Net income for the Winston-Salem-based company in the second quarter was $211 million, up from $127 million during the same period of 2001. Earnings per share increased to $2.29 from $1.26.

Net sales were level with the year-ago quarter at $1.70 billion, due to higher pricing, which was offset by lower volume and higher promotional spending. Operating income for the second quarter was $372 million, up 4 percent from $357 million in 2001.

RJR's shares were down 40 cents at $51.58 each in early trading Friday on the New York Stock Exchange.

"We met our objectives for the second quarter and took several steps to enhance shareholder value," said Andrew J. Schindler, RJR's chairman and chief executive officer.

In its earnings statement, RJR said it expects earnings per share for the third quarter to rise to $2.20 to $2.30 a share, up from $2.14 a year earlier. The average estimate of industry analysts surveyed by Thomson First Call had been for earnings of $2.32 per share in the third quarter.

RJR said the company's previous full-year guidance was lowered slightly to reflect the impact of the joint venture with Gallaher Group PLC to market American-blend cigarettes, initially in four European countries.

There were other factors as well, Schindler said.

"Yesterday, one of our major competitors announced increased promotional spending in the second half of 2002," he said. "The guidance ... is based on current promotional trends and will be subject to further evaluation given yesterday's announcement."

On Thursday, market leader Philip Morris said it would spend an extra $350 million on marketing its premium cigarettes led by top-selling Marlboros.

RJR Tobacco's market share for the three-month period averaged 22.77, an increase of 0.12 share points compared to the first two months of the year. During the same period last year, its market share was 23.56.

___

On the Net:

R.J. Reynolds Tobacco: www.rjrt.com