<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_____________to_____________
Commission File Number 0-17506
UST Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-1193986
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 West Putnam Avenue, Greenwich, CT 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 661-1100
NONE
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No___
Number of Common shares ($.50 par value) outstanding at March 31, 1998
185,619,836
<PAGE> 2
UST Inc.
(Registrant)
INDEX
Page No.
Part I. Financial Information:
Condensed Consolidated Statement of Financial Position -
March 31, 1998 and December 31, 1997 2
Condensed Consolidated Statement of Earnings -
Three months ended March 31, 1998 and 1997 3
Condensed Consolidated Statement of Cash Flows -
Three months ended March 31, 1998 and 1997 4
Notes to Condensed Consolidated Financial Statements 5
Management's Discussion and Analysis of Operations and
Financial Condition 9
Part II. Other Information:
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
20. Other Documents or Statements to Security
Holders
27. Financial Data Schedule
Signature 13
<PAGE> 3
UST Inc.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- -----------
(Unaudited) (Note)
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents $ 54,615 $ 6,927
Accounts receivable 65,686 67,702
Inventories:
Leaf tobacco 191,013 152,869
Products in process and finished goods 140,687 148,720
Other materials and supplies 18,177 18,077
----------- -----------
349,877 319,666
Prepaid expenses and other current assets 30,495 31,753
Deferred income taxes 13,864 15,796
----------- -----------
Total current assets 514,537 441,844
Property, plant and equipment, net 321,239 326,709
Other assets 56,091 57,025
----------- -----------
Total assets $ 891,867 $ 825,578
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term obligations $ -- $ 10,000
Accounts payable and accrued expenses 81,570 119,345
Income taxes 94,906 37,174
----------- -----------
Total current liabilities 176,476 166,519
Long-term debt 100,000 100,000
Postretirement benefits other than pensions 74,886 73,868
Other liabilities 48,234 48,396
Contingencies (see note) -- --
----------- -----------
Total liabilities 399,596 388,783
Stockholders' equity
Preferred stock - par value $.10 per share:
Authorized - 10 million shares; issued - none
Common stock - par value $.50 per share:
Authorized - 600 million shares;
issued 207,444,836 shares in 1998
and 206,614,236 shares in 1997 103,722 103,307
Additional paid-in capital 492,989 474,661
Retained earnings 572,851 536,014
Accumulated other comprehensive loss (8,736) (8,632)
----------- -----------
1,160,826 1,105,350
Less cost of shares in treasury - 21,825,000 shares 668,555 668,555
----------- -----------
Total stockholders' equity 492,271 436,795
----------- -----------
Total liabilities and stockholders' equity $ 891,867 $ 825,578
=========== ===========
</TABLE>
Note: The statement of financial position at December 31, 1997 has been
derived from the audited financial statements at that date.
See Notes to Condensed Consolidated Financial Statements.
(2)
<PAGE> 4
UST Inc.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
-------- --------
<S> <C> <C>
Net sales $340,164 $334,616
Costs and expenses
Cost of products sold 61,951 58,954
Excise taxes 5,917 6,136
Selling, advertising and administrative 91,117 104,848
Interest, net 571 2,467
-------- --------
Total costs and expenses 159,556 172,405
-------- --------
Earnings before income taxes 180,608 162,211
Income taxes 68,631 61,005
-------- --------
Net earnings $111,977 $101,206
======== ========
Net earnings per share
Basic $ .60 $ .55
Diluted $ .60 $ .54
Dividends per share $.40 1/2 $.40 1/2
Average number of shares
Basic 185,257 183,607
Diluted 187,448 185,782
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
(3)
<PAGE> 5
UST Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
--------- ---------
OPERATING ACTIVITIES
<S> <C> <C>
Net cash provided by operating activities $ 88,835 $ 96,158
INVESTING ACTIVITIES
Purchases of property, plant and equipment (12,029) (12,932)
Dispositions of property, plant and equipment 17,127 126
Proceeds from the sale of a business 20,152 --
--------- ---------
Net cash provided by (used in) investing activities 25,250 (12,806)
--------- ---------
FINANCING ACTIVITIES
Repayment of borrowings (10,000) (36,000)
Proceeds from the issuance of stock 18,743 21,465
Dividends paid (75,140) (74,293)
Stock repurchased -- (32,102)
--------- ---------
Net cash used in financing activities (66,397) (120,930)
--------- ---------
Increase (decrease) in cash and cash equivalents 47,688 (37,578)
Cash and cash equivalents at beginning of year 6,927 54,452
--------- ---------
Cash and cash equivalents at end of period $ 54,615 $ 16,874
========= =========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes $ 2,803 $ 3,242
Interest 1,413 2,230
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
(4)
<PAGE> 6
UST Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1998
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in Registrant's annual
report on Form 10-K for the year ended December 31, 1997.
COMPREHENSIVE INCOME
In the first quarter Registrant adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income," which establishes
standards for the reporting of comprehensive income. The main components of
comprehensive income that directly relate to Registrant are net earnings,
foreign currency translation adjustments (SFAS No. 52) and additional minimum
pension liability adjustments (SFAS No. 87). Prior to adoption, the pension
adjustment was included in stockholders' equity and the translation adjustment
was included in other assets. The December 31, 1997 Statement of Financial
Position has been reclassified to conform to the requirements of SFAS No. 130.
During the first quarter of 1998 and 1997, total comprehensive income, net of
taxes, amounted to $111,873,000 and $101,111,000, respectively.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 131 requires Registrant to provide additional disclosures and is effective
for year end reporting beginning in 1998 and additionally on an interim basis
thereafter. In February 1998, the FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." SFAS No. 132 will
revise Registrant's disclosures for year end reporting beginning in 1998.
Registrant expects no material impact upon adoption of these two pronouncements.
(5)
<PAGE> 7
UST Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
EARNINGS PER SHARE
The following table presents the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three months ended March 31,
1998 1997
-------- --------
<S> <C> <C>
Numerator:
Net earnings $111,977 $101,206
Denominator:
Denominator for basic earnings per share -
weighted-average shares 185,257 183,607
Dilutive effect of employee stock options 2,191 2,175
-------- --------
Denominator for diluted earnings per share 187,448 185,782
Basic earnings per share $ .60 $ .55
Diluted earnings per share $ .60 $ .54
</TABLE>
Options to purchase 0.3 million shares and 1.9 million shares of common stock
outstanding as of March 31, 1998 and 1997, respectively, were not included in
the computation of diluted earnings per share because their exercise prices were
greater than the average market price of the common shares and, therefore, would
be antidilutive.
CONTINGENCIES
Registrant has been named in certain health care cost reimbursement/third party
recoupment/class action litigation against the major domestic cigarette
companies and others seeking damages and other relief. The complaints in these
cases on their face predominantly relate to the usage of cigarettes; within that
context, certain complaints contain a few allegations relating specifically to
smokeless tobacco products. These actions are in varying stages of pretrial
activities.
Registrant believes that these pending litigation matters will not result in any
material liability for a number of reasons, including the fact that Registrant
has had only limited involvement with cigarettes and Registrant's current
percentage of total tobacco industry sales is relatively small. Prior to 1986,
Registrant manufactured some cigarette products which had a de minimis market
share. From May 1, 1982 to August 1, 1994, Registrant distributed a small volume
of imported cigarettes and is indemnified against claims relating to those
products.
In January 1998, health care cost reimbursement litigation was settled with the
state of Texas. Registrant's portion, including related expenses, was
approximately $4.6 million (to be paid on an installment basis) related solely
to a pilot program primarily to reduce youth access to tobacco products in the
state.
Registrant has been named in three actions brought by individual plaintiffs, all
of whom are represented by the same Louisiana attorney, against a number of
smokeless tobacco manufacturers, cigarette manufacturers and certain other
organizations seeking damages and other relief in connection with injuries
allegedly sustained as a result of tobacco usage, including smokeless tobacco
products. An action seeking damages and/or other relief and which purported to
state a class action on behalf of residents of Louisiana who have purchased and
used smokeless tobacco manufactured by defendants was dismissed by court order
in January 1998.
(6)
<PAGE> 8
UST Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Registrant is also named in an action in Illinois seeking damages and other
relief brought by an individual plaintiff and purporting to state a class action
"on behalf of himself and all other persons similarly situated" alleging that
his use of Registrant's smokeless tobacco products "resulted in his addiction to
nicotine, increased use of Defendants' products and gum deterioration."
Registrant is also named in an action in San Francisco, California along with
five other smokeless tobacco manufacturers seeking damages and other relief
brought by the City and County of San Francisco and the Environmental Law
Foundation purportedly on behalf of "the residents of San Francisco County and
the general public" alleging violation of The Safe Drinking Water and Toxic
Enforcement Act of 1986, Health and Safety Code Sections 25249.6, et seq.
("Proposition 65") and the California Unfair Competition Act, Business and
Professions Code Sections 17200, et seq. The action alleges, among other
things, that the defendants sold smokeless tobacco products in California
without providing a ". . . 'clear and reasonable' warning that their use
results in multiple exposures to substances known to the State of California
to cause cancer, birth defects and reproductive harm."
Registrant believes, and has been so advised by counsel handling these cases,
that it has a number of meritorious defenses to all such pending litigation.
Except as to Registrant's intention to pursue federal legislation resolving
certain regulatory and litigation issues, all such cases are, and will continue
to be, vigorously defended. Registrant believes that the ultimate outcome of all
such pending litigation will not have a material adverse effect on the
consolidated financial statements of Registrant.
Registrant is named in an action in Kentucky seeking more than $400 million in
"actual damages" before trebling, punitive damages and injunctive relief
brought by one of Registrant's competitors alleging that certain actions and
practices of Registrant violate federal antitrust and advertising laws in
connection with the marketing and sale of its moist snuff brands and also
alleges various violations of tort and state law. Registrant believes that this
action is without merit and intends to defend itself vigorously, and also
believes that the ultimate outcome of this action will not have a material
adverse effect on its consolidated financial statements.
On August 28, 1996, the Food and Drug Administration (FDA) published regulations
asserting unprecedented jurisdiction over nicotine in tobacco as a "drug" and
purporting to regulate smokeless tobacco products as a "medical device." The
final regulations include severe restrictions on the advertising, marketing and
promotion of smokeless tobacco products and will require Registrant, to comply
with a wide range of labeling, reporting and other requirements. Registrant and
other smokeless tobacco manufacturers filed suit against the FDA seeking a
judicial declaration that the FDA has no authority to regulate smokeless tobacco
products. On April 25, 1997, a federal district court ruled that the FDA, as a
matter of law, is not precluded from regulating cigarettes and smokeless tobacco
as "medical devices" and implementing certain labeling and access restrictions.
Further trial proceedings are still required to determine whether the FDA, based
on the facts, can prove that smokeless tobacco products fit the statutory
definitions and the restrictions are justified. The court, granting Registrant's
motion for summary judgment, also ruled that the FDA has no authority to
implement restrictions on the advertising and promotion of smokeless tobacco
products. The court issued an injunction to prohibit most of the restrictions
(labeling, access and advertising/promotion) set for August 28, 1997 from taking
effect, pending resolution of any appeals and subsequent proceedings; the court
also certified the ruling for interlocutory appeal on the grounds that it
involves "controlling questions of law as to which there is substantial ground
for difference of opinion." Certain aspects of this ruling appealed to the
Fourth Circuit Court of Appeals are awaiting decision. Registrant is not able to
predict the outcome of the appeal, or assess the future effect that these FDA
regulations, if implemented, may have on its smokeless tobacco business.
(7)
<PAGE> 9
UST Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On June 20, 1997, Registrant's subsidiary, United States Tobacco Company, along
with other manufacturers in the United States tobacco industry, executed a
Memorandum of Understanding (the "Memorandum") to support the adoption of
federal legislation incorporating the features described in the proposed
resolution attached to the Memorandum. The proposed resolution, if enacted into
law, would achieve a resolution of many of the regulatory and litigation issues
affecting the United States tobacco industry and, thereby, reduce uncertainties
facing the industry and increase stability in business and capital markets.
However, if such legislation were enacted the financial obligations to be
imposed on Registrant are expected to be significant although the precise amount
of such obligations cannot be determined at this time. Discussions with other
tobacco manufacturers, who were participants in the negotiations which led to
the Memorandum, are continuing regarding the allocation of both the initial and
subsequent payments and Registrant's obligations related thereto. Depending on
the amounts required to be paid by Registrant, as well as a number of other
factors, including (i) the timing of any payments and the means used to finance
such payments; (ii) the effect of the legislation on the pricing and consumption
of smokeless tobacco products; and (iii) the impact of the legislation on
Registrant's competitive position in the smokeless tobacco industry, its
financial position could be materially adversely affected in the year of
implementation and the unit volume, operating revenues and operating income of
Registrant could be materially adversely affected in future years.
Since June 20, 1997, a number of legislative proposals have been introduced in
Congress, some of which reflect all or part of the substantive provisions
contained in the proposed resolution and others which reflect more extreme views
on how to address the current controversy regarding tobacco issues. Registrant
continues to believe that the proposed resolution represents the best approach
to resolving the issues surrounding tobacco products. However, Registrant
reluctantly has concluded that Congress is unlikely to enact -- and the
President does not intend to sign -- legislation reflecting the provisions of
the June 20 proposal. On April 8, 1998, Registrant announced that it will
vigorously oppose any excise tax or other regulatory proposals that are
punitive in nature, such as the Senate Commerce Committee bill, and that do not
truly address the issue of youth usage of smokeless tobacco products in a
constructive and comprehensive fashion. There can be no assurance that any
legislation will be enacted.
(8)
<PAGE> 10
UST Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATIONS AND FINANCIAL CONDITION
(Unaudited)
Results of Operations
First quarter 1998 compared
with the first quarter of 1997
Net sales for the first quarter were $340.2 million, a 2% increase over the
corresponding period in the prior year. The Tobacco and Wine segments posted
sales gains of 5% and 8%, respectively, and Other segment sales declined. The
increase in Tobacco segment sales was primarily due to higher selling prices and
a volume increase for moist smokeless tobacco. Gross unit volume for moist
smokeless tobacco increased 4.8%, while unit volume net of returned goods
increased 1.3%. Returned goods were substantially higher than in the
corresponding period of the prior year due to an emphasis on increasing product
freshness at retail and promotional units sold in prior periods. The increase in
Wine segment sales was primarily due to higher selling prices and slightly
higher unit volume for premium wines. The decrease in Other segment sales
resulted from a substantial weakness in the premium cigar business and the
absence of sales for businesses divested.
Cost of products sold and excise taxes increased 4% for the first quarter
primarily due to higher costs for moist smokeless tobacco and wine, partially
offset by the absence of costs for businesses divested and lower premium cigar
volume. The increase in moist smokeless tobacco costs resulted from higher leaf
tobacco costs, while the increase in the Wine segment was caused by higher
average costs associated with low harvest yields in prior years. The overall
gross margin percentage decreased slightly in the first quarter as a result of
higher unit costs for moist smokeless tobacco.
Selling, advertising and administrative expenses decreased 13% for the first
quarter, which included increases for the Tobacco and Wine segments and a
decrease for the Other segment. The Tobacco segment increase included a $4.6
million charge resulting from Registrants' portion of the funding for a pilot
program, primarily to reduce youth access to tobacco products, and related
expenses, as part of the settlement with the state of Texas in connection with
its health care cost reimbursement litigation. All other Tobacco segment
expenses were essentially even with the corresponding period, as spending
related to the 1997 Gear for Lids program was redirected in 1998 towards
incentive programs and direct marketing. Increased spending in the Wine segment
was in support of premium varietal wines. The decrease in the Other segment was
primarily due to gains recorded on the sale of certain commercial agricultural
properties and the video entertainment subsidiary, which combined amounted to
$10.7 million. Administrative and other expenses also decreased in the first
quarter primarily due to the absence of a 1997 charge related to recording the
present value of future obligations arising under employment contracts with two
former executive officers.
Net interest expense decreased significantly as compared to the corresponding
period in the prior year primarily due to lower average levels of debt
outstanding.
Net earnings increased 11% to $112 million and diluted earnings per share
increased 11% (9% basic) to 60 cents, as compared to the corresponding period in
the prior year.
(9)
<PAGE> 11
UST Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION (Continued)
Liquidity and Sources of Capital
Changes in Financial Condition Since December 31, 1997
Net cash provided by operating activities represents net income adjusted for the
non-cash items included in the determination of net income as well as changes in
operating assets and liabilities. The decrease in net cash provided by operating
activities as compared to the similar period in the prior year was primarily due
to changes in certain operating account balances such as accounts payable and
accrued expenses, inventories and accounts receivable. Primary uses of cash in
operations were for raw material inventories, principally seasonal purchases of
leaf tobacco for moist smokeless tobacco, leaf tobacco purchases for cigars and
grape purchases for the wine operations. Registrant anticipates that overall raw
material inventory purchases in 1998 will approximate amounts expended in 1997.
Net cash provided by investing activities resulted from proceeds from the sale
of Registrant's video entertainment subsidiary and the dispositions of property,
plant and equipment, primarily the sale of certain commercial agricultural
property, partially offset by the purchases of property, plant and equipment.
Registrant expects the 1998 capital program to approximate $74 million.
Net cash used in financing activities were amounts expended for dividends and
the repayment of borrowings, partially offset by proceeds from the issuance of
common stock. Registrant had suspended its stock repurchase program in 1997 and
did not increase its 1998 quarterly dividend rate as a result of regulatory and
litigation issues affecting the tobacco industry. (See Contingencies Note.)
Registrant's cash requirements for the remainder of 1998 will be primarily for
dividends and its capital program. Registrant expects to meet all cash
requirements with internally generated funds augmented by borrowings when
necessary. If legislation implementing the proposed resolution or similar
legislation were enacted, the financial obligations to be imposed on Registrant
are expected to be significant, although the precise amount of such obligations
cannot be determined at this time. (See Contingencies Note.)
Forward-Looking and Cautionary Statements
Reference is made to the section captioned "Cautionary Statement Regarding
Forward-Looking Information" which was filed as part of Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Registrant's 1997 Form 10-K, and to the legal and regulatory initiatives
described in Form 8-K, dated July 3, 1997 regarding important factors that could
cause actual results to differ materially from those contained in any
forward-looking statement made by Registrant, including forward-looking
statements contained in this report.
(10)
<PAGE> 12
UST Inc.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Registrant has been advised that it, along with other
smokeless tobacco manufacturers and certain retailers, is
named in an action entitled The City and County of San
Francisco, on Behalf of the People of the State of California,
and Environmental Law Foundation, on behalf of the General
Public v. United States Tobacco Company, et al., (No. 993992),
Superior Court of the State of California, County of San
Francisco. Plaintiffs allege defendants' violation of The Safe
Drinking Water and Toxic Enforcement Act of 1986, Health and
Safety Code Sections 25249.6, et seq. ("Proposition 65"),
claiming "the unlawful marketing and sale by defendants of
tobacco snuff and chewing tobacco . . . to children and
adolescents without providing a 'clear and reasonable' warning
that their use results in multiple exposures to substances
known to the State of California to cause cancer, birth
defects and reproductive harm." Plaintiffs further allege
defendants' statutory violation of the Unfair Competition Act,
Business and Professions Code Sections 17200, et seq. The
action seeks unspecified compensatory damages, injunctive
relief, restitution, attorneys fees and costs. Registrant
intends to defend this action vigorously. On March 31, 1998,
Registrant issued a press release regarding this action which
is filed herewith as Exhibit 20 and incorporated herein by
reference.
On April 23, 1998, Registrant was served with a Summons and
Complaint in an action entitled Conwood Company, L.P. and
Conwood Sales Company, L.P. v. United States Tobacco Company,
United States Tobacco Sales and Marketing Company Inc., United
States Tobacco Manufacturing Company Inc. and UST Inc. (Case
No. 5: 98CV-108-R), United States District Court, Western
District of Kentucky, Paducah Division. Plaintiffs allege,
among other things, Registrant's violation of federal
antitrust and advertising laws in connection with the
marketing and sale of its moist snuff brands, and alleges
various violations of tort and state law. The complaint seeks
an injunction against alleged "anticompetitive conduct," more
than $400 million in "actual damages" before trebling, and
punitive damages. Registrant believes that the complaint
contains numerous misstatements of fact and that the
allegations are without merit. Registrant intends to defend
this action vigorously.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1998 Annual Meeting of Stockholders was held on May 5,
1998.
(c) Matters voted upon at the meeting:
<TABLE>
<CAPTION>
Affirmative Negative Broker
Votes Votes Abstentions Non-Votes
----------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Ratification 166,621,082 395,361 229,617 N/A
and Approval
of Independent
Auditors
(Proposal No. 2)
Stockholder 6,821,045 140,313,030 7,271,576 12,840,409
Proposal
(Proposal No. 3)
</TABLE>
(11)
<PAGE> 13
UST Inc.
PART II - OTHER INFORMATION (continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
20. United States Tobacco Company's Press Release dated
March 31, 1998
27. Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K for the three months
ended March 31, 1998.
(12)
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UST Inc.
(Registrant)
Date May 15, 1998 /s/ Robert T. D'Alessandro
-------------------- --------------------------
Robert T. D'Alessandro
Senior Vice President and Controller
(Principal Accounting Officer and
Principal Financial Officer)
(13)
<PAGE> 1
Exhibit 20
UNITED STATES TOBACCO COMPANY
PRESS RELEASE
STATEMENT ON SAN FRANCISCO LAWSUIT
GREENWICH, CONN., MARCH 31, 1998 -- United States Tobacco Company believes the
lawsuit filed against it, Pinkerton Tobacco Company, Inc., Conwood Company,
L.P., Swisher International Group, Inc., National Tobacco Company, L. P. and
Brown & Williamson Tobacco Corporation by the City of San Francisco and the
Environmental Law Foundation, is without merit and the Company intends to defend
itself vigorously.
Despite claims by anti-tobacco activists that underage use of smokeless tobacco
is at very high levels, the fact is that data from government reports indicate
that use of smokeless tobacco products by minors is low and decreasing. In
August 1997 government data, highlighted by Secretary of the U. S. Department of
Health and Human Services Donna Shalala, indicates that youth usage of smokeless
tobacco products is 1.9 percent, declining and already below the federal
government's goal of 4 percent by the year 2000.
The Company also believes that contentious legal action, such as this, serves no
audience other than those who wish to continue the self-proclaimed "battle over
tobacco" that has consumed almost a half-century. The Company, while it will
defend itself against this action, still believes that Congressional passage of
comprehensive tobacco legislation, containing the provisions of the June 20
Proposed Resolution, is the nation's best method of addressing the current
issues surrounding tobacco products.
# # #
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Registrant's
condensed consolidated statement of financial positon and condensed consolidated
statement of earnings and is qualified in its entirety by reference to such
financial statements.(In thousands, except per share amounts).
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 54,615
<SECURITIES> 0
<RECEIVABLES> 65,686
<ALLOWANCES> 0
<INVENTORY> 349,877
<CURRENT-ASSETS> 514,537
<PP&E> 561,331
<DEPRECIATION> 240,092
<TOTAL-ASSETS> 891,867
<CURRENT-LIABILITIES> 176,476
<BONDS> 100,000
0
0
<COMMON> 103,722
<OTHER-SE> 388,549
<TOTAL-LIABILITY-AND-EQUITY> 891,867
<SALES> 340,164
<TOTAL-REVENUES> 340,164
<CGS> 67,868
<TOTAL-COSTS> 67,868
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 571
<INCOME-PRETAX> 180,608
<INCOME-TAX> 68,631
<INCOME-CONTINUING> 111,977
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,977
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
<FN>
NOTE: ITEM NUMBER 5-03(b)(20) AMOUNTS PRESENT EARNINGS PER SHARE - BASIC AND
EARNINGS PER SHARE - DILUTED, RESPECTIVELY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
REGISTRANT'S CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS. (IN THOUSANDS EXCEPT PER SHARE AMOUNTS).
</LEGEND>
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997
<CASH> 16,874 22,658 11,341 6,927
<SECURITIES> 0 0 0 0
<RECEIVABLES> 89,214 76,897 78,588 67,702
<ALLOWANCES> 0 0 0 0
<INVENTORY> 301,560 285,584 278,344 319,666
<CURRENT-ASSETS> 453,223 424,326 418,585 441,844
<PP&E> 526,137 534,761 547,776 564,494
<DEPRECIATION> 219,978 226,817 233,614 237,785
<TOTAL-ASSETS> 824,622 799,312 800,028 825,578
<CURRENT-LIABILITIES> 300,619 233,553 185,385 166,519
<BONDS> 100,000 100,000 100,000 100,000
0 0 0 0
0 0 0 0
<COMMON> 102,488 102,832 103,048 103,307
<OTHER-SE> 195,808 245,178 292,600 333,488
<TOTAL-LIABILITY-AND-EQUITY> 824,622 799,312 800,028 825,578
<SALES> 334,616 690,380 1,050,962 1,401,718
<TOTAL-REVENUES> 334,616 690,380 1,050,962 1,401,718
<CGS> 65,090 136,448 211,022 291,942
<TOTAL-COSTS> 65,090 136,448 211,022 291,942
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 2,467 5,049 6,544 7,451
<INCOME-PRETAX> 162,211 349,520 532,666 703,857
<INCOME-TAX> 61,005 131,425 200,349 264,719
<INCOME-CONTINUING> 101,206 218,095 332,317 439,138
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 101,206 218,095 332,317 439,138
<EPS-PRIMARY> .55 1.19 1.81 2.39
<EPS-DILUTED> .54 1.18 1.79 2.37
<FN>
NOTE: ITEM NUMBER 5-03(b)(20) AMOUNTS PRESENT EARNINGS PER SHARE - BASIC AND
EARNINGS PER SHARE - DILUTED, RESPECTIVELY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains restated summary financial information extracted from
Registrant's condensed consolidated statement of financial position and
condensed consolidated statement of earnings and is qualified in its entirety by
reference to such financial statements.(In thousands, except per share amounts).
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 16,551 11,992 19,416 54,452
<SECURITIES> 0 0 0 0
<RECEIVABLES> 69,200 66,893 74,399 77,855
<ALLOWANCES> 0 0 0 0
<INVENTORY> 284,746 269,048 251,787 271,425
<CURRENT-ASSETS> 401,747 387,334 397,372 450,570
<PP&E> 498,836 500,713 512,885 514,313
<DEPRECIATION> 204,077 208,328 213,824 213,428
<TOTAL-ASSETS> 760,069 742,851 760,310 807,392
<CURRENT-LIABILITIES> 263,134 210,811 227,178 306,553
<BONDS> 100,000 100,000 100,000 100,000
0 0 0 0
0 0 0 0
<COMMON> 101,413 101,709 101,786 102,077
<OTHER-SE> 183,256 215,576 216,161 179,943
<TOTAL-LIABILITY-AND-EQUITY> 760,069 742,851 760,310 807,392
<SALES> 322,835 667,818 1,027,303 1,371,705
<TOTAL-REVENUES> 322,835 667,818 1,027,303 1,371,705
<CGS> 63,525 130,573 200,465 272,756
<TOTAL-COSTS> 63,525 130,573 200,465 272,756
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 1,322 3,081 4,590 6,364
<INCOME-PRETAX> 173,668 367,184 565,857 744,526
<INCOME-TAX> 66,872 141,311 216,327 280,527
<INCOME-CONTINUING> 106,796 225,873 349,530 463,999
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 106,796 225,873 349,530 463,999
<EPS-PRIMARY> .56 1.20 1.86 2.48
<EPS-DILUTED> .55 1.18 1.83 2.44
<FN>
NOTE: ITEM NUMBER 5-03(b)(20) AMOUNTS PRESENT EARNINGS PER SHARE - BASIC AND
EARNINGS PER SHARE - DILUTED, RESPECTIVELY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
REGISTRANT'S CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS. (IN THOUSANDS EXCEPT PER SHARE AMOUNTS).
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-30-1995
<CASH> 69,403
<SECURITIES> 0
<RECEIVABLES> 69,598
<ALLOWANCES> 0
<INVENTORY> 256,101
<CURRENT-ASSETS> 425,555
<PP&E> 492,165
<DEPRECIATION> 197,359
<TOTAL-ASSETS> 784,752
<CURRENT-LIABILITIES> 280,723
<BONDS> 100,000
0
0
<COMMON> 101,040
<OTHER-SE> 192,517
<TOTAL-LIABILITY-AND-EQUITY> 784,752
<SALES> 1,305,796
<TOTAL-REVENUES> 1,305,796
<CGS> 262,203
<TOTAL-COSTS> 262,203
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,179
<INCOME-PRETAX> 704,590
<INCOME-TAX> 274,830
<INCOME-CONTINUING> 429,760
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 429,760
<EPS-PRIMARY> 2.21
<EPS-DILUTED> 2.17
<FN>
NOTE: ITEM NUMBER 5-03(b)(20) AMOUNTS PRESENT EARNINGS PER SHARE - BASIC AND
EARNINGS PER SHARE - DILUTED, RESPECTIVELY.
</FN>
</TABLE>
