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Actionable news in RAI: REYNOLDS AMERICAN Inc,

Reynolds American: Winston-Salem, N.C. April 26, 2016

The following excerpt is from the company's SEC filing.

Fourth Quarter 2016 At a Glance

Reported EPS: First quarter at $2.49, up 591.7 percent from prior-year quarter

Adjusted EPS: First quarter at $0.50, up 16.3 percent from prior-year quarter

Excludes a gain on divestiture related to the sale of Natural American Spirits business outside the U.S., and charges for debt and financing costs, and implementation costs, and other special items*

RAI reaffirms 2016 guidance: Adjusted EPS range of $2.25 to $2.35, up 13.6 percent to 18.7 percent from 2015

Excludes the above-mentioned items

Other quarterly highlights

Completed sale of Natural American Spirits business outside the U.S.

Completed debt tender offer and redemption for early debt repayment

Increased quarterly dividend 16.7 percent

Created RAI Innovations Company

Newport manufacturing integration on track for early completion by mid-2016

RAI CEO Cameron to remain with company to complete Lorillard integration and succession planning

* Special items are detailed in Schedule 2 and include 2015 charges for the 2003 NPM Adjustment, transaction-related costs for the Lorillard, Inc. (Lorillard) acquisition and related divestiture,

Engle

progeny lawsuits and tobacco-related and other litigation.

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.

Reynolds American Inc. (NYSE: RAI) today announced first-quarter 2016 reported EPS of $2.49, up 591.7 percent from the prior-year quarter, driven primarily by the gain on divestiture related to the sale of Natural American Spirits business outside the U.S., as well as higher pricing and volumes on both cigarettes and moist snuff.

Adjusted first-quarter EPS was $0.50, up 16.3 percent. Adjusted results exclude the gain on divestiture and charges for debt and financing costs, and implementation costs. A reconciliation of reported to adjusted results is detailed in Schedule 2.

RAI reaffirmed 2016 adjusted EPS guidance in a range of $2.25 to $2.35, up 13.6 percent to 18.7 percent from the companys 2015 adjusted EPS of $1.98. This excludes the above-referenced items.

First Quarter 2016 Financial Results Highlights*

(unaudited)

(all dollars in millions, except per-share amounts;

for reconciliations, including GAAP to non-GAAP, see Schedules 2 and 3)

For the Three Months

Ended March 31

Change

Net sales

Operating income

Reported (GAAP)

Adjusted (Non-GAAP)

Net income

Net income per diluted share

* The financial results reflect the Lorillard acquisition and related divestiture that occurred on June 12, 2015, as well as Natural American Spirits business outside the U.S. until its sale on Jan. 13, 2016.

MANAGEMENTS PERSPECTIVE

Overview

Reynolds Americans operating companies began the year with strong momentum out of the gate, driving additional growth in RAIs profitability, said Susan M. Cameron, president and chief executive officer of RAI. All of our operating companies demonstrated excellent performance, benefiting from increased volumes and higher pricing on both cigarettes and moist snuff.

Im very pleased to report that Newports manufacturing integration is progressing smoothly and is now expected to be completed by the middle of this year, well ahead of the initial projection for the end of 2016, Cameron said. Newport has delivered impressive market-share gains during this successful transition, and the brand has been a driving force behind our accelerated business performance over the past three quarters.

The addition of Newport has given our businesses new energy in a competitive and dynamic environment, Cameron said. As a result, RAI remains on track for earnings growth of 13.6 percent to 18.7 percent for the full year, and we are committed to finding new opportunities for returning value to our shareholders.

Cameron also said that she has agreed to remain with RAI to see through the full integration of the Newport brand into R.J. Reynolds Tobacco Company later this year, and complete the succession planning process that we have underway. Camerons original agreement to return to RAI as president and CEO in 2014 was scheduled to end April 30, but included the ability to be extended.

Other highlights in the quarter included:

RAIs completion of the sale of Natural American Spirits business outside the U.S.;

RAIs tender offer and redemption for the early repayment of a portion of outstanding debt;

A 16.7 percent increase in RAIs quarterly dividend; and,

RAIs creation of RAI Innovations Company to drive speed-to-market of leading-edge products.

Cameron said that R.J. Reynolds Vapor Companys VUSE Digital Vapor Cigarette continued to make headway in the first quarter, and remains the leader in the emerging vapor category.

RAIs operating companies cigarette and moist-snuff retail market shares, using shipments to retail data administered by Management Science Associates, Inc. (MSAi), have been revised to reflect the new universe of direct customers following last years acquisition of Lorillard. This revision results in slightly higher absolute share levels in 2015 on some of RAIs operating companies brands, but does not affect overall share trends. Prior-year market share data has been restated on this basis for comparison purposes.

COMBUSTIBLES

Total RAI operating companies cigarette volumes increased 34.2 percent in the first quarter, largely driven by the addition of the Newport brand. Industry cigarette volume increased 0.4 percent in the quarter, but when adjusted for wholesale inventory changes, industry shipments were approximately flat.

In the first quarter, total RAI operating companies retail cigarette market share increased 0.3 percentage points to 34.6 percent.

Total retail cigarette market share in RAI operating companies drive brands (Newport, Camel, Pall Mall and Natural American Spirit) increased 0.5 percentage points to 32.0 percent in the first quarter. These brands now make up about 93 percent of RAI operating companies total cigarette retail market share.

RJR Tobacco

RJR Tobaccos reported first-quarter operating income increased 88.3 percent from the prior-year quarter, to $1.11 billion, benefiting from the addition of the Newport brand and higher cigarette volumes and pricing.

Adjusted first-quarter operating income was $1.12 billion, up 73.8 percent. Adjusted results exclude charges for

progeny lawsuits and implementation costs.

Adjusted first-quarter operating margin increased 6.4 percentage points from the prior-year quarter, to 46.5 percent, reflecting RJR Tobaccos improved mix of premium cigarette volume, which increased 12.0 percentage points to 70.6 percent.

RJR Tobaccos first-quarter cigarette shipments increased 35.1 percent from the prior-year quarter, driven by the addition of Newport.

First-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 32.5 percent.

The combined first-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 30.0 percent.

Newport, the nations No. 1 menthol brand, again demonstrated strong momentum, benefiting from an improved presence at retail stores and increased engagement with adult tobacco consumers. The brands first-quarter retail market share increased by 0.6 percentage points from the prior-year quarter, to 14.0 percent.

Camels first-quarter cigarette retail market share was down 0.2 percentage points from the prior-year quarter, at 8.2 percent, but was up 0.1 percentage point when compared with the fourth quarter of last year. Pall Malls share was down 0.3 percentage points from the prior-year quarter, at 7.8 percent, but has remained relatively stable for the past four quarters.

Santa Fe

Santa Fe posted another strong performance, increasing first-quarter operating income by 33.2 percent to $123 million as the company benefited from higher pricing and volumes.

Santa Fes first-quarter operating margin increased 2.5 percentage points from the prior-year quarter, to 56.4 percent.

Natural American Spirit, the nations No. 1 super-premium brand, continued to attract positive adult consumer interest in markets across the nation. The brand gained 0.3 percentage points of retail market share from the prior-year quarter, to 2.0 percent, on volume growth of 22.1 percent.

MOIST SNUFF

American Snuff

American Snuff also benefited from higher pricing and volumes in the first quarter, growing operating income by 11.9 percent to $133 million, and operating margin by 2.4 percentage points to 61.3 percent.

American Snuffs first-quarter moist-snuff retail market share increased 0.2 percentage points to 33.4 percent, on volume growth of 3.3 percent, compared to industry growth of about 5 percent. Industry growth was positively impacted by the national expansion of competitive line extensions in the category during the quarter.

The companys flagship Grizzly brand continued to make solid gains, especially in fast growing wintergreen and pouch styles. The brand increased first-quarter retail market share by 0.4 percentage points from the prior-year quarter, to 30.8 percent, on volume growth of 3.9 percent.

FINANCIAL UPDATE

Reynolds Americans first-quarter reported EPS of $2.49 increased 591.7 percent from the prior-year quarter, driven primarily by the gain on divestiture related to the sale of Natural American Spirits business outside the U.S.

First-quarter adjusted EPS was $0.50, up 16.3 percent, benefitting from the addition of Newport and higher cigarette and moist-snuff pricing and volume. Adjusted EPS excludes a $2.11 gain on divestiture and charges of $0.12 for debt and financing costs, and implementation costs.

RAIs first-quarter adjusted operating margin increased 8.0 percentage points from the prior-year quarter, to 45.2 percent.

During the quarter, the company announced 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.

RAI also completed a cash tender offer and redemption of about $3.6 billion for certain of its outstanding notes, allowing the company to continue to reduce its level of outstanding debt. RAIs long-term debt was $13.2 billion at the end of the first quarter, with an average interest rate of 4.9 percent and an average maturity of 12.6 years.

RAI ended the quarter with cash balances of $4.4 billion. On April 15, R.J. Reynolds made its MSA payment of $2.3 billion, including $597 million paid into the NPM disputed payments account.

Im very pleased with our successful start to the year, and as a result, RAI has reaffirmed 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, said Andrew Gilchrist, RAIs chief financial officer.

This adjusted EPS guidance excludes the previously referenced items.

CONFERENCE CALL WEBCAST TODAY

Reynolds American will webcast a conference call to discuss first-quarter 2016 results at 9:00 a.m. Eastern Time on April 26, 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

to receive alerts when news about the company has been posted, and to follow RAI on Twitter at

RISK FACTORS

Statements included in this report 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 document and in documents incorporated by reference, forward-looking statements include, without limitation, statements regarding financial forecasts or projections, and RAI and its subsidiaries expectations, beliefs, intentions or future strategies that are 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:

the effect of unfavorable litigation relating to the sale, distribution, manufacture, development, advertising, marketing and claimed health effects of tobacco products (including smokeless tobacco products and electronic cigarettes) that is pending or may be instituted against RAI or its subsidiaries, including, the

Progeny cases;

the effect of adverse governmental developments on RAIs subsidiaries sales of products that contain menthol, including the possibility that the U.S. Food and Drug Administration (FDA) will issue regulations prohibiting menthol, or restricting the use of menthol, in cigarettes;

the adverse effects (including damage to RAIs reputation, recall costs and decreased sales) arising from an order of the Center for Tobacco Products established within the FDA (CTP) (1) finding that a provisional product sold by an RAI subsidiary is not substantially equivalent to a predicate product, and (2) as a result, requiring that the provisional product be removed from the market;

the possibility that the CTP fails to grant a marketing order allowing an RAI subsidiary to launch a new tobacco product or modify an existing product;

the adverse effects arising out of (1) the FDAs issuance of a warning letter to Santa Fe Natural Tobacco Company, Inc. regarding the companys use of the terms natural and additive free in the product labeling and advertising for Natural American Spirit cigarettes without a modified risk product authorization order from the agency, or (2) other FDA actions related to product labeling and advertising, in each case potentially resulting in damage to RAIs reputation, fines and related costs and decreased sales;

the possibility that the FDA will issue regulations further controlling constituents in cigarettes, including requiring the reduction of nicotine levels or the reduction or elimination of other constituents, or extend its control and authority over tobacco products to e-cigarettes, subjecting e-cigarettes to restrictions on, among other things, the manufacturing, marketing and sale of such products;

the substantial payment obligations based on cigarette sales, coupled with the substantial limitations on the sale, advertising and marketing of cigarettes (and of RJR Tobaccos smoke-free tobacco products) under the State Settlement Agreements and the possibility that NPM Adjustment awards could be vacated or otherwise modified;

the continued decline in U.S. cigarette consumption or the possible transition of consumers away from premium brands to lower-cost brands, considering RAIs and its subsidiaries dependence on the U.S. cigarette industry and premium and super-premium cigarette brands;

the success or failure of new products (including vapor category product offerings and other non-traditional tobacco products), marketing strategies and promotional programs;

competitive actions and pricing pressures from other manufacturers, including manufacturers of deep-discount cigarette brands;

significant current and anticipated federal, state and local governmental regulation of tobacco products, including limitations on advertising, sale and use of tobacco products;

substantial and increasing taxation of tobacco products;

fluctuations in the availability, quality and price of raw materials and commodities, including tobacco leaf, used in the products of RAIs subsidiaries;

the reliance on a few significant manufacturing facilities and single source suppliers for certain key raw materials;

the reliance of RJR Tobacco on ITG to manufacture Newport on RJR Tobaccos behalf for a period of time after the acquisition of Lorillard (Merger) and the related divestiture;

the possible impairment of goodwill and other intangible assets, including trademarks;

the effect of market conditions on the investment returns earned on pension assets or any adverse effects of any new legislation or regulations changing pension and postretirement benefits accounting or required pension funding levels;

the concentration of a material amount of sales with a limited number of customers and potential loss of these customers;

security breaches or disruptions in critical information technology systems, many of which are managed by third party service providers;

the impact of the health and social issues associated with the tobacco industry on attracting and retaining qualified professionals;

the inability to adequately protect intellectual property rights;

indemnification obligations for specified matters and retention of certain liabilities related to assets transferred in transactions with ITG and JT International Holdings BV;

the success or failure of acquisitions or dispositions, which RAI or its subsidiaries may engage in from time to time;

the effect of market conditions on interest rate risk and the return on corporate cash, or adverse changes in liquidity in the financial markets;

the substantial amount of RAI and RJR Tobacco debt, including the additional debt assumed and incurred in connection with the Merger, and failure to comply with debt covenants;

the impact of a potential decrease in RAIs credit ratings on RAIs ability to access the debt capital markets and on RAIs borrowing costs;

the possibility of changes in RAIs historical dividend policy;

the significant collective ownership interest in RAI of British American Tobacco p.l.c. (BAT) and its subsidiaries, and their associated rights under the governance agreement, which if terminated, in whole or in part, in accordance with its terms, could eliminate the board composition and share transfer restrictions placed on BAT and its subsidiaries; and

the absence of significant anti-takeover measures, following the expiration of the standstill provision in the governance agreement and the RAI shareholder rights plan, together with the effects of a possible declassification of the board of directors.

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 is a marketer of digital vapor cigarettes, manufactured on its behalf by R.J. Reynolds, under the VUSE brand name in the United States.

Copies of RAIs news releases, annual reports, SEC filings and other financial materials, including risk factors containing forward-looking information, are available at

. To learn more about how Reynolds American and its operating companies are transforming the tobacco industry, visit

Transforming Tobacco

(financial and volume schedules follow)

Schedule 1

REYNOLDS AMERICAN INC.

Condensed Consolidated Statements of Income - GAAP

(Dollars in Millions, Except Per Share Amounts)

(Unaudited)

Three Months Ended

March 31,

2016

2015

Net sales, external

Net sales, related party

Cost of products sold

Selling, general and administrative expenses

Gain on divestiture

(4,861

Amortization expense

Interest and debt expense

Interest income

Other (income) expense, net

Income from continuing operations before income taxes

Provision for income taxes

Basic net income per share:

Net Income

Diluted net income per share:

Basic weighted average shares, in thousands

1,427,448

1,063,053

Diluted weighted average shares, in thousands

1,431,069

1,066,994

Segment data:

Net sales:

All Other

Operating income:

Gain on Divestiture

Corporate

Supplemental information:

Excise tax expense

Master Settlement Agreement and other state settlement expense

FDA fees

Reconciliation of GAAP to Adjusted Results

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 companys 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 March 31,

GAAP results

The GAAP results include the following:

(3,023

Debt and financing costs

Implementation costs

2003 NPM Adjustment Claim

Tobacco Related and Other Litigation

Transaction related costs

Total adjustments

(4,823

(2,844

Condensed Consolidated Balance Sheets

(Dollars in Millions)

Mar. 31,

Dec. 31,

Assets

Cash and cash equivalents

4,441

2,567

Other current assets

3,088

3,620

Trademarks and other intangible assets, net

29,461

29,467

Goodwill

15,993

Other noncurrent assets

1,425

1,485

54,408

53,132

Liabilities and shareholders equity

Tobacco settlement accruals

3,446

2,816

Other current liabilities

4,158

2,475

Long-term debt (less current maturities)

13,213

16,849

Deferred income taxes, net

10,285

10,236

Long-term retirement benefits (less current portion)

1,917

2,265

Other noncurrent liabilities

Shareholders equity

21,163

18,252

Schedule 3

Reconciliation of GAAP to Adjusted Operating Income by Segment

The RJR Tobacco 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 companys continuing operations is enhanced through the disclosure of these metrics.

RJR Tobacco

Santa Fe

American Snuff

GAAP operating income

Implementation costs

Total adjustments

Adjusted operating income

For the three months ended Mar 31, 2016, RAI and its operating companies recorded aggregate implementation cost adjustments of $25 million including $24 million in the corporate and all other segment.

For the three months ended Mar 31, 2015, RAI and its operating companies recorded aggregate transaction related cost adjustments of $15 million which are included in corporate costs.

Schedule 4

RAI OPERATING COMPANIES U.S. CIGARETTE VOLUMES AND RETAIL SHARE OF MARKET

VOLUME (in billions):

Total RJR Tobacco drive brands

Total RJR Tobacco:

Total premium

Total value

Premium/total mix

RETAIL SHARE OF MARKET*:

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 Fes 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.

The universe of industry participants that MSAi uses to estimate RJR Tobaccos and Santa Fes cigarette shipments to retail market shares has been revised to reflect the new universe of direct customers as a result of the Merger. The revision results in higher absolute share levels in 2015 on some of RJR Tobaccos and Santa Fes brands, but does not affect overall share trends. Prior-year market share data has been restated on this basis for comparison purposes.

Schedule 5

AMERICAN SNUFF MOIST-SNUFF VOLUMES

AND RETAIL SHARE OF MARKET

VOLUME (in millions of cans):

Units

Total moist snuff cans

Total retail share of market

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 Snuffs 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 its brands may overstate or understate their actual market share.

The universe of industry participants that MSAi uses to estimate American Snuffs moist snuff shipments to retail market shares has been revised to reflect the new universe of direct customers as a result of the Merger. The revision results in higher absolute share levels in 2015 on some of American Snuffs brands, but does not affect overall share trends. Prior-year market share data has been restated on this basis for comparison purposes.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

Quarterly report [Sections 13 or 15(d)] - April 26, 2016
Reynolds American Inc director was just granted 640 restricted shares - April 4, 2016
Reynolds American Inc director was just granted 197 restricted shares - April 4, 2016
Reynolds American Inc director was just granted 197 restricted shares - April 4, 2016