RAI Reynolds American (delisted)

Reported EPS up 38.5% Year to Date; Adjusted EPS up 13.8% WINSTON-SALEM, N.C., Oct. 25 /PRNewswire-FirstCall/ -- At a Glance * Reported EPS: third quarter up 45.8 percent at $1.05; nine months up 38.5 percent at $3.49 * Adjusted EPS: third quarter up 0.9 percent at $1.09; nine months up 13.8 percent at $3.29 * Reported EPS forecast increased to a range of $4.20 to $4.30 (post split) * R.J. Reynolds' brand-portfolio strategy continues to drive investment- brand growth * Conwood's Grizzly brand reaches 20 percent share of moist-snuff market All references in this release to "reported" numbers refer to GAAP measurements; all "adjusted" numbers are non-GAAP, as defined in schedules 3 and 4 of this release, which reconcile reported to adjusted results for the third-quarter and nine-month periods. Reynolds American Inc. (NYSE:RAI) today announced gains in third-quarter and nine-month 2006 diluted GAAP EPS compared with the prior-year periods. Adjusted EPS of $3.29 for the nine-month period was up 13.8 percent from pricing, costs reductions and timing of promotional spending. Third-quarter adjusted EPS of $1.09, up 0.9 percent, was impacted by quarterly fluctuations at R.J. Reynolds. RAI increased its full-year reported EPS forecast to $4.20 to $4.30, adjusted for the August stock split. Third Quarter and Nine Month 2006 Financial Results - Highlights (unaudited) (all dollars in millions, except per share amounts; for reconciliations, including GAAP to non-GAAP, see schedules 3 and 4) For the Three Months For the Nine Months Ending Sept. 30 Ending Sept. 30 % % 2006 2005 Change 2006 2005 Change Net sales $2,190 $2,149 1.9% $6,441 $6,209 3.7% Operating income Reported (GAAP) $544 $357 52.4% $1,606 $1,241 29.4% Adjusted (Non-GAAP) 567 520 9.0% 1,632 1,408 15.9% Net income Reported (GAAP) $309 $213 45.1% $1,030 $745 38.3% Adjusted (Non-GAAP) 323 318 1.6% 972 852 14.1% Net income per diluted share Reported (GAAP) $1.05 $0.72 45.8% $3.49 $2.52 38.5% Adjusted (Non-GAAP) 1.09 1.08 0.9% 3.29 2.89 13.8% MANAGEMENT'S PERSPECTIVE Overview "Reynolds American's year-to-date results underscore the power of our business model and our operating companies' inherent strength," said Susan M. Ivey, RAI's chairman and chief executive officer. "Nine-month profit gains from each of our operating units contributed to RAI's continued growth momentum. Our performance continues to validate that our strategy is solid, and it's driving results." Ivey said that continued total share-trend improvements at R.J. Reynolds are in line with those expected from the brand-portfolio strategy the company put in place in early 2005. She also said that the third quarter was marked by the continued strong growth momentum of Conwood, the smokeless tobacco business RAI acquired in May. "Our performance is on track for RAI to again deliver strong full-year results," Ivey said, "and we are increasing our full-year forecast based on additional gains at R.J. Reynolds and Conwood." R.J. Reynolds "Our year-to-date market-share results confirm the ongoing strength of R.J. Reynolds' brand-portfolio strategy," said Lynn J. Beasley, R.J. Reynolds' president and chief operating officer. "Our overall share decline continued to moderate during the first nine months of 2006, as accelerated investment- brand growth increasingly offset share declines on other brands." During the third quarter, R.J. Reynolds' two investment brands, Camel and Kool, continued to post strong share gains, with a combined increase of 1.07 share points. On a nine-month combined basis, the company's two investment brands were up 0.91 share points compared with the prior-year period. This investment-brand growth contributed to the continued moderation of R.J. Reynolds' overall share declines. The company's total retail market share for the nine-month period was 29.87 percent, down 0.35 points. Beasley said that recent disruptions in the shipment of some R.J. Reynolds brand styles has not materially affected the company's share of market or shipment volume. R.J. Reynolds' nine-month adjusted operating income was up 8.2 percent at $1,412 million. However, the company's third-quarter adjusted operating income of $455 million was down 5.4 percent. Two factors contributing to this decline were spending to combat state ballot initiatives and an 8 percent volume decline that was partially driven by trade-inventory movements. During the first half, the trade increased its wholesale inventory of R.J. Reynolds' brands by about 1 billion units in anticipation of the July 4th holiday and the company's implementation of an SAP systems platform. This first-half volume imbalance affects second-half performance in two ways. First, it decreases second-half sales. Second, it boosts second-half costs, since manufacturers' discounting is not applied until product is shipped to retail. So discounts are being paid in the second half for volume that was sold earlier in the year. "We expected trade-inventory levels to return to normal in the third quarter," Beasley said, "but half of the excess inventory remained at the end of the quarter. As a result, our year-to-date volume is down 2.8 percent. We now expect inventory levels to return to normal in the fourth quarter. That should result in a full-year decline of 4 percent in shipment volume. "In addition," she said, "there were some third-quarter favorabilities in the timing of marketing expenses, which will decrease fourth-quarter margins. "Looking beyond the quarterly fluctuations, our performance continues to propel us toward strong full-year results," Beasley said. "We are delivering productivity gains ahead of schedule, our year-to-date profits are up and it's increasingly clear that our brand strategy is producing solid results." Conwood Conwood continued to deliver strong growth for the third quarter and the first nine months. The company's accelerated performance helped drive today's increase in RAI's full-year forecast. To enhance understanding of Conwood's underlying performance, RAI is providing adjusted pro-forma results, computed as if Conwood had been owned by RAI since the beginning of 2005. On this basis, Conwood again delivered strong gains in volume, share and operating income for both the third quarter and the first nine months of 2006, compared with the same periods in 2005. Conwood's third-quarter pro-forma adjusted operating income rose 7.4 percent to $73 million. For the nine-month period, pro-forma adjusted operating income climbed 13.3 percent to $213 million. Nine-month margins of 58.7 percent are up 1.6 percentage points from the prior-year period. During the quarter and year-to-date, Conwood continued to show its strength as the growth leader in the moist-snuff category. Conwood's nine- month moist-snuff share of shipments was 25.4 percent, up 2.8 points from the prior-year period. Driving Conwood's performance is Grizzly, a price-value brand that now commands 20 percent of the moist-snuff market. Grizzly continued to display strong growth, with a 3.7 share-point gain for the first nine months compared with the same period of 2005. Conwood, the nation's second-largest smokeless tobacco company, is the only company that competes in all five smokeless tobacco categories. Conwood holds the No. 1 or No. 2 position in every category, and it has more than doubled its total share of the moist-snuff market in the past six years. FULL YEAR FORECAST "Based on additional strength from our largest operating units, we are increasing Reynolds American's full-year forecast. We now expect to report EPS of $4.20 to $4.30, on a post-split basis. That forecast anticipates a soft fourth quarter, which will balance prior quarterly distortions," said Dianne M. Neal, RAI's chief financial officer. Neal noted that Conwood will be more accretive to earnings in 2006 than previously forecasted, as Conwood's operating profit contributions will more than offset acquisition financing expenses. She said that the revised reported EPS estimate includes the pre-tax effect of approximately: * $260 million in incremental merger-related synergies and productivity initiatives; * $50 million in acquisition and merger-related costs; and * $40 million that R.J. Reynolds is investing to combat state ballot initiatives on cigarette excise tax increases and smoking restrictions. It also includes a $74 million extraordinary gain in the first half resulting from the favorable resolution of prior years' tax matters. Neal said that the company's full-year forecast does not include: * Any expense that will result from the fair-value allocation of Conwood's purchase price; or * Any potential impact of the annual assessment of intangible asset valuations. Neal said that RAI expects to end the year with a strong balance sheet, with cash and short-term investments of about $2.3 billion, and debt of about $4.7 billion. She noted that the year-end cash forecast does not include $100 million of cash collateral for the appellate bond in the Engle class-action lawsuit because, "It is still difficult to accurately predict when these funds will be returned." CONFERENCE CALL WEBCAST TODAY Reynolds American will webcast a conference call to discuss third-quarter 2006 results at 9:30 a.m. Eastern Time on Wednesday, Oct. 25, 2006. The call will be available live online on a listen-only basis. To register for the call, please visit the "Investors" section of http://www.reynoldsamerican.com/. A replay of the call will be available on the site for 30 days. 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 Seth Moskowitz at (336) 741-7698. RISK FACTORS Statements included in this news 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. Forward-looking statements regarding RAI's future performance and financial results inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include: * the substantial and increasing regulation and taxation of tobacco products; * various legal actions, proceedings and claims relating to the sale, distribution, manufacture, development, advertising, marketing and claimed health effects of tobacco products that are pending or may be instituted against RAI or its subsidiaries; * the substantial payment obligations and limitations on the advertising and marketing of cigarettes under the MSA and other state settlement agreements; * the continuing decline in volume in the domestic cigarette industry; * concentration of a material amount of sales with a single customer or distributor; * competition from other manufacturers, including any new entrants in the marketplace; * increased promotional activities by competitors and the growth of deep- discount cigarette brands; * the success or failure of new product innovations and acquisitions; * the responsiveness of both the trade and consumers to new products, marketing strategies and promotional programs; * the failure to realize the anticipated benefits arising from the Conwood acquisition; * 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, including future market pricing of tobacco leaf, which could adversely impact inventory valuations; * the effect of market conditions on foreign currency exchange-rate risk, interest-rate risk and the return on corporate cash; * the effect of market conditions on the performance of pension assets or any adverse effects of any new legislation or regulations changing pension expense accounting or required pension funding levels; * the rating of RAI's and RJR's securities; * any restrictive covenants imposed under RAI's and RJR's debt agreements; * the possibility of fire, violent weather and other disasters that may adversely affect the manufacturing facilities; * any adverse effects from the transition of the packaging operations formerly conducted by RJR Packaging, LLC, a wholly owned subsidiary of RJR Tobacco, to the buyers of RJR Packaging, LLC's businesses and the recent shortage of packaging materials causing incomplete deliveries to RJR Tobacco's customers of certain brand styles; * any adverse effects arising out of the implementation of an SAP enterprise business system in the third quarter of 2006; and * the potential existence of significant deficiencies or material weaknesses in internal control over financial reporting that may be identified during the performance of testing required under Section 404 of the Sarbanes-Oxley Act of 2002. Due to these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news 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; Conwood Company, LLC; Santa Fe Natural Tobacco Company, Inc.; Lane, Limited; and R.J. Reynolds Global Products, Inc. * R.J. Reynolds Tobacco Company, the second-largest U.S. tobacco company, manufactures about one of every three cigarettes sold in the country. The company's brands include five of the 10 best-selling U.S. brands: Camel, Kool, Winston, Salem and Doral. * Conwood Company, LLC is the nation's second-largest manufacturer of smokeless tobacco products. Its leading brands are Kodiak, Grizzly and Levi Garrett. * Santa Fe Natural Tobacco Company, Inc. manufactures Natural American Spirit cigarettes and other tobacco products for U.S. and international markets. * Lane, Limited manufactures several roll-your-own, pipe tobacco and little cigar brands, and distributes Dunhill tobacco products. * R.J. Reynolds Global Products, Inc. manufactures, sells and distributes American-blend cigarettes and other tobacco products to a variety of customers worldwide. Copies of RAI's news releases, annual reports, SEC filings and other financial materials are available at http://www.reynoldsamerican.com/. (financial and volume tables follow) Schedule 1 REYNOLDS AMERICAN INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME-GAAP (Dollars in Millions, Except Per Share Amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 Net sales, external $2,071 $2,024 $6,056 $5,827 Net sales, related party 119 125 385 382 Net sales 2,190 2,149 6,441 6,209 Cost of products sold 1,202 1,384 3,643 3,736 Selling, general and administrative expenses 437 399 1,171 1,175 Amortization expense 7 9 21 33 Loss on sale of assets - - - 25 Restructuring adjustments - - - (1) Operating income 544 357 1,606 1,241 Interest and debt expense 92 31 179 81 Interest income (34) (23) (93) (53) Other (income) expense, net (3) 7 (6) 14 Income from continuing operations before income taxes 489 342 1,526 1,199 Provision for income taxes 180 129 570 454 Income from continuing operations 309 213 956 745 Extraordinary item - gain on acquisition (1) - - 74 - Net income $309 $213 $1,030 $745 Basic income per share: Income from continuing operations $1.05 $0.72 $3.24 $2.53 Extraordinary item (1) - - 0.25 - Net income $1.05 $0.72 $3.49 $2.53 Diluted income per share: Income from continuing operations $1.05 $0.72 $3.24 $2.52 Extraordinary item (1) - - 0.25 - Net income $1.05 $0.72 $3.49 $2.52 Basic weighted average shares, in thousands 295,058 294,793 295,014 294,775 Diluted weighted average shares, in thousands 295,420 295,169 295,355 295,162 Segment data: Net sales: RJR Tobacco $1,932 $2,011 $5,862 $5,778 Conwood 122 - 164 - All Other 136 138 415 431 $2,190 $2,149 $6,441 $6,209 Operating income: RJR Tobacco $439 $318 $1,393 $1,163 Conwood 70 - 97 - All Other 47 48 144 103 Corporate Expense (12) (9) (28) (25) $544 $357 $1,606 $1,241 (1) Includes adjustments to the 2000 extraordinary gain on acquisition, resulting from favorable resolution of prior-years' tax matters. Schedule 2 REYNOLDS AMERICAN INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Millions) (Unaudited) On a preliminary basis, the $3.5 billion cost of the acquisition of Conwood has been allocated on the basis of historical net book value of assets acquired and liabilities assumed as of the acquisition date. The excess purchase price over the net book value was included in goodwill. The fair values of acquired tangible and intangible assets have not yet been finalized. The allocation of purchase price to the fair value of assets acquired and liabilities assumed is expected to reduce goodwill in the fourth quarter of 2006. September 30, December 31, 2006 2005 Assets Cash and cash equivalents $1,128 $1,333 Short-term investments 1,403 1,373 Other current assets 2,274 2,359 Trademarks, net 2,179 2,188 Goodwill 9,073 5,672 Other noncurrent assets 1,607 1,594 $17,664 $14,519 Liabilities and shareholders' equity Tobacco settlement and related accruals $2,119 $2,254 Current maturities of long-term debt 344 190 Accrued liabilities and other current liabilities 1,818 1,705 Long-term debt (less current maturities) 4,394 1,558 Long-term deferred income taxes 672 639 Long-term retirement benefits 1,075 1,374 Other noncurrent liabilities 243 246 Shareholders' equity 6,999 6,553 $17,664 $14,519 Schedule 3 REYNOLDS AMERICAN INC. Reconciliation of GAAP to Adjusted Results Results include the acquired operations of Conwood since May 31, 2006. The fair values of acquired assets and liabilities assumed have not yet been finalized. 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 September 30, 2006 2005 Operating Net Diluted Operating Net Diluted Income Income EPS Income Income EPS GAAP results $544 $309 $1.05 $357 $213 $0.72 The GAAP results include the following expense (income): Federal tobacco buyout assessment - - - 74 48 0.16 Phase II growers' trust related expenses - - - 53 34 0.12 Merger/integration costs 23 14 0.04 36 23 0.08 Total adjustments 23 14 0.04 163 105 0.36 Adjusted results $567 $323 $1.09 $520 $318 $1.08 Nine Months Ended September 30, 2006 2005 Operating Net Diluted Operating Net Diluted Income Income EPS Income Income EPS GAAP results $1,606 $1,030 $3.49 $1,241 $745 $2.52 The GAAP results include the following expense (income): Federal tobacco buyout assessment (9) (6) (0.02) 81 51 0.17 Phase II growers' trust offset - - - (79) (49) (0.17) Phase II growers' trust related expenses - - - 53 34 0.12 Merger/integration costs 35 22 0.07 88 56 0.19 Restructuring charges (adjustments) - - - (1) (1) - Loss on sale of assets - - - 25 16 0.06 Extraordinary gain on acquisition - (74) (0.25) - - - Total adjustments 26 (58) (0.20) 167 107 0.37 Adjusted results $1,632 $972 3.29 $1,408 $852 $2.89 Schedule 4 REYNOLDS AMERICAN INC. Reconciliation of GAAP to Proforma Adjusted Operating Income by Segment R.J. Reynolds is the second largest cigarette manufacturer in the United States and manages a contract manufacturing business. Conwood is the second largest smokeless tobacco products manufacturer in the United States. Conwood's GAAP operating income includes the operations acquired by RAI since May 31, 2006. Proforma operating income includes Conwood's pre- acquisition operating income. The fair values of acquired assets and liabilities assumed have not yet been finalized, and therefore, no resulting proforma adjustments have been made in the proforma adjusted operating income. 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 September 30, 2006 2005 R.J. R.J. Reynolds Conwood Reynolds Conwood GAAP operating income $439 $70 $318 $- The GAAP results include the following expense (income): Federal tobacco buyout assessment - - 74 - Phase II growers' trust related expenses - - 53 - Merger/integration costs 16 3 36 - Total adjustments 16 3 163 - Adjusted operating income $455 $73 $481 - Conwood pre-acquisition GAAP operating income 68 Proforma adjusted operating income $68 Nine Months Ended September 30, 2006 2005 R.J. R.J. Reynolds Conwood Reynolds Conwood GAAP operating income $1,393 $97 $1,163 $- The GAAP results include the following expense (income): Federal tobacco buyout assessment (9) - 81 - Phase II growers' trust offset - - (79) - Phase II growers' trust related expenses 53 Merger/integration costs 28 3 88 - Restructuring charges (adjustments) - - (1) - Total adjustments 19 3 142 - Adjusted operating results $1,412 100 $1,305 - Conwood pre-acquisition GAAP operating income 113 188 Proforma adjusted operating income $213 $188 Schedule 5 REYNOLDS AMERICAN INC. / INDUSTRY VOLUMES (Volume in Billion Units) Three Months Ended Sep 30, Change 2006 2005 UNITS % CAMEL (Filter Styles) 6.1 6.0 0.1 2.2% KOOL 2.9 3.0 -0.1 -4.7% TOTAL INVESTMENT BRANDS 9.0 9.0 0.0 -0.1% TOTAL SELECTIVE SUPPORT BRANDS 10.9 11.8 -0.9 -7.7% TOTAL NON-SUPPORT BRANDS 6.2 7.5 -1.3 -17.2% TOTAL RJRT DOMESTIC 26.0 28.2 -2.2 -7.8% OTHER RAI COMPANIES 0.7 0.6 0.1 9.2% TOTAL RAI 26.7 28.8 -2.1 -7.4% TOTAL RJRT 26.0 28.2 -2.2 -7.8% TOTAL FP 16.1 17.0 -0.9 -5.3% TOTAL SAVINGS 9.9 11.2 -1.3 -11.6% FP/TOTAL MIX 62.1% 60.4% 1.6% INDUSTRY 96.0 99.3 -3.3 -3.3% FULL PRICE 69.9 70.4 -0.5 -0.7% SAVINGS 26.1 28.8 -2.8 -9.6% FP/TOTAL MIX 72.9% 71.0% 1.9% Amounts are rounded on an individual basis and, accordingly, may not sum in the aggregate. Other RAI Companies include U.S. volume for Lane Limited and Santa Fe Natural Tobacco Co., as well as volume for Puerto Rico and other U.S. territories. Industry data based on information from Management Science Associates, Inc. Schedule 5 REYNOLDS AMERICAN INC. / INDUSTRY VOLUMES (Volume in Billion Units) Nine Months Ended Sep 30, Change 2006 2005 UNITS % CAMEL (Filter Styles) 17.7 16.3 1.4 8.5% KOOL 8.8 8.7 0.1 0.9% TOTAL INVESTMENT BRANDS 26.5 25.0 1.5 5.9% TOTAL SELECTIVE SUPPORT BRANDS 32.8 33.9 -1.1 -3.3% TOTAL NON-SUPPORT BRANDS 19.2 21.8 -2.6 -12.0% TOTAL RJRT DOMESTIC 78.5 80.7 -2.3 -2.8% OTHER RAI COMPANIES 2.0 1.8 0.1 5.9% TOTAL RAI 80.4 82.6 -2.1 -2.6% TOTAL RJRT 78.5 80.7 -2.3 -2.8% TOTAL FP 48.2 48.6 -0.4 -0.9% TOTAL SAVINGS 30.3 32.1 -1.8 -5.7% FP/TOTAL MIX 61.4% 60.2% 1.2% INDUSTRY 280.6 287.2 -6.6 -2.3% FULL PRICE 203.5 204.6 -1.1 -0.6% SAVINGS 77.2 82.6 -5.4 -6.5% FP/TOTAL MIX 72.5% 71.3% 1.3% Amounts are rounded on an individual basis and, accordingly, may not sum in the aggregate. Other RAI Companies include U.S. volume for Lane Limited and Santa Fe Natural Tobacco Co., as well as volume for Puerto Rico and other U.S. territories. Industry data based on information from Management Science Associates, Inc. Schedule 6 R.J. REYNOLDS - RETAIL SHARE OF MARKET Three Months Ended Nine Months Ended Sep 30, Sep 30, 2006 2005 Change 2006 2005 Change CAMEL (Filter Styles) 7.55% 6.58% 0.97 7.37% 6.60% 0.77 KOOL 3.14% 3.04% 0.10 3.11% 2.97% 0.14 TOTAL INVESTMENT BRANDS 10.69% 9.62% 1.07 10.49% 9.58% 0.91 TOTAL SELECTIVE SUPPORT BRANDS 12.10% 12.34% (0.24) 12.09% 12.54% (0.44) TOTAL NON-SUPPORT BRANDS 7.01% 8.02% (1.01) 7.28% 8.11% (0.82) TOTAL RJRT DOMESTIC 29.80% 29.98% (0.18) 29.87% 30.22% (0.35) Amounts are rounded on an individual basis and, accordingly, may not sum in the aggregate. Retail shares of market are as reported by Information Resources Inc. Schedule 7 CONWOOD VOLUMES AND SHARE OF MARKET (Volume in Millions of Cans) Three Months Nine Months Ended Ended UNIT VOLUME September 30, Change September 30, Change 2006 2005 Units % 2006 2005 Units % KODIAK 13.9 15.3 (1.4) -9.4% 42.6 45.5 (2.9) -6.4% Other premium 0.9 1.0 (0.1) -7.4% 2.7 2.8 (0.1) -3.3% Total premium 14.8 16.3 (1.5) -9.3% 45.2 48.2 (3.0) -6.2% GRIZZLY 52.0 42.4 9.6 22.5% 147.2 113.8 33.4 29.4% Other price-value 0.8 1.0 (0.3) -25.5% 2.4 3.3 (0.9) -26.7% Total price-value 52.7 43.4 9.3 21.4% 149.6 117.1 32.6 27.8% Total moist snuff cans 67.5 59.7 7.8 13.0% 194.9 165.3 29.6 17.9% Volumes reported include pre-acquisition amounts. Amounts are rounded on an individual basis and, accordingly, may not sum in the aggregate. Three Months Nine Months Ended Ended MARKET SHARE September 30, September 30, 2006 2005 Change 2006 2005 Change Kodiak 5.17% 5.61% (0.44) 5.28% 6.03% (0.75) Total premium 5.51% 5.99% (0.48) 5.63% 6.42% (0.79) Grizzly 20.22% 16.62% 3.60 19.42% 15.72% 3.70 Total price-value 20.50% 17.00% 3.50 19.72% 16.15% 3.57 Total company 26.01% 22.99% 3.02 25.35% 22.57% 2.78 Share data for total moist snuff based on distributor reported data processed by Management Science Associates, Inc. DATASOURCE: Reynolds American Inc. CONTACT: Investor Relations, Ken Whitehurst, +1-336-741-0951, or Media, Seth Moskowitz, +1-336-741-7698, both for Reynolds American Inc. Web site: http://www.rjrt.com/

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