RJR Reports First Quarter 2004 Results; Increases Full Year
Guidance WINSTON-SALEM, N.C., April 27 /PRNewswire-FirstCall/ --
R.J. Reynolds Tobacco Holdings, Inc. today reported significantly
higher net income for the first quarter of 2004 compared with the
prior-year quarter, and adjusted its full-year guidance to reflect
a more favorable earnings outlook. RJR said the earnings growth and
improved outlook are the result of fundamental changes in the
company's strategies and cost structure associated with the
restructuring RJR announced in September 2003. RJR reported the
following results for the first quarter of 2004: GAAP First Quarter
Highlights (dollars in millions, except per-share amounts) 1st
Quarter 2004 2003 % Change Net sales $ 1,218 $1,218 0% Operating
income(1) $221 $135 63.7% Net income $122 $71 71.8% Net income per
diluted share $1.43 $0.84 70.2% (1)Operating results include the
net benefit of a $9 million reversal for previously recorded
restructuring charges. The reversal is primarily related to the
company's decision to retain approximately 750 field sales
positions that had previously been identified for elimination as
part of the September 2003 restructuring. Operating results also
include a $33 million charge related to RJR Tobacco's settlement of
the tobacco growers' lawsuit. Balance Sheet Highlights (as of March
31, 2004) - Cash and short-term investments: $1.5 billion - Debt:
$1.7 billion - Equity: $3.1 billion - Dividend: $0.95 per share
quarterly; $3.80 per share annualized Discussion of First Quarter
2004 Results "Our first-quarter results demonstrate that RJR is on
the right path to strengthen its business and improve
profitability," said Andrew J. Schindler, chairman and chief
executive officer of RJR. "We are making excellent progress against
our restructuring goals, and we are capturing cost-savings at an
accelerated rate. As a result, we are increasing our full-year
earnings guidance. "We currently estimate that we will achieve $450
million in savings in 2004, rather than our original estimate of
$400 million for the year," Schindler said. "Those savings, in
addition to the $400 million in savings we achieved in 2003,
demonstrate that we are on track to reach our cost-savings goal of
$1 billion." Schindler said that the proposed combination of RJR
Tobacco's business with the U.S. operations of the nation's No. 3
tobacco company, Brown & Williamson Tobacco Corp., is still
expected to close mid-year, upon shareholder approval. Efforts to
obtain rulings by the Federal Trade Commission and other regulatory
agencies are proceeding on schedule, and RJR continues to believe
that the deal should be approved as structured. "Plans to integrate
the two businesses with Reynolds American Inc. as the new parent
company are progressing well," Schindler said. He noted that the
proposed business combination is expected to yield at least $500
million in synergies once full integration is complete -- 18 to 24
months after the deal closes. Financial Results RJR's first-quarter
net sales were $1.22 billion, level with the year-ago quarter, as
the effects of lower volume were offset by the net benefit of
modifications made in marketplace programs and an improved
full-price to savings-brand mix. Operating income increased to $221
million from $135 million in the prior- year quarter, primarily due
to cost-reduction programs throughout the company. Operating
results also benefited from a net $9 million reversal of previously
recorded restructuring charges. The reversal is primarily related
to the company's decision to retain approximately 750 field sales
positions that had previously been identified for elimination as
part of the September 2003 restructuring. Included in operating
income is a $33 million charge related to RJR Tobacco's settlement
of the tobacco growers' lawsuit. Net income was $122 million, up
$51 million from the prior-year period due to the factors discussed
above. Earnings per diluted share were $1.43, compared with $0.84
in the first quarter of 2003. Volume and Product Mix During First
Quarter RJR Shipment Volume The following table summarizes RJR's
first-quarter 2004 U.S. cigarette shipment volume, in billions of
units: 1st Quarter % 2004 2003 Change(1) RJR Tobacco volume 17.9
19.1 -6.4% RJR Tobacco total full-price 11.6 11.4 +2.1% RJR Tobacco
total savings 6.3 7.7 -19.0% SFNTC volume(2) 0.3 0.3 +7.2% RJR
total domestic volume(3) 18.2 19.4 -6.3% (1) Percentages are
calculated from unrounded volume numbers. (2) The 7.2% increase in
SFNTC volume is based on actual volume of 279 million units in the
first quarter of 2004, compared with 260 million units during the
first quarter of 2003. This does not include international volume
of 147 million units in the first quarter of 2004 and 135 million
units in the first quarter of 2003. (3) This does not include
Puerto Rico cigarette volume of 280 million units in the first
quarter of 2004, compared with 295 million units during the first
quarter of 2003. RJR Tobacco's volume declined 6.4 percent in the
first quarter, driven by declines in its savings business. The
company's full-price volume was up 2.1 percent on the strength of
Camel's filtered styles, which were up 9.1 percent compared with
the first quarter of 2003. RJR Tobacco's savings volume was down
19.0 percent, due to declines on Doral and other savings brands. In
the first quarter, RJR Tobacco's full-price to savings-brand mix
was 65.0 percent, up from 59.5 percent in the first quarter of
2003. Based on information from Management Science Associates, Inc.
(MSAi), total U.S. industry cigarette volume in the first quarter
was 85.1 billion units, down 3.5 percent from 88.2 billion units in
first-quarter 2003. The industry full-price mix for the first
quarter was 74.6 percent, up from 72.9 percent in the first quarter
of 2003. RJR Tobacco continues to believe the volume associated
with smaller, deep-discount manufacturers is not fully reflected in
MSAi's reported numbers. Brand Performance In the first quarter,
RJR Tobacco's total share of U.S. retail cigarette sales was 21.53
percent, down 1.39 share points from the first quarter of 2003.
This decrease was driven by savings declines of 1.08 points. Camel,
RJR Tobacco's largest brand, showed strength in the first quarter,
with performance equaling that of a particularly strong year-ago
quarter. Salem, RJR Tobacco's other growth brand, grew 0.28 points
compared to the first quarter of 2003, based on the continuing
benefit of the brand's 2003 repositioning. Retail share of RJR
Tobacco's limited-investment brands - Winston and Doral - declined,
reflecting the company's objective to optimize the profitability of
those brands over time. During the first quarter, Santa Fe Natural
Tobacco Company's Natural America Spirit brand delivered volume,
share and profit growth. Full Year 2004 Earnings Outlook "We now
expect to capture cost savings of approximately $450 million in
2004, and we are increasing our operating income guidance for the
year," said Dianne M. Neal, RJR's chief financial officer.
"Including restructuring charges and the settlement of the tobacco
growers' lawsuit, estimated at $35 million," she said, "we expect
to generate operating income of $740 million to $790 million, net
income of $405 million to $435 million, and diluted EPS of $4.75 to
$5.10. We expect to end the year with $1.6 billion in cash." Neal
said the company's new guidance does not include the effect of the
proposed RJR Tobacco/B&W business combination. Conference Call
Webcast Today R.J. Reynolds Tobacco Holdings, Inc. will webcast a
conference call to discuss first-quarter financial results at 10
a.m. Eastern Daylight Time on Tuesday, April 27. The call will be
available live online on a listen-only basis. To register for the
call, please visit the "Investors" section of
http://www.rjrholdings.com/ . A replay of the call will be
available on the site for seven days. 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 Seth Moskowitz at (336) 741-7698.
Statements included in this news release which 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. Forward- looking statements regarding RJR's future
performance and financial results include risks and uncertainties
that could cause actual results to differ materially from those
described in the forward-looking statements. These risks include
the substantial and increasing regulation and taxation of the
cigarette industry; various legal actions, proceedings and claims
relating to the sale, distribution, manufacture, development,
advertising, marketing and claimed health effects of cigarettes
that are pending or may be instituted against RJR or its
subsidiaries; the substantial payment obligations and limitations
on the advertising and marketing of cigarettes under various
litigation settlement agreements; the continuing decline in volume
in the domestic cigarette industry; competition from other
cigarette manufacturers, including increased promotional activities
and the growth of the deep-discount category; the success or
failure of new product innovations and acquisitions; the
responsiveness of both the trade and consumers to new products and
marketing and promotional programs; any potential costs or savings
associated with realigning the cost structure of RJR and its
subsidiaries; the ability to achieve efficiencies in manufacturing
and distribution operations without negatively affecting sales; the
cost of tobacco leaf and other raw materials and commodities used
in products; the effect of market conditions on the performance of
pension assets and the return on corporate cash; and the ratings of
RJR securities. In addition, RJR can give no assurance that the
proposed formation of Reynolds American Inc., the combination of
RJR Tobacco and the U.S. assets, liabilities and operations of
Brown & Williamson Tobacco Corporation, and the related
transactions, will be consummated, or if consummated, that any
expectations relating thereto will be realized. Factors that could
affect whether these transactions are consummated include obtaining
approvals from U.S. and European regulatory authorities and RJR
shareholders, the receipt of satisfactory Internal Revenue Service
rulings and the satisfaction or waiver of certain other conditions.
Due to these uncertainties and risks, undue reliance should not be
placed on these forward- looking statements, which speak only as of
the date of this news release. Except as provided by federal
securities laws, RJR is not required to publicly update or revise
any forward-looking statement, whether as a result of new
information, future events or otherwise. Additional Information and
Where To Find It Reynolds American Inc., the holding company to be
formed in the proposed business combination, has filed a
registration statement on Form S-4 that includes a preliminary
proxy statement/prospectus and other relevant documents in
connection with the proposed business combination. When the
registration statement becomes effective, a final proxy
statement/prospectus and other relevant documents will be mailed to
RJR shareholders. INVESTORS AND SECURITY HOLDERS OF RJR ARE ADVISED
TO READ THESE DOCUMENTS WHEN THEY BECOME AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED BUSINESS
COMBINATION. Documents filed by RJR and Reynolds American Inc. with
the SEC can be found at the SEC's Web site at http://www.sec.gov/ .
Once available, free copies of the final prospectus/proxy
statement, as well as RJR's and Reynolds American Inc.'s related
filings with the SEC, also may be obtained from RJR by directing a
request to R.J. Reynolds Tobacco Holdings, Inc. at P.O. Box 2866,
Winston-Salem, NC 27102-2866, Attn.: Office of Investor Relations,
or by telephone at (336) 741-5165 or on RJR's Web site,
http://www.rjrholdings.com/ . R.J. Reynolds Tobacco Holdings, Inc.
is the parent company of R.J. Reynolds Tobacco Company and Santa Fe
Natural Tobacco Company, Inc. R.J. Reynolds Tobacco Company is the
second-largest tobacco company in the United States, manufacturing
about one of every four cigarettes sold in the United States.
Reynolds Tobacco's product line includes four of the nation's 10
best-selling cigarette brands: Camel, Winston, Salem and Doral.
Santa Fe Natural Tobacco Company, Inc. manufactures Natural
American Spirit cigarettes and other tobacco products, and markets
them both nationally and internationally. Copies of RJR's news
releases, annual reports, SEC filings and other financial materials
are available on the company's Web site,
http://www.rjrholdings.com/ . (financial tables follow) R.J.
REYNOLDS TOBACCO HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS
OF INCOME-GAAP (Dollars in Millions, Except Per Share Amounts)
(Unaudited) Three Months Ended March 31 2004 2003 Net sales $ 1,218
$ 1,218 Cost of products sold 711 749 Selling, general and
administrative expenses 295 334 Restructuring charges (9) -
Operating income 221 135 Interest and debt expense 20 36 Interest
income (5) (10) Other (income) expense, net 5 (7) Income before
income taxes 201 116 Provision for income taxes 79 45 Net income
$122 $71 Basic income per share $1.45 $0.84 Diluted income per
share $1.43 $0.84 Basic weighted average shares, in thousands
84,274 84,031 Diluted weighted average shares, in thousands 85,238
84,952 Reconciliation of 2003 Results to 2004 Results (Dollars in
Millions) (Unaudited) First Quarter Operating Net Income Income
2003 Results $135 $71 Net reversal of restructuring and impairment
charges 9 6 Settlement of tobacco growers' lawsuit (33) (20)
Operations 110 65 2004 Results $221 $122 R.J. REYNOLDS TOBACCO
HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (Dollars in Millions)
March 31, December 31, 2004 2003 Assets Cash and cash equivalents
$1,348 $1,523 Short-term investments 108 107 Other current assets
1,680 1,701 Trademarks, net 1,759 1,759 Goodwill, net 3,288 3,292
Other noncurrent assets 1,294 1,295 $9,477 $9,677 Liabilities and
stockholders' equity Tobacco settlement and related accruals $1,548
$1,629 Current maturities of long-term debt 56 56 Other current
liabilities 966 1,180 Long-term debt (less current maturities)
1,692 1,671 Deferred income taxes 789 806 Long-term retirement
benefits 1,068 1,034 Other noncurrent liabilities 250 244
Stockholders' equity 3,108 3,057 $9,477 $9,677 DATASOURCE: R.J.
Reynolds Tobacco Holdings, Inc. CONTACT: Investors, Carole Biermann
Wehn, +1-336-741-5182, or Media, Seth Moskowitz, +1-336-741-7698,
both of R.J. Reynolds Web site: http://www.rjrholdings.com/
Copyright
RJ Reynolds Tob (NYSE:RJR)
Historical Stock Chart
From Jun 2024 to Jul 2024
RJ Reynolds Tob (NYSE:RJR)
Historical Stock Chart
From Jul 2023 to Jul 2024