Reynolds American trademark devalued
Jump to full article: Winston-Salem (NC) Journal, 2009-04-30
Author: Richard Craver * Journal Reporter
Intro: The recent increase in the federal excise tax on cigarettes took a toll on both Reynolds American Inc.'s profitability and trademark values in the first quarter.
The decision to take a $453 million trademark-impairment charge on a pretax, noncash basis, contributed to Reynolds reporting just $8 million in net income -- down $285 million from a year ago.
Diluted earnings were 3 cents a share, compared with $1.71 a share a year ago. The earnings from the first quarter of 2008 included a gain of 71 cents from the dissolution of Reynolds' Gallaher joint venture. . . .
The 62-cent increase in the federal excise tax, effective April 1, affected Reynolds in three ways.
In response to congressional approval of the tax increase, the company on March 16 raised the list price on its cigarette brands from 41 cents to 78 cents a pack for wholesale customers.
That led some retailers and suppliers to cut back on their orders. . . .
Susan Ivey, the parent company's chairwoman, president and CEO, said that the tax and pricing increases "triggered trademark valuations that resulted in impairment charges on some of our companies' non-growth brands."
Those include the Kool, Winston, Doral and Salem cigarette brands and the Kodiak smokeless brands.
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