Acquisition

9 Months Ended

Sep. 30, 2012

Acquisition [Abstract]

Acquisition

2. Acquisition

On April 24, 2012, Lorillard, Inc., through its wholly 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, sale and service 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 provides Lorillard with the blu eCigs brand and an e-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 $14 million and $21 million of sales of blu eCigs and Lorillard incurred $1 million and $6 million of acquisition-related expenses during the three and nine months ended September 30, 2012, respectively. blu eCigs incurred an operating loss of $5 million and $6 million during the three and nine months ended September 30, 2012, respectively.

Lorillard is still in the process of valuing the assets acquired and the liabilities assumed in the Acquisition. The allocation of the purchase price is preliminary and subject to change. The preliminary estimated 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