WINSTON-SALEM, N.C., Jan 6 (Reuters) - R.J. Reynolds Tobacco Co., the nation's No. 2 cigarette maker, on Thursday said its U.S. shipment volume fell 12.7 percent from 1998 levels due to higher prices.

The Winston-Salem, N.C.-based company, a unit of R.J. Reynolds Tobacco Holdings Inc., said 1999 cigarette volume -- shipments to wholesalers --fell to 96.4 billion units from 110.5 billion units in 1998. The 1999 shipments, which matched estimates, exclude volume in Puerto Rico of 1.3 billion units. The maker of the Winston, Camel and Salem cigarettes reported a 9.3 percent drop in industry shipments in the the third quarter of 1999. R.J. Reynolds Tobacco said in a statement the results were ``in line with expectations for the year and were driven primarily by unprecedented settlement-related cigarette price increases during 1998 and 1999.'' The statement was referring to the November 1998 settlement reached between cigarette makers and U.S. states. Industry analyst Bonnie Herzog of Credit Suisse First Boston had expected the company's volume to decline between 12 percent and 13 percent for the year, compared with an industry decline of 9.5 percent in the same period. The holding company expects to report fourth-quarter and year-end results in the last week of January. Its stock rose 5/16 to 18-3/4 on Thursday in New York Stock Exchange trading.

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