Lorillard CEO Kessler made $8.5M in '12

RICHMOND, Va. (AP) -- Lorillard Inc. CEO Murray Kessler received a pay package from the nation's third-biggest tobacco company valued at $8.5 million in 2012, about 35 percent less than the previous year, according to an Associated Press analysis of a regulatory filing.

The pay package came in a year when the maker of Newport, Kent, True and Maverick cigarettes saw its profit fall 1.5 percent to $1.09 billion and its revenue excluding excise taxes increase 4 percent to $4.63 billion. Shipments fell 1.4 percent to more than 40 billion cigarettes, compared with an estimated industry decline of 2.5 percent. Its share of the U.S. retail market rose to 14.4 percent.

The compensation deal was disclosed in a preliminary annual proxy filing with the Securities and Exchange Commission filed late Monday.

Much of the decrease was due to the company's switch to awarding restricted stock instead of stock options. In 2011, Kessler had received stock options valued at $2.9 million. His salary rose 5 percent to $1.26 million and he received a nearly $2.1 million performance-based bonus. The value of his stock awards was $5 million and he received other compensation worth $182,494.

The 53-year-old, who also serves as board chairman, received $13 million for 2011. He joined the company in September 2010.

Lorillard also announced that it will hold its annual meeting May 14 in its headquarters city of Greensboro, N.C., where shareholders will vote to declassify its board and re-elect three directors to the panel. Lorillard, the oldest continuously operating U.S. tobacco company, spun off from Loews Corp. in 2008.

The Associated Press formula calculates an executive's total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.

The value that a company assigned to an executive's stock and option awards for 2012 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company's stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.

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Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .