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1.

Please discuss in detail the basis upon which accruals are made and the significant judgments, assumptions and uncertainties associated with determining the amount of accruals. For factors that are variable, disclose those most subject to change and the related sensitivity to change, along with the factors that cause changes. Refer to Section V of “Interpretation: Commission Guidance Regarding Management's Discussion and Analysis of Financial Condition and Results of Operations” available on our website at http://www.sec.gov/rules/interp/33-8350.htm for guidance. Please provide us with a copy of your intended revised disclosure.

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2.

We note that cost of goods sold is material to your results but you do not provide a discussion and analysis of this line item. Please revise your disclosure to provide a direct comparative discussion analysis. Your disclosure should quantify and analyze the impact of each (and not netted) significant component of cost of goods sold that caused this line item to materially vary (or not vary when expected to) between comparative periods, with explanation of the associated underlying reasons. In this regard, we believe materiality should be assessed in relation to operating income. This disclosure should be presented in a manner so as to allow investors to discern the relative contribution of each component cited to the total change in cost of goods sold. In addition, the impacts of material variances in components of cost of goods sold that offset each other should be separately disclosed, quantified, and discussed (and not netted). Please provide us with a copy of your intended revised disclosure.

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3.

We note that the current liability for “settlement accruals” increased from $18.803 million at December 31, 2009 to $48.071 million at December 31, 2010, increased from $48.071 million at December 31, 2010 to $80.796 million at March 31, 2011 and increased from $77.742 million at June 30, 2011 to $117.668 million at September 30, 2011 without apparent direct explanation. Please explain to us in detail and disclose the basis for these increases, as well as the decrease between March 2011 and June 2011, citing the specific matters to which they relate, and where in your financial statements amounts accrued were charged.

4.

You state that you are unable to estimate the possible loss or range of loss that could result from an unfavorable outcome in any of the pending tobacco related cases. We recognize that there are a number of uncertainties and potential outcomes associated with loss contingencies. Nonetheless, an effort should be made to develop estimates for purposes of disclosure, including determining which of the potential outcomes are reasonably possible and what the reasonably possible range of losses would be for those reasonably possible outcomes. In this regard, please (i) explain to us the procedures you undertake on a quarterly basis to attempt to develop a range of reasonably possible loss for disclosure and (ii) for each material matter, what specific factors caused the inability to estimate and when you expect those factors to be alleviated. For example, we note that your June 2010 payment of $14.361 million related to the Lukacs Case was not preceded in an earlier reporting period with disclosure of an amount of reasonably possible loss or range of loss nor of accrual of any amount of loss deemed probable for the case.

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1.	Most cases are inactive and substantive discovery has not occurred;

2.	Without discovery, we cannot properly evaluate whether the smoker or decedent qualifies as an Engle class member who would be entitled to the extension of the statute of limitations;

3.	Without discovery, we do not know brand usage or amount smoked and when smoked;

4.	Without discovery, we do not know what the alleged injuries are (e.g., the value of a lung cancer case is different from the value of a mild COPD case);

5.	Without discovery, we do not know if there are viable alternative causation or other defenses;

6.	Without discovery, we do not know the level of awareness of the smoker of the risks of smoking throughout the years;

7.	With the cases that have gone to trial, there has been a high variability of verdicts and apportionment of fault.  These results demonstrate that there is no formula that would form the basis for a reasonable estimate of potential loss;

8.	The number of trials that have gone to verdict do not take into account the number of cases where plaintiffs have dropped us for no or nominal amounts of money.  The fact that plaintiffs have dropped us in most instances when we have no or de minimus smoking history illustrates the importance of having discovery before evaluating a case;

9.	Even with some discovery, until depositions are taken we do not have a clear picture of the smoking history, injuries and damages involved in any given case;

10.	Plaintiffs do not typically request a specific amount of damages in their pleadings;

11.

There are issues with the delay in getting to trial that potentially effect valuation of a case.  For example, a plaintiff whose cancer has gone into remission may become statistically unlikely to have a recurrence, if the remission period exceeds a certain length of time. Also, it is impossible to predict whether a smoker, or a smoker's survivors, will still be alive when their case comes to trial;

12.

The Engle progeny litigation has raised numerous legal issues, many of which have yet to be addressed by the appellate courts, which relate to the viability of Engle progeny plaintiffs' claims.  A number of these issues are currently on appeal and may significantly impact the survival of a number of causes of action currently pending.  Some examples of these legal issues include: a) whether a cigarette manufacturer can be held liable to an Engle progeny plaintiff who never used a product manufactured by that manufacturer; and b) whether a plaintiff is entitled to amend a personal injury complaint to substitute the personal representative of the estate and allege wrongful death, when the smoker dies during the pendency of the litigation or whether the personal representative is required to file a new lawsuit and, if so, what is the impact of the statute of limitations; and

13.	The Special Master, appointed by the federal court to manage the federal Engle progeny cases, said in the January 31, 2012 report to the court, among other things:

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5.

Given the extensiveness of your tobacco related litigation, please include in the notes to your financial statements a roll forward schedule for the “settlement accruals” obligation reported (as well as for any other liability account that may be recorded in regard to this type of litigation if not included in “settlement accruals”). The schedule should include separate lines for beginning and ending balances, new amounts accrued, payments, and adjustments to prior accruals, and should be segregated by the type of action you have noted, that is, individual actions, class actions, health care cost recovery actions, MSA and other state settlement agreements. We believe this will provide more transparency

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