UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
SCHEDULE
14A
(Rule
14A-101)
PROXY
STATEMENT PURSUANT TO SECTION 14(a)
OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed
by the Registrant þ
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by a Party other than the Registrant □
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the appropriate box:
□
Preliminary Proxy Statement
□
Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
□
Definitive Proxy Statement
□
Definitive Additional Materials
þ Soliciting Materials
Pursuant to Section 240.14a-12
UST
Inc.
(Name
of Registrant as Specified in its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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þ
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No
fee required.
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□
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11
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1)
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Title
of each class of securities to which the transaction
applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4)
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Proposed
maximum aggregate value of transaction:
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5)
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Total
fee paid:
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□
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Fee
paid previously with preliminary materials
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement No.:
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3)
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Filing
Party:
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4)
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Date
Filed:
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The following press release was issued
by UST Inc. on Friday, October 24, 2008.
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Thomas
J. Fitzgerald
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Mark
A. Rozelle
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Media
Relations
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Investor
Relations
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(203)
817-3549
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(203)
817-3520
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UST
REPORTS THIRD QUARTER 2008 RESULTS;
REAFFIRMS
EARNINGS GUIDANCE FOR THE YEAR
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·
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Net
sales increased 1% vs. year ago to $484.6 million
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·
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Diluted
EPS was stable vs. year ago at $.84
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·
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Adjusted
diluted EPS increased 4.6% vs. year ago to $.91 (see
table)
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·
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Successfully
responded to increased moist smokeless tobacco competitive activity;
premium can sales return to growth, sequential share
stabilized
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·
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Moist
smokeless tobacco category grew 8.2%
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·
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Ste.
Michelle Wine Estates posts strong growth in net sales (+21%) and
operating profit (+28%)
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·
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Reaffirming
2008 adjusted diluted E.P.S. target of $3.65, with a range of $3.60 to
$3.70
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·
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Altria
Group, Inc.’s acquisition of UST on track to close during the first full
week of Jan. 2009 and no later than Jan.
7
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STAMFORD, Conn., Oct.
24, 2008 – UST Inc. (NYSE: UST) today announced for the third quarter ended
Sept. 30, 2008, reported diluted earnings per share was stable versus the prior
year period at $.84 and adjusted diluted earnings per share increased 4.6
percent to $.91. Adjustments affecting the comparison in the quarter include
acquisition related costs, restructuring charges associated with the company’s
Project Momentum cost savings initiative, antitrust litigation settlement
charges and the net impact related to the sale of the company’s headquarters in
the prior year period. The table below provides a reconciliation of such
non-GAAP financial measures to the most directly comparable GAAP
measures.
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Consolidated
diluted E.P.S.
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Third
Quarter
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||||
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2008
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2007
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%
Change
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|||
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GAAP
diluted E.P.S.
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$.84
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$.84
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-
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||
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Other
items (net of taxes):
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|||||
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Antitrust
litigation
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-
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.01
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-
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||
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Restructuring
charges
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.03
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.01
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-
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||
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Acquisition
related costs
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.04
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-
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-
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||
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Impact
of sale of corporate headquarters, net
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-
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.01
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-
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||
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Adj.
non-GAAP diluted E.P.S.
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$.91
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$.87
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4.6
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||
Adjusted
diluted earnings for the third quarter increased 4.6 percent versus the prior
year period. Promotional spending on moist smokeless tobacco was
increased in the third quarter in response to a rise in competitive and new
product activity. This higher promotional spending was more than offset by
continued strong sales and operating profit for the company’s wine operations,
lower costs and spending due to Project Momentum initiatives and reduced income
tax expense resulting from a reversal of tax reserves. Increased
interest expense related to borrowing incurred as part of the company’s share
repurchase program was more than offset, on an earnings per share basis, by a
reduction in shares outstanding versus the prior year period, even though the
company suspended its share repurchase program in the second quarter due to
Altria Group, Inc.’s pending acquisition of UST.
“The
third quarter was another good example of our expanded toolbox at work. The
company was able to invest against its premium moist smokeless tobacco brands to
meet increased competition, while at the same time deliver on its earnings per
share commitment. Importantly, the increased promotional spending worked,
returning the company’s premium brands, Copenhagen and Skoal, to growth by
mid-quarter and stabilizing sequential share of the segment,” said Murray S.
Kessler, chairman and chief executive officer. “With premium volume growing
again, the competitive environment normalizing and gasoline prices coming down,
the company remains confident in delivering its original adjusted earnings per
share target of $3.65 for 2008 with a range of $3.60 to $3.70.”
For
the nine-month period ended Sept. 30, 2008, diluted earnings per share increased
10.5 percent to $2.62 and adjusted diluted earnings per share increased 7.1
percent to $2.70 versus the prior year period (see table below).
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Consolidated
diluted E.P.S.
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Nine
months ended Sept. 30,
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||||
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2008
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2007
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%
Change
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|||
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GAAP
diluted E.P.S.
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$2.62
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$2.37
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10.5
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||
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Other
items (net of taxes):
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|||||
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Antitrust
litigation
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.01
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.50
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-
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Restructuring
charges
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.03
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.04
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-25.0
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Acquisition
related costs
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.04
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-
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-
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Impact
of sale of corporate headquarters, net
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-
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(.39)
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-
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Adj.
non-GAAP diluted E.P.S.
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$2.70
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$2.52
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7.1
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||
Smokeless Tobacco
Segment
Smokeless
Tobacco segment third quarter 2008 net sales decreased 5.2 percent to $364.1
million and operating profit decreased 8.6 percent to $194.8 million, versus the
prior year period. On an adjusted basis, operating profit decreased 7.1 percent
to $201.2 million (see attached table). The reduction in net sales and operating
profit primarily resulted from increased promotional spending in response to
increased competitive promotional and new product activity.
In
the quarter, total underlying moist smokeless tobacco net can volume increased
0.9 percent to 164.9 million and underlying premium net can volume increased 0.1
percent to 137.3 million. On a reported basis, total net can volume decreased
0.2 percent and premium decreased 0.9 percent. The difference between underlying
and reported shipments in the quarter related to the timing of shipments to
wholesale last year, which negatively affected the quarter’s comparison to the
prior year period by approximately 2 million cans.
Importantly,
during the second half of the quarter, when U.S. Smokeless Tobacco Company’s
(USSTC) increased promotional plans were in full effect, shipments accelerated
with total net can volume up 1.8 percent, and premium net can volume up 1.2
percent versus the prior year period.
USSTC’s
Retail Account Data Share & Volume Tracking System (RAD-SVT) for the most
recent 12-week period ended Sept. 6, 2008, also indicates solid growth for
USSTC’s total shipments which were up 2.9 percent versus year ago and USSTC’s
premium shipments which were up 1.6 percent. USSTC’s price value shipments
increased 8.9 percent. Category growth for the same period was robust, up 8.2
percent versus year ago. USSTC’s total share of 57.4 percent was the same as the
second quarter, another sign the company’s increased promotional support was
effective. Versus year ago, USSTC’s share was down 3 percentage points. (See
supplemental schedule for information about RAD-SVT data).
Smokeless
Tobacco segment nine-month 2008 net sales decreased 1.7 percent to $1,131.4
million versus the prior year period. Total moist smokeless tobacco net can
sales increased 1.3 percent to 496.8 million, with premium net can sales up 0.3
percent to 414.9 million and price value net can sales up 6.9 percent to 81.9
million.
Operating
profit for the segment, including antitrust litigation settlement charges and
its share of restructuring charges in 2008 and 2007, increased 23 percent to
$624.6 million. Excluding these items, adjusted operating profit decreased 1
percent to $633.8 million.
Wine
Segment
In
the third quarter 2008, net sales for the Wine segment increased 21.2 percent to
$99.8 million, as total premium case sales increased 17.7 percent to 1.4
million. Strong growth was realized across the product portfolio and was driven
by strong acclaim for several recently released wines, a new advertising
campaign for Columbia Crest and improved distribution as a result of an expanded
sales force. Strong sales growth, combined with increased productivity, led to a
28 percent increase in operating profit to $16.3 million.
Based
on AC Nielsen for the 13 weeks ending Sept. 20, 2008, shipments for Ste.
Michelle Wine Estates (SMWE) grew 13.2 percent in a category that increased 2.4
percent. Once again this quarter, SMWE was the fastest growing top 10 winery in
the U.S.
For
the nine-month 2008 period, Wine segment net sales increased 23.6 percent to
$285.1 million on a 17.8 percent increase in premium case sales versus the
corresponding 2007 period. Operating profit advanced 21.3 percent to $43
million.
Altria Group, Inc.’s Pending
Acquisition of UST
In
early Sept. 2008, the company announced it had reached a definitive agreement
for Altria to acquire all outstanding shares of UST for $69.50 per share in
cash. Altria has fully committed financing to complete the transaction. The
Federal Trade Commission has granted early termination of the initial waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
indicating no further federal regulatory review is required to complete the
transaction. And, the company has
scheduled a special shareholder meeting
for Dec. 4, 2008 to consider the proposed
transaction and will be mailing a definitive proxy next week to shareholders of record as of the close of business on Oct. 23, 2008. Assuming shareholder
approval and the satisfaction of other customary closing conditions, the company
expects the transaction to close during the first full week of Jan. 2009 and no
later than Jan. 7.
Outlook
For
the year, the company remains on track to deliver its previously released
adjusted non-GAAP diluted earnings per share target of $3.65, with a range of
$3.60 to $3.70.
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Consolidated
diluted E.P.S.
|
Full
Year
|
||||
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2008
Estimate
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2007
Actual
|
%
Change
|
|||
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GAAP
diluted E.P.S.
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$3.55
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$3.27
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8.6
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||
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Other
items (net of taxes):
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|||||
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Antitrust
litigation
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.01
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.54
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-
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||
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Restructuring
charges
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.03
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.04
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-
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Acquisition
related costs
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.06
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-
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-
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||
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Impact
of sale of corporate headquarters, net
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-
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(.39)
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-
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||
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Adj.
non-GAAP diluted E.P.S.
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$3.65
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$3.46
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5.5
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||
A
conference call is scheduled for 9 a.m. Eastern Time today to discuss these
results. To listen to the call, please visit www.ustinc.com.
A 14-day playback is available by calling (888) 286-8010 or (617) 801-6888, code
#50517327 or by visiting the website.
UST
Inc. is a holding company for its principal subsidiaries: U.S. Smokeless Tobacco
Company and Ste. Michelle Wine Estates. U.S. Smokeless Tobacco
Company is the leading producer and marketer of moist smokeless tobacco products
including Copenhagen, Skoal, Red Seal and Husky. Ste. Michelle Wine Estates
produces and markets premium wines sold nationally under 20 different labels
including Chateau Ste. Michelle, Columbia Crest, Stag’s Leap Wine Cellars and
Erath, as well as exclusively distributes and markets Antinori products in the
United States.
Forward-Looking and
Cautionary Statements
All
statements included in this
press release that are not historical in nature are forward-looking statements
made pursuant to the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements regarding the
company’s future performance and financial results are subject to a variety of
risks and uncertainties that could cause actual results and outcomes to differ
materially from those described in any forward-looking statement made by the
company. These risks and uncertainties include uncertainties associated with
ongoing and future litigation relating to product liability, antitrust and other
matters and legal and other regulatory initiatives; the company’s ability to
execute strategic actions, including acquisitions and the integration of
acquired businesses; federal and state legislation, including actual and
potential excise tax increases, and marketing restrictions relating to matters
such as adult sampling, minimum age of purchase, self service displays and
flavors; competition from other companies, including any new entrants in the
marketplace; wholesaler ordering patterns; consumer preferences, including those
relating to premium and price value brands and receptiveness to new product
introductions and marketing and other promotional programs; the cost of tobacco
leaf and other raw materials; conditions in capital markets, including the
market price per share of the company’s common stock and its impact on the
number of shares repurchased; and other factors described in this press release
and in the company’s Annual Report on Form 10-K for the year ended December 31,
2007. Forward-looking statements made by the company are based on its knowledge
of its businesses and the environment in which it operates as of the date on
which the statements were made. Due to these risks and uncertainties, as well as
matters beyond the control of the company which can affect forward-looking
statements, you are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this press
release. The company undertakes no duty to update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise.
Other
Information
In
connection with the proposed acquisition, UST intends to file relevant materials
with the U.S. Securities and Exchange Commission (SEC), including a proxy
statement on Schedule 14A.
INVESTORS
AND SHAREHOLDERS ARE URGED TO READ UST’S PROXY STATEMENT AND ALL RELEVANT
DOCUMENTS FILED WITH THE SEC (WHEN THEY BECOME AVAILABLE) BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors
and shareholders will be able to obtain the documents free of charge through the
website maintained by the SEC at www.sec.gov. A free copy of the proxy statement
and other relevant documents, when they become available, also may be obtained
from UST Inc., 6 High Ridge Park, Building A, Stamford, Connecticut 06905-1323,
Attn: Investor Relations. Investors and security holders may access copies of
the documents filed with the SEC by UST on its website at
www.ustinc.com.
Altria
and UST and their respective directors and executive officers may be deemed to
be participants in the solicitation of proxies from UST’s shareholders in
connection with the transaction. Information about Altria’s directors and
executive officers is set forth in Altria’s proxy statement on Schedule 14A
filed with the SEC on April 24, 2008 and Altria’s Annual Report on Form 10-K
filed on February 28, 2008. Information about UST’s directors and executive
officers is set forth in UST’s proxy statement on Schedule 14A filed with the
SEC on March 24, 2008 and UST’s Annual Report on Form 10-K filed on February 22,
2008. Additional information regarding the interests of participants in the
solicitation of proxies in connection with the transaction will be included in
the proxy statement that UST intends to file with the SEC.
(CONSOLIDATED
UNAUDITED RESULTS ARE ATTACHED)
# # #
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UST
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||||||||||||
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CONSOLIDATED
SALES AND EARNINGS
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||||||||||||
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(In
thousands, except per share amounts)
|
||||||||||||
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(Unaudited)
|
||||||||||||
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Third
Quarter
|
||||||||||||
|
2008
|
2007
|
%
Change
|
||||||||||
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Net
sales
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$ | 484,631 | $ | 479,612 | + 1.0 | |||||||
|
Costs
and expenses
|
||||||||||||
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Cost
of products sold
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143,664 | 126,469 | + 13.6 | |||||||||
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Selling,
advertising and administrative
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123,347 | 129,832 | - 5.0 | |||||||||
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Restructuring
charges
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6,406 | 1,677 | - | |||||||||
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Antitrust
litigation
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450 | 3,158 | - | |||||||||
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Acquisition
related costs
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7,082 | - | - | |||||||||
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Total
costs and expenses
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280,949 | 261,136 | + 7.6 | |||||||||
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Operating
income
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203,682 | 218,476 | - 6.8 | |||||||||
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Interest,
net
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18,493 | 9,308 | - | |||||||||
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Earnings
before income taxes, minority interest andequity earnings
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185,189 | 209,168 | - 11.5 | |||||||||
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Income
tax expense
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59,286 | 75,484 | - 21.5 | |||||||||
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Earnings
before minority interest and equity earnings
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125,903 | 133,684 | - 5.8 | |||||||||
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Minority
interest expense and equity earnings, net
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581 | 84 | - | |||||||||
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Net
earnings
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$ | 125,322 | $ | 133,600 | - 6.2 | |||||||
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Net
earnings per share:
|
||||||||||||
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Basic
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$ | .85 | $ | .85 | - | |||||||
|
Diluted
|
$ | .84 | $ | .84 | - | |||||||
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Dividends
per share
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$ | .63 | $ | .60 | + 5.0 | |||||||
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Average
number of shares:
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||||||||||||
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Basic
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147,212 | 157,666 | ||||||||||
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Diluted
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148,653 | 158,951 | ||||||||||
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UST
|
||||||||||||
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CONSOLIDATED
SALES AND EARNINGS
|
||||||||||||
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(In
thousands, except per share amounts)
|
||||||||||||
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(Unaudited)
|
||||||||||||
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Nine
months ended September 30,
|
||||||||||||
|
2008
|
2007
|
%
Change
|
||||||||||
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Net
sales
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$ | 1,463,516 | $ | 1,417,884 | + 3.2 | |||||||
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Costs
and expenses
|
||||||||||||
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Cost
of products sold
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415,319 | 368,971 | + 12.6 | |||||||||
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Selling,
advertising and administrative
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376,851 | 395,450 | - 4.7 | |||||||||
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Restructuring
charges
|
8,024 | 9,105 | - 11.9 | |||||||||
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Antitrust
litigation
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1,975 | 125,258 | - | |||||||||
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Acquisition
related costs
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7,082 | - | - | |||||||||
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Total
costs and expenses
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809,251 | 898,784 | - 10.0 | |||||||||
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Gain
on sale of corporate headquarters
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- | 105,143 | - | |||||||||
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Operating
income
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654,265 | 624,243 | + 4.8 | |||||||||
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Interest,
net
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55,024 | 27,438 | - | |||||||||
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Earnings
before income taxes, minority interest andequity earnings
|
599,241 | 596,805 | + 0.4 | |||||||||
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Income
tax expense
|
207,620 | 215,296 | - 3.6 | |||||||||
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Earnings
before minority interest and equity earnings
|
391,621 | 381,509 | + 2.7 | |||||||||
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Minority
interest expense and equity earnings, net
|
1,305 | 425 | - | |||||||||
|
Net
earnings
|
$ | 390,316 | $ | 381,084 | + 2.4 | |||||||
|
Net
earnings per share:
|
||||||||||||
|
Basic
|
$ | 2.64 | $ | 2.40 | + 10.0 | |||||||
|
Diluted
|
$ | 2.62 | $ | 2.37 | + 10.5 | |||||||
|
Dividends
per share
|
$ | 1.89 | $ | 1.80 | + 5.0 | |||||||
|
Average
number of shares:
|
||||||||||||
|
Basic
|
147,861 | 159,056 | ||||||||||
|
Diluted
|
149,202 | 160,536 | ||||||||||
UST
CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
(Dollars
in thousands)
|
September
30,
|
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
(Unaudited)
|
||||||||
|
Asset
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 29,501 | $ | 73,697 | ||||
|
Accounts
receivable
|
64,406 | 60,318 | ||||||
|
Inventories:
|
||||||||
|
Leaf
tobacco
|
163,159 | 202,137 | ||||||
|
Products
in process
|
205,879 | 258,814 | ||||||
|
Finished
goods
|
196,438 | 163,247 | ||||||
|
Other
materials and supplies
|
23,014 | 22,365 | ||||||
|
Total
inventories
|
588,490 | 646,563 | ||||||
|
Deferred
income taxes
|
22,743 | 26,737 | ||||||
|
Income
taxes receivable
|
7,848 | 8,663 | ||||||
|
Assets
held for sale
|
25,047 | - | ||||||
|
Prepaid
expenses and other current assets
|
30,673 | 30,296 | ||||||
|
Total
current assets
|
768,708 | 846,274 | ||||||
|
Property,
plant and equipment, net
|
486,280 | 505,101 | ||||||
|
Deferred
income taxes
|
45,397 | 35,972 | ||||||
|
Goodwill
|
28,093 | 28,304 | ||||||
|
Intangible
assets, net
|
55,385 | 56,221 | ||||||
|
Other
assets
|
18,325 | 15,206 | ||||||
|
Total
assets
|
$ | 1,402,188 | $ | 1,487,078 | ||||
|
Liabilities
and stockholders’ deficit:
|
||||||||
|
Current
liabilities:
|
||||||||
|
Short
term borrowings
|
$ | 40,000 | $ | - | ||||
|
Current
portion of long term debt
|
240,000 | - | ||||||
|
Accounts
payable and accrued expenses
|
228,574 | 321,256 | ||||||
|
Litigation
liability
|
23,380 | 75,360 | ||||||
|
Total
current liabilities
|
531,954 | 396,616 | ||||||
|
Long-term
debt
|
900,000 | 1,090,000 | ||||||
|
Postretirement
benefits other than pensions
|
86,235 | 81,668 | ||||||
|
Pensions
|
165,781 | 150,318 | ||||||
|
Income
taxes payable
|
28,519 | 38,510 | ||||||
|
Other
liabilities
|
15,268 | 20,162 | ||||||
|
Total
liabilities
|
1,727,757 | 1,777,274 | ||||||
|
Contingencies
|
||||||||
|
Minority
interest and put arrangement
|
30,504 | 30,006 | ||||||
|
Stockholders’
deficit:
|
||||||||
|
Capital
stock(1)
|
106,187 | 105,635 | ||||||
|
Additional
paid-in capital
|
1,153,190 | 1,096,923 | ||||||
|
Retained
earnings
|
883,418 | 773,829 | ||||||
|
Accumulated
other comprehensive loss
|
(48,633 | ) | (45,083 | ) | ||||
| 2,094,162 | 1,931,304 | |||||||
|
Less
treasury stock – 64,016,506 shares in 2008
|
||||||||
|
and
60,332,966 shares in 2007
|
2,450,235 | 2,251,506 | ||||||
|
Total
stockholders’ deficit
|
(356,073 | ) | (320,202 | ) | ||||
|
Total
liabilities and stockholders’ deficit
|
$ | 1,402,188 | $ | 1,487,078 | ||||
|
|
(1)
|
Common
Stock par value $.50 per share: Authorized – 600 million shares; issued –
212,373,904 shares in 2008 and 211,269,622 shares in
2007. Preferred Stock par value $.10 per share: Authorized – 10
million shares; Issued – None.
|
UST
CONSOLIDATED
STATEMENT OF CASH FLOWS
(Dollars
in thousands)
(Unaudited)
|
Nine
Months Ended Sept. 30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Operating
Activities:
|
||||||||
|
Net
earnings
|
$ | 390,316 | $ | 381,084 | ||||
|
Adjustment
to reconcile net earnings to net cash provided
|
||||||||
|
by
operating activities:
|
||||||||
|
Depreciation
and amortization
|
39,542 | 33,362 | ||||||
|
Share-based
compensation expense
|
8,357 | 9,575 | ||||||
|
Excess
tax benefits from share-based compensation
|
(11,644 | ) | (7,520 | ) | ||||
|
Minority
interest expense and equity earnings, net
|
1,305 | 423 | ||||||
|
Gain
on sale of corporate headquarters
|
- | (105,143 | ) | |||||
|
Gain
on disposition of property, plant and equipment
|
(1,260 | ) | (474 | ) | ||||
|
Amortization
of imputed rent on corporate headquarters building
|
- | 6,740 | ||||||
|
Deferred
income taxes
|
(3,518 | ) | (12,024 | ) | ||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable
|
(4,088 | ) | (9,856 | ) | ||||
|
Inventories
|
58,073 | 41,914 | ||||||
|
Prepaid
expenses and other assets
|
1,619 | (1,476 | ) | |||||
|
Accounts
payable, accrued expenses, pensions and other
|
||||||||
|
liabilities
|
(67,669 | ) | (16,462 | ) | ||||
|
Income
taxes
|
4,395 | 3,802 | ||||||
|
Litigation
liability
|
(51,980 | ) | 119,597 | |||||
|
Net
cash provided by operating activities
|
363,448 | 443,542 | ||||||
|
Investing
Activities:
|
||||||||
|
Short-term
investments, net
|
- | 10,000 | ||||||
|
Purchases
of property, plant and equipment
|
(46,990 | ) | (51,504 | ) | ||||
|
Proceeds
from dispositions of property, plant and equipment
|
2,733 | 130,701 | ||||||
|
Acquisition
of business
|
- | (155,202 | ) | |||||
|
Loan
to minority interest holder
|
- | (27,096 | ) | |||||
|
Repayment
of loan by minority interest holder
|
- | 27,096 | ||||||
|
Investment
in joint venture
|
(339 | ) | (579 | ) | ||||
|
Net
cash used in investing activities
|
(44,596 | ) | (66,584 | ) | ||||
|
Financing
Activities:
|
||||||||
|
Repayment
of debt
|
- | (7,095 | ) | |||||
|
Revolving
credit facility repayments, net
|
(210,000 | ) | - | |||||
|
Proceeds
from the issuance of debt
|
296,307 | - | ||||||
|
Change
in book cash overdraft
|
(16,973 | ) | - | |||||
|
Excess
tax benefits from share-based compensation
|
11,644 | 7,520 | ||||||
|
Proceeds
from the issuance of stock
|
34,916 | 30,517 | ||||||
|
Dividends
paid
|
(280,213 | ) | (286,622 | ) | ||||
|
Stock
repurchased
|
(198,729 | ) | (250,014 | ) | ||||
|
Net
cash used in financing activities
|
(363,048 | ) | (505,694 | ) | ||||
|
Decrease
in cash and cash equivalents
|
(44,196 | ) | (128,736 | ) | ||||
|
Cash
and cash equivalents at beginning of year
|
73,697 | 254,393 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 29,501 | $ | 125,657 | ||||
Reconciliation
of GAAP Financial Measures to Non-GAAP Financial Measures
(Unaudited)
The
adjusted non-GAAP financial measures used in this press release exclude the
impact of the net gain on the sale of the company’s corporate headquarters,
restructuring charges associated with the Project Momentum cost savings
initiative, antitrust litigation charges and acquisition related costs
associated with the definitive agreement for Altria Group, Inc. to acquire all
outstanding shares of UST for $69.50 per share in cash. The “gain on the sale of
corporate headquarters, net” reflects the net impact of the gain recorded on the
sale and the amortization of the short-term imputed rent on the property, which
was recognized through Sept. 2007 when the company relocated its headquarters.
These non-GAAP financial measures are not prepared in accordance with generally
accepted accounting principles and may be different from non-GAAP measures used
by other companies. Non-GAAP financial measures should not be considered as a
substitute for, or superior to, measures of financial performance prepared in
accordance with GAAP. The company believes that these non-GAAP financial
measures are helpful in assessing ongoing and forecasted operating results. In
addition, these non-GAAP financial measures facilitate the company’s internal
comparisons to historical operating results and comparisons to competitors’
operating results. The company has included these non-GAAP financial measures in
this press release because it believes such measures allow for greater
transparency related to supplemental information used by management in its
financial and operational analysis. Investors are encouraged to review the
reconciliations of the non-GAAP financial measures used in this press release to
their most directly comparable GAAP financial measures as provided on the
following pages.
Reconciliation
of GAAP Financial Measures to non-GAAP Financial Measures
(Unaudited)
|
Third
Quarter
|
|||||
|
Third
Quarter
|
|||||
|
2008
|
2007
|
%
Change
|
|||
|
GAAP
operating income
|
$203,682
|
$218,476
|
-6.8
|
||
|
Other
items:
|
|||||
|
Antitrust
litigation
|
450
|
3,158
|
-
|
||
|
Restructuring
charges
|
6,406
|
1,677
|
-
|
||
|
Acquisition
related costs
|
7,082
|
-
|
-
|
||
|
Impact
of sale of corporate headquarters, net
|
-
|
2,889
|
-
|
||
|
Adj.
non-GAAP operating income
|
$217,620
|
$226,200
|
-3.8
|
||
|
Consolidated
Net Earnings
|
Third
Quarter
|
||||
|
2008
|
2007
|
%
Change
|
|||
|
GAAP
net earnings
|
$125,322
|
$133,600
|
-6.2
|
||
|
Other
items (net of taxes):
|
|||||
|
Antitrust
litigation
|
287
|
2,018
|
-
|
||
|
Restructuring
charges
|
4,091
|
1,072
|
-
|
||
|
Acquisition
related costs*
|
6,204
|
-
|
-
|
||
|
Impact
of sale of corporate headquarters, net
|
-
|
1,835
|
-
|
||
|
Adj.
non-GAAP net earnings
|
$135,904
|
$138,525
|
-1.9
|
||
*Includes
impact of acquisition-related costs that are not deductible for tax
purposes.
|
Consolidated
diluted E.P.S.
|
Third
Quarter
|
||||
|
2008
|
2007
|
%
Change
|
|||
|
GAAP
diluted E.P.S.
|
$.84
|
$.84
|
-
|
||
|
Other
items (net of taxes):
|
|||||
|
Antitrust
litigation
|
-
|
.01
|
-
|
||
|
Restructuring
charges
|
.03
|
.01
|
-
|
||
|
Acquisition
related costs
|
.04
|
-
|
-
|
||
|
Impact
of sale of corporate headquarters, net
|
-
|
.01
|
-
|
||
|
Adj.
non-GAAP diluted E.P.S.
|
$.91
|
$.87
|
4.6
|
||
|
Smokeless
Tobacco Segment Operating Profit
|
Third
Quarter
|
||||
|
2008
|
2007
|
%
Change
|
|||
|
GAAP
operating profit
|
$194,806
|
$213,073
|
-8.6
|
||
|
Other
items:
|
|||||
|
Antitrust
litigation
|
450
|
3,158
|
-
|
||
|
Restructuring
charges
|
5,913
|
403
|
-
|
||
|
Adj.
non-GAAP operating profit
|
$201,169
|
$216,634
|
-7.1
|
||
Reconciliation
of GAAP Financial Measures to non-GAAP Financial Measures
(Unaudited)
|
Nine
Months
|
|||||
|
Consolidated
Operating Income
|
Nine
months ended Sept. 30,
|
||||
|
2008
|
2007
|
%
Change
|
|||
|
GAAP
operating income
|
$654,265
|
$624,243
|
4.8
|
||
|
Other
items:
|
|||||
|
Antitrust
litigation
|
1,975
|
125,258
|
-
|
||
|
Restructuring
charges
|
8,024
|
9,105
|
-11.9
|
||
|
Acquisition
related costs
|
7,082
|
-
|
-
|
||
|
Impact
of sale of corporate headquarters, net
|
-
|
(98,403)
|
-
|
||
|
Adj.
non-GAAP operating income
|
$671,346
|
$660,203
|
1.7
|
||
|
Consolidated
Net Earnings
|
Nine
months ended Sept. 30,
|
||||
|
2008
|
2007
|
%
Change
|
|||
|
GAAP
net earnings
|
$390,316
|
$381,084
|
2.4
|
||
|
Other
items (net of taxes):
|
|||||
|
Antitrust
litigation
|
1,261
|
79,770
|
-
|
||
|
Restructuring
charges
|
5,126
|
5,818
|
-11.9
|
||
|
Acquisition
related costs*
|
6,204
|
-
|
-
|
||
|
Impact
of sale of corporate headquarters, net
|
-
|
(62,890)
|
-
|
||
|
Adj.
non-GAAP net earnings
|
$402,907
|
$403,782
|
-0.2
|
||
*Includes
impact of acquisition-related costs that are not deductible for tax
purposes.
|
Consolidated
diluted E.P.S.
|
Nine
months ended Sept. 30,
|
||||
|
2008
|
2007
|
%
Change
|
|||
|
GAAP
diluted E.P.S.
|
$2.62
|
$2.37
|
10.5
|
||
|
Other
items (net of taxes):
|
|||||
|
Antitrust
litigation
|
.01
|
.50
|
-
|
||
|
Restructuring
charges
|
.03
|
.04
|
-25.0
|
||
|
Acquisition
related costs
|
.04
|
-
|
-
|
||
|
Impact
of sale of corporate headquarters, net
|
-
|
(.39)
|
-
|
||
|
Adj.
non-GAAP diluted E.P.S.
|
$2.70
|
$2.52
|
7.1
|
||
|
Smokeless
Tobacco Segment Operating Profit
|
Nine
months ended Sept. 30,
|
||||
|
2008
|
2007
|
%
Change
|
|||
|
GAAP
operating profit
|
$624,606
|
$507,821
|
23.0
|
||
|
Other
items:
|
|||||
|
Antitrust
litigation
|
1,975
|
125,258
|
-
|
||
|
Restructuring
charges
|
7,235
|
6,889
|
-5.0
|
||
|
Adj.
non-GAAP operating profit
|
$633,816
|
$639,968
|
-1.0
|
||
UST
SUPPLEMENTAL
SCHEDULE
(Unaudited)
|
Third
Quarter
|
Nine
months ended Sept. 30,
|
||||||
|
Smokeless
Tobacco
|
2008
|
2007
|
%
Chg.
|
2008
|
2007
|
%
Chg.
|
|
|
Net
Sales (mil)
|
$364.1
|
$384.1
|
-5.2
|
$1,131.4
|
$1,150.5
|
-1.7
|
|
|
Adj.
Non-GAAP Oper. Profit (mil)
|
$201.2
|
$216.6
|
-7.1
|
$633.8
|
$640.0
|
-1.0
|
|
|
MST Net Can
Sales(1)
|
|||||||
|
Premium
(mil)
|
137.3
|
138.6
|
-0.9
|
414.9
|
413.6
|
0.3
|
|
|
Price
Value (mil)
|
27.6
|
26.6
|
3.9
|
81.9
|
76.6
|
6.9
|
|
|
Total
(mil)
|
164.9
|
165.2
|
-0.2
|
496.8
|
490.2
|
1.3
|
|
(1)
Adjusted for timing of shipments to wholesale last year, premium and total
underlying net can sales in the third quarter
increased 0.1 percent and 0.9 percent, respectively. The
difference between underlying and reported shipments related to the timing of
shipments to wholesale last year, which negatively affected the
quarter’s comparison to the prior year period by approximately 2 million cans.
The impact on nine-month shipments was not material.
|
Volume
%
|
Point
|
|||
|
MST
Share Data
|
Chg.
vs.
|
Chg.
vs.
|
||
|
RAD-SVT 12 wks ended
9/06/08(2)
|
YAGO
|
Share
|
YAGO
|
|
|
Total
Category
|
+8.2%
|
|||
|
Total
Premium Segment
|
+1.9%
|
52.0%
|
-3.2
pts
|
|
|
Total
Value Segments
|
+16.0%
|
47.9%
|
+3.2
pts
|
|
|
USSTC
Share of Total Category
|
+2.9%
|
57.4%
|
-3.0
pts
|
|
|
USSTC
Share of Premium Segment
|
+1.6%
|
90.9%
|
-0.2
pts
|
|
|
USSTC
Share of Value Segments
|
+8.9%
|
21.3%
|
-1.4
pts
|
(2)
RAD-SVT – Retail Account Data Share & Volume Tracking
System. RAD-SVT information is being provided as an indication of
current domestic moist smokeless tobacco industry trends from wholesale to
retail and is not intended as a basis for measuring the company’s financial
performance. This information can vary significantly from the
company’s actual results due to the fact that the company reports net shipments
to wholesale, while RAD-SVT measures shipments from wholesale to retail, the
difference in time periods measured, as well as new product introductions and
promotions.
|
Third
Quarter
|
Nine
months ended Sept. 30,
|
||||||
|
Wine
|
2008
|
2007
|
%
Chg.
|
2008
|
2007
|
%
Chg.
|
|
|
Net
Sales (mil)
|
$99.8
|
$82.3
|
21.2
|
$285.1
|
$230.6
|
23.6
|
|
|
Operating
Profit (mil)
|
$16.3
|
$12.8
|
28.0
|
$43.0
|
$35.5
|
21.3
|
|
|
Premium
Case Sales (thou)
|
1,441
|
1,224
|
17.7
|
4,173
|
3,541
|
17.8
|
|
|
Other
|
|||||||
|
Net
Sales (mil)
|
$20.7
|
$13.3
|
56.3
|
$47.1
|
$36.8
|
27.9
|
|
|
Operating
Profit (mil)
|
$6.3
|
$4.2
|
49.7
|
$15.1
|
$13.1
|
14.8
|
|