RJR RJ Reynolds Tob Hlds

R.J. Reynolds Tobacco Holdings Presents to Consumer Analyst Group of New York SCOTTSDALE, Ariz., Feb. 18 /PRNewswire-FirstCall/ -- In a presentation here to industry analysts and investors, R.J. Reynolds Tobacco Holdings, Inc. reiterated its commitment to strengthening and improving its business, and building shareholder value. The company also reaffirmed the full-year guidance it issued on Jan. 27. Speaking at the Consumer Analyst Group of New York (CAGNY) conference, Dianne M. Neal, RJR's chief financial officer, said that 2003 was a year of reevaluation and transformation for the company. RJR entered 2003 facing significant challenges, Neal said, including continuing industry volume declines; permanent pressure from low-cost competitors; a cost-structure disadvantage; and a lack of pricing flexibility due to settlement costs and increased state and federal excise taxes. These factors prompted the company to undertake a comprehensive business analysis; announce a new business plan; and enter into an agreement to combine the U.S. business operations of RJR Tobacco with those of British American Tobacco's (BAT) Brown & Williamson (B&W) subsidiary. In September 2003, RJR announced a two-pronged initiative to drive profit growth: a new brand-portfolio strategy for RJR Tobacco; and a cost-structure reduction that will enable RJR to achieve $1 billion in annualized savings by year-end 2005. The new brand-portfolio strategy adopted by RJR Tobacco focuses on investing in its two growth brands, Camel and Salem; limiting investment in Winston and Doral; and emphasizing profit on its private-label brands. Neal said that RJR's cost-reduction efforts yielded savings of $400 million in 2003 and are expected to produce an additional $400 million in savings in 2004. The company is on track to deliver a $1 billion cost reduction by the end of 2005, she said. RJR also reaffirmed the full-year guidance it provided in January. In 2004, Neal said, RJR expects to generate operating income of $725 million to $775 million, excluding restructuring charges currently estimated to be approximately $20 million. With these restructuring charges included, RJR expects operating income of $705 million to $755 million, net income of $385 million to $415 million and diluted earnings per share of $4.55 to $4.90. The company expects to end the year with approximately $1.6 billion in cash. The company's guidance does not include the potential effects of the pending B&W transaction. Neal reported that the RJR/B&W business combination is proceeding on schedule. Once it is complete, current RJR shareholders will retain 58 percent ownership in the new holding company, Reynolds American Inc. Combining the U.S. operations of RJR Tobacco and B&W will make the company a more effective and efficient competitor, Neal said. RJR expects to achieve synergies of at least $500 million once the companies are fully integrated. The deal is expected to close in mid-2004, following receipt of regulatory and shareholder approvals. Full integration of the two companies is expected to take 18 to 24 months thereafter, she said. "The company's restructuring, the implementation of RJR Tobacco's new brand portfolio strategy and the business combination with B&W are allon track," Neal said. "We are pleased with the significant progress we have made toward putting RJR on the right path to improve business performance and enhance shareholder value in 2004 and the years ahead." Statements included in this news releasewhich 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 RJR's future performance and financial results include risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks include the substantial and increasing regulation and taxation of the cigarette industry; various legal actions, proceedings and claims relating to the sale, distribution, manufacture, development, advertising, marketing and claimed health effects of cigarettes that are pending or may be instituted against RJR or its subsidiaries; the substantial payment obligations and limitations on the advertising and marketing of cigarettes under various litigation settlement agreements; the continuing decline in volume in the domestic cigarette industry; competition from other cigarette manufacturers, includingincreased promotional activities and the growth of the deep-discount category; the success or failure of new product innovations and acquisitions; the effect of market conditions on the performance of pension assets and the return on corporate cash; any potential costs or savings associated with realigning the cost structure of RJR and its subsidiaries; 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; the responsiveness of both the trade and consumers to new products and marketing and promotional programs; and the ratings of RJR securities. In addition, RJR can give no assurance that the proposed formation of Reynolds American Inc., the combination of RJR Tobacco and the U.S. assets, liabilities and operations of Brown & Williamson Tobacco Corporation, and the related transactions, will be consummated, or if consummated, that any expectationsrelating thereto will be realized. Factors that could affect whether these transactions are consummated include the satisfaction of regulatory conditions to the business combination that cannot be waived and the satisfaction or waiver of all other conditions, including obtaining clearances from U.S. and European regulatory authorities and RJR shareholders, as well as the receipt of satisfactory Internal Revenue Service rulings. Due to these uncertainties and risks, undue reliance should not be placed on these forward-looking statements, which speak only as of the date of this news release. Except as provided by federal securities laws, RJR is not required to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Additional Information and Where To Find It Reynolds American Inc., the holding company to be formed in the proposed business combination, has filed a registration statement on Form S-4 that includes a preliminary proxy statement/prospectus and other relevant documents in connection with the proposed business combination. The registration statement will be amended to include the year-end 2003 financial statements. When the registration statement becomes effective, a final proxy statement/prospectus and other relevant documents will be mailed to RJR shareholders. INVESTORS AND SECURITY HOLDERS OF RJR ARE ADVISED TO READ THESE DOCUMENTS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED BUSINESS COMBINATION. Documents filed by RJR and Reynolds American Inc. with the SEC can be found at the SEC's Web site at http://www.sec.gov/ . Once available, free copies of the final prospectus/proxy statement, as well as RJR's and Reynolds American Inc.'s related filings with the SEC, also may be obtained from RJR by directing a request to R.J. Reynolds Tobacco Holdings, Inc. at P.O. Box 2866, Winston-Salem, NC 27102-2866, Attn.: Office of Investor Relations, or by telephone at (336) 741-5165 or on RJR's Web site, http://www.rjrholdings.com/ . R.J. Reynolds Tobacco Holdings, Inc. is the parent company of R.J. Reynolds Tobacco Company and Santa Fe Natural Tobacco Company, Inc. R.J. Reynolds Tobacco Company is the second-largest tobacco company in the United States, manufacturing about one of every four cigarettes sold in the United States. Reynolds Tobacco's product line includes four of the nation's 10 best-selling cigarette brands: Camel, Winston, Salem and Doral. Santa Fe Natural Tobacco Company, Inc. manufactures Natural American Spirit cigarettes and other tobacco products, and markets them both nationally and internationally. Copies of RJR's news releases, annual reports, SEC filings and other financial materials are available on the company's Web site, http://www.rjrhholdings.com/ . DATASOURCE: R.J. Reynolds Tobacco Holdings, Inc. CONTACT: Investors, Carole Biermann Wehn, +1-336-741-5182, or Media, Jan Smith, +1-336-741-6995, both of R.J. Reynolds Tobacco Holdings, Inc. Web site: http://www.rjrt.com/ http://www.rjrholdings.com/

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