RJ Reynolds Tob (NYSE:RJR)
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R.J. Reynolds Tobacco Holdings Presents to Consumer Analyst Group of New York
SCOTTSDALE, Ariz., Feb. 18 /PRNewswire-FirstCall/ -- In a presentation here to
industry analysts and investors, R.J. Reynolds Tobacco Holdings, Inc.
reiterated its commitment to strengthening and improving its business, and
building shareholder value. The company also reaffirmed the full-year guidance
it issued on Jan. 27.
Speaking at the Consumer Analyst Group of New York (CAGNY) conference, Dianne M.
Neal, RJR's chief financial officer, said that 2003 was a year of reevaluation
and transformation for the company.
RJR entered 2003 facing significant challenges, Neal said, including continuing
industry volume declines; permanent pressure from low-cost competitors; a
cost-structure disadvantage; and a lack of pricing flexibility due to settlement
costs and increased state and federal excise taxes. These factors prompted the
company to undertake a comprehensive business analysis; announce a new business
plan; and enter into an agreement to combine the U.S. business operations of RJR
Tobacco with those of British American Tobacco's (BAT) Brown & Williamson (B&W)
subsidiary.
In September 2003, RJR announced a two-pronged initiative to drive profit
growth: a new brand-portfolio strategy for RJR Tobacco; and a cost-structure
reduction that will enable RJR to achieve $1 billion in annualized savings by
year-end 2005.
The new brand-portfolio strategy adopted by RJR Tobacco focuses on investing in
its two growth brands, Camel and Salem; limiting investment in Winston and
Doral; and emphasizing profit on its private-label brands.
Neal said that RJR's cost-reduction efforts yielded savings of $400 million in
2003 and are expected to produce an additional $400 million in savings in 2004.
The company is on track to deliver a $1 billion cost reduction by the end of
2005, she said.
RJR also reaffirmed the full-year guidance it provided in January. In 2004,
Neal said, RJR expects to generate operating income of $725 million to $775
million, excluding restructuring charges currently estimated to be approximately
$20 million. With these restructuring charges included, RJR expects operating
income of $705 million to $755 million, net income of $385 million to $415
million and diluted earnings per share of $4.55 to $4.90. The company expects to
end the year with approximately $1.6 billion in cash. The company's guidance
does not include the potential effects of the pending B&W transaction.
Neal reported that the RJR/B&W business combination is proceeding on schedule.
Once it is complete, current RJR shareholders will retain 58 percent ownership
in the new holding company, Reynolds American Inc.
Combining the U.S. operations of RJR Tobacco and B&W will make the company a
more effective and efficient competitor, Neal said. RJR expects to achieve
synergies of at least $500 million once the companies are fully integrated. The
deal is expected to close in mid-2004, following receipt of regulatory and
shareholder approvals. Full integration of the two companies is expected to
take 18 to 24 months thereafter, she said.
"The company's restructuring, the implementation of RJR Tobacco's new brand
portfolio strategy and the business combination with B&W are allon track," Neal
said. "We are pleased with the significant progress we have made toward putting
RJR on the right path to improve business performance and enhance shareholder
value in 2004 and the years ahead."
Statements included in this news releasewhich 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, includingincreased promotional activities and the
growth of the deep-discount category; the success or failure of new product
innovations and acquisitions; the effect of market conditions on the performance
of pension assets and the return on corporate cash; 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 other commodities used in products; the
responsiveness of both the trade and consumers to new products and marketing and
promotional programs; 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 expectationsrelating thereto will be
realized. Factors that could affect whether these transactions are consummated
include the satisfaction of regulatory conditions to the business combination
that cannot be waived and the satisfaction or waiver of all other conditions,
including obtaining clearances from U.S. and European regulatory authorities and
RJR shareholders, as well as the receipt of satisfactory Internal Revenue
Service rulings. 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. The registration
statement will be amended to include the year-end 2003 financial statements.
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.rjrhholdings.com/ .
DATASOURCE: R.J. Reynolds Tobacco Holdings, Inc.
CONTACT: Investors, Carole Biermann Wehn, +1-336-741-5182, or Media, Jan
Smith, +1-336-741-6995, both of R.J. Reynolds Tobacco Holdings, Inc.
Web site: http://www.rjrt.com/
http://www.rjrholdings.com/