("=Reynolds American 1Q Net Skids 98% On Items; Volume Down," published at 8:16 a.m. EDT, misstated the latest market-share figure for R.J. Reynolds in the seventh paragraph. The correct version follows:)

 
   DOW JONES NEWSWIRES 
 

Reynolds American Inc.'s (RAI) first-quarter net income skidded 98% amid one-time items and lower volume as inventories were reduced ahead of an excise tax hike.

Cigarette sales volumes have been declining in the U.S. due to increased health-consciousness and smoking bans. Producers have been entering the smokeless tobacco arena, partly to offset the weakening numbers. A recent excise tax increase is expected to cut volume further as consumers watch their budgets in the recession.

The second largest U.S. tobacco company behind Altria Group Inc. (MO) reported net income of $8 million, or 3 cents a share, down from $505 million, or $1.71 a share, a year earlier. Excluding trademark write-downs in the latest quarter and a prior-year gain from terminating the Gallaher venture, earnings were flat at $1.

Revenue decreased 6.6% to $1.92 billion despite higher pricing.

Analysts polled by Thomson Reuters most recently were looking for earnings of 95 cents on revenue of $1.97 billion.

Gross margin rose to 48% from 43.4% on the price hikes.

The R.J. Reynolds Tobacco division's volume fell 11% as earnings rose 7.7% on higher prices and streamlining efforts. Market share fell 0.7 percentage point to 27.7% while Camel rose 0.1 point to 7.6%.

At the Conwood unit, which makes smokeless-tobacco brands Kodiak and Grizzly, earnings excluding the write-down rose 3% on a 1% volume increase while market share for moist snuff shipments rose two points to 28.8%.

Meanwhile, Reynolds projected 2009 earnings of $4.15 to $4.45 a share, which includes a 40-cent impact from higher pension costs. Analysts were looking for $4.38.

Shares closed at $40.64 on Tuesday and didn't trade premarket.

-By Tess Stynes, Dow Jones Newswires; 201-938-2473; tess.stynes@dowjones.com