Reynolds American (RAI) 10-K 19 Feb 10 2009 FY Annual report Financial data

Document and Company Informatio

Document and Company Information (USD $)
In Billions, except Share data	12 Months Ended Dec. 31, 2009	Jan. 29, 2010	Jun. 30, 2009
Document and Company Information [Abstract]
Entity Registrant Name	REYNOLDS AMERICAN INC
Entity Central Index Key	0001275283
Document Type	10-K
Document Period End Date	2009-12-31
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			6.5
Entity Common Stock, Shares Outstanding		291,441,336

Consolidated Statements of Inco

Consolidated Statements of Income (USD $)
In Millions, except Per Share data	12 Months Ended Dec. 31, 2009		12 Months Ended Dec. 31, 2008		12 Months Ended Dec. 31, 2007
Statements of Income [Abstract]
Net sales(1)	$8,015	[1]	$8,377	[1]	$8,516	[1]
Net sales, related party	404		468		507
Net sales	8,419		8,845		9,023
Costs and expenses:
Cost of products sold(1)(2)(3)	4,485	[1],[2],[3]	4,863	[1],[2],[3]	4,960	[1],[2],[3]
Selling, general and administrative expenses	1,508		1,500		1,687
Amortization expense	28		22		23
Restructuring charge	56		90		0
Trademark impairment charges	567		318		65
Operating income	1,775		2,052		2,288
Interest and debt expense	251		275		338
Interest income	(19)		(60)		(134)
Gain on termination of joint venture	0		(328)		0
Other expense, net	9		37		11
Income before income taxes and extraordinary item	1,534		2,128		2,073
Provision for income taxes	572		790		766
Income before extraordinary item	962		1,338		1,307
Extraordinary item - gain on acquisition	0		0		1
Net income	$962		$1,338		$1,308
Basic income per share:
Income before extraordinary item	3.3		4.56		4.43
Extraordinary item	$0		$0		$0
Net income	3.3		4.56		4.43
Diluted income per share:
Income before extraordinary item	3.3		4.56		4.43
Extraordinary item	$0		$0		$0
Net income	3.3		4.56		4.43
Dividends declared per share	3.45		3.4		3.2
[1]Excludes excise taxes of $3,927 million, $1,890 million and $2,026 million for the years ended December 31, 2009, 2008 and 2007, respectively.
[2]Includes federal tobacco quota buyout expenses of $240 million, $249 million and $255 million for the years ended December 31, 2009, 2008 and 2007, respectively.
[3]Includes Master Settlement Agreement, referred to as MSA, and other state settlement agreements with the states of Mississippi, Florida, Texas and Minnesota, together with the MSA collectively referred to as the State Settlement Agreements, expense of $2,540 million, $2,703 million and $2,821 million for the years ended December 31, 2009, 2008 and 2007, respectively.

1_Consolidated Statements of In

Consolidated Statements of Income (Parenthetical) (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
Costs and expenses:
Excise taxes	$3,927	$1,890	$2,026
State Settlement Agreements expense	2,540	2,703	2,821
Federal tobacco quota buyout expenses	$240	$249	$255

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
Cash flows from (used in) operating activities:
Net income	$962	$1,338	$1,308
Adjustments to reconcile to net cash flows from (used in) continuing operating activities:
Depreciation and amortization	144	142	143
Gain on termination of joint venture	0	(328)	0
Restructuring charge, net of cash payments	7	75	(12)
Trademark impairment charges	567	318	65
Deferred income tax expense	(154)	16	69
Other changes that provided (used) cash:
Accounts and other receivables	0	(27)	8
Inventories	(49)	26	(41)
Related party, net	2	0	(47)
Accounts payable	(10)	(12)	(57)
Accrued liabilities including income taxes and other working capital	(191)	(67)	(72)
Litigation bonds	(23)	5	94
Tobacco settlement	291	(125)	205
Pension and postretirement	(181)	(88)	(328)
Other, net	89	42	(4)
Net cash flows from operating activities	1,454	1,315	1,331
Cash flows from (used in) investing activities:
Purchases of short-term investments	0	(56)	(3,764)
Proceeds from settlement of short-term investments	19	238	4,655
Proceeds from settlement of long-term investments	6	8	0
Capital expenditures	(141)	(113)	(142)
Acquisition, net of cash acquired	(43)	0	(3)
Distributions from equity investees	0	27	15
Net proceeds from sale of fixed assets	11	8	3
Proceeds from termination of joint venture	24	164	0
Other, net	1	2	(1)
Net cash flows from (used in) investing activities	(123)	278	763
Cash flows from (used in) financing activities:
Dividends paid on common stock	(991)	(999)	(916)
Repurchase of common stock	(5)	(210)	(60)
Repayments of long-term debt	(200)	0	(329)
Repayment of term loan	0	0	(1,542)
Proceeds from issuance of long-term debt	0	0	1,547
Deferred debt issuance costs	0	0	(15)
Other, net	4	3	3
Net cash flows used in financing activities	(1,192)	(1,206)	(1,312)
Effect of exchange rate changes on cash and cash equivalents	6	(24)	0
Net change in cash and cash equivalents	145	363	782
Cash and cash equivalents at beginning of year	2,578	2,215	1,433
Cash and cash equivalents at end of year	2,723	2,578	2,215
Income taxes paid, net of refunds	709	846	655
Interest paid	$245	$268	$334

Consolidated Balance Sheets

Consolidated Balance Sheets (USD $)
In Millions	Dec. 31, 2009	Dec. 31, 2008
Current assets:
Cash and cash equivalents	$2,723	$2,578
Short-term investments	4	23
Accounts receivable	109	84
Accounts receivable, related party	96	91
Notes receivable	36	35
Other receivables	15	37
Inventories	1,219	1,170
Deferred income taxes, net	956	838
Prepaid expenses and other	337	163
Total current assets	5,495	5,019
Property, plant and equipment, at cost:
Land and land improvements	88	95
Buildings and leasehold Improvements	661	692
Machinery and equipment	1,759	1,756
Construction-in-process	87	37
Total property, plant, and equipment	2,595	2,580
Less accumulated depreciation	1,570	1,549
Property, plant and equipment, net	1,025	1,031
Trademarks and other intangible assets, net of accumulated amortization (2009 - $647; 2008 - $619)	2,718	3,270
Goodwill	8,185	8,174
Other assets and deferred charges	586	660
Total assets	18,009	18,154
Current liabilities:
Accounts payable	196	206
Tobacco settlement accruals	2,611	2,321
Due to related party	3	3
Deferred revenue, related party	57	50
Current maturities of long-term debt	300	200
Other current liabilities	1,173	1,143
Total current liabilities	4,340	3,923
Long-term debt (less current maturities)	4,136	4,486
Deferred income taxes, net	441	282
Long-term retirement benefits (less current portion)	2,218	2,836
Other noncurrent liabilities	376	390
Shareholders' equity:
Common stock (shares issued: 2009 - 291,424,051; 2008 - 291,450,762)	0	0
Paid-in capital	8,498	8,463
Accumulated deficit	(579)	(531)
Accumulated other comprehensive loss - (Defined benefit pension and post-retirement plans: 2009 - $(1,376)and 2008 - $(1,643), net of tax)	(1,421)	(1,695)
Total shareholders' equity	6,498	6,237
Total liabilities and stockholders' equity	$18,009	$18,154

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data	Dec. 31, 2009	Dec. 31, 2008
Assets
Accumulated amortization on trademarks and other intangible assets	$647	$619
Shareholders' equity:
Common stock, shares issued	291,424,051	291,450,762
Defined benefit pension and post-retirement plans	($1,376)	($1,643)

Consolidated Statements of Shar

Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) (USD $)
In Millions	Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total
Beginning Balance at Dec. 31, 2006	$8,702	($1,241)	($418)	$7,043
Cumulative effect of change in accounting principle		5		5
Adjusted balance as of January 1, 2007	8,702	(1,236)	(418)	7,048
Net income		1,308		1,308
Retirement benefits, net of $72 tax expense, $884 tax benefit, and $177 tax __for the years ended December 31, 2007, 2008, and 2009, respectively			112	112
Unrealized gain (loss) on investments, net of $8 tax benefit, $20 tax benefit, and $2 tax __for the years ended December 31, 2007, 2008, and 2009, respectively			(11)	(11)
Cumulative translation adjustment and other, net of $6 and $7 tax benefit for year 2008 and 2009 respectively			3	3
Dividends -- $3.20, $3.40, and $3.45 per share for the years ended December 31, 2007, 2008, and 2009, respectively		(945)		(945)
Equity incentive award plan and stock-based compensation	9			9
Repurchase of common stock	(60)			(60)
Excess tax benefit on stock-based compensation plans	2			2
Ending Balance at Dec. 31, 2007	8,653	(873)	(314)	7,466
Net income		1,338		1,338
Retirement benefits, net of $72 tax expense, $884 tax benefit, and $177 tax __for the years ended December 31, 2007, 2008, and 2009, respectively			(1,337)	(1,337)
Unrealized gain (loss) on investments, net of $8 tax benefit, $20 tax benefit, and $2 tax __for the years ended December 31, 2007, 2008, and 2009, respectively			(30)	(30)
Cumulative translation adjustment and other, net of $6 and $7 tax benefit for year 2008 and 2009 respectively			(14)	(14)
Dividends -- $3.20, $3.40, and $3.45 per share for the years ended December 31, 2007, 2008, and 2009, respectively		(996)		(996)
Equity incentive award plan and stock-based compensation	18			18
Repurchase of common stock	(210)			(210)
Excess tax benefit on stock-based compensation plans	2			2
Ending Balance at Dec. 31, 2008	8,463	(531)	(1,695)	6,237
Net income		962		962
Retirement benefits, net of $72 tax expense, $884 tax benefit, and $177 tax __for the years ended December 31, 2007, 2008, and 2009, respectively			267	267
Unrealized gain (loss) on investments, net of $8 tax benefit, $20 tax benefit, and $2 tax __for the years ended December 31, 2007, 2008, and 2009, respectively			4	4
Cumulative translation adjustment and other, net of $6 and $7 tax benefit for year 2008 and 2009 respectively			3	3
Dividends -- $3.20, $3.40, and $3.45 per share for the years ended December 31, 2007, 2008, and 2009, respectively		(1,010)		(1,010)
Equity incentive award plan and stock-based compensation	38			38
Repurchase of common stock	(5)			(5)
Excess tax benefit on stock-based compensation plans	2			2
Ending Balance at Dec. 31, 2009	($8,498)	($579)	($1,421)	$6,498

2_Consolidated Statements of Sh

Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) (Parenthetical) (USD $)
In Millions, except Per Share data	Accumulated Deficit	Accumulated Other Comprehensive Loss	Comprehensive Income (Loss)	Total
Tax effect on Retirement Benefit		$72	$72	$72
Tax effect on Unrealized loss on investments		8	8	8
Dividends - per share	3.2			3.2
Tax effect on Retirement Benefit		884	884	884
Tax effect on Unrealized loss on investments		20	20	20
Tax effect on Cumulative translation adjustment and other		6	6	6
Dividends - per share	3.4			3.4
Tax effect on Retirement Benefit		177	177	177
Tax effect on Unrealized loss on investments		2	2	2
Tax effect on Cumulative translation adjustment and other		$7	$7	$7
Dividends - per share	3.45			3.45

Business and Summary of Signifi

Business and Summary of Significant Accounting Policies
	12 Months Ended Dec. 31, 2009 USD / shares
Business and Summary of Significant Accounting Policies [Abstract]
Business and Summary of Significant Accounting Policies	Note1 Business and Summary of Significant Accounting Policies Overview The consolidated financial statements include the accounts of Reynolds American Inc., referred to as RAI, and its wholly owned subsidiaries. RAIs wholly owned subsidiaries include R. J. Reynolds Tobacco Company; SantaFe Natural Tobacco Company, Inc., referred to as SantaFe; Lane, Limited, referred to as Lane; Conwood Holdings Inc.; and American Snuff Company, LLC, formerly known as Conwood Company, LLC, and Rosswil LLC, collectively referred to as the Conwood companies. RAI was incorporated as a holding company in the state of North Carolina on January5, 2004, and its common stock is listed on the NYSE under the symbol RAI. RAI was created to facilitate the transactions on July30, 2004, to combine the U.S.assets, liabilities and operations of Brown Williamson Holdings, Inc., referred to as BW, an indirect, wholly owned subsidiary of British American Tobacco p.l.c., referred to as BAT, with R. J. Reynolds Tobacco Company, a wholly owned operating subsidiary of R.J. Reynolds Tobacco Holdings, Inc., referred to as RJR. These July30, 2004, transactions generally are referred to as the BW business combination. References to RJR Tobacco prior to July30, 2004, relate to R. J. Reynolds Tobacco Company, a New Jersey corporation and a wholly owned subsidiary of RJR. References to RJR Tobacco on and subsequent to July30, 2004, relate to the combined U.S.assets, liabilities and operations of BW and R. J. Reynolds Tobacco Company, a North Carolina corporation. RAIs reportable operating segments are RJR Tobacco and Conwood. The RJR Tobacco segment consists of the primary operations of R. J. Reynolds Tobacco Company. The Conwood segment consists of Conwood Holdings, Inc., the primary operations of the Conwood companies and Lane. SantaFe and Niconovum AB, among other RAI subsidiaries, are included in All Other. The segments were identified based on how RAIs chief operating decision maker allocates resources and assesses performance. RAIs wholly owned operating subsidiaries have entered into intercompany agreements for products or services with other RAI operating subsidiaries. As a result, certain activities of an operating subsidiary may be included in a different segment of RAI. RAIs operating subsidiaries primarily conduct their business in the United States. Basis of Presentation The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, referred to as GAAP, requires estimates and assumptions to be made that affect the reported amounts in the consolidated financial statements and accompanying notes. Volatile credit and equity markets, changes to regulatory and legal environments, and consumer spending may affect the uncertainty inherent in such estimates and assumptions. Actual results could differ from those estimates. Certain reclassifications were made to conform prior years financial statements to the current presentation. The equity method is used to account for investments in businesses that RAI does not control, but has the abilit

Fair Value Measurement

Fair Value Measurement
	12 Months Ended Dec. 31, 2009 USD / shares
Fair Value Measurement [Abstract]
Fair Value Measurement	Note2 Fair Value Measurement Financial assets (liabilities) carried at fair value as of December31, 2009, were as follows: Level 1 Level 2 Level 3 Total Money market funds $ 2,662 $ $ 4 $ 2,666 Auction rate securities corporate credit risk 30 30 Auction rate securities financial insurance companies 17 17 Mortgage-backed security 16 16 Marketable equity security 19 19 Assets held in grantor trusts 12 12 Interest rate swaps fixed to floating rate 182 182 Interest rate swaps floating to fixed rate 57 57 Interest rate swaps floating to fixed rate (2 ) (2 ) Financial assets carried at fair value as of December31, 2008, were as follows: Level 1 Level 2 Level 3 Total Money market funds $ 2,269 $ $ 23 $ 2,292 Auction rate securities corporate credit risk 44 44 Auction rate securities financial insurance companies 15 15 Mortgage-backed security 21 21 Assets held in grantor trusts 16 16 Interest rate swaps fixed to floating rate 287 287 The fair value of the interest rate swaps, classified as Level2, utilized a market approach model using the notional amount of the interest rate swap multiplied by the observable inputs of time to maturity, interest rates and credit spreads. See note13 for additional information on interest rate swaps. The fair value of the money market funds, classified as Level3, utilized an income approach model and was based upon expected future cash flows from accumulated cash in the fund and future maturities of the remaining securities held in the fund. During 2009, redemptions of $5million were received from the Reserve Fund-Primary Fund and redemptions of $14million were received from the Reserve Fund-International Liquidity Fund. No current valuations had been issued by either fund, and RAI was unable to identify a similar fund that carried identical holdings. As a result, the observable transactions and pricing were not current. The funds did issue a detailed listing of the securities that were held and not matured, as well as their face value and maturity date. This observable data, along with unobservable factors, such as assumptions about fund liquidation of accumulated cash and the collectability of the outstanding underlying securities, were used to determine the fair value of the funds as of December31, 2009. The fair value of the auction rate securities, either related to certain financial insurance companies or linked to the credit

Intangible Assets

Intangible Assets
	12 Months Ended Dec. 31, 2009 USD / shares
Intangible Assets [Abstract]
Intangible Assets	Note3 Intangible Assets There were no changes in goodwill in 2008. The changes in the carrying amounts of goodwill by segment as of December31, 2009, were as follows: RJR Tobacco Conwood All Other Consolidated Balance as of December31, 2008 Goodwill $ 9,065 $ 2,650 $ 224 $ 11,939 Less: Accumulated impairment losses (3,763 ) (2 ) (3,765 ) Net goodwill balance as of December31, 2008 5,302 2,648 224 8,174 Balance as of December31, 2009 Acquisition of Niconovum AB 11 11 Goodwill 9,065 2,650 235 11,950 Less: Accumulated impairment losses (3,763 ) (2 ) (3,765 ) Net goodwill balance as December31, 2009 $ 5,302 $ 2,648 $ 235 $ 8,185 The changes in the carrying amounts of indefinite-lived intangible assets by segment not subject to amortization during the years ended December31, 2009 and 2008, were as follows: RJR Tobacco Conwood All Other Consolidated Trademarks Other Trademarks Trademarks Other Trademarks Other Balance as of December31, 2007 $ 1,826 $ 55 $ 1,374 $ 155 $ 47 $ 3,355 $ 102 Impairment (173 ) (130 ) (303 ) Acquisition 1 1 Transfer to finite-lived (22 ) (22 ) Balance as of December31, 2008 1,653 55 1,222 155 48 3,030 103 Impairment (490 ) (70 ) (560 ) Intersegment transfer 44 (44 ) Acquisition of Niconovum AB 43 43 Balance as of December31, 2009 $ 1,163 $ 99 $ 1,152 $ 155 $ 47 $ 2,470 $ 146 The changes in the carrying amounts of finite-lived intangible assets by segment subject to amortization during the years ended December31, 2009 and 2008, were

Restructuring Charges

Restructuring Charges
	12 Months Ended Dec. 31, 2009 USD / shares
Restructuring Charges [Abstract]
Restructuring Charges	Note4 Restructuring Charges 2009 Restructuring Charge In December 2009, RJR Tobacco announced the elimination of approximately 400full-time production positions. These positions were selected from employees who volunteered to be considered for job elimination. The job eliminations are expected to be substantially completed by December31, 2010. Under existing benefit plans, $48million of severance-related cash benefits and $8million of non-cash pension-related benefits comprised a restructuring charge of $56million. None of the cash portion of the charge was paid during 2009. Accordingly, in the consolidated balance sheet as of December31, 2009, $21million was included in other current liabilities, and $27million was included in other noncurrent liabilities. The cash benefits are expected to be substantially paid by December31, 2011. The component of the restructuring charge accrued and utilized was as follows: Employee Severance and Benefits Original accrual $ 56 Utilized in 2009 (8 ) Balance as of December31, 2009 $ 48 2008 Restructuring Charge In 2008, RAI and RJR Tobacco announced changes in their organizational structures to streamline non-core business processes and programs in order to allocate additional resources to strategic growth initiatives. The reorganizations resulted in the elimination of approximately 600full-time jobs, substantially completed by December31, 2009. Under existing benefit plans, $83million of severance-related cash benefits and $7million of non-cash pension-related benefits comprised a restructuring charge of $90million. Of this charge, $81million was recorded in the RJR Tobacco segment. Of the cash portion of the charge, $43million was paid as of December31, 2009. Accordingly, in the consolidated balance sheet as of December31, 2009, $29million was included in other current liabilities, and $11million was included in other noncurrent liabilities. The cash benefits are expected to be substantially paid by December31, 2011. The component of the restructuring charge accrued and utilized was as follows: Employee Severance and Benefits Original accrual $ 91 Utilized in 2008 (12 ) Adjusted in 2008 (1 ) Balance as of December31, 2008 78 Utilized in 2009 (38 ) Balance as of December31, 2009 $ 40 2004 BW Business Combination Restructuring Costs In connection with the allocation of the cost of the BW business combination to assets acquired and liabilities assumed, RJR Tobacco accrued restructuring costs of $272million in 2004, related to severance, and other relocation, contract terminations and facility closure costs. As of December31, 2009, $248million of the accrual had been paid, and a net cost reduction of $17million had been recorded for lower-than-expected costs. In the consolidated balance sheet as of December31, 2009, $1million is included in other current liabilities an

Termination of Joint Venture

Termination of Joint Venture
	12 Months Ended Dec. 31, 2009 USD / shares
Termination of Joint Venture [Abstract]
Termination of Joint Venture	Note5 Termination of Joint Venture In 2002, R.J. Reynolds Tobacco C.V., an indirect wholly owned subsidiary of RAI and referred to as RJRTCV, and an affiliate of Gallaher Group Plc, referred to as Gallaher, formed a joint venture, with each party owning a 50% membership interest. The joint venture, R. J. Reynolds-Gallaher International Sarl, marketed American-blend cigarettes primarily in Italy, France and Spain. In 2007, an affiliate of Japan Tobacco Inc., referred to as JTI, acquired Gallaher, and Gallaher subsequently notified RJRTCV that the acquisition constituted a change of control of Gallaher within the meaning of the joint venture agreement. Pursuant to the terms of the joint venture agreement, RJRTCV elected to terminate the joint venture prior to its expiration date. The joint venture was terminated on December31, 2007. The joint venture agreement provided that upon a termination of the joint venture, the value of all the trademarks each joint venture member or its affiliate licensed to the joint venture, other than NATURAL AMERICAN SPIRIT, would be calculated and that the party whose licensed trademarks were determined to be of greater value would be required to pay the other party an amount, referred to as the Termination Amount, equal to one-half of the difference between the values of the parties respective trademarks. In 2008, RJRTCV and Gallaher Limited, an affiliate of Gallaher, entered into a valuation payment settlement agreement, pursuant to which Gallaher Limited agreed to pay RJRTCV a Termination Amount equal to euros 265million, or approximately $388million. Of this amount, euros 132.50million, or 50%, was paid as of December31, 2009, and the remaining 50% is to be paid in five equal annual installments starting in April 2010. Of this receivable, $35million, including imputed interest, was included in current notes receivable, and $134million was included in other assets and deferred charges, in RAIs consolidated balance sheet as of December31, 2009. Related to the gain on termination of the joint venture of $328million, approximately $118million of deferred tax was recognized and included in deferred income taxes, net in the noncurrent liability section of the consolidated balance sheet as of December31, 2009.

Income Per Share

Income Per Share
	12 Months Ended Dec. 31, 2009 USD / shares
Income Per Share [Abstract]
Income Per Share	Note6 Income Per Share The components of the calculation of income per share were as follows: For the Years Ended December31, 2009 2008 2007 Income from continuing operations before extraordinary item $ 962 $ 1,338 $ 1,307 Extraordinary item gain on acquisition 1 Net income $ 962 $ 1,338 $ 1,308 Basic weighted average shares, in thousands 291,381 293,401 295,163 Effect of dilutive potential shares: Options 135 199 246 Stock units 310 Diluted weighted average shares, in thousands 291,826 293,600 295,409 Effective January1, 2009, RAI adopted revised GAAP that had the effect of including unvested restricted shares outstanding in basic and diluted weighted average share calculations. Retrospective application reduced basic and diluted income per share by $0.02 and $0.01, respectively, for 2008, and reduced basic income per share by $0.01 for 2007.

Investments

Investments
	12 Months Ended Dec. 31, 2009 USD / shares
Investments [Abstract]
Investments	Note7 Investments Short-term investments classified as available-for-sale were as follows: December31, 2009 December31, 2008 Gross Estimated Realized Estimated Cost Redemptions Fair Value Cost Loss Redemptions Fair Value Reserve Fund Primary Fund $ 7 $ (5 ) $ 2 $ 37 $ (1 ) $ (29 ) $ 7 Reserve Fund International Liquidity Fund 16 (14 ) 2 17 (1 ) 16 $ 23 $ (19 ) $ 4 $ 54 $ (2 ) $ (29 ) $ 23 RAI has the intent and the ability to hold the investments in the Reserve Funds until the remaining holdings are distributed. Long-term investments classified as available-for-sale were as follows: December31, 2009 December31, 2008 Gross Gross Gross Unrealized Estimated Realized Unrealized Estimated Cost Gain/(Loss) Fair Value Cost Loss Loss Fair Value Auction rate securities corporate credit risk $ 95 $ (65 ) $ 30 $ 95 $ $ (51 ) $ 44 Auction rate securities financial insurance companies 17 17 50 (33 ) (2 ) 15 Mortgage-backed security 31 (15 ) 16 37 (16 ) 21 Marketable equity security 2 17 19 2 2 $ 145 $ (63 ) $ 82 $ 184 $ (33 ) $ (69 ) $ 82 RAI has five investments in auction rate securities linked to corporate credit risk, four investments in auction rate securities related to financial insurance companies, one investment in a mortgage-backed security and one investment in a marketable equity security. These securities were carried at fair value and included in other assets and deferred charges, and unrealized gains and losses, net of tax, were included in other comprehensive loss in RAIs consolidated balance sheets as of December31, 2009 and 2008. The realized losses were recorded in other expense, net in RAIs consolidated statement of income for the years ended December31, 2009, 2008 and 2007. The funds associated with the auction rate securities will not be accessible until a successful auctio

Inventories

Inventories
	12 Months Ended Dec. 31, 2009 USD / shares
Inventories [Abstract]
Inventories	Note8 Inventories The major components of inventories at December 31 were as follows: 2009 2008 Leaf tobacco $ 1,052 $ 993 Other raw materials 65 60 Work in process 80 58 Finished products 180 145 Other 32 26 Total 1,409 1,282 Less LIFO allowance 190 112 $ 1,219 $ 1,170 Inventories valued under the LIFO method were $743million and $765million at December31, 2009 and 2008, respectively, net of the LIFO allowance. The LIFO allowance reflects the excess of the current cost of LIFO inventories at December31, 2009 and 2008, over the amount at which these inventories were carried on the consolidated balance sheets. RAI recorded expense of $78million, $61million and income of $12million from LIFO inventory changes during 2009, 2008 and 2007, respectively.

Other Current Liabilities

Other Current Liabilities
	12 Months Ended Dec. 31, 2009 USD / shares
Other Current Liabilities [Abstract]
Other Current Liabilities	Note9 Other Current Liabilities Other current liabilities at December 31 included the following: 2009 2008 Payroll and employee benefits $ 228 $ 222 Pension and other post-retirement benefits 79 85 Marketing and advertising 142 137 Declared dividends 262 248 Excise, franchise and property tax 166 66 Restructuring 52 43 Other 244 342 $ 1,173 $ 1,143

Income Taxes

Income Taxes
	12 Months Ended Dec. 31, 2009 USD / shares
Income Tax [Abstract]
Income Taxes	Note10 Income Taxes The components of the provision for income taxes from continuing operations for the years ended December31 were as follows: 2009 2008 2007 Current: Federal $ 592 $ 632 $ 588 State and other 134 142 109 726 774 697 Deferred: Federal (150 ) 27 42 State and other (4 ) (11 ) 27 (154 ) 16 69 $ 572 $ 790 $ 766 The net current deferred income tax asset shown on the consolidated balance sheets at December 31 included the following: 2009 2008 Deferred tax assets (liabilities): LIFO inventories $ (206 ) $ (203 ) Pension and other postretirement liabilities 36 48 Tobacco settlement accruals 1,040 925 Other accrued liabilities 86 68 $ 956 $ 838 The composition of the net current deferred income tax asset by jurisdiction at December 31 was as follows: 2009 2008 Federal $ 778 $ 683 State and other 178 155 $ 956 $ 838 The net noncurrent deferred income tax liability shown on the consolidated balance sheets at December 31 included the following: 2009 2008 Deferred tax assets: Pension and other postretirement liabilities $ 766 $ 1,134 Other noncurrent liabilities 141 139 907 1,273 Deferred tax liabilities: Property and equipment (231 ) (236 ) Trademarks and other intangibles (985 ) (1,200 ) Other (132 ) (119 ) (1,348 ) (1,555 ) $ (441 ) $ (282 ) The composition of net noncurrent deferred income tax liability by jurisdiction at December 31 was as follows: 2009 2008 Federal $ (414 ) $ (319 ) State and other (27 ) 37 $ (441 ) $ (282 ) No valuation allowance has been provided on the deferred tax assets as of December31, 2009 or 2008, as RAI believes it is more likely than not that all of the deferred tax assets will be realized through the expected generation of future taxable income. Pre-tax incom

Borrowing Arrangements

Borrowing Arrangements
	12 Months Ended Dec. 31, 2009 USD / shares
Borrowing Arrangements [Abstract]
Borrowing Arrangements	Note11 Borrowing Arrangements On June28, 2007, RAI entered into a Fifth Amended and Restated Credit Agreement, which, as subsequently amended, is referred to as the Credit Facility and provides for a five-year, $498million revolving credit facility, which may be increased up to $848million at the discretion of the lenders upon the request of RAI. Effective July3, 2009, RAI entered into a Second Amendment to Credit Agreement, referred to as the Second Amendment, amending the Credit Facility by, among other things: terminating the revolving loan commitment of Lehman Commercial Paper Inc., which filed for protection under Chapter11 of the federal Bankruptcy Code on October5, 2008, and thereby reducing the total revolving loan commitment under the Credit Facility from $550million to $498million; amending the definition of Lender Default and certain related definitions; granting RAI the right under certain circumstances to terminate the revolving loan commitment of a Defaulting Lender, as defined in the Credit Facility, if RAI is unable to replace such Defaulting Lender;and otherwise clarifying the rights and responsibilities of the parties to the Credit Facility upon the occurrence of a Lender Default. The Credit Facility contains, among others, the following restrictive covenants that limit, and in some circumstances prohibit, the ability of RAI and its subsidiaries to: incur or guarantee additional debt; pay dividends; make capital expenditures, investments or other restricted payments; engage in transactions with shareholders and affiliates; create, incur or assume liens; engage in mergers, acquisitions and consolidations; and sell assets. These covenants are subject to a number of qualifications and exceptions. RAIs results on certain covenants under the Credit Facility were as follows: Actual Credit Facility Requirement Consolidated total leverage ratio as of December31, 2009 1.67 Less than or equal to 3.25 Consolidated interest coverage ratio as of December31, 2009 11.12 Greater than or equal to 3.00 Capital expenditures in 2009 $141 million Less than or equal to $450 million The Credit Facility contains customary events of default, including upon a change in control, that could result in the acceleration of the repayment of all amounts and cancellation of all commitments outstanding thereunder. RAI is able to use the Credit Facility for borrowings and issuances of letters of credit at its option. Issuances of letters of credit reduce availability under the facility. As of December31, 2009, there were no borrowings, and $15million of letters of credit outstanding, under the Credit Facility. Under the terms of the Credit Facility, RAI is not required to maintain compensating balances; however, RAI is required to pay a commitment fee of between 0.25% and 1.0% per annum on the unused portion of the Credit Facility. During 2009, RAI incurred $3million in commitment fees. Borrowings und

Long-Term Debt

Long-Term Debt
	12 Months Ended Dec. 31, 2009 USD / shares
Long-term Debt [Abstract]
Long-term Debt [Text Block]	Note12 Long-Term Debt Long-term debt, net of discount and including fair value adjustments associated with interest rate swaps, as of December 31 consisted of the following: 2009 2008 RJR debt: 9.25%, notes due 2013 $ 60 $ 60 7.25% guaranteed, notes due 2012 61 64 7.3% guaranteed, notes due 2015 1 1 Total RJR debt 122 125 RAI debt: 6.5% guaranteed, notes due 2010 299 6.75% guaranteed, notes due 2017 824 846 7.25% guaranteed, notes due 2012 424 439 7.25% guaranteed, notes due 2013 623 622 7.25% guaranteed, notes due 2037 448 447 7.3% guaranteed, notes due 2015 199 199 7.625% guaranteed, notes due 2016 847 860 7.75% guaranteed, notes due 2018 249 249 Floating rate, guaranteed, notes due 2011 400 400 Total RAI debt 4,014 4,361 Total long-term debt (less current maturities) 4,136 4,486 Current maturities of long-term debt 300 200 $ 4,436 $ 4,686 As of December31, 2009, the maturities of RAIs and RJRs notes, net of discount and excluding fair value adjustments associated with interest rate swaps, were as follows: Year RAI RJR Total 2010 $ 300 $ $ 300 2011 400 400 2012 392 57 449 2013 623 60 683 2015 and thereafter 2,368 1 2,369 $ 4,083 $ 118 $ 4,201 In conjunction with their obligations under the Credit Facility, RAIs material domestic subsidiaries, including RJR, RJR Tobacco, SantaFe, Lane, GPI and the Conwood companies guarantee the Notes. The estimated fair value of RAIs and RJRs outstanding long-term notes was $4.4billion and $3.5billion with an effective average annual interest rate of 5.46% and 5.67%, as of December31, 2009 and 2008, respectively. The fair values were based on available market quotes, credit spreads and discounted cash flows, as appropriate. At its option, RAI and RJR, as applicable, may redeem any or all of their outstanding fixed-rate notes, in whole or in part, at any time, subject to the payment of a make-whole premium. The floating rate notes, with the variable component of interest based on three-month LIBOR, are redeemable at par on any interest payment date after December15, 2008.

Financial Instruments

Financial Instruments
	12 Months Ended Dec. 31, 2009 USD / shares
Financial Instruments [Abstract]
Financial Instruments	Note13 Financial Instruments Interest Rate Management RAI and RJR use interest rate swaps to manage interest rate risk on a portion of their respective debt obligations. Swaps existed on the following principal amount of debt: Fixed to Floating Rate Floating to Fixed Rate Fixed to Floating Rate December31, December31, December31, 2008 2009 2009 and 2007 RJR 7.25%notes, due 2012 $ 44 $ 44 $ 57 Total swapped RJR debt 44 44 57 RAI 7.25%notes, due 2012 306 306 393 RAI 7.625%notes, due 2016 450 450 450 RAI 6.75%notes, due 2017 700 700 700 Total swapped RAI debt 1,456 1,456 1,543 Total swapped debt $ 1,500 $ 1,500 $ 1,600 Historically, the interest rate swap agreements were derivative instruments that qualified for hedge accounting. RAI and RJR assess at the inception of the hedge whether the hedging derivatives are highly effective in offsetting changes in fair value of the hedged item. Ineffectiveness results when changes in the market value of the hedged debt are not completely offset by changes in the market value of the interest rate swap. There was no ineffectiveness recognized related to derivative instruments during 2009, 2008 or 2007. As detailed below, at December31, 2009, RAI and RJR had no derivative instruments designated as hedges. On January6, 2009, the fair value of RAIs and RJRs fixed to floating interest rate swaps, designated as hedges, was $258million. RAI and RJR locked in the value of these swaps by entering into offsetting floating to fixed interest rate swap agreements in the notional amount of $1.5billion with maturity dates ranging from June1, 2012 to June15, 2017. The floating to fixed interest rate swaps were entered into with the same financial institution that holds a notional amount of $1.5billion of fixed to floating interest rate swaps and have a legal right of offset. The future cash flows, established as a result of entering into the January6, 2009, floating to fixed interest rate swaps, total $321million, and will be amortized and effectively reduce net interest costs over the remaining life of the notes. Concurrent with entering the floating to fixed interest rate swap agreements on January6, 2009, which were not designated as hedging instruments, RAI and RJR removed the designation of fair value hedge from the fixed to floating interest rate swaps. On January7, 2009, RAI and RJR terminated an interest rate swap agreement in the notional amount of $100million with a maturity date of June1, 2012. The resulting gain of approximately $12million will be amortized to effectively reduce interest expense over the remaining life of the notes. As a result of these actions, RAI and

Commitments and Contingencies

Commitments and Contingencies
	12 Months Ended Dec. 31, 2009 USD / shares
Commitments and Contingencies [Abstract]
Commitments and Contingencies	Note14 Commitments and Contingencies Tobacco Litigation General Introduction Various legal proceedings or claims, including litigation claiming that cancer and other diseases, as well as addiction, have resulted from the use of, or exposure to, RAIs operating subsidiaries products, are pending or may be instituted against RJR Tobacco, the Conwood companies or their affiliates, including RAI and RJR, or indemnitees, including BW. These pending legal proceedings include claims relating to cigarette products manufactured by RJR Tobacco or certain of its affiliates and indemnitees, as well as claims relating to smokeless tobacco products manufactured by the Conwood companies. A discussion of the legal proceedings relating to cigarette products is set forth below under the heading Litigation Affecting the Cigarette Industry. All of the references under that heading to tobacco-related litigation, smoking and health litigation and other similar references are references to legal proceedings relating to cigarette products and are not references to legal proceedings involving smokeless tobacco products, and case numbers under that heading include only cases involving cigarette products. The legal proceedings relating to the smokeless tobacco products manufactured by the Conwood companies are discussed separately under the heading Smokeless Tobacco Litigation below. In connection with the BW business combination, RJR Tobacco has agreed to indemnify BW and its affiliates, including its indirect parent, British American Tobacco p.l.c., referred to as BAT, against certain liabilities, costs and expenses incurred by BW or its affiliates arising out of the U.S.cigarette and tobacco business of BW. As a result of this indemnity, RJR Tobacco has assumed the defense of pending BW-specific tobacco-related litigation, has paid the judgments and costs related to certain pre-business combination tobacco-related litigation of BW, and has posted bonds on behalf of BW, where necessary, in connection with cases decided since the BW business combination. In addition, pursuant to this indemnity, RJR Tobacco expensed less than $1million during each of 2009 and 2008 and $1million in 2007 for funds to be reimbursed to BAT for costs and expenses incurred arising out of certain tobacco-related litigation. Certain Terms and Phrases Certain terms and phrases used in this disclosure may require some explanation. The term judgment or final judgment refers to the final decision of the court resolving the dispute and determining the rights and obligations of the parties. At the trial court level, for example, a final judgment generally is entered by the court after a jury verdict and after post-verdict motions have been decided. In most cases, the losing party can appeal a verdict only after a final judgment has been entered by the trial court. The term damages refers to the amount of money sought by a plaintiff in a complaint, or awarded to a party by a jury or, in some cases, by a judge. Compensatory damages are awarded to compensate the prevailing party for actual losses suffered, if liability is proved. In cases in which ther

Shareholders Equity

Shareholders Equity
	12 Months Ended Dec. 31, 2009 USD / shares
Shareholders' Equity [Abstract]
Shareholders' Equity	Note15 Shareholders Equity RAIs authorized capital stock at December31, 2009, consisted of 100million shares of preferred stock, par value $.01 per share, and 800million shares of common stock, par value $.0001 per share. Four million shares of the preferred stock are designated as SeriesA Junior Participating Preferred Stock, none of which is issued or outstanding. The SeriesA Junior Participating Preferred Stock will rank junior as to dividends and upon liquidation to all other series of RAI preferred stock, unless specified otherwise. Also, of the preferred stock, one million shares are designated as SeriesB Preferred Stock, all of which are issued and outstanding. The SeriesB Preferred Stock ranks senior upon liquidation, but not with respect to dividends, to all other series of RAI capital stock, unless specified otherwise. As a part of the BW business combination, RJR is the holder of the outstanding SeriesB Preferred Stock. In 2009, RAI declared $43million in dividends to RJR with respect to the SeriesB Preferred Stock. In 2004, RAIs board of directors adopted a shareholder rights plan, pursuant to which RAI declared a dividend of one preferred stock purchase right on each share of RAI common stock outstanding on July30, 2004. The board also authorized the issuance of rights for each share of RAI common stock issued after the dividend record date, until the occurrence of certain specified events. The rights will expire on July30, 2014, unless earlier redeemed, exercised or exchanged under the terms of the rights plan. The rights are not exercisable until a distribution date that is the earlier of: ten days following an announcement that a person or group, other than BAT and its subsidiaries, except in certain circumstances, has acquired beneficial ownership of at least 15% of RAI common stock,and ten business days, or such later date as may be determined by the board, following the announcement of a tender offer which would result in a person becoming an acquiring person. If the acquiring person or tender offeror is BAT or one of its subsidiaries, then the foregoing 15% threshold is subject to adjustment. The rights are initially exercisable for 1/100thof a share of RAIs SeriesA Junior Participating Preferred Stock at a purchase price of $130, subject to adjustment. Each fractional share of such preferred stock would give the holder approximately the same dividend, voting and liquidation rights as does one share of RAI common stock. Until the distribution date, the rights will be evidenced by RAI common stock certificates and trade with such shares. Upon the occurrence of certain events after the distribution date, holders of rights, other than the acquiring person, will be entitled to receive upon exercise of the right, in lieu of shares of preferred stock, RAI common stock or common stock of the acquiring corporation having in either case a market value of two times the exercise price of the right. RAIs board of directors declared the following quarterly cash dividends per share of RAI common stock in 2009, 2008 and 2007: 2009 200

Stock Plans

Stock Plans
	12 Months Ended Dec. 31, 2009 USD / shares
Stock Plans [Abstract]
Stock Plans	Note16 Stock Plans As of December31, 2009, RAI had two stock plans, the Equity Incentive Award Plan for Directors of RAI, referred to as the EIAP, and the Reynolds American Inc. 2009 Omnibus Incentive Compensation Plan, referred to as the Omnibus Plan. Under the EIAP, RAI currently provides (1)grants of deferred stock units to eligible directors upon becoming a director or, provided the director did not receive an initial award upon his/her election to the board, upon appointment to the position of Non-Executive Chairman and (2)grants of deferred stock units to eligible directors on a quarterly and annual basis thereafter. Directors may elect to receive shares of common stock in lieu of their initial and annual grants of deferred stock units. A maximum of 1,000,000shares of common stock may be issued under this plan, of which 588,612shares were available for grant as of December31, 2009. Deferred stock units granted under the EIAP have a value equal to, and bear dividend equivalents at the same rate as, one share of RAI common stock, and have no voting rights. The dividends are paid as additional units in an amount equal to the number of shares of RAI common stock that could be purchased with the dividends on the date of payment. Generally, distribution of a directors deferred stock units will be made on January 2 following his or her last year of service on the board; however, for all grants made under the EIAP after December31, 2007, a director may elect to receive his or her deferred stock units on the later of January 2 of a specified year or January 2 following his or her last year of service on the board. At the election of a director, distribution may be made in one lump sum or in up to ten annual installments. A director is paid in cash for the units granted quarterly and in common stock for the units granted initially and annually, unless the director elects to receive cash for the initial and annual grants. Cash payments are based on the average closing price of RAI common stock during December of the year preceding payment. Compensation expense related to the EIAP was $3million expense during 2009, $1million income during 2008, due to the decline of the price of RAI common stock during 2008, and $4million expense during 2007. In May 2009, the shareholders of RAI approved the Omnibus Plan. Awards under the Omnibus Plan may be in the form of cash awards, incentive or non-incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units or other awards. Subject to adjustments as set forth in the Omnibus Plan, the number of shares of RAI common stock that may be issued with respect to awards under the Omnibus Plan will not exceed 19,000,000shares in the aggregate. The Omnibus Plan replaced the LTIP, which expired on June14, 2009. No awards were made under the Omnibus Plan during 2009. The outstanding grants made under the LTIP prior to its expiration will remain outstanding in accordance with their terms. The LTIP provided for grants of incentive stock options, other stock options, stock appreciation rights, restricted stock, restricted

Retirement Benefits

Retirement Benefits
	12 Months Ended Dec. 31, 2009 USD / shares
Retirement Benefits [Abstract]
Retirement Benefits	Note17 Retirement Benefits RAI and certain of its subsidiaries sponsor a number of non-contributory defined benefit pension plans covering most of their employees, and also provide certain health and life insurance benefits for most of their retired employees and their dependents. These benefits are generally no longer provided to employees hired on or after January1, 2004. The changes in benefit obligations and plan assets, as well as the funded status of these plans at December31, were as follows: Postretirement Pension Benefits Benefits 2009 2008 2009 2008 Change in benefit obligation: Obligation at beginning of year $ 5,106 $ 5,088 $ 1,445 $ 1,485 Service cost 31 36 4 5 Interest cost 319 318 80 90 Actuarial (gain) loss 218 66 13 (25 ) Plan amendments 26 (99 ) Benefits paid (411 ) (424 ) (92 ) (110 ) Settlements (1 ) (11 ) Curtailment/special termination benefits 8 7 Obligation at end of year $ 5,270 $ 5,106 $ 1,351 $ 1,445 Change in plan assets: Fair value of plan assets at beginning of year $ 3,376 $ 5,421 $ 254 $ 364 Actual return on plan assets 795 (1,631 ) 43 (78 ) Employer contributions 295 21 65 78 Benefits paid (411 ) (424 ) (92 ) (110 ) Settlements (1 ) (11 ) Fair value of plan assets at end of year $ 4,054 $ 3,376 $ 270 $ 254 Funded status $ (1,216 ) $ (1,730 ) $ (1,081 ) $ (1,191 ) Amounts recognized in the consolidated balance sheets consist of: Accrued benefit other current liability (9 ) (6 ) (70 ) (79 ) Accrued benefit long-term retirement benefits (1,207 ) (1,724 ) (1,011 ) (1,112 ) Net amount recognized (1,216 ) (1,730 ) (1,081 ) (1,191 ) Accumulated other comprehensive loss 2,105 2,448 171 271 Net amounts recognized in the consolidated balance sheets $ 889 $ 718

Segment Information

Segment Information
	12 Months Ended Dec. 31, 2009 USD / shares
Segment Information [Abstract]
Segment Information	Note18 Segment Information RAIs reportable operating segments are RJR Tobacco and Conwood. The RJR Tobacco segment consists of the primary operations of R. J. Reynolds Tobacco Company. The Conwood segment consists of Conwood Holdings, Inc., the primary operations of the Conwood companies and Lane. Two of RAIs wholly owned subsidiaries, SantaFe and Niconovum AB, among others, are included in All Other. The segments were identified based on how RAIs chief operating decision maker allocates resources and assesses performance. RAIs wholly owned operating subsidiaries have entered into intercompany agreements for products or services with other RAI operating subsidiaries. As a result, certain activities of an operating subsidiary may be included in a different segment of RAI. RAIs largest reportable operating segment, RJR Tobacco, is the second largest cigarette manufacturer in the United States. RJR Tobaccos largest-selling cigarette brands, CAMEL, PALL MALL, WINSTON, KOOL and DORAL, were five of the ten best-selling brands of cigarettes in the United States as of December31, 2009. Those brands, and its other brands, including SALEM, MISTY and CAPRI, are manufactured in a variety of styles and marketed in the United States. RJR Tobacco also manages contract manufacturing of cigarette and tobacco products through arrangements with BAT affiliates. RAIs other reportable operating segment, Conwood, is the second largest smokeless tobacco products manufacturer in the United States. Conwoods primary brands include its largest-selling moist snuff brands, GRIZZLY, the best-selling moist snuff brand in the United States as of December31, 2009, and KODIAK. Conwood also distributes a variety of tobacco products including WINCHESTER and CAPTAIN BLACK little cigars, and BUGLER roll-your-own tobacco. SantaFe manufactures and markets cigarettes and other tobacco products under the NATURAL AMERICAN SPIRIT brand, as well as manages RJR Tobaccos super premium cigarette brands, DUNHILL and STATE EXPRESS 555, which are licensed from BAT. In January 2009, the activities of GPI were transitioned to other operating subsidiaries of RAI. The management and export of tobacco products to certain U.S.territories, U.S.duty-free shops and U.S.overseas military bases was transferred to RJR Tobacco, and sales of NATURAL AMERICAN SPIRIT in Europe and Japan were transferred to other indirect subsidiaries of RAI. RAIs operating subsidiaries sales to foreign countries, primarily to related parties, for the years ended December31, 2009, 2008 and 2007 were $547million, $611million and $616million, respectively. Intersegment revenues and items below the operating income line of the consolidated statements of income are not presented by segment, since they are excluded from the measure of segment profitability reviewed by RAIs chief operating decision maker. Segment Data: 2009 2008 2007 Net sales: RJR Tobacco $ 7,334 $ 7,755 $ 8,022 Conwood 673 723 670 All Other 412 367

Related Party Transactions

Related Party Transactions
	12 Months Ended Dec. 31, 2009 USD / shares
Related Party Transactions [Abstract]
Related Party Transactions	Note19 Related Party Transactions RAI and its operating subsidiaries engage in transactions with affiliates of BAT. The following is a summary of balances and transactions with such BAT affiliates as of and for the years ended December 31: Balances: 2009 2008 Accounts receivable $ 96 $ 91 Accounts payable (3 ) (3 ) Deferred revenue (57 ) (50 ) Significant transactions: 2009 2008 2007 Net sales $ 404 $ 468 $ 507 Research and development services billings 2 3 3 Purchases 16 12 18 RAI common stock purchases from BW 75 RAIs operating subsidiaries sell contract-manufactured cigarettes, processed strip leaf, pipe tobacco and little cigars to BAT affiliates. In 2009, as in the prior years, pricing for contract-manufactured cigarettes was generally calculated based on 2004 prices, using BWs forecasted 2004 manufacturing costs plus 10%, increased by a multiple equal to the increase in the Producer Price Index for subsequent years, reported by the U.S.Bureau of Labor Statistics. Net sales, primarily of cigarettes, to BAT affiliates represented approximately 5.0% of RAIs total net sales in each of 2009 and 2008 and 6.0% of RAIs total net sales in 2007. RJR Tobacco recorded deferred sales revenue relating to leaf sold to BAT affiliates that had not been delivered as of December31, given that RJR Tobacco had a legal right to bill the BAT affiliates. Leaf sales revenue to BAT affiliates will be recognized when the product is shipped to the customer. RJR Tobacco performs certain research and development for BAT affiliates pursuant to a joint technology sharing agreement entered into as a part of the BW business combination. These services were accrued and billed to BAT affiliates and were recorded in RJR Tobaccos selling, general and administrative expenses, net of associated costs. RAIs operating subsidiaries also purchase unprocessed leaf at market prices, and imports cigarettes at prices not to exceed manufacturing costs plus 10%, from BAT affiliates. In connection with RAIs share repurchase program, which expired on April30, 2009, RAI and BW entered into an agreement on April29, 2008, pursuant to which BW agreed to participate in the repurchase program on a basis approximately proportionate with BWs 42% ownership of RAI common stock. Under this agreement, RAI repurchased 1,387,095shares of RAI common stock from BW during 2008. No shares of RAI common stock were repurchased by RAI during 2009 under this program.

RAI Guaranteed, Unsecured Notes

RAI Guaranteed, Unsecured Notes Condensed Consolidating Financial Statements
	12 Months Ended Dec. 31, 2009 USD / shares
Guaranteed Unsecured Notes Condensed Consolidating Financial Statements Parent [Abstract]
RAI Guaranteed, Unsecured Notes - Condensed Consolidating Financial Statements	Note20 RAI Guaranteed, Unsecured Notes Condensed Consolidating Financial Statements The following condensed consolidating financial statements relate to the guaranties of RAIs $4.3billion unsecured notes. See note12 for additional information relating to these notes. RAIs direct, wholly owned subsidiaries and certain of its indirectly owned subsidiaries have fully and unconditionally and jointly and severally, guaranteed these notes. The following condensed consolidating financial statements include: the accounts and activities of RAI, the parent issuer; RJR, RJR Tobacco, the Conwood companies, Conwood Holdings, Inc., SantaFe, Lane, GPI and certain of RJR Tobaccos other subsidiaries, the Guarantors; other indirect subsidiaries of RAI that are not Guarantors; and elimination adjustments. Condensed Consolidating Statements of Income (Dollars in Millions) Parent Non- Issuer Guarantors Guarantors Eliminations Consolidated For the Year Ended December31, 2009 Net sales $ $ 7,985 $ 162 $ (132 ) $ 8,015 Net sales, related party 404 404 Cost of products sold 4,541 76 (132 ) 4,485 Selling, general and administrative expenses 16 1,419 73 1,508 Amortization expense 28 28 Restructuring charge 56 56 Trademark impairment charges 567 567 Operating income (loss) (16 ) 1,778 13 1,775 Interest and debt expense 242 9 251 Interest income (9 ) (10 ) (19 ) Intercompany interest (income) expense (115 ) 114 1 Intercompany dividend income (43 ) 43 Other (income) expense, net (4 ) 13 9 Income (loss) before income taxes (139 ) 1,694 22 (43 ) 1,534 Provision for (benefit from) income taxes (48 ) 620 572 Equity income from subsidiaries 1,053 25 (1,078 ) Net income $ 962 $ 1,099 $ 22 $ (1,121 ) $ 962 For the Year Ended December31, 2008 Net sales $ $ 8,345 $ 157 $ (125 ) $

RJR Guaranteed, Unsecured Notes

RJR Guaranteed, Unsecured Notes Condensed Consolidating Financial Statements
	12 Months Ended Dec. 31, 2009 USD / shares
Guaranteed Unsecured Notes Condensed Consolidating Financial Statements Subsidiary [Abstract]
RJR Guaranteed, Unsecured Notes - Condensed Consolidating Financial Statements	Note21 RJR Guaranteed, Unsecured Notes Condensed Consolidating Financial Statements The following condensed consolidating financial statements relate to the guaranties of RJRs $62million unsecured notes. See note12 for additional information relating to these notes. RAI and certain of its direct or indirect, wholly owned subsidiaries, have fully and unconditionally, and jointly and severally, guaranteed these notes. The following condensed consolidating financial statements include: the accounts and activities of RAI, the parent Guarantor; RJR, the issuer of the debt securities; RJR Tobacco, GPI and certain of RJRs other subsidiaries, the other Guarantors; other subsidiaries of RAI and RJR, including SantaFe, Lane and the Conwood companies, that are not Guarantors; and elimination adjustments. Condensed Consolidating Statements of Income (Dollars in Millions) Parent Other Non- Guarantor Issuer Guarantors Guarantors Eliminations Consolidated For the Year Ended December31, 2009 Net sales $ $ $ 7,078 $ 1,139 $ (202 ) $ 8,015 Net sales, related party 396 8 404 Cost of products sold 4,294 393 (202 ) 4,485 Selling, general and administrative expenses 16 3 1,180 309 1,508 Amortization expense 27 1 28 Restructuring charge 56 56 Trademark impairment charges 491 76 567 Operating income (loss) (16 ) (3 ) 1,426 368 1,775 Interest and debt expense 242 8 1 251 Interest income (1 ) (7 ) (11 ) (19 ) Intercompany interest (income) expense (115 ) (7 ) (49 ) 171 Intercompany dividend income (43 ) 43 Other (income) expense, net (4 ) 12 2 (1 ) 9 Income (loss) before income taxes (139 ) 28 1,479 209 (43 ) 1,534 Provision for (benefit from) income taxes (48 ) (5 ) 565 60 572 Equity income from subsidiaries 1,053 941 25 (2,019 ) Net income $

Quarterly Results of Operations

Quarterly Results of Operations (Unaudited)
	12 Months Ended Dec. 31, 2009 USD / shares
Quarterly Results of Operations (Unaudited) [Abstract]
Quarterly Results of Operations (Unaudited)	Note22 Quarterly Results of Operations (Unaudited) First Second Third Fourth 2009 Net sales $ 1,921 $ 2,250 $ 2,152 $ 2,096 Gross profit 923 1,049 1,014 948 Net income(1) 8 377 362 215 Per share data(2): Basic: Net income $ 0.03 $ 1.29 $ 1.24 $ 0.74 Diluted: Net income $ 0.03 $ 1.29 $ 1.24 $ 0.74 2008 Net sales $ 2,057 $ 2,339 $ 2,272 $ 2,177 Gross profit 893 1,034 1,043 1,012 Net income(1) 505 364 211 258 Per share data(2): Basic: Net income $ 1.71 $ 1.24 $ 0.72 $ 0.89 Diluted: Net income $ 1.71 $ 1.23 $ 0.72 $ 0.88 (1) First quarter of 2009net income includes a $453million trademark impairment charge. First quarter of 2008net income includes a $328million gain on termination of joint venture. Third quarter of 2008net income includes a $91million restructuring charge and a $173million trademark impairment charge. Fourth quarter of 2009net income includes a $56million restructuring charge and a $114million trademark impairment charge. Fourth quarter of 2008net income includes a $(1)million restructuring charge and a $145million trademark impairment charge. (2) Income per share is computed independently for each of the periods presented. The sum of the income per share amounts for the quarters may not equal the total for the year.