UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 11, 2016
Reynolds American Inc.
(Exact
Name of Registrant as Specified in its Charter)
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North Carolina |
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1-32258 |
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20-0546644 |
(State or Other Jurisdiction
of Incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
401 North Main Street,
Winston-Salem, NC 27101
(Address of Principal Executive Offices) (Zip Code)
Registrants telephone number, including area code: 336-741-2000
Not Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02 Results of Operations and Financial Condition.
The information in this Current Report is being furnished and shall not be deemed filed for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subjected to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the
Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
On February 11,
2016, Reynolds American Inc. issued an earnings release announcing its financial results for the fourth quarter and year ended December 31, 2015. A copy of the earnings release is attached as Exhibit 99.1.
ITEM 9.01 Financial Statements and Exhibits.
(d)
Exhibits.
The following is furnished as an Exhibit to this Report.
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Number |
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Exhibit |
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99.1 |
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EarningsRelease of Reynolds American Inc., dated February 11, 2016. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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REYNOLDS AMERICAN INC. |
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By: |
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/s/ Frederick W. Smothers |
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Name: Frederick W. Smothers |
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Title: Senior Vice President and Chief Accounting Officer |
Date: February 11, 2016
INDEX TO EXHIBITS
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Number |
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Exhibit |
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99.1 |
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Earnings Release of Reynolds American Inc., dated February 11, 2016. |
Exhibit 99.1
Reynolds American Inc.
P.O. Box 2990
Winston-Salem, NC 27102-2990
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Contact: |
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Investor Relations: Morris Moore
(336) 741-3116 |
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Media: Jane Seccombe
(336) 741-5068 |
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RAI 2016-08 |
RAI CEO:
A
transformational 2015 delivers
significant momentum entering 2016
WINSTON-SALEM, N.C. Feb. 11, 2016
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Fourth Quarter 2015 At a Glance |
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Reported EPS: Fourth quarter at $0.19, up 35.7 percent from prior-year quarter; full year at $2.57, up 87.6 percent |
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Adjusted EPS: Fourth quarter at $0.48, up 9.1 percent from prior-year quarter; full year at $1.98, up 15.8 percent |
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Excludes charges for pension and postretirement mark-to-market adjustments, implementation costs and tax items, the gain on divestiture, a benefit from the 2003 NPM
adjustment claim, a one-time benefit from the New York NPM Settlement and other special items* |
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RAIs reportable business segments finish 2015 with significant momentum |
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RAI announced completion of sale of Natural Americans business outside the U.S. on Jan. 13 |
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RAI announced debt tender offer and redemption on Feb. 4 |
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RAI announces 16.7 percent dividend increase |
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RAI issues 2016 guidance: Adjusted EPS range of $2.25 to $2.35, up 13.6 percent to 18.7 percent from 2015 |
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* Special items are detailed in Schedule 2 and include charges for
transaction-related and financing costs for the Lorillard, Inc. (Lorillard) acquisition and related divestiture, Engle progeny cases, and tobacco-related and other litigation, as well as a 2014 gain on discontinued operations,
and asset impairment and exit charges. |
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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. |
1
Reynolds American Inc. (NYSE: RAI) today announced fourth-quarter 2015 reported EPS of
$0.19, up 35.7 percent from the prior-year quarter.
Adjusted fourth-quarter EPS was $0.48, up 9.1 percent, benefitting from higher
pricing and volume on both cigarettes and moist snuff. Adjusted results exclude charges for pension and postretirement mark-to-market adjustments, implementation costs and tax items, the gain on divestiture, a benefit from the 2003 NPM adjustment
claim, and a one-time benefit from the N.Y. NPM Settlement. A reconciliation of reported to adjusted results is detailed in Schedule 2.
For the full year, reported EPS was $2.57, up 87.6 percent from the prior-year period. Full-year adjusted EPS was $1.98, up 15.8 percent
from the prior-year period. This excludes the above-referenced items, as well as transaction-related and financing costs, asset impairment and exit charges, and charges for Engle progeny lawsuits and tobacco-related and other litigation.
RAI issued 2016 adjusted EPS guidance in a range of $2.25 to $2.35, up 13.6 percent to 18.7 percent from 2015s adjusted EPS of
$1.98.
Fourth Quarter and Full Year 2015 Financial Results Highlights*
(unaudited)
(all dollars in millions,
except per-share amounts;
for reconciliations, including GAAP to non-GAAP, see Schedules 2 and 3)
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For the Three Months Ended Dec. 31 |
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For the Full Year Ended Dec. 31 |
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2015 |
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2014 |
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%
Change |
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2015 |
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2014 |
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%
Change |
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Net sales |
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$ |
3,054 |
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$ |
2,134 |
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43.1 |
% |
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$ |
10,675 |
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$ |
8,471 |
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26.0 |
% |
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Operating income |
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Reported (GAAP) |
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$ |
690 |
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$ |
293 |
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135.5 |
% |
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$ |
6,953 |
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$ |
2,531 |
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174.7 |
% |
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Adjusted (Non-GAAP) |
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1,257 |
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780 |
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61.2 |
% |
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4,438 |
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3,105 |
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42.9 |
% |
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Net income |
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Reported (GAAP) |
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$ |
279 |
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$ |
148 |
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88.5 |
% |
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$ |
3,253 |
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$ |
1,470 |
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121.3 |
% |
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Adjusted (Non-GAAP) |
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692 |
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466 |
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48.5 |
% |
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2,509 |
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1,831 |
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37.0 |
% |
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Net income per diluted share |
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Reported (GAAP) |
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$ |
0.19 |
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$ |
0.14 |
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35.7 |
% |
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$ |
2.57 |
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$ |
1.37 |
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87.6 |
% |
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Adjusted (Non-GAAP) |
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0.48 |
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0.44 |
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9.1 |
% |
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1.98 |
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1.71 |
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15.8 |
% |
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*Includes the Newport brand and excludes the Winston, KOOL and Salem brands for the period June 12, 2015, to Dec. 31, 2015,
following the Lorillard acquisition and related divestiture.
2
MANAGEMENTS PERSPECTIVE
Overview
Reynolds Americans strong fourth-quarter results
wrapped up a transformational year for our company, said Susan M. Cameron, president and chief executive officer of RAI. Each of our operating companies delivered excellent results both in the quarter and for the full year. The
integration of Newport is going extremely well, and I believe weve entered 2016 with significant momentum.
Another highlight of the quarter was the
announcement of a series of product innovations by R.J. Reynolds Vapor Companys VUSE Digital Vapor Cigarette. VUSE remains the vapor category leader, and we expect the brands lineup of exciting new formats to generate even more
interest from adult tobacco consumers this year, Cameron said.
In addition to the companys robust growth and advancement of its transforming-tobacco
initiatives, RAI continues to create additional value for shareholders.
Im very pleased to announce today that we have increased our quarterly dividend
by 16.7 percent reflecting RAIs strong adjusted EPS growth in 2015 and our outlook for 2016, Cameron said. This significant dividend increase reflects the benefits of the completion of the Lorillard acquisition,
continued strong growth from our Santa Fe and American Snuff segments, and meaningful cost savings.
Other positive developments for RAI shareholders include
the recent completion of the $5 billion sale of Natural American Spirits business outside the U.S., and the subsequent announcement of RAIs tender offer and redemption for the early repayment of a portion of outstanding debt.
Cameron said that RAI and its operating companies made great strides in 2015, and were well- positioned for another busy and successful year in 2016.
COMBUSTIBLES
Total RAI operating companies
domestic cigarette volumes increased 33.6 percent in the fourth quarter, driven by the addition of the Newport brand. Industry cigarette volume declined 0.5 percent during the quarter, and declined 0.1 percent for the full year.
When adjusted for wholesale inventory changes, industry shipments were down about 0.2 percent for the quarter, and were down about 0.6 percent for the full year.
Total RAI operating companies domestic retail cigarette market share increased 0.3 percentage points to 33.8 percent in the fourth quarter, and
0.2 percentage points to 33.8 percent for the full year.
Total domestic retail cigarette market share in RAI operating companies drive brands
(Newport, Camel, Pall Mall and Natural American Spirit) increased 0.6 percentage points to 31.3 percent in the fourth quarter, and 0.5 percentage points to 31.3 percent for the full year.
3
RJR Tobacco
RJR Tobaccos
reported fourth-quarter operating income increased 291.0 percent from the prior-year quarter, to $915 million.
Adjusted fourth-quarter operating income
was $1.13 billion, up 66.2 percent, benefiting from the addition of the Newport brand and higher cigarette pricing. Adjusted results exclude charges for pension and postretirement mark-to-market adjustments and implementation costs, a
benefit from the 2003 NPM adjustment claim, a one-time benefit from the N.Y. NPM Settlement, and charges for Engle progeny and tobacco-related and other litigation.
For the full year, RJR Tobaccos reported operating income was $3.36 billion, up 54.6 percent from the prior-year period.
Adjusted full-year operating income was $3.83 billion, up 43.1 percent. Adjusted results exclude the above-referenced items.
Adjusted fourth-quarter operating margin increased 4.1 percentage points from the prior-year quarter, to 44.6 percent, bringing full-year adjusted operating
margin to 44.4 percent. The increased margin reflects RJR Tobaccos improved premium mix of cigarette volume, which increased 11.8 percentage points to 70.2 percent in the fourth quarter of 2015.
RJR Tobaccos fourth-quarter cigarette shipments increased 34.6 percent from the prior-year quarter, driven by the addition of Newport.
Fourth-quarter retail market share, which is reflected on a pro-forma basis for the companys new brand portfolio following the Lorillard acquisition and the
divestiture to ITG Brands, LLC (ITG), was in line with the prior-year quarter, at 31.8 percent.
The combined fourth-quarter retail market share of RJR
Tobaccos cigarette drive brands Newport, Camel and Pall Mall increased 0.2 percentage points from the prior-year quarter, to 29.3 percent. These brands now make up about 92 percent of RJR Tobaccos total
cigarette retail market share.
Growth in Newport, the nations No. 1 menthol brand, accelerated in the fourth quarter, with gains across its menthol and
non-menthol styles. The brands retail market share increased by 0.6 percentage points from the prior-year quarter, to 13.6 percent. Newport benefited from the mid-November implementation of the companys new retail contracts,
following the expiration of the standstill period in the route-to-market agreement that prohibited changes to retail merchandising.
RJR Tobaccos
other drive brands, Camel and Pall Mall, continued to play key roles in the companys cigarette portfolio strategy and demonstrated steady performance during the quarter. Camel maintained its fourth-quarter cigarette retail market share in line
with the prior-year quarter, at 8.0 percent. Pall Malls share was down 0.3 percentage points from the prior-year quarter, at 7.8 percent; however, the brand has been stable over the last three quarters of the year.
Santa Fe
Santa Fe also delivered excellent performance, with reported
fourth-quarter operating income increasing 24.4 percent to $112 million, while the companys adjusted operating income increased 22.9 percent from the prior-year quarter, to $111 million, benefiting from higher pricing and
strong volume growth. Adjusted results exclude a one-time benefit of $1 million from the N.Y. NPM Settlement.
4
For the full year, the companys reported operating income increased 33.2 percent to $449 million, and
adjusted operating income increased 33.1 percent from the prior-year period, to $448 million. Adjusted results exclude the above-referenced item.
Santa
Fes fourth-quarter adjusted operating margin increased 1.1 percentage points from the prior-year quarter, to 52.8 percent, bringing full-year adjusted operating margin to 54.8 percent.
Natural American Spirit, the nations No. 1 super-premium brand, offers distinctive tobacco styles that are generating interest well beyond the brands
traditional strong presence in western U.S. markets. The brand achieved a milestone 2.0 percent in U.S. retail market share in the fourth quarter, which represented a gain of 0.3 percentage points from the prior-year quarter, on volume
growth of 18.4 percent.
MOIST SNUFF
American
Snuff
American Snuff finished a strong year with fourth-quarter reported operating income increasing 22.0 percent to $133 million, while adjusted
operating income increased 18.4 percent from the prior-year quarter, to $134 million, benefitting from higher pricing and volume. Adjusted results exclude a charge of $1 million for pension and postretirement mark-to-market
adjustments.
For the full year, the companys reported operating income grew 14.6 percent to $502 million, while adjusted operating income rose
13.9 percent, to $503 million. Adjusted results exclude the above-referenced item.
American Snuffs fourth-quarter adjusted operating margin
increased 3.3 percentage points to 59.4 percent, bringing the full-year adjusted operating margin to 58.8 percent.
American Snuffs
fourth-quarter moist-snuff retail market share grew 0.8 percentage points to 33.5 percent, on volume growth of 6.0 percent, which again outpaced industry growth of about 2.5 percent.
The companys flagship Grizzly brand continued to make strong gains, increasing fourth-quarter retail market share by 0.9 percentage points from the
prior-year quarter, to 30.8 percent, on volume growth of 6.6 percent.
Grizzly remains the clear leader in both wintergreen and pouch styles, which are
driving growth in the smokeless category.
FINANCIAL UPDATE
Reynolds Americans fourth-quarter reported EPS of $0.19 increased 35.7 percent from the prior-year quarter.
Fourth-quarter adjusted EPS was $0.48, up 9.1 percent, benefitting from higher cigarette and moist-snuff pricing and volume. Adjusted EPS excludes charges for
pension and postretirement mark-to-market adjustments, implementation costs and tax items, the gain on divestiture, a benefit from the 2003 NPM adjustment claim, and a one-time benefit from the N.Y. NPM Settlement.
5
For the full year, RAIs reported EPS was $2.57, up 87.6 percent from the prior-year period. Full-year adjusted EPS
was $1.98, up 15.8 percent from the prior-year period. These adjusted results exclude the above-referenced items, as well as transaction-related and financing costs, asset impairment and exit charges, and charges for Engle progeny
lawsuits and tobacco-related and other litigation.
RAIs fourth-quarter adjusted operating margin increased 4.6 percentage points, to 41.2 percent.
The company also announced board approval for a 16.7 percent increase in the quarterly cash dividend, to an annualized $1.68 per share, in line with
RAIs target dividend payout ratio of 75 percent. The quarterly dividend will be payable on April 1, 2016, to shareholders of record on March 10, 2016.
On Feb. 4, RAI announced a cash tender offer for up to $2.8 billion aggregate purchase price for certain of its outstanding notes and the redemption of
$950 million aggregate principal amount of certain of its other outstanding notes. This decision is in line with our commitment to deleverage as quickly and efficiently as possible, while maintaining our financial flexibility over
time, said Andrew Gilchrist, RAIs chief financial officer.
RAIs long-term debt was $16.9 billion at the end of 2015, with an average
interest rate of 4.6 percent and an average maturity of 12.2 years.
RAI ended 2015 with cash balances of $2.6 billion. The companys pension
plans remain well-funded, as RAI contributed an additional $325 million to its pension plans in January 2016.
Based on a very successful year and our
expectations for the year ahead, Im pleased to announce our 2016 adjusted EPS guidance in the range of $2.25 to $2.35, up 13.6 percent to 18.7 percent on last years adjusted EPS of $1.98, Gilchrist said.
CONFERENCE CALL WEBCAST TODAY
Reynolds American will webcast
a conference call to discuss fourth-quarter 2015 results at 9:00 a.m. Eastern Time on Feb. 11, 2016. The call will be available live online on a listen-only basis. To register for the call, please go to the Investors Events and
Presentations section on our website. A replay of the call will be available on the site. Investors, analysts and members of the news media can also listen to the live call by phone, by dialing (877) 201-0168 (toll free) or
(647) 788-4901 (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.
Web and Social Media Disclosure
RAIs website,
www.reynoldsamerican.com, is the primary source of publicly disclosed news, including our quarterly earnings, about RAI and its operating companies. RAI also uses Twitter to publicly disseminate company news via @RAI News. It is
possible that the information we post could be deemed to be material information. We encourage investors and others to register at www.reynoldsamerican.com to receive alerts when news about the company has been posted, and to follow RAI on
Twitter at @RAI News.
6
RISK FACTORS
Statements included in this press 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. When used in this press release, forward-looking statements include, without limitation, statements regarding financial forecasts or projections, and RAIs and its subsidiaries expectations,
beliefs, intentions or future strategies that may be signified by the words anticipate, believe, estimate, expect, intend, may, objective, outlook,
plan, project, possible, potential, should and similar expressions. These statements regarding future events or the future performance or results of RAI and its subsidiaries inherently are
subject to a variety of risks, contingencies and other uncertainties that could cause actual results, performance or achievements to differ materially from those described in or implied by the forward-looking statements. These risks, contingencies
and other uncertainties include:
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the information appearing under the caption Risk Factors included in RAIs most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange
Commission (SEC) and in any updates to the risk factors in any quarterly or other report filed by RAI with the SEC subsequent to such Annual Report; |
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the substantial and increasing taxation and regulation of tobacco products, including the regulation of tobacco products by the U.S. Food and Drug Administration (FDA); |
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the effect of adverse governmental developments on RAIs subsidiaries sales of products that contain menthol, including the possibility that the FDA will issue regulations prohibiting menthol, or restricting
the use of menthol, in cigarettes; |
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the possibility that the FDA will require the reduction of nicotine levels or the reduction or elimination of other constituents in cigarettes; |
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the adverse effects (including decreased sales and recall costs) arising from an order of the FDAs Center for Tobacco Products (CTP) (1) finding that a provisional product sold by an RAI operating
subsidiary is not substantially equivalent to a predicate product, and (2) as a result, requiring that the provisional product be removed from the market; |
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the possibility that the CTP fails to grant a marketing order allowing an RAI operating subsidiary to launch a new tobacco product or modify an existing product; |
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the adverse effects (including decreased sales, and the incurrence of fines and costs) arising from an FDA enforcement action against Santa Fe Natural Tobacco Company, Inc. for the companys use of the terms
natural and additive free in the product labeling and/or advertising for NATURAL AMERICAN SPIRIT cigarettes without a modified risk tobacco product authorization order from the agency; |
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the possibility that the FDA will issue regulations extending the FDAs authority over tobacco products to e-cigarettes, subjecting e-cigarettes to restrictions on, among other things, the manufacturing, marketing
and sale of such products; |
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decreased sales resulting from the future issuance of corrective communications, required by the order in the U.S. Department of Justice case on five subjects, including smoking and health, and
addiction; |
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various legal actions, proceedings and claims relating to the sale, distribution, manufacture, development, advertising, marketing and claimed health effects of tobacco products (including smokeless tobacco products and
electronic cigarettes) that are pending or may be instituted against RAI or its subsidiaries; |
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the possibility of being required to pay various adverse judgments in the Engle Progeny cases and/or other litigation; |
7
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the substantial payment obligations with respect to cigarette sales, and the substantial limitations on the advertising and marketing of cigarettes (and of RJR Tobaccos smoke-free tobacco products) under the
Master Settlement Agreement and prior states settlement agreements; |
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the possibility that the arbitration award partially resolving disputes relating to the NPM adjustment provision under the Master Settlement Agreement (2003 NPM adjustment) will be vacated or otherwise modified;
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the possibility that the final arbitration award with respect to certain of the states found to be non-diligent in connection with the 2003 NPM adjustment will be vacated or otherwise modified; |
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the continuing decline in volume in the U.S. cigarette industry and RAIs and its subsidiaries dependence on the U.S. cigarette industry and premium and super-premium brands, a dependence that will increase
as a result of the sale (Transaction) of the non-United States operations of RAIs subsidiaries NATURAL AMERICAN SPIRIT brand to JT International Holdings BV (JTI); |
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concentration of a material amount of sales with a limited number of customers and potential loss of these customers; |
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competition from other manufacturers, including those resulting from industry consolidations or any new entrants in the marketplace; |
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increased promotional activities by competitors, including manufacturers of deep-discount cigarette brands; |
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the success or failure of new product innovations, including the Digital Vapor Cigarette, VUSE; |
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the success or failure of acquisitions or dispositions, which RAI or its subsidiaries may engage in from time to time, including the acquisition of Lorillard (Merger) and the divestiture (Divestiture) of certain brands
and other assets to ITG; |
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the responsiveness of both the trade and consumers to new products, marketing strategies and promotional programs; |
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the reliance on outside suppliers to manage certain non-core business processes; |
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the reliance on a limited number of suppliers for certain raw materials; |
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the cost of tobacco leaf, and other raw materials and commodities used in products; |
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the passage of new federal or state legislation or regulations; |
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the effect of market conditions on interest rate risk, foreign currency exchange rate risk and the return on corporate cash, or adverse changes in liquidity in the financial markets; |
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the impairment of goodwill and other intangible assets, including trademarks; |
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the effect of market conditions on the performance of pension assets or any adverse effects of any new legislation or regulations changing pension and postretirement benefits accounting or required pension funding
levels; |
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the substantial amount of RAI debt, including the additional debt incurred and assumed in connection with the Merger; |
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the possibility of decreases in the credit ratings assigned to RAI, and to the senior unsecured long-term debt of RAI; |
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the possibility of changes in RAIs historical dividend policy; |
8
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the restrictive covenants imposed under RAIs debt agreements; |
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the possibility of natural or man-made disasters or other disruptions, including disruptions in information technology systems or security breaches, that may adversely affect manufacturing or other operations and other
facilities or data; |
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the loss of key personnel or difficulties recruiting and retaining qualified personnel; |
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the inability to adequately protect intellectual property rights; |
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the significant ownership interest in RAI of British American Tobacco p.l.c. (BAT) and its subsidiaries, collectively RAIs largest beneficial owner, and their rights under the governance agreement among the
companies; |
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the potential consequences due to the expiration of the standstill provisions of the governance agreement, and the expiration of RAIs shareholder rights plan on July 30, 2014; |
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a termination of the governance agreement or certain of its provisions in accordance with its terms, including the limitations on Brown & Williamson Holdings, Inc.s representation on the RAI board of
directors and its committees; |
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the potential for increased competition between RAI and BAT and their respective subsidiaries due to expiration of the non-competition agreement between RAI and BAT on July 30, 2014; |
|
|
|
additional risks, contingencies and uncertainties associated with the Merger and Divestiture that could result in an adverse effect on the results of operations, cash flows and financial position of RAI and its
subsidiaries and/or the failure to realize any anticipated benefits of the Merger and Divestiture to RAI shareholders, including: |
|
o |
the effect of the Merger and Divestiture on the ability to maintain business relationships, and on operating results and businesses generally; |
|
|
o |
the reliance of RJR Tobacco on ITG to manufacture Newport on RJR Tobaccos behalf for a period of time after the Merger and Divestiture; |
|
|
o |
RAIs obligations to indemnify ITG for specified matters and to retain certain liabilities related to the transferred assets; |
|
|
o |
the failure to realize projected synergies and other benefits from the Merger and Divestiture; and |
|
|
o |
the incurrence of significant post-transaction related costs in connection with the Merger and Divestiture; and |
|
|
|
|
additional risks, contingencies and uncertainties associated with the sale of the international rights to the NATURAL AMERICAN SPIRIT brand name and associated trademarks that could have an adverse effect on the results
of operations, cash flows and financial position of RAI and its subsidiaries including: |
|
o |
the effect of restrictions placed on RAIs and its subsidiaries business activities, including RAIs agreement not to compete with JTI, and agreement to cause its controlled affilitates not to, engage in
the business of producing, selling, distributing and developing natural, organic and additive-free combustible tobacco cigarettes and roll your own or make your own tobacco products outside of the United States for a period of five years after the
closing; and |
|
|
o |
RAIs obligation to indemnify JTI for specified matters and to retain certain liabilities related to the acquired business. |
|
9
Due to these risks, contingencies and other uncertainties, you are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this press 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.
ABOUT US
Reynolds American
Inc. (NYSE: RAI) is the parent company of R.J. Reynolds Tobacco Company; Santa Fe Natural Tobacco Company, Inc.; American Snuff Company, LLC; Niconovum USA, Inc.; Niconovum AB; and R.J. Reynolds Vapor Company.
|
|
|
R.J. Reynolds Tobacco Company is the second-largest U.S. tobacco company. R.J. Reynolds brands include Newport, Camel and Pall Mall. |
|
|
|
Santa Fe Natural Tobacco Company, Inc. manufactures and markets Natural American Spirit products. |
|
|
|
American Snuff Company, LLC is the nations second-largest manufacturer of smokeless tobacco products. Its leading brands are Grizzly and Kodiak. |
|
|
|
Niconovum USA, Inc. and Niconovum AB market innovative nicotine replacement therapy products in the United States and Sweden, respectively, under the ZONNIC brand name. |
|
|
|
R.J. Reynolds Vapor Company manufactures and markets VUSE e-cigarettes. |
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. To learn more about how Reynolds American and its operating companies are
transforming the tobacco industry, visit Transforming Tobacco.
(financial and volume schedules follow)
10
Schedule 1
REYNOLDS AMERICAN INC.
Condensed Consolidated
Statements of Income - GAAP
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Net sales, external |
|
$ |
2,997 |
|
|
$ |
2,071 |
|
|
$ |
10,416 |
|
|
$ |
8,160 |
|
Net sales, related party |
|
|
57 |
|
|
|
63 |
|
|
|
259 |
|
|
|
311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
3,054 |
|
|
|
2,134 |
|
|
|
10,675 |
|
|
|
8,471 |
|
Cost of products sold |
|
|
1,350 |
|
|
|
1,135 |
|
|
|
4,688 |
|
|
|
4,058 |
|
Selling, general and administrative expenses |
|
|
683 |
|
|
|
703 |
|
|
|
2,098 |
|
|
|
1,871 |
|
Gain on divestiture |
|
|
325 |
|
|
|
- |
|
|
|
(3,181 |
) |
|
|
- |
|
Amortization expense |
|
|
6 |
|
|
|
3 |
|
|
|
18 |
|
|
|
11 |
|
Asset impairment and exit charges |
|
|
- |
|
|
|
- |
|
|
|
99 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
690 |
|
|
|
293 |
|
|
|
6,953 |
|
|
|
2,531 |
|
Interest and debt expense |
|
|
185 |
|
|
|
89 |
|
|
|
570 |
|
|
|
286 |
|
Interest income |
|
|
(2 |
) |
|
|
- |
|
|
|
(6 |
) |
|
|
(3 |
) |
Other (income) expense, net |
|
|
(3 |
) |
|
|
(5 |
) |
|
|
5 |
|
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
510 |
|
|
|
209 |
|
|
|
6,384 |
|
|
|
2,262 |
|
Provision for income taxes |
|
|
231 |
|
|
|
61 |
|
|
|
3,131 |
|
|
|
817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
279 |
|
|
|
148 |
|
|
|
3,253 |
|
|
|
1,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of tax |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
279 |
|
|
$ |
148 |
|
|
$ |
3,253 |
|
|
$ |
1,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.20 |
|
|
$ |
0.14 |
|
|
$ |
2.57 |
|
|
$ |
1.36 |
|
Income from discontinued operations |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
0.20 |
|
|
$ |
0.14 |
|
|
$ |
2.57 |
|
|
$ |
1.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.19 |
|
|
$ |
0.14 |
|
|
$ |
2.57 |
|
|
$ |
1.35 |
|
Income from discontinued operations |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
0.19 |
|
|
$ |
0.14 |
|
|
$ |
2.57 |
|
|
$ |
1.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares, in thousands |
|
|
1,428,219 |
|
|
|
1,062,568 |
|
|
|
1,264,182 |
|
|
|
1,066,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares, in thousands |
|
|
1,432,060 |
|
|
|
1,066,632 |
|
|
|
1,267,715 |
|
|
|
1,069,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R.J. Reynolds |
|
$ |
2,519 |
|
|
$ |
1,669 |
|
|
$ |
8,634 |
|
|
$ |
6,767 |
|
Santa Fe |
|
|
211 |
|
|
|
176 |
|
|
|
818 |
|
|
|
658 |
|
American Snuff |
|
|
226 |
|
|
|
202 |
|
|
|
855 |
|
|
|
783 |
|
All Other |
|
|
98 |
|
|
|
87 |
|
|
|
368 |
|
|
|
263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,054 |
|
|
$ |
2,134 |
|
|
$ |
10,675 |
|
|
$ |
8,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R.J. Reynolds |
|
$ |
915 |
|
|
$ |
234 |
|
|
$ |
3,359 |
|
|
$ |
2,173 |
|
Santa Fe |
|
|
112 |
|
|
|
90 |
|
|
|
449 |
|
|
|
337 |
|
American Snuff |
|
|
133 |
|
|
|
109 |
|
|
|
502 |
|
|
|
438 |
|
All Other |
|
|
(42 |
) |
|
|
(58 |
) |
|
|
(265 |
) |
|
|
(234 |
) |
Gain on Divestiture |
|
|
(325 |
) |
|
|
- |
|
|
|
3,181 |
|
|
|
- |
|
Corporate |
|
|
(103 |
) |
|
|
(82 |
) |
|
|
(273 |
) |
|
|
(183 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
690 |
|
|
$ |
293 |
|
|
$ |
6,953 |
|
|
$ |
2,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excise tax expense |
|
$ |
1,162 |
|
|
$ |
890 |
|
|
$ |
4,209 |
|
|
$ |
3,625 |
|
Master Settlement Agreement and other state settlement expense |
|
$ |
683 |
|
|
$ |
481 |
|
|
$ |
2,403 |
|
|
$ |
1,917 |
|
FDA fees |
|
$ |
49 |
|
|
$ |
36 |
|
|
$ |
174 |
|
|
$ |
135 |
|
Federal tobacco buyout expense |
|
$ |
- |
|
|
$ |
5 |
|
|
$ |
- |
|
|
$ |
163 |
|
Schedule 2
REYNOLDS AMERICAN INC.
Reconciliation of GAAP
to Adjusted Results
(Dollars in Millions, Except Per Share Amounts)
(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 company's 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 December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
Operating Income |
|
|
Net Income |
|
|
Diluted EPS |
|
|
Operating Income |
|
|
Net Income |
|
|
Diluted EPS |
|
GAAP results |
|
$ |
690 |
|
|
$ |
279 |
|
|
$ |
0.19 |
|
|
$ |
293 |
|
|
$ |
148 |
|
|
$ |
0.14 |
|
The GAAP results include the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestiture |
|
|
325 |
|
|
|
237 |
|
|
|
0.17 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Mark-to-market pension/postretirement adjustments |
|
|
246 |
|
|
|
152 |
|
|
|
0.11 |
|
|
|
452 |
|
|
|
275 |
|
|
|
0.26 |
|
Implementation costs |
|
|
26 |
|
|
|
16 |
|
|
|
0.01 |
|
|
|
4 |
|
|
|
2 |
|
|
|
- |
|
2003 NPM Adjustment Claim |
|
|
(23 |
) |
|
|
(14 |
) |
|
|
(0.01 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
One-time benefit from the NPM Settlement |
|
|
(15 |
) |
|
|
(9 |
) |
|
|
(0.01 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Transaction related costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15 |
|
|
|
12 |
|
|
|
0.01 |
|
Financing costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19 |
|
|
|
0.02 |
|
Engle Progeny cases |
|
|
2 |
|
|
|
1 |
|
|
|
- |
|
|
|
16 |
|
|
|
10 |
|
|
|
0.01 |
|
Tobacco Related and Other Litigation |
|
|
6 |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Tax Items |
|
|
- |
|
|
|
26 |
|
|
|
0.02 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments |
|
|
567 |
|
|
|
413 |
|
|
|
0.29 |
|
|
|
487 |
|
|
|
318 |
|
|
|
0.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted results |
|
$ |
1,257 |
|
|
$ |
692 |
|
|
$ |
0.48 |
|
|
$ |
780 |
|
|
$ |
466 |
|
|
$ |
0.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
Operating Income |
|
|
Net Income |
|
|
Diluted EPS |
|
|
Operating Income |
|
|
Net Income |
|
|
Diluted EPS |
|
GAAP results |
|
$ |
6,953 |
|
|
$ |
3,253 |
|
|
$ |
2.57 |
|
|
$ |
2,531 |
|
|
$ |
1,470 |
|
|
$ |
1.37 |
|
The GAAP results include the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on divestiture |
|
|
(3,181 |
) |
|
|
(1,236 |
) |
|
|
(0.97 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Mark-to-market pension/postretirement adjustments |
|
|
246 |
|
|
|
152 |
|
|
|
0.12 |
|
|
|
452 |
|
|
|
275 |
|
|
|
0.26 |
|
Implementation costs |
|
|
223 |
|
|
|
141 |
|
|
|
0.11 |
|
|
|
16 |
|
|
|
10 |
|
|
|
0.01 |
|
2003 NPM Adjustment Claim |
|
|
(93 |
) |
|
|
(57 |
) |
|
|
(0.04 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
One-time benefit from the NPM Settlement |
|
|
(15 |
) |
|
|
(9 |
) |
|
|
(0.01 |
) |
|
|
(34 |
) |
|
|
(21 |
) |
|
|
(0.02 |
) |
Transaction related costs |
|
|
54 |
|
|
|
43 |
|
|
|
0.03 |
|
|
|
38 |
|
|
|
30 |
|
|
|
0.03 |
|
Financing costs |
|
|
- |
|
|
|
38 |
|
|
|
0.03 |
|
|
|
- |
|
|
|
28 |
|
|
|
0.02 |
|
Asset impairment and exit charges |
|
|
99 |
|
|
|
63 |
|
|
|
0.05 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Engle Progeny cases |
|
|
127 |
|
|
|
80 |
|
|
|
0.06 |
|
|
|
100 |
|
|
|
63 |
|
|
|
0.06 |
|
Tobacco Related and Other Litigation |
|
|
25 |
|
|
|
15 |
|
|
|
0.01 |
|
|
|
2 |
|
|
|
1 |
|
|
|
- |
|
Tax Items |
|
|
- |
|
|
|
26 |
|
|
|
0.02 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Gain on discontinued operations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(25 |
) |
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments |
|
|
(2,515 |
) |
|
|
(744 |
) |
|
|
(0.59 |
) |
|
|
574 |
|
|
|
361 |
|
|
|
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted results |
|
$ |
4,438 |
|
|
$ |
2,509 |
|
|
$ |
1.98 |
|
|
$ |
3,105 |
|
|
$ |
1,831 |
|
|
$ |
1.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets
(Dollars in Millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 31, 2015 |
|
|
|
|
Dec. 31, 2014 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,567 |
|
|
|
|
$ |
966 |
|
Other current assets |
|
|
3,620 |
|
|
|
|
|
2,357 |
|
Trademarks and other intangible assets, net |
|
|
29,467 |
|
|
|
|
|
2,421 |
|
Goodwill |
|
|
15,993 |
|
|
|
|
|
8,016 |
|
Other noncurrent assets |
|
|
1,577 |
|
|
|
|
|
1,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
53,224 |
|
|
|
|
$ |
15,196 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity |
|
|
|
|
|
|
|
|
|
|
Tobacco settlement accruals |
|
$ |
2,816 |
|
|
|
|
$ |
1,819 |
|
Other current liabilities |
|
|
2,475 |
|
|
|
|
|
1,725 |
|
Long-term debt (less current maturities) |
|
|
16,941 |
|
|
|
|
|
4,633 |
|
Deferred income taxes, net |
|
|
10,236 |
|
|
|
|
|
383 |
|
Long-term retirement benefits (less current portion) |
|
|
2,265 |
|
|
|
|
|
1,997 |
|
Other noncurrent liabilities |
|
|
239 |
|
|
|
|
|
117 |
|
Shareholders equity |
|
|
18,252 |
|
|
|
|
|
4,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
53,224 |
|
|
|
|
$ |
15,196 |
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 3
REYNOLDS AMERICAN INC.
Reconciliation of GAAP
to Adjusted Operating Income by Segment
(Dollars in Millions)
(Unaudited)
The R.J. Reynolds segment consists of the primary
operations of R.J. Reynolds Tobacco Company, the second-largest tobacco company in the United States and which also manages a contract manufacturing business.
The
Santa Fe segment consists of the primary operations of Santa Fe Natural Tobacco Company, Inc., which manufactures Natural American Spirit cigarettes and other additive-free tobacco products.
The American Snuff segment consists of the primary operations of American Snuff Company, LLC, 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 company's continuing operations is enhanced through the disclosure of these metrics.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
R.J. Reynolds |
|
|
Santa Fe |
|
|
American Snuff |
|
|
R.J. Reynolds |
|
|
Santa Fe |
|
|
American Snuff |
|
GAAP operating income |
|
$ |
915 |
|
|
$ |
112 |
|
|
$ |
133 |
|
|
$ |
234 |
|
|
$ |
90 |
|
|
$ |
109 |
|
|
|
|
|
|
|
|
The GAAP results include the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark-to-market pension/postretirement adjustments (6) |
|
|
229 |
|
|
|
- |
|
|
|
1 |
|
|
|
422 |
|
|
|
- |
|
|
|
4 |
|
Implementation costs (2) |
|
|
10 |
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
2003 NPM Adjustment Claim |
|
|
(23 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
One-time benefit from the NPM Settlement |
|
|
(14 |
) |
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Engle Progeny cases |
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
16 |
|
|
|
- |
|
|
|
- |
|
Tobacco Related and Other Litigation |
|
|
6 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments (5) |
|
|
210 |
|
|
|
(1 |
) |
|
|
1 |
|
|
|
442 |
|
|
|
- |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating income |
|
$ |
1,125 |
|
|
$ |
111 |
|
|
$ |
134 |
|
|
$ |
676 |
|
|
$ |
90 |
|
|
$ |
113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, |
|
|
|
2015 |
|
|
|
|
|
|
|
|
2014 |
|
|
|
|
|
|
|
|
|
R.J. Reynolds |
|
|
Santa Fe |
|
|
American Snuff |
|
|
R.J. Reynolds |
|
|
Santa Fe |
|
|
American Snuff |
|
|
|
|
|
|
|
|
GAAP operating income |
|
$ |
3,359 |
|
|
$ |
449 |
|
|
$ |
502 |
|
|
$ |
2,173 |
|
|
$ |
337 |
|
|
$ |
438 |
|
|
|
|
|
|
|
|
The GAAP results include the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark-to-market pension/postretirement adjustments (6) |
|
|
229 |
|
|
|
- |
|
|
|
1 |
|
|
|
422 |
|
|
|
- |
|
|
|
4 |
|
Implementation costs (2) |
|
|
198 |
|
|
|
- |
|
|
|
- |
|
|
|
16 |
|
|
|
- |
|
|
|
- |
|
2003 NPM Adjustment Claim |
|
|
(93 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
One-time benefit from the NPM Settlement |
|
|
(14 |
) |
|
|
(1 |
) |
|
|
- |
|
|
|
(34 |
) |
|
|
- |
|
|
|
- |
|
Engle Progeny cases |
|
|
127 |
|
|
|
- |
|
|
|
- |
|
|
|
100 |
|
|
|
- |
|
|
|
- |
|
Tobacco Related and Other Litigation |
|
|
25 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments (1); (3); (4); (5) |
|
|
472 |
|
|
|
(1 |
) |
|
|
1 |
|
|
|
504 |
|
|
|
- |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating income |
|
$ |
3,831 |
|
|
$ |
448 |
|
|
$ |
503 |
|
|
$ |
2,677 |
|
|
$ |
337 |
|
|
$ |
442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
For the twelve months ended Dec 31, 2015, RAI and its operating companies recorded aggregate transaction related cost adjustments of $54 million which are included in corporate costs. |
(2) |
For the three and twelve months ended Dec 31, 2015, RAI and its operating companies recorded aggregate implementation cost adjustments of $26 million and $223 million, respectively, including $16 million and $25
million, respectively, in the corporate and all other segment. |
(3) |
For the twelve months ended Dec 31, 2015, RAI and its operating companies recorded aggregate adjustments of $99 million in asset impairment and exit charges which are included in the all other segment.
|
(4) |
For the twelve months ended Dec 31, 2014, RAI and its operating companies recorded aggregate adjustments of $2 million in tobacco related and other litigation charges which is included in corporate costs.
|
(5) |
For the three and twelve months ended Dec 31, 2014, RAI and its operating companies recorded aggregate adjustments of $15 million and $38 million, respectively, in transaction related costs which are included in
corporate costs. |
(6) |
For the three and twelve months ended Dec 31, 2015, and Dec 31, 2014, RAI and its operating companies recorded aggregate mark-to-market adjustments of $246 million and $452 million, respectively, including $16 million
and $26 million, respectively, in the corporate and all other segment. |
Schedule 4
RAI
OPERATING COMPANIES' CIGARETTE VOLUMES AND RETAIL SHARE OF MARKET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VOLUME (in billions): |
|
Three Months Ended |
|
|
Twelve Months Ended |
|
|
|
December 31, |
|
|
Change |
|
|
December 31, |
|
|
Change |
|
R.J. Reynolds domestic |
|
2015 |
|
|
2014 |
|
|
Units |
|
|
% |
|
|
2015 |
|
|
2014 |
|
|
Units |
|
|
% |
|
Newport |
|
|
8.6 |
|
|
|
0.0 |
|
|
|
8.6 |
|
|
|
NM |
|
|
|
18.9 |
|
|
|
0.0 |
|
|
|
18.9 |
|
|
|
NM |
|
Camel |
|
|
5.0 |
|
|
|
5.1 |
|
|
|
(0.1 |
) |
|
|
-2.0 |
% |
|
|
20.8 |
|
|
|
20.9 |
|
|
|
(0.1 |
) |
|
|
-0.5 |
% |
Pall Mall |
|
|
4.9 |
|
|
|
5.0 |
|
|
|
(0.2 |
) |
|
|
-3.5 |
% |
|
|
19.9 |
|
|
|
20.6 |
|
|
|
(0.7 |
) |
|
|
-3.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total R.J. Reynolds drive brands |
|
|
18.4 |
|
|
|
10.1 |
|
|
|
8.3 |
|
|
|
82.3 |
% |
|
|
59.5 |
|
|
|
41.5 |
|
|
|
18.0 |
|
|
|
43.5 |
% |
|
|
|
|
|
|
|
|
|
Other |
|
|
1.6 |
|
|
|
4.8 |
|
|
|
(3.2 |
) |
|
|
-66.7 |
% |
|
|
11.8 |
|
|
|
19.5 |
|
|
|
(7.7 |
) |
|
|
-39.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total R.J. Reynolds domestic |
|
|
20.0 |
|
|
|
14.9 |
|
|
|
5.1 |
|
|
|
34.6 |
% |
|
|
71.3 |
|
|
|
61.0 |
|
|
|
10.4 |
|
|
|
17.0 |
% |
|
|
|
|
|
|
|
|
|
Santa Fe domestic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural American Spirit |
|
|
1.2 |
|
|
|
1.1 |
|
|
|
0.2 |
|
|
|
18.4 |
% |
|
|
4.8 |
|
|
|
3.9 |
|
|
|
0.8 |
|
|
|
21.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RAI operating companies |
|
|
21.3 |
|
|
|
15.9 |
|
|
|
5.3 |
|
|
|
33.6 |
% |
|
|
76.1 |
|
|
|
64.9 |
|
|
|
11.2 |
|
|
|
17.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total R.J. Reynolds domestic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total premium |
|
|
14.0 |
|
|
|
8.7 |
|
|
|
5.4 |
|
|
|
61.7 |
% |
|
|
47.0 |
|
|
|
35.6 |
|
|
|
11.4 |
|
|
|
32.1 |
% |
Total value |
|
|
6.0 |
|
|
|
6.2 |
|
|
|
(0.2 |
) |
|
|
-3.4 |
% |
|
|
24.3 |
|
|
|
25.4 |
|
|
|
(1.0 |
) |
|
|
-4.1 |
% |
Premium/total mix |
|
|
70.2 |
% |
|
|
58.4 |
% |
|
|
11.8 |
|
|
|
|
|
|
|
65.9 |
% |
|
|
58.4 |
% |
|
|
7.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry |
|
|
65.1 |
|
|
|
65.4 |
|
|
|
(0.3 |
) |
|
|
-0.5 |
% |
|
|
264.3 |
|
|
|
264.6 |
|
|
|
(0.3 |
) |
|
|
-0.1 |
% |
Premium |
|
|
46.5 |
|
|
|
47.0 |
|
|
|
(0.5 |
) |
|
|
-1.1 |
% |
|
|
190.3 |
|
|
|
189.1 |
|
|
|
1.3 |
|
|
|
0.7 |
% |
Value |
|
|
18.5 |
|
|
|
18.3 |
|
|
|
0.2 |
|
|
|
1.0 |
% |
|
|
74.0 |
|
|
|
75.5 |
|
|
|
(1.6 |
) |
|
|
-2.1 |
% |
Premium/total mix |
|
|
71.5 |
% |
|
|
71.9 |
% |
|
|
(0.4 |
) |
|
|
|
|
|
|
72.0 |
% |
|
|
71.5 |
% |
|
|
0.6 |
|
|
|
|
|
|
|
|
|
RETAIL SHARE OF MARKET*: |
|
Three Months Ended December 31, |
|
|
Twelve Months Ended December 31, |
|
|
|
|
R.J. Reynolds domestic: |
|
2015 |
|
|
2014 |
|
|
Change |
|
|
|
|
|
2015 |
|
|
2014 |
|
|
Change |
|
|
|
|
Newport |
|
|
13.6 |
% |
|
|
13.0 |
% |
|
|
0.6 |
|
|
|
|
|
|
|
13.4 |
% |
|
|
12.9 |
% |
|
|
0.4 |
|
|
|
|
|
Camel |
|
|
8.0 |
% |
|
|
8.0 |
% |
|
|
(0.0 |
) |
|
|
|
|
|
|
8.2 |
% |
|
|
8.2 |
% |
|
|
0.0 |
|
|
|
|
|
Pall Mall |
|
|
7.8 |
% |
|
|
8.1 |
% |
|
|
(0.3 |
) |
|
|
|
|
|
|
7.8 |
% |
|
|
8.1 |
% |
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total R.J. Reynolds drive brands |
|
|
29.3 |
% |
|
|
29.1 |
% |
|
|
0.2 |
|
|
|
|
|
|
|
29.4 |
% |
|
|
29.2 |
% |
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
2.5 |
% |
|
|
2.7 |
% |
|
|
(0.2 |
) |
|
|
|
|
|
|
2.6 |
% |
|
|
2.9 |
% |
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total R.J. Reynolds domestic |
|
|
31.8 |
% |
|
|
31.8 |
% |
|
|
(0.0 |
) |
|
|
|
|
|
|
32.0 |
% |
|
|
32.1 |
% |
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Santa Fe domestic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural American Spirit |
|
|
2.0 |
% |
|
|
1.6 |
% |
|
|
0.3 |
|
|
|
|
|
|
|
1.9 |
% |
|
|
1.5 |
% |
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RAI operating companies |
|
|
33.8 |
% |
|
|
33.5 |
% |
|
|
0.3 |
|
|
|
|
|
|
|
33.8 |
% |
|
|
33.6 |
% |
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts are rounded on an individual basis and, accordingly, may not sum in the aggregate.
* |
RJR Tobacco and Santa Fe are now reporting market share information based on shipments to retail (STR) data, instead of information based on sampling of retail cigarette sales, referred to as retail scan data.
Management believes that STR data provides a more complete indicator of the performance of RJR Tobacco and Santa Fe's brands as well as overall market trends, than retail scan data. All share information has been restated to reflect STR data. You
should not rely on the STR data reported by MSAi as being a precise measurement of actual market share as the shipments to retail do not reflect actual consumer sales and do not track all volume and trade channels. Accordingly, the STR data in the
U.S. cigarette market of RJR Tobacco and Santa Fe and their brands may overstate or understate their actual market share. Moreover, you should be aware that in a product market experiencing overall declining consumption, a particular product can
experience increasing market share relative to competing products, yet still be subject to declining consumption volumes. |
* |
Market share information is included for RJR Tobacco and Santa Fe to provide enhanced analysis of their brands performance. For brands that were acquired in the Lorillard Merger, share information is displayed as if the
brands were part of the portfolio for all time periods shown. Brands that were part of the Divestiture to ITG Brands have been removed for all presented time periods. Accordingly, these pro forma results are presented for informational purposes only
and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Merger and Divestiture had occurred at the beginning of the periods presented, nor are they indicative of future results of
operations. |
Schedule 5
AMERICAN SNUFF MOIST-SNUFF VOLUMES
AND
RETAIL SHARE OF MARKET
VOLUME (in millions of cans):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
|
|
December 31, |
|
|
Change |
|
|
December 31, |
|
|
Change |
|
|
|
2015 |
|
|
2014 |
|
|
Units |
|
|
% |
|
|
2015 |
|
|
2014 |
|
|
Units |
|
|
% |
|
Grizzly |
|
|
116.4 |
|
|
|
109.2 |
|
|
|
7.2 |
|
|
|
6.6 |
% |
|
|
454.4 |
|
|
|
433.8 |
|
|
|
20.6 |
|
|
|
4.7 |
% |
Other |
|
|
11.4 |
|
|
|
11.3 |
|
|
|
0.1 |
|
|
|
0.8 |
% |
|
|
44.7 |
|
|
|
44.9 |
|
|
|
(0.2 |
) |
|
|
-0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total moist snuff cans |
|
|
127.8 |
|
|
|
120.5 |
|
|
|
7.3 |
|
|
|
6.0 |
% |
|
|
499.1 |
|
|
|
478.6 |
|
|
|
20.4 |
|
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
RETAIL SHARE OF MARKET*: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
Twelve Months Ended |
|
|
|
|
|
|
December 31, |
|
|
|
|
|
December 31, |
|
|
|
|
|
|
2015 |
|
|
2014 |
|
|
Change |
|
|
|
|
|
2015 |
|
|
2014 |
|
|
Change |
|
|
|
|
Grizzly |
|
|
30.8 |
% |
|
|
29.8 |
% |
|
|
0.9 |
|
|
|
|
|
|
|
30.7 |
% |
|
|
30.0 |
% |
|
|
0.8 |
|
|
|
|
|
Other |
|
|
2.7 |
% |
|
|
2.9 |
% |
|
|
(0.1 |
) |
|
|
|
|
|
|
2.8 |
% |
|
|
2.9 |
% |
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail share of market |
|
|
33.5 |
% |
|
|
32.7 |
% |
|
|
0.8 |
|
|
|
|
|
|
|
33.5 |
% |
|
|
32.9 |
% |
|
|
0.6 |
|
|
|
|
|
Amounts are rounded on an individual basis and, accordingly, may not sum in the aggregate.
* |
American Snuff is now reporting market share information based on shipments to retail (STR) data, instead of information based on sampling of retail moist snuff sales, referred to as retail scan data. Management
believes that STR data provides a more complete indicator of the performance of American Snuff's brands as well as overall market trends, than retail scan data. All share information has been restated to reflect STR data. You should not rely on the
STR data reported by MSAi as being a precise measurement of actual market share as the shipments to retail do not reflect actual consumer sales and do not track all volume and trade channels. Accordingly, the STR data in the U.S. moist snuff market
of American Snuff and it's brands may overstate or understate their actual market share. |
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