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8-K - FORM 8-K - REYNOLDS AMERICAN INC | g23014e8vk.htm |
Exhibit 99.1
Reynolds American Inc.
P.O. Box 2990
Winston-Salem, NC 27102-2990
P.O. Box 2990
Winston-Salem, NC 27102-2990
Contact:
|
Investor Relations: | Media: | RAI 2010-06 | |||
Morris Moore | Jane Seccombe | |||||
(336) 741-3116 | (336) 741-5068 |
RAI delivers first-quarter gains;
Reaffirms full-year guidance
WINSTON-SALEM, N.C. April 22, 2010
First Quarter 2010 At a Glance
| Adjusted EPS: First quarter at $1.11, up 11 percent |
| Excludes charges related to changes in federal health-care laws, and prior-year trademark impairments | ||
| Excludes charges related to settlements of Canadian governments civil claims and criminal charges |
| Reported EPS: First quarter at $0.28 vs. $0.03 in prior-year quarter | ||
| R.J. Reynolds increases operating income and total cigarette market share | ||
| American Snuff Co. delivers double-digit moist-snuff volume growth | ||
| R.J. Reynolds and American Snuff Co. to move to a single field trade-marketing organization | ||
| RAI ends quarter with $3.3 billion in cash balances | ||
| RAI reaffirms 2010 guidance, with adjusted EPS range of $4.80 to $5.00 |
| Excludes charges related to health care and Canadian governments settlements |
All references in this release to reported numbers refer to GAAP measurements; all
adjusted numbers are non-GAAP, as defined in schedules 2 and 3 of this release, which
reconcile reported to adjusted results for the first quarter.
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Reynolds American Inc. (NYSE: RAI) today announced first-quarter 2010 adjusted EPS (excluding
health-care and Canadian governments settlements charges) of $1.11, up 11 percent from the
prior-year quarter. Higher cigarette pricing, moist-snuff volume and productivity more than offset
lower cigarette volume and higher promotional expense. Reported EPS was $0.28 versus $0.03 in the
prior-year quarter, which included trademark impairments.
RAI reaffirmed adjusted EPS guidance for 2010 in the range of $4.80 to $5.00, reflecting
mid-single-digit percentage growth. This excludes charges related to health care and Canadian
governments settlements.
1Q 2010 Financial Results Highlights
(unaudited)
(all dollars in millions, except per-share amounts; for
reconciliations, including GAAP to non-GAAP, see schedules 2 and 3)
(unaudited)
(all dollars in millions, except per-share amounts; for
reconciliations, including GAAP to non-GAAP, see schedules 2 and 3)
For the Three Months | ||||||||||||
Ended Mar. 31 | ||||||||||||
% | ||||||||||||
2010 | 2009 | Change | ||||||||||
Net sales |
$ | 1,986 | $ | 1,921 | 3.4 | % | ||||||
Operating income |
||||||||||||
Reported (GAAP) |
$ | 570 | $ | 97 | n/a | |||||||
Adjusted (Non-GAAP) |
570 | 550 | 3.6 | % | ||||||||
Net income |
||||||||||||
Reported (GAAP) |
$ | 82 | $ | 8 | n/a | |||||||
Adjusted (Non-GAAP) |
325 | 293 | 10.9 | % | ||||||||
Net income per diluted share |
||||||||||||
Reported (GAAP) |
$ | 0.28 | $ | 0.03 | n/a | |||||||
Adjusted (Non-GAAP) |
1.11 | 1.00 | 11.0 | % |
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MANAGEMENTS PERSPECTIVE
Overview
Reynolds American started the year well, said Susan M. Ivey, RAIs chairman, president and chief
executive officer. We reported higher first-quarter earnings compared with the prior-year quarter
and continued to demonstrate the fundamental strength of our operating companies business
strategies and brands.
Its important to note that first-quarter comparisons benefited from unusually low cigarette and
moist-snuff shipment volume in last years first quarter, as wholesalers and retailers
significantly reduced inventories ahead of federal excise-tax increases that took effect last
April, Ivey said.
We achieved these results in a challenging environment, marked by significant competitive
promotional activity and product introductions in both the cigarette and moist-snuff categories,
she said. In addition, consumer spending patterns continued to be affected by the ongoing impact
of higher tobacco taxes and the weak economy.
Despite these circumstances, our companies maintained their focus on strategies that delivered
solid performance, Ivey said. Both of our reportable operating segments continued to make
significant progress, with further growth in operating income and total cigarette market share at
R.J. Reynolds, and double-digit moist-snuff volume gains at American Snuff Co.
She added that RAIs Santa Fe subsidiary again delivered robust volume and earnings growth.
Ivey also said that plans are under way for R.J. Reynolds and American Snuff Co. to move to a
single field trade-marketing organization. The field trade-marketing group at R.J. Reynolds will be
expanded to provide services to American Snuff Co. through a services agreement. Nearly all
employees currently in the field trade-marketing organization at American Snuff Co. will be offered
positions at R.J. Reynolds.
This strategic move will offer both companies greater efficiency and speed to market, provide
stronger support for the retail trade and give the companies brands a stronger retail presence,
she said. We expect the change to be essentially completed by the end of the third quarter.
Ivey said she was pleased with the resolution of the decade-old Canadian governments civil claims
and criminal charges, which eliminates the continuing uncertainties, expense and distraction
associated with this litigation.
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Concerning federal regulation of tobacco products, she said that RAIs operating companies are
well prepared to comply and compete in the new regulatory environment.
Looking ahead, Ivey said that RAIs operating companies will continue to strengthen their key
brands, maintain a keen focus on productivity and position their businesses for long-term growth by
investing in cigarette and smokeless-tobacco innovations to meet the changing preferences of adults
who enjoy tobacco.
Our companies ability to offer consumers a broad range of products will continue to serve our
shareholders well, Ivey said.
R.J. Reynolds
R.J. Reynolds increased operating income and total cigarette market share in the first quarter
despite heightened competitive activity and ongoing weakness in the economy, said Daniel M. Delen,
R.J. Reynolds chairman, president and chief executive officer. The companys strong business
strategies, product offerings and productivity initiatives all contributed to our improved
results.
Delen said that R.J. Reynolds first-quarter adjusted operating income of $470 million was up
2.4 percent from the prior-year quarter, as higher cigarette pricing and productivity gains more
than offset lower cigarette volume and higher promotional expense. Prior-period adjusted results
exclude trademark impairments.
R.J. Reynolds first-quarter adjusted operating margin was down slightly at 27.3 percent, 0.2
percentage points lower than the prior-year quarter. However, the companys margin was up
0.6 percentage points sequentially.
Contributing to first-quarter results were savings from ongoing productivity initiatives, which
include previous restructuring and outsourcing programs, and complexity reductions across the
company, Delen said.
R.J. Reynolds total first-quarter cigarette market share increased 0.2 share points from the
prior-year quarter, to 27.9 percent, even after a 0.4 share-point loss on low-margin, private-label
brands, which the company continues to de-emphasize.
Were pleased that the companys overall share performance has been stable for the past two
years, Delen said, even as we have trimmed our portfolio to better focus on key-brand growth.
R.J. Reynolds first-quarter cigarette shipment volume declined 2.5 percent from the prior-year
quarter, compared with the industry decline of 2.4 percent. The majority of the companys decline,
2.2 percentage points, resulted from the move away from private-label brands.
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Delen noted that there was a significant trade-inventory reduction in the prior-year quarter,
ahead of the federal tobacco excise-tax increase. Adjusting for this, the companys cigarette
volume decline would have been 4.8 percent, compared with an industry decline of 7.3 percent.
The companys growth brands, Camel and Pall Mall, posted a combined first-quarter cigarette market
share gain of 3.1 percentage points to 13.6 percent as Pall
Malls 3.6 share-point gain more than
offset a 0.5 share-point decline on Camel.
Camels first-quarter cigarette market share of 7.1 percent was negatively impacted by significant
competitive promotional activity, as well as continued pressure on premium-priced products in the
current economy.
As we moved through the quarter, Camels performance
improved as we took steps to make the brand
more competitive, Delen said. Camel ended the quarter with a share of 7.4 percent, and we expect continued
improvement in the brands performance.
Late in the first quarter, R.J. Reynolds also repositioned Camels two core menthol styles. These
styles now have fresh new packaging and feature the companys innovative capsule technology, which
gives adult smokers the option of more menthol flavor on demand. Initial reaction to these
upgrades has been very positive, Delen said.
Camel Crush, which uses the same capsule technology to offer the choice of regular or menthol with
each cigarette, continues to perform well. The first-quarter market share of Camel Crush was up 0.1
percentage points, at 0.7 percent.
In the first quarter, cigarette styles featuring R.J. Reynolds capsule technology had a total
share of 1.3 percent.
Camel continues to enhance its image as a total-tobacco brand, offering a broad range of innovative
products to meet the changing preferences of adult tobacco consumers. In addition to Camel
cigarettes and snus, R.J. Reynolds recently introduced Camel Dissolvables and American Snuff Co.
introduced Camel Dip.
Camel Snus, the brands first smoke-free product, was expanded nationally last year. On a
cigarette-equivalent basis, which assumes that a tin of Camel Snus is equal to a pack of
cigarettes, Camel Snus had a relatively stable share of 0.2 percent in the first quarter. That
brought Camels total-tobacco share, which includes Camel cigarettes and snus, to 7.3 percent in
the first quarter, down 0.3 percentage points, driven by the cigarette declines.
Snus is still a relatively new tobacco category in the U.S., and we believe that consumer
awareness and trial of Camel Snus will benefit from the national expansion of competitive snus
offerings, Delen said.
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Camels dissolvable products Orbs, Sticks and Strips which were introduced in three lead
markets last year, continued to generate good interest. Consumer feedback is being incorporated to
improve the products and their packaging, as well as the companys communications to adult tobacco
consumers about these products.
R.J. Reynolds second growth brand, Pall Mall, steadily built volume and share during the quarter
as value-conscious adult smokers increasingly discover the benefits of this high-quality,
longer-lasting cigarette at an affordable price. The brands increase of 3.6 percentage points from
the prior-year quarter brought its market share to 6.5 percent.
Camel and Pall Mall now account for half of the companys total cigarette volume, Delen said.
And our focus on building our key brands and efficiency will continue to serve us well as we move
through the year.
American Snuff Co.
American Snuff Co. posted solid performance in a quarter marked by intensified competitive pricing
and promotions, said Bryan K. Stockdale, the companys president and chief executive officer. Im
very pleased with the resilience that our business has demonstrated in this environment, as
evidenced by our moist-snuff volume growth, higher margin and stable earnings performance.
American Snuff Co.s first-quarter adjusted operating income held steady at $84 million compared to
the prior-year quarter, as higher volume and pricing on Grizzly offset lower margins on Kodiak.
Prior-period adjusted results exclude trademark impairments.
The companys first-quarter adjusted operating margin was 51.8 percent, up 1.3 percentage points
from the prior-year quarter.
American Snuff Co.s total moist-snuff shipment volume increased 12.2 percent in the first quarter,
compared with 8.9 percent for the category. Both comparisons benefited from the prior-year
quarters trade-inventory deloading ahead of the federal tobacco excise-tax increase. On a consumer
off-take basis, which better reflects retail sales, American Snuff Co.s volume increased about 6.7 percent.
Grizzly, the companys flagship brand, again drove the companys performance, with an 11.7 percent
increase in first-quarter shipment volume.
In contrast, Grizzlys first-quarter share of shipments declined 0.7 percentage points to 24.0
percent, due to significantly higher competitive promotional shipments and new product
introductions. However, on a consumer off-take basis, Grizzlys
share was up 1.2 percentage points, at 25.0 percent.
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Were very pleased with the gains in Grizzlys shipment volume and consumer off-take,
especially in the face of aggressive competitive promotions on both premium and value brands,
Stockdale said. Grizzlys solid performance is testament to its great value and powerful brand
equity.
American Snuff Co. further enhanced Grizzlys value and consumers quality perceptions with the
March expansion of embossed metal lids across the entire brand.
Grizzly also improved its position in the rapidly-growing pouch segment, with a first-quarter share
of 1.7 percent on its pouch styles, up half a share point from the prior-year quarter. Pouch styles
now account for 9.6 percent of the moist-snuff category.
The
first-quarter national introduction of Grizzly 1900 Long Cut also added to the brands broad-based
appeal among moist-snuff consumers. A natural product with a traditional long cut, Grizzly 1900
Long Cut has captured a 0.3 share of market in its first three months.
American Snuff Co. continues to focus on improving its position in the premium segment. Kodiak
further enhanced the brands premium image with an upgrade to embossed metal lids late in the first
quarter. Despite an extremely competitive environment, Kodiaks share of shipments has remained
steady at about 3.8 percent for more than a year. Its first-quarter volume increased 12.0 percent
from the prior-year quarter.
The company is also improving its premium position with Camel Dip, which was introduced in two
states last June and was expanded to select outlets in 10 additional states this year. Along with
the expansion, Camel introduced a third moist-snuff style, Camel Wintergreen Pouches. Camel Dip,
which leverages the brands authentic heritage and innovation, posted a 0.9 share of shipments in
those 12 states during March.
We continue to operate well despite a tough environment, Stockdale said. American Snuff Co. has
strong strategies and great brands, and we are focused on providing consumers with more value
and on delivering profitable growth.
FINANCIAL UPDATE
RAIs first-quarter results keep us on track to meet our 2010 EPS guidance of $4.80 to $5.00 on an
adjusted basis. That excludes the charges related to changes in federal health-care laws and the
Canadian governments settlements, said Thomas R. Adams, Reynolds Americans chief financial
officer.
Adams said that RAIs first-quarter adjusted EPS increased 11 percent to $1.11, which excludes
charges of $0.09 per share for health care and $0.74 per share for the Canadian governments
settlements. On a reported basis, first-quarter EPS was $0.28, compared with
$0.03 in the prior-year quarter, which included $0.97 in trademark impairments.
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The settlements of the Canadian governments civil claims and criminal charges were finalized
on April 13, with R.J. Reynolds and its affiliate Northern Brands International, Inc. making
payments of $325 million and $75 million, respectively. This resulted in a first-quarter charge of
$216 million to discontinued operations.
Reynolds American ended the quarter with $3.3 billion in cash balances after contributing $300
million to the pension plan in January.
On April 15, R.J. Reynolds made this years $2.0 billion Master Settlement Agreement payment, of
which $448 million was deposited in the NPM disputed-funds account. R.J. Reynolds now has a total
of $2.4 billion in dispute related to the NPM Adjustment for years 2003 through 2007. The
arbitration process to resolve the dispute over the 2003 adjustment of $615 million is underway.
RAI continues to build its businesses and maintain a strong balance sheet, while
fulfilling our commitment to returning value to our shareholders, including a 75 percent dividend
payout policy, Adams said.
CONFERENCE CALL WEBCAST TODAY
Reynolds American will webcast a conference call to discuss first-quarter 2010 results at 10:30
a.m. Eastern Time on Thursday, April 22, 2010. The call will be available live online on a
listen-only basis. To register for the call, please visit the Investors section of
www.ReynoldsAmerican.com. A replay of the call will be available on the site for 30 days.
Investors, analysts and members of the news media can also listen to the live call by phone, by
dialing (877) 390-5533 (toll free) or (678) 894-3969 (international). Remarks made during the
conference call will be current at the time of the call and will not be updated to reflect
subsequent material developments. Although news media representatives will not be permitted to ask
questions during the call, they are welcome to monitor the remarks on a listen-only basis.
Following the call, media representatives may direct inquiries to Jane Seccombe at (336) 741-5068.
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WEB DISCLOSURE
RAIs website, www.ReynoldsAmerican.com, is the primary source of publicly disclosed news about RAI
and its operating companies. We use the website as our primary means of distributing quarterly
earnings and other company news. We encourage investors and others to register at
www.ReynoldsAmerican.com to receive alerts when news about the company has been posted.
RISK FACTORS
Statements included in this news release that are not historical in nature are
forward-looking statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These statements regarding future events or the future performance
or results of RAI and its subsidiaries inherently are subject to a variety of risks and
uncertainties that could cause actual results to differ materially from those described in the
forward-looking statements.
These risks and uncertainties include:
| the substantial and increasing taxation and regulation of tobacco products, including the 2009 federal excise-tax increases, and the regulation of tobacco products by the U.S. Food and Drug Administration (FDA); | ||
| the possibility that the FDA will issue a regulation prohibiting menthol as a flavor in cigarettes or that the FDA will extend the ban on characterizing flavors to smokeless tobacco products; | ||
| various legal actions, proceedings and claims relating to the sale, distribution, manufacture, development, advertising, marketing and claimed health effects of tobacco products that are pending or may be instituted against RAI or its subsidiaries; | ||
| the potential difficulty of obtaining bonds as a result of litigation outcomes; | ||
| the substantial payment obligations with respect to cigarette sales, and the substantial limitations on the advertising and marketing of cigarettes (and of R.J. Reynolds smoke-free tobacco products) under the State Settlement Agreements; | ||
| the continuing decline in volume in the U.S. cigarette industry and RAIs dependence on the U.S. cigarette industry; | ||
| concentration of a material amount of sales with a single customer or distributor; | ||
| competition from other manufacturers, including industry consolidations or any new entrants in the marketplace; | ||
| increased promotional activities by competitors, including deep-discount cigarette brands; | ||
| the success or failure of new product innovations and acquisitions; | ||
| the responsiveness of both the trade and consumers to new products, marketing strategies and promotional programs; |
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| the ability to achieve efficiencies in the businesses of RAIs operating companies, including outsourcing functions, without negatively affecting sales; | ||
| the reliance on a limited number of suppliers for certain raw materials; | ||
| the cost of tobacco leaf and other raw materials and other commodities used in products; | ||
| the effect of market conditions on interest-rate risk, foreign currency exchange-rate risk and the return on corporate cash; | ||
| changes in the position or financial strength of lenders participating in RAIs credit facility; | ||
| the impairment of goodwill and other intangible assets, including trademarks; | ||
| the effect of market conditions on the performance of pension assets or any adverse effects of any new legislation or regulations changing pension expense accounting or required pension funding levels; | ||
| the substantial amount of RAI debt; | ||
| the credit rating of RAI and its securities; | ||
| any restrictive covenants imposed under RAIs debt agreements; | ||
| the possibility of fire, violent weather and other disasters that may adversely affect manufacturing and other facilities; | ||
| the significant ownership interest of Brown & Williamson Holdings, Inc., RAIs largest shareholder, in RAI and the rights of B&W under the governance agreement between the companies; | ||
| the expiration of the standstill provisions of the governance agreement; and | ||
| the potential existence of significant deficiencies or material weaknesses in internal control over financial reporting that may be identified during the performance of testing required under Section 404 of the Sarbanes-Oxley Act of 2002. |
Due to these risks and uncertainties, you are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this news release. Except as
provided by federal securities laws, RAI is not required to publicly update or revise any
forward-looking statement, whether as a result of new information, future events or otherwise.
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ABOUT US
Reynolds American Inc. (NYSE: RAI) is the parent company of R.J. Reynolds Tobacco Company; American
Snuff Company, LLC; Santa Fe Natural Tobacco Company, Inc.; and Niconovum AB.
| R.J. Reynolds Tobacco Company is the second-largest U.S. tobacco company. The companys brands include five of the 10 best-selling cigarettes in the U.S., Camel, Pall Mall, Winston, Doral and Kool. | ||
| American Snuff Company, LLC (formerly Conwood Company, LLC) is the nations second-largest manufacturer of smokeless tobacco products. Its leading brands are Kodiak, Grizzly and Levi Garrett. American Snuff Co. also sells and distributes a variety of tobacco products manufactured by Lane, Limited, including Winchester and Captain Black little cigars, and Bugler roll-your-own tobacco. | ||
| Santa Fe Natural Tobacco Company, Inc. manufactures Natural American Spirit cigarettes and other additive-free tobacco products, and manages and markets other super-premium brands. | ||
| Niconovum AB markets innovative nicotine replacement therapy products in Sweden and Denmark under the Zonnic brand name. |
Copies of RAIs news releases, annual reports, SEC filings and other financial materials, including
risk factors containing forward-looking information, are available at www.ReynoldsAmerican.com.
(financial and volume schedules follow)
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Schedule 1
REYNOLDS AMERICAN INC.
Condensed Consolidated Statements of Income GAAP
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
Condensed Consolidated Statements of Income GAAP
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
Net sales, external |
$ | 1,858 | $ | 1,832 | ||||
Net sales, related party |
128 | 89 | ||||||
Net sales |
1,986 | 1,921 | ||||||
Cost of products sold |
1,070 | 998 | ||||||
Selling, general and administrative expenses |
339 | 365 | ||||||
Amortization expense |
7 | 8 | ||||||
Trademark impairment charges |
| 453 | ||||||
Operating income |
570 | 97 | ||||||
Interest and debt expense |
60 | 66 | ||||||
Interest income |
(4 | ) | (5 | ) | ||||
Other expense, net |
2 | 19 | ||||||
Income from continuing operations before income taxes |
512 | 17 | ||||||
Provision for income taxes |
214 | 9 | ||||||
Income from continuing operations |
298 | 8 | ||||||
Loss on discontinued operations, net of tax |
(216 | ) | | |||||
Net income |
$ | 82 | $ | 8 | ||||
Basic net income per share: |
||||||||
Income from continuing operations |
$ | 1.02 | $ | 0.03 | ||||
Loss on discontinued operations |
(0.74 | ) | | |||||
Net income |
$ | 0.28 | $ | 0.03 | ||||
Diluted net income per share: |
||||||||
Income from continuing operations |
$ | 1.02 | $ | 0.03 | ||||
Loss on discontinued operations |
(0.74 | ) | | |||||
Net income |
$ | 0.28 | $ | 0.03 | ||||
Basic weighted average shares, in thousands |
291,431 | 291,424 | ||||||
Diluted weighted average shares, in thousands |
292,169 | 291,606 | ||||||
Segment data: |
||||||||
Net sales: |
||||||||
RJR Tobacco |
$ | 1,720 | $ | 1,671 | ||||
American Snuff |
161 | 166 | ||||||
All Other |
105 | 84 | ||||||
$ | 1,986 | $ | 1,921 | |||||
Operating income: |
||||||||
RJR Tobacco |
$ | 470 | $ | 82 | ||||
American Snuff |
84 | 8 | ||||||
All Other |
30 | 24 | ||||||
Corporate |
(14 | ) | (17 | ) | ||||
$ | 570 | $ | 97 | |||||
Supplemental information: |
||||||||
Excise tax expense |
$ | 1,017 | $ | 410 | ||||
Master Settlement Agreement and other state settlement expense |
$ | 587 | $ | 578 | ||||
Federal tobacco buyout expense |
$ | 61 | $ | 52 | ||||
FDA fees |
$ | 16 | $ | |
Schedule 2
REYNOLDS
AMERICAN INC.
Reconciliation of GAAP to Adjusted Results
(Dollars in Millions)
(Unaudited)
(Dollars in Millions)
(Unaudited)
RAI management uses adjusted (non-GAAP) measurements to set performance goals and to
measure the performance of the overall company, and believes that investors understanding of the
underlying performance of the companys continuing operations is enhanced through the disclosure of
these metrics. Adjusted (non-GAAP) results are not, and should not be viewed as, substitutes for
reported (GAAP) results.
Three Months Ended March 31, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Operating | Net | Diluted | Operating | Net | Diluted | |||||||||||||||||||
Income | Income | EPS | Income | Income | EPS | |||||||||||||||||||
GAAP results |
$ | 570 | $ | 82 | $ | 0.28 | $ | 97 | $ | 8 | $ | 0.03 | ||||||||||||
The GAAP results include the following: |
||||||||||||||||||||||||
Trademark impairment charges |
| | | 453 | 285 | 0.97 | ||||||||||||||||||
Health-care subsidy tax charge |
| 27 | 0.09 | | | | ||||||||||||||||||
Loss on discontinued operations |
| 216 | 0.74 | | | | ||||||||||||||||||
Total adjustments |
| 243 | 0.83 | 453 | 285 | 0.97 | ||||||||||||||||||
Adjusted results |
$ | 570 | $ | 325 | $ | 1.11 | $ | 550 | $ | 293 | $ | 1.00 | ||||||||||||
Condensed Consolidated Balance Sheets
(Dollars in Millions)
(Unaudited)
(Dollars in Millions)
(Unaudited)
March 31, | Dec. 31, | |||||||
2010 | 2009 | |||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 3,272 | $ | 2,723 | ||||
Other current assets |
2,629 | 2,772 | ||||||
Trademarks and other intangible assets, net |
2,711 | 2,718 | ||||||
Goodwill |
8,185 | 8,185 | ||||||
Other noncurrent assets |
1,605 | 1,611 | ||||||
$ | 18,402 | $ | 18,009 | |||||
Liabilities and shareholders equity |
||||||||
Tobacco settlement accruals |
$ | 3,196 | $ | 2,611 | ||||
Other current liabilities |
2,045 | 1,729 | ||||||
Long-term debt (less current maturities) |
4,127 | 4,136 | ||||||
Deferred income taxes, net |
454 | 441 | ||||||
Long-term retirement benefits (less current portion) |
1,913 | 2,218 | ||||||
Other noncurrent liabilities |
306 | 376 | ||||||
Shareholders equity |
6,361 | 6,498 | ||||||
$ | 18,402 | $ | 18,009 | |||||
Schedule 3
REYNOLDS AMERICAN INC.
Reconciliation of GAAP to Adjusted Operating Income by Segment
Reconciliation of GAAP to Adjusted Operating Income by Segment
R.J. Reynolds is the second-largest tobacco company in the United States and manages a contract
manufacturing business.
American Snuff is the second-largest smokeless tobacco products manufacturer in the United States.
Management uses adjusted (non-GAAP) measurements to set performance goals and to measure the
performance of the company, and believes that investors understanding of the underlying
performance of the companys continuing operations is enhanced through the disclosure of these
metrics.
Three Months Ended March 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
R.J. Reynolds | American Snuff | R.J. Reynolds | American Snuff | |||||||||||||
GAAP operating income |
$ | 470 | $ | 84 | $ | 82 | $ | 8 | ||||||||
The GAAP results include the following: |
||||||||||||||||
Trademark impairment charges |
| | 377 | 76 | ||||||||||||
Total adjustments |
| | 377 | 76 | ||||||||||||
Adjusted operating income |
$ | 470 | $ | 84 | $ | 459 | $ | 84 | ||||||||
Schedule 4
R.J. REYNOLDS CIGARETTE VOLUMES AND SHARE OF MARKET
VOLUME
(in billions):
Three Months Ended | ||||||||||||||||
March 31, | Change | |||||||||||||||
2010 | 2009 | Units | % | |||||||||||||
Camel (filter styles) |
4.7 | 5.0 | (0.3 | ) | -5.3 | % | ||||||||||
Pall Mall |
4.4 | 1.9 | 2.5 | 134.3 | % | |||||||||||
Total growth brands |
9.1 | 6.9 | 2.3 | 32.9 | % | |||||||||||
Total support brands |
7.7 | 9.7 | (2.0 | ) | -21.0 | % | ||||||||||
Total non-support brands |
1.4 | 2.1 | (0.7 | ) | -33.1 | % | ||||||||||
Total R.J. Reynolds domestic |
18.2 | 18.7 | (0.5 | ) | -2.5 | % | ||||||||||
Total premium |
10.3 | 11.7 | (1.4 | ) | -11.8 | % | ||||||||||
Total value |
7.9 | 7.0 | 0.9 | 13.2 | % | |||||||||||
Premium/total mix |
56.7 | % | 62.7 | % | ||||||||||||
Industry |
72.0 | 73.8 | (1.8 | ) | -2.4 | % | ||||||||||
Premium |
51.0 | 51.7 | (0.8 | ) | -1.5 | % | ||||||||||
Value |
21.1 | 22.1 | (1.0 | ) | -4.6 | % | ||||||||||
Premium/total mix |
70.7 | % | 70.1 | % |
RETAIL
SHARE OF MARKET:
Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2010 | 2009 | Change | ||||||||||
Camel (filter styles) |
7.1 | % | 7.6 | % | (0.5 | ) | ||||||
Pall Mall |
6.5 | % | 2.9 | % | 3.6 | |||||||
Total growth brands |
13.6 | % | 10.5 | % | 3.1 | |||||||
Total support brands |
11.9 | % | 14.1 | % | (2.2 | ) | ||||||
Total non-support brands |
2.4 | % | 3.1 | % | (0.7 | ) | ||||||
Total R.J. Reynolds domestic |
27.9 | % | 27.7 | % | 0.2 |
Amounts are rounded on an individual basis and, accordingly, may not sum in the
aggregate. R.J. Reynolds support brands include Winston, Doral, Kool, Salem,
Misty and Capri. Industry volume data based on information from Management Science
Associates, Inc. Retail shares of market are as reported by Information
Resources Inc./Capstone.
Schedule 5
AMERICAN SNUFF MOIST-SNUFF VOLUMES AND SHARE OF SHIPMENTS
VOLUME
(in millions of cans):
Three Months Ended | ||||||||||||||||
March 31, | Change | |||||||||||||||
2010 | 2009 | Units | % | |||||||||||||
Kodiak |
12.0 | 10.7 | 1.3 | 12.0 | % | |||||||||||
Grizzly |
72.6 | 65.0 | 7.6 | 11.7 | % | |||||||||||
Other |
1.2 | 0.8 | 0.4 | 46.9 | % | |||||||||||
Total moist snuff cans |
85.7 | 76.4 | 9.3 | 12.2 | % |
SHARE
OF SHIPMENTS:
Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2010 | 2009 | Change | ||||||||||
Kodiak |
3.8 | % | 3.8 | % | | |||||||
Grizzly |
24.0 | % | 24.7 | % | (0.7 | ) | ||||||
Other |
0.3 | % | 0.3 | % | | |||||||
Total share of shipments |
28.1 | % | 28.8 | % | (0.7 | ) |
Amounts are rounded on an individual basis and, accordingly, may not sum in the aggregate.
Share data for total moist snuff based on distributor reported retail shipment data processed by
Management Science Associates, Inc.