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"As we invest in growth to expand the business base of our operatingcompanies to innovative new tobacco products, we continually review our plansto support that strategy and to strengthen performance in a changingmarketplace," said Susan M. Ivey, RAI's chairman, president and chiefexecutive officer. "We are intent on operating our businesses as efficientlyas possible to focus our resources on growth priorities, while aligning ourplans, processes and cost structures with the competitive and externalenvironment."
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RAI will record a pretax third-quarter restructuring charge ofapproximately $90 million, or about $55 million after tax. The $90 millioncharge represents severance, benefits and related costs.
Reductions in the RAI and R.J. Reynolds Tobacco workforces will generatesavings of about $100 million by year-end 2010, with annualized savings ofabout $55 million thereafter.
Management's Perspective
"In August, Reynolds American and R.J. Reynolds Tobacco began acomprehensive business analysis as the latest step in our ongoing process ofevaluating the best ways to continue improving the performance, efficiency andcompetitive position of each company," said Ivey. "Both companies reviewedall their business plans and activities - with RAI focused on enhancinginnovation and strategic insight across its operating companies, and R.J.Reynolds focused on freeing up additional resources to invest in growth byseizing opportunities to become faster, more flexible and efficient."
Through the business analysis, Reynolds American and Reynolds Tobaccoidentified various ways to simplify programs and processes, reduce complexityand improve productivity across their organizations.
"Continued success demands that we fully align our plans, programs andpeople behind the things that matter most to our future performance," saidDaniel M. Delen, chairman, president and chief executive officer of R.J.Reynolds. "The steps we are taking support R.J. Reynolds' ongoing evolutionto a 'total tobacco' business model that includes both cigarettes andinnovative smokeless tobacco products.
"Simplifying and discontinuing activities results in significant jobeliminations, and has involved many difficult and painful decisions. Wedeeply regret the personal impact on employees whose jobs are eliminated; andwe are providing generous severance benefits to help with their transitions,"Delen said.
Key Initiatives at Reynolds American
The following changes are designed to enhance growth and efficiency at RAIoperating companies, as well as the parent company's strategic oversight role:
-- Reynolds American is creating a new growth and innovationsorganization, which will focus on innovation, consumer and market insights,competitive assessment and maximizing trademark equity across RAI's operatingcompanies. RAI operating companies make and market leading national tobaccobrands across most major tobacco-product categories, and Reynolds Americanplans to capitalize on the collective expertise and insights about adulttobacco consumers across its operating companies.
-- The R.J. Reynolds Global Products, Inc. (GPI) subsidiary of RAI was notpart of the business analysis, but separately undertook a review of itsstrategic focus and resource allocation. As a result, several of GPI'scurrent activities will be reassigned to other RAI operating companies byyear-end.
Key Chang
