By MICHAEL FELBERBAUM
RICHMOND, Va. (AP) â¿¿ Reynolds American Inc. said Tuesday that its first-quarter net income jumped 88 percent as higher prices and lower expenses from a longstanding legal settlement offset a decline in cigarette sales.
The nation's second-biggest tobacco company earned $508 million, or 92 cents per share, for the quarter ended March 31, up from $270 million, or 47 cents per share, a year ago.
Adjusted earnings were 72 cents per share, beating Wall Street expectations by three cents. That excludes a benefit of 21 cents per share in credits for disputed payments under the 1998 Master Settlement Agreement in which some cigarette makers are paying states for smoking-related health care costs. The Winston-Salem, N.C.-based company also adjusted for one-time implementation costs.
The maker of Camel, Pall Mall and Natural American Spirit cigarettes said revenue excluding excise taxes fell nearly 3 percent to $1.88 billion. Analysts polled by FactSet expected $1.91 billion.
Its shares fell 39 cents to close at $45.43 Tuesday. It shares have traded in a 52-week range of $39.45 to $46.93.
Reynolds American said higher gas prices and payroll taxes lowered consumers' disposable income during the quarter. Those factors, along with two fewer shipping days, reduced the number of cigarettes sold by its R.J. Reynolds Tobacco subsidiary by about 9 percent during the quarter to 14.9 billion cigarettes, compared with its estimate of a total industry decline of 6 percent.
It sold 5.5 percent less of its Camel brand and Pall Mall volumes fell 2 percent. The brands account for more than 60 percent of Reynolds American's total cigarette volume.
Camel's market share increased 0.1 percentage points to 8.5 percent of the U.S. market, while Pall Mall's market share grew 0.5 percentage points to 9 percent.
The company has promoted Pall Mall as a longer-lasting and more affordable cigarette as smokers weather the weak economy and high unemployment, and has said half the people who try the brand continue using it.