<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 11-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 0-17506
--------------------------
A: Full title of the plan:
UST INC.
EMPLOYEES' SAVINGS PLAN
B: Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
UST INC.
100 West Putnam Avenue
Greenwich, Connecticut 06830
<PAGE> 2
UST Inc.
Employees' Savings Plan
Audited Financial Statements
and
Supplemental Schedules
Years ended December 31, 1998 and 1997
with Report of Independent Auditors
<PAGE> 3
UST Inc.
Employees' Savings Plan
(the "Plan")
Audited Financial Statements and Supplemental Schedules
Years ended December 31, 1998 and 1997
INDEX
Report of Independent Auditors........................................ 1
Audited Financial Statements
Statement of Net Assets Available for Benefits................... 2
Statement of Changes in Net Assets Available for Benefits........ 4
Notes to Financial Statements.................................... 6
Supplemental Schedules
Line 27A - Schedule of Assets Held for Investment Purposes...... 12
Line 27D - Schedule of Reportable Transactions.................. 14
<PAGE> 4
Report of Independent Auditors
To the UST Inc.
Employee Benefits Administration Committee
We have audited the accompanying statements of net assets available for benefits
of the UST Inc. Employees' Savings Plan as of December 31, 1998 and 1997, and
the related statements of changes in net assets available for benefits for the
years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1998 and 1997, and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes as of December 31, 1998, and reportable
transactions for the year then ended, are presented for purpose of additional
analysis and are not a required part of the financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
plan's management. Fund Information in the statement of net assets available for
benefits and the statement of changes in net assets available for benefits is
presented for purposes of additional analysis rather than to present the net
assets available for benefits and changes in net assets available for benefits
of each fund. The supplemental schedules and Fund Information have been
subjected to auditing procedures applied in our audits of the financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.
Ernst & Young LLP
April 30, 1999
1
<PAGE> 5
UST INC.
EMPLOYEES' SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
INFORMATION BY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FUNDS
FUND A FUND B C AND D FUND E FUND F
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments (Notes 1 and 4):
Common stock of UST Inc.-at fair value
(cost: $28,686,750) $83,021,821
Group trust funds--
At fair value:
Common stock (cost: $9,281,332) $21,182,549
Short-term investments $ 2,806,754 4,041
Balanced Fund (cost: $5,190,608) $5,493,714
Small Company Fund (cost: $6,160,513) $5,948,166
At contract value:
Guaranteed investment contracts 15,476,582
Participant loans receivable
- -----------------------------------------------------------------------------------------------------------------------------------
Total investments 18,283,336 21,182,549 83,025,862 5,493,714 5,948,166
- -----------------------------------------------------------------------------------------------------------------------------------
Contributions receivable:
Participants 161,533 224,787 109,718 94,518 120,056
Employer 2,586 460,380
Accrued income receivable 7,736
Interfund receivables (payables), net (170,879) 299,562 (705,925) 547,392 159,341
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 18,284,312 21,706,898 82,890,035 6,135,624 6,227,563
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to participants 125,967 279,252 1,135,122 217,279 83,265
Due to trustee 3,187 1,445 10,135 704 712
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 129,154 280,697 1,145,257 217,983 83,977
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets available for benefits $ 18,155,158 $21,426,201 $81,744,778 $5,917,641 $6,143,586
===================================================================================================================================
VALUATION
UNITS PER UNIT
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
Fund A 1,182,746 $15.35
Fund B 335,518 63.86
Funds C and D 2,343,601 34.88
Fund E 317,811 18.62
Fund F 392,561 15.65
Participant Loan Fund 3,763,827 1.00
</TABLE>
<TABLE>
<CAPTION>
INFORMATION BY FUND
- ---------------------------------------------------------------------------------
PARTICIPANT
LOAN FUND TOTAL
- ---------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments (Notes 1 and 4):
Common stock of UST Inc.-at fair value
(cost: $28,686,750) $ 83,021,821
Group trust funds--
At fair value:
Common stock (cost: $9,281,332) 21,182,549
Short-term investments 2,810,795
Balanced Fund (cost: $5,190,608) 5,493,714
Small Company Fund (cost: $6,160,513) 5,948,166
At contract value:
Guaranteed investment contracts 15,476,582
Participant loans receivable $3,881,179 3,881,179
- ---------------------------------------------------------------------------------
Total investments 3,881,179 137,814,806
- ---------------------------------------------------------------------------------
Contributions receivable:
Participants 710,612
Employer 462,966
Accrued income receivable 29,910 37,646
Interfund receivables (payables), net (129,491) -
- ---------------------------------------------------------------------------------
Total assets 3,781,598 139,026,030
- ---------------------------------------------------------------------------------
LIABILITIES
Due to participants 17,771 1,858,656
Due to trustee 16,183
- ---------------------------------------------------------------------------------
Total liabilities 17,771 1,874,839
- ---------------------------------------------------------------------------------
Net assets available for benefits $3,763,827 $137,151,191
=================================================================================
AMOUNT
- ---------------------------------------------------------------------------------
Net assets available for benefits
Fund A $ 18,155,158
Fund B 21,426,201
Funds C and D 81,744,778
Fund E 5,917,641
Fund F 6,143,586
Participant Loan Fund 3,763,827
------------
$137,151,191
============
</TABLE>
See accompanying notes to financial statements
2
<PAGE> 6
UST Inc.
Employees' Savings Plan
Statement of Net Assets Available for Benefits
December 31, 1997
<TABLE>
<CAPTION>
Information by Fund
- -----------------------------------------------------------------------------------------------------------------------------------
FUNDS
FUND A FUND B C AND D FUND E FUND F
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments (Notes 1 and 4):
Common stock of UST Inc.-at fair value
(cost: $25,846,522) $87,372,222
Group trust funds--
At fair value:
Common stock (cost: $7,501,038) $15,786,605
Short-term investments $ 2,329,922 1,025,816
Balanced Fund (cost: $3,957,078) $4,295,260
Small Company Fund (cost: $5,841,467) $7,207,607
At contract value:
Guaranteed investment contracts 15,091,365
Participant loans receivable
- -----------------------------------------------------------------------------------------------------------------------------------
Total investments 17,421,287 15,786,605 88,398,038 4,295,260 7,207,607
- -----------------------------------------------------------------------------------------------------------------------------------
Contributions receivable:
Participants 129,792 149,883 87,376 61,865 111,078
Employer 1,287 313,283
Accrued income receivable 7,252
Interfund receivables (payables), net 157,179 72,615 (475,427) 282,441 57,349
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 17,716,797 16,009,103 88,323,270 4,639,566 7,376,034
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Due to participants 87,791 30,621 1,153,902 14,173 27,351
Due to trustee 7,618 4,805 26,813 1,573 2,448
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 95,409 35,426 1,180,715 15,746 29,799
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets available for benefits $17,621,388 $15,973,677 $87,142,555 $4,623,820 $7,346,235
===================================================================================================================================
VALUATION
UNITS PER UNIT
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
Fund A 1,218,744 $14.46
Fund B 321,608 49.67
Funds C and D 2,359,030 36.94
Fund E 276,511 16.72
Fund F 397,411 18.49
Participant Loan Fund 3,781,791 1.00
</TABLE>
<TABLE>
<CAPTION>
Information by Fund
- -------------------------------------------------------------------------------
PARTICIPANT
LOAN FUND TOTAL
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments (Notes 1 and 4):
Common stock of UST Inc.-at fair value
(cost: $25,846,522) $ 87,372,222
Group trust funds--
At fair value:
Common stock (cost: $7,501,038) 15,786,605
Short-term investments 3,355,738
Balanced Fund (cost: $3,957,078) 4,295,260
Small Company Fund (cost: $5,841,467) 7,207,607
At contract value:
Guaranteed investment contracts 15,091,365
Participant loans receivable $3,860,724 3,860,724
- -------------------------------------------------------------------------------
Total investments 3,860,724 136,969,521
- -------------------------------------------------------------------------------
Contributions receivable:
Participants 539,994
Employer 314,570
Accrued income receivable 21,139 28,391
Interfund receivables (payables), net (94,157) -
- -------------------------------------------------------------------------------
Total assets 3,787,706 137,852,476
- -------------------------------------------------------------------------------
LIABILITIES
Due to participants 5,915 1,319,753
Due to trustee 43,257
- -------------------------------------------------------------------------------
Total liabilities 5,915 1,363,010
- -------------------------------------------------------------------------------
Net assets available for benefits $3,781,791 $136,489,466
===============================================================================
AMOUNT
- -------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS
Fund A $ 17,621,388
Fund B 15,973,677
Funds C and D 87,142,555
Fund E 4,623,820
Fund F 7,346,235
Participant Loan Fund 3,781,791
------------
$136,489,466
============
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 7
UST INC.
EMPLOYEES' SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INFORMATION BY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FUNDS
FUND A FUND B C AND D FUND E FUND F
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADDITIONS
Investment income
Dividends on common stock of UST Inc. $ 3,840,818
Interest and other dividends $ 1,118,810 23,858 $ 517,097 $ 758,464
Interest on participant loans
- -----------------------------------------------------------------------------------------------------------------------------------
1,118,810 3,864,676 517,097 758,464
Net realized and unrealized appreciation
(depreciation) in fair value
of investments:
Common stock of UST Inc. (4,570,776)
Group trust funds $ 4,722,659 9,466 (1,798,058)
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 1,118,810 4,722,659 (706,100) 526,563 (1,039,594)
- -----------------------------------------------------------------------------------------------------------------------------------
Contributions
Participants 1,657,193 2,160,824 1,059,953 942,470 1,312,586
Employer 4,486,050
- -----------------------------------------------------------------------------------------------------------------------------------
1,657,193 2,160,824 5,546,003 942,470 1,312,586
- -----------------------------------------------------------------------------------------------------------------------------------
Total additions 2,776,003 6,883,483 4,839,903 1,469,033 272,992
- -----------------------------------------------------------------------------------------------------------------------------------
DEDUCTIONS
Participant distributions 3,250,552 2,329,926 7,982,958 1,004,310 612,855
Administrative expenses 97,151 70,714 223,215 16,752 19,553
- -----------------------------------------------------------------------------------------------------------------------------------
Total deductions 3,347,703 2,400,640 8,206,173 1,021,062 632,408
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) prior to interfund
transfers (571,700) 4,482,843 (3,366,270) 447,971 (359,416)
Interfund transfers, net 1,105,470 969,681 (2,031,507) 845,850 (843,233)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets available
for benefits 533,770 5,452,524 (5,397,777) 1,293,821 (1,202,649)
Net assets available for benefits:
Beginning of year 17,621,388 15,973,677 87,142,555 4,623,820 7,346,235
- -----------------------------------------------------------------------------------------------------------------------------------
End of year $18,155,158 $21,426,201 $81,744,778 $5,917,641 $6,143,586
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
INFORMATION BY FUND
- -----------------------------------------------------------------------------
PARTICIPANT
LOAN FUND TOTAL
- -----------------------------------------------------------------------------
<S> <C> <C>
ADDITIONS
Investment income
Dividends on common stock of UST Inc. $ 3,840,818
Interest and other dividends 2,418,229
Interest on participant loans $ 284,438 284,438
- -----------------------------------------------------------------------------
284,438 6,543,485
Net realized and unrealized appreciation
(depreciation) in fair value
of investments:
Common stock of UST Inc. (4,570,776)
Group trust funds 2,934,067
- -----------------------------------------------------------------------------
Investment income (loss), net 284,438 4,906,776
- -----------------------------------------------------------------------------
Contributions
Participants 7,133,026
Employer 4,486,050
- -----------------------------------------------------------------------------
11,619,076
- -----------------------------------------------------------------------------
Total additions 284,438 16,525,852
- -----------------------------------------------------------------------------
DEDUCTIONS
Participant distributions 256,141 15,436,742
Administrative expenses 427,385
- -----------------------------------------------------------------------------
Total deductions 256,141 15,864,127
- -----------------------------------------------------------------------------
Net increase (decrease) prior to interfund
transfers 28,297 661,725
Interfund transfers, net (46,261) -
- -----------------------------------------------------------------------------
Increase (decrease) in net assets available
for benefits (17,964) 661,725
Net assets available for benefits:
Beginning of year 3,781,791 136,489,466
- -----------------------------------------------------------------------------
End of year $3,763,827 $137,151,191
=============================================================================
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 8
UST Inc.
Employees' Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Information by Fund
- -----------------------------------------------------------------------------------------------------------------------------------
FUNDS
FUND A FUND B C AND D FUND E FUND F
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADDITIONS
Investment income
Dividends on common stock of UST Inc. $ 3,889,834
Interest and other dividends $ 1,089,029 $ 2,414 23,211 $ 435,198 $ 2,345
Interest on participant loans
- -----------------------------------------------------------------------------------------------------------------------------------
1,089,029 2,414 3,913,045 435,198 2,345
Net realized and unrealized appreciation
in fair value of investments:
Common stock of UST Inc. 10,053,096
Group trust funds 3,610,100 166,325 250,371
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income, net 1,089,029 3,612,514 13,966,141 601,523 252,716
- -----------------------------------------------------------------------------------------------------------------------------------
Contributions
Participants 1,753,932 1,553,391 1,458,002 645,129 1,426,145
Employer 10,806 3,763,909
- -----------------------------------------------------------------------------------------------------------------------------------
1,764,738 1,553,391 5,221,911 645,129 1,426,145
- -----------------------------------------------------------------------------------------------------------------------------------
Total additions 2,853,767 5,165,905 19,188,052 1,246,652 1,678,861
- -----------------------------------------------------------------------------------------------------------------------------------
DEDUCTIONS
Participant distributions 3,070,042 1,407,927 9,517,375 206,609 711,368
Administrative expenses 99,785 46,842 208,461 9,887 18,199
- -----------------------------------------------------------------------------------------------------------------------------------
Total deductions 3,169,827 1,454,769 9,725,836 216,496 729,567
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) prior to interfund
transfers (316,060) 3,711,136 9,462,216 1,030,156 949,294
Interfund transfers, net 569,980 2,392,654 (3,171,082) 1,146,384 (895,617)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets available
for benefits 253,920 6,103,790 6,291,134 2,176,540 53,677
Net assets available for benefits:
Beginning of year 17,367,468 9,869,887 80,851,421 2,447,280 7,292,558
- -----------------------------------------------------------------------------------------------------------------------------------
End of year $17,621,388 $15,973,677 $87,142,555 $4,623,820 $7,346,235
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Information by Fund
- ------------------------------------------------------------------------------
PARTICIPANT
LOAN FUND TOTAL
- ------------------------------------------------------------------------------
<S> <C> <C>
ADDITIONS
Investment income
Dividends on common stock of UST Inc. $ 3,889,834
Interest and other dividends 1,552,197
Interest on participant loans $ 259,564 259,564
- ------------------------------------------------------------------------------
259,564 5,701,595
Net realized and unrealized appreciation
in fair value of investments:
Common stock of UST Inc. 10,053,096
Group trust funds 4,026,796
- ------------------------------------------------------------------------------
Investment income, net 259,564 19,781,487
- ------------------------------------------------------------------------------
Contributions
Participants 6,836,599
Employer 3,774,715
- ------------------------------------------------------------------------------
10,611,314
- ------------------------------------------------------------------------------
Total additions 259,564 30,392,801
- ------------------------------------------------------------------------------
DEDUCTIONS
Participant distributions 332,055 15,245,376
Administrative expenses 383,174
- ------------------------------------------------------------------------------
Total deductions 332,055 15,628,550
- ------------------------------------------------------------------------------
Net increase (decrease) prior to interfund
transfers (72,491) 14,764,251
Interfund transfers, net (42,319) -
- ------------------------------------------------------------------------------
Increase (decrease) in net assets available
for benefits (114,810) 14,764,251
Net assets available for benefits:
Beginning of year 3,896,601 121,725,215
- ------------------------------------------------------------------------------
End of year $3,781,791 $136,489,466
==============================================================================
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 9
UST Inc.
Employees' Savings Plan
Notes to Financial Statements
Years Ended December 31, 1998 and 1997
1. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Plan have been prepared in accordance with
generally accepted accounting principles and, as such, include amounts based on
judgments and estimates made by management, which may differ from actual
results.
Investments in common stock of UST Inc. (the Company) are stated at fair value
of $34.88 per share at December 31, 1998. (At April 30, 1999 UST Inc. common
stock had a fair value of $27.88 per share.) Group trust funds investments are
also stated at fair value. The change in the difference between the fair value
and the cost of such investments is reflected as unrealized appreciation
(depreciation) in the aggregate fair value of investments. The realized
appreciation (depreciation) in the aggregate fair value of investments is the
difference between the proceeds received and the average cost of the investments
sold. The guaranteed investment contracts, which are fully benefit responsive,
are stated at contract value which approximates fair value. Participant loans
receivable are valued at their outstanding principal balances, which approximate
fair value.
Interest and dividend income for Fund B group trust investments are included in
the net realized and unrealized appreciation (depreciation) caption on the
Statement of Changes in Net Assets Available for Benefits.
Securities traded on a national securities exchange are valued at the last
reported sales price on the last business day of the year. Investments traded in
the over-the-counter market and listed securities for which no sale was reported
on that date are valued at the average of the last reported bid and ask prices.
The fair value of the participation units owned by the Plan in group trust funds
is based on quoted redemption value on the last business day of the Plan year.
In the event that the Plan is terminated, participants receive the fair value of
their accounts.
2. DESCRIPTION OF PLAN
The Plan is a defined contribution employee benefit plan established to
encourage and assist employees to adopt a regular savings program and to help
provide additional security for retirement. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
The Plan is a trusteed plan administered by the UST Inc. Employee Benefits
Administration Committee (EBAC). Wachovia Bank, N.A. is the trustee for the
Plan.
Employees are eligible to participate in the Plan the first day of the month
following the date a year of service has been completed. A year of service shall
be met upon completion of at least 1,000 hours of service during a 12-month
consecutive period measured from the employees' date of hire.
6
<PAGE> 10
UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1998 and 1997
2. DESCRIPTION OF PLAN (CONTINUED)
The majority of participants may make an aggregate contribution to the Plan of
2% to 12% (in 1/2% increments) of base pay on a before-tax or after-tax basis,
of which the first 6% is subject to a 100% matching contribution by the Company.
Employees of Stimson Lane Ltd. (Stimson Lane) who are participants of the Plan
may make an aggregate contribution to the Plan of 2% to 12% (in 1/2% increments)
of base pay on a before-tax or after-tax basis. Through December 31, 1997, the
first 3% of such contribution was subject to a 50% matching contribution by the
Company. Effective January 1, 1998, the Company's matching contribution for
Stimson Lane employees increased to 50% of the first 6% of compensation
contributed, and employees of F.W. Rickard Seeds and Yakima Brewing & Malting
Company were provided Company matching contributions of 50% of the first 3% and
6% of compensation contributed, respectively. In addition, effective May 1,
1998, the Company's matching contribution for eligible U.S. Cigar Sales, Inc.
employees is 50% of the first 6% of employee contributions.
In compliance with federal tax law, the maximum annual contribution for a
participant for the plan years presented is limited to the lesser of $30,000 or
25% of compensation and the maximum annual before-tax contribution was limited
to $10,000 in 1998 and $9,500 in 1997. The maximum amount of compensation taken
into account under the Plan for any participant was limited to $160,000 in both
1998 and 1997.
In accordance with the Plan, participants can direct the investment of their
contributions between Fund A (a fixed income fund, as defined), Fund B (an index
fund, as defined), Fund C (common stock of UST Inc.), Fund E (a balanced fund,
as defined) and Fund F (a small company fund, as defined). The Plan allows
participants who invest in more than one fund to allocate their contributions in
multiples of 5% per fund. This method permits Plan participants to change their
existing account balances by transferring amounts from any one
participant-directed fund to any other such fund.
Forfeitures (1998--$87,501; 1997--$54,623) remain in Fund D and are applied to
reduce employer contributions. At the discretion of the UST Inc. Board of
Directors (the Board), additional matching contributions may be made by the
Company. For the years ended December 31, 1998 and 1997, no additional
discretionary contributions were made. Company matching contributions are
invested in common stock of UST Inc. and are deposited in Fund D. Employees aged
59 1/2 years or older can direct the investment of Company matching
contributions in Fund A rather than Fund D. Employee contributions are always
100% vested, while vesting of the Company's contributions generally occurs over
a period of five years at a rate of 20% for each year of service. The period of
time during which a participant is eligible to participate in the Plan, but
chooses not to, does not count toward vesting. Participants become 100% vested
upon death or attainment of age 55.
7
<PAGE> 11
UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1998 and 1997
2. DESCRIPTION OF PLAN (CONTINUED)
The Plan includes a loan feature for participants who are currently employed by
the Company enabling them to borrow from their vested plan balance. Participants
may not obtain a loan if they (i) already have two outstanding loans under the
Plan or (ii) have obtained a loan from the Plan within the six-month period
immediately preceding the application for a new loan. The term of the loan can
range from one to five years as elected by the participant. Loan repayments are
made in equal installments of principal and interest by automatic payroll
deductions starting two months after the effective date of the loan. The maximum
amount the participant can borrow is the lesser of 50% of their vested interest
in the Plan or $50,000 less the highest outstanding loan balance over the
previous twelve months. The minimum loan amount is $1,000. The loan interest
rate is determined on a monthly basis and is equal to the prime rate published
in the Wall Street Journal on the first business day of the calendar month. The
interest rate is fixed for the term of the loan. In the event a participant
defaults on a Plan loan, the entire unpaid balance of the loan shall become due
and payable immediately.
Participants in the Plan are not subject to federal income tax on amounts
contributed to the Plan by the Company or on amounts that such participants
contribute to the Plan on a before-tax basis until such time that their
participating interest in the Plan is distributed to them. A participant is
subject to tax on the amount by which the distribution paid exceeds the amount
contributed on an after-tax basis to the Plan.
Expenses incurred to administer the Plan are paid from Plan assets to the extent
permissible under applicable law. All costs and expenses with regard to the
purchase or sale of investments are paid by the Plan.
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100 percent vested in their accounts.
The foregoing description of the Plan provides only general information.
Participants should refer to the Summary Plan Description (SPD) for a more
complete description of the Plans provisions. Copies of the SPD are available
from the Company's Employee Benefits Department.
3. PARTICIPANTS' INTERESTS
A participant's interest in the Plan is based on "Units of Participation", the
value of which is calculated monthly for each fund based on the aggregate fair
value of the funds investments at each month end. The value of a unit for Funds
A, B, E and F is determined by dividing the fair value of each Fund by the total
number of its outstanding units. The unit value for Funds C and D is equal to
the fair value of one share of common stock of the Company. The Participant Loan
Fund unit value is $1.
A participant obtaining a distribution from the Plan receives the fair value of
their account. If a participant leaves the Company before becoming fully vested
in the employer's contributions to the Plan (value of Fund D), the participant
will forfeit the nonvested portion of the employer's contributions. Under the
provisions of the Plan, a participant may, at the discretion of the EBAC, be
permitted to (i) contribute to the Plan certain distributions received from
another qualified employee benefit plan or (ii) direct the trustee of such other
plan to make a trust-to-trust transfer to the Plan of the participants account
in such other plan.
8
<PAGE> 12
UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1998 and 1997
3. PARTICIPANTS' INTERESTS (CONTINUED)
As of December 31, 1998 and 1997, there were 1,879 and 1,873 participants in the
Plan, respectively. The number of participants in each fund at December 31 was
as follows:
<TABLE>
<CAPTION>
FUND 1998 1997
---- ---- ----
<S> <C> <C>
A 1,074 1,097
B 1,200 1,081
C 875 899
D 1,861 1,840
E 751 630
F 907 915
Participant Loan 793 565
</TABLE>
The accounting records for Funds C and D are combined, and are not separately
maintained between these two funds. Separate participant records are, however,
maintained for each Fund. A summary of such participant records for 1998 and
1997 follows:
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------- ----------------- ---------------- ----------------- ----------------
Fund C FUND D TOTAL Fund C Fund D Total
---------------- ----------------- ----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Participants $ 1,059,953 $ 1,059,953 $ 1,458,002 $ 1,458,002
Employer $ 4,486,050 4,486,050 $ 3,763,909 3,763,909
---------------- ----------------- ----------------- ---------------- ----------------- ----------------
Total Contributions: 1,059,953 4,486,050 5,546,003 1,458,002 3,763,909 5,221,911
Investment income 118,103 (824,203) (706,100) 2,389,975 11,576,166 13,966,141
Administrative expenses (223,215) (223,215) (208,461) (208,461)
Participant distributions (780,758) (7,202,200) (7,982,958) (1,656,690) (7,860,685) (9,517,375)
Interfund transfers, net (1,113,170) (918,337) (2,031,507) (2,301,225) (869,857) (3,171,082)
---------------- ----------------- ----------------- ---------------- ----------------- ----------------
Net increase (decrease) (939,087) (4,458,690) (5,397,777) (318,399) 6,609,533 6,291,134
Net assets available for
benefits:
Beginning of year 12,400,628 74,741,927 87,142,555 12,719,027 68,132,394 80,851,421
================ ================= ================= ================ ================= ================
End of year $11,461,541 $70,283,237 $81,744,778 $12,400,628 $74,741,927 $87,142,555
================ ================= ================= ================ ================= ================
Units:
Beginning of year 335,697 2,023,333 2,359,030 392,805 2,104,151 2,496,956
================ ================= ================= ================ ================= ================
End of year 328,599 2,015,002 2,343,601 335,697 2,023,333 2,359,030
================ ================= ================= ================ ================= ================
</TABLE>
9
<PAGE> 13
UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1998 and 1997
4. INVESTMENTS
The fair and contract values, as determined by quoted market prices, of
individual investments that represent 5% or more of net assets available for
benefits are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------
1998 1997
---- ----
<S> <C> <C>
UST Inc. Common Stock; 1998 - 2,380,554 shares;
1997 - 2,365,375 shares $83,021,821 $87,372,222
State Street Bank & Trust Company; Common Stock
Fund; 1998 - 103,479 shares; 1997 - 99,127 shares 21,182,549 15,786,605
State Street Bank & Trust Company; Guaranteed
Investment Contract Fund; 1998 - 15,476,582 units;
1997 - 15,091,365 units 15,476,582 15,091,365
John Hancock Special Equities Fund;
1998 - 0 shares; 1997 - 272,396 shares - 7,207,607
</TABLE>
Fund A (the fixed income fund, as defined) includes fully benefit responsive
investment contracts with insurance companies and other financial institutions.
Benefit responsive contracts consist of contributions made under the contract
and interest at the contract rate and provide contract value payments for
participant distributions, loans and investment transfers as allowed by the
Plan. There are exceptions for payments to participants who, as a result of a
company event, cease to be employed by the Company. A company event includes a
significant early retirement program, divestiture or other company action that
could be construed as causing increased plan payments to participants.
The interest rates are set at the time of purchase and provide a stated rate of
interest on the principal and accrued interest balance over the life of the
contract. The weighted-average yield for all guaranteed investment contracts was
6.6% in 1998 and 6.5% in 1997. The weighted-average crediting interest rate for
all guaranteed investment contracts was 6.3% at December 31, 1998 and 6.6% at
December 31, 1997.
5. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated January 9, 1995, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The EBAC believes the
Plan is being operated in compliance with the applicable requirements of the
Code and, therefore, believes that the Plan is qualified and the related trust
is tax exempt.
10
<PAGE> 14
UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1998 and 1997
6. YEAR 2000 ISSUE (UNAUDITED)
The year 2000 issue relates to computer systems and programs which may not
properly distinguish the difference between the year 1900 and the year 2000. As
a result of the potential time sensitivity of existing software, any business
entity is at risk for possible system failure or miscalculations causing
disruptions of operations.
The Company has determined that it will be necessary to take certain steps in
order to ensure that the Plan's systems are prepared to handle year 2000 dates.
This process also includes determining whether third party service providers
have reasonable plans in place to become year 2000 compliant. The Company and
its primary service providers currently expect the project to be completed by
mid 1999. The Company does not expect this project to have any effect on plan
operations.
11
<PAGE> 15
SUPPLEMENTAL SCHEDULES
<PAGE> 16
UST Inc.
Employees' Savings Plan
EIN 06-1193986, Plan number 002
Line 27A - Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
DESCRIPTION OF INVESTMENT
IDENTITY OF ISSUE, BORROWER, INCLUDING MATURITY DATE,
LESSOR OR SIMILAR PARTY RATE OF INTEREST, PAR OR
MATURITY VALUE COST FAIR/CONTRACT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UST Inc.* 2,380,554 shares --
Common Stock $28,687,619 $83,021,821
---------------------------------------
Group Trust Funds:
State Street Bank and Trust Company 103,479 shares --
Common Stock Fund 9,281,332 21,182,549
---------------------------------------
State Street Bank and Trust Company 2,806,754 units -- Yield
Enhanced Short-term
Investment Fund 2,806,754 2,806,754
State Street Bank and Trust Company 4,041 shares --
Short-term Investment Fund 4,041 4,041
---------------------------------------
Total 2,810,795 2,810,795
---------------------------------------
American Balanced Fund 348,590 shares --
Investment Fund 5,190,608 5,493,714
---------------------------------------
MAS Small Capital Value Fund 343,030 shares --
Investment Fund 6,160,513 5,948,166
---------------------------------------
State Street Bank and Trust Company
Guaranteed Investment Contracts:
Allstate Life Insurance Company 1,125,443 units, 6.66%,
due October 1, 2001 1,125,443 1,125,443
Capital Holding Corp. 592,879 units, 6.78%,
due December 29, 2000 592,879 592,879
Capital Holding Corp. 1,002,695 units, 5.61%,
due March 31, 2003 1,002,695 1,002,695
Continental Assurance 952,369 units, 6.49%,
due April 2, 2001 952,369 952,369
John Hancock Life Insurance Company 1,102,573 units, 6.72%,
due July 1, 2002 1,102,573 1,102,573
John Hancock Life Insurance Company 1,122,448 units, 7.12%,
due April 1, 2002 1,122,448 1,122,448
</TABLE>
*Indicates party-in-interest to the Plan.
12
<PAGE> 17
UST Inc.
Employees' Savings Plan
EIN 06-1193986, Plan number 002
Line 27A - Schedule of Assets Held for Investment Purposes (continued)
December 31, 1998
<TABLE>
<CAPTION>
DESCRIPTION OF INVESTMENT
IDENTITY OF ISSUE, BORROWER, INCLUDING MATURITY DATE,
LESSOR OR SIMILAR PARTY RATE OF INTEREST, PAR OR
MATURITY VALUE COST FAIR/CONTRACT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Metropolitan Life Insurance Company 1,159,487 units, 6.80%,
due June 30, 2000 $1,159,487 $1,159,487
Metropolitan Life Insurance Company 1,061,825 units, 6.20%,
due December 29, 2000 1,061,825 1,061,825
New York Life Insurance Company 682,288 units, 7.75%,
due March 31, 1999 682,288 682,288
New York Life Insurance Company 527,113 units, 6.50%,
due September 30, 1999 527,113 527,113
Principal Mutual Life Insurance Company 342,465 units, 7.85%,
due June 30, 1999 342,465 342,465
Principal Mutual Life Insurance Company 402,934 units, 6.05%,
due June 30, 1999 402,934 402,934
Protective Life Insurance Company 1,020,867 units, 5.97%,
due September 30, 2002 1,020,867 1,020,867
The Life Insurance Company of Virginia 882,265 units, 6.82%,
due September 29, 2000 882,265 882,265
Transamerica 1,186,620 units, 7.08%,
due December 31, 2000 1,186,620 1,186,620
Travelers Insurance Company 1,045,811 units, 6.08%,
due October 1, 2001 1,045,811 1,045,811
Travelers Insurance Company 1,266,500 units, 5.59%,
due June 30, 2003 1,266,500 1,266,500
---------------------------------------
Total 15,476,582 15,476,582
---------------------------------------
Participant Loans Receivable - 3,881,179
---------------------------------------
Total Investments $67,607,449 $137,814,806
=======================================
</TABLE>
13
<PAGE> 18
UST Inc.
Employees' Savings Plan
EIN 06-1193986, Plan number 002
Line 27D - Schedule of Reportable Transactions
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Identity of Purchase Selling Net
Party Involved Description of Assets Price (1) Price (1) Cost of Asset Gain (Loss)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CATEGORY (iii)--A SERIES OF TRANSACTIONS IN EXCESS OF 5 PERCENT
OF PLAN ASSETS
John Hancock Special Equities Fund
Investment Fund Shares:
54,016 $1,315,350 $1,315,350 -
326,412 $6,937,263 7,156,818 $(219,555)
State Street Bank and Short-term Investment Fund
Trust Company Shares:
30,341,938 30,341,938 30,341,938 -
31,363,713 31,363,713 31,363,713 -
State Street Bank and Yield Enhanced Short-term
Trust Company Investment Fund Shares:
7,621,151 7,621,151 7,621,151 -
7,144,319 7,144,319 7,144,319 -
UST Inc.* Common Stock-Shares:
158,110 4,762,843 4,762,843 -
142,931 4,541,600 1,921,746 2,619,854
</TABLE>
THERE WERE NO CATEGORY (i), (ii) OR (iv) REPORTABLE TRANSACTIONS DURING 1998.
*INDICATES PARTY-IN-INTEREST TO THE PLAN.
"LEASE RENTAL" AND "EXPENSES INCURRED WITH TRANSACTION" COLUMNS WERE NOT
APPLICABLE DURING 1998.
(1) Purchase and selling prices are equal to fair value at dates of acquisition
and disposition, respectively.
14
<PAGE> 19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the UST
Inc. Employee Benefits Administration Committee has duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
UST INC. EMPLOYEES SAVINGS PLAN
/s/ ALTON W. ADAMS
Alton W. Adams
Chairman, UST Inc. Employee Benefits
Administration Committee
Dated: May 17, 1999
<PAGE> 20
Consent of Independent Auditors
We consent to the incorporation by reference in Post-Effective Amendment No. 4
to the Registration Statement (Form S-8 No. 2-72410) pertaining to the
Employees' Savings Plan of UST Inc. of our report dated April 30, 1999, with
respect to the financial statements and schedules of the UST Inc. Employees'
Savings Plan included in this Annual Report (Form 11-K) for the year ended
December 31, 1998.
ERNST & YOUNG LLP
Stamford, Connecticut
May 17, 1999
