Segment Information

12 Months Ended

Dec. 31, 2013

Segment Information

21. 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 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 of the operations of LOEC (d/b/a blu eCigs), Cygnet (t/a SKYCIG) 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. Lorillard acquired certain of the assets and operations or SKYCIG, a United Kingdom based electronic cigarette business on October 1, 2013.

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 fixed assets are in the United States of America. Newport, Kent, True, Maverick, Old Gold, blu eCigs and SKYCIG are the registered trademarks of Lorillard and its subsidiaries. Lorillard sold its major cigarette trademarks outside of the United States in 1977.

(In millions)	Year Ended December 31, 2013
	Cigarettes		Electronic Cigarettes		Consolidating Adjustments			Total Lorillard
Net sales	$	6,720	$	230	$	—		$	6,950
Cost of sales		4,071		160		—			4,231
Gross profit		2,649		70		—			2,719
Selling, general and administrative		595		70		—			665
Operating income	$	2,054	$	—	$	—		$	2,054
Depreciation and amortization	$	44	$	6	$	—		$	50
Total assets	$	3,316	$	345	$	(125	)	$	3,536
Capital expenditures	$	61	$	1		—		$	62

(In millions)	Year Ended December 31, 2012
	Cigarettes		Electronic Cigarettes		Consolidating Adjustments			Total Lorillard
Net sales	$	6,562	$	61	$	—		$	6,623
Cost of sales		4,201		40		—			4,241
Gross profit		2,361		21		—			2,382
Selling, general and administrative		484		20		—			504
Operating income	$	1,877	$	1	$	—		$	1,878
Depreciation and amortization	$	38	$	1	$	—		$	39
Total assets	$	3,313	$	208	$	(125	)	$	3,396
Capital expenditures	$	74		—		—		$	74