retirement Plans | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Retirement Plans | 15 | Retirement Plans | |||||||||||||||
Lorillard has defined benefit pension, postretirement benefits, profit sharing and savings plans for eligible employees. | |||||||||||||||||
Net periodic benefit cost components were as follows: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
Pension Benefits | 2013 | 2012 | 2013 | 2012 | |||||||||||||
(In millions) | |||||||||||||||||
Service cost | $ | 7 | $ | 6 | $ | 20 | $ | 18 | |||||||||
Interest cost | 13 | 14 | 38 | 42 | |||||||||||||
Expected return on plan assets | (21 | ) | (19 | ) | (62 | ) | (57 | ) | |||||||||
Amortization of net loss | 5 | 5 | 16 | 16 | |||||||||||||
Amortization of prior service cost | 1 | 1 | 3 | 3 | |||||||||||||
Net periodic benefit cost | $ | 5 | $ | 7 | $ | 15 | $ | 22 | |||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
Other Postretirement Benefits | 2013 | 2012 | 2013 | 2012 | |||||||||||||
(In millions) | |||||||||||||||||
Service cost | $ | 2 | $ | 1 | $ | 5 | $ | 4 | |||||||||
Interest cost | 2 | 3 | 7 | 7 | |||||||||||||
Net periodic benefit cost | $ | 4 | $ | 4 | $ | 12 | $ | 11 | |||||||||
Lorillard expects to contribute $31 million to its pension plans and $14 million to its other postretirement benefit plans in 2013, of which $31 million and $10 million had been contributed to the pension and postretirement benefit plans, respectively, as of September 30, 2013. |
Share_Repurchase_Programs
Share Repurchase Programs | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Share Repurchase Programs | 16 | Share Repurchase Programs | |||||||
As of August 9, 2011, the Company completed its $1.4 billion share repurchase program. The program was announced in August 2010 and authorized the Company to repurchase in the aggregate up to $1 billion of its outstanding common stock. The Board of Directors amended this program in May 2011, authorizing an additional $400 million in repurchases for a total of $1.4 billion under this program. The Company repurchased 45.1 million shares at an average price of $31.02 per share under this program. | |||||||||
As of February 24, 2012, the Company completed its $750 million share repurchase program that was announced in August 2011, after repurchasing an additional 4.9 million shares in January and February 2012 for $188 million at an average purchase price of $38.28. The Company repurchased a total of 20.1 million shares at an average price of $37.29 per share under this program. | |||||||||
As of January 30, 2013, the Company completed its $500 million share repurchase program that was announced in August 2012, after repurchasing an additional 2.8 million shares in January 2013 for $109 million at an average purchase price of $39.24. The Company repurchased a total of 12.7 million shares at an average price of $39.38 per share under this program. | |||||||||
On March 12, 2013, Lorillard, Inc. announced that its 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. Purchases by the Company under this program are made from time to time at prevailing market prices in open market purchases, privately negotiated transactions and block purchases or otherwise, as determined by the Company’s management. The repurchases are funded from existing cash balances. On May 21, 2013, the Company announced that the Board of Directors amended the Company’s existing $500 million share repurchase program, authorizing the Company to repurchase an additional $500 million of its outstanding common stock. | |||||||||
This program does not obligate the Company to acquire any particular amount of common stock. The timing, frequency and amount of repurchase activity will depend on a variety of factors such as levels of cash generation from operations, cash requirements for investment in the Company’s business, current stock price, market conditions and other factors. The share repurchase program may be suspended, modified or discontinued at any time and has no set expiration date. | |||||||||
During the first quarter of 2013, the Company repurchased approximately 2.8 million shares for $109 million at an average purchase price of $39.24 per share under the $500 million share repurchase program that ended on January 30, 2013. During the nine months ended September 30, 2013, the Company also repurchased approximately 10.6 million shares for $458 million at an average purchase price of $43.13 per share under the amended $1 billion share repurchase program announced on March 12, 2013 and amended on May 21, 2013. | |||||||||
As of September 30, 2013, total shares repurchased under share repurchase programs authorized by the Board since the separation from Loews in 2008 were as follows: | |||||||||
Program | Amount | Number of | |||||||
Authorized | Shares | ||||||||
Repurchased | |||||||||
(In millions) | (In millions) | ||||||||
July 2008 – October 2008 | $ | 400 | 17.6 | ||||||
May 2009 – July 2009 | 250 | 11 | |||||||
July 2009 – January 2010 | 750 | 29.3 | |||||||
February 2010 – May 2010 | 250 | 9.8 | |||||||
August 2010 *– August 2011 | 1,400 | 45.1 | |||||||
August 2011 – February 2012 | 750 | 20.1 | |||||||
August 2012 – January 2013 | 500 | 12.7 | |||||||
March 2013 **– | 1,000 | 10.6 | |||||||
Total | $ | 5,300 | 156.2 | ||||||
* | As amended on May 19, 2011 | ||||||||
** | As amended on May 21, 2013 |
Accumulated_Other_Comprehensiv
Accumulated Other Comprehensive Loss | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Accumulated Other Comprehensive Loss | 17 | Accumulated Other Comprehensive Loss | |||||||
Changes in accumulated other comprehensive loss during the period consisted of the following: | |||||||||
Defined Benefit | |||||||||
Pension | |||||||||
Plan Items | |||||||||
(In millions) | |||||||||
Beginning balance, January 1, 2013 | $ | 241 | |||||||
Amortization of pension and post-retirement plan actuarial gains and prior service cost | (3 | ) | |||||||
Ending balance September 30, 2013 | $ | 238 | |||||||
Reclassifications out of accumulated other comprehensive loss during the period were as follows: | |||||||||
Amount | Affected Line Item in | ||||||||
Reclassified | the Consolidated | ||||||||
from Accumulated | Statements of Income | ||||||||
Other | |||||||||
Comprehensive | |||||||||
Loss | |||||||||
(In millions) | |||||||||
Amortization of defined benefit pension and post-retirement items: | |||||||||
Prior service costs | $ | (3 | ) | (A) | |||||
Actuarial loss | (16 | ) | (A) | ||||||
(19 | ) | Total before tax | |||||||
7 | Income tax benefit | ||||||||
Total reclassifications for the period | $ | (12 | ) | Net of tax | |||||
(A) | These accumulated comprehensive loss components are included in the computation of net periodic pension cost (see Note 15, “Retirement Plans,” for additional details), which is included in cost of sales and selling, general and administrative expenses. |
Segment_Information
Segment Information | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Segment Information | 18 | Segment Information | |||||||||||||||
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance. Lorillard has two reportable segments, Cigarettes and Electronic Cigarettes. Lorillard identifies segments based on how our chief operating decision maker assesses performance and allocates resources, which is based on the types of products sold by each segment. Centrally incurred costs, such as the cost of Lorillard’s sales force and administrative overhead costs, are allocated to each segment based on the percentage of each segment’s budgeted net sales (excluding federal excise taxes) of Lorillard consolidated net sales (excluding federal excise taxes). | |||||||||||||||||
The Cigarettes segment consists principally of the operations of the Company, Lorillard Tobacco and related entities. 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 Electronic Cigarettes segment consists principally of the operations of LOEC and related entities. LOEC is an electronic cigarette company in the United States, and markets its products under the blu eCigs brand. 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. | |||||||||||||||||
Prior to the acquisition of blu eCigs on April 24, 2012, Lorillard managed its operations on the basis of one operating and reportable segment. | |||||||||||||||||
Lorillard maintains its headquarters and manufactures all of its cigarette products at its Greensboro, North Carolina facilities. Substantially all of Lorillard’s sales and all of Lorillard’s fixed assets are in the United States of America. Newport, Kent, True, Maverick, Old Gold and blu eCigs are the registered trademarks of Lorillard and its subsidiaries. Lorillard sold its major cigarette trademarks outside of the United States in 1977. | |||||||||||||||||
Three Months Ended September 30, 2013 | |||||||||||||||||
Cigarettes | Electronic | Consolidating | Total | ||||||||||||||
Cigarettes | Adjustments | Lorillard | |||||||||||||||
(In millions) | |||||||||||||||||
Net sales | $ | 1,764 | $ | 63 | $ | — | $ | 1,827 | |||||||||
Cost of sales | 1,110 | 48 | — | 1,158 | |||||||||||||
Gross profit | 654 | 15 | — | 669 | |||||||||||||
Selling, general and administrative | 196 | 15 | — | 211 | |||||||||||||
Operating income | $ | 458 | $ | — | $ | — | $ | 458 | |||||||||
Depreciation and amortization | $ | 10 | $ | — | $ | — | $ | 10 | |||||||||
Capital expenditures | $ | 14 | $ | — | $ | — | $ | 14 | |||||||||
Nine Months Ended September 30, 2013 | |||||||||||||||||
Cigarettes | Electronic | Consolidating | Total | ||||||||||||||
Cigarettes | Adjustments | Lorillard | |||||||||||||||
(In millions) | |||||||||||||||||
Net sales | $ | 5,031 | $ | 177 | $ | — | $ | 5,208 | |||||||||
Cost of sales | 3,025 | 123 | — | 3,148 | |||||||||||||
Gross profit | 2,006 | 54 | — | 2,060 | |||||||||||||
Selling, general and administrative | 456 | 45 | — | 501 | |||||||||||||
Operating income | $ | 1,550 | $ | 9 | $ | — | $ | 1,559 | |||||||||
Depreciation and amortization | $ | 33 | $ | — | $ | — | $ | 33 | |||||||||
Total assets | $ | 3,383 | $ | 297 | $ | (125 | ) | $ | 3,555 | ||||||||
Capital expenditures | $ | 47 | $ | 1 | $ | — | $ | 48 | |||||||||
Three Months Ended September 30, 2012 | |||||||||||||||||
Cigarettes | Electronic | Consolidating | Total | ||||||||||||||
Cigarettes | Adjustments | Lorillard | |||||||||||||||
(In millions) | |||||||||||||||||
Net sales | $ | 1,647 | $ | 14 | $ | — | $ | 1,661 | |||||||||
Cost of sales | 1,049 | 10 | — | 1,059 | |||||||||||||
Gross profit | 598 | 4 | — | 602 | |||||||||||||
Selling, general and administrative | 113 | 9 | — | 122 | |||||||||||||
Operating income/(loss) | $ | 485 | $ | (5 | ) | $ | — | $ | 480 | ||||||||
Depreciation and amortization | $ | 10 | $ | — | $ | — | $ | 10 | |||||||||
Capital expenditures | $ | 15 | $ | — | $ | — | $ | 15 | |||||||||
Nine Months Ended September 30, 2012 | |||||||||||||||||
Cigarettes | Electronic | Consolidating | Total | ||||||||||||||
Cigarettes | Adjustments | Lorillard | |||||||||||||||
(In millions) | |||||||||||||||||
Net sales | $ | 4,897 | $ | 22 | $ | — | $ | 4,919 | |||||||||
Cost of sales | 3,164 | 17 | — | 3,181 | |||||||||||||
Gross profit | 1,733 | 5 | — | 1,738 | |||||||||||||
Selling, general and administrative | 371 | 11 | — | 382 | |||||||||||||
Operating income/(loss) | $ | 1,362 | $ | (6 | ) | $ | — | $ | 1,356 | ||||||||
Depreciation and amortization | $ | 30 | $ | — | $ | — | $ | 30 | |||||||||
Total assets | $ | 3,368 | $ | 181 | $ | (125 | ) | $ | 3,424 | ||||||||
Capital expenditures | $ | 51 | $ | — | $ | — | $ | 51 |
Consolidating_Financial_Inform
Consolidating Financial Information | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Consolidating Financial Information | 19 | Consolidating Financial Information | |||||||||||||||||||
In June 2009, April 2010, August 2011, August 2012 and May 2013, Lorillard Tobacco, as primarily obligor, issued the Notes, which are unconditionally guaranteed by the Company for the payment and performance of Lorillard Tobacco’s obligation in connection therewith. | |||||||||||||||||||||
The following sets forth the condensed consolidating balance sheets as of September 30, 2013 and December 31, 2012, condensed consolidating statements of income for the three and nine months ended September 30, 2013 and 2012, condensed consolidating statements of comprehensive income for the three and nine months ended September 30, 2013 and 2012, and condensed consolidating statements of cash flows for the nine months ended September 30, 2013 and 2012 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 Rule 3-10 of SEC Regulation S-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 | |||||||||||||||||||||
September 30, 2013 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Assets: | |||||||||||||||||||||
Cash and cash equivalents | $ | 331 | $ | 529 | $ | 630 | $ | — | $ | 1,490 | |||||||||||
Short-term investments – available for sale securities | — | 145 | — | — | 145 | ||||||||||||||||
Accounts receivable, less allowances of $2 | — | 14 | 19 | — | 33 | ||||||||||||||||
Other receivables (1) | — | 55 | 93 | (92 | ) | 56 | |||||||||||||||
Inventories | — | 394 | 70 | — | 464 | ||||||||||||||||
Deferred income taxes | — | 553 | 2 | — | 555 | ||||||||||||||||
Other current assets | — | 112 | 8 | — | 120 | ||||||||||||||||
Total current assets | 331 | 1,802 | 822 | (92 | ) | 2,863 | |||||||||||||||
Investment in subsidiaries | — | 634 | — | (634 | ) | — | |||||||||||||||
Plant and equipment, net | — | 312 | 1 | — | 313 | ||||||||||||||||
Long-term investments – available for sale securities | — | 88 | — | — | 88 | ||||||||||||||||
Goodwill | — | — | 64 | — | 64 | ||||||||||||||||
Intangible assets | — | — | 57 | — | 57 | ||||||||||||||||
Deferred income taxes | — | 47 | 6 | (2 | ) | 51 | |||||||||||||||
Other assets | 125 | 119 | — | (125 | ) | 119 | |||||||||||||||
Total assets | $ | 456 | $ | 3,002 | $ | 950 | $ | (853 | ) | $ | 3,555 | ||||||||||
Liabilities and Shareholders’ Equity (Deficit): | |||||||||||||||||||||
Accounts and drafts payable | $ | — | $ | 30 | $ | 5 | $ | — | $ | 35 | |||||||||||
Accrued liabilities (1) | 10 | 499 | 13 | (92 | ) | 430 | |||||||||||||||
Settlement costs | — | 1,098 | — | — | 1,098 | ||||||||||||||||
Income taxes | — | — | 3 | — | 3 | ||||||||||||||||
Total current liabilities | 10 | 1,627 | 21 | (92 | ) | 1,566 | |||||||||||||||
Long-term debt | — | 3,571 | — | — | 3,571 | ||||||||||||||||
Investment in subsidiaries | 2,486 | — | — | (2,486 | ) | — | |||||||||||||||
Postretirement pension, medical and life insurance benefits | — | 397 | — | — | 397 | ||||||||||||||||
Other liabilities | 2 | 48 | 140 | (127 | ) | 63 | |||||||||||||||
Total liabilities | 2,498 | 5,643 | 161 | (2,705 | ) | 5,597 | |||||||||||||||
Shareholders’ Equity (Deficit): | |||||||||||||||||||||
Common stock | 4 | — | — | — | 4 | ||||||||||||||||
Additional paid-in capital | 239 | 113 | 152 | (265 | ) | 239 | |||||||||||||||
Accumulated (deficit)/Retained earnings | (1,518 | ) | (2,516 | ) | 637 | 1,879 | (1,518 | ) | |||||||||||||
Accumulated other comprehensive loss | (238 | ) | (238 | ) | — | 238 | (238 | ) | |||||||||||||
Treasury stock | (529 | ) | — | — | — | (529 | ) | ||||||||||||||
Total shareholders’ equity (deficit) | (2,042 | ) | (2,641 | ) | 789 | 1,852 | (2,042 | ) | |||||||||||||
Total liabilities and shareholders’ equity (deficit) | $ | 456 | $ | 3,002 | $ | 950 | $ | (853 | ) | $ | 3,555 | ||||||||||
-1 | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. | ||||||||||||||||||||
Condensed Consolidating Balance Sheets | |||||||||||||||||||||
December 31, 2012 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Assets: | |||||||||||||||||||||
Cash and cash equivalents | $ | 150 | $ | 1,471 | $ | 99 | $ | — | $ | 1,720 | |||||||||||
Accounts receivable, less allowances of $3 | — | 8 | 10 | — | 18 | ||||||||||||||||
Other receivables (1) | 1 | 41 | 77 | (67 | ) | 52 | |||||||||||||||
Inventories | — | 369 | 41 | — | 410 | ||||||||||||||||
Deferred income taxes | — | 555 | 2 | — | 557 | ||||||||||||||||
Other current assets | — | 12 | 8 | — | 20 | ||||||||||||||||
Total current assets | 151 | 2,456 | 237 | (67 | ) | 2,777 | |||||||||||||||
Investment in subsidiaries | — | 118 | — | (118 | ) | — | |||||||||||||||
Plant and equipment, net | — | 298 | — | — | 298 | ||||||||||||||||
Goodwill | — | — | 64 | — | 64 | ||||||||||||||||
Intangible assets | — | — | 57 | — | 57 | ||||||||||||||||
Deferred income taxes | — | 45 | 5 | (2 | ) | 48 | |||||||||||||||
Other assets | 125 | 152 | — | (125 | ) | 152 | |||||||||||||||
Total assets | $ | 276 | $ | 3,069 | $ | 363 | $ | (312 | ) | $ | 3,396 | ||||||||||
Liabilities and Shareholders’ Equity (Deficit): | |||||||||||||||||||||
Accounts and drafts payable | $ | — | $ | 35 | $ | 4 | $ | — | $ | 39 | |||||||||||
Accrued liabilities (1) | 14 | 399 | 10 | (67 | ) | 356 | |||||||||||||||
Settlement costs | — | 1,183 | — | — | 1,183 | ||||||||||||||||
Income taxes | — | — | 23 | — | 23 | ||||||||||||||||
Total current liabilities | 14 | 1,617 | 37 | (67 | ) | 1,601 | |||||||||||||||
Long-term debt | — | 3,111 | — | — | 3,111 | ||||||||||||||||
Investment in subsidiaries | 2,037 | — | — | (2,037 | ) | — | |||||||||||||||
Postretirement pension, medical and life insurance benefits | — | 409 | — | — | 409 | ||||||||||||||||
Other liabilities | 2 | 39 | 138 | (127 | ) | 52 | |||||||||||||||
Total liabilities | 2,053 | 5,176 | 175 | (2,231 | ) | 5,173 | |||||||||||||||
Shareholders’ Equity (Deficit): | |||||||||||||||||||||
Common stock | 5 | — | — | — | 5 | ||||||||||||||||
Additional paid-in capital | 298 | 92 | 72 | (164 | ) | 298 | |||||||||||||||
Retained earnings/Accumulated (deficit) | 2,351 | (1,958 | ) | 116 | 1,842 | 2,351 | |||||||||||||||
Accumulated other comprehensive loss | (241 | ) | (241 | ) | — | 241 | (241 | ) | |||||||||||||
Treasury stock | (4,190 | ) | — | — | — | (4,190 | ) | ||||||||||||||
Total shareholders’ equity (deficit) | (1,777 | ) | (2,107 | ) | 188 | 1,919 | (1,777 | ) | |||||||||||||
Total liabilities and shareholders’ equity (deficit) | $ | 276 | $ | 3,069 | $ | 363 | $ | (312 | ) | $ | 3,396 | ||||||||||
-1 | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. | ||||||||||||||||||||
Condensed Consolidating Statements of Income | |||||||||||||||||||||
For the Three Months Ended September 30, 2013 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net sales (including excise taxes of $517) | $ | — | $ | 1,764 | $ | 352 | $ | (289 | ) | $ | 1,827 | ||||||||||
Cost of sales (including excise taxes of $517) | — | 1,110 | 48 | — | 1,158 | ||||||||||||||||
Gross profit | — | 654 | 304 | (289 | ) | 669 | |||||||||||||||
Selling, general and administrative (1) | 1 | 484 | 15 | (289 | ) | 211 | |||||||||||||||
Operating income | (1 | ) | 170 | 289 | — | 458 | |||||||||||||||
Investment income | — | — | — | — | — | ||||||||||||||||
Interest expense | 1 | (45 | ) | (1 | ) | — | (45 | ) | |||||||||||||
Income before income taxes | — | 125 | 288 | — | 413 | ||||||||||||||||
Income taxes | 2 | 48 | 105 | — | 155 | ||||||||||||||||
Equity in earnings of subsidiaries | 260 | 182 | — | (442 | ) | — | |||||||||||||||
Net income | $ | 258 | $ | 259 | $ | 183 | $ | (442 | ) | $ | 258 | ||||||||||
-1 | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. | ||||||||||||||||||||
Condensed Consolidating Statements of Income | |||||||||||||||||||||
For the Nine Months Ended September 30, 2013 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net sales (including excise taxes of $1,488) | $ | — | $ | 5,031 | $ | 1,001 | $ | (824 | ) | $ | 5,208 | ||||||||||
Cost of sales (including excise taxes of $1,488) | — | 3,025 | 123 | — | 3,148 | ||||||||||||||||
Gross profit | — | 2,006 | 878 | (824 | ) | 2,060 | |||||||||||||||
Selling, general and administrative (1) | 1 | 1,279 | 45 | (824 | ) | 501 | |||||||||||||||
Operating income | (1 | ) | 727 | 833 | — | 1,559 | |||||||||||||||
Investment income | — | 2 | — | — | 2 | ||||||||||||||||
Interest expense | 4 | (128 | ) | (4 | ) | — | (128 | ) | |||||||||||||
Income before income taxes | 3 | 601 | 829 | — | 1,433 | ||||||||||||||||
Income taxes | 3 | 224 | 308 | — | 535 | ||||||||||||||||
Equity in earnings of subsidiaries | 898 | 516 | — | (1,414 | ) | — | |||||||||||||||
Net income | $ | 898 | $ | 893 | $ | 521 | $ | (1,414 | ) | $ | 898 | ||||||||||
-1 | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. | ||||||||||||||||||||
Condensed Consolidating Statements of Income | |||||||||||||||||||||
For the Three Months Ended September 30, 2012 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net sales (including excise taxes of $498) | $ | — | $ | 1,647 | $ | 14 | $ | — | $ | 1,661 | |||||||||||
Cost of sales (including excise taxes of $498) | — | 1,049 | 10 | — | 1,059 | ||||||||||||||||
Gross profit | — | 598 | 4 | — | 602 | ||||||||||||||||
Selling, general and administrative (1) | — | 379 | (257 | ) | — | 122 | |||||||||||||||
Operating income | — | 219 | 261 | — | 480 | ||||||||||||||||
Investment income | — | 1 | — | — | 1 | ||||||||||||||||
Interest expense | — | (37 | ) | (1 | ) | — | (38 | ) | |||||||||||||
Income before income taxes | — | 183 | 260 | — | 443 | ||||||||||||||||
Income taxes | — | 67 | 93 | — | 160 | ||||||||||||||||
Equity in earnings of subsidiaries | 283 | 171 | — | (454 | ) | — | |||||||||||||||
Net income | $ | 283 | $ | 287 | $ | 167 | $ | (454 | ) | $ | 283 | ||||||||||
-1 | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. | ||||||||||||||||||||
Condensed Consolidating Statements of Income | |||||||||||||||||||||
For the Nine Months Ended September 30, 2012 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net sales (including excise taxes of $1,491) | $ | — | $ | 4,897 | $ | 22 | $ | — | $ | 4,919 | |||||||||||
Cost of sales (including excise taxes of $1,491) | — | 3,165 | 16 | — | 3,181 | ||||||||||||||||
Gross profit | — | 1,732 | 6 | — | 1,738 | ||||||||||||||||
Selling, general and administrative (1) | 1 | 1,157 | (776 | ) | — | 382 | |||||||||||||||
Operating income | (1 | ) | 575 | 782 | — | 1,356 | |||||||||||||||
Investment income | — | 2 | 1 | — | 3 | ||||||||||||||||
Interest expense | (1 | ) | (112 | ) | (1 | ) | — | (114 | ) | ||||||||||||
Income before income taxes | (2 | ) | 465 | 782 | — | 1,245 | |||||||||||||||
Income taxes | (1 | ) | 174 | 282 | — | 455 | |||||||||||||||
Equity in earnings of subsidiaries | 791 | 505 | — | (1,296 | ) | — | |||||||||||||||
Net income | $ | 790 | $ | 796 | $ | 500 | $ | (1,296 | ) | $ | 790 | ||||||||||
-1 | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. | ||||||||||||||||||||
Condensed Consolidating Statements of Comprehensive Income | |||||||||||||||||||||
For the Three Months Ended September 30, 2013 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net income | $ | 258 | $ | 259 | $ | 183 | $ | (442 | ) | $ | 258 | ||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||
Defined benefit retirement plan gains, net of tax expense of $2 | — | 4 | — | — | 4 | ||||||||||||||||
Comprehensive income | $ | 258 | $ | 263 | $ | 183 | $ | (442 | ) | $ | 262 | ||||||||||
Condensed Consolidating Statements of Comprehensive Income | |||||||||||||||||||||
For the Nine Months Ended September 30, 2013 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net income | $ | 898 | $ | 893 | $ | 521 | $ | (1,414 | ) | $ | 898 | ||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||
Defined benefit retirement plan gains, net of tax expense of $2 | — | 3 | — | — | 3 | ||||||||||||||||
Comprehensive income | $ | 898 | $ | 896 | $ | 521 | $ | (1,414 | ) | $ | 901 | ||||||||||
Condensed Consolidating Statements of Comprehensive Income | |||||||||||||||||||||
For the Three Months Ended September 30, 2012 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net income | $ | 283 | $ | 287 | $ | 167 | $ | (454 | ) | $ | 283 | ||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||
Defined benefit retirement plan gains, net of tax expense of $2 | — | 4 | — | — | 4 | ||||||||||||||||
Comprehensive income | $ | 283 | $ | 291 | $ | 167 | $ | (454 | ) | $ | 287 | ||||||||||
Condensed Consolidating Statements of Comprehensive Income | |||||||||||||||||||||
For the Nine Months Ended September 30, 2012 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net income | $ | 790 | $ | 796 | $ | 500 | $ | (1,296 | ) | $ | 790 | ||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||
Defined benefit retirement plan gains, net of tax expense of $7 | — | 13 | — | — | 13 | ||||||||||||||||
Comprehensive income | $ | 790 | $ | 809 | $ | 500 | $ | (1,296 | ) | $ | 803 | ||||||||||
Condensed Consolidating Statements of Cash Flows | |||||||||||||||||||||
For the Nine Months Ended September 30, 2013 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||||
Net income | $ | 898 | $ | 893 | $ | 521 | $ | (1,414 | ) | $ | 898 | ||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||||||||||||
Equity income from subsidiaries | (898 | ) | (516 | ) | — | 1,414 | — | ||||||||||||||
Depreciation and amortization | — | 33 | — | — | 33 | ||||||||||||||||
Pension, health and life insurance contributions | — | (41 | ) | — | — | (41 | ) | ||||||||||||||
Pension, health and life insurance benefits expense | — | 27 | — | — | 27 | ||||||||||||||||
Deferred income taxes | — | (2 | ) | (1 | ) | — | (3 | ) | |||||||||||||
Share-based compensation | 1 | 13 | — | — | 14 | ||||||||||||||||
Excess tax benefits from share-based arrangements | — | (7 | ) | — | — | (7 | ) | ||||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||||||
Accounts and other receivables | — | (41 | ) | (34 | ) | 25 | (50 | ) | |||||||||||||
Inventories | — | (25 | ) | (29 | ) | — | (54 | ) | |||||||||||||
Accounts payable and accrued liabilities | (4 | ) | 94 | 4 | (25 | ) | 69 | ||||||||||||||
Settlement costs | — | (85 | ) | — | — | (85 | ) | ||||||||||||||
Income taxes | 1 | (65 | ) | (15 | ) | — | (79 | ) | |||||||||||||
Other current assets | — | 2 | 6 | — | 8 | ||||||||||||||||
Other assets | — | 5 | — | — | 5 | ||||||||||||||||
Return on investment in subsidiaries | 1,452 | — | — | (1,452 | ) | — | |||||||||||||||
Net cash provided by (used in) operating activities | 1,450 | 285 | 452 | (1,452 | ) | 735 | |||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||||
Purchases of investments | — | (236 | ) | — | — | (236 | ) | ||||||||||||||
Additions to plant and equipment | — | (47 | ) | (1 | ) | — | (48 | ) | |||||||||||||
Sales, maturities and calls of investments | — | 3 | — | — | 3 | ||||||||||||||||
Investment in subsidiary | (80 | ) | — | — | 80 | — | |||||||||||||||
Net cash used in investing activities | (80 | ) | (280 | ) | (1 | ) | 80 | (281 | ) | ||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||
Proceeds from issuance of long-term debt | — | 500 | — | — | 500 | ||||||||||||||||
Dividends paid | (621 | ) | (1,452 | ) | — | 1,452 | (621 | ) | |||||||||||||
Shares repurchased | (568 | ) | — | — | — | (568 | ) | ||||||||||||||
Debt issuance costs | — | (4 | ) | — | — | (4 | ) | ||||||||||||||
Contributions from parent | — | — | 80 | (80 | ) | — | |||||||||||||||
Proceeds from exercise of stock options | — | 2 | — | — | 2 | ||||||||||||||||
Excess tax benefits from share-based arrangements | — | 7 | — | — | 7 | ||||||||||||||||
Net cash (used in) provided by financing activities | (1,189 | ) | (947 | ) | 80 | 1,372 | (684 | ) | |||||||||||||
Change in cash and cash equivalents | 181 | (942 | ) | 531 | — | (230 | ) | ||||||||||||||
Cash and cash equivalents, beginning of year | 150 | 1,471 | 99 | — | 1,720 | ||||||||||||||||
Cash and cash equivalents, end of period | $ | 331 | $ | 529 | $ | 630 | $ | — | $ | 1,490 | |||||||||||
Condensed Consolidating Statements of Cash Flows | |||||||||||||||||||||
For the Nine Months Ended September 30, 2012 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||||
Net income | $ | 790 | $ | 796 | $ | 500 | $ | (1,296 | ) | $ | 790 | ||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||||||||||||
Equity income from subsidiaries | (791 | ) | (505 | ) | — | 1,296 | — | ||||||||||||||
Depreciation and amortization | — | 30 | — | — | 30 | ||||||||||||||||
Pension, health and life insurance contributions | — | (41 | ) | — | — | (41 | ) | ||||||||||||||
Pension, health and life insurance benefits expense | — | 34 | — | — | 34 | ||||||||||||||||
Deferred income taxes | (1 | ) | 1 | (1 | ) | — | (1 | ) | |||||||||||||
Share-based compensation | 1 | 13 | — | — | 14 | ||||||||||||||||
Excess tax benefits from share-based arrangements | — | (9 | ) | — | — | (9 | ) | ||||||||||||||
Changes in operating assets and liabilities, net of amounts acquired: | |||||||||||||||||||||
Accounts and other receivables | — | 864 | (2 | ) | (875 | ) | (13 | ) | |||||||||||||
Inventories | — | (110 | ) | (14 | ) | — | (124 | ) | |||||||||||||
Accounts payable and accrued liabilities | (4 | ) | 60 | (877 | ) | 875 | 54 | ||||||||||||||
Settlement costs | — | (84 | ) | — | — | (84 | ) | ||||||||||||||
Income taxes | — | (15 | ) | (2 | ) | — | (17 | ) | |||||||||||||
Other current assets | — | 17 | (11 | ) | — | 6 | |||||||||||||||
Other assets | (125 | ) | 2 | — | 125 | 2 | |||||||||||||||
Return on investment in subsidiaries | 1,021 | — | — | (1,021 | ) | — | |||||||||||||||
Net cash provided by (used in) operating activities | 891 | 1,053 | (407 | ) | (896 | ) | 641 | ||||||||||||||
Cash flows from investing activities, net of cash acquired: | |||||||||||||||||||||
Business acquisition | — | — | (135 | ) | — | (135 | ) | ||||||||||||||
Additions to plant and equipment | — | (51 | ) | — | — | (51 | ) | ||||||||||||||
Investment in subsidiary | (50 | ) | — | — | 50 | — | |||||||||||||||
Net cash (used in) provided by investing activities | (50 | ) | (51 | ) | (135 | ) | 50 | (186 | ) | ||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||
Dividends paid | (608 | ) | (1,021 | ) | — | 1,021 | (608 | ) | |||||||||||||
Proceeds from issuance of long-term debt | — | 500 | 125 | (125 | ) | 500 | |||||||||||||||
Shares repurchased | (274 | ) | — | — | — | (274 | ) | ||||||||||||||
Contributions from Parent | — | — | 50 | (50 | ) | — | |||||||||||||||
Debt issuance costs | — | (6 | ) | — | — | (6 | ) | ||||||||||||||
Proceeds from exercise of stock options | — | 5 | — | — | 5 | ||||||||||||||||
Excess tax benefits from share-based arrangements | — | 9 | — | — | 9 | ||||||||||||||||
Net cash (used in) provided by financing activities | (882 | ) | (513 | ) | 175 | 846 | (374 | ) | |||||||||||||
Change in cash and cash equivalents | (41 | ) | 489 | (367 | ) | — | 81 | ||||||||||||||
Cash and cash equivalents, beginning of year | 235 | 582 | 817 | — | 1,634 | ||||||||||||||||
Cash and cash equivalents, end of period | $ | 194 | $ | 1,071 | $ | 450 | $ | — | $ | 1,715 | |||||||||||
Legal_Proceedings
Legal Proceedings | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Legal Proceedings | 20 | Legal Proceedings | |||
Overview | |||||
As of October 17, 2013, 7,795 product liability cases are pending against cigarette manufacturers in the United States. Lorillard Tobacco is a defendant in 6,871 of these cases. Lorillard, Inc. is a co-defendant in 658 pending cases. A total of 4,237 of these lawsuits are Engle Progeny Cases, described below. In addition to the product liability cases, Lorillard Tobacco and, in some instances, Lorillard, Inc., are defendants in Filter Cases and Tobacco-Related Antitrust Cases. | |||||
Pending cases against Lorillard are those in which Lorillard Tobacco or Lorillard, Inc. have been joined to the litigation by either receipt of service of process, or execution of a waiver thereof, and a dismissal order has not been entered with respect to Lorillard Tobacco or Lorillard, Inc. Certain Flight Attendant Cases that were dismissed for administrative reasons, but which may be reinstated pursuant to the settlement agreement in Broin v. Philip Morris Companies, Inc., et al. have been included in the count of pending cases. The table below lists the number of certain tobacco-related cases pending against Lorillard as of the dates listed. A description of each type of case follows the table. | |||||
Type of Case | Total Number of Cases | ||||
Pending against Lorillard as | |||||
of October 17, 2013 | |||||
Conventional Product Liability Cases | 22 | ||||
Engle Progeny Cases | 4,237 | ||||
West Virginia Individual Personal Injury Cases | 38 | ||||
Flight Attendant Cases | 2,572 | ||||
Class Action Cases | 1 | ||||
Reimbursement Cases | 1 | ||||
Filter Cases | 61 | ||||
Tobacco-Related Antitrust Cases | 1 | ||||
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. Lorillard Tobacco is a defendant in each of the Conventional Product Liability cases listed in the table above, and Lorillard, Inc. is a co-defendant in four of the Conventional Product Liability 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 each of the Engle Progeny Cases listed in the above table and Lorillard, Inc. is a co-defendant in 654 Engle Progeny Cases. The time period for filing Engle Progeny Cases expired in January 2008 and no additional cases may be filed. Some of the Engle Progeny Cases were filed on behalf of multiple class members. Some of the courts hearing the cases filed by multiple class members have severed these suits into separate individual cases. It is possible the remaining suits filed by multiple class members may also be severed into separate individual cases. | |||||
West Virginia Individual Personal Injury Cases. In a 1999 administrative order, the West Virginia Supreme Court of Appeals transferred to a single West Virginia court a group of cases brought by individuals who allege cancer or other health effects caused by smoking cigarettes, smoking cigars, or using smokeless tobacco products (the “West Virginia Individual Personal Injury Cases”). The plaintiffs’ claims alleging injury from smoking cigarettes have been consolidated for trial. The plaintiffs’ claims alleging injury from the use of other tobacco products have been severed from the consolidated cigarette claims and have not been consolidated for trial. Lorillard Tobacco is a defendant in each of the West Virginia Individual Personal Injury Cases listed in the above table. Lorillard, Inc. is not a defendant in any of the West Virginia Individual Personal Injury Cases. The time for filing a case that could be consolidated for trial with the West Virginia Individual Personal Injury Cases expired in 2000. | |||||
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 January 15, 1997. Lorillard Tobacco is a defendant in each of the Flight Attendant Cases listed in the above table. Lorillard, Inc. is not a defendant in any of the Flight Attendant Cases. The time for filing Flight Attendant Cases expired in 2000 and no additional cases in this category may be filed. | |||||
Class Action Cases. Class Action Cases are purported to be brought on behalf of large numbers of individuals for damages allegedly caused by smoking. Lorillard Tobacco but not Lorillard, Inc. is a defendant in the Class Action Case listed in the above table. Neither Lorillard Tobacco nor Lorillard, Inc. is a defendant in additional Class Action Cases that are pending against other cigarette manufacturers, including approximately 19 “lights” Class Action Cases and two Class Action Cases that seek court-supervised medical monitoring programs. | |||||
Reimbursement Cases. Reimbursement Cases are brought by or on behalf of entities seeking equitable relief and reimbursement of expenses incurred in providing health care to individuals who allegedly were injured by smoking. Plaintiffs in these cases have included the U.S. federal government, U.S. state and local governments, foreign governmental entities, hospitals or hospital districts, American Indian tribes, labor unions, private companies and private citizens. Included in this category is the suit filed by the federal government, United States of America v. Philip Morris USA, Inc., et al., (“Philip Morris”), that sought to recover profits earned by the defendants and other equitable relief. Lorillard Tobacco is a defendant in the case, and Lorillard, Inc. is not a party to this case. In August 2006, the trial court issued its final judgment and remedial order and granted injunctive and other equitable relief. The final judgment did not award monetary damages. In May 2009, the final judgment was largely affirmed by an appellate court. In June 2010, the U.S. Supreme Court denied review of the case. See “Reimbursement Cases” below. | |||||
Filter Cases. Filter Cases are brought by individuals, including former employees of a predecessor of Lorillard Tobacco, who seek damages resulting from their alleged exposure to asbestos fibers that were incorporated into filter material used in one brand of cigarettes manufactured by Lorillard for a limited period of time ending more than 50 years ago. Lorillard Tobacco is a defendant in 60 of the 61 Filter Cases listed in the above table. Lorillard, Inc. is a co-defendant in one of the 60 Filter Cases that are pending against Lorillard Tobacco. Lorillard, Inc. is also a defendant in one additional Filter Case in which Lorillard Tobacco is not a defendant. | |||||
Tobacco-Related Antitrust Cases. Lorillard Tobacco is a defendant in the Tobacco-Related Antitrust Case as set forth in the table above. Lorillard, Inc. is not a defendant in this case. In 2000 and 2001, a number of cases were brought against cigarette manufacturers, including Lorillard Tobacco, alleging that defendants conspired to set the price of cigarettes in violation of federal and state antitrust and unfair business practices statutes. Plaintiffs sought class certification on behalf of persons who purchased cigarettes directly or indirectly from one or more of the defendant cigarette manufacturers. All of the other cases have been either successfully defended or voluntarily dismissed. | |||||
Loss Accrual and Disclosure Policy | |||||
Lorillard establishes accruals in accordance with Accounting Standards Codification Topic 450, Contingencies (“ASC 450”), when a material litigation liability is both probable and can be reasonably estimated. There are a number of factors impacting Lorillard’s ability to estimate the possible loss or a range of loss, including the specific facts of each matter; the legal theories proffered by plaintiffs and legal defenses available to Lorillard Tobacco and Lorillard, Inc.; the wide-ranging outcomes reached in similar cases; differing procedural and substantive laws in the various jurisdictions in which lawsuits have been filed, including whether punitive damages may be pursued or are permissible; the degree of specificity in a plaintiff’s complaint; the history of the case and whether discovery has been completed; plaintiffs’ history of use of Lorillard Tobacco’s cigarettes relative to those of the other defendants; the attribution of damages, if any, among multiple defendants; the application of contributory and/or comparative negligence to the allocation of damage awards among plaintiffs and defendants; the likelihood of settlements for de minimis amounts prior to trial; the likelihood of success at trial; the likelihood of success on appeal; and the impact of current and pending state and federal appellate decisions. It has been Lorillard’s experience and is its continued expectation that the above complexities and uncertainties will not be clarified until the late stages of litigation. For those reasonably possible loss contingencies for which an estimate of the possible loss or range of loss cannot be made, Lorillard discloses the nature of the litigation and any developments as appropriate. | |||||
Lorillard monitors the status of all outstanding litigation on an ongoing basis in order to determine the probability of loss and assess whether an estimate of the possible loss or range of loss can be determined. In evaluating litigation, Lorillard considers, among other things, the nature of the claims; the jurisdiction in which the claims have been filed and the law and case law developed in that jurisdiction; the experience of plaintiffs’ counsel in this type of litigation; the parties’ respective litigation strategies; the stage of the proceedings; the outcome of the matters at trial or on appeal; the type and amount of damages claimed by plaintiffs; the outcomes and damage awards, if any, for similar matters brought against Lorillard and/or the tobacco industry; and the possibility and likelihood of success on appeal. Lorillard’s assessment of a possible loss or range of loss is based on its assessment of the final outcome of the litigation upon the conclusion of all appeals. | |||||
Lorillard records provisions in the consolidated financial statements for pending litigation when it determines that it is probable that a loss has been incurred and the amount of loss can be reasonably estimated. Except for the impact of the State Settlement Agreements and the Evans case as described below, while it is reasonably possible that a loss has been incurred, (i) management has concluded that it is not probable that a loss has been incurred in any material pending litigation against Lorillard, (ii) management is unable to estimate the possible loss or range of loss that could result from an unfavorable outcome in any material pending litigation due to the many variables, uncertainties and complexities described above, and (iii) accordingly, management has not provided any amounts in the consolidated financial statements for possible losses related to material pending litigation. It is possible that Lorillard’s results of operations or cash flows in a particular quarterly or annual period or its financial position could be materially adversely affected by an unfavorable outcome or settlement of certain pending or future litigation or an inability to secure bonds where required to stay the execution of judgments on appeal. | |||||
Tobacco-Related Product Liability Litigation | |||||
Conventional Product Liability Cases | |||||
Since January 1, 2010, verdicts have been returned in eleven Conventional Product Liability Cases against cigarette manufacturers. Lorillard Tobacco was the only defendant in one of these eleven trials, Evans v. Lorillard Tobacco Company (Superior Court, Suffolk County, Massachusetts). In December 2010, the jury in Evans awarded $50 million in compensatory damages to the estate of a deceased smoker, $21 million in damages to the deceased smoker’s son, and $81 million in punitive damages. In September 2011, the court granted in part Lorillard Tobacco’s motion to reduce the jury’s damages awards and reduced the verdicts to the deceased smoker to $25 million and to the deceased smoker’s son to $10 million. The court did not reduce the punitive damages verdict, and it denied the other motions Lorillard Tobacco filed following trial that contested the jury’s verdict. In September 2011, the court also issued an order that addressed the claim based upon a Massachusetts consumer protection statute, which was not submitted to the jury in the trial. While the court made certain findings that were favorable to the plaintiffs on the consumer protection claim, it did not award additional damages to the plaintiffs on this claim. The court denied the various motions filed by Lorillard Tobacco following the entry of the order on the claim that was not submitted to the jury. In September 2011, the court entered a judgment that reflected the jury’s damages awards and the court’s reductions following trial. The judgment awarded plaintiffs interest on each of the three damages awards at the rate of 12% per year from the date the case was filed in 2004. Interest on the three awards was to continue to accrue until either the judgment was paid or was vacated on appeal. The judgment permitted plaintiff’s counsel to request an award of attorneys’ fees and costs. In November 2011, the court granted in part plaintiff’s counsel’s application for attorneys’ fees and costs and awarded approximately $2.4 million in fees and approximately $225,000 in costs. The court entered a final judgment that incorporated the amounts of the verdicts, as reduced by the trial court, the awards of interest, and the awards of attorneys’ fees and costs. Lorillard Tobacco noticed an appeal from the final judgment to the Massachusetts Appeals Court. In March 2012, plaintiff’s application for direct appellate review was granted, transferring the appeal to the Massachusetts Supreme Judicial Court. The parties’ arguments in this appeal were heard in December 2012. On June 11, 2013, the Massachusetts Supreme Judicial Court affirmed the compensatory damages award but remanded the case to the trial court for a new trial on the issue of punitive damages, finding that the jury was inadequately instructed regarding the application of various theories of negligence. The Massachusetts Supreme Judicial Court also vacated the judgment of the trial court pertaining to the claim based upon a Massachusetts consumer protection statute that was not submitted to the jury, and instructed the trial court to reconsider this claim in its entirety, (including the issue of liability, compensatory damages, attorneys’ fees and costs and whether to award double or treble damages), based solely on the relevant evidence presented at trial. Lorillard Tobacco filed a petition for rehearing, which was denied on July 26, 2013. In September 2013, plaintiff filed a motion seeking immediate entry of judgment on the compensatory damages award. At a status conference on September 17, 2013, the trial judge rejected defendant’s proposed procedures for retrial of plaintiff’s claims. Consequently, Lorillard Tobacco has incurred a charge of $79 million, including $35 million for compensatory damages plus statutory interest of 12% per year since June 28, 2004. This charge is reflected in selling, general and administrative expense for the third quarter 2013. This amount was paid in October 2013, and the case has been dismissed in its entirety and is now concluded. | |||||
Neither Lorillard Tobacco nor Lorillard, Inc. was a defendant in the ten other trials since January 1, 2010. Juries found in favor of the plaintiffs and awarded compensatory damages in four of these trials and also awarded $4.0 million in punitive damages in one of these trials. Defendants appealed the verdicts in two of these trials. The verdict in the first case was affirmed on appeal in July 2013; judgment has since been satisfied and this case is concluded. As of October 17, 2013 the appeal in the second case remains pending. In September 2013, an agreement was reached between the parties in the third case and no further appellate review will be taken. Satisfaction of judgment has been filed and this case is concluded. Post-trial motions are pending in the fourth case. The plaintiff in another case was awarded $25 million in punitive damages in a retrial ordered by an appellate court in which the jury was permitted to consider only the amount of punitive damages to award. Defendants have appealed that verdict. Juries found in favor of the defendants in the five other trials. Three of these five cases have concluded. Plaintiffs in two of the cases did not pursue appeals. Plaintiff in the third case noticed an appeal, which was affirmed in February 2013, and then did not seek any further review. In December 2012, the Court granted a post-trial motion for a new trial filed by the plaintiff in the fourth case, however, the defendant’s motion for reconsideration was granted by the Court, and a new order was entered which denied plaintiff’s motion for a new trial. The plaintiff filed a petition for review of this decision with the Alaska Supreme Court, which was denied in April 2013. The plaintiff in the fifth case filed a motion for a new trial, which was denied in August 2013. This case is currently on appeal. | |||||
In rulings addressing cases tried in earlier years, some appellate courts have reversed verdicts returned in favor of the plaintiffs in whole or in part, while other judgments that awarded damages to smokers have been affirmed on appeal. Manufacturers have exhausted their appeals and have been required to pay damages to plaintiffs in fourteen individual cases since 2001. Punitive damages were paid to the smokers in six of these cases. Neither Lorillard Tobacco nor Lorillard, Inc. was a party to any of these matters. | |||||
As of October 17, 2013, there was one case scheduled for trial in 2013. Some cases are scheduled for trial in 2014. As of October 17, 2013, Lorillard Tobacco is a defendant in one of these cases. Lorillard, Inc. is not a defendant in any of these cases. Trial dates are subject to change. | |||||
Engle Progeny Cases | |||||
In 2006, the Florida Supreme Court issued a ruling in Engle v. R.J. Reynolds Tobacco Co., et al., that had been certified as a class action on behalf of Florida residents, and survivors of Florida residents, who were injured or died from medical conditions allegedly caused by addiction to smoking. During a three-phase trial, a Florida jury awarded compensatory damages to three individuals and approximately $145 billion in punitive damages to the certified class. In its 2006 decision, the Florida Supreme Court vacated the punitive damages award, determined that the case could not proceed further as a class action and ordered decertification of the class. The Florida Supreme Court also reinstated the compensatory damages awards to two of the three individuals whose claims were heard during the first phase of the Engle trial. These two awards totaled $7 million, and both verdicts were paid in February 2008. Lorillard Tobacco’s payment to these two individuals, including interest, totaled approximately $3 million. | |||||
The Florida Supreme Court’s 2006 ruling also permitted Engle class members to file individual actions, including claims for punitive damages. The court further held that these individuals are entitled to rely on a number of the jury’s findings in favor of the plaintiffs in the first phase of the Engle trial. The time period for filing Engle Progeny Cases expired in January 2008 and no additional cases may be filed. In 2009, the Florida Supreme Court rejected a petition that sought to extend the time for purported class members to file an additional lawsuit. | |||||
Engle Progeny Cases are pending in various Florida state and federal courts. Some of the Engle Progeny Cases were filed on behalf of multiple plaintiffs. Various courts have entered orders severing the cases filed by multiple plaintiffs into separate actions. In 2009, one Florida federal court entered orders that severed the claims of approximately 4,400 Engle Progeny plaintiffs, initially asserted in a small number of multi-plaintiff actions, into separate lawsuits. In some cases, spouses or children of alleged former class members have also brought derivative claims. In 2011, approximately 500 cases that were among the 4,400 cases severed into separate lawsuits in 2009, filed by family members of alleged former class members, were combined with the cases filed by the smoker from which the family members’ claims purportedly derived. On August 1, 2013, Judge William G. Young of the District of Massachusetts took over responsibility for the Engle cases in the Middle District of Florida, Jacksonville Division. Judge Young issued an order that day that called for three groups of cases to be prepared for trial on the following schedule: approximately 50 cases to be made trial ready by January 2, 2014, approximately 107 cases to be made trial ready by May 2014, and approximately 120 cases to be made trial ready by September 2, 2014. Since the issuance of this order, fourteen of the cases to be prepared for trial have been dismissed. | |||||
Since January 2010 and through October 17, 2013, the United States District Court for the Middle District of Florida has dismissed a total of approximately 3,224 cases. In some instances, the plaintiffs whose cases were dismissed also were pursuing cases pending in other courts. In other instances, the attorneys who represented the plaintiffs asked the court to enter dismissal orders because they were no longer able to contact their clients. In September 2012, the Court dismissed approximately 589 cases for failure to comply with court deadlines and granted a motion that dismissed 211 additional cases for a variety of reasons. In November 2012, the Court granted a motion by defendants and dismissed an additional 36 cases as barred by the statute of limitations. In January 2013, the Court granted a motion by defendants and dismissed approximately 520 cases in which the plaintiffs were deceased at the time their personal injury lawsuits were filed. Plaintiffs appealed the dismissal of these 520 cases to the United States Court of Appeal for the Eleventh Circuit, and as of October 17, 2013, this appeal remains pending. In June 2013, the Court dismissed an additional approximately 440 cases for a variety of reasons. Plaintiffs have appealed the dismissal of approximately 70 of these cases, in which the plaintiffs were deceased at the time their personal injury lawsuits were filed or where the cases were barred by the statute of limitations. The Court granted plaintiffs’ motion to consolidate the appeals from the January and June orders dismissing these groups of federal cases. Other courts, including state courts, have entered orders dismissing additional cases. | |||||
Various intermediate state and federal Florida appellate courts have issued rulings that address the scope of the preclusive effect of the findings from the first phase of the Engle trial, including whether those findings relieve plaintiffs from the burden of proving certain legal elements of their claims. The Florida Supreme Court granted review in the Douglas case, in which a verdict awarding damages to the plaintiff was affirmed by an intermediate state Florida appellate court, to address the issue of whether a tobacco manufacturer’s due process rights are violated by reliance upon the Engle Phase I findings. On March 14, 2013, the Florida Supreme Court ruled that application of the Engle Phase I findings to establish certain elements of plaintiffs’ claims is not a violation of the Engle defendants’ due process rights. In order to prevail on either strict liability or negligence claims, the Court found that an Engle plaintiff must establish (i) membership in the Engle class; (ii) that addiction to smoking the Engle defendants’ cigarettes containing nicotine was a legal cause of the injuries the plaintiff alleged; and (iii) damages. On August 12, 2013, defendants filed a petition with the United States Supreme Court seeking review of the Florida Supreme Court’s decision. This petition for review was denied on October 7, 2013. The due process issue was also on appeal in the United States Court of Appeals for the Eleventh Circuit in two cases that had been consolidated for appeal: Duke and Walker. On September 6, 2013, the United States Court of Appeals for the Eleventh Circuit affirmed the verdicts in these cases, holding that the judgment of the Florida Supreme Court in Douglas should be given full faith and credit, and that deference to the decision in Douglas did not violate the due process rights of the defendant. The defendant has filed a petition for rehearing of the decision in Duke and Walker with the United States Court of Appeals for the Eleventh Circuit. As of October 17, 2013, the Court had not ruled on this petition. | |||||
Various courts, including appellate courts, have issued rulings that have addressed the conduct of the cases prior to trial. One intermediate state appellate court ruled in 2011 that plaintiffs are permitted to assert a claim against a cigarette manufacturer even if the smoker did not smoke a brand sold by that manufacturer. Defendants’ petition for review of this decision by the Florida Supreme Court was denied in August 2012. In March 2012, another intermediate state appellate court agreed with the 2011 ruling and reversed dismissals in a group of cases. In June and July 2013, the Florida Supreme Court denied defendants’ petitions for review of the intermediate appellate court’s decision in these cases. These rulings may limit the ability of the defendants, including Lorillard Tobacco and Lorillard, Inc., to be dismissed from cases in which smokers did not use a cigarette manufactured by Lorillard Tobacco. In October 2012, the Florida First District Court of Appeal affirmed the judgment awarding damages in one case, however the appeals court certified to the Florida Supreme Court the question of whether Engle class members may pursue an award of punitive damages based on claims of negligence or strict liability. As of October 17, 2013, the Florida Supreme Court had not announced whether it would grant review of this case. In June 2013, the Florida Supreme Court reversed an intermediate state appellate court and held that a plaintiff’s representative may continue to litigate an existing lawsuit after the original plaintiff has died. As of October 17, 2013, no petition seeking further review of this decision has been filed. | |||||
In connection with the Engle Progeny Cases, Lorillard and various other tobacco manufacturing defendants face various other legal issues that could materially affect the outcome of the Engle cases. These legal issues include, but are not limited to, the application of the statute of limitations and statute of repose, the constitutionality of a cap on the amount of a bond necessary to obtain an automatic stay of a post-trial judgment, and whether a judgment based on a claim of intentional conduct should be reduced by a jury’s findings of comparative fault. Various intermediate Florida appellate courts and Florida Federal Courts have issued rulings on these issues. | |||||
Lorillard Tobacco and Lorillard, Inc. are defendants in Engle Progeny Cases that have been placed on courts’ 2013 and 2014 trial calendars or in which specific trial dates have been set. Trial schedules are subject to change and it is not possible to predict how many of the cases pending against Lorillard Tobacco or Lorillard, Inc. will be tried in 2013. It also is not possible to predict whether some courts will implement procedures that consolidate multiple Engle Progeny Cases for trial. | |||||
As of October 17, 2013, trial was underway in one Engle Progeny Case in which Lorillard Tobacco is a defendant: Jacobson v. R. J. Reynolds Tobacco Company, et al. (Federal Court, Southern District, Florida). Lorillard, Inc. is not a defendant in this trial. | |||||
As of October 17, 2013, verdicts had been returned in fourteen Engle Progeny Cases in which Lorillard Tobacco was a defendant. Lorillard, Inc. was a defendant in one of these fourteen cases at the time of verdict. Juries awarded compensatory damages to the plaintiffs in eleven of these cases. In three of the eleven cases in which juries awarded compensatory damages, plaintiffs were awarded punitive damages from Lorillard Tobacco. In another case, the court entered an order following trial that awarded plaintiff compensatory damages. The fourteen cases are listed below in the order in which the verdicts were returned: | |||||
• | In Rohr v. R.J. Reynolds Tobacco Company, et al. (Circuit Court, Seventeenth Judicial Circuit, Broward County, Florida), a jury returned a verdict in favor of the defendants, including Lorillard Tobacco, in October 2010. Plaintiff in Rohr did not pursue an appeal and the case is concluded. | ||||
• | In Mrozek v. Lorillard Tobacco Company (Circuit Court, Fourth Judicial Circuit, Duval County, Florida), the jury awarded plaintiff a total of $6 million in compensatory damages and $11.3 million in punitive damages, in March 2011. The jury apportioned 35% of the fault for the smoker’s injuries to the smoker and 65% to Lorillard Tobacco. The final judgment entered by the trial court reflected the jury’s verdict and awarded plaintiff $3,900,588 in compensatory damages and $11,300,000 in punitive damages plus 6% annual interest. A motion filed by Lorillard Tobacco to disqualify the trial judge based on comments he made in another Engle Progeny trial was denied in July 2012 and a petition filed by Lorillard Tobacco requesting that the Florida First District Court of Appeal review that decision was denied in January 2013. In December 2012, the Florida First District Court of Appeal affirmed the final judgment awarding compensatory and punitive damages and Lorillard Tobacco’s motion for rehearing of the appellate court opinion was denied in February 2013. In March 2013, Lorillard Tobacco filed a notice with the Florida Supreme Court seeking review of the appellate court decision. In April 2013, the Florida Supreme Court ordered Lorillard Tobacco to show cause why the Florida Supreme Court’s decision in Douglas, which addressed the application of the Engle Phase I findings, is not controlling in this case. Lorillard Tobacco filed a response to this order in May 2013. As of October 17, 2013, the Florida Supreme Court had not announced whether it would grant review. The appellate court provisionally granted plaintiff’s motion for appellate attorneys’ fees, ruling that the trial court is authorized to award appellate fees if the trial court determines entitlement to attorneys’ fees. In June 2013, the trial court granted plaintiff’s motion for entitlement to trial court attorneys’ costs and fees and also determined that plaintiff was entitled to appellate attorneys’ fees. As of October 17, 2013, the trial court had not determined the amount of trial court or appellate fees to award. | ||||
• | In Tullo v. R.J. Reynolds, et al. (Circuit Court, Fifteenth Judicial Circuit, Palm Beach County, Florida), the jury awarded plaintiff a total of $4.5 million in compensatory damages, in April 2011. The jury assessed 45% of the fault to the smoker, 5% to Lorillard Tobacco and 50% to other defendants. The jury did not award punitive damages to the plaintiff. The court entered a final judgment that awarded plaintiff $225,000 in compensatory damages from Lorillard Tobacco plus 6% annual interest. Defendants noticed an appeal from the final judgment to the Florida Fourth District Court of Appeal. In August 2013, the Florida Fourth District Court of Appeal affirmed the final judgment awarding compensatory damages. Defendants filed a notice with the Florida Supreme Court seeking review of the appellate court decision. As of October 17, 2013, the Florida Supreme Court had not announced whether it would grant review. The appellate court provisionally granted plaintiff’s motion for appellate attorneys’ fees, ruling that the trial court is authorized to award appellate fees if the trial court determines entitlement to attorneys’ fees. As of October 17, 2013, the trial court had not determined the amount of trial court or appellate fees to award. | ||||
• | In Sulcer v. Lorillard Tobacco Company, et al. (Circuit Court, First Judicial Circuit, Escambia County, Florida), in April 2011, the jury awarded $225,000 in compensatory damages to the plaintiff and it assessed 95% of the fault for the smoker’s injuries to the smoker with 5% allocated to Lorillard Tobacco. The jury returned a verdict for Lorillard Tobacco as to whether plaintiff is entitled to punitive damages. The court entered a final judgment that incorporated the jury’s determination of the parties’ fault and awarded plaintiff $11,250 in compensatory damages. Lorillard Tobacco paid approximately $246,000 to resolve the verdict, costs and fees, as well as all post-trial motions and any potential appeal by the plaintiff. Following this payment, Sulcer was concluded. | ||||
• | In Jewett v. R.J. Reynolds Tobacco Co., et al. (Circuit Court, Fourth Judicial Circuit, Duval County, Florida), the jury awarded the estate of the decedent $692,981 in compensatory damages and awarded the plaintiff $400,000 for loss of companionship in May 2011. The jury assessed 70% of the responsibility for the decedent’s injuries to the decedent, 20% to R.J. Reynolds and 10% to Lorillard Tobacco. The jury returned a verdict for the defendants regarding whether punitive damages were warranted. The final judgment entered by the trial court reflected the jury’s verdict and awarded plaintiff a total of $109,298 from Lorillard Tobacco plus 6% annual interest. In June 2012, an agreement was reached between the parties as to the amount of costs and attorneys’ fees incurred and plaintiff’s motion for costs and attorneys’ fees was withdrawn. In November 2012, the Florida First District Court of Appeal reversed the judgment awarding compensatory damages and ordered the case returned to the trial court for a new trial. In January 2013, the appellate court denied a motion filed by the plaintiff for rehearing of the decision reversing the judgment. Both the plaintiff and defendants have filed notices with the Florida Supreme Court seeking review of the appellate court decision. As of October 17, 2013, the Florida Supreme Court had not announced whether it would grant review of this case. | ||||
• | In Weingart v. R.J. Reynolds Tobacco Company, et al. (Circuit Court, Fifteenth Judicial Circuit, Palm Beach County, Florida), in July 2011, the jury determined that the decedent did not sustain any compensatory damages from the defendants, including Lorillard Tobacco, and it returned a verdict for the defendants that punitive damages were not warranted. The jury assessed 91% of the fault for the decedent’s injuries to the decedent, 3% to Lorillard Tobacco and 3% to each of the other two defendants. Following trial, the court granted in part a motion filed by the plaintiff to award damages and it awarded plaintiff $150,000 in compensatory damages. The court entered a final judgment that applied the jury’s comparative fault determinations to the court’s award of compensatory damages. The final judgment awarded plaintiff $4,500 from Lorillard Tobacco. Defendants noticed an appeal to the Florida Fourth District Court of Appeal from the order that awarded compensatory damages to the plaintiff and amended their notice of appeal to address the final judgment. On February 13, 2013, the Florida Fourth District Court of Appeal affirmed the final judgment awarding compensatory damages. Defendants filed a notice with the Florida Supreme Court seeking review of this decision. In March 2012, the court entered a judgment against the defendants for costs with Lorillard Tobacco’s share amounting to $43,081 plus 4.75% annual interest. Defendants noticed an appeal from this costs judgment. In June 2013, all defendants satisfied both the final judgment awarding compensatory damages and the costs judgment, with Lorillard Tobacco’s share amounting to approximately $50,000. Defendants’ petition for Florida Supreme Court review and the appeal from the costs judgment have been dismissed. This case is now concluded. | ||||
• | In Sury v. R.J. Reynolds Tobacco Company, et al. (Circuit Court, Fourth Judicial Circuit, Duval County, Florida), in November 2011, the jury awarded plaintiff $1,000,000 in compensatory damages and assessed 60% of the responsibility for the decedent’s injuries to the decedent, 20% to Lorillard Tobacco and 20% to R.J. Reynolds. The jury returned a verdict for the defendants regarding whether punitive damages were warranted. In March 2012, the court entered a final judgment against defendants in the amount of $1,000,000 plus 4.75% annual interest, declining to apply the jury’s comparative fault findings to causes of action alleging intentional conduct. In December 2012, Lorillard Tobacco reached an agreement with the plaintiff to resolve the trial costs and fees, should the judgment be upheld on appeal. On June 24, 2013, the Florida First District Court of Appeal affirmed the final judgment awarding compensatory damages to the plaintiff. Lorillard Tobacco’s motion for rehearing of this decision with the Florida First District Court of Appeal was denied in August 2013. The defendants have filed a petition with the Florida Supreme Court seeking review of this decision. As of October 17, 2013, the Florida Supreme Court had not announced whether it would grant review of this case. | ||||
• | In Alexander v. Lorillard Tobacco Company, et al. (Circuit Court, Eleventh Judicial Circuit, Miami-Dade County, Florida), the jury awarded plaintiff $20,000,000 in compensatory damages and $25,000,000 in punitive damages in February and March 2012. Lorillard Tobacco is the only defendant in this case. The jury apportioned 20% of the fault for the smoker’s injuries to the smoker and 80% to Lorillard Tobacco. In March 2012, the court entered a final judgment that applied the jury’s comparative fault determination to the court’s award of compensatory damages, awarding the plaintiff $16,000,000 in compensatory damages and $25,000,000 in punitive damages from Lorillard Tobacco. In May 2012, the court granted a motion by Lorillard Tobacco to lower the amount of compensatory damages and reduced the amount awarded to $10,000,000 from Lorillard Tobacco. Other post-trial motions challenging the verdict were denied. The court entered an amended final judgment that applied the jury’s comparative fault determination to the court’s award of compensatory damages, awarding the plaintiff $8,000,000 in compensatory damages and $25,000,000 in punitive damages, plus the statutory rate of interest, which is currently 4.75%. In September 2012, an agreement was reached between the parties as to the amount of costs and attorneys’ fees incurred, should the judgment be upheld on appeal. Lorillard Tobacco noticed an appeal from the amended final judgment to the Florida Third District Court of Appeal. On September 4, 2013, the Florida Third District Court of Appeal affirmed the amended final judgment awarding compensatory and punitive damages. Lorillard Tobacco has filed a motion for rehearing of this decision with the Florida Third District Court of Appeal. As of October 17, 2013, the Court had not ruled on this motion. | ||||
• | In Calloway v. R.J. Reynolds Tobacco Company, et al. (Circuit Court, Seventeenth Judicial Circuit, Broward County, Florida), the jury awarded plaintiff and a daughter of the decedent a total of $20,500,000 in compensatory damages in May 2012. The jury apportioned 20.5% of the fault for the smoker’s injuries to the smoker, 27% to R.J. Reynolds, 25% to Philip Morris, 18% to Lorillard Tobacco, and 9.5% to Liggett. The jury awarded $12,600,000 in punitive damages from Lorillard Tobacco and $42,250,000 from the other defendants, for a total punitive damages award of $54,850,000. In August 2012, the court granted a post-trial motion by the defendants and lowered the compensatory damages award to $16,100,000. The court also ruled that the jury’s finding on the plaintiff’s percentage of comparative fault would not be applied to reduce the compensatory damage award because the jury found in favor of the plaintiff on her claims alleging intentional conduct. In August 2012, the court entered final judgment against defendants in the amount of $16,100,000 in compensatory damages and $54,850,000 ($12,600,000 from Lorillard Tobacco) in punitive damages, plus the statutory rate of interest. The final judgment also granted plaintiff’s application for costs and attorneys’ fees, but as of October 17, 2013, the trial court had not awarded an amount. Defendants have noticed an appeal from the final judgment to the Florida Fourth District Court of Appeal. | ||||
• | In Evers v. R.J. Reynolds Tobacco Company, et al. (Circuit Court, Thirteenth Judicial Circuit, Hillsborough County, Florida), the jury awarded plaintiff and the estate of the decedent a total of $3,230,000 in compensatory damages in February 2013. The jury apportioned 31% of the fault for the smoker’s injuries to the smoker, 60% to R.J. Reynolds and 9% to Lorillard Tobacco. The jury found that punitive damages against Lorillard Tobacco were not warranted and awarded $12,362,042 in punitive damages from R.J. Reynolds Tobacco Company. The Court granted a post-trial motion by the defendants for a directed verdict on punitive damages and, as a result, the jury’s punitive damages award was set aside. The Court denied a motion filed by the plaintiff to reconsider the directed verdict. At a post-trial hearing, the plaintiff waived entitlement to the jury’s loss of services award which amounted to $280,000 of the total compensatory damages award. In May, 2013, the court entered a final judgment that applied the jury’s comparative fault determinations and awarded plaintiff and the estate of the decedent $2,035,500 in compensatory damages ($256,500 from Lorillard Tobacco), plus the statutory rate of interest. Plaintiff and defendants have both appealed the final judgment to the Florida Second District Court of Appeal. Plaintiff also filed a motion for entitlement to attorneys’ fees and costs. As of October 17, 2013, the trial court had not ruled on this motion. | ||||
• | In Cohen v. R.J. Reynolds Tobacco Company, et al. (Circuit Court, Fifteenth Judicial Circuit, Palm Beach County, Florida), the jury awarded plaintiff and the estate of the decedent a total of $2,055,050 in compensatory damages in May 2013. The jury apportioned 40% of the fault for the smoker’s injuries to the smoker, 30% to R.J. Reynolds, 20% to Lorillard Tobacco, and 10% to Liggett. The jury found that punitive damages were not warranted against any of the defendants. On May 6, 2013, the Court entered final judgment against defendants in the amount of $1,233,030 ($411,010 from Lorillard Tobacco) plus 4.75% annual interest. On July 10, 2013, the Court entered an order granting defendants’ motion for a new trial based on the plaintiff’s improper arguments during closing. This order effectively vacated the final judgment. Plaintiff has filed a notice of appeal from the order granting a motion for new trial to the Florida Fourth District Court of Appeal. Plaintiff has also filed a petition with the Florida Fourth District Court of Appeal seeking to disqualify the trial court judge from further consideration of this case. As of October 17, 2013, the Court had not ruled on this petition. | ||||
• | In LaMotte v. R.J. Reynolds Tobacco Company, et al. (Circuit Court, First Judicial Circuit, Escambia County, Florida), the jury returned a verdict in favor of the defendants in May 2013. The Court entered final judgment in favor of the defendants in May 2013. Plaintiff has agreed to waive any post-trial or appellate review of the verdict and judgment, and defendants have agreed not to seek to recover costs or fees. This case is concluded. | ||||
• | In Ruffo v. R.J. Reynolds Tobacco Company, et al. (Circuit Court, Eleventh Circuit, Miami-Dade County, Florida), the jury awarded plaintiff $1,500,000 in compensatory damages in May 2013. The jury apportioned 85% of the fault for the smoker’s injuries to the smoker, 12% to Philip Morris, and 3% to Lorillard Tobacco. Defendants’ post-trial motions challenging the verdict were denied. On October 4, 2013, the Court entered a final judgment against defendants that applied the jury’s comparative fault determinations and awarded plaintiff $225,000 in compensatory damages ($45,000 from Lorillard Tobacco) plus the statutory rate of interest which is currently 4.75%. Plaintiff has filed a motion seeking entitlement to attorneys’ costs and fees. As of October 17, 2013, the Court had not ruled on this motion. | ||||
• | In Gafney v. R.J. Reynolds Tobacco Company, et al. (Circuit Court, Fifteenth Judicial Circuit, Palm Beach County, Florida), the jury awarded plaintiff a total of $5,800,000 in compensatory damages in September 2013. The jury apportioned 34% of the fault for the smoker’s injuries to the smoker, 33% to R.J. Reynolds, and 33% to Lorillard Tobacco. Lorillard, Inc. was also a defendant in this trial but damages and comparative fault were not assessed separately for Lorillard, Inc. Because the jury found in favor of the defendants on the claims alleging intentional conduct, the plaintiff was not entitled to punitive damages. On September 26, 2013, the Court entered a final judgment that applied the jury’s comparative fault determinations and awarded the plaintiff a total of $3,828,000 in compensatory damages ($1,914,000 from Lorillard Tobacco), plus the statutory rate of interest. Plaintiff has filed a motion seeking entitlement to attorneys’ fees and costs and defendants have filed post-trial motions challenging the verdict. As of October 17, 2013, the Court had not ruled on these motions. | ||||
As of October 17, 2013, trial was not underway in any Engle Progeny Cases involving defendants other than Lorillard Tobacco or Lorillard, Inc. | |||||
As of October 17, 2013, verdicts have been returned in 92 Engle Progeny trials since the Florida Supreme Court issued its 2006 ruling that permitted members of the Engle class to bring individual lawsuits in which neither Lorillard Tobacco nor Lorillard, Inc. was a defendant at trial. Juries awarded compensatory damages and punitive damages in 30 of the trials. The 30 punitive damages awards have totaled approximately $707 million and have ranged from $20,000 to $244 million. In 28 of the trials, juries’ awards were limited to compensatory damages. In the 34 remaining trials, juries found in favor of the defendants. Post-trial motions challenging the verdicts in some cases and appeals from final judgments in some cases are pending before various Florida circuit and intermediate appellate courts. As of October 17, 2013, one verdict in favor of the defendants and three verdicts in favor of the plaintiff have been reversed on appeal and returned to the trial court for a new trial on all issues. In nine cases, the appellate courts have ruled that the issue of damages awarded must be revisited by the trial court. Motions for rehearing of these appellate court rulings are pending in some cases. | |||||
In a case tried prior to the Florida Supreme Court’s 2006 decision permitting members of the Engle class to bring individual lawsuits, one Florida court allowed the plaintiff to rely at trial on certain of the Engle jury’s findings. That trial resulted in a verdict for the plaintiffs in which they were awarded approximately $25 million in compensatory damages. Neither Lorillard Tobacco nor Lorillard, Inc. was a party to this case. In March 2010, a Florida appellate court affirmed the jury’s verdict. The court denied defendants’ petitions for rehearing in May 2010, and the defendants have satisfied the judgment by paying the damages award. | |||||
In June 2009, Florida amended the security requirements for a stay of execution of any judgment during the pendency of appeal in Engle Progeny Cases. The amended statute provides for the amount of security for individual Engle Progeny Cases to vary within prescribed limits based on the number of adverse judgments that are pending on appeal at a given time. The required security decreases as the number of appeals increases to ensure that the total security posted or deposited does not exceed $200 million in the aggregate. This amended statute applies to all judgments entered on or after June 16, 2009. The plaintiffs in some cases challenged the constitutionality of the amended statute. These motions were denied, withdrawn or declared moot. In January 2012, the Florida Supreme Court agreed to review one of the orders denying a challenge to the amended statute. In August 2012, the Florida Supreme Court dismissed the appeal as moot because the defendant had satisfied the judgment. | |||||
West Virginia Individual Personal Injury Cases | |||||
The West Virginia Individual Personal Injury Cases (the “IPIC Cases”) are brought in a single West Virginia court by individuals who allege cancer or other health effects caused by smoking cigarettes, smoking cigars, or using smokeless tobacco products. Approximately 600 IPIC Cases are pending. Most of the pending cases have been consolidated for trial. The order that consolidated the cases for trial, among other things, also limited the consolidation to those cases that were filed by September 2000. No additional IPIC Cases may be consolidated for trial with this group. The court has entered a trial plan for the IPIC Cases that calls for a multi-phase trial. | |||||
In September 2000, there were approximately 1,250 IPIC Cases, and Lorillard Tobacco was named in all but a few of them. Plaintiffs in most of the cases alleged injuries from smoking cigarettes, and the claims alleging injury from smoking cigarettes have been consolidated for a multi-phase trial. Approximately 645 IPIC Cases have been dismissed in their entirety. Lorillard Tobacco has been dismissed from approximately 565 additional IPIC Cases because those plaintiffs did not submit evidence that they used a Lorillard Tobacco product. These additional IPIC Cases remain pending against other cigarette manufacturers and some or all of the dismissals of Lorillard Tobacco could be contested in subsequent appeals. As of October 17, 2013, Lorillard Tobacco is a defendant in 31 of the pending IPIC Cases. Lorillard, Inc. was not a defendant in any of the IPIC Cases. | |||||
The first phase of the consolidated trial began April 15, 2013, and ended with a Phase I verdict entered by the jury on May 15, 2013. In its verdict, the jury found against plaintiffs on their claims against defendants for design defect, negligent design, failure to warn, concealment, breach of express warranty, and willful and wanton misconduct. The jury found for plaintiffs on their claim that all ventilated filter cigarettes manufactured and sold between 1964 and July 1, 1969 were defective because of a failure to instruct. In pleadings filed before trial, no plaintiff in a pending IPIC Case claims to have smoked a ventilated filtered cigarette manufactured and sold by Lorillard Tobacco between 1964 and July 1, 1969. Plaintiffs and defendants both filed post-trial motions on July 15, 2013. The trial court heard argument on those motions on August 13, 2013. | |||||
On September 16, 2013, the court entered a judgment on the jury’s Phase I verdict and entered a separate order denying the parties’ post-trial motions. Plaintiffs filed a motion to alter or amend the judgment on September 24, 2013, and defendants filed their opposition to that motion on October 2, 2013. On October 7, 2013, the court informed the parties that, on its own authority, it will vacate the September 16, 2013 judgment and order. The court stated that it intends to enter a new judgment reciting that: 1) ventilated cigarettes the defendants manufactured and sold between 1964 and July 1, 1969, were defective due to a failure to instruct; 2) all other cigarettes manufactured and sold by defendants were not defective; 3) defendants’ conduct did not justify an award of punitive damages; 4) there is no just reason for delaying entry of final judgment on the jury’s verdict; and 5) plaintiffs’ motion to alter or amend the September 16 judgment is denied as moot. The court also stated that it intends to enter an order that: 1) denies the parties’ post-trial motions; 2) makes final the dismissals of the approximately 645 IPIC cases that occurred before trial; and 3) states that there is no just cause for denying entry of final judgment in those cases. As of October 17, 2013, the court had not vacated the September 16 judgment and order or entered referenced judgment or order. It is possible that if a new judgment and order are entered, they may not conform in all respects to the court’s intent as described above. | |||||
The court has severed from the IPIC Cases those claims alleging injury from the use of tobacco products other than cigarettes, including smokeless tobacco and cigars (the “Severed IPIC Claims”). The Severed IPIC Claims involve 30 plaintiffs. Twenty-eight of these plaintiffs have asserted both claims alleging that their injuries were caused by smoking cigarettes as well as claims alleging that their injuries were caused by using other tobacco products. The former claims were included in the consolidated trial of the IPIC Cases, while the latter claims are among the Severed IPIC Claims. Lorillard Tobacco is a defendant in seven of the Severed IPIC Claims. Lorillard, Inc. is not a defendant in any of the Severed IPIC Claims. Two plaintiffs have asserted only claims alleging that injuries were caused by using tobacco products other than cigarettes, and no part of their cases was included in the consolidated trial of the IPIC Cases (the “Severed IPIC Cases”). Neither Lorillard Tobacco nor Lorillard, Inc. is a defendant in either of the Severed IPIC Cases. | |||||
As of October 17, 2013, the Severed IPIC Claims and the Severed IPIC Cases were not subject to a trial plan. None of the Severed IPIC Claims or the Severed IPIC Cases was scheduled for trial as of October 17, 2013. | |||||
Flight Attendant Cases | |||||
Lorillard Tobacco and three other cigarette manufacturers are the defendants in each of the pending Flight Attendant Cases. Lorillard, Inc. is not a defendant in any of these cases. These suits were filed as a result of a settlement agreement by the parties, including Lorillard Tobacco, in Broin v. Philip Morris Companies, Inc., et al. (Circuit Court, Miami-Dade County, Florida, filed October 31, 1991), a class action brought on behalf of flight attendants claiming injury as a result of exposure to environmental tobacco smoke. The settlement agreement, among other things, permitted the plaintiff class members to file these individual suits. These individuals may not seek punitive damages for injuries that arose prior to January 15, 1997. The period for filing Flight Attendant Cases expired in 2000 and no additional cases in this category may be filed. | |||||
The judges who have presided over the cases that have been tried have relied upon an order entered in October 2000 by the Circuit Court of Miami-Dade County, Florida. The October 2000 order has been construed by these judges as holding that the flight attendants are not required to prove the substantive liability elements of their claims for negligence, strict liability and breach of implied warranty in order to recover damages. The court further ruled that the trials of these suits are to address whether the plaintiffs’ alleged injuries were caused by their exposure to environmental tobacco smoke and, if so, the amount of damages to be awarded. | |||||
Lorillard Tobacco was a defendant in each of the eight Flight Attendant Cases in which verdicts have been returned. Defendants have prevailed in seven of the eight trials. In one of the seven cases in which a defense verdict was returned, the court granted plaintiff’s motion for a new trial and, following appeal, the case has been returned to the trial court for a second trial. The six remaining cases in which defense verdicts were returned are concluded. In the single trial decided for the plaintiff, French v. Philip Morris Incorporated, et al., the jury awarded $5.5 million in damages. The court, however, reduced this award to $500,000. This verdict, as reduced by the trial court, was affirmed on appeal and the defendants have paid the award. Lorillard Tobacco’s share of the judgment in this matter, including interest, was approximately $60,000. | |||||
As of October 17, 2013, none of the Flight Attendant Cases were scheduled for trial. | |||||
Class Action Cases | |||||
Lorillard Tobacco but not Lorillard Inc. is a defendant in the one pending Class Action Case, in which plaintiffs seek class certification on behalf of groups of cigarette smokers, or the estates of deceased cigarette smokers, who reside in West Virginia. | |||||
Cigarette manufacturers, including Lorillard Tobacco, have defeated motions for class certification in a number of cases. Motions for class certification have also been ruled upon in some of the “lights” cases or in other class actions to which neither Lorillard Tobacco nor Lorillard, Inc. was a party. In some of these cases, courts have denied class certification to the plaintiffs, while classes have been certified in other matters. | |||||
“Lights” Class Action Cases. Neither Lorillard Tobacco nor Lorillard, Inc. is a defendant in the approximately 19 Class Action Cases in which plaintiffs’ claims are based on the allegedly fraudulent marketing of “light” or “ultra-light” cigarettes. Classes have been certified in some of these cases. In one of these cases, Craft v. Philip Morris USA (Circuit Court, City of St. Louis, Missouri, filed February 29, 2000), trial began in September 2011. In November 2011, the court ordered a mistrial when the jury was unable to reach a verdict. Retrial has been scheduled for January 2014. In another of the “lights” Class Action Cases, Good v. Altria Group, Inc., et al., the U.S. Supreme Court ruled in December 2008 that neither the Federal Cigarette Labeling and Advertising Act nor the Federal Trade Commission’s regulation of cigarettes’ tar and nicotine disclosures preempts (or bars) some of plaintiffs’ claims. In 2009, the Judicial Panel on Multidistrict Litigation consolidated various federal court “lights” Class Action Cases pending against Philip Morris USA or Altria Group and transferred those cases to the U.S. District Court of Maine (the “MDL cases”). The court denied plaintiffs’ motion for class certification filed in four of the MDL Cases, and a federal appellate court declined to review the class certification order. Following the appellate court’s ruling, plaintiffs dismissed thirteen of the MDL Cases, including Good v. Altria Group, Inc., et al. In April, 2012, the Judicial Panel on Multidistrict Litigation entered an order transferring the four MDL cases that remained pending to the courts in which each originated. On September 23, 2013, in the “Lights” Class Action Case Brown v. The American Tobacco Company, Inc., et al. (Superior Court, San Diego County, California), the Court issued a Statement of Decision that granted judgment in favor of the defendant. The Court held that the defendant misrepresented the health benefits of its “light” cigarette but that plaintiffs were not entitled to restitution or injunctive relief. Final judgment was entered in favor of the defendant on October 15, 2013. | |||||
Reimbursement Cases | |||||
U.S. Government Case. In August 2006, the U.S. District Court for the District of Columbia issued its final judgment and remedial order in the federal government’s reimbursement suit, United States of America v. Philip Morris USA, Inc., et al. (U.S. District Court, District of Columbia, filed September 22, 1999). The final judgment and remedial order concluded a bench trial that began in September 2004. Lorillard Tobacco, other cigarette manufacturers, two parent companies and two trade associations were defendants in this action during trial. Lorillard, Inc. is not a party to this case. | |||||
In its 2006 final judgment and remedial order, the court determined that the defendants, including Lorillard Tobacco, violated certain provisions of the RICO statute, that there was a likelihood of present and future RICO violations, and that equitable relief was warranted. The government was not awarded monetary damages. The equitable relief included permanent injunctions that prohibit the defendants, including Lorillard Tobacco, from engaging in any act of racketeering, as defined under RICO; from making any material false or deceptive statements concerning cigarettes; from making any express or implied statement about health on cigarette packaging or promotional materials (these prohibitions include a ban on using such descriptors as “low tar,” “light,” “ultra-light,” “mild” or “natural”); from making any statements that “low tar,” “light,” “ultra-light,” “mild” or “natural” or low-nicotine cigarettes may result in a reduced risk of disease; and from participating in the management or control of certain entities or their successors. The final judgment and remedial order also requires the defendants, including Lorillard Tobacco, to make corrective statements on their websites, in certain media, in point-of-sale advertisements, and on cigarette package “onserts” concerning: the health effects of smoking; the addictiveness of smoking; that there are no significant health benefits to be gained by smoking “low tar,” “light,” “ultra-light,” “mild” or “natural” cigarettes; that cigarette design has been manipulated to ensure optimum nicotine delivery to smokers; and that there are adverse effects from exposure to secondhand smoke. Lorillard Tobacco has accrued estimated costs of approximately $20 million to comply with or otherwise resolve the final judgment and remedial order. The final judgment and remedial order also requires defendants, including Lorillard Tobacco, to make disclosures of disaggregated marketing data to the government, and to make document disclosures on a website and in a physical depository. The final judgment and remedial order prohibits each defendant that manufactures cigarettes, including Lorillard Tobacco, from selling any of its cigarette brands or certain elements of its business unless certain conditions are met. | |||||
The final judgment and remedial order has not yet been fully implemented. Following trial, the final judgment and remedial order was stayed because the defendants, the government and several intervenors noticed appeals to the Circuit Court of Appeals for the District of Columbia. In May 2009, a three judge panel upheld substantially all of the District Court’s final judgment and remedial order. In September 2009, the Court of Appeals denied defendants’ rehearing petitions as well as their motion to vacate those statements in the appellate ruling that address defendants’ marketing of “low tar” or “lights” cigarettes, to vacate those parts of the trial court’s judgment on that issue, and to remand the case with instructions to deny as moot the government’s allegations and requested relief regarding “lights” cigarettes. The Court of Appeals stayed its order that formally relinquished jurisdiction of defendants’ appeal pending the disposition of the petitions for writ of certiorari to the U.S. Supreme Court that were noticed by the defendants, the government and the intervenors. In June 2010, the U.S. Supreme Court denied all of the petitions for writ of certiorari. The case has been returned to the trial court for implementation of the Court of Appeals’ directions in its 2009 ruling and for entry of an amended final judgment. On November 27, 2012, the court entered an order prescribing the language the defendants must include in the corrective statements defendants are to make on their websites and through other media. The court directed the parties to engage in discussions to implement those statements, and as of October 17, 2013, those discussions were still ongoing. On January 25, 2013, defendants appealed the court’s November 27, 2012 order to the U.S. Court of Appeals for the District of Columbia Circuit. On February 15, 2013, the Court of Appeals granted defendants’ unopposed motion to hold the appeal in abeyance pending the district court’s resolution of the issues regarding the implementation of the corrective statements. As of October 17, 2013, the district court had not entered an amended final judgment. | |||||
Following remand, the defendants filed a motion asserting that the 2009 Family Smoking Prevention and Tobacco Control Act had, in whole or in part, extinguished the court’s jurisdiction. In the alternative, defendants urged the court not to order any injunctive remedy in deference to the regulatory authority recently extended to the Food and Drug Administration. The trial court denied this motion in June 2011, and defendants noticed an appeal to the U.S. Court of Appeals for the District of Columbia Circuit. On July 27, 2012, the appellate court affirmed the district court’s ruling, permitting the case to proceed. The defendants did not seek further review of that decision. The government filed a motion following remand requesting clarification of the extent of the defendants’ obligation to make disclosures of disaggregated marketing data and the use the government can make of that data. The trial court granted that motion in April, 2011, holding that the defendants must provide a broad range of data for the ten-year period beginning July 29, 2010, and that the Department of Justice may share that data with other governmental agencies, subject to the confidentiality requirements previously imposed by the trial court. The defendants noticed an appeal from this order to the U.S. Court of Appeals for the District of Columbia Circuit. On July 27, 2012, the appellate court dismissed the appeal for lack of jurisdiction. The defendants did not seek further review of that decision. | |||||
While trial was underway, the Court of Appeals ruled that plaintiff may not seek to recover profits earned by the defendants. Prior to trial, the government had claimed that it was entitled to approximately $280 billion from the defendants for its claim to recover profits earned by the defendants. The U.S. Supreme Court declined to address the decisions dismissing recovery of profits when it denied review of the government’s and the intervenors’ petitions, which effectively disposed of the claim to recover profits in this case. | |||||
Settlement of State Reimbursement Litigation. On November 23, 1998, Lorillard Tobacco, Philip Morris Incorporated, Brown & Williamson Tobacco Corporation and R.J. Reynolds Tobacco Company (the “Original Participating Manufacturers”) entered into the Master Settlement Agreement (“MSA”) with 46 states, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa and the Commonwealth of the Northern Mariana Islands to settle the asserted and unasserted health care cost recovery and certain other claims of those states. These settling entities are generally referred to as the “Settling States.” The Original Participating Manufacturers had previously settled similar claims brought by Mississippi, Florida, Texas and Minnesota, which together with the MSA are referred to as the “State Settlement Agreements.” | |||||
The State Settlement Agreements provide that the agreements are not admissions, concessions or evidence of any liability or wrongdoing on the part of any party, and were entered into by the Original Participating Manufacturers to avoid the further expense, inconvenience, burden and uncertainty of litigation. Lorillard recorded pretax charges for its obligations under the State Settlement Agreements of $369 million and $888 million for the three and nine months ended September 30, 2013, respectively, and $343 million and $1.045 billion for the three and nine months ended September 30, 2012, respectively. Lorillard’s portion of ongoing adjusted settlement payments and legal fees is based on its share of domestic cigarette shipments in the year preceding that in which the payment is due. Accordingly, Lorillard records its portions of ongoing adjusted settlement payments as part of cost of manufactured products sold as the related sales occur. | |||||
The State Settlement Agreements require that the domestic tobacco industry make annual payments of $10.4 billion, subject to adjustment for several factors, including inflation, market share and industry volume. In addition, the domestic tobacco industry is required to pay settling plaintiffs’ attorneys’ fees, subject to an annual cap of $500 million, and was required to pay an additional amount of up to $125 million in each year through 2008. These payment obligations are the several and not joint obligations of each settling defendant. The State Settlement Agreements also include provisions relating to significant advertising and marketing restrictions, public disclosure of certain industry documents, limitations on challenges to tobacco control and underage use laws, and other provisions. | |||||
Lorillard Tobacco, the other Original Participating Manufacturers and other subsequent participating manufacturers (collectively, the “Participating Manufacturers”) are seeking from the Settling States an adjustment in the amount of payments for 2003 and subsequent years pursuant to a provision in the MSA that permits such adjustment if it is determined that the MSA was a significant factor in their loss of market share to companies not participating in the MSA and that the Settling States failed to diligently enforce certain statutes passed in connection with the MSA. If the Participating Manufacturers are ultimately successful, any recovery would be in the form of reimbursement of proceeds already paid or as a credit against future payments by the Participating Manufacturers. | |||||
On December 17, 2012, the Participating Manufacturers, including Lorillard Tobacco, 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. The Participating Manufacturers presented the settlement to the arbitration panel responsible for adjudicating the 2003 non-participating manufacturer (“NPM”) adjustment dispute with a request that the panel enter it as a partial settlement and award. On March 12, 2013, the arbitration panel issued a Stipulated Partial Settlement and Award that directed the Independent Auditor under the MSA to implement the settlement provisions involved, thereby allowing the settlement to proceed. Since the panel’s ruling, one additional state joined the settlement on April 12, 2013 and two additional states joined the settlement on May 24, 2013. | |||||
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 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 five years of approximately $220 million on its outstanding claims, with $164 million having occurred 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 in 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 under the agreements with the previously settled states. During the second quarter of 2013 Lorillard Tobacco recorded a reduction in its State Settlements liability and expense of $12 million as a result of the two additional states joining the settlement. The reduction was partially offset by an increase of $1 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 under agreements with the previously settled states. | |||||
The arbitration proceeding will continue as to those states that have not settled. As of September 30, 2013, fourteen 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 the Company. | |||||
On September 11, 2013, the arbitration panel responsible for adjudicating the 2003 NPM adjustment dispute issued a determination that six states failed to diligently enforce escrow provisions applicable to non-participating manufacturers. The six non-diligent states included Indiana, Kentucky, Missouri, New Mexico, Maryland, and Pennsylvania. Nine other states that did not participate in the settlement were considered by the arbitration panel because the OPMs contested their diligence as well. The arbitration panel found those nine states diligent. As a result of the panel’s ruling, the OPMs are entitled to receive $457.9 million, plus interest and earnings, with Lorillard’s share of the principal amount totaling $46.9 million. If the award is ultimately upheld after any state court challenges, the non-diligent states will receive reductions in future MSA payments they receive, and the OPMs and states found diligent will be entitled to receive amounts due to them through payments from the Disputed Payments Account and/or adjustments associated with future payments. No amount has been recorded in Lorillard’s financial statements related to this award as it is Lorillard’s expectation that the six states found non-diligent by the arbitration panel will contest the arbitration panel’s findings in their individual state MSA courts, and, as a result, it is uncertain this award will be realized. | |||||
From time to time, lawsuits have been brought against Lorillard Tobacco and other participating manufacturers to the MSA, or against one or more of the Settling States, challenging the validity of the MSA on certain grounds, including as a violation of the antitrust laws. See “MSA-Related Antitrust Suit” below. | |||||
In addition, in connection with the MSA, the Original Participating Manufacturers entered into an agreement to establish a $5.2 billion trust fund payable between 1999 and 2010 to compensate the tobacco growing communities in 14 states (the “Trust”). Payments to the Trust ended in 2005 as a result of an assessment imposed under a federal law, enacted in 2004, repealing the federal supply management program for tobacco growers. Under the law, tobacco quota holders and growers will be compensated over 10 years with payments totaling $10.1 billion, funded by an assessment on tobacco manufacturers and importers. Payments under the law to qualifying tobacco quota holders and growers commenced in 2005 and will be completed in 2014. | |||||
Lorillard believes that the State Settlement Agreements will materially adversely affect its cash flows and operating income in future years. The degree of the adverse impact will depend, among other things, on the rates of decline in domestic cigarette sales in the premium price and discount price segments, Lorillard’s share of the domestic premium price and discount price cigarette segments, and the effect of any resulting cost advantage of manufacturers not subject to significant payment obligations under the State Settlement Agreements. | |||||
Filter Cases | |||||
In addition to the above, claims have been brought against Lorillard Tobacco and Lorillard, Inc. by individuals who seek damages resulting from their alleged exposure to asbestos fibers that were incorporated into filter material used in one brand of cigarettes manufactured by a predecessor to Lorillard Tobacco for a limited period of time ending more than 50 years ago. As of October 17, 2013, Lorillard Tobacco was a defendant in 60 Filter Cases. Lorillard, Inc. was a defendant in two Filter Cases, including one that also names Lorillard Tobacco. Since January 1, 2011, Lorillard Tobacco has paid, or has reached agreement to pay, a total of approximately $30 million in settlements to finally resolve 122 claims, including the Lenney case, discussed below. The related expense was recorded in selling, general and administrative expenses on the consolidated statements of income. Since January 1, 2011, verdicts have been returned in the following four Filter Cases: Lenney v. Armstrong International, Inc., et al., tried in the Superior Court of California, San Francisco County; McGuire v. Lorillard Tobacco Company and Hollingsworth & Vose Company, tried in the Circuit Court, Division Four, of Jefferson County, Kentucky; Couscouris v. Hatch Grinding Wheels, et al., tried in the Superior Court of the State of California, Los Angeles; and DeLisle v. A.W. Chesterton Company, et al., tried in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida. In the Lenney trial, the jury found in favor of the plaintiffs as to their claims for compensatory damages and damages for loss of consortium, but it determined that plaintiffs were not entitled to an award of punitive damages from Lorillard Tobacco or Hollingsworth & Vose. Pursuant to the terms of a 1952 agreement between P. Lorillard Company and H&V Specialties Co., Inc. (the manufacturer of the filter material), Lorillard Tobacco is required to indemnify Hollingsworth & Vose for legal fees, expenses, judgments and resolutions in cases and claims alleging injury from finished products sold by P. Lorillard Company that contained the filter material. The final judgment entered by the trial court awarded plaintiffs a total of approximately $1.1 million in compensatory damages, damages for loss of consortium and costs from Lorillard Tobacco and Hollingsworth & Vose. Lorillard Tobacco and Hollingsworth & Vose noticed an appeal to the California Court of Appeals. In 2012, Lorillard Tobacco reached agreement with the plaintiffs to resolve plaintiffs’ pending claims, and any claims they might assert in the future, for an amount that is included in the above total for settlements reached since January 1, 2011. The jury in the McGuire case returned a verdict for Lorillard Tobacco and Hollingsworth & Vose, and the Court entered final judgment in May 2012. Plaintiff’s appeal is pending in the Kentucky Court of Appeals. On October 4, 2012, the jury in the Couscouris case returned a verdict for Lorillard Tobacco and Hollingsworth & Vose, and the court entered final judgment on November 1, 2012. On June 17, 2013, the California Court of Appeal for the Second Appellate District entered an order dismissing the appeal of the final judgment pursuant to plaintiffs’ request. On September 13, 2013, the jury in the DeLisle case found in favor of the plaintiffs as to their claims for negligence and strict liability, and awarded $8 million. Lorillard Tobacco Company is responsible for 44%, or $3.52 million. As of October 17, 2013, judgment has not yet been entered. As of October 17, 2013, 31 Filter Cases were scheduled for trial or have been placed on courts’ trial calendars. Trial dates are subject to change. | |||||
Tobacco-Related Antitrust Cases | |||||
Indirect Purchaser Suits | |||||
Approximately 30 antitrust suits were filed in 2000 and 2001 on behalf of putative classes of consumers in various state courts against cigarette manufacturers. The suits all alleged that the defendants entered into agreements to fix the wholesale prices of cigarettes in violation of state antitrust laws which permit indirect purchasers, such as retailers and consumers, to sue under price fixing or consumer fraud statutes. More than 20 states permit such suits. Lorillard Tobacco was a defendant in all but one of these indirect purchaser cases. Lorillard, Inc. was not named as a defendant in any of these cases. Four indirect purchaser suits, in New York, Florida, New Mexico and Michigan, thereafter were dismissed by courts in those states. The actions in all other states, except for Kansas, were either voluntarily dismissed or dismissed by the courts. | |||||
In the Kansas case, the District Court of Seward County certified a class of Kansas indirect purchasers in 2002. In July 2006, the Court issued an order confirming that fact discovery was closed, with the exception of privilege issues that the Court determined, based on a Special Master’s report, justified further fact discovery. In October 2007, the Court denied all of the defendants’ privilege claims, and the Kansas Supreme Court thereafter denied a petition seeking to overturn that ruling. On March 23, 2012, The District Court of Seward County granted the defendants’ motions for summary judgment dismissing the Kansas suit. Plaintiff’s motion for reconsideration was denied. On July 18, 2012, plaintiff filed a notice of appeal to the Court of Appeals for the State of Kansas. Briefing on plaintiff’s appeal has been completed and argument in the Court of Appeals is scheduled for December 11, 2013. | |||||
Defenses | |||||
Each of Lorillard Tobacco and Lorillard, Inc. believes that it has valid defenses to the cases pending against it as well as valid bases for appeal should any adverse verdicts be returned against either of them. While Lorillard Tobacco and Lorillard, Inc. intend to defend vigorously all tobacco products liability litigation, it is not possible to predict the outcome of any of this litigation. Litigation is subject to many uncertainties. Plaintiffs have prevailed in several cases, as noted above. It is possible that one or more of the pending actions could be decided unfavorably as to Lorillard Tobacco, Lorillard, Inc. or the other defendants. Lorillard Tobacco and Lorillard, Inc. may enter into discussions in an attempt to settle particular cases if either believe it is appropriate to do so. | |||||
Neither Lorillard Tobacco nor Lorillard, Inc. can predict the outcome of pending litigation. Some plaintiffs have been awarded damages from cigarette manufacturers at trial. While some of these awards have been overturned or reduced, other damages awards have been paid after the manufacturers have exhausted their appeals. These awards and other litigation activities against cigarette manufacturers continue to receive media attention. In addition, health issues related to tobacco products also continue to receive media attention. It is possible, for example, that the 2006 verdict inUnited States of America v. Philip Morris USA, Inc., et al., which made many adverse findings regarding the conduct of the defendants, including Lorillard Tobacco, could form the basis of allegations by other plaintiffs or additional judicial findings against cigarette manufacturers. Any such developments could have an adverse effect on the ability of Lorillard Tobacco or Lorillard, Inc. to prevail in smoking and health litigation and could influence the filing of new suits against Lorillard Tobacco or Lorillard, Inc. Lorillard Tobacco and Lorillard, Inc. also cannot predict the type or extent of litigation that could be brought against either of them, or against other cigarette manufacturers, in the future. | |||||
Indemnification Obligations | |||||
In connection with the Separation, Lorillard entered into a separation agreement with Loews (the “Separation Agreement”) and agreed to indemnify Loews and its officers, directors, employees and agents against all costs and expenses arising out of third party claims (including, without limitation, attorneys’ fees, interest, penalties and costs of investigation or preparation for defense), judgments, fines, losses, claims, damages, liabilities, taxes, demands, assessments and amounts paid in settlement based on, arising out of or resulting from, among other things, Loews’s ownership of or the operation of Lorillard and its assets and properties, and its operation or conduct of its businesses at any time prior to or following the Separation (including with respect to any product liability claims). | |||||
Loews is a defendant in three pending product liability cases, each of which are purported Class Action Cases. Pursuant to the Separation Agreement, Lorillard is required to indemnify Loews for the amount of any losses and any legal or other fees with respect to such cases. | |||||
Other Litigation | |||||
Lorillard is also party to other litigation arising in the ordinary course of business. The outcome of this other litigation will not, in the opinion of management, materially affect Lorillard’s results of operations or equity. |
Subsequent_Event
Subsequent Event | 9 Months Ended | |
Sep. 30, 2013 | ||
Subsequent Event | 21 | Subsequent Event |
On October 1, 2013, Lorillard acquired all of the assets and operations of SKYCIG®, a British-based electronic cigarette (e-cigarette) business for approximately £30 million (approximately $49 million) in cash paid at closing and contingent consideration of up to an additional £30 million (approximately $49 million at October 1, 2013 exchange rates) to be paid in 2016 based on the achievement of certain financial performance benchmarks. | ||
The acquisition provides Lorillard with a major UK electronic cigarette brand and, along with its leading U.S. electronic cigarette brand – blu eCigs®, a global presence in the rapidly growing worldwide e-cigarette category. SKYCIG is expected to benefit from Lorillard’s significant sales, marketing, regulatory, research and development expertise to further strengthen its competitive position in the UK e-cigarette market. |
Basis_of_Presentation_Policies
Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2013 | |
Basis of Presentation | Basis of Presentation. The accompanying unaudited consolidated condensed financial statements reflect all adjustments necessary to present fairly the financial position as of September 30, 2013 and December 31, 2012 and the consolidated income, comprehensive income, shareholders’ deficit and cash flows for the three and nine months ended September 30, 2013 and 2012. |
Results of operations for the three and nine months for each of the years reported herein are not necessarily indicative of results of operations of the entire year. | |
These consolidated condensed financial statements should be read in conjunction with the Consolidated Financial Statements and related Notes to Consolidated Financial Statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on February 19, 2013. | |
Stock Split | Stock Split. On November 13, 2012, the Company’s Board of Directors declared a three-for-one split of the Company’s common stock effected in the form of a 200% stock dividend. The record date of the stock split was December 14, 2012 and the additional shares were distributed on January 15, 2013. Treasury shares were not treated as shares outstanding in the stock split. All shares and per share amounts in these financial statements have been adjusted for prior periods presented for the stock split. |
Short-term and Long-term Investments | Short-term and Long-term Investments. Our short-term and long-term investments consist of investment grade debt securities, all of which are classified as available for sale. Available for sale securities are recorded at fair value, and unrealized holding gains and losses are recorded, net of tax, as a component of accumulated other comprehensive income. Available for sale securities with remaining maturities of less than one year and those identified by management at the time of purchase to be used to fund operations within one year are classified as short-term. All other available for sale securities are classified as long-term. Unrealized losses are charged against net earnings when a decline in fair value is determined to be other than temporary. We review several factors to determine whether a loss is other than temporary, such as the length and extent of the fair value decline, the financial condition and near term prospects of the issuer, and whether we have the intent to sell or will likely be required to sell before the anticipated recovery of the securities, which may be at maturity. Realized gains and losses are accounted for using the specific identification method. Purchases and sales are recorded on a trade date basis. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements. Lorillard adopted ASU 2011-04 “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” ASU 2011-04 clarifies certain areas of the fair value guidance, including application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, and quantitative information about unobservable inputs used in a Level 3 fair value measurement. Additionally, ASU 2011-04 contains guidance on measuring the fair value of instruments that are managed within a portfolio, application of premiums and discounts in a fair value measurement, and requires additional disclosures about fair value measurements. The amendments contained in ASU 2011-04 are to be applied prospectively, and ASU 2011-04 is effective for public companies for interim and annual periods beginning after December 15, 2011. ASU 2011-04 did not have a material impact on Lorillard’s financial position or results of operations. |
Lorillard adopted ASU 2011-05 “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” ASU 2011-05 requires presentation of comprehensive income in either a single statement of comprehensive income or two separate but consecutive statements. ASU 2011-05 does not change the definitions or the components of net income and other comprehensive income (OCI), when an item must be reclassified from OCI to net income, or the calculation or presentation of earnings per share. The entity still has the choice to either present OCI components before tax with one line amount for tax, or net of taxes. Disclosure of the tax impact for each OCI component is still required. ASU 2011-05 is effective for public companies for reporting periods beginning after December 15, 2011 and must be applied retrospectively. ASU 2011-05 did not have any impact on Lorillard’s financial position or results of operations, but resulted in the presentation of a separate statement of other comprehensive income. | |
In September 2011, the FASB issued ASU 2011-08 “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment.” ASU 2011-08 gives an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines that it is not more likely than not, then performing a two-step impairment test of goodwill is not necessary. ASU 2011-08 is effective for public companies for reporting periods beginning after December 15, 2011. The adoption of ASU 2011-08 did not have a material impact on Lorillard’s financial position or results of operations, but may impact the manner in which Lorillard assesses goodwill for impairment. | |
In July 2012, the FASB issued ASU 2012-02 “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Asset for Impairment.” ASU 2012-02 gives an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances indicates that it is more likely than not that indefinite-lived intangible assets other than goodwill are impaired, before being required to complete a quantitative impairment test. If an entity concludes, after assessing the totality of qualitative factors, that it is more likely than not that the indefinite-lived intangible assets are not impaired, then it is not required to complete a quantitative impairment test whereby the fair value of the indefinite-lived intangible asset would be determined and compared with the carrying amount of the intangible asset. The amendments in this update are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, and early adoption is permitted. The adoption of ASU 2012-02 in the first quarter of 2013 did not have a material impact on Lorillard’s financial position or results of operations, but may impact the manner in which Lorillard assesses indefinite-lived intangible assets for impairment. | |
In February 2013, the FASB issued ASU 2013-02 “Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income.” ASU 2013-02 requires an entity to provide information about amounts reclassified out of accumulated other comprehensive income. An entity is also required to present either on the face of the financial statements or in the footnotes, significant items reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety. For other items that are not required under U.S. GAAP to be reclassified to net income in their entirety, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. This standard is effective for public entities prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU 2013-02 did not have any impact on Lorillard’s financial position or results of operations, but resulted in disclosure of additional information about amounts reclassified out of accumulated other comprehensive income. For additional information, see Note 17, “Accumulated Other Comprehensive Loss.” |
Acquisition_Tables
Acquisition (Tables) | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Fair Values of Assets Acquired and Liabilities Assumed | The fair values of the assets acquired and liabilities assumed at the date of acquisition are summarized below (in millions): | ||||
Assets acquired: | |||||
Current assets: | |||||
Accounts receivable | $ | 2 | |||
Inventories | 15 | ||||
Total current assets | 17 | ||||
Goodwill | 64 | ||||
Intangible assets | 58 | ||||
Total assets | 139 | ||||
Liabilities assumed: | |||||
Current liabilities: | |||||
Accounts and drafts payable | 4 | ||||
Purchase price | $ | 135 | |||
Inventories_Tables
Inventories (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Inventories | Inventories consisted of the following: | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(In millions) | |||||||||
Leaf tobacco | $ | 307 | $ | 311 | |||||
Manufactured stock | 149 | 94 | |||||||
Material and supplies | 8 | 5 | |||||||
$ | 464 | $ | 410 | ||||||
Other_Current_Assets_Tables
Other Current Assets (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Other Current Assets | Other current assets were as follows: | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(In millions) | |||||||||
Prepaid income taxes | $ | 108 | $ | — | |||||
Appeal bonds | 7 | 7 | |||||||
Deposits | — | 7 | |||||||
Other current assets | 5 | 6 | |||||||
Total | $ | 120 | $ | 20 | |||||
Plant_and_Equipment_Net_Tables
Plant and Equipment, Net (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Plant and Equipment Stated at Historical Cost | Plant and equipment is stated at historical cost and consisted of the following: | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(In millions) | |||||||||
Land | $ | 3 | $ | 3 | |||||
Buildings | 95 | 95 | |||||||
Equipment | 695 | 657 | |||||||
Total | 793 | 755 | |||||||
Accumulated depreciation | (480 | ) | (457 | ) | |||||
Plant and equipment, net | $ | 313 | $ | 298 | |||||
Other_Assets_Tables
Other Assets (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Other Assets | Other assets were as follows: | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(In millions) | |||||||||
Debt issuance costs | $ | 27 | $ | 26 | |||||
Interest rate swaps | 71 | 111 | |||||||
Other prepaid assets | 21 | 15 | |||||||
Total | $ | 119 | $ | 152 | |||||
Accrued_Liabilities_Tables
Accrued Liabilities (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Accrued Liabilities | Accrued liabilities were as follows: | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(In millions) | |||||||||
Legal fees | $ | 39 | $ | 23 | |||||
Salaries and other compensation | 25 | 19 | |||||||
Medical and other employee benefit plans | 29 | 33 | |||||||
Consumer rebates | 88 | 87 | |||||||
Sales promotion | 24 | 26 | |||||||
Accrued vendor charges | 5 | 19 | |||||||
Excise and other taxes | 16 | 63 | |||||||
Accrued interest | 60 | 33 | |||||||
U.S. Government Case accrual | 20 | — | |||||||
Evans Case accrual | 79 | — | |||||||
Other accrued liabilities | 45 | 53 | |||||||
Total | $ | 430 | $ | 356 | |||||
Fair_Value_Tables
Fair Value (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Assets and Liabilities Measured at Fair Value on Recurring Basis | Assets and liabilities measured at fair value on a recurring basis as of September 30, 2013, were as follows: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
(In millions) | |||||||||||||||||
Cash and Cash Equivalents: | |||||||||||||||||
Prime money market funds | $ | 1,490 | $ | — | $ | — | $ | 1,490 | |||||||||
Total cash and cash equivalents | $ | 1,490 | $ | — | $ | — | $ | 1,490 | |||||||||
Short-term investments: | |||||||||||||||||
Corporate debt securities | $ | — | $ | 72 | $ | — | $ | 72 | |||||||||
U.S. Government agency obligations | — | 44 | — | 44 | |||||||||||||
Commercial paper | — | 16 | — | 16 | |||||||||||||
International government obligations | — | 13 | — | 13 | |||||||||||||
Total short-term investments | $ | — | $ | 145 | $ | — | $ | 145 | |||||||||
Long-term investments: | |||||||||||||||||
Corporate debt securities | $ | — | $ | 70 | $ | — | $ | 70 | |||||||||
U.S. Government agency obligations | — | 18 | — | 18 | |||||||||||||
Total long-term investments | $ | — | $ | 88 | $ | — | $ | 88 | |||||||||
Derivative Asset: | |||||||||||||||||
Interest rate swaps – fixed to floating rate | $ | — | $ | 71 | $ | — | $ | 71 | |||||||||
Total derivative asset | $ | — | $ | 71 | $ | — | $ | 71 | |||||||||
Assets and liabilities measured at fair value on a recurring basis at December 31, 2012 were as follows: | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
(In millions) | |||||||||||||||||
Cash and Cash Equivalents: | |||||||||||||||||
Prime money market funds | $ | 1,720 | $ | — | $ | — | $ | 1,720 | |||||||||
Total cash and cash equivalents | $ | 1,720 | $ | — | $ | — | $ | 1,720 | |||||||||
Derivative Asset: | |||||||||||||||||
Interest rate swaps – fixed to floating rate | $ | — | $ | 111 | $ | — | $ | 111 | |||||||||
Total derivative asset | $ | — | $ | 111 | $ | — | $ | 111 | |||||||||
LongTerm_Debt_Tables
Long-Term Debt (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Long-Term Debt | Long-term debt consisted of the following: | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(In millions) | |||||||||
2016 Notes - 3.500% Notes due 2016 | $ | 500 | $ | 500 | |||||
2017 Notes - 2.300% Notes due 2017 | 500 | 500 | |||||||
2019 Notes - 8.125% Notes due 2019 | 821 | 861 | |||||||
2020 Notes - 6.875% Notes due 2020 | 750 | 750 | |||||||
2023 Notes - 3.750% Notes due 2023 | 500 | — | |||||||
2040 Notes - 8.125% Notes due 2040 | 250 | 250 | |||||||
2041 Notes - 7.000% Notes due 2041 | 250 | 250 | |||||||
Total long-term debt | $ | 3,571 | $ | 3,111 | |||||
Earnings_Per_Share_Tables
Earnings Per Share (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Basic and Diluted Earnings Per Share | Basic and diluted earnings per share (“EPS”) were calculated using the following: | ||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
(In millions, except per share data) | |||||||||||||||||
Numerator: | |||||||||||||||||
Net income, as reported | $ | 258 | $ | 283 | $ | $898 | $ | 790 | |||||||||
Less: Net income attributable to participating securities | (1 | ) | (1 | ) | (2 | ) | (2 | ) | |||||||||
Net income available to common shareholders | $ | 257 | $ | 282 | $ | 896 | $ | 788 | |||||||||
Denominator: | |||||||||||||||||
Basic EPS- weighted average shares | 371.01 | 390.21 | 375.13 | 390.75 | |||||||||||||
Effect of dilutive securities: | |||||||||||||||||
Stock Options and SARS | 0.76 | 0.84 | 0.8 | 0.9 | |||||||||||||
Diluted EPS- adjusted weighted average shares and assumed conversions | 371.77 | 391.05 | 375.93 | 391.65 | |||||||||||||
Earnings Per Share: | |||||||||||||||||
Basic | $ | 0.69 | $ | 0.72 | $ | 2.39 | $ | 2.02 | |||||||||
Diluted | $ | 0.69 | $ | 0.72 | $ | 2.38 | $ | 2.01 |
Retirement_Plans_Tables
Retirement Plans (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Net Periodic Pension and Other Postretirement Benefit Costs | Net periodic benefit cost components were as follows: | ||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
Pension Benefits | 2013 | 2012 | 2013 | 2012 | |||||||||||||
(In millions) | |||||||||||||||||
Service cost | $ | 7 | $ | 6 | $ | 20 | $ | 18 | |||||||||
Interest cost | 13 | 14 | 38 | 42 | |||||||||||||
Expected return on plan assets | (21 | ) | (19 | ) | (62 | ) | (57 | ) | |||||||||
Amortization of net loss | 5 | 5 | 16 | 16 | |||||||||||||
Amortization of prior service cost | 1 | 1 | 3 | 3 | |||||||||||||
Net periodic benefit cost | $ | 5 | $ | 7 | $ | 15 | $ | 22 | |||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
Other Postretirement Benefits | 2013 | 2012 | 2013 | 2012 | |||||||||||||
(In millions) | |||||||||||||||||
Service cost | $ | 2 | $ | 1 | $ | 5 | $ | 4 | |||||||||
Interest cost | 2 | 3 | 7 | 7 | |||||||||||||
Net periodic benefit cost | $ | 4 | $ | 4 | $ | 12 | $ | 11 | |||||||||
Share_Repurchase_Programs_Tabl
Share Repurchase Programs (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Share Repurchase Program | As of September 30, 2013, total shares repurchased under share repurchase programs authorized by the Board since the separation from Loews in 2008 were as follows: | ||||||||
Program | Amount | Number of | |||||||
Authorized | Shares | ||||||||
Repurchased | |||||||||
(In millions) | (In millions) | ||||||||
July 2008 – October 2008 | $ | 400 | 17.6 | ||||||
May 2009 – July 2009 | 250 | 11 | |||||||
July 2009 – January 2010 | 750 | 29.3 | |||||||
February 2010 – May 2010 | 250 | 9.8 | |||||||
August 2010 *– August 2011 | 1,400 | 45.1 | |||||||
August 2011 – February 2012 | 750 | 20.1 | |||||||
August 2012 – January 2013 | 500 | 12.7 | |||||||
March 2013 **– | 1,000 | 10.6 | |||||||
Total | $ | 5,300 | 156.2 | ||||||
* | As amended on May 19, 2011 | ||||||||
** | As amended on May 21, 2013 |
Accumulated_Other_Comprehensiv1
Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Changes in Accumulated Other Comprehensive Loss | Changes in accumulated other comprehensive loss during the period consisted of the following: | ||||||||
Defined Benefit | |||||||||
Pension | |||||||||
Plan Items | |||||||||
(In millions) | |||||||||
Beginning balance, January 1, 2013 | $ | 241 | |||||||
Amortization of pension and post-retirement plan actuarial gains and prior service cost | (3 | ) | |||||||
Ending balance September 30, 2013 | $ | 238 | |||||||
Reclassifications Out of Accumulated Other Comprehensive Loss | Reclassifications out of accumulated other comprehensive loss during the period were as follows: | ||||||||
Amount | Affected Line Item in | ||||||||
Reclassified | the Consolidated | ||||||||
from Accumulated | Statements of Income | ||||||||
Other | |||||||||
Comprehensive | |||||||||
Loss | |||||||||
(In millions) | |||||||||
Amortization of defined benefit pension and post-retirement items: | |||||||||
Prior service costs | $ | (3 | ) | (A) | |||||
Actuarial loss | (16 | ) | (A) | ||||||
(19 | ) | Total before tax | |||||||
7 | Income tax benefit | ||||||||
Total reclassifications for the period | $ | (12 | ) | Net of tax | |||||
(A) | These accumulated comprehensive loss components are included in the computation of net periodic pension cost (see Note 15, “Retirement Plans,” for additional details), which is included in cost of sales and selling, general and administrative expenses. |
Segment_Information_Tables
Segment Information (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Segment Information | |||||||||||||||||
Three Months Ended September 30, 2013 | |||||||||||||||||
Cigarettes | Electronic | Consolidating | Total | ||||||||||||||
Cigarettes | Adjustments | Lorillard | |||||||||||||||
(In millions) | |||||||||||||||||
Net sales | $ | 1,764 | $ | 63 | $ | — | $ | 1,827 | |||||||||
Cost of sales | 1,110 | 48 | — | 1,158 | |||||||||||||
Gross profit | 654 | 15 | — | 669 | |||||||||||||
Selling, general and administrative | 196 | 15 | — | 211 | |||||||||||||
Operating income | $ | 458 | $ | — | $ | — | $ | 458 | |||||||||
Depreciation and amortization | $ | 10 | $ | — | $ | — | $ | 10 | |||||||||
Capital expenditures | $ | 14 | $ | — | $ | — | $ | 14 | |||||||||
Nine Months Ended September 30, 2013 | |||||||||||||||||
Cigarettes | Electronic | Consolidating | Total | ||||||||||||||
Cigarettes | Adjustments | Lorillard | |||||||||||||||
(In millions) | |||||||||||||||||
Net sales | $ | 5,031 | $ | 177 | $ | — | $ | 5,208 | |||||||||
Cost of sales | 3,025 | 123 | — | 3,148 | |||||||||||||
Gross profit | 2,006 | 54 | — | 2,060 | |||||||||||||
Selling, general and administrative | 456 | 45 | — | 501 | |||||||||||||
Operating income | $ | 1,550 | $ | 9 | $ | — | $ | 1,559 | |||||||||
Depreciation and amortization | $ | 33 | $ | — | $ | — | $ | 33 | |||||||||
Total assets | $ | 3,383 | $ | 297 | $ | (125 | ) | $ | 3,555 | ||||||||
Capital expenditures | $ | 47 | $ | 1 | $ | — | $ | 48 | |||||||||
Three Months Ended September 30, 2012 | |||||||||||||||||
Cigarettes | Electronic | Consolidating | Total | ||||||||||||||
Cigarettes | Adjustments | Lorillard | |||||||||||||||
(In millions) | |||||||||||||||||
Net sales | $ | 1,647 | $ | 14 | $ | — | $ | 1,661 | |||||||||
Cost of sales | 1,049 | 10 | — | 1,059 | |||||||||||||
Gross profit | 598 | 4 | — | 602 | |||||||||||||
Selling, general and administrative | 113 | 9 | — | 122 | |||||||||||||
Operating income/(loss) | $ | 485 | $ | (5 | ) | $ | — | $ | 480 | ||||||||
Depreciation and amortization | $ | 10 | $ | — | $ | — | $ | 10 | |||||||||
Capital expenditures | $ | 15 | $ | — | $ | — | $ | 15 | |||||||||
Nine Months Ended September 30, 2012 | |||||||||||||||||
Cigarettes | Electronic | Consolidating | Total | ||||||||||||||
Cigarettes | Adjustments | Lorillard | |||||||||||||||
(In millions) | |||||||||||||||||
Net sales | $ | 4,897 | $ | 22 | $ | — | $ | 4,919 | |||||||||
Cost of sales | 3,164 | 17 | — | 3,181 | |||||||||||||
Gross profit | 1,733 | 5 | — | 1,738 | |||||||||||||
Selling, general and administrative | 371 | 11 | — | 382 | |||||||||||||
Operating income/(loss) | $ | 1,362 | $ | (6 | ) | $ | — | $ | 1,356 | ||||||||
Depreciation and amortization | $ | 30 | $ | — | $ | — | $ | 30 | |||||||||
Total assets | $ | 3,368 | $ | 181 | $ | (125 | ) | $ | 3,424 | ||||||||
Capital expenditures | $ | 51 | $ | — | $ | — | $ | 51 |
Consolidating_Financial_Inform1
Consolidating Financial Information (Tables) | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Condensed Consolidating Balance Sheets | Condensed Consolidating Balance Sheets | ||||||||||||||||||||
September 30, 2013 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Assets: | |||||||||||||||||||||
Cash and cash equivalents | $ | 331 | $ | 529 | $ | 630 | $ | — | $ | 1,490 | |||||||||||
Short-term investments – available for sale securities | — | 145 | — | — | 145 | ||||||||||||||||
Accounts receivable, less allowances of $2 | — | 14 | 19 | — | 33 | ||||||||||||||||
Other receivables (1) | — | 55 | 93 | (92 | ) | 56 | |||||||||||||||
Inventories | — | 394 | 70 | — | 464 | ||||||||||||||||
Deferred income taxes | — | 553 | 2 | — | 555 | ||||||||||||||||
Other current assets | — | 112 | 8 | — | 120 | ||||||||||||||||
Total current assets | 331 | 1,802 | 822 | (92 | ) | 2,863 | |||||||||||||||
Investment in subsidiaries | — | 634 | — | (634 | ) | — | |||||||||||||||
Plant and equipment, net | — | 312 | 1 | — | 313 | ||||||||||||||||
Long-term investments – available for sale securities | — | 88 | — | — | 88 | ||||||||||||||||
Goodwill | — | — | 64 | — | 64 | ||||||||||||||||
Intangible assets | — | — | 57 | — | 57 | ||||||||||||||||
Deferred income taxes | — | 47 | 6 | (2 | ) | 51 | |||||||||||||||
Other assets | 125 | 119 | — | (125 | ) | 119 | |||||||||||||||
Total assets | $ | 456 | $ | 3,002 | $ | 950 | $ | (853 | ) | $ | 3,555 | ||||||||||
Liabilities and Shareholders’ Equity (Deficit): | |||||||||||||||||||||
Accounts and drafts payable | $ | — | $ | 30 | $ | 5 | $ | — | $ | 35 | |||||||||||
Accrued liabilities (1) | 10 | 499 | 13 | (92 | ) | 430 | |||||||||||||||
Settlement costs | — | 1,098 | — | — | 1,098 | ||||||||||||||||
Income taxes | — | — | 3 | — | 3 | ||||||||||||||||
Total current liabilities | 10 | 1,627 | 21 | (92 | ) | 1,566 | |||||||||||||||
Long-term debt | — | 3,571 | — | — | 3,571 | ||||||||||||||||
Investment in subsidiaries | 2,486 | — | — | (2,486 | ) | — | |||||||||||||||
Postretirement pension, medical and life insurance benefits | — | 397 | — | — | 397 | ||||||||||||||||
Other liabilities | 2 | 48 | 140 | (127 | ) | 63 | |||||||||||||||
Total liabilities | 2,498 | 5,643 | 161 | (2,705 | ) | 5,597 | |||||||||||||||
Shareholders’ Equity (Deficit): | |||||||||||||||||||||
Common stock | 4 | — | — | — | 4 | ||||||||||||||||
Additional paid-in capital | 239 | 113 | 152 | (265 | ) | 239 | |||||||||||||||
Accumulated (deficit)/Retained earnings | (1,518 | ) | (2,516 | ) | 637 | 1,879 | (1,518 | ) | |||||||||||||
Accumulated other comprehensive loss | (238 | ) | (238 | ) | — | 238 | (238 | ) | |||||||||||||
Treasury stock | (529 | ) | — | — | — | (529 | ) | ||||||||||||||
Total shareholders’ equity (deficit) | (2,042 | ) | (2,641 | ) | 789 | 1,852 | (2,042 | ) | |||||||||||||
Total liabilities and shareholders’ equity (deficit) | $ | 456 | $ | 3,002 | $ | 950 | $ | (853 | ) | $ | 3,555 | ||||||||||
-1 | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. | ||||||||||||||||||||
Condensed Consolidating Balance Sheets | |||||||||||||||||||||
December 31, 2012 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Assets: | |||||||||||||||||||||
Cash and cash equivalents | $ | 150 | $ | 1,471 | $ | 99 | $ | — | $ | 1,720 | |||||||||||
Accounts receivable, less allowances of $3 | — | 8 | 10 | — | 18 | ||||||||||||||||
Other receivables (1) | 1 | 41 | 77 | (67 | ) | 52 | |||||||||||||||
Inventories | — | 369 | 41 | — | 410 | ||||||||||||||||
Deferred income taxes | — | 555 | 2 | — | 557 | ||||||||||||||||
Other current assets | — | 12 | 8 | — | 20 | ||||||||||||||||
Total current assets | 151 | 2,456 | 237 | (67 | ) | 2,777 | |||||||||||||||
Investment in subsidiaries | — | 118 | — | (118 | ) | — | |||||||||||||||
Plant and equipment, net | — | 298 | — | — | 298 | ||||||||||||||||
Goodwill | — | — | 64 | — | 64 | ||||||||||||||||
Intangible assets | — | — | 57 | — | 57 | ||||||||||||||||
Deferred income taxes | — | 45 | 5 | (2 | ) | 48 | |||||||||||||||
Other assets | 125 | 152 | — | (125 | ) | 152 | |||||||||||||||
Total assets | $ | 276 | $ | 3,069 | $ | 363 | $ | (312 | ) | $ | 3,396 | ||||||||||
Liabilities and Shareholders’ Equity (Deficit): | |||||||||||||||||||||
Accounts and drafts payable | $ | — | $ | 35 | $ | 4 | $ | — | $ | 39 | |||||||||||
Accrued liabilities (1) | 14 | 399 | 10 | (67 | ) | 356 | |||||||||||||||
Settlement costs | — | 1,183 | — | — | 1,183 | ||||||||||||||||
Income taxes | — | — | 23 | — | 23 | ||||||||||||||||
Total current liabilities | 14 | 1,617 | 37 | (67 | ) | 1,601 | |||||||||||||||
Long-term debt | — | 3,111 | — | — | 3,111 | ||||||||||||||||
Investment in subsidiaries | 2,037 | — | — | (2,037 | ) | — | |||||||||||||||
Postretirement pension, medical and life insurance benefits | — | 409 | — | — | 409 | ||||||||||||||||
Other liabilities | 2 | 39 | 138 | (127 | ) | 52 | |||||||||||||||
Total liabilities | 2,053 | 5,176 | 175 | (2,231 | ) | 5,173 | |||||||||||||||
Shareholders’ Equity (Deficit): | |||||||||||||||||||||
Common stock | 5 | — | — | — | 5 | ||||||||||||||||
Additional paid-in capital | 298 | 92 | 72 | (164 | ) | 298 | |||||||||||||||
Retained earnings/Accumulated (deficit) | 2,351 | (1,958 | ) | 116 | 1,842 | 2,351 | |||||||||||||||
Accumulated other comprehensive loss | (241 | ) | (241 | ) | — | 241 | (241 | ) | |||||||||||||
Treasury stock | (4,190 | ) | — | — | — | (4,190 | ) | ||||||||||||||
Total shareholders’ equity (deficit) | (1,777 | ) | (2,107 | ) | 188 | 1,919 | (1,777 | ) | |||||||||||||
Total liabilities and shareholders’ equity (deficit) | $ | 276 | $ | 3,069 | $ | 363 | $ | (312 | ) | $ | 3,396 | ||||||||||
-1 | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. | ||||||||||||||||||||
Condensed Consolidating Statements of Income | Condensed Consolidating Statements of Income | ||||||||||||||||||||
For the Three Months Ended September 30, 2013 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net sales (including excise taxes of $517) | $ | — | $ | 1,764 | $ | 352 | $ | (289 | ) | $ | 1,827 | ||||||||||
Cost of sales (including excise taxes of $517) | — | 1,110 | 48 | — | 1,158 | ||||||||||||||||
Gross profit | — | 654 | 304 | (289 | ) | 669 | |||||||||||||||
Selling, general and administrative (1) | 1 | 484 | 15 | (289 | ) | 211 | |||||||||||||||
Operating income | (1 | ) | 170 | 289 | — | 458 | |||||||||||||||
Investment income | — | — | — | — | — | ||||||||||||||||
Interest expense | 1 | (45 | ) | (1 | ) | — | (45 | ) | |||||||||||||
Income before income taxes | — | 125 | 288 | — | 413 | ||||||||||||||||
Income taxes | 2 | 48 | 105 | — | 155 | ||||||||||||||||
Equity in earnings of subsidiaries | 260 | 182 | — | (442 | ) | — | |||||||||||||||
Net income | $ | 258 | $ | 259 | $ | 183 | $ | (442 | ) | $ | 258 | ||||||||||
-1 | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. | ||||||||||||||||||||
Condensed Consolidating Statements of Income | |||||||||||||||||||||
For the Nine Months Ended September 30, 2013 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net sales (including excise taxes of $1,488) | $ | — | $ | 5,031 | $ | 1,001 | $ | (824 | ) | $ | 5,208 | ||||||||||
Cost of sales (including excise taxes of $1,488) | — | 3,025 | 123 | — | 3,148 | ||||||||||||||||
Gross profit | — | 2,006 | 878 | (824 | ) | 2,060 | |||||||||||||||
Selling, general and administrative (1) | 1 | 1,279 | 45 | (824 | ) | 501 | |||||||||||||||
Operating income | (1 | ) | 727 | 833 | — | 1,559 | |||||||||||||||
Investment income | — | 2 | — | — | 2 | ||||||||||||||||
Interest expense | 4 | (128 | ) | (4 | ) | — | (128 | ) | |||||||||||||
Income before income taxes | 3 | 601 | 829 | — | 1,433 | ||||||||||||||||
Income taxes | 3 | 224 | 308 | — | 535 | ||||||||||||||||
Equity in earnings of subsidiaries | 898 | 516 | — | (1,414 | ) | — | |||||||||||||||
Net income | $ | 898 | $ | 893 | $ | 521 | $ | (1,414 | ) | $ | 898 | ||||||||||
-1 | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. | ||||||||||||||||||||
Condensed Consolidating Statements of Income | |||||||||||||||||||||
For the Three Months Ended September 30, 2012 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net sales (including excise taxes of $498) | $ | — | $ | 1,647 | $ | 14 | $ | — | $ | 1,661 | |||||||||||
Cost of sales (including excise taxes of $498) | — | 1,049 | 10 | — | 1,059 | ||||||||||||||||
Gross profit | — | 598 | 4 | — | 602 | ||||||||||||||||
Selling, general and administrative (1) | — | 379 | (257 | ) | — | 122 | |||||||||||||||
Operating income | — | 219 | 261 | — | 480 | ||||||||||||||||
Investment income | — | 1 | — | — | 1 | ||||||||||||||||
Interest expense | — | (37 | ) | (1 | ) | — | (38 | ) | |||||||||||||
Income before income taxes | — | 183 | 260 | — | 443 | ||||||||||||||||
Income taxes | — | 67 | 93 | — | 160 | ||||||||||||||||
Equity in earnings of subsidiaries | 283 | 171 | — | (454 | ) | — | |||||||||||||||
Net income | $ | 283 | $ | 287 | $ | 167 | $ | (454 | ) | $ | 283 | ||||||||||
-1 | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. | ||||||||||||||||||||
Condensed Consolidating Statements of Income | |||||||||||||||||||||
For the Nine Months Ended September 30, 2012 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net sales (including excise taxes of $1,491) | $ | — | $ | 4,897 | $ | 22 | $ | — | $ | 4,919 | |||||||||||
Cost of sales (including excise taxes of $1,491) | — | 3,165 | 16 | — | 3,181 | ||||||||||||||||
Gross profit | — | 1,732 | 6 | — | 1,738 | ||||||||||||||||
Selling, general and administrative (1) | 1 | 1,157 | (776 | ) | — | 382 | |||||||||||||||
Operating income | (1 | ) | 575 | 782 | — | 1,356 | |||||||||||||||
Investment income | — | 2 | 1 | — | 3 | ||||||||||||||||
Interest expense | (1 | ) | (112 | ) | (1 | ) | — | (114 | ) | ||||||||||||
Income before income taxes | (2 | ) | 465 | 782 | — | 1,245 | |||||||||||||||
Income taxes | (1 | ) | 174 | 282 | — | 455 | |||||||||||||||
Equity in earnings of subsidiaries | 791 | 505 | — | (1,296 | ) | — | |||||||||||||||
Net income | $ | 790 | $ | 796 | $ | 500 | $ | (1,296 | ) | $ | 790 | ||||||||||
-1 | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. | ||||||||||||||||||||
Condensed Consolidating Statements of Comprehensive Income | Condensed Consolidating Statements of Comprehensive Income | ||||||||||||||||||||
For the Three Months Ended September 30, 2013 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net income | $ | 258 | $ | 259 | $ | 183 | $ | (442 | ) | $ | 258 | ||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||
Defined benefit retirement plan gains, net of tax expense of $2 | — | 4 | — | — | 4 | ||||||||||||||||
Comprehensive income | $ | 258 | $ | 263 | $ | 183 | $ | (442 | ) | $ | 262 | ||||||||||
Condensed Consolidating Statements of Comprehensive Income | |||||||||||||||||||||
For the Nine Months Ended September 30, 2013 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net income | $ | 898 | $ | 893 | $ | 521 | $ | (1,414 | ) | $ | 898 | ||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||
Defined benefit retirement plan gains, net of tax expense of $2 | — | 3 | — | — | 3 | ||||||||||||||||
Comprehensive income | $ | 898 | $ | 896 | $ | 521 | $ | (1,414 | ) | $ | 901 | ||||||||||
Condensed Consolidating Statements of Comprehensive Income | |||||||||||||||||||||
For the Three Months Ended September 30, 2012 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net income | $ | 283 | $ | 287 | $ | 167 | $ | (454 | ) | $ | 283 | ||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||
Defined benefit retirement plan gains, net of tax expense of $2 | — | 4 | — | — | 4 | ||||||||||||||||
Comprehensive income | $ | 283 | $ | 291 | $ | 167 | $ | (454 | ) | $ | 287 | ||||||||||
Condensed Consolidating Statements of Comprehensive Income | |||||||||||||||||||||
For the Nine Months Ended September 30, 2012 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Net income | $ | 790 | $ | 796 | $ | 500 | $ | (1,296 | ) | $ | 790 | ||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||
Defined benefit retirement plan gains, net of tax expense of $7 | — | 13 | — | — | 13 | ||||||||||||||||
Comprehensive income | $ | 790 | $ | 809 | $ | 500 | $ | (1,296 | ) | $ | 803 | ||||||||||
Condensed Consolidating Statements of Cash Flows | Condensed Consolidating Statements of Cash Flows | ||||||||||||||||||||
For the Nine Months Ended September 30, 2013 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||||
Net income | $ | 898 | $ | 893 | $ | 521 | $ | (1,414 | ) | $ | 898 | ||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||||||||||||
Equity income from subsidiaries | (898 | ) | (516 | ) | — | 1,414 | — | ||||||||||||||
Depreciation and amortization | — | 33 | — | — | 33 | ||||||||||||||||
Pension, health and life insurance contributions | — | (41 | ) | — | — | (41 | ) | ||||||||||||||
Pension, health and life insurance benefits expense | — | 27 | — | — | 27 | ||||||||||||||||
Deferred income taxes | — | (2 | ) | (1 | ) | — | (3 | ) | |||||||||||||
Share-based compensation | 1 | 13 | — | — | 14 | ||||||||||||||||
Excess tax benefits from share-based arrangements | — | (7 | ) | — | — | (7 | ) | ||||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||||||
Accounts and other receivables | — | (41 | ) | (34 | ) | 25 | (50 | ) | |||||||||||||
Inventories | — | (25 | ) | (29 | ) | — | (54 | ) | |||||||||||||
Accounts payable and accrued liabilities | (4 | ) | 94 | 4 | (25 | ) | 69 | ||||||||||||||
Settlement costs | — | (85 | ) | — | — | (85 | ) | ||||||||||||||
Income taxes | 1 | (65 | ) | (15 | ) | — | (79 | ) | |||||||||||||
Other current assets | — | 2 | 6 | — | 8 | ||||||||||||||||
Other assets | — | 5 | — | — | 5 | ||||||||||||||||
Return on investment in subsidiaries | 1,452 | — | — | (1,452 | ) | — | |||||||||||||||
Net cash provided by (used in) operating activities | 1,450 | 285 | 452 | (1,452 | ) | 735 | |||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||||
Purchases of investments | — | (236 | ) | — | — | (236 | ) | ||||||||||||||
Additions to plant and equipment | — | (47 | ) | (1 | ) | — | (48 | ) | |||||||||||||
Sales, maturities and calls of investments | — | 3 | — | — | 3 | ||||||||||||||||
Investment in subsidiary | (80 | ) | — | — | 80 | — | |||||||||||||||
Net cash used in investing activities | (80 | ) | (280 | ) | (1 | ) | 80 | (281 | ) | ||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||
Proceeds from issuance of long-term debt | — | 500 | — | — | 500 | ||||||||||||||||
Dividends paid | (621 | ) | (1,452 | ) | — | 1,452 | (621 | ) | |||||||||||||
Shares repurchased | (568 | ) | — | — | — | (568 | ) | ||||||||||||||
Debt issuance costs | — | (4 | ) | — | — | (4 | ) | ||||||||||||||
Contributions from parent | — | — | 80 | (80 | ) | — | |||||||||||||||
Proceeds from exercise of stock options | — | 2 | — | — | 2 | ||||||||||||||||
Excess tax benefits from share-based arrangements | — | 7 | — | — | 7 | ||||||||||||||||
Net cash (used in) provided by financing activities | (1,189 | ) | (947 | ) | 80 | 1,372 | (684 | ) | |||||||||||||
Change in cash and cash equivalents | 181 | (942 | ) | 531 | — | (230 | ) | ||||||||||||||
Cash and cash equivalents, beginning of year | 150 | 1,471 | 99 | — | 1,720 | ||||||||||||||||
Cash and cash equivalents, end of period | $ | 331 | $ | 529 | $ | 630 | $ | — | $ | 1,490 | |||||||||||
Condensed Consolidating Statements of Cash Flows | |||||||||||||||||||||
For the Nine Months Ended September 30, 2012 | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
Parent | Issuer | Non- | Total | Consolidated | |||||||||||||||||
guarantor | Consolidating | ||||||||||||||||||||
Subsidiaries | Adjustments | ||||||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||||
Net income | $ | 790 | $ | 796 | $ | 500 | $ | (1,296 | ) | $ | 790 | ||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||||||||||||
Equity income from subsidiaries | (791 | ) | (505 | ) | — | 1,296 | — | ||||||||||||||
Depreciation and amortization | — | 30 | — | — | 30 | ||||||||||||||||
Pension, health and life insurance contributions | — | (41 | ) | — | — | (41 | ) | ||||||||||||||
Pension, health and life insurance benefits expense | — | 34 | — | — | 34 | ||||||||||||||||
Deferred income taxes | (1 | ) | 1 | (1 | ) | — | (1 | ) | |||||||||||||
Share-based compensation | 1 | 13 | — | — | 14 | ||||||||||||||||
Excess tax benefits from share-based arrangements | — | (9 | ) | — | — | (9 | ) | ||||||||||||||
Changes in operating assets and liabilities, net of amounts acquired: | |||||||||||||||||||||
Accounts and other receivables | — | 864 | (2 | ) | (875 | ) | (13 | ) | |||||||||||||
Inventories | — | (110 | ) | (14 | ) | — | (124 | ) | |||||||||||||
Accounts payable and accrued liabilities | (4 | ) | 60 | (877 | ) | 875 | 54 | ||||||||||||||
Settlement costs | — | (84 | ) | — | — | (84 | ) | ||||||||||||||
Income taxes | — | (15 | ) | (2 | ) | — | (17 | ) | |||||||||||||
Other current assets | — | 17 | (11 | ) | — | 6 | |||||||||||||||
Other assets | (125 | ) | 2 | — | 125 | 2 | |||||||||||||||
Return on investment in subsidiaries | 1,021 | — | — | (1,021 | ) | — | |||||||||||||||
Net cash provided by (used in) operating activities | 891 | 1,053 | (407 | ) | (896 | ) | 641 | ||||||||||||||
Cash flows from investing activities, net of cash acquired: | |||||||||||||||||||||
Business acquisition | — | — | (135 | ) | — | (135 | ) | ||||||||||||||
Additions to plant and equipment | — | (51 | ) | — | — | (51 | ) | ||||||||||||||
Investment in subsidiary | (50 | ) | — | — | 50 | — | |||||||||||||||
Net cash (used in) provided by investing activities | (50 | ) | (51 | ) | (135 | ) | 50 | (186 | ) | ||||||||||||
Cash flows from financing activities: | |||||||||||||||||||||
Dividends paid | (608 | ) | (1,021 | ) | — | 1,021 | (608 | ) | |||||||||||||
Proceeds from issuance of long-term debt | — | 500 | 125 | (125 | ) | 500 | |||||||||||||||
Shares repurchased | (274 | ) | — | — | — | (274 | ) | ||||||||||||||
Contributions from Parent | — | — | 50 | (50 | ) | — | |||||||||||||||
Debt issuance costs | — | (6 | ) | — | — | (6 | ) | ||||||||||||||
Proceeds from exercise of stock options | — | 5 | — | — | 5 | ||||||||||||||||
Excess tax benefits from share-based arrangements | — | 9 | — | — | 9 | ||||||||||||||||
Net cash (used in) provided by financing activities | (882 | ) | (513 | ) | 175 | 846 | (374 | ) | |||||||||||||
Change in cash and cash equivalents | (41 | ) | 489 | (367 | ) | — | 81 | ||||||||||||||
Cash and cash equivalents, beginning of year | 235 | 582 | 817 | — | 1,634 | ||||||||||||||||
Cash and cash equivalents, end of period | $ | 194 | $ | 1,071 | $ | 450 | $ | — | $ | 1,715 | |||||||||||
Legal_Proceedings_Tables
Legal Proceedings (Tables) | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Number of Cases Pending | The table below lists the number of certain tobacco-related cases pending against Lorillard as of the dates listed. A description of each type of case follows the table. | ||||
Type of Case | Total Number of Cases | ||||
Pending against Lorillard as | |||||
of October 17, 2013 | |||||
Conventional Product Liability Cases | 22 | ||||
Engle Progeny Cases | 4,237 | ||||
West Virginia Individual Personal Injury Cases | 38 | ||||
Flight Attendant Cases | 2,572 | ||||
Class Action Cases | 1 | ||||
Reimbursement Cases | 1 | ||||
Filter Cases | 61 | ||||
Tobacco-Related Antitrust Cases | 1 |
Basis_of_Presentation_Addition
Basis of Presentation - Additional Information (Detail) (USD $) | 1 Months Ended | 9 Months Ended |
In Millions, unless otherwise specified | Nov. 13, 2012 | Sep. 30, 2013 |
Segment | ||
Basis of Presentation [Line Items] | ||
Number of operating segments | 2 | |
Dividend common stock split ratio | 3 | |
Common stock dividend stock split rate | 200.00% | |
Record date of the stock split | 14-Dec-12 | |
Retirement of treasury shares (in shares) | 143.9 | |
Maximum | ||
Basis of Presentation [Line Items] | ||
Available for sale securities maturity period | 1 year | |
Treasury Stock | ||
Basis of Presentation [Line Items] | ||
Retirement of treasury shares | -4,229 | |
Common Stock | ||
Basis of Presentation [Line Items] | ||
Retirement of treasury shares | 1 | |
Additional Paid-in Capital | ||
Basis of Presentation [Line Items] | ||
Retirement of treasury shares | 82 | |
Retained Earnings | ||
Basis of Presentation [Line Items] | ||
Retirement of treasury shares | 4,146 |
Acquisition_Additional_Informa
Acquisition - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Apr. 24, 2012 |
Business Acquisition [Line Items] | |||||
Operating income | $458 | $480 | $1,559 | $1,356 | |
Lorillard Holdings Company, Inc. | |||||
Business Acquisition [Line Items] | |||||
Percentage of ownership interest in subsidiary | 100.00% | ||||
Blu eCigs | |||||
Business Acquisition [Line Items] | |||||
Business acquisition purchase price cash paid | 135 | ||||
Revenues | 63 | 14 | 177 | 22 | |
Operating income | 0 | 5 | 9 | 6 | |
Acquisition-related expenses | $6 |
Fair_Values_of_Assets_Acquired
Fair Values of Assets Acquired and Liabilities Assumed (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Apr. 24, 2012 |
In Millions, unless otherwise specified | Blu eCigs | ||
Current assets: | |||
Accounts receivable | $2 | ||
Inventories | 15 | ||
Total current assets | 17 | ||
Goodwill | 64 | 64 | 64 |
Intangible assets | 58 | ||
Total assets | 139 | ||
Current liabilities: | |||
Accounts and drafts payable | 4 | ||
Purchase price | $135 |
Inventories_Additional_Informa
Inventories - Additional Information (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Inventory [Line Items] | ||
Manufactured stock in first-in, first-out basis | $70 | $41 |
Excess of average cost over stated value of inventories valued on LIFO basis | $265 | $245 |
Inventories_Detail
Inventories (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Inventory [Line Items] | ||
Leaf tobacco | $307 | $311 |
Manufactured stock | 149 | 94 |
Materials and supplies | 8 | 5 |
Inventories | $464 | $410 |
Other_Current_Assets_Detail
Other Current Assets (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Other Assets, Current [Line Items] | ||
Prepaid income taxes | $108 | |
Appeal bonds | 7 | 7 |
Deposits | 7 | |
Other current assets | 5 | 6 |
Total | $120 | $20 |
Plant_and_Equipment_Stated_at_
Plant and Equipment Stated at Historical Cost (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Property, Plant, and Equipment Disclosure [Line Items] | ||
Land | $3 | $3 |
Buildings | 95 | 95 |
Equipment | 695 | 657 |
Total | 793 | 755 |
Accumulated depreciation | -480 | -457 |
Plant and equipment, net | $313 | $298 |
Goodwill_and_Intangible_Assets1
Goodwill and Intangible Assets - Additional Information (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Apr. 24, 2012 | Apr. 24, 2012 |
In Millions, unless otherwise specified | Blu eCigs | Blu eCigs | ||
Trademarks and Trade names | ||||
Intangible Assets And Goodwill [Line Items] | ||||
Acquisition resulted in recognition of goodwill | $64 | $64 | $64 | |
Acquisition resulted in recognition of intangible assets | $58 | $57 |
Other_Assets_Detail
Other Assets (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Other Assets [Line Items] | ||
Debt issuance costs | $27 | $26 |
Interest rate swaps | 71 | 111 |
Other prepaid assets | 21 | 15 |
Total | $119 | $152 |
Accrued_Liabilities_Detail
Accrued Liabilities (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | ||
In Millions, unless otherwise specified | ||||
Accrued liabilities | ||||
Legal fees | $39 | $23 | ||
Salaries and other compensation | 25 | 19 | ||
Medical and other employee benefit plans | 29 | 33 | ||
Consumer rebates | 88 | 87 | ||
Sales promotion | 24 | 26 | ||
Accrued vendor charges | 5 | 19 | ||
Excise and other taxes | 16 | 63 | ||
Accrued interest | 60 | 33 | ||
U.S. Government Case accrual | 20 | |||
Evans Case accrual | 79 | |||
Other accrued liabilities | 45 | 53 | ||
Total | $430 | [1] | $356 | [1] |
[1] | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. |
Commitments_Additional_Informa
Commitments - Additional Information (Detail) (USD $) | Sep. 30, 2013 |
In Millions, unless otherwise specified | |
Lorillard Tobacco | Leaf Tobacco | |
Unrecorded Unconditional Purchase Obligation [Line Items] | |
Approximate Contractual purchase obligations between July 1, 2013 and June 30, 2014 | $104 |
Approximate Contractual purchase obligations between October, 2014 and September 30, 2015 | 5 |
Lorillard Tobacco | Machinery | |
Unrecorded Unconditional Purchase Obligation [Line Items] | |
Approximate Contractual purchase obligations between July 1, 2013 and June 30, 2014 | 60 |
Blu eCigs | Inventory | |
Unrecorded Unconditional Purchase Obligation [Line Items] | |
Approximate Contractual purchase obligations between July 1, 2013 and June 30, 2014 | $57 |
Assets_and_Liabilities_Measure
Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Derivative Asset: | ||
Total derivative asset | $71 | $111 |
Cash and Cash Equivalents: | ||
Total cash and cash equivalents | 1,490 | 1,720 |
Short-term investments: | ||
Total short-term investments | 145 | |
Long-term investments: | ||
Total long-term investments | 88 | |
Prime money market funds | ||
Cash and Cash Equivalents: | ||
Total cash and cash equivalents | 1,490 | 1,720 |
Interest rate swaps - fixed to floating rate | ||
Derivative Asset: | ||
Total derivative asset | 71 | 111 |
Corporate debt securities | ||
Short-term investments: | ||
Total short-term investments | 72 | |
Long-term investments: | ||
Total long-term investments | 70 | |
Agency obligations | ||
Short-term investments: | ||
Total short-term investments | 44 | |
Long-term investments: | ||
Total long-term investments | 18 | |
Commercial paper | ||
Short-term investments: | ||
Total short-term investments | 16 | |
International government obligations | ||
Short-term investments: | ||
Total short-term investments | 13 | |
Level 1 | ||
Cash and Cash Equivalents: | ||
Total cash and cash equivalents | 1,490 | 1,720 |
Level 1 | Prime money market funds | ||
Cash and Cash Equivalents: | ||
Total cash and cash equivalents | 1,490 | 1,720 |
Level 2 | ||
Derivative Asset: | ||
Total derivative asset | 71 | 111 |
Short-term investments: | ||
Total short-term investments | 145 | |
Long-term investments: | ||
Total long-term investments | 88 | |
Level 2 | Interest rate swaps - fixed to floating rate | ||
Derivative Asset: | ||
Total derivative asset | 71 | 111 |
Level 2 | Corporate debt securities | ||
Short-term investments: | ||
Total short-term investments | 72 | |
Long-term investments: | ||
Total long-term investments | 70 | |
Level 2 | Agency obligations | ||
Short-term investments: | ||
Total short-term investments | 44 | |
Long-term investments: | ||
Total long-term investments | 18 | |
Level 2 | Commercial paper | ||
Short-term investments: | ||
Total short-term investments | 16 | |
Level 2 | International government obligations | ||
Short-term investments: | ||
Total short-term investments | $13 |
Fair_Value_Additional_Informat
Fair Value - Additional Information (Detail) (USD $) | 9 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 |
Fair Value Measurements Disclosure [Line Items] | |
Proceeds from Sale of Available for sale securities | $3 |
Credit_Agreement_Additional_In
Credit Agreement - Additional Information (Detail) (USD $) | 9 Months Ended | 1 Months Ended | |||
In Millions, unless otherwise specified | Sep. 30, 2013 | Jul. 10, 2012 | Sep. 30, 2013 | Jul. 10, 2012 | Mar. 26, 2010 |
Lorillard Tobacco | Lorillard Tobacco | Old Revolving Credit Facility | |||
Debt [Line Items] | |||||
Percentage of ownership interest in subsidiary | 100.00% | 100.00% | |||
Revolving credit facility | $200 | $185 | |||
Credit facility maturity term | 3 years | ||||
Revolving credit facility, initiation date | 10-Jul-12 | ||||
Revolving credit facility, expiration date | 10-Jul-17 | ||||
Revolving credit facility, increase, additional borrowing | $300 | ||||
Ratio of Debt to EBITDA to be maintained as per Revolver requirement | not more than 2.25 to 1 | ||||
Ratio of EBITDA to interest expense to be maintained as per Revolver requirement | not less than 3.0 to 1 | ||||
Maximum ratio of debt to EBITDA | 2.25% | ||||
Minimum ratio of EBITDA | 3.00% |
LongTerm_Debt_Detail
Long-Term Debt (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Debt Instrument [Line Items] | ||
Total long-term debt | $3,571 | $3,111 |
2016 Notes - 3.500% Notes due 2016 | ||
Debt Instrument [Line Items] | ||
Senior Long Term Notes | 500 | 500 |
2017 Notes - 2.300% Notes due 2017 | ||
Debt Instrument [Line Items] | ||
Senior Long Term Notes | 500 | 500 |
2019 Notes - 8.125% Notes due 2019 | ||
Debt Instrument [Line Items] | ||
Senior Long Term Notes | 821 | 861 |
2020 Notes - 6.875% Notes due 2020 | ||
Debt Instrument [Line Items] | ||
Senior Long Term Notes | 750 | 750 |
2023 Notes - 3.750% Notes due 2023 | ||
Debt Instrument [Line Items] | ||
Senior Long Term Notes | 500 | |
2040 Notes - 8.125% Notes due 2040 | ||
Debt Instrument [Line Items] | ||
Senior Long Term Notes | 250 | 250 |
2041 Notes - 7.000% Notes due 2041 | ||
Debt Instrument [Line Items] | ||
Senior Long Term Notes | $250 | $250 |
LongTerm_Debt_Additional_Infor
Long-Term Debt - Additional Information (Detail) (USD $) | 1 Months Ended | 9 Months Ended | 1 Months Ended | ||||||||||
In Millions, unless otherwise specified | Aug. 04, 2011 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Jul. 10, 2012 | Aug. 04, 2011 | Aug. 04, 2011 | Aug. 21, 2012 | Sep. 30, 2013 | Jun. 30, 2009 | Apr. 30, 2010 | Apr. 30, 2010 | 31-May-13 |
Tranche | Lorillard Tobacco | Lorillard Tobacco | 2016 Notes - 3.500% Notes due 2016 | 2041 Notes - 7.000% Notes due 2041 | 2017 Notes - 2.300% Notes due 2017 | 2019 Notes - 8.125% Notes due 2019 | 2019 Notes - 8.125% Notes due 2019 | 2020 Notes - 6.875% Notes due 2020 | 2040 Notes - 8.125% Notes due 2040 | 2023 Notes - 3.750% Notes due 2023 | |||
Debt Instrument [Line Items] | |||||||||||||
Issuance of unsecured senior notes | $750 | $500 | $250 | $500 | $750 | $750 | $250 | $500 | |||||
Unsecured senior debt stated interest rate percent | 3.50% | 7.00% | 2.30% | 8.13% | 6.88% | 8.13% | 3.75% | ||||||
Number of tranches issued | 2 | ||||||||||||
Debt instrument maturity date | 4-Aug-16 | 4-Aug-41 | 21-Aug-17 | 20-May-23 | |||||||||
Percentage of ownership interest in subsidiary | 100.00% | 100.00% | |||||||||||
Minimum incremental increase in interest rate on the notes | 0.25% | ||||||||||||
Maximum incremental increase in interest rate on the notes | 2.00% | ||||||||||||
Debt instrument description | The interest rate payable on the 2019 Notes is subject to incremental increases from 0.25% to 2.00% in the event either Moody's Investors Services, Inc. ("Moody's"), Standard & Poor's Ratings Services ("S&P") or both Moody's and S&P downgrade the 2019 Notes below investment grade (Baa3 and BBB- for Moody's and S&P, respectively). As of September 30, 2013, our debt ratings were Baa2 and BBB- with Moody's and S&P, respectively, both of which are investment grade. | ||||||||||||
Offer to repurchase notes upon change of control triggering event | 101.00% | ||||||||||||
Number of days ceased to be rated investment grade for becoming change of control triggering event | 60 days | ||||||||||||
Carrying value of notes | 3,571 | 3,111 | |||||||||||
Estimated fair value of notes | $3,804 | $3,512 |
Derivative_Instruments_Additio
Derivative Instruments - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2009 |
Debt Instrument [Line Items] | ||||
Notional amount of interest rate swap | $750 | |||
Fixed interest rate under interest rate swap agreement | 8.13% | |||
Spread on variable rate based on one month LIBOR | 4.63% | |||
Variable interest rate | 4.81% | 4.81% | 4.84% | |
Reduction in interest expense | 6 | 18 | ||
Interest rate swap agreements expiration date | 2019-06 | |||
Fair value of the interest rate swaps | 71 | 71 | 111 | |
2019 Notes - 8.125% Notes due 2019 | ||||
Debt Instrument [Line Items] | ||||
Adjusted carrying amounts of hedged debt outstanding | 821 | 821 | 861 | |
Other Assets | ||||
Debt Instrument [Line Items] | ||||
Fair value of the interest rate swaps | $71 | $71 | $111 |
Basic_and_Diluted_Earnings_Per
Basic and Diluted Earnings Per Share (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Numerator: | ||||
Net income, as reported | $258 | $283 | $898 | $790 |
Less: Net income attributable to participating securities | -1 | -1 | -2 | -2 |
Net income available to common shareholders | $257 | $282 | $896 | $788 |
Denominator: | ||||
Basic EPS- weighted average shares | 371.01 | 390.21 | 375.13 | 390.75 |
Effect of dilutive securities: | ||||
Stock Options and SARS | 0.76 | 0.84 | 0.8 | 0.9 |
Diluted EPS- adjusted weighted average shares and assumed conversions | 371.77 | 391.05 | 375.93 | 391.65 |
Earnings Per Share: | ||||
Basic | $0.69 | $0.72 | $2.39 | $2.02 |
Diluted | $0.69 | $0.72 | $2.38 | $2.01 |
Earnings_Per_Share_Additional_
Earnings Per Share - Additional Information (Detail) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2013 | Sep. 30, 2013 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Shares of common stock excluded from diluted earnings per share calculation | 0 | 0 |
Net_Periodic_Pension_and_Other
Net Periodic Pension and Other Postretirement Benefit Cost (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Pension Benefits | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | $7 | $6 | $20 | $18 |
Interest cost | 13 | 14 | 38 | 42 |
Expected return on plan assets | -21 | -19 | -62 | -57 |
Amortization of net loss | 5 | 5 | 16 | 16 |
Amortization of prior service cost | 1 | 1 | 3 | 3 |
Net periodic benefit cost | 5 | 7 | 15 | 22 |
Other Postretirement Benefits | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 2 | 1 | 5 | 4 |
Interest cost | 2 | 3 | 7 | 7 |
Net periodic benefit cost | $4 | $4 | $12 | $11 |
Retirement_Plans_Additional_In
Retirement Plans - Additional Information (Detail) (USD $) | 9 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 |
Pension Benefits | |
Defined Benefit Plan Disclosure [Line Items] | |
Defined benefit plan expected contributions for next year | $31 |
Defined benefit plan contribution | 31 |
Other Postretirement Benefits | |
Defined Benefit Plan Disclosure [Line Items] | |
Defined benefit plan expected contributions for next year | 14 |
Defined benefit plan contribution | $10 |
Share_Repurchase_Programs_Addi
Share Repurchase Programs - Additional Information (Detail) (USD $) | 9 Months Ended | 1 Months Ended | 9 Months Ended | 1 Months Ended | 9 Months Ended | 1 Months Ended | 2 Months Ended | 9 Months Ended | 1 Months Ended | 9 Months Ended | 1 Months Ended | 9 Months Ended | |||||
In Millions, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Aug. 09, 2011 | 31-May-11 | Sep. 30, 2013 | 31-May-11 | Sep. 30, 2013 | Feb. 24, 2012 | Feb. 29, 2012 | Sep. 30, 2013 | Jan. 30, 2013 | Jan. 31, 2013 | Sep. 30, 2013 | 21-May-13 | Mar. 12, 2013 | Sep. 30, 2013 | |
Share repurchase program, August 2010 - August 2011 | Share repurchase program, August 2010 - August 2011 | Share repurchase program, August 2010 - August 2011 | Share Repurchase Program May 2011 | Share Repurchase Program May 2011 | Share repurchase program, August 2011 - February 2012 | Share repurchase program, August 2011 - February 2012 | Share repurchase program, August 2011 - February 2012 | Share repurchase program, August 2012 | Share repurchase program, August 2012 | Share repurchase program, August 2012 | Share repurchase program, August 2012 | Share repurchase program, August 2012 | Shares repurchase under 2011 and 2012 programs | ||||
Maximum | |||||||||||||||||
Equity, Class of Treasury Stock [Line Items] | |||||||||||||||||
Amount authorized for repurchase of outstanding common stock | $5,300 | $1,400 | $1,000 | $1,400 | [1] | $750 | $750 | $500 | $500 | $500 | |||||||
Authorized amount for additional repurchase of outstanding common stock | 400 | 500 | |||||||||||||||
Payments for repurchase of common stock | 568 | 274 | 1,400 | ||||||||||||||
Repurchase of common stock, shares | 156.2 | 45.1 | [1] | 45.1 | 4.9 | 20.1 | 2.8 | 12.7 | 10.6 | ||||||||
Average per share price of repurchase of common stock | $31.02 | $38.28 | $37.29 | $39.24 | $39.38 | $43.13 | |||||||||||
Repurchase of common stock | $568 | $274 | $188 | $109 | $458 | ||||||||||||
[1] | As amended on May 19, 2011 |
Share_Repurchase_Program_Detai
Share Repurchase Program (Detail) (USD $) | 9 Months Ended | 1 Months Ended | 9 Months Ended | 1 Months Ended | 2 Months Ended | 9 Months Ended | 1 Months Ended | 9 Months Ended | |||||||||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Aug. 09, 2011 | 31-May-11 | Sep. 30, 2013 | Feb. 24, 2012 | Feb. 29, 2012 | Sep. 30, 2013 | Jan. 30, 2013 | Jan. 31, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | ||
Share repurchase program, July 2008 - October 2008 | Share repurchase programs, May 2009 - July 2009 | Share repurchase program, July 2009 - January 2010 | Share repurchase program, February 2010 - May 2010 | Share repurchase program, August 2010 - August 2011 | Share repurchase program, August 2010 - August 2011 | Share repurchase program, August 2010 - August 2011 | Share repurchase program, August 2011 - February 2012 | Share repurchase program, August 2011 - February 2012 | Share repurchase program, August 2011 - February 2012 | Share repurchase program, August 2012 | Share repurchase program, August 2012 | Share repurchase program, August 2012 | Share Repurchase Program March, 2013 | ||||
Equity, Class of Treasury Stock [Line Items] | |||||||||||||||||
Amount authorized | $5,300 | $400 | $250 | $750 | $250 | $1,400 | $1,000 | $1,400 | [1] | $750 | $750 | $500 | $500 | $1,000 | [2] | ||
Number of shares repurchased | 156.2 | 17.6 | 11 | 29.3 | 9.8 | 45.1 | [1] | 4.9 | 20.1 | 2.8 | 12.7 | 10.6 | [2] | ||||
Share repurchase program periods | July 2008 - October 2008 | May 2009 - July 2009 | July 2009 - January 2010 | Febuary 2010 - May 2010 | August 2010 - August 2011 | [1] | August 2011 - February 2012 | August 2012 - January 2013 | Mar-13 | [2] | |||||||
[1] | As amended on May 19, 2011 | ||||||||||||||||
[2] | As amended on May 21, 2013 |
Changes_in_Accumulated_Other_C
Changes in Accumulated Other Comprehensive Loss (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 |
In Millions, unless otherwise specified | Accumulated Defined Benefit Plans Adjustment | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance, January 1, 2013 | ($238) | ($241) | $241 |
Amortization of pension and post-retirement plan actuarial gains and prior service cost | -3 | ||
Ending balance September 30, 2013 | ($238) | ($241) | $238 |
Reclassifications_Out_of_Accum
Reclassifications Out of Accumulated Other Comprehensive Loss (Detail) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Amortization of defined benefit pension and post-retirement items: | |||||
Income taxes | ($155) | ($160) | ($535) | ($455) | |
Accumulated Defined Benefit Plans Adjustment | Reclassification out of Accumulated Other Comprehensive Income | |||||
Amortization of defined benefit pension and post-retirement items: | |||||
Prior service costs | -3 | [1] | |||
Actuarial loss | -16 | [1] | |||
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest, Total | -19 | ||||
Income taxes | 7 | ||||
Total reclassifications for the period | ($12) | ||||
[1] | These accumulated comprehensive loss components are included in the computation of net periodic pension cost (see Note 15, "Retirement Plans," for additional details), which is included in cost of sales and selling, general and administrative expenses. |
Segment_Information_Additional
Segment Information - Additional Information (Detail) | 1 Months Ended | 9 Months Ended |
Apr. 30, 2012 | Sep. 30, 2013 | |
Segment | Segment | |
Segment Reporting Information [Line Items] | ||
Number of reportable segments | 1 | 2 |
Segment_Information_Detail
Segment Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | |||||||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | ||||
Revenue from External Customer [Line Items] | |||||||||
Net sales | $1,827 | $1,661 | $5,208 | $4,919 | |||||
Cost of sales | 1,158 | 1,059 | 3,148 | 3,181 | |||||
Gross profit | 669 | 602 | 2,060 | 1,738 | |||||
Selling, general and administrative | 211 | [1] | 122 | [1] | 501 | [1] | 382 | [1] | |
Operating income/(loss) | 458 | 480 | 1,559 | 1,356 | |||||
Depreciation and amortization | 10 | 10 | 33 | 30 | |||||
Total assets | 3,555 | 3,424 | 3,555 | 3,424 | 3,396 | ||||
Capital expenditures | 14 | 15 | 48 | 51 | |||||
Cigarettes | |||||||||
Revenue from External Customer [Line Items] | |||||||||
Net sales | 1,764 | 1,647 | 5,031 | 4,897 | |||||
Cost of sales | 1,110 | 1,049 | 3,025 | 3,164 | |||||
Gross profit | 654 | 598 | 2,006 | 1,733 | |||||
Selling, general and administrative | 196 | 113 | 456 | 371 | |||||
Operating income/(loss) | 458 | 485 | 1,550 | 1,362 | |||||
Depreciation and amortization | 10 | 10 | 33 | 30 | |||||
Total assets | 3,383 | 3,368 | 3,383 | 3,368 | |||||
Capital expenditures | 14 | 15 | 47 | 51 | |||||
Electronic Cigarettes | |||||||||
Revenue from External Customer [Line Items] | |||||||||
Net sales | 63 | 14 | 177 | 22 | |||||
Cost of sales | 48 | 10 | 123 | 17 | |||||
Gross profit | 15 | 4 | 54 | 5 | |||||
Selling, general and administrative | 15 | 9 | 45 | 11 | |||||
Operating income/(loss) | -5 | 9 | -6 | ||||||
Total assets | 297 | 181 | 297 | 181 | |||||
Capital expenditures | 1 | ||||||||
Consolidating Adjustments | |||||||||
Revenue from External Customer [Line Items] | |||||||||
Total assets | ($125) | ($125) | ($125) | ($125) | |||||
[1] | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. |
Condensed_Consolidating_Balanc
Condensed Consolidating Balance Sheets (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Dec. 31, 2011 | ||
In Millions, unless otherwise specified | ||||||
Assets: | ||||||
Cash and cash equivalents | $1,490 | $1,720 | $1,715 | $1,634 | ||
Short-term investments - available for sale securities | 145 | |||||
Accounts receivable, less allowances of $2 and $3 | 33 | 18 | ||||
Other receivables | 56 | [1] | 52 | [1] | ||
Inventories | 464 | 410 | ||||
Deferred income taxes | 555 | 557 | ||||
Other current assets | 120 | 20 | ||||
Total current assets | 2,863 | 2,777 | ||||
Plant and equipment, net | 313 | 298 | ||||
Long-term investments - available for sale securities | 88 | |||||
Goodwill | 64 | 64 | ||||
Intangible assets | 57 | 57 | ||||
Deferred income taxes | 51 | 48 | ||||
Other assets | 119 | 152 | ||||
Total assets | 3,555 | 3,396 | 3,424 | |||
Liabilities and Shareholders' Equity (Deficit): | ||||||
Accounts and drafts payable | 35 | 39 | ||||
Accrued liabilities | 430 | [1] | 356 | [1] | ||
Settlement costs | 1,098 | 1,183 | ||||
Income taxes | 3 | 23 | ||||
Total current liabilities | 1,566 | 1,601 | ||||
Long-term debt | 3,571 | 3,111 | ||||
Postretirement pension, medical and life insurance benefits | 397 | 409 | ||||
Other liabilities | 63 | 52 | ||||
Total liabilities | 5,597 | 5,173 | ||||
Shareholders' Equity (Deficit): | ||||||
Common stock | 4 | 5 | ||||
Additional paid-in capital | 239 | 298 | ||||
Accumulated (deficit)/Retained earnings | -1,518 | 2,351 | ||||
Accumulated other comprehensive loss | -238 | -241 | ||||
Treasury stock | -529 | -4,190 | ||||
Total shareholders' deficit | -2,042 | -1,777 | -1,564 | -1,513 | ||
Total liabilities and shareholders' equity (deficit) | 3,555 | 3,396 | ||||
Parent | ||||||
Assets: | ||||||
Cash and cash equivalents | 331 | 150 | 194 | 235 | ||
Other receivables | 1 | [1] | ||||
Total current assets | 331 | 151 | ||||
Other assets | 125 | 125 | ||||
Total assets | 456 | 276 | ||||
Liabilities and Shareholders' Equity (Deficit): | ||||||
Accrued liabilities | 10 | [1] | 14 | [1] | ||
Total current liabilities | 10 | 14 | ||||
Investment in subsidiaries | 2,486 | 2,037 | ||||
Other liabilities | 2 | 2 | ||||
Total liabilities | 2,498 | 2,053 | ||||
Shareholders' Equity (Deficit): | ||||||
Common stock | 4 | 5 | ||||
Additional paid-in capital | 239 | 298 | ||||
Accumulated (deficit)/Retained earnings | -1,518 | 2,351 | ||||
Accumulated other comprehensive loss | -238 | -241 | ||||
Treasury stock | -529 | -4,190 | ||||
Total shareholders' deficit | -2,042 | -1,777 | ||||
Total liabilities and shareholders' equity (deficit) | 456 | 276 | ||||
Issuer | ||||||
Assets: | ||||||
Cash and cash equivalents | 529 | 1,471 | 1,071 | 582 | ||
Short-term investments - available for sale securities | 145 | |||||
Accounts receivable, less allowances of $2 and $3 | 14 | 8 | ||||
Other receivables | 55 | [1] | 41 | [1] | ||
Inventories | 394 | 369 | ||||
Deferred income taxes | 553 | 555 | ||||
Other current assets | 112 | 12 | ||||
Total current assets | 1,802 | 2,456 | ||||
Investment in subsidiaries | 634 | 118 | ||||
Plant and equipment, net | 312 | 298 | ||||
Long-term investments - available for sale securities | 88 | |||||
Deferred income taxes | 47 | 45 | ||||
Other assets | 119 | 152 | ||||
Total assets | 3,002 | 3,069 | ||||
Liabilities and Shareholders' Equity (Deficit): | ||||||
Accounts and drafts payable | 30 | 35 | ||||
Accrued liabilities | 499 | [1] | 399 | [1] | ||
Settlement costs | 1,098 | 1,183 | ||||
Total current liabilities | 1,627 | 1,617 | ||||
Long-term debt | 3,571 | 3,111 | ||||
Postretirement pension, medical and life insurance benefits | 397 | 409 | ||||
Other liabilities | 48 | 39 | ||||
Total liabilities | 5,643 | 5,176 | ||||
Shareholders' Equity (Deficit): | ||||||
Additional paid-in capital | 113 | 92 | ||||
Accumulated (deficit)/Retained earnings | -2,516 | -1,958 | ||||
Accumulated other comprehensive loss | -238 | -241 | ||||
Total shareholders' deficit | -2,641 | -2,107 | ||||
Total liabilities and shareholders' equity (deficit) | 3,002 | 3,069 | ||||
Non-guarantor Subsidiaries | ||||||
Assets: | ||||||
Cash and cash equivalents | 630 | 99 | 450 | 817 | ||
Accounts receivable, less allowances of $2 and $3 | 19 | 10 | ||||
Other receivables | 93 | [1] | 77 | [1] | ||
Inventories | 70 | 41 | ||||
Deferred income taxes | 2 | 2 | ||||
Other current assets | 8 | 8 | ||||
Total current assets | 822 | 237 | ||||
Plant and equipment, net | 1 | |||||
Goodwill | 64 | 64 | ||||
Intangible assets | 57 | 57 | ||||
Deferred income taxes | 6 | 5 | ||||
Total assets | 950 | 363 | ||||
Liabilities and Shareholders' Equity (Deficit): | ||||||
Accounts and drafts payable | 5 | 4 | ||||
Accrued liabilities | 13 | [1] | 10 | [1] | ||
Income taxes | 3 | 23 | ||||
Total current liabilities | 21 | 37 | ||||
Other liabilities | 140 | 138 | ||||
Total liabilities | 161 | 175 | ||||
Shareholders' Equity (Deficit): | ||||||
Additional paid-in capital | 152 | 72 | ||||
Accumulated (deficit)/Retained earnings | 637 | 116 | ||||
Total shareholders' deficit | 789 | 188 | ||||
Total liabilities and shareholders' equity (deficit) | 950 | 363 | ||||
Total Consolidating Adjustments | ||||||
Assets: | ||||||
Other receivables | -92 | [1] | -67 | [1] | ||
Total current assets | -92 | -67 | ||||
Investment in subsidiaries | -634 | -118 | ||||
Deferred income taxes | -2 | -2 | ||||
Other assets | -125 | -125 | ||||
Total assets | -853 | -312 | ||||
Liabilities and Shareholders' Equity (Deficit): | ||||||
Accrued liabilities | -92 | [1] | -67 | [1] | ||
Total current liabilities | -92 | -67 | ||||
Investment in subsidiaries | -2,486 | -2,037 | ||||
Other liabilities | -127 | -127 | ||||
Total liabilities | -2,705 | -2,231 | ||||
Shareholders' Equity (Deficit): | ||||||
Additional paid-in capital | -265 | -164 | ||||
Accumulated (deficit)/Retained earnings | 1,879 | 1,842 | ||||
Accumulated other comprehensive loss | 238 | 241 | ||||
Total shareholders' deficit | 1,852 | 1,919 | ||||
Total liabilities and shareholders' equity (deficit) | ($853) | ($312) | ||||
[1] | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. |
Condensed_Consolidating_Balanc1
Condensed Consolidating Balance Sheets (Parenthetical) (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Condensed Financial Statements, Captions [Line Items] | ||
Accounts receivable, allowances | $2 | $3 |
Condensed_Consolidating_Statem
Condensed Consolidating Statements of Income (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | ||||
Condensed Financial Statements, Captions [Line Items] | ||||||||
Net sales | $1,827 | $1,661 | $5,208 | $4,919 | ||||
Cost of sales | 1,158 | 1,059 | 3,148 | 3,181 | ||||
Gross profit | 669 | 602 | 2,060 | 1,738 | ||||
Selling, general and administrative | 211 | [1] | 122 | [1] | 501 | [1] | 382 | [1] |
Operating income | 458 | 480 | 1,559 | 1,356 | ||||
Investment income | 1 | 2 | 3 | |||||
Interest expense | -45 | -38 | -128 | -114 | ||||
Income before income taxes | 413 | 443 | 1,433 | 1,245 | ||||
Income taxes | 155 | 160 | 535 | 455 | ||||
Net income | 258 | 283 | 898 | 790 | ||||
Parent | ||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||
Selling, general and administrative | 1 | [1] | 1 | [1] | 1 | [1] | ||
Operating income | -1 | -1 | -1 | |||||
Interest expense | 1 | 4 | -1 | |||||
Income before income taxes | 3 | -2 | ||||||
Income taxes | 2 | 3 | -1 | |||||
Equity in earnings of subsidiaries | 260 | 283 | 898 | 791 | ||||
Net income | 258 | 283 | 898 | 790 | ||||
Issuer | ||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||
Net sales | 1,764 | 1,647 | 5,031 | 4,897 | ||||
Cost of sales | 1,110 | 1,049 | 3,025 | 3,165 | ||||
Gross profit | 654 | 598 | 2,006 | 1,732 | ||||
Selling, general and administrative | 484 | [1] | 379 | [1] | 1,279 | [1] | 1,157 | [1] |
Operating income | 170 | 219 | 727 | 575 | ||||
Investment income | 1 | 2 | 2 | |||||
Interest expense | -45 | -37 | -128 | -112 | ||||
Income before income taxes | 125 | 183 | 601 | 465 | ||||
Income taxes | 48 | 67 | 224 | 174 | ||||
Equity in earnings of subsidiaries | 182 | 171 | 516 | 505 | ||||
Net income | 259 | 287 | 893 | 796 | ||||
Non-guarantor Subsidiaries | ||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||
Net sales | 352 | 14 | 1,001 | 22 | ||||
Cost of sales | 48 | 10 | 123 | 16 | ||||
Gross profit | 304 | 4 | 878 | 6 | ||||
Selling, general and administrative | 15 | [1] | -257 | [1] | 45 | [1] | -776 | [1] |
Operating income | 289 | 261 | 833 | 782 | ||||
Investment income | 1 | |||||||
Interest expense | -1 | -1 | -4 | -1 | ||||
Income before income taxes | 288 | 260 | 829 | 782 | ||||
Income taxes | 105 | 93 | 308 | 282 | ||||
Net income | 183 | 167 | 521 | 500 | ||||
Total Consolidating Adjustments | ||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||
Net sales | -289 | -824 | ||||||
Gross profit | -289 | -824 | ||||||
Selling, general and administrative | -289 | [1] | -824 | [1] | ||||
Equity in earnings of subsidiaries | -442 | -454 | -1,414 | -1,296 | ||||
Net income | ($442) | ($454) | ($1,414) | ($1,296) | ||||
[1] | Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount. |
Condensed_Consolidating_Statem1
Condensed Consolidating Statements of Income (Parenthetical) (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Condensed Financial Statements, Captions [Line Items] | ||||
Excise taxes | $517 | $498 | $1,488 | $1,491 |
Condensed_Consolidating_Statem2
Condensed Consolidating Statements of Comprehensive Income (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Condensed Financial Statements, Captions [Line Items] | ||||
Net income | $258 | $283 | $898 | $790 |
Other comprehensive income, net of tax: | ||||
Defined benefit retirement plan gains, net of tax expense of $2, $2, $2 and $7 | 4 | 4 | 3 | 13 |
Comprehensive income | 262 | 287 | 901 | 803 |
Parent | ||||
Condensed Financial Statements, Captions [Line Items] | ||||
Net income | 258 | 283 | 898 | 790 |
Other comprehensive income, net of tax: | ||||
Comprehensive income | 258 | 283 | 898 | 790 |
Issuer | ||||
Condensed Financial Statements, Captions [Line Items] | ||||
Net income | 259 | 287 | 893 | 796 |
Other comprehensive income, net of tax: | ||||
Defined benefit retirement plan gains, net of tax expense of $2, $2, $2 and $7 | 4 | 4 | 3 | 13 |
Comprehensive income | 263 | 291 | 896 | 809 |
Non-guarantor Subsidiaries | ||||
Condensed Financial Statements, Captions [Line Items] | ||||
Net income | 183 | 167 | 521 | 500 |
Other comprehensive income, net of tax: | ||||
Comprehensive income | 183 | 167 | 521 | 500 |
Total Consolidating Adjustments | ||||
Condensed Financial Statements, Captions [Line Items] | ||||
Net income | -442 | -454 | -1,414 | -1,296 |
Other comprehensive income, net of tax: | ||||
Comprehensive income | ($442) | ($454) | ($1,414) | ($1,296) |
Condensed_Consolidating_Statem3
Condensed Consolidating Statements of Comprehensive Income (Parenthetical) (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Condensed Financial Statements, Captions [Line Items] | ||||
Defined benefit retirement plan gain (loss), net of tax expense (benefit) | $2 | $2 | $2 | $7 |
Condensed_Consolidating_Statem4
Condensed Consolidating Statements of Cash Flows (Detail) (USD $) | 9 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Cash flows from operating activities: | ||
Net income | $898 | $790 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 33 | 30 |
Pension, health and life insurance contributions | -41 | -41 |
Pension, health and life insurance benefits expense | 27 | 34 |
Deferred income taxes | -3 | -1 |
Share-based compensation | 14 | 14 |
Excess tax benefits from share-based arrangements | -7 | -9 |
Changes in operating assets and liabilities, net of amounts acquired: | ||
Accounts and other receivables | -50 | -13 |
Inventories | -54 | -124 |
Accounts payable and accrued liabilities | 69 | 54 |
Settlement costs | -85 | -84 |
Income taxes | -79 | -17 |
Other current assets | 8 | 6 |
Other assets | 5 | 2 |
Net cash provided by (used in) operating activities | 735 | 641 |
Cash flows from investing activities, net of cash acquired: | ||
Purchases of investments | -236 | |
Business acquisition | -135 | |
Additions to plant and equipment | -48 | -51 |
Sales, maturities and calls of investments | 3 | |
Net cash (used in) provided by investing activities | -281 | -186 |
Cash flows from financing activities: | ||
Proceeds from issuance of long-term debt | 500 | 500 |
Dividends paid | -621 | -608 |
Shares repurchased | -568 | -274 |
Debt issuance costs | -4 | -6 |
Proceeds from exercise of stock options | 2 | 5 |
Excess tax benefits from share-based arrangements | 7 | 9 |
Net cash (used in) provided by financing activities | -684 | -374 |
Change in cash and cash equivalents | -230 | 81 |
Cash and cash equivalents, beginning of year | 1,720 | 1,634 |
Cash and cash equivalents, end of period | 1,490 | 1,715 |
Parent | ||
Cash flows from operating activities: | ||
Net income | 898 | 790 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Equity income from subsidiaries | -898 | -791 |
Deferred income taxes | -1 | |
Share-based compensation | 1 | 1 |
Changes in operating assets and liabilities, net of amounts acquired: | ||
Accounts payable and accrued liabilities | -4 | -4 |
Income taxes | 1 | |
Other assets | -125 | |
Return on investment in subsidiaries | 1,452 | 1,021 |
Net cash provided by (used in) operating activities | 1,450 | 891 |
Cash flows from investing activities, net of cash acquired: | ||
Investment in subsidiary | -80 | -50 |
Net cash (used in) provided by investing activities | -80 | -50 |
Cash flows from financing activities: | ||
Dividends paid | -621 | -608 |
Shares repurchased | -568 | -274 |
Net cash (used in) provided by financing activities | -1,189 | -882 |
Change in cash and cash equivalents | 181 | -41 |
Cash and cash equivalents, beginning of year | 150 | 235 |
Cash and cash equivalents, end of period | 331 | 194 |
Issuer | ||
Cash flows from operating activities: | ||
Net income | 893 | 796 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Equity income from subsidiaries | -516 | -505 |
Depreciation and amortization | 33 | 30 |
Pension, health and life insurance contributions | -41 | -41 |
Pension, health and life insurance benefits expense | 27 | 34 |
Deferred income taxes | -2 | 1 |
Share-based compensation | 13 | 13 |
Excess tax benefits from share-based arrangements | -7 | -9 |
Changes in operating assets and liabilities, net of amounts acquired: | ||
Accounts and other receivables | -41 | 864 |
Inventories | -25 | -110 |
Accounts payable and accrued liabilities | 94 | 60 |
Settlement costs | -85 | -84 |
Income taxes | -65 | -15 |
Other current assets | 2 | 17 |
Other assets | 5 | 2 |
Net cash provided by (used in) operating activities | 285 | 1,053 |
Cash flows from investing activities, net of cash acquired: | ||
Purchases of investments | -236 | |
Additions to plant and equipment | -47 | -51 |
Sales, maturities and calls of investments | 3 | |
Net cash (used in) provided by investing activities | -280 | -51 |
Cash flows from financing activities: | ||
Proceeds from issuance of long-term debt | 500 | 500 |
Dividends paid | -1,452 | -1,021 |
Debt issuance costs | -4 | -6 |
Proceeds from exercise of stock options | 2 | 5 |
Excess tax benefits from share-based arrangements | 7 | 9 |
Net cash (used in) provided by financing activities | -947 | -513 |
Change in cash and cash equivalents | -942 | 489 |
Cash and cash equivalents, beginning of year | 1,471 | 582 |
Cash and cash equivalents, end of period | 529 | 1,071 |
Non-guarantor Subsidiaries | ||
Cash flows from operating activities: | ||
Net income | 521 | 500 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Deferred income taxes | -1 | -1 |
Changes in operating assets and liabilities, net of amounts acquired: | ||
Accounts and other receivables | -34 | -2 |
Inventories | -29 | -14 |
Accounts payable and accrued liabilities | 4 | -877 |
Income taxes | -15 | -2 |
Other current assets | 6 | -11 |
Net cash provided by (used in) operating activities | 452 | -407 |
Cash flows from investing activities, net of cash acquired: | ||
Business acquisition | -135 | |
Additions to plant and equipment | -1 | |
Net cash (used in) provided by investing activities | -1 | -135 |
Cash flows from financing activities: | ||
Proceeds from issuance of long-term debt | 125 | |
Contributions from parent | 80 | 50 |
Net cash (used in) provided by financing activities | 80 | 175 |
Change in cash and cash equivalents | 531 | -367 |
Cash and cash equivalents, beginning of year | 99 | 817 |
Cash and cash equivalents, end of period | 630 | 450 |
Total Consolidating Adjustments | ||
Cash flows from operating activities: | ||
Net income | -1,414 | -1,296 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Equity income from subsidiaries | 1,414 | 1,296 |
Changes in operating assets and liabilities, net of amounts acquired: | ||
Accounts and other receivables | 25 | -875 |
Accounts payable and accrued liabilities | -25 | 875 |
Other assets | 125 | |
Return on investment in subsidiaries | -1,452 | -1,021 |
Net cash provided by (used in) operating activities | -1,452 | -896 |
Cash flows from investing activities, net of cash acquired: | ||
Investment in subsidiary | 80 | 50 |
Net cash (used in) provided by investing activities | 80 | 50 |
Cash flows from financing activities: | ||
Proceeds from issuance of long-term debt | -125 | |
Dividends paid | 1,452 | 1,021 |
Contributions from parent | -80 | -50 |
Net cash (used in) provided by financing activities | $1,372 | $846 |
Legal_Proceedings_Additional_I
Legal Proceedings - Additional Information (Detail) (USD $) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 1 Months Ended | 1 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | 1 Months Ended | 1 Months Ended | 9 Months Ended | 1 Months Ended | 1 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sep. 11, 2013 | Apr. 30, 2013 | Sep. 30, 2013 | Mar. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2012 | Nov. 30, 2011 | Mar. 31, 2012 | Jul. 31, 2011 | Sep. 11, 2013 | Jun. 30, 2013 | Jan. 31, 2013 | Feb. 28, 2008 | Jun. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2006 | Dec. 31, 2011 | Dec. 31, 2009 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Apr. 30, 2011 | 31-May-11 | Aug. 31, 2012 | 31-May-12 | Feb. 28, 2013 | 31-May-13 | Feb. 28, 2013 | Mar. 31, 2011 | Apr. 30, 2011 | Jul. 31, 2011 | Mar. 31, 2012 | Nov. 30, 2011 | Jul. 23, 2013 | 31-May-12 | Mar. 31, 2012 | 31-May-13 | 6-May-13 | 31-May-13 | Sep. 30, 2013 | 31-May-12 | 31-May-13 | Sep. 30, 2013 | 31-May-12 | 31-May-13 | 31-May-13 | 31-May-12 | 31-May-13 | 6-May-13 | 31-May-13 | Sep. 30, 2013 | 31-May-12 | 31-May-13 | 31-May-12 | Sep. 30, 2013 | Oct. 31, 2012 | Sep. 30, 2000 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 13, 2013 | Sep. 30, 2013 | Sep. 13, 2013 | Dec. 31, 2010 | Sep. 30, 2013 | Sep. 30, 2011 | Oct. 17, 2013 | Oct. 17, 2013 | Oct. 04, 2013 | Oct. 04, 2013 | Oct. 17, 2013 | Oct. 17, 2013 | Oct. 17, 2013 | Oct. 17, 2013 | Oct. 17, 2013 | Oct. 17, 2013 | Oct. 17, 2013 | Oct. 17, 2013 | Oct. 17, 2013 | |
State | State | State | Weingart v. R.J. Reynolds Tobacco Company, et al. | Weingart v. R.J. Reynolds Tobacco Company, et al. | Lorillard Tobacco | Lorillard Tobacco | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | West Virginia Individual Personal Injury Cases | West Virginia Individual Personal Injury Cases | West Virginia Individual Personal Injury Cases | Reimbursement Cases | Reimbursement Cases | Reimbursement Cases | Reimbursement Cases | Tobacco-Related Antitrust Cases | Indemnification Obligations | Filter Cases | Filter Cases | Filter Cases | Conventional Product Liability Cases | Conventional Product Liability Cases | Conventional Product Liability Cases | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | |||||
Weingart v. R.J. Reynolds Tobacco Company, et al. | LegalMatter | LegalMatter | LegalMatter | LegalMatter | Employee | LegalMatter | Claim | 2-Jan-14 | May-14 | 2-Sep-14 | Sulcer v. Lorillard Tobacco Company, et al. | Jewett v. R.J. Reynolds, et al. | Calloway v. R.J. Reynolds Tobacco Company, et al. | Calloway v. R.J. Reynolds Tobacco Company, et al. | Evers | Evers v. R.J. Reynolds Tobacco Company, et al. | Evers v. R.J. Reynolds Tobacco Company, et al. | Mrozek v. Lorillard Tobacco Company | Tullo v. R.J. Reynolds, et al. | Weingart v. R.J. Reynolds Tobacco Company, et al. | Sury v. R.J. Reynolds Tobacco Company, et al. | Sury v. R.J. Reynolds Tobacco Company, et al. | Alexander v. Lorillard Tobacco Company, et al. | Alexander v. Lorillard Tobacco Company, et al. | Alexander v. Lorillard Tobacco Company, et al. | Cohen v. R.J. Reynolds Tobacco Company, et al. | Cohen v. R.J. Reynolds Tobacco Company, et al. | Ruffo v. R.J. Reynolds Tobacco Company, et al. | Gafney v. R.J. Reynolds Tobacco Company | R J Reynolds | R J Reynolds | R J Reynolds | Philip Morris | Philip Morris | Lorillard Tobacco | Lorillard Tobacco | Lorillard Tobacco | Lorillard Tobacco | Lorillard Tobacco | Lorillard Tobacco | Liggett | Liggett | Other Defendants | LegalMatter | LegalMatter | LegalMatter | LegalMatter | LegalMatter | Lorillard Tobacco | LegalMatter | LegalMatter | LegalMatter | Engle Progeny Cases | Engle Progeny Cases | Engle Progeny Cases | West Virginia Individual Personal Injury Cases | Flight Attendant Cases | Class Action Cases | Reimbursement Cases | Tobacco-Related Antitrust Cases | Filter Cases | Conventional Product Liability Cases | Conventional Product Liability Cases | Conventional Product Liability Cases | |||||||||||||||||||
LegalMatter | LegalMatter | LegalMatter | Calloway v. R.J. Reynolds Tobacco Company, et al. | Cohen v. R.J. Reynolds Tobacco Company, et al. | Gafney v. R.J. Reynolds Tobacco Company | Calloway v. R.J. Reynolds Tobacco Company, et al. | Ruffo v. R.J. Reynolds Tobacco Company, et al. | Calloway v. R.J. Reynolds Tobacco Company, et al. | Cohen v. R.J. Reynolds Tobacco Company, et al. | Cohen v. R.J. Reynolds Tobacco Company, et al. | Ruffo v. R.J. Reynolds Tobacco Company, et al. | Gafney v. R.J. Reynolds Tobacco Company | Calloway v. R.J. Reynolds Tobacco Company, et al. | Cohen v. R.J. Reynolds Tobacco Company, et al. | Calloway v. R.J. Reynolds Tobacco Company, et al. | Plaintiff | State | LegalMatter | Ruffo v. R.J. Reynolds Tobacco Company, et al. | Lorillard Tobacco | LegalMatter | LegalMatter | LegalMatter | LegalMatter | LegalMatter | LegalMatter | LegalMatter | Case One | Case Two | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ruffo v. R.J. Reynolds Tobacco Company, et al. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss Contingencies [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases pending against cigarette manufacturers | 600 | 7,795 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lorillard Tobacco as defendant | 6,871 | 31 | 60 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lorillard Tobacco or Lorillard Inc as defendant | 4,237 | 38 | 2,572 | 1 | 1 | 1 | 61 | 22 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lorillard Inc. as co-defendant | 0 | 658 | 654 | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lights cases pending against other manufacturers, excluding Lorillard | 19 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Medical monitoring Class Action cases | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of additional filter cases in which parent is defendant but which subsidiary is not defendant | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Verdict returned for cigarette manufacturers | 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensatory damages awarded | $25,000,000 | $7,000,000 | $8,000,000 | $3,520,000 | $50,000,000 | $35,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Damages paid to deceased smoker's son | 21,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Punitive damages awarded | 145,000,000,000 | 81,000,000 | 4,000,000 | 25,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reduce in jury's damages awards and reduce in verdicts to deceased smoker | 25,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reduce in jury's damages awards and reduce in verdicts to deceased smoker's son | 10,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Percentage of interest on Damages Awarded | 12.00% | 12.00% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of compensatory damages awarded | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Application fees | 2,400,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Attorney costs awarded by Court | 225,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lorillard Tobacco's share | 3,000,000 | 79,000,000 | 60,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Damages paid to plaintiffs in individual cases by manufacturers | 14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Punitive damages paid to smokers | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Actual damages paid | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinstated the compensatory damages awards by Florida Supreme Court | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases filed by family members | 500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of claims severed into separate lawsuits | 4,400 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases scheduled for trial | 50 | 107 | 120 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of cases dismissed | 14 | 3,224 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional Number of cases dismissed | 520 | 589 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of cases dismissed for a variety of reasons | 440 | 211 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Court granted defendants and dismissed additional cases | 36 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of appeal filed by plaintiffs | 70 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Percentage of fault of company for injuries | 5.00% | 10.00% | 9.00% | 65.00% | 5.00% | 3.00% | 20.00% | 80.00% | 18.00% | 20.00% | 3.00% | 33.00% | 44.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jury apportion of fault for smoker's injuries to smokers | 95.00% | 70.00% | 20.50% | 31.00% | 35.00% | 45.00% | 91.00% | 60.00% | 20.00% | 40.00% | 85.00% | 34.00% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensatory damages awarded to plaintiff | 4,500 | 225,000 | 692,981 | 3,230,000 | 6,000,000 | 4,500,000 | 150,000 | 1,000,000 | 1,000,000 | 20,000,000 | 2,055,050 | 5,800,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Punitive damages awarded to plaintiff in final judgment | 11,300,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensatory damages awarded to plaintiff in final judgment | 43,081 | 50,000 | 11,250 | 109,298 | 16,100,000 | 2,035,500 | 3,900,588 | 225,000 | 1,233,030 | 1,500,000 | 3,828,000 | 256,500 | 411,010 | 1,914,000 | 225,000 | 45,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual interest rate on damages awarded in final judgment | 6.00% | 6.00% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensatory damages awarded in punitive | 12,362,042 | 11,300,000 | 25,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Percentage of fault of other defendants for injuries | 50.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Litigation cost and fees to company | 246,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Damages awarded to plaintiffs for loss of companionship | 400,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jury apportion of fault for smoker's injuries to other defendants | 20.00% | 60.00% | 3.00% | 20.00% | 27.00% | 30.00% | 33.00% | 25.00% | 12.00% | 9.50% | 10.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Final judgment of annual interest | 4.75% | 6.00% | 4.75% | 4.75% | 4.75% | 4.75% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reduction in compensatory damages | 10,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss contingency compensatory damages awarded value | 20,500,000 | 8,000,000 | 16,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Final contingency punitive damages awarded value | 54,850,000 | 25,000,000 | 12,600,000 | 42,250,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Damages awarded to plaintiffs for jury's loss of services | 280,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Verdict returned against other cigarette manufacturers | 92 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Actual and punitive damages were paid in Engle Progeny Cases | 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Punitive damages award in cases against other cigarette manufacturers | 707,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Minimum punitive damages award in one of the twelve cases against other cigarette manufacturers | 20,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maximum punitive damages award in one of the cases against other cigarette manufacturers | 244,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maximum security deposit for Engle Progeny cases | 200,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases dismissed | 645 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lorillard Tobacco has been dismissed from cases in lack of evidence against them | 565 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases consolidated for trial | 1,250 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of plaintiffs asserting both claims | 28 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of plaintiffs involved in severed IPIC claims | 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lorillard Tobacco as a defendant in Severed IPIC Claims | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of plaintiffs involved in Severed IPIC claims using only other tobacco products in which neither Lorillard Inc nor Lorillard Tobacco are Defendants | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cigarette Manufacturers companies and Trade associations as defendants | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional cases to be filed | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Verdicts returned | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases are concluded | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defendant Prevailed | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Court granted plaintiff's motion for a new trial | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Damages awarded to plaintiff for French v. Philip Morris Incorporated | 5,500,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Damages reduced by trial court for French v. Philip Morris Incorporated | 500,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The cost of compliance to Lorillard Tobacco | 20,000,000 | 20,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amount claimed to recover profits earned by defendants | 280,000,000,000 | 280,000,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pretax charges for obligations under state settlement agreements | 369,000,000 | 343,000,000 | 888,000,000 | 1,045,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual payment by domestic tobacco industry | 10,400,000,000 | 10,400,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cap on plaintiffs attorneys fees paid by domestic tobacco industry | 500,000,000 | 500,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional amount paid for plaintiffs attorneys fees | 125,000,000 | 125,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of states involved in master settlement agreement | 17 | 17 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amount of expected credit to be received over the next five years | 220,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amount of expected credit to be received | 164,000,000 | 12,000,000 | 164,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Increase under state settlements liability and expenses | 1,000,000 | 21,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of states failed to diligently enforce escrow | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of states that did not participate in the settlement | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensatory damages expected to be paid | 457,900,000 | 46,900,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trust fund payable to compensate tobacco growing communities | 5,200,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of states having tobacco growing communities to be compensated by "Trust" | 14 | 14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation to tobacco quota holders and tobacco growers | 10,100,000,000 | 10,100,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of years compensated by law to tobacco quota holders and tobacco growers | 10 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payment made in settlement | 30,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensatory damages and damages for loss of consortium | $1,100,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Indirect purchaser suits | 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of states involved in Tobacco-Related Antitrust Indirect Purchasers Suits | 20 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Indirect purchaser suits dismissed by courts | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loews as co-defendant | 3 |
Number_of_Cases_Pending_Detail
Number of Cases Pending (Detail) (Subsequent Event) | Oct. 17, 2013 |
LegalMatter | |
Conventional Product Liability Cases | |
Loss Contingencies [Line Items] | |
Loss contingency pending claims number | 22 |
Engle Progeny Cases | |
Loss Contingencies [Line Items] | |
Loss contingency pending claims number | 4,237 |
West Virginia Individual Personal Injury Cases | |
Loss Contingencies [Line Items] | |
Loss contingency pending claims number | 38 |
Flight Attendant Cases | |
Loss Contingencies [Line Items] | |
Loss contingency pending claims number | 2,572 |
Class Action Cases | |
Loss Contingencies [Line Items] | |
Loss contingency pending claims number | 1 |
Reimbursement Cases | |
Loss Contingencies [Line Items] | |
Loss contingency pending claims number | 1 |
Filter Cases | |
Loss Contingencies [Line Items] | |
Loss contingency pending claims number | 61 |
Tobacco-Related Antitrust Cases | |
Loss Contingencies [Line Items] | |
Loss contingency pending claims number | 1 |
Subsequent_Events_Additional_I
Subsequent Events - Additional Information (Detail) (Subsequent Event, SKYCIG) | 1 Months Ended | |||
In Millions, unless otherwise specified | Oct. 01, 2013 | Oct. 01, 2013 | Oct. 01, 2013 | Oct. 01, 2013 |
USD ($) | GBP (£) | Maximum | Maximum | |
USD ($) | GBP (£) | |||
Subsequent Event [Line Items] | ||||
Purchase price, cash | $49 | £ 30 | ||
Additional contingent consideration | $49 | £ 30 | ||
Contingent consideration payment year | 2016 | 2016 |