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UNITED STATES

FORM 10-Q

Commission file number: 1-6388

R.J. Reynolds Tobacco Holdings, Inc.

401 North Main Street

(336) 741-5500

(Former name, former address and former fiscal year, if changed from last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     YES x     NO o

      Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 89,548,691 shares of common stock, par value $.01 per share, as of July 18, 2002.

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INDEX

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PART I — Financial Information

Item 1. Financial Statements

R.J. REYNOLDS TOBACCO HOLDINGS, INC.

*	Excludes excise taxes of $452 million and $405 million for the three months ended June 30, 2002 and 2001, respectively, and $880 million and $767 million for the six months ended June 30, 2002 and 2001, respectively.

See Notes to Condensed Consolidated Financial Statements

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R.J. REYNOLDS TOBACCO HOLDINGS, INC.

See Notes to Condensed Consolidated Financial Statements

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R.J. REYNOLDS TOBACCO HOLDINGS, INC.

See Notes to Condensed Consolidated Financial Statements

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 — Interim Reporting

Basis of Presentation

      The condensed consolidated financial statements include the accounts of R.J. Reynolds Tobacco Holdings, Inc., referred to as RJR, and its wholly owned subsidiaries. RJR’s wholly owned subsidiaries include its operating subsidiaries, R. J. Reynolds Tobacco Company, referred to as RJR Tobacco, and Santa Fe Natural Tobacco Company, Inc., referred to as Santa Fe. RJR also wholly owns RJR Acquisition Corp.

      The equity method is used to account for investments in businesses that RJR does not control, but has the ability to significantly influence operating and financial policies. The cost method is used to account for investments in which RJR does not have the ability to significantly influence operating and financial policies. All material intercompany balances have been eliminated.

      The accompanying unaudited, interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and, in management’s opinion, contain all adjustments, consisting only of normal recurring items, necessary for a fair statement of the results for the periods presented. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. For interim reporting purposes, certain costs and expenses are charged to operations in proportion to the estimated total annual amount expected to be incurred. The results for the interim period ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002.

      The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related footnotes which appear in RJR’s Annual Report on Form 10-K for the year ended December 31, 2001. For comparability, certain reclassifications were made to conform prior periods to the current presentation format. All dollar amounts are presented in millions unless otherwise noted.

      On January 16, 2002, RJR acquired, with cash, 100% of the voting stock of privately held Santa Fe. Fiesta Acquisition Corp., a wholly owned subsidiary of RJR, merged with and into Santa Fe, and Santa Fe, being the surviving corporation, became a wholly owned subsidiary of RJR. The acquisition was accounted for as a purchase, with its cost of $354 million allocated on the basis of the estimated fair market value of the assets acquired and liabilities assumed. The results of operations of Santa Fe have been included in the accompanying condensed consolidated statements of income since January 16, 2002. The financial condition and results of operations of Santa Fe do not meet the criteria for a reportable operating segment. As a result, information related to Santa Fe is not generally disclosed separately in this document.

Recently Adopted Accounting Pronouncements

      On January 1, 2002, RJR adopted the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” As of December 31, 2001, the carrying values of RJR Tobacco’s goodwill and trademarks were $6.9 billion and $2.8 billion, respectively. RJR Tobacco recorded goodwill and trademark amortization expense of $90 million and $181 million during the three and six months ended June 30, 2001, respectively. As of January 1, 2002, RJR Tobacco’s trademarks and goodwill are no longer amortized.

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      The following table reconciles net income to its amount adjusted to exclude goodwill and trademark amortization expense:

      The new criteria provided in SFAS No. 142 require the testing of impairment based on fair value. For initial application of SFAS No. 142, an independent appraisal firm was engaged to value RJR’s goodwill and trademarks as of January 1, 2002. RJR’s goodwill as of January 1, 2002 was attributable to one reporting unit, RJR Tobacco, which comprises substantially all of RJR’s consolidated results of operations and financial condition.

      No goodwill impairment was indicated, since the fair value of RJR was determined to be greater than its carrying value using several valuation techniques, including discounted cash flow analysis. RJR’s most recent fair value determination resulted in an amount that substantially exceeded the carrying value. Accordingly, RJR is not required to annually determine the fair value of the reporting unit, as long as its assets and liabilities do not change significantly, and it is considered unlikely that the current fair value would be less than the carrying value.

      The changes in the carrying amount of goodwill during the six months ended June 30, 2002 were:

      Other intangible assets as of January 1, 2002 consisted