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• UPDATE 2-Lorillard starts CEO succession review  

Lorillard Inc (LO.N) had begun reviewing options for succession to CEO Martin Orlowsky, whose contract expires on Dec. 31, 2010, the third-largest U.S. cigarette maker said on Thursday .

The board will weigh "all relevant options," the company said in a filing with the U.S. Securities and Exchange Commission.

A spokeswoman for Lorillard declined to comment further on the succession options.

Orlowsky, 67, has been president and chief executive since 1999 and became chairman in 2001. Lorillard was spun off from Loews Corp (L.N) in June 2008.

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Judge denies RJR motion for injunction 

R.J. Reynolds Tobacco Co.'s bid to carve out a "free speech" marketing niche for innovative products was dealt a blow today.

A U.S. District Court judge in Richmond denied a motion for a preliminary injunction sought by Reynolds and other tobacco manufacturers regarding The Family Smoking Prevention and Tobacco Control Act.

A lawsuit was filed Aug. 31 against the federal government and the Food and Drug Administration by Reynolds, Conwood Co. LLC, a sister company with Reynolds American Inc., Lorillard Inc. and Commonwealth Brands Inc.

The companies had sought a preliminary injunction against The Family Smoking Prevention and Tobacco Control Act. They said they are trying to "protect their First Amendment right to communicate with adult tobacco consumers about their products."

But Judge Joseph McKinley ruled that the "plaintiffs have little likelihood of success" in their challenge to the modified risk tobacco products provision in the law.

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Special Tobacco Analysis, Pt. 2 Big Tobacco Shifts Strategies  

In the past three months, the major tobacco companies have altered their promotional strategies, pulling back from umbrella programs and rechanneling efforts to specific brand promotions.

Based on an exclusive survey conducted by CSP Daily News and UBS Tobacco Analyst Nik Modi, nearly 80% of c-store chains said manufacturers have overhauled their total promotions, while only one of five said marketing promotions essentially have remained steady.

Among key comments from retailer respondents to the survey:

"From Altria I have notice more regionalized promotion deals. From R.J. Reynolds, they have cut back on their monthly discounts. Lorillard has given extra dollars off to the state of Wisconsin," responded one retailer.

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• Special Tobacco Analysis, Pt. 1 Big Tobacco Fights for Share  

Cigarettes' big three—Altria, R.J. Reynolds and Lorillard—are facing aggressive challenges from down trading and segment shifting in the convenience-store channel.

The nation's top three brands—Marlboro, Camel and Newport—are battling to hold onto market position in the convenience channel, some six months since Congress approved a record increase in the federal excise tax (FET) to finance expansion of the national children's insurance program, SCHIP.

Based on an exclusive survey conducted by CSP Daily News and UBS Tobacco Analyst Nik Modi, Lorillard appears to be the safest of the three.

Responding to the survey question asking, "Are you seeing substantial trade down from the big three premium brands?" half of the survey respondents said yes.

Asked which of the three premium brands are seeing the most negative pressure, about 40% named Marlboro specifically, and another 40% cited Camel or other Reynolds' brands such as Winston and Salem,

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It's No Time to Quit Lorillard  

Lorillard investors should take a deep breath. For one thing, while its average price per pack fell from the second quarter, that was partly because of rapid growth for one of Lorillard's low-cost cigarettes, called Maverick. Lorillard sells the brand for about half the price of Newport. But Maverick's sales volume, up 52% from a year earlier, accounted for 10.7% of the company's domestic volume, compared with 6.6% a year earlier.

And Newport still has potential for growth, even with its hefty 35% share of the U.S. menthol market. In markets west of the Mississippi River, Newport accounts for less than 20% of menthol consumption, reckons Thilo Wrede of Credit Suisse. Boosting market share in western states to the national average could increase Newport volume by roughly 8%, he says.

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• UPDATE 2-Lorillard 3rd-qtr profit below estimates  

Newport cigarette maker Lorillard Inc (LO.N) posted a lower-than-expected quarterly profit as wholesalers cut back on cigarette inventories and the company offered more special promotions to spur sales.

Lorillard said on Monday third-quarter profit was $235 million, or $1.44 a share, compared with $237 million, or $1.38 a share, a year earlier. Per-share profit rose because of a decline in shares outstanding.

Analysts on average forecast $1.52 a share, according to Thomson Reuters I/B/E/S. . . .

Last week, Lorillard competitor Altria Group Inc (MO.N) posted lower-than-expected quarterly revenue as cigarette volume dropped 16.4 percent. [ID:nN17379270]

Another rival, Reynolds American, also saw volume fall more than expected.

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Lorillard, Inc. Reports Third Quarter 2009 Results 

Highlights

* Net sales were $1.419 billion for the third quarter of 2009, compared to $1.125 billion for the third quarter of 2008. This includes a significant increase in federal excise taxes. Net sales excluding excise taxes were $953 million for the third quarter of 2009 compared to $936 million for the third quarter of 2008.

* Operating income increased 2.6% to $392 million, or 41.1% of net sales excluding excise taxes for the quarter, up 14% to $1.143 billion for the first nine months, compared to the 2008 periods.

* Earnings per diluted share was up 4.3%, to $1.44 for the quarter, and up 17.1% to $4.24 for the first nine months, compared to the 2008 periods.

* Total domestic industry wholesale shipments declined 12.6% versus Lorillard's 6.1% decline comparing the third quarter of 2009 with the third quarter of 2008. . . .

"Lorillard's overall performance during the third quarter of 2009 was positive in terms of its domestic wholesale shipments out-performing the industry compared to the third quarter of 2008. Additionally, Newport's domestic retail market share continued to grow despite a challenging marketplace," noted Martin Orlowsky, Chairman, President and Chief Executive Officer. "We remain committed to Lorillard's core business strategy of balancing profitability with Newport's market share position and continue to return cash to shareholders, via the recent increase in our quarterly dividend and share repurchase program."

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Lorillard 3Q profit dips partly on higher expenses 

Cigarette maker Lorillard Inc. said Monday that its third-quarter profit dipped 1 percent, pinched by higher expenses and consumers tightening their spending.

The maker of Newport menthol cigarettes earned $235 million, or $1.44 per share, for the three months ended Sept. 30. That's down from $237 million, or $1.38 per share, a year ago.

The per share discrepancy is a result of fewer shares outstanding in the current quarter.

Lorillard, whose other brands include Kent, True and Maverick, said revenue climbed 26 percent to $1.42 billion from $1.13 billion on higher prices, offset by selling fewer cigarettes and spending more on promotions. Excluding excise taxes, revenue grew 2 percent to $953 million from $936 million.

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Earnings Preview: Lorillard Inc.  

Tobacco maker Lorillard Inc. reports its third-quarter results on Monday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: The oldest continuously operating U.S. tobacco company and maker of Newport menthol cigarettes, based in Greensboro, N.C., said in July that it was selling more cigarettes even after it raised prices and a federal tax increase went into effect April 1.

Cigarette volumes at Lorillard, whose brands also include Kent, True, Maverick, Old Gold and Max, increased 2.1 percent for the second quarter, when the company estimated volumes fell 4.1 percent across the industry. . . .

WHAT'S AHEAD: The tobacco industry is anticipating more fallout from the FDA's new regulatory authority. Although a ban on flavored cigarettes went into effect last month, the FDA has not clarified how it will treat menthol cigarettes like Lorillard's popular Newport brand. And both Altria and Reynolds American hope to take some of Lorillard's share of the menthol market.

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In Bergen, are Ferriero's inmates running the asylum? 

Democratic incumbents Julie O'Brien and Vernon Walton have seized on attacks against tobacco companies as a critical issue in a race for Bergen County Freeholder. They are blaming GOP challenger John Driscoll, who is a field sales representative for Lorillard Tobacco, for his role in enabling children to smoke cigarettes. "As a mother and a grandmother I know how hard it is to keep kids away from cigarettes. John Driscoll's efforts aren't helping. It takes your breath way," O'Brien said. Maybe it's smart politics that O'Brien has shifted the debate away from property taxes and Ferriero (by the way, he picked her too).

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• CLEARY v. PHILIP MORRIS, INC.  

Brian Cleary and Rita Burke, representing a putative class, have sued several tobacco companies and tobacco-related entities. This case was filed in state court in 1998. Defendant Lorillard Tobacco Co. removed it to this Court after plaintiffs filed a third amended complaint on March 3, 2009. In their third amended complaint, plaintiffs make several claims against the defendants on behalf of Illinois residents. Among other claims, plaintiffs allege that defendants deceptively marketed "low tar," "light," and "ultra light" cigarettes as being safer than regular cigarettes, although they were equally dangerous. Defendants have moved for judgment on the pleadings with respect to these claims on the ground that they are time-barred. For the following reasons, the Court grants the motion as to the defendants other than Philip Morris but defers ruling as to Philip Morris. . . .

For the foregoing reasons, the Court grants defendants' motion for judgment on the pleadings concerning Count 3 of the third amended complaint [docket no. 85] as to all defendants other than Philip Morris. The Court directs Philip Morris to show cause, by no later than September 21, 2009, why the Court should not vacate the state court's interlocutory order dismissing the light cigarettes claim. Pending ruling on that matter, the Court defers consideration of whether the Marlboro Lights claims in the third amended complaint relate back to the date the plaintiffs filed the first amended complaint. The case is set for a status hearing on September 23, 2009 at 9:30 a.m.

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Ahead of the Bell: Tobacco companies  

A Credit Suisse analyst downgraded Altria Group Inc. Monday, worried about possibly declining Marlboro prices and the company's ability to balance profit and market share growth for the cigarette brand.

In separate client notes, analyst Thilo Wrede boosted the price targets of peers Lorillard Inc. and Reynolds American ( RAI ) Inc.

Wrede said Altria ( MO)'s Marlboro has been underperforming, and reported market share loss in its most recent quarter. The analyst anticipates the Richmond, Va.-based tobacco company may have to cut prices of the cigarettes as unemployment continues to climb.

Wrede dropped Altria to "Neutral" from "Outperform" and reaffirmed a $20 price target.

The analyst still believes Lorillard is the best tobacco company in the U.S.

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• 21 charged in cigarette tax-evasion scheme; probe also snared bomb suspect  

A Yonkers man is among 21 cigarette-smuggling suspects charged with evading the state tobacco tax in a sting operation that also netted a cache of homemade bombs and weapons inside Cortlandt man's home.

The cigarette bust, which cost the state $21 million in lost taxes, was the largest of its kind in the United States, a state official said at a news conference this afternoon at the Westchester County District Attorney's Office.

"There will be more arrests, I'm confident," said William Comiskey, the deputy commissoner of taxation and finance. "This is just one type of activity they're involved in."

Ibrahim Althnaibat, 49, of Willow Street in Yonkers was one of the alleged "middle men" arrested in the sting, joining 20 others from the five boroughs of New York, Pennsylvania, and Virginia.

The sting also led to Thursday's arrest of 52-year-old Gary Burstell of Cortlandt, where police said they found homemade bombs, 14 rifles, thousands of rounds of ammunition and $500 worth of fireworks during a raid of his home. . . .

They bought cartons of cigarettes straight from the manufacturers - mostly Newport and Marlboro - and started selling them out of a Yonkers garage.

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The leading players in the US tobacco market include Altria Group, Inc., Reynolds American Inc. and Lorillard 

This databook provides key data and information on the tobacco market in the US. This report is a comprehensive resource for market, category and segment level data including value, volume, distribution share and company & brand share. This report also provides expenditure and consumption data for the historic and forecast periods.

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Editorial: Hot air from Big Tobacco  

Any company selling products that addict and eventually kill 400,000 customers annually might well be reluctant to point out the health dangers.

So the federal courts should be mighty skeptical when Big Tobacco screams about its First Amendment rights to keep peddling cigarettes without the oversize health warning labels ordered by Congress this year. . . .

For decades, tobacco firms hid the devastating health risks of smoking, made bogus safety claims, and pitched smoking to teens.

Despite that history as a rogue industry, the tobacco companies contend in their lawsuit that tobacco products are legal and, therefore, they have a right to market widely and refuse labels that "stigmatize their own products."

The case likely will reach the Supreme Court, which decisively struck down restrictions on billboard tobacco ads on free speech grounds in 2001. Were the industry's broad legal challenge to succeed, FDA regulation of tobacco would be virtually meaningless.

Maybe Big Tobacco will be able to hide behind the Bill of Rights, but Americans should have a greater right to public-health efforts designed to safeguard them from the deadly ills of smoking.

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