British American Tobacco p l c : RAI Financial Statements 31 December 2024 (1,356 kb)

REYNOLDS AMERICAN INC.

Consolidated Financial Statements

December 31, 2024 and 2023

(With Independent Auditors' Report Thereon)

REYNOLDS AMERICAN INC.

Consolidated Financial Statements

Index

Independent Auditors' Report	1
Consolidated Statements of Income - For the Years Ended December 31, 2024 and 2023	3
Consolidated Statements of Comprehensive Income - For the Years Ended December 31, 2024 and 2023	4
Consolidated Statements of Cash Flows - For the Years Ended December 31, 2024 and 2023	5
Consolidated Balance Sheets - As of December 31, 2024 and 2023	6
Consolidated Statements of Shareholders' Equity - For the Years Ended December 31, 2024 and 2023	7
Notes to Consolidated Financial Statements	8

KPMG LLP

4242 Six Forks Road

Suite 850

Raleigh, NC 27609

Independent Auditors' Report

The Board of Directors

Reynolds American Inc.:

Opinion

We have audited the consolidated financial statements of Reynolds American Inc. and its subsidiaries (the Company), which comprise the consolidated balance sheets as of December 31, 2024 and 2023, and the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date that the consolidated financial statements are issued.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

Raleigh, North Carolina

February 19, 2025

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REYNOLDS AMERICAN INC.

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Millions)

			For the Years Ended December 31,
		2024				2023
Net sales (1)	$	14,369		$	14,851
Net sales, related party		53			54
Net sales		14,422			14,905
Costs and expenses:
Cost of products sold (1)		3,997			4,413
Selling, general and administrative expenses		1,842			1,647
Amortization expense		796			82
Asset impairment charges		-		54
Trademark impairment charges		-		6,877
Operating income		7,787			1,832
Interest and debt expense		380			404
Interest expense, related party		324			279
Interest income, related party		(177)		(181)
Net periodic benefit income, excluding service cost		(39)		(25)
Other expense, net		2			6
Other income, related party		(68)		-
Other expense, related party		57			37
Income before income taxes		7,308			1,312
Provision for income taxes		1,649			408
Net income		$	5,659		$	904

1. Excludes excise taxes of $2,333 million and $2,621 million for the years ended December 31, 2024 and 2023, respectively.
   See Notes to Consolidated Financial Statements

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REYNOLDS AMERICAN INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Millions)

	For the Years Ended December 31,
	2024				2023
Net income	$	5,659		$	904
Other comprehensive loss, net of tax benefit:
Retirement benefits, net of tax benefit:
(2024 - $12; 2023 - $15)		(38)		(50)
Comprehensive income	$	5,621		$	854

See Notes to Consolidated Financial Statements

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REYNOLDS AMERICAN INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Millions)

	For the Years Ended December 31,
	2024				2023
Cash flows from (used in) operating activities:
Net income	$	5,659		$	904
Adjustments to reconcile to net cash flows from operating activities:
Depreciation and amortization expense		907			209
Asset impairment charges		-		54
Trademark impairment charges		-		6,877
Deferred income tax expense (benefit)		(123)		(1,573)
Gain on sale of property, plant and equipment		(26 )		-
Other changes that provided (used) cash:
Accounts and other receivables		4			23
Inventories		86			207
Related party, net		37			(75)
Accounts payable		11			(35)
Accrued liabilities, including other working capital		32			135
Income taxes		778			4
Tobacco settlement accruals		(375)		(358)
Pension and postretirement		(89)		(78)
Other, net		(186)		(25)
Net cash flows from operating activities		6,715			6,269
Cash flows from (used in) investing activities:
Capital expenditures		(126)		(62)
Amounts due from related party - cash management agreements		138			538
Proceeds from sale of property, plant and equipment		69			10
Acquisition of intangibles		(30)		(74)
Net cash flows from investing activities		51			412
Cash flows from (used in) financing activities:
Dividends paid on common stock		(6,260)		(6,150)
Borrowings under notes payable to related party		305			1,099
Repayments of notes payable to related party		(781)		(535 )
Repayments of long-term notes		-		(1,057)
Other, net		(30)		(38)
Net cash flows used in financing activities		(6,766)		(6,681)
Net change in cash		-			-
Cash at beginning of year		1			1
Cash at end of year	$	1		$	1
Income taxes paid, net of refunds	$	781		$	1,685
Income taxes paid to parent	$	297		$	233
Interest paid	$	377		$	415
Interest paid to related party	$	420		$	111

See Notes to Consolidated Financial Statements

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REYNOLDS AMERICAN INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in Millions)

			As of December 31,
		2024				2023
Assets
Current assets:
Cash	$	1		$	1
Accounts receivable		41			44
Accounts receivable, related party		15			42
Other receivables		16			17
Inventories		821			907
Amounts due from related party - cash management agreements		4,118			4,118
Other current assets		146			98
Total current assets		5,158			5,227
Property, plant and equipment, net		1,231			1,245
Trademarks and other intangible assets, net of accumulated amortization		21,752			22,427
Goodwill		15,977			15,977
Long-term deferred income taxes		12			20
Pension assets		652			658
Other assets and deferred charges		106			82
Total assets	$	44,888		$	45,636
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	391		$	380
Tobacco settlement accruals		1,904			2,279
Due to related party		75			65
Current maturities of long-term debt		2,048			16
Notes and interest payable to related party		73			660
Other current liabilities		2,668			1,639
Total current liabilities		7,159			5,039
Long-term debt (less current maturities)		4,787			6,823
Long-term deferred income taxes		4,450			4,664
Long-term retirement benefits (less current portion)		530			572
Long-term notes payable to related party		5,105			5,129
Other noncurrent liabilities		487			403
Commitments and contingencies
Shareholders' equity:
Common stock (shares issued: 2024 and 2023 - 1,426,125,631)		-		-
Paid-in capital		18,312			18,309
Retained earnings		4,094			4,695
Accumulated other comprehensive income (loss)		(36)		2
Total shareholders' equity		22,370			23,006
Total liabilities and shareholders' equity		$	44,888		$	45,636

See Notes to Consolidated Financial Statements

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REYNOLDS AMERICAN INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars in Millions, Except Per Share Amounts)

													Accumulated
													Other			Total
	Common				Paid-In		Retained			Comprehensive			Shareholders'
	Stock				Capital			Earnings			Income (Loss)				Equity
Balance at December 31, 2022	$	-	$	18,316		$	9,941		$	52		$	28,309
Net income		-				-		904				-			904
Retirement benefits, net of $15 tax
benefit		-				-		-			(50)			(50)
Dividends - $4.31 per share		-				-		(6,150)			-			(6,150)
Stock-based compensation		-				(7)		-			-			(7)
Balance at December 31, 2023		-				18,309			4,695				2				23,006
Net income		-				-		5,659				-			5,659
Retirement benefits, net of $12 tax
benefit		-				-		-			(38)			(38)
Dividends - $4.39 per share		-				-		(6,260)			-			(6,260)
Stock-based compensation		-				3			-				-				3
Balance at December 31, 2024	$	-	$	18,312		$	4,094			$	(36)	$	22,370

See Notes to Consolidated Financial Statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - 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. RAI's wholly owned operating subsidiaries include R. J. Reynolds Tobacco Company; Santa Fe Natural Tobacco Company, Inc., referred to as SFNTC; American Snuff Company, LLC, referred to as American Snuff Co.; R. J. Reynolds Vapor Company, referred to as RJRV and Modoral Brands Inc., referred to as MBI.

On January 16, 2017, RAI, British American Tobacco p.l.c., referred to as BAT, BATUS Holdings Inc., an indirect, wholly owned subsidiary of BAT referred to as BHI, and Flight Acquisition Corporation, an indirect, wholly owned subsidiary of BAT, referred to as Merger Sub, entered into an Agreement and Plan of Merger, as it and the plan of merger contained therein were amended on June 8, 2017, referred to as the Merger Agreement, pursuant to which Merger Sub merged with and into RAI, referred to as the BAT Merger, with RAI surviving as an indirect, wholly owned subsidiary of BAT. Pursuant to the terms of the Merger Agreement, the BAT Merger was completed on July 25, 2017.

RAI elected not to apply pushdown accounting in its separate consolidated financial statements upon completion of the BAT Merger.

RAI was incorporated as a holding company in the State of North Carolina in 2004. RAI was created to facilitate the business combination of the United States, referred to as U.S., business of Brown & Williamson Holdings, Inc., referred to as B&W, an indirect wholly owned subsidiary of BAT, with R. J. Reynolds Tobacco Company, a wholly owned subsidiary of R.J. Reynolds Tobacco Holdings, Inc., referred to as RJR, on July 30, 2004, with such combination referred to as the B&W business combination.

References to RJR Tobacco prior to July 30, 2004, relate to R. J. Reynolds Tobacco Company, a New Jersey corporation. References to RJR Tobacco on and subsequent to July 30, 2004, and until June 12, 2015, relate to the combined U.S. assets, liabilities and operations of B&W and R. J. Reynolds Tobacco Company. Concurrent with the completion of the B&W business combination, RJR Tobacco became a North Carolina corporation. References to RJR Tobacco on and subsequent to June 12, 2015, relate to R. J. Reynolds Tobacco Company, a North Carolina corporation, and reflect the effects of (1) RAI's acquisition, referred to as the Lorillard Merger, on June 12, 2015, of Lorillard, Inc., n/k/a Lorillard LLC, referred to as Lorillard, and (2) the divestiture on June 12, 2015, referred to as the Divestiture, of certain assets including the brands WINSTON, SALEM, KOOL and MAVERICK, referred to as the Acquired Brands by subsidiaries or affiliates of RAI and Lorillard, together with the transfer of certain employees and certain liabilities, to a wholly owned subsidiary of Imperial Brands PLC. Additionally on June 12, 2015, shortly after the completion of the Lorillard Merger, Lorillard Tobacco Company, LLC, a wholly owned subsidiary of Lorillard, referred to as Lorillard Tobacco, merged with and into RJR Tobacco, with RJR Tobacco continuing as the surviving entity, referred to as the Lorillard Tobacco Merger.

Nature of Operations

RAI's primary operating subsidiaries are RJR Tobacco, SFNTC, American Snuff Co. and RJRV. RAI's operating subsidiaries conduct substantially all of their business in the U.S. and its territories.

RAI's largest operating subsidiary, RJR Tobacco, is the second largest tobacco company in the U.S. Its brands include three of the top four best-selling cigarettes in the U.S.: NEWPORT, CAMEL and LUCKY STRIKE. These brands, together with its other brands, including PALL MALL, DORAL, MISTY and CAPRI, are manufactured in a variety of styles and marketed in the U.S. As part of its total tobacco strategy, RJR Tobacco also offers a smoke-free tobacco product, CAMEL Snus. RJR Tobacco manages the export of tobacco products to U.S. territories, U.S. duty-free shops and U.S. overseas military bases. RJR Tobacco also manages the premium brands, DUNHILL and STATE EXPRESS 555, which are licensed from BAT. For additional information regarding related parties, see Note 11.

SFNTC manufactures and markets premium cigarettes and other tobacco products under the NATURAL AMERICAN SPIRIT brand in the U.S.

American Snuff Co. is the second largest traditional oral tobacco products manufacturer in the U.S. American Snuff Co.'s primary brands include its largest selling moist snuff brands, GRIZZLY and KODIAK.

RJRV is the largest vapor company in the U.S. RJRV manufactures and markets vapor products under the VUSE brand name. Other operating subsidiaries include MBI that markets modern oral products under the VELO brand name. These subsidiaries operate in the U.S.

Major U.S. Customers and Foreign Sales

Sales to Performance Food Group Company, Inc., a distributor, constituted approximately 23% of RAI's consolidated net sales in each of 2024 and 2023. Sales to McLane Company, Inc., a distributor, constituted approximately 22% of RAI's consolidated net sales in 2024 and 20% in 2023. No other customer accounted for 10% or more of RAI's consolidated net sales during those periods.

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