<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, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-17506
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UST Inc.
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(Exact name of registrant as specified in its charter)
Delaware 06-1193986
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 West Putnam Avenue, Greenwich, CT 06830
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 661-1100
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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, 2000
162,212,156
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<PAGE> 2
UST Inc.
(Registrant)
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I. Financial Information:
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statement of Financial Position -
March 31, 2000 and December 31, 1999 2
Condensed Consolidated Statement of Earnings -
Three months ended March 31, 2000 and 1999 3
Condensed Consolidated Statement of Cash Flows -
Three months ended March 31, 2000 and 1999 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Operations and
Financial Condition 9
Part II. Other Information:
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
27. Financial Data Schedule
Signature 15
</TABLE>
(1)
<PAGE> 3
UST Inc.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 38,093 $ 74,989
Accounts receivable 63,318 64,349
Inventories:
Leaf tobacco 217,287 189,414
Products in process 114,903 116,291
Finished goods 77,043 75,757
Other materials and supplies 22,263 22,007
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431,496 403,469
Prepaid expenses and other current assets 27,242 26,709
Deferred income taxes 10,152 10,508
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Total current assets 570,301 580,024
Property, plant and equipment, net 364,710 361,882
Other assets 76,657 73,742
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Total assets $ 1,011,668 $ 1,015,648
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt $ - $ 70,965
Accounts payable and accrued expenses 87,624 144,678
Income taxes 104,614 45,684
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Total current liabilities 192,238 261,327
Long-term debt 540,000 411,000
Postretirement benefits other than pensions 80,936 80,547
Other liabilities 63,297 61,970
Contingencies (see note) - -
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Total liabilities 876,471 814,844
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 209,033,756 shares in 2000
and 208,936,586 shares in 1999 104,517 104,468
Additional paid-in capital 528,771 526,676
Retained earnings 891,514 861,816
Accumulated other comprehensive loss (12,256) (12,277)
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1,512,546 1,480,683
Less treasury stock - 46,821,600 shares in 2000 and
42,129,500 shares in 1999 1,377,349 1,279,879
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Total stockholders' equity 135,197 200,804
----------- -----------
Total liabilities and stockholders' equity $ 1,011,668 $ 1,015,648
=========== ===========
</TABLE>
Note: The statement of financial position at December 31, 1999 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,
---------------------------
2000 1999
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<S> <C> <C>
Net sales $368,295 $350,085
Costs and expenses
Cost of products sold 66,975 61,286
Excise taxes 8,396 5,732
Selling, advertising and administrative 119,509 105,673
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Total costs and expenses 194,880 172,691
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Operating income 173,415 177,394
Interest, net 7,527 1,065
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Earnings before income taxes 165,888 176,329
Income taxes 63,924 67,869
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Net earnings $101,964 $108,460
======= =========
Net earnings per share
Basic $.62 $.60
Diluted $.62 $.60
Dividends per share $.44 $.42
Average number of shares
Basic 164,961 179,763
Diluted 165,123 180,650
</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,
----------------------------
2000 1999
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<S> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net cash provided by operating activities $ 85,213 $ 89,649
INVESTING ACTIVITIES
- --------------------
Purchases of property, plant and equipment (13,153) (9,386)
Dispositions of property, plant and
equipment 601 496
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Net cash used in investing activities (12,552) (8,890)
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FINANCING ACTIVITIES
- --------------------
Proceeds from borrowings 300,000 153,700
Repayment of borrowings (241,965) -
Proceeds from the issuance of stock 2,144 2,597
Dividends paid (72,266) (74,904)
Stock repurchased (97,470) (180,290)
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Net cash used in financing activities (109,557) (98,897)
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Decrease in cash and cash equivalents (36,896) (18,138)
Cash and cash equivalents at beginning of year 74,989 33,210
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Cash and cash equivalents at end of period $ 38,093 $ 15,072
========= =========
- -----------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes $5,276 $4,365
Interest 2,621 1,608
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
(4)
<PAGE> 6
UST Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States 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, 2000 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2000. 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, 1999.
REPURCHASE OF COMMON STOCK
In 2000, Registrant repurchased 4.7 million shares costing $97.5 million. The
repurchases were pursuant to Registrant's authorized program to repurchase its
outstanding common stock up to a maximum of 20 million shares. As of March 31,
2000, 7.2 million shares were repurchased under this program. Registrant has
suspended its stock repurchase program pending the court's review of post-trial
matters in Registrant's antitrust litigation.
COMPREHENSIVE INCOME
The main components of comprehensive income for Registrant are net earnings,
foreign currency translation adjustments and additional minimum pension
liability adjustments. For the first quarter of 2000 and 1999, total
comprehensive income, net of taxes, amounted to $101,985,000 and $107,817,000,
respectively.
OTHER MATTERS
On March 6, 2000, Registrant issued $300 million aggregate principal amount of
8.8 percent fixed rate senior notes. These notes mature on March 15, 2005, with
semiannual interest payments. Costs associated with the issuance of the notes
have been capitalized and are being amortized over the term of the notes.
In February 2000, Registrant announced that its subsidiary, Stimson Lane Ltd.,
had reached an agreement to purchase the Guenoc Ranch in northern California for
an undisclosed price subject to regulatory approval and certain other
conditions. The closing of the Guenoc Ranch purchase has been delayed pending
the results of post-trial matters regarding Registrant's antitrust litigation.
(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,
---------------------------
2000 1999
------ ------
<S> <C> <C>
Numerator:
Net earnings $101,964 $108,460
======== ========
Denominator:
Denominator for basic earnings per share -
weighted-average shares 164,961 179,763
Dilutive effect of stock options 162 887
-------- --------
Denominator for diluted earnings per share 165,123 180,650
======== ========
Basic earnings per share $ .62 $ .60
Diluted earnings per share $ .62 $ .60
</TABLE>
Options to purchase 14.5 million shares and 7.9 million shares of common stock
outstanding as of March 31, 2000 and 1999, 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.
SEGMENT INFORMATION
Registrant's reportable segments are Tobacco and Wine. Those business units that
do not meet quantitative reportable thresholds are included in all other
operations. Included in all other operations for both periods is Registrant's
international and cigar operations. Interim segment information is as follows:
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------
<S> <C> <C>
Net Sales to Unaffiliated Customers: 2000 1999
------ ------
Tobacco $ 324,231 $ 311,167
Wine 37,107 32,133
All other 6,957 6,785
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Net sales $ 368,295 $ 350,085
========= =========
</TABLE>
<TABLE>
<S> <C> <C>
Operating Profit (Loss):
Tobacco $ 179,640 $ 179,627
Wine 2,477 2,082
All other (2,027) (1,433)
--------- ---------
Operating profit 180,090 180,276
Corporate expenses (6,675) (2,882)
Interest, net (7,527) (1,065)
--------- ---------
Earnings before income taxes $ 165,888 $ 176,329
========= =========
</TABLE>
Registrant's identifiable assets did not change significantly from amounts
appearing in the December 31, 1999 Consolidated Segment Information (See Form
10-K for the year then ended).
(6)
<PAGE> 8
UST Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 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.
Registrant has been named in two actions brought by individual plaintiffs, both
of which 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.
Registrant is also named in an action in Illinois brought by an individual
plaintiff and purporting to state a class action "on behalf of himself and all
other persons similarly situated" alleging that Registrant "manipulates the
nicotine levels and absorption rates" in its smokeless tobacco products and
seeking to recover monetary damages "in an amount not less than the purchase
price" of Registrant's smokeless tobacco products and certain other relief. The
purported class excludes all persons who claim any personal injury as a result
of using Registrant's smokeless tobacco products.
Registrant is also named in several actions in West Virginia brought on behalf
of individual plaintiffs against cigarette manufacturers, smokeless tobacco
manufacturers, and other organizations seeking damages and other relief in
connection with injuries allegedly sustained as a result of tobacco usage,
including smokeless tobacco products. Included among the plaintiffs are three
individuals alleging, in addition to the use of other tobacco products, use of
Registrant's smokeless tobacco products and alleging the types of injuries
claimed to be associated with the use of smokeless tobacco products.
Registrant has been named in an action commenced in Nevada by an individual
plaintiff against cigarette and smokeless tobacco manufacturers seeking damages
and other relief for injuries allegedly sustained as a result of his exposure to
environmental tobacco smoke, cigarette smoking and use of smokeless tobacco
products.
Registrant is named in an action in San Francisco, California along with five
other smokeless tobacco manufacturers seeking unspecified 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
(7)
<PAGE> 9
UST Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONTINGENCIES (Continued)
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 willingness to consider alternative solutions for
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 position of Registrant, but may have a material
impact on Registrant's consolidated financial results for a particular reporting
period in which resolved.
On March 28, 2000, a Kentucky jury rendered a verdict against Registrant,
awarding $350 million in compensatory damages to Conwood Company, L.P., for its
claims under federal antitrust laws that Registrant had engaged in exclusionary
and anticompetitive conduct in the marketing and promotion of moist smokeless
tobacco products. The verdict, when entered as a judgment, was subject to
trebling under federal antitrust laws to $1.05 billion. Registrant has filed
motions with the court for judgment as a matter of law to overturn the verdict,
for a new trial or reduced damages award, and to authorize a supersedeas bond at
less than the full amount of the judgment. In the event the District Court fails
to enter judgment in Registrant's favor, Registrant intends to appeal to the
Court of Appeals for the Sixth Circuit. As of the date of this filing, the court
has not ruled on any of these motions, or plaintiffs' motions for injunctive
relief, attorneys' fees and costs. Registrant believes that the evidence
presented at trial was insufficient to support the jury verdict and, as a
result, believes that, while there can be no assurances, the judgment should
ultimately be reversed. The Company is not presently able to reasonably estimate
the amount of damages, if any, which may be ultimately imposed and, accordingly,
no charge relating to the judgment is reflected in Registrant's financial
statements. While Registrant believes that the judgment should ultimately be
reversed, if the adverse judgment is sustained after all appeals, satisfaction
of the judgment is likely to have a material adverse effect on Registrant's
consolidated financial results for a particular year, but is not expected to
have a material adverse effect on Registrant's consolidated financial position.
Registrant was also named in two purported class actions filed in state court in
Tennessee and New Mexico on behalf of putative class members who were indirect
purchasers of smokeless tobacco products manufactured by Registrant during the
period April 1996 through March 28, 2000, alleging that Registrant has violated
the antitrust laws, unfair or deceptive trade practices statutes and the common
law of certain states. The plaintiffs seek to recover compensatory and statutory
damages in an amount not to exceed $74,000 after trebling per putative class
member, and certain other relief. The actions are similar in all material
respects and are derived directly from the Conwood litigation and therefore will
need to overcome the same issues raised by Registrant in its post-trial motions
discussed above. Even if Conwood were ultimately to prevail on issues which
Registrant is currently challenging in post-trial motions or on appeal, the
plaintiffs in these two actions will still need to establish additional elements
before liability can be imposed upon Registrant. Registrant believes that it has
meritorious defenses in this regard and that the ultimate outcome of these
class actions will not have a material adverse effect on its consolidated
financial position, although if plaintiffs were to prevail these actions could
have a material impact on its consolidated financial results for a particular
reporting period in which resolved.
(8)
<PAGE> 10
UST Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATIONS AND FINANCIAL CONDITION
(Unaudited)
RESULTS OF OPERATIONS
FIRST QUARTER 2000 COMPARED WITH THE FIRST QUARTER OF 1999
CONSOLIDATED RESULTS
Consolidated net sales increased 5.2 percent to $368.3 million, operating income
decreased 2.2 percent to $173.4 million, net earnings declined 6.0 percent to
$102.0 million and basic and diluted earnings per share increased 3.3 percent to
$0.62 as compared to the corresponding 1999 period. The consolidated gross
profit percentage for the first quarter 2000 decreased slightly primarily due to
increased unit cost, partially offset by higher selling prices for our moist
smokeless tobacco products. Corporate expenses increased for the first quarter
2000 mainly due to a hedging loss related to the recent debt issuance. Net
interest expense increased significantly to $7.5 million as a result of higher
average debt outstanding and higher interest rates. Income taxes decreased in
the first quarter of 2000 mainly due to lower earnings before taxes as compared
with the corresponding 1999 period. The first quarter 2000 effective tax rate
remained level with the corresponding 1999 period.
TOBACCO SEGMENT
Net sales for the Tobacco segment increased 4.2 percent to $324.2 million and
accounted for 88 percent of consolidated net sales in 2000. The increase was the
result of higher selling prices on premium products and a 2 percent increase in
moist smokeless tobacco net unit volume to 152.5 million cans. Unit volume
results for moist smokeless tobacco products included non-premium products'
contribution of an additional 4.4 million cans, while premium products declined
slightly.
Cost of products sold increased 12.2 percent in the first quarter primarily due
to higher moist smokeless tobacco unit cost, mainly attributable to federal
tobacco excise taxes and higher leaf tobacco costs associated with the increased
can weight for Skoal Long Cut products. Gross profit rose 2.8 percent as
compared to the similar 1999 period. Tobacco segment gross profit percentage
decreased slightly as a result of the aforementioned unfavorable increases in
cost of products sold.
Selling and advertising expenses increased for the first quarter, primarily
promotional activities at retail, as Registrant continued its accelerated
spending plan, started in the third quarter of 1999, in an effort to increase
category growth. Indirect selling expenses also increased primarily in support
of Registrant's promotional activities. Administrative expenses increased in the
first quarter of 2000 primarily due to legal expenses associated with
Registrant's antitrust litigation.
Operating profit for the Tobacco segment remained stable at $179.6 million for
the first quarter of 2000 as compared with 1999.
(9)
<PAGE> 11
UST Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION (Continued)
WINE SEGMENT
Wine segment net sales increased 15.5 percent to $37.1 million for the first
quarter of 2000 and accounted for 10.1 percent of consolidated net sales in
2000. Higher net sales were primarily due to an 11.5 percent increase in premium
wine case unit volume. The case volume growth was attributable to the Chateau
Ste. Michelle and Villa Mt. Eden brands, while the Columbia Crest brand
decreased slightly. Registrant's two leading brands of premium wine, Columbia
Crest and Chateau Ste. Michelle, accounted for 81 percent of Registrant's total
wine sales in 2000.
Wine unit costs increased for the first quarter primarily due to higher grape
costs. Gross profit for the Wine segment increased primarily due to higher
premium case unit volume, partially offset by the higher unit cost, while the
gross profit percentage remained stable.
Selling and advertising expenses in the first quarter of 2000 were level with
1999 amounts. Administrative and other expenses were higher primarily due to
costs incurred for the pending Guenoc purchase and continued infrastructure
spending to meet current and expected growth.
Operating profit for the Wine segment increased 19.0 percent to $2.5 million for
the first quarter of 2000, as compared to $2.1 million in 1999.
ALL OTHER OPERATIONS
Sales for all other operations increased 2.5 percent to $7.0 million and
accounted for 1.9 percent of consolidated net sales in 2000. Overall, all other
operations recorded an operating loss of $2.0 million in the first quarter of
2000 as compared to a $1.4 million operating loss in 1999.
LIQUIDITY AND SOURCES OF CAPITAL
CHANGES IN FINANCIAL CONDITION SINCE DECEMBER 31, 1999
Net cash provided by operating activities decreased in the first quarter of 2000
to $85.2 as compared with $89.6 million for the corresponding 1999 period. Lower
net earnings were the main cause of the decrease. Registrant's primary sources
of cash were net earnings generated by the Tobacco segment and an increase in
income taxes payable, while a reduction in accounts payable and accrued expenses
and seasonal purchases of leaf tobacco for moist smokeless tobacco products were
the main uses of cash from operations. Registrant estimates that the overall raw
material inventory purchases and other costs, for leaf tobacco and grapes, in
2000 will approximate amounts expended in 1999.
Net cash used in investing activities was $12.6 million in 2000 as compared to
$8.9 million in 1999. Expenditures in both years were for purchases of property,
plant and equipment.
(10)
<PAGE> 12
UST Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION (Continued)
Net cash used in financing activities increased to $109.6 million in 2000 as
compared to $98.9 million in 1999. This increase in 2000 includes funds received
for the issuance of $300 million in 5 year senior notes, which was primarily
used to repay Registrant's commercial paper borrowings of $242 million, while
1999 included additional proceeds from borrowings of $153.7 million. Registrant
expended $97.5 million in the first quarter of 2000 for its stock repurchase
program, which was significantly lower than the first quarter of 1999.
Registrant has suspended its stock repurchase program pending the court's review
of post-trial matters in Registrant's antitrust litigation.
As of the date of this filing, Registrant is not able to assess the amount of
funds to be allocated for investing and financing activities, primarily for the
capital program and stock repurchase program, for the remainder of 2000, as
Registrant may have significant cash obligations with regards to any bonding
requirements. Registrant is presently engaged in efforts to obtain appropriate
commitments to satisfy any requirements for bonding which may be imposed.
Additional borrowings and internally generated funds will be utilized to meet
Registrant's cash requirements for the remainder of 2000.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On March 6, 2000, Registrant issued $300 million aggregate principal amount of
8.8 percent fixed rate senior notes, which mature on March 15, 2005. Upon this
issuance, Registrant settled its treasury lock interest agreements used to hedge
the exposure to interest rate fluctuations. There were no other material changes
in market risk since December 31, 1999.
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 1999 Form 10-K, and Form 8-K, dated March 30, 2000, 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.
(11)
<PAGE> 13
UST Inc.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In Amy Leslie, individually and as Executor of the Estate of Robert
Leslie and as Guardian ad litem for minor Nicole Taylor Leslie v. United
States Tobacco Company, et. al., (No. C99-2874-UVW), United States
District Court, Northern District of California, on March 31, 2000, the
court entered Order Approving Stipulation of Voluntary Dismissal, thereby
dismissing this action.
In 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, on April 12, 2000, Registrant filed its
motion for judgment as a matter of law in favor of Registrant. In the
alternative, Registrant filed a motion for a new trial or for a reduced
damages award. In the event the judgment is not vacated or a new trial is
not ordered, Registrant intends to appeal the judgment to the Court of
Appeals for the Sixth Circuit. On April 19, 2000, Registrant filed its
motion to authorize a supersedeas bond and other conditions for security
of the judgment, and to abide by other stated conditions with respect to
the judgment, pending the court's ruling on Registrant's post-trial
motions and the outcome of any appeal by Registrant. To date, the court
has not ruled on any of Registrant's motions.
On April 17, 2000, Registrant was served with a Summons and Class Action
Complaint in an action entitled Philip Edward Davis, on behalf of himself
and all others similarly situated in the States of Tennessee, Arizona,
California, Florida, Kansas, Maine, Michigan, Minnesota, Mississippi, New
Mexico, North Carolina, North Dakota, South Dakota, West Virginia,
Wisconsin and the District of Columbia v. United States Tobacco Company,
United States Tobacco Sales and Marketing Company Inc., United States
Tobacco Manufacturing Company Inc. and UST Incorporated (Case No. 17,305
IV), Circuit Court for Jefferson County, Tennessee at Dandridge
("Davis"). This action was brought by an individual plaintiff on behalf
of himself and a purported class of "all persons and entities" in the 15
states and the District of Columbia listed in the caption above ("class
jurisdictions") "who purchased smokeless tobacco products indirectly from
the Defendants during the period commencing April 1996, and continuing
through March 28, 2000". Plaintiffs allege that Registrant has violated
the antitrust laws and unfair or deceptive trade practices statutes of
the class jurisdictions as well as the common law of those jurisdictions.
Plaintiffs seek unspecified compensatory and statutory damages in an
amount not to exceed $74,000 (including trebling) per putative class
member and certain other relief.
(12)
<PAGE> 14
UST Inc.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings (Continued)
On April 18, 2000, Registrant was served with a Summons and Antitrust
Class Action Complaint in an action entitled Arthur Simoni, on behalf of
himself and all others similarly situated v. United States Tobacco
Company, United States Sales and Marketing Company Inc., United States
Tobacco Manufacturing Company, Inc. and UST Incorporated (No.
D-0117-CV-2000000921), First Judicial District Court, County of Rio
Arriba, New Mexico ("Simoni"). This action was brought by an individual
plaintiff on behalf of himself and a purported class of indirect
purchasers of smokeless tobacco products in the State of New Mexico who
purchased smokeless tobacco products manufactured by Registrant during
the period April 1996 through March 20, 1998. Plaintiffs seek to recover
damages for Registrants' alleged violations of the antitrust laws and
unfair or deceptive trade practices statutes of New Mexico, as well as
Registrants' alleged violations of the common law of New Mexico.
Plaintiffs seek unspecified compensatory and statutory damages in an
amount not to exceed $74,000 (including trebling) per putative class
member and certain other relief.
These two purported class actions are derived directly from the Conwood
litigation and are brought by the same plaintiffs' counsel. The
allegations are similar in all material respects. Even if Conwood were
ultimately to prevail on issues currently challenged by Registrant in
post-trial motions or on appeal, the plaintiffs in the Davis and Simoni
actions will still need to establish additional elements before liability
could be imposed on Registrant, and Registrant believes it has
meritorious defenses in this regard.
Item 4. Submission of Matters to a Vote of Security Holders
a) The 2000 Annual Meeting of Stockholders was held on May 2, 2000.
c) Matters voted upon at the meeting:
<TABLE>
<CAPTION>
Broker
Affirmative Negative Abstentions Non-Votes
----------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Approval of Amendment 132,365,830 9,610,665 891,848 0
and Restatement of 1992
Stock Option Plan
(Proposal No. 2)
Ratification and 141,925,799 395,972 546,572 0
Approval of Independent
Auditors (Proposal No. 3)
Stockholder Proposal 4,725,225 114,300,517 7,734,410 16,108,191
(Proposal No. 4)
Stockholder Proposal 4,324,139 113,306,121 9,129,893 16,108,190
(Proposal No. 5)
Stockholder Proposal 4,556,199 114,232,907 7,971,046 16,108,191
(Proposal No. 6)
</TABLE>
(13)
<PAGE> 15
UST Inc.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
On February 18, 2000, Registrant filed a Current Report on Form 8-K which
reported its Results of Operations for the fourth quarter and the year
ended December 31, 1999 and its Capitalization and Other Financial
Information.
On March 30, 2000, Registrant filed a Current Report on Form 8-K which
reported a $350 million jury award, subject to trebling, against
Registrant in connection with an antitrust suit brought against it by one
of its competitors. In addition, it was also reported that the Court had
entered an order staying execution of the judgment and deferring any
bonding relating to the stay until further briefing and review of
post-trial motions.
(14)
<PAGE> 16
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 12, 2000 /s/ Robert T. D'Alessandro
------------------------------
Robert T. D'Alessandro
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer and
Principal Financial Officer)
(15)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains 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>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 38,093
<SECURITIES> 0
<RECEIVABLES> 63,318
<ALLOWANCES> 0
<INVENTORY> 431,496
<CURRENT-ASSETS> 570,301
<PP&E> 644,581
<DEPRECIATION> 279,871
<TOTAL-ASSETS> 1,011,668
<CURRENT-LIABILITIES> 192,238
<BONDS> 540,000
0
0
<COMMON> 104,517
<OTHER-SE> 30,680
<TOTAL-LIABILITY-AND-EQUITY> 1,011,668
<SALES> 368,295
<TOTAL-REVENUES> 368,295
<CGS> 75,371
<TOTAL-COSTS> 75,371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,527
<INCOME-PRETAX> 165,888
<INCOME-TAX> 63,924
<INCOME-CONTINUING> 101,964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,964
<EPS-BASIC> .62
<EPS-DILUTED> .62
</TABLE>
