Lorillard Inc., the nation's third-largest tobacco company, gave its former CEO, Martin Orlowsky, a 2010 pay package worth more than $18.8 million for fiscal 2010, up more than 90 percent from fiscal 2009, according to an Associated Press analysis of a regulatory filing the company made Wednesday.
The maker of Newport, Kent, True and Maverick cigarettes saw its net income rise 8.5 percent to a record $1.03 billion for 2010, and its net revenue excluding excise taxes grew 10 percent to $4.05 billion as it sold 5 percent more cigarettes.
Orlowsky retired as CEO in September and as chairman at the end of the year after leading Lorillard since January 1999. His successor, Murray Kessler, arrived in September and received $3.7 million for 2010.
Most of the increase in Orlowsky's pay was in the value of his stock awards, which rose almost six-fold to $9.2 million as part of a retirement and consulting agreement that extended or accelerated the vesting period of the options and awards.
Orlowsky's salary was $1.2 million, and he received a $4.5 million performance-based bonus, up 15 percent from the previous year.
His 2010 stock options were worth $3.2 million when they were granted, compared with the roughly $3 million in options he received in 2009. He got other compensation worth $684,811, primarily life insurance premiums.
His total 2009 compensation was valued at $9.8 million.
Kessler's pay package included a $1 million signing bonus, $369,595 in salary and a $996,923 performance-based bonus. He received stock options and stock awards worth $1.16 million when they were granted plus other compensation worth $190,017.
Lorillard announced it will hold its annual meeting May 19 in Greensboro, N.C., where the company is based. 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 2010 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.