Reynolds American Inc. (NYSE:RAI) Q1 2016 Earnings Conference Call - Final Transcript

Apr 26, 2016 • 09:00 am ET


Reynolds American Inc. (NYSE:RAI) Q1 2016 Earnings Conference Call - Final Transcript


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Good morning. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Reynolds American First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions). Thank you.

Morris Moore, Vice President of Investor Relations, you may begin your conference.

Morris Moore

Good morning, and thank you for joining our call. Today, we'll review Reynolds American's results for the first quarter, as well as our outlook for the rest of the year. As usual, our discussion will include adjusted results as management believes this provides additional perspective on our underlying business performance. A reconciliation of reported to adjusted earnings is in our press release, which is available on our website at Joining me this morning are RAI's President and CEO, Susan Cameron, and Andrew Gilchrist, our CFO.

(Forward-Looking Cautionary Statements)

I'd also remind you that RAI's website is our primary source of publicly disclosed news. And we also use Twitter to disseminate Company news.

Now, I'll turn the call over to Susan.

Susan Cameron

Thank you, Morris, and good morning, everyone. As we've said previously, our operating companies entered the new year with strong momentum and that helped to drive an exceptional first quarter for RAI. All of our operating companies continued to deliver against their strategies, turning in another excellent performance.

Significant positive factors in the quarter were the addition of Newport, higher cigarette and moist snuff volumes, combined with higher pricing, and the gain on the divestiture of Natural American Spirit's business outside the United States. I'm especially pleased with the smooth sailing on the integration of Newport, and this success underscores the transformational nature of our acquisition in June last year. Newport has made really impressive gains in market share since then, and it's been a driving force behind the accelerated business performance you see today.

And now another milestone is within sight. We expect Newport's manufacturing integration to be completed by about the middle of this year, well ahead of the 18-month transition that we initially projected. In addition, Newport is now far more visible at retailers across the country, as the reset of retail merchandisers is almost complete. And our Company's trading consumer marketing engagement has ramped up very well.

As you can imagine, this kind of transition has a lot of moving parts. Our employees have made it look easy, but I can assure you, it's been quite an achievement and they've done it while keeping the rest of the business firmly on track. Clearly, Newport has brought a new vitality to the business in what continues to be a competitive and dynamic environment. So in light of our strong performance out of the gate for the year, I'm pleased to report that RAI remains on track for earnings growth of 13.6% to 18.7% for the year. So that's how we're returning excellent value to our shareholders. And now, I'd