Lorillard Inc.’s first-quarter profit jumped 26% as its cigarette shipments increased and the company’s Newport menthol cigarettes grew their market share.

Lorillard, the third-largest cigarette manufacturer by sales, dominates the market for menthol cigarettes, which have done better than regular cigarettes in the U.S. in recent years.

The company’s earnings and revenue beat expectations. Still, Lorillard cautioned that fluctuations in retail inventories early last year complicated comparisons with the recent quarter and that the big comparative shipment increases may not continue into the second quarter.

Retailer inventory levels on cigarettes fluctuated sharply early last year in the midst of tax changes on cigarettes, making comparisons with this year’s shipments difficult. Wholesalers and retailers brought down their cigarette stocks and purchases to unusually low levels in the first quarter of last year, ahead of an expected increase in federal excise taxes on cigarettes that took place in April 2009.

The retailer stocks later picked up again, and some retailers even appear to have built up more than needed inventory in this year’s first quarter, the company said.

Lorillard’s first-quarter profit was $232 million, or $1.50 a share, up from $184 million, or $1.09 a share, a year earlier. Shares outstanding fell 8% as the company repurchased 2.6 million shares during the quarter.

Sales soared 48% to $1.36 billion and climbed 20% excluding excise taxes. Sales excluding excise taxes were $923 million, compared with $767 million a year earlier. Analysts polled by Thomson Reuters predicted earnings of $1.22 a share on $803 million on sales.

Lorillard’s dependence on menthol cigarettes for revenue has put the company in greater focus recently. Some public health advocates argue that menthol, which is generally derived from mint plants, masks the harmful flavors of cigarettes and encourages people to smoke. A special panel of health and other experts has in recent weeks begun to work with the Food and Drug Administration to help the agency decide whether it should restrict sales or marketing of menthol products.

On a conference call, Lorillard Chief Executive Martin Orlowsky said the thrust of the panel has largely been as expected so far. The company still believes that scientific research supports its view that the effects of menthol cigarettes aren’t different from regular cigarettes, he said.

In the latest quarter, the company’s U.S. wholesale shipments climbed 12.7%. The company’s domestic retail market share increased by 1.17 share points over the year-ago period to 12.61%. Newport domestic retail market share increased by 0.75 share points from a year earlier to reach share of 10.9%.

Newport is Lorillard’s main brand, although the company sells other cigarette brands like Maverick and Kent.

—Matt Jarzemsky contributed to this article. Online.wsj

Federal officials began grappling Tuesday with one of the thorniest issues surrounding the regulation of tobacco: whether to ban menthol, the most popular cigarette flavoring, which is smoked by millions of Americans every day.

The issue carries great importance for public health advocates and tobacco executives. But it also has racial implications, since menthol cigarettes are overwhelmingly popular among African Americans.

A scientific advisory panel that will advise the Food and Drug Administration on regulating tobacco opened a two-day meeting Tuesday and began reviewing hundreds of published studies on menthol cigarettes. The panel, largely made up of scientists, physicians and public health experts, has a year to make a recommendation to the FDA on menthol cigarettes, which are used by about 26 percent of smokers and make up almost one-third of the $70 billion U.S. cigarette market.

Menthol cigarettes are especially popular among young smokers. According to the National Survey on Drug Use and Health, 62 percent of middle-school students who smoke begin with menthol cigarettes, whose minty taste can mask the harshness of tobacco.

About 75 percent of African American smokers use menthol brands, and tobacco companies heavily advertise menthol products in black communities and media.

Many African American smokers view menthol cigarettes as “soothing” and “smooth,” and less harsh and dangerous than regular cigarettes, according to a 2008 study by the Centers for Disease Control and Prevention. But there is no evidence that menthol cigarettes are less lethal than regular cigarettes. Although African Americans smoke fewer cigarettes compared with white smokers, they have higher rates of lung cancer, stroke and other tobacco-related diseases.

“When you peel away the layers, this is an economic issue for the tobacco industry,” said William S. Robinson, executive director of the National African American Tobacco Prevention Network, which wants the FDA to ban menthol cigarettes. “We’re talking about $18 billion a year; that’s a serious hit for them,” Robinson said in an interview.

When Congress passed a historic law last year that gave the FDA the power to regulate tobacco, it also banned candy and spice flavorings such as chocolate and clove, saying cigarette makers used those products to hook youngsters into a lifetime addiction. But it exempted menthol from the ban, saying it wanted the FDA to study the issue and report by 2012 whether restrictions on it would serve the public health.

That prompted a letter of protest to Congress from seven former U.S. health secretaries, who said that allowing menthol-cigarette sales to continue would “trample the health” of African Americans. They called it a “loophole big enough for a herd of wild animals to romp through.”

Lorillard, which makes Newport, the country’s most popular brand of menthol cigarettes, said in a statement Tuesday that menthol cigarettes are no more dangerous to health than standard cigarettes. “Menthol, obviously, has been used for decades in food, drink, cosmetics and other products,” the company said. “And the science is clear and compelling that there is no differing health risk between menthol and non-menthol products. With respect to public health, using the best methods available to science, it is clear a menthol cigarette is just another cigarette and should be treated no differently.”

But the scientific advisory panel has not yet reached that conclusion, and it spent Tuesday listening to FDA staff members present their review of 343 research papers on menthol cigarettes, published between 1921 and 2009.

Under the law passed last year, the FDA can demand for the first time internal studies and data from the tobacco industry. One of the advisory panel’s goals during its first meeting is to determine what additional information it will request from the industry.

Robinson said that could be key in settling the debate about whether menthol poses a particular danger to public health.

“We still have questions about the role of menthol, regarding initiation of smoking and continued addiction and difficulty in quitting,” he said. “Under this new law, the industry has to turn over documents at a level that’s unprecedented. They have to share their scientific information. When we begin to know what they know, hopefully that will lead to a ban on menthol products.”

By Lyndsey Layton, Washingtonpost

Membership of the FDA’s Tobacco Products Scientific Advisory Committee was recently established, with Lorillard Tobacco Co.’s principal scientist, Dr. J. Daniel Heck, assuming the role of non-voting representative of the tobacco manufacturing industry.

“With the full membership of the Tobacco Products Scientific Advisory Committee now in place, Lorillard looks forward to working with the committee and contributing to its scientific review of menthol and other topics,” the company said in a statement. “Lorillard remains confident that a serious examination of menthol science will show that the best available science does not support an assertion that menthol impacts public health.”

Heck has more than 30 years of experience in research, with a record of peer-reviewed articles and studies, according to the company, which makes Newport, the No. 1 menthol cigarette brand in the U.S. Heck earned his doctorate in pharmacology and toxicology from the Graduate School of Biomedical Sciences at the University of Texas Health Sciences Center in Houston, and has served as principal scientist at Lorillard since 2003.

Other members of the Tobacco Products Scientific Advisory Committee include:

– Chair: Jonathan M. Samet, M.D., M.S.: Department of Preventive Medicine, Keck School of Medicine.

– Acting Designated Federal Official: Cristi L. Stark, M.S.: Center for Tobacco Products, FDA

– Neal L. Benowitz, M.D.; Schools of Medicine and Pharmacy, University of California.

– Dorothy K. Hatsukami, Ph.D.: Tobacco Use Research Center, University of Minnesota.

– Mark Stuart Clanton, M.D., M.P.H.: American Cancer Society

– Gregory Niles Connolly, D.M.D., M.P.H.: Division of Public Health Practice, Harvard School of Public Health.

– Karen L. DeLeeuw, M.S.W.: Center for Healthy Living and Chronic Disease Prevention, Colorado Department of Public Health and Environment.

– Representative of the General Public: Patricia Nez Henderson, M.P.H., M.D.: Black Hills Center for American Indian Health.

– Jack E. Henningfield, Ph.D.: Research and Health Policy, Pinney Associates.

– Luby Arnold Hamm, Jr.: Representative of the interests of tobacco growers, non-voting.

– John H. Lauterbach, Ph.D., DABT: Representative for the interest of small business tobacco manufacturing industry, non-voting; Lauterbach & Associates LLC.

– Melanie Wakefield, Ph.D.: Centre for Behavioural Research in Cancer, The Cancer Council Victoria.

The Tobacco Products Scientific Advisory Committee was established as part of the 2009 Family Smoking Prevention and Tobacco Control Act, which gave the FDA power to regulate tobacco. It was designed to advise the commissioner or designee in discharging responsibilities as they relate to the regulation of tobacco products, the FDA’s Web site states.

The first meeting of the committee will be March 30, when it will receive presentations on the background and overview of the FDA Center for Tobacco Products, the Family Smoking Prevention and Tobacco Control Act and the Tobacco Products Scientific Advisory Committee, according to the FDA’s Web site. It will also receive presentations on and discuss published literature on menthol, covering user demographics, preferential use by persons initiating tobacco use, health effects, the effects of menthol on addiction and cessation, menthol marketing and consumer perceptions, sensory qualities and effect on how cigarettes are smoked.

On March 31, the committee will also discuss an action plan for the enforcement of restrictions on the advertising and promotion of menthol and other cigarettes to youth; and the establishment of a list of harmful tobacco product constituents, according to the Web site.

GREENSBORO, N.C. — In a conference call with analysts regarding fourth-quarter earnings, Martin Orlowsky, CEO of Lorillard Inc., the nation’s third-largest cigarette company and maker of the top menthol cigarette brand, Newport, discussed an upcoming review of menthol by the U.S. Food and Drug Administration’s Tobacco Products Scientific Advisory Committee, which is planning to consider claims that products like menthol cigarettes have greater public health impacts, including among children and certain ethnic groups, The Associated Press reported.

“We believe the weight of the scientific evidence does not support a conclusion that menthol cigarettes convert greater health risk than non-menthol cigarettes. We also believe that the scientific advisory committee will indeed form its conclusions and recommendations based on the scientific evidence before it. We therefore continue to believe that the scientific advisory committee will not make a recommendation to the FDA that it ban menthol,” he said. “We believe that a ban on menthol would lead to a massive black market for contraband mentholated cigarettes and encourage the entry of totally unregulated products into the marketplace that would not meet even the basic standards for product integrity and quality.”

While analysts believe a ban on menthol is unlikely, the FDA could take some action against it, such as warning labels or reducing the amount of menthol in products, according to the report.

Also during the call, Lorillard said it will enter the moist smokeless tobacco product market. Lorillard didn’t provide details of the new moist smokeless tobacco product, but said that an existing joint venture with Swedish Match to develop a new “snus” tobacco product for the U.S. had been mutually terminated, The Wall Street Journal reported.

In 2006 Lorillard entered into a joint venture with Swedish Match North America to develop and study of Triumph Snus. During the call, Lorillard said the snus product didn’t make gains in the test markets in the U.S., and that it may not have been the right time for the product in North America, according to the report.

Lorillard appears to be betting that Americans will continue to prefer more traditional products such as moist smokeless tobacco, the report stated.

Swedish Match sells its flagship snus brand, General, as well as the Catch brand in the U.S. Swedish Match will also continue selling in the U.S. its moist smokeless tobacco products such as Red Man and Timberwolf.

“We remain committed to the U.S. market,” Lars Dahlgren, chief executive of Swedish Match, said in an e-mail statement to the Journal. The company said the dissolution of the Lorillard joint venture has no bearing on its snus joint venture company with Philip Morris International Inc., which distributes snus products outside of the U.S. and Scandinavia.

GREENSBORO, N.C. — Newport cigarette maker Lorillard Inc. said on Monday it will soon enter the market for moist smokeless tobacco products, according to a Wall Street Journal report, but said that an earlier joint venture with Swedish Match AB to develop a new product in the United States had been mutually terminated.

Sales of smokeless tobacco products, widely sold by companies such as Altria Group Inc. through brands like Copenhagen and Skoal, have risen in the United States even as cigarette sales have dropped.

Lorillard did not provide details of the new moist smokeless tobacco product it will sell, but told the newspaper that an existing joint venture with Swedish Match to develop a new snus tobacco product for the United States had been terminated. Snus is a nearly 200-year-old Swedish product. In 2006 Lorillard entered into a joint venture with Swedish Match North America to develop and study the possibility of marketing a tobacco product for the U.S. market called Triumph Snus, the report said.

Snus differs from most smokeless tobacco products because it is created through a special pasteurization process. It comes in small pouches and does not require spitting. On a conference call cited by the Journal, Lorillard said the snus product did not make gains in the test markets in the United States and that it may not have been the right time for the product in North America. Lorillard appears to be betting that Americans will continue to lean toward traditional formulations like moist smokeless tobacco, as opposed to newer forms they are less familiar with said the report.

Other companies are still saying they believe snus has a future in the United States. Altria and Reynolds American Inc. have launched snus products, but sales of these products have generally stayed relatively small, according to the Journal. Both of these companies, however, said they are expanding the reach of their snus products.

A spokesperson for Reynolds American, David Howard, told the paper that the company has been very pleased with sales of its Camel Snus product and believes that it is a “viable” product.

The company rolled out Camel Snus nationwide in first-quarter 2009 after putting it in test markets for almost three years. “It’s a small market, but we believe there is potential growth for that market,” Howard said. An Altria spokesperson, Brendan McCormick, told the paper that the company is pleased with the results of its Marlboro Snus product in test markets and will be expanding it nationally at the end of March.

Swedish Match sells its flagship snus brand General in the United States, as well as another brand called Catch. These were sold outside of the Lorillard joint venture and will continue to be sold in the United States. Swedish Match will also continue selling the moist smokeless tobacco products, such as its Red Man and Timberwolf brands, it already sells in the United States.

“We remain committed to the U.S. market,” Lars Dahlgren, CEO of Swedish Match told the Journal. The company said the dissolution of the Lorillard joint venture has no bearing on its snus joint venture company with Philip Morris International Inc. That venture aims to distribute snus products outside of the United States and Scandinavia.

Lorillard dominates the market for menthol cigarettes. Lorillard’s Newport brand represents the bulk of its U.S. sales, and its U.S. volume fell 6.5% during the quarter, though its U.S. market share rose to 10.32% from 9.86%

Greensboro, N.C.-based Lorillard is the third-largest manufacturer of cigarettes in the United States. In addition to Newport, the Lorillard product line has five additional brand families marketed under the Kent, True, Maverick, Old Gold and Max brand names. These six brands include 41 different product offerings which vary in price, taste, flavor, length and packaging.