Exhibit 99.1
Morgan Stanley
Consumer Conference
November 19, 2013
1
Murray S. Kessler
Chairman, President and Chief
Executive Officer
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Safe Harbor Disclaimer
You are cautioned that certain statements made in this presentation are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain the words “expect”, “intend”, “plan”, “anticipate”, “estimate”, “believe”, “will be”, “will continue”, “will likely result”, and similar expressions. In addition, any statement that may be provided by management concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible actions by Lorillard, Inc. are also forward-looking statements as defined by the Act.
Forward-looking statements are based on current expectations and projections about future events and are inherently subject to a variety of risks and uncertainties, many of which are beyond the control of Lorillard, Inc., and could cause actual results to differ materially from those anticipated or projected.
Information describing factors that could cause actual results to differ materially from those in forward-looking statements is available in Lorillard, Inc.’s various filings with the Securities and Exchange Commission (“SEC”). These filings are available from the SEC over the Internet or on hard copy, and are, in some cases, available from Lorillard, Inc. as well.
Forward-looking statements speak only as of the time they are made, and Lorillard, Inc. expressly disclaims any obligation or undertaking to update these statements to reflect any change in expectations or beliefs or any change in events, conditions or circumstances on which any forward-looking statement is based.
This forward-looking statements disclaimer is only a brief summary of Lorillard, Inc.’s statutory forward-looking-statements disclaimer. You are urged to read that disclaimer, which is included in Lorillard Inc.’s Form 10-K and Form 10-Q filings with the SEC.
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Regulation G Compliance
You are also reminded that during this presentation, certain non-GAAP financial measures, such as Adjusted Earnings Per Share may be discussed. These measures should not be considered an alternative to net income, or any other measure of financial performance or liquidity presented in accordance with generally accepted accounting principles (GAAP). These measures are not necessarily comparable to a similarly titled measure of another company. Please refer to Appendix A for information that reconciles these measures with the most comparable GAAP measures.
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Lorillard is the #3 Tobacco Company in the USA With Very Strong Brands
The #2 U.S. Cigarette Brand - Newport ®
The #1 U.S. Menthol Brand - Newport
The #1 U.S. electronic cigarette – blu eCigs ®
– Newly-acquired international e-cigarette business - SKYCIG®
Source: Lorillard proprietary retail database (“EXCEL”). As of full year ended 12/31/2012.
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In Cigarettes, Lorillard has Gained Market Share For Eleven Consecutive Years
Lorillard Retail Market Share of U.S. Cigarettes
16%
14.9%
14.1% 14.4%
14%
12.9%
11.8%
12%
11.0%
10.4%
10.0% 10% 9.6%
9.0% 9.2%
8.7%
8% 6% 4% 2% 0%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD
Newport Total Lorillard
Source: MSA, Inc. Excel retail database. 2013 YTD data through 9/30/2013.
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Driving a Consistent Track Record of Superior Financial Results
Net Sales (ex-FET) Operating Income* E.P.S.*
Billions Billions
$5.0 4.64 $2.0 1.87 1.88 $3.0 2.82 4.45 2.63 4.05 1.73 1.54 $2.5 2.25
$4.0 3.69
3.49 $1.5 1.42
1.91
$2.0
1.71
$3.0
$1.0 $1.5
$2.0 $1.0 $0.5 $1.0 $0.5
$0.0 $0.0 $0.0
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012
CAGRs + 7.3% + 7.4% + 13.3%
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| Adjusted results. See Appendix A for further discussion of adjustments. Source: Company filings. 7 |
Allowing The Company to Return Significant Cash to Shareholders
Annualized Dividend Per Share
+79%
Cumulative Cash Returned
In millions $3.00 $7,310
$7,500
$5,925
$5,000 $4,191
$2.00 $3,615 $3,613 $2,254 $2,026
$2,500
$713 $1,310 $2,312 $3,119 $1,589 $313 $400 $944
$1.00 $0
Q3 2008 Q3 2009 Q3 2010 Q1 2011 Q1 2012 Q1 2013 2008 2009 2010 2011 2012
Dividends Buybacks
More than $8 Billion Cash Returned to Investors Since Going Public
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Source: Lorillard filings. Since Lorillard spin-off completed in June 2008. Dividend data adjusted to reflect 3-for-1 stock split effected January 15, 2013.
And Ultimately Contributing To Significant Increases In Shareholder Value
More than $9 billion of value creation since 12/31/2010
Stock Price
$52.6
P/E Ratio 16.6 Stock Price $27.4 Enterprise P/E Ratio 12.1 $21.4 Value (B)
Enterprise
$11.8
Value (B)
2011 2012 2013
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Source: Bloomberg. As of November 15, 2013
The First Nine Months of 2013 Has Been a Continuation Of Lorillard’s Industry-Leading Fundamentals
Lorillard YTD 2013 performance through September 30 versus year ago
14% 13.3%
12% 10.2%
10% 8.5%
8%
6% E.P.S.*
Operating
4% Net Sales Income*
2% (ex-FET)
0%
* Adjusted results. See Appendix A for further discussion of adjustments. Source: Company fillings.
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Pursuit of Lorillard’s Strategic Vision Should Allow The Company to Continue Delivering Superior Results
“To Responsibly Bring Newport Pleasure To All Adult Smokers”
Carefully
Protect & Build Out Pursue
Grow The Processes and Close-in
Core Capabilities Adjacencies
With a Goal of Consistently Delivering a Double-Digit
Shareholder Return Over the Long-Term
* Double-digit shareholder return as measured by EPS growth and the dividend yield.
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As The Company Uniquely has Numerous Close-In “White Space” Growth Opportunities it is Pursuing, While Protecting its Core Franchise
2012 U.S. Tobacco Market Segmentation 15.1 B Packs/Cans
0.2 %
90.5 % 0.5 % 8.8 %
100%
RJR RJR RJR Others
80% RJR
All Others Altria
RJR
60%
40% Altria Altria RJR
Altria
Altria
20%
Altria
0%
Non-Full Flavor Non-Menthol Full-Flavor NFF MST Discount
Snus e-Cigs
Non-Menthol Menthol Menthol
Source: MSA, Inc. Excel retail database. 12
Accordingly, Lorillard’s Strategic Priorities Are as Follows:
1. Profitably maintain a stable Newport Full-Flavor franchise in the core through a disciplined and focused approach
2. Offset cigarette industry declines through close-in adjacency expansion
– Geographic expansion of Newport promotions west of the Mississippi River
– Product expansion into Non-Menthol (Red & Gold)
3. Establish Lorillard as “first and best” with blu eCigs in electronic cigarettes
4. Defend Lorillard’s freedom to operate – hold regulators to science-based decisions
5. Continue to reward shareholders with superior returns
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Stability of Newport Full-Flavor Menthol in the Core is Job #1
Premium Full-Flavor Menthol, Core States
100% FF Menthol
All Other All Other All Other All Other
80% Rest of Industry
60%
40% Newport Newport Newport Newport
-1.2%
20%
0%
2010 2011 2012 2013 YTD -5.0%
Newport Share of
Premium Full-Flavor 74% 74% 73% 74% 5 Year CAGRs
Menthol Core States 2007 - 2012
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Source: MSA, Inc. Excel retail database. Year-to-date 2013 as of November 1, 2013.
Achieved Through Strong Brand-Building
Brand-Building Initiatives
Advertising
Product Merchandising
Consistent 40-year campaign
Distinctive & recognizable
Proven messaging
Iconic brand
Consumer preferred
Unique taste profile
61% Net Promoter Score
32,000 new retail plans
New product visibility
Best relationships in industry
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And Achieved Without Heavy Use of Discounting
Percentage of 2013 Menthol Volume Sold at Full Price*
100% 97%
80%
63%
60% 54%
40%
Newport #2 Menthol #3 Menthol Brand Brand
* Source: MSA, Inc. Excel retail database, year-to-date through 9/30/2013. Full price is defined as within 50 cents per pack of the most common retail price of the mainline brand.
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Lorillard’s Strategic Priorities
1. Profitably maintain a stable Newport Full-Flavor franchise in the core through a disciplined and focused approach
2. Offset cigarette industry declines through close-in adjacency expansion
– Geographic expansion of Newport promotions west of the Mississippi River
– Product expansion into Non-Menthol (Red & Gold)
3. Establish Lorillard as “first and best” with blu eCigs in electronic cigarettes
4. Defend Lorillard’s freedom to operate – hold regulators to science-based decisions
5. Continue to reward shareholders with superior returns
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Geographic Expansion of Promotions and Product Line Have Been Successful
Results from geographic expansion strategy in the non-core
Volume Trends Market Share
5.5% 5.0% 4.3%
Newport
-4.9% 18.6%
7.3% 5.5%
Total
-1.1%
Lorillard
Pre Post Pre Post
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Source: MSA, Inc. Excel retail database. Pre-period is 2009 change and Post-period is 2012 change.
As Has Lorillard’s Entry into Non-Menthol, First with Newport Red
2012 0.9% retail market share
Premium Non-Menthol Full Flavor 2.2 billion units in 2012
Units by Brand Pricing up more than 35%
since launch
Source: MSA, Inc. Excel retail database.
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Non-Menthol Gold Represents Our Next Opportunity
89 B units
100% Other
80% RJR
60%
40% Altria
20%
0%
Recently authorized by FDA
2012
Consumer-preferred taste
Premium Non-Menthol Non-Full Flavor Consumer-preferred packaging
Units by Brand Priced in-line with Newport Red
Sources: MSA, Inc. Excel Retail Database ; Newport 80mm Box Gold Non-Menthol Product Test, 20
January 2011; Newport Non-Menthol Gold Online Packaging Test, August 2011;
Shipments Commenced on October 4, 2013
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Lorillard’s Strategic Priorities
1. Profitably maintain a stable Newport Full-Flavor franchise in the core through a disciplined and focused approach
2. Offset cigarette industry declines through close-in adjacency expansion
— Geographic expansion of Newport promotions west of the Mississippi River
— Product expansion into Non-Menthol (Red & Gold)
3. Establish Lorillard as “first and best” with blu eCigs in electronic cigarettes
4. Defend Lorillard’s freedom to operate – hold regulators to science-based decisions
5. Continue to reward shareholders with superior returns
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Lorillard’s Acquisition of blu eCigs in 2012 Gives the
Company a Head-Start in an Emerging New Category
Category estimated at $1 billion with 100% annual market growth
Awareness = ~100%
Trial = 43%
Repeat Usage = 26%
~1% impact on cigarettes
Gives Lorillard a major seat in the harm reduction debate
Sources: Wells Fargo/Nielsen estimates, research note dated 7/26/2013;
Lorillard Adult User Survey; May 2013 (n=523)
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We Also Completed Another e-Cigarette Acquisition – The First Step in Global Expansion
A leading UK e-cigarette brand
Demonstrated track record of bringing innovative products to market
Provides platform for further geographic expansion
Establishes Lorillard as a global leader in tobacco harm reduction
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Lorillard Has Been Focused on Being First and Best
National retail roll-out – 127,000+ outlets currently
National TV and print advertising campaign ($40 MM 2013 marketing spend)
Product enhancements & quality controls
Increased manufacturing capacity & inventory
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Brand-Building is the Top Priority
Stephen Dorff Jenny McCarthy
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Brand-Building is the Top Priority
Other Brand-Building Activities
Sampling Music Motor Sports
...All Targeted to Adult Smokers
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blu
ELECTRONIC
CIGARETTES
Through These Efforts, blu eCigs has Emerged as The #1 e-Cig Company
Quarterly blu eCigs Retail Market Share
Share 40%+ Market Share ~127,000 Retail Outlets
50% 44%
40% 34%
~10% Market Share*
30%
~12,000 Retail
20% Outlets *
15% 10%*
10%
0%
Q2 2012 Q3 2012 Q4 2012 YTD 2013
EPS Accretive in Year 1
Source: MSA, Inc. Excel retail database for electronic cigarettes, as of Sep. 30, 2013. * blu eCigs internal estimates.
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Lorillard’s Strategic Priorities
1. Profitably maintain a stable Newport Full-Flavor franchise in the core through a disciplined and focused approach
2. Offset cigarette industry declines through close-in adjacency expansion
— Geographic expansion of Newport promotions west of the Mississippi River
— Product expansion into Non-Menthol (Red & Gold)
3. Establish Lorillard as “first and best” with blu eCigs in electronic cigarettes
4. Defend Lorillard’s freedom to operate – hold regulators to science-based decisions
5. Continue to reward shareholders with superior returns
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Lorillard’s Position on Menthol is Based on Science
Scientific evidence does not support a finding that a product standard related to menthol would be
“appropriate for public health”
FDA’s PSE is Fundamentally Flawed
Lack of transparency in FDA’s selection and weighting of studies
FDA’s conclusions often based on strained interpretations of data not supported by suitable evidence
FDA inappropriately uses “association” instead of causation
FDA appears to ignore some studies and peer review comments
FDA relies upon unpublished and non-peer reviewed studies
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Lorillard Agrees with Comments from the CTP Director
“As a regulatory agency, we can only go as far as the regulatory science will take us.” “The bottom line is we need more information.”
Mitch Zeller, Director, FDA Center for Tobacco Products
- New York Times, July 23, 2013
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Lorillard Intends to Hold Regulators to Science-Based Decisions
FDA’s Deeming Regulations for e-Cigarettes
Lorillard supports reasonable regulations for e-cigs including:
Minimum age of purchase laws restricting sales to minors
Product quality and safety standards
Disclosure of relevant consumer safety and ingredient information
Lorillard believes e-cig regulations should also allow marketing freedoms including:
Broad retail and online availability
Marketing freedom to advertise product advantages and attributes
Flavors acceptable as a choice for adult consumers
Flexibility enabling the swift introduction of new products
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Lorillard’s Strategic Priorities
1. Profitably maintain a stable Newport Full-Flavor franchise in the core through a disciplined and focused approach
2. Offset cigarette industry declines through close-in adjacency expansion
Geographic expansion of Newport promotions west of the Mississippi River
Product expansion into Non-Menthol (Red & Gold)
3. Establish Lorillard as “first and best” with blu eCigs in electronic cigarettes
4. Defend Lorillard’s freedom to operate – hold regulators to science-based decisions
5. Continue to reward shareholders with superior returns
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Lorillard Formula for Success is Unchanged
Focus on
Industry Lean
Returning
Leading Cost
Cash to
Fundamentals Structure
Shareholders
Consistent Delivery of a Double Digit Total Shareholder Return Over the Long-Term
* Double-digit shareholder return as measured by EPS growth and the dividend yield.
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Continually Improving Capital Structure
2013-
2010 2011 2012
9/30
Leverage* 1.0 X 1.3X 1.6 X 1.7 X Long-Term Debt $1.77 B $2.60 B $3.11 B $3.57 B Shares Repurchased (millions) 27.0 46.7 14.8 13.4 Dividend Payout 63% 66% 73% nm Weighted Average Interest Rate on Debt 6.2% 5.7% 5.2% 5.0%
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* See Appendix A for further discussion of leverage.
Consistently Rewarding Shareholders with Superior Returns
600
+463.6%
500
100 400 to Indexed 300
200
Prices +59.1%
100
0
Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
LO S&P 500
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Source: Bloomberg. From Carolina Group IPO on 1/31/2002 through 11/15/2013.
Summary
1. Delivering superior results over the long-term
2. Core cigarette business still has running room
3. e-Cigarettes are a significant growth opportunity
4. Lorillard believes that science does not support disproportionate regulation of menthol cigarettes
5. As always, the Company is focused on rewarding shareholders
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Questions
Murray S. Kessler
Chairman, President and Chief Executive Officer
David H. Taylor
Executive Vice President and Chief Financial Officer
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Appendix A
Regulation G Reconciliations
Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Results
(Amounts in millions, except per share data) (Unaudited)
Operating E-Cigarette Segment
Year ended December 31, 2011 Income Diluted EPS Operating Income
Reported (GAAP) results $1,892 $2.66 N/A
GAAP results include the following:
1) Tobacco settlement expense impact of RAI mark-to-market
adjustments (25) (0.03) N/A
Adjusted (Non-GAAP) results $1,867 $2.63 N/A
Operating E-Cigarette Segment
Year ended December 31, 2012 Income Diluted EPS Operating Income
Reported (GAAP) results $1,878 $2.81 $1
GAAP results include the following:
1) Tobacco settlement expense impact of RAI mark-to-market
pension accounting adjustments (8) (0.01) -
2) Tobacco settlement expense impact of RJRT adjustments to its
2001-2005 operating income and restructuring charges 7 0.01
3) blu eCigs acquisition expenses 6 0.01 1
Adjusted (Non-GAAP) results $1,883 $2.82 $2
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Appendix A (cont.)
Regulation G Reconciliations
Reconciliation of Reported (GAAP) to Adjusted (Non-GAAP) Results
(Amounts in millions, except per share data) (Unaudited)
Nine Months Ended September 30, 2013 E-Cigarette
Operating Diluted Segment
Income EPS Operating Income
Reported (GAAP) results $ 1.559 $2.38 $ 9
GAAP results include the following:
1) Settlement to resolve certain MSA payment disputes (154) (0.25) -
2) Estimated costs to comply with or otherwise resolve
U.S. Government Case judgment 20 0.03 -
3) Accrued costs related to compensatory damages and
statutory interest to dismiss Evans case 79 0.13 -
4) SKYCIG acquisition expenses 4 0.01 -
Adjusted (Non-GAAP) results $ 1,508 $2.30 $ 9
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Appendix A (cont.)
Regulation G Reconciliations
Leverage Ratios
2010 2011 2012 2013 – Q3
Adjusted operating income $ 1,725 $ 1,867 $ 1,883 $2,022 (1)
Depreciation and amortization 35 37 39 42 (1)
Earnings before interest, taxes, depreciation and
amortization (B) $ 1,760 $ 1,904 $ 1,922 $2,064
Long-term debt $ 1,769 $ 2,595 $ 3,111 $3,571
Fair value of interest rate swap (69) (95) (111) (71)
Long-term debt, net of fair value of interest rate swap
(A) $ 1,700 $ 2,500 $ 3,000 $3,500
Leverage (A/B) 1.0 1.3 1.6 1.7
(1) Based on prior twelve months ended 9/30/2013.
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Lorillard
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