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FORM 10-K
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-17506
UST INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1193986
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 WEST PUTNAM AVENUE, GREENWICH, CONNECTICUT 06830
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 661-1100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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COMMON STOCK -- $.50 PAR VALUE NEW YORK STOCK EXCHANGE
PACIFIC EXCHANGE, INC.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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(TITLE OF CLASS)
INDICATE BY CHECK MARK WHETHER THE 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 THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]
AS OF FEBRUARY 1, 1999, THE AGGREGATE MARKET VALUE OF REGISTRANT'S COMMON
STOCK, $.50 PAR VALUE, HELD BY NON-AFFILIATES OF REGISTRANT (WHICH FOR THIS
PURPOSE DOES NOT INCLUDE DIRECTORS OR OFFICERS) WAS $5,552,186,929.
AS OF FEBRUARY 1, 1999, THERE WERE 181,533,336 SHARES OF REGISTRANT'S COMMON
STOCK, $.50 PAR VALUE, OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE
CERTAIN SECTIONS OF UST ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1998 AND FILED AS AN EXHIBIT AS REQUIRED BY
ITEM 601(b)(13) OF REGULATION S-K.........................PARTS I & II
CERTAIN PAGES OF UST 1999 NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT.......................................................PART III
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PART I
ITEM 1 -- BUSINESS
GENERAL
UST Inc. was formed on December 23, 1986 as a Delaware corporation.
Pursuant to a reorganization approved by stockholders at the 1987 Annual
Meeting, United States Tobacco Company (originally incorporated in 1911) became
a wholly owned subsidiary of UST Inc. on May 5, 1987. UST Inc., through its
subsidiaries (collectively "Registrant" unless the context otherwise requires),
is engaged in manufacturing and marketing consumer products in the following
operating segments:
SMOKELESS TOBACCO PRODUCTS: Registrant's primary activities are
manufacturing and marketing smokeless tobacco (snuff and chewing tobacco).
WINE: Registrant produces and markets wine and craft beers.
ALL OTHER OPERATIONS: Registrant's international operation which
markets moist smokeless tobacco and its cigar operation which manufactures
and markets premium cigars are included in all other operations.
OPERATING SEGMENT DATA
Registrant hereby incorporates by reference the Consolidated Segment
Information pertaining to the years 1996 through 1998 set forth on page 23 of
its Annual Report to stockholders for the fiscal year ended December 31, 1998
("Annual Report"), which page is included in Exhibit 13.
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SMOKELESS TOBACCO PRODUCTS
PRINCIPAL PRODUCTS
Registrant's principal smokeless tobacco products and brand names are as
follows:
Moist -- COPENHAGEN, SKOAL LONG CUT, SKOAL, COPENHAGEN LONG CUT, SKOAL
BANDITS, RED SEAL, ROOSTER
Dry -- BRUTON, CC, RED SEAL
It has been claimed that the use of tobacco products, including smokeless
tobacco, may be harmful to health. Registrant believes that an unresolved
controversy continues to exist among scientists concerning the claims made about
tobacco and health. In 1986, federal legislation was enacted regulating
smokeless tobacco products by, inter alia, requiring health warning notices on
smokeless tobacco packages and advertising and prohibiting the advertising of
smokeless tobacco products on electronic media. A federal excise tax was imposed
in 1986, which was increased in 1991, 1993 and 1997. Also, in recent years,
other proposals have been made at the federal level for additional regulation of
tobacco products including, inter alia, the requirement of additional warning
notices, the disallowance of advertising and promotion expenses as deductions
under federal tax law, a significant increase in federal excise taxes, a ban or
further restriction of all advertising and promotion, regulation of
environmental tobacco smoke and increased regulation of the manufacturing and
marketing of tobacco products by new or existing federal agencies. Substantially
similar proposals will likely be considered in 1999. In recent years, various
state and local governments continued the regulation of tobacco products,
including, inter alia, the imposition of significantly higher taxes, sampling
and advertising bans or restrictions, ingredients disclosure requirements,
regulation of environmental tobacco smoke and anti-tobacco advertising
campaigns. Additional state and local legislative and regulatory actions will
likely be considered in 1999. Registrant is unable to assess the future effects
these various actions may have on its smokeless tobacco business.
On August 28, 1996, the Food and Drug Administration ("FDA") published
regulations asserting unprecedented jurisdiction over nicotine in tobacco as a
"drug" and purporting to regulate smokeless tobacco products as a "medical
device." Registrant and other smokeless tobacco manufacturers filed suit against
FDA seeking a judicial declaration that FDA has no authority to regulate
smokeless tobacco products. On April 25, 1997, a federal district court ruled
that FDA, as a matter of law, is not precluded from regulating smokeless tobacco
as "medical devices" and implementing certain labeling and access restrictions.
The court, granting Registrant's motion for summary judgment, also ruled that
FDA has no authority to implement restrictions on the advertising and promotion
of smokeless tobacco products. The court issued an injunction to prohibit most
of the restrictions (labeling, access and advertising/promotion) set for August
28, 1997 from taking effect, pending resolution of any appeals and subsequent
proceedings; the court also certified the ruling for interlocutory appeal on the
grounds that it involves "controlling questions of law as to which there is
substantial ground for difference of opinion." On August 14, 1998, the Fourth
Circuit Court of Appeals ruled in favor of Registrant and other tobacco product
manufacturers stating that FDA lacks jurisdiction to regulate tobacco products
and that all of the regulations published by FDA on August 28, 1996 are invalid.
On January 19, 1999, FDA filed a petition for certiorari seeking review of the
Fourth Circuit's ruling by the United States Supreme Court. Registrant is not
able to predict the outcome of the appeal, or assess the future effect that
these FDA regulations, if implemented, may have on its smokeless tobacco
business.
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RAW MATERIALS
Except as noted below, raw materials essential to Registrant's business are
generally purchased in domestic markets under competitive conditions.
Almost all of the tobacco used in Registrant's products is purchased from
domestic suppliers. Various factors, including the level of domestic tobacco
production, can affect the amount of tobacco purchased by Registrant from
domestic and other sources. Tobaccos used in the manufacture of smokeless
tobacco products are processed and aged by Registrant for a period of two to
three years prior to their use.
Registrant or its suppliers purchase certain flavoring components used in
Registrant's tobacco products from foreign sources.
At the present time, Registrant has no reason to believe that future raw
material requirements for its tobacco products will not be satisfied. However,
the continuing availability and the cost of tobacco is dependent upon a variety
of factors which cannot be predicted, including weather, growing conditions,
disease, local planting decisions, overall market demands and other factors.
WORKING CAPITAL
The principal portion of Registrant's operating cash requirements relates
to its need to maintain significant inventories of leaf tobacco, primarily for
manufacturing of smokeless tobacco products, to ensure a two to three year aging
process prior to use.
CUSTOMERS
Registrant markets its moist smokeless tobacco products throughout the
United States principally to chain stores and tobacco and grocery wholesalers.
Approximately 32% of Registrant's gross sales of tobacco products are made to
four customers, one of which, McLane Co. Inc., a national distributor, accounts
for 21% of Registrant's consolidated revenue. Registrant has maintained
satisfactory relationships with its customers for many years.
COMPETITIVE CONDITIONS
The tobacco manufacturing industry in the United States is composed of at
least four domestic companies larger than Registrant and many smaller ones. The
larger companies concentrate on the manufacture and marketing of cigarettes, one
of which also manufactures and markets smokeless tobacco products. Registrant is
a well established and major factor in the smokeless tobacco sector of the
overall tobacco market. Consequently, Registrant competes actively with both
larger and smaller companies in the marketing of its tobacco products.
Registrant's principal methods of competition in the marketing of its tobacco
products include quality, advertising, promotion, sampling, price, product
recognition and distribution.
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WINE
Registrant is an established producer of premium varietal and blended
wines. CHATEAU STE. MICHELLE and COLUMBIA CREST varietal table wines and DOMAINE
STE. MICHELLE sparkling wine are produced by Registrant in the state of
Washington and marketed throughout the United States. Registrant also produces
and markets two California premium wines under the labels of VILLA MT. EDEN and
CONN CREEK and imports, bottles and markets wine from France under the COLOUR
VOLANT label. Approximately 54% of Registrant's wine sales are made to ten
distributors, no one of which accounts for more than 25% of total wine sales.
Substantially all wines are sold through state-licensed distributors with whom
Registrant maintains satisfactory relationships.
In addition, Registrant owns and operates a microbrewery located in Yakima,
Washington, which produces and markets craft beers primarily under the brand
name BERT GRANT'S ALE. Registrant is a minor factor in the total nationwide
business of producing craft beers.
It has been claimed that the use of alcohol beverages may be harmful to
health. Registrant believes that an unresolved controversy continues to exist
among scientists concerning the claims made about alcohol beverages and health.
In 1988, federal legislation was enacted regulating alcohol beverages by
requiring health warning notices on alcohol beverages. Effective in 1991, the
federal excise tax on wine was increased from $.17 a gallon to $1.07 a gallon
for those manufacturers that produce more than 250,000 gallons a year, such as
Registrant. In recent years at the federal level, proposals were made for
additional regulation of alcohol beverages including, inter alia, an excise tax
increase, modification of the required health warning notices and the regulation
of labeling, advertising and packaging. Substantially similar proposals will
likely be considered in 1999. Also in recent years, increased regulation of
alcohol beverages by various states included, inter alia, the imposition of
higher taxes, the requirement of health warning notices and the regulation of
advertising and packaging. Additional state and local legislative and regulatory
actions affecting the marketing of alcohol beverages will likely be considered
during 1999. Registrant is unable to assess the future effects these regulatory
and other actions may have on the sale of its wines and craft beers.
Registrant uses grapes harvested from its own vineyards, as well as grapes
purchased from independent growers located primarily in Washington state and
purchased bulk wine from other sources. Total grape tonnage harvested and
purchased in 1998 was slightly higher than in 1997. Due to the outstanding
harvest yields experienced in 1998 and 1997, the supply of grapes is adequate to
meet expected demand and thereby eliminate the need for product allocations in
1999.
Registrant's principal competition comes from many larger, well-established
national companies, as well as many smaller wine producers. Registrant's
principal methods of competition include quality, price, consumer and trade wine
tastings, competitive wine judging and advertising. Registrant is a minor factor
in the total nationwide business of producing wines.
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ALL OTHER OPERATIONS
All other operations consist of the international operation which markets
moist smokeless tobacco; cigar operation which manufactures and markets the
premium cigar brands, DON TOMAS, ASTRAL and HABANO PRIMERO. None of the above,
singly, constitutes a material portion of Registrant's operations.
It has been claimed that the use of tobacco products, including cigars, may
be harmful to health. Registrant believes that an unresolved controversy
continues to exist among scientists concerning the claims made about tobacco and
health. The federal excise tax on cigars was last increased in 1993. On August
28, 1996, FDA published regulations asserting unprecedented jurisdiction over
nicotine in tobacco as a "drug" and purports to regulate cigarettes and
smokeless tobacco products as "medical devices." FDA did not attempt to assert
jurisdiction over cigars, and FDA's regulations do not apply to cigars. On July
25, 1997, a public health group filed a petition with FDA requesting that the
agency initiate proceedings to assert jurisdiction over cigars as "nicotine
delivery systems." In the event FDA attempts to extend its purported tobacco
regulations to cover cigars and the regulations survive a judicial challenge,
those regulations would impose severe restrictions on the advertising, marketing
and promotion of cigar products and would require Registrant to comply with a
wide range of labeling, reporting and other requirements with respect to its
cigar products. Also, in recent years, other proposals have been made at the
federal level for additional regulation of tobacco products including, inter
alia, the requirement of warning notices on cigar products, the disallowance of
advertising and promotion expenses as deductions under federal tax law, a
significant increase in federal excise taxes, a ban or further restriction of
all advertising and promotion, regulation of environmental tobacco smoke and
increased regulation of the manufacturing and marketing of tobacco products by
new or existing federal agencies. Substantially similar proposals will likely be
considered in 1999. In recent years, various state and local governments
continued the regulation of tobacco products, including, inter alia, additional
proposed warning notices on cigar products, the imposition of significantly
higher taxes, advertising bans and restrictions, constituent disclosure
requirements, regulation of environmental tobacco smoke and anti-tobacco
advertising campaigns. Additional state and local legislative and regulatory
actions will likely be considered in 1999. Registrant is unable to assess the
future effects these various actions may have on its cigar business.
ADDITIONAL BUSINESS INFORMATION
ENVIRONMENTAL REGULATIONS
Registrant does not believe that compliance with federal, state and local
provisions regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment will have a material
effect upon the capital expenditures, earnings or competitive position of
Registrant.
NUMBER OF EMPLOYEES
Registrant's average number of employees during 1998 was 4,924.
TRADEMARKS
Registrant markets consumer products under a large number of trademarks.
All of Registrant's trademarks either have been registered or applications
therefor are pending with the United States Patent and Trademark Office.
SEASONAL BUSINESS
No material portion of the business of any operating segment of Registrant
is seasonal.
ORDERS
Backlog of orders is not a material factor in any operating segment of
Registrant.
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ITEM 2 -- PROPERTIES
Set forth below is information concerning principal facilities and real
properties of Registrant.
BUILDINGS IN
APPROXIMATE
LOCATION SQUARE FEET ACTIVITIES
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Tobacco Facilities:
Nashville, Tennessee.............. 973,000 Office and manufacturing plants for
moist and dry smokeless tobacco
products, plastic injection molding
operation for production of cans and
lids, manufacturing engineering
department, research and development
laboratory and warehouse for
distribution of various products.
Hopkinsville, Kentucky............ 998,500 Office, plants and warehouses for
tobacco leaf handling, processing
and storage and for manufacture of
dry flour for smokeless tobacco
products.
Franklin Park, Illinois........... 505,000 Office and manufacturing plant for
moist smokeless tobacco products,
fiberboard can operations and
warehouse for distribution of
various products.
Wine Facilities:
Paterson, Washington.............. 620,000 Winery, distribution and storage
facility, office and retail shop.
Woodinville, Washington........... 195,000 Winery, distribution and storage
facility, executive and sales
offices and retail shop.
Grandview, Washington............. 40,000 Winery and storage facility.
St. Helena, California............ 19,800 Winery and storage facility.
Yakima, Washington................ 26,000 Microbrewery, distribution and
storage facility and office.
Other Facilities:
Tampa, Florida.................... 57,000 Office, warehouse and cigar
distribution center.
Danli, Honduras, C.A. ............ 134,000 Office, warehouses and manufacturing
plant for cigars and boxes.
Talanga, Honduras, C.A. .......... 107,000 Office, warehouse and barns.
Santiago, Dominican Republic...... 16,000 Office and manufacturing plant for
cigars.
Headquarters:
Greenwich, Connecticut............ 208,000 Executive, sales and general offices
in several buildings.
LAND IN
APPROXIMATE
LOCATION ACRES ACTIVITIES
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Yakima and Benton Counties,
Washington..................... 3,390 Vineyards.
Grant and Benton Counties,
Washington..................... 10,864 Other, including agricultural
properties.
Such principal properties in Registrant's operations were utilized only in
connection with Registrant's business operations. Registrant believes that the
above properties at December 31, 1998 were suitable and adequate for the
purposes for which they were used, and were operated at satisfactory levels of
capacity.
All principal properties are owned in fee by Registrant.
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ITEM 3 -- LEGAL PROCEEDINGS
Registrant has been named in certain health care cost reimbursement/third
party recoupment/class action litigation against the major domestic cigarette
companies and others seeking damages and other relief. The complaints in these
cases on their face predominantly relate to the usage of cigarettes; within that
context, certain complaints contain a few allegations relating specifically to
smokeless tobacco products. These actions are in varying stages of pretrial
activities.
Registrant believes that these pending litigation matters will not result
in any material liability for a number of reasons, including the fact that
Registrant has had only limited involvement with cigarettes and Registrant's
current percentage of total tobacco industry sales is relatively small. Prior to
1986, Registrant manufactured some cigarette products which had a de minimis
market share. From May 1, 1982 to August 1, 1994, Registrant distributed a small
volume of imported cigarettes and is indemnified against claims relating to
those products.
On November 23, 1998, Registrant entered into the Smokeless Tobacco Master
Settlement Agreement (the "Settlement Agreement") with attorneys general of
various states and U.S. territories to resolve the remaining health care cost
reimbursement cases initiated by various attorneys general against Registrant.
The Settlement Agreement requires Registrant to adopt various marketing and
advertising restrictions and make payments expected to total between $100 and
approximately $200 million over ten years -- depending on various factors -- for
programs to reduce youth usage of tobacco and combat youth substance abuse and
for enforcement purposes.
Registrant has been named in three actions brought by individual
plaintiffs, all of whom are represented by the same Louisiana attorney, against
a number of smokeless tobacco manufacturers, cigarette manufacturers and certain
other organizations seeking damages and other relief in connection with injuries
allegedly sustained as a result of tobacco usage, including smokeless tobacco
products.
Registrant is named in an action in Illinois seeking damages and other
relief brought by an individual plaintiff and purporting to state a class action
"on behalf of himself and all other persons similarly situated" alleging that
his use of Registrant's smokeless tobacco products "resulted in his addiction to
nicotine, increased use of Defendant's products and gum deterioration."
Registrant has also been served with a Summons and Complaint in an action
entitled Roger L. Campbell v. American Tobacco Company, et al., (File No.
98CVS10642), General Court of Justice, Superior Court Division, Guilford County,
North Carolina, on November 13, 1998. This action is brought by an individual
plaintiff who alleges that he developed bladder cancer as a result of his use of
smokeless tobacco manufactured by Registrant. Plaintiff seeks unspecified
damages in excess of $10,000.
In Morgan v. United States Tobacco Company, et al., (No. 68655B), Tenth
Judicial District Court for the Parish of Natchitoches, State of Louisiana, the
action was dismissed by court Order dated November 6, 1997. On November 5, 1998,
the same plaintiff, now in his individual capacity only, commenced another
action against Registrant, entitled David Chris Morgan v. United States Tobacco
Company, et al., (No. 70723A), Tenth Judicial District Court, Parish of
Natchitoches, State of Louisiana. The petition alleged that plaintiff has
"developed a lesion on his lower lip" and "is addicted to the nicotine contained
in smokeless tobacco" as a result of his use of Registrant's smokeless tobacco
products. Plaintiff sought unspecified compensatory and punitive damages and
other general, special and equitable relief in an amount not to exceed $50,000.
On December 18, 1998, the court entered an Order dismissing this action.
In The City and County of San Francisco, on Behalf of the People of the
State of California, and Environmental Law Foundation, on Behalf of the General
Public v. United States Tobacco Company, et al., (No. 993992), Superior Court of
the State of California, County of San Francisco, plaintiffs allege defendants'
violation of The Safe Drinking Water and Toxic Enforcement Act of 1986, Health
and Safety Code sec.sec.25249.6, et seq. ("Proposition 65"), claiming "the
unlawful marketing and sale by defendants of tobacco snuff and chewing tobacco .
. . to children and adolescents without providing a 'clear and reasonable'
warning that their use results in multiple exposures to substances known to the
State of California to cause cancer, birth defects and reproductive harm."
Plaintiffs further allege defendants' statutory violation of the Unfair
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Competition Act, Business and Professions Code sec.sec.17200, et seq. The action
seeks unspecified compensatory damages, injunctive relief, restitution,
attorneys fees and costs.
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,
Plaintiffs allege, among other things, Registrant's violation of federal
antitrust and advertising laws in connection with the marketing and sale of its
moist snuff brands, and alleges various violations of tort and state law. The
complaint seeks an injunction against alleged "anticompetitive conduct," more
than $400 million in "actual damages" before trebling, and punitive damages.
Registrant believes that the complaint contains numerous misstatements of fact
and that the allegations are without merit. Registrant intends to defend this
action vigorously.
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.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to instruction 3 to Item 401(b) of Regulation S-K, the name,
office, age and business experience of each executive officer of Registrant as
of February 1, 1999 is set forth below:
NAME OFFICE AGE
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Vincent A. Gierer, Jr........................... Chairman of the Board, Chief 51
Executive Officer and President
Robert E. Barrett............................... Executive Vice President and 60
President -- UST Enterprises Inc.
Richard H. Verheij.............................. Executive Vice President and General 40
Counsel
Allen C. Shoup.................................. President -- International Wine & 55
Spirits Ltd.
A. Gary Smith................................... President -- United States Tobacco 50
Company
Robert T. D'Alessandro.......................... Senior Vice President and Controller 45
None of the executive officers of Registrant has any family relationship to
any other executive officer or director of Registrant.
After election, all executive officers serve until the next annual
organization meeting of the Board of Directors and until their successors are
elected and qualified.
Mr. Gierer has served as Chairman of the Board and Chief Executive Officer
since December 1, 1993 and has served as President since September 27, 1990. Mr.
Gierer has been employed by Registrant since March 16, 1978.
Mr. Barrett has served as Executive Vice President since October 7, 1991.
He also has served as President of UST Enterprises Inc. since July 1, 1991. Mr.
Barrett has been employed by Registrant since January 1, 1991.
Mr. Verheij has served as Executive Vice President and General Counsel
since May 7, 1996. Mr. Verheij served as Senior Vice President and General
Counsel from December 1, 1994 to May 6, 1996, as Senior Vice President and
Associate General Counsel from April 4, 1994 to November 30, 1994 and as Vice
President and
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Associate General Counsel from December 17, 1992 to April 3, 1994. Mr. Verheij
has been employed by Registrant since November 24, 1986.
Mr. Shoup has served as President of International Wine & Spirits Ltd.
since February 19, 1987. He has been employed by Registrant since December 3,
1980.
Mr. Smith has served as President of United States Tobacco Company since
June 25, 1998. He served as Executive Vice President of United States Tobacco
Company from January 1, 1998 to June 24, 1998 and as Senior Vice President of
United States Tobacco Company from December 17, 1992 to December 31, 1997. Mr.
Smith has been employed by Registrant since September 18, 1972.
Mr. D'Alessandro has served as Senior Vice President and Controller since
January 1, 1996. He has served as Controller since December 19, 1991. Mr.
D'Alessandro has been employed by Registrant since May 4, 1981.
PART II
ITEM 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Registrant hereby incorporates by reference the information with respect to
the market for its common stock, $.50 par value ("Common Stock"), and related
security holder matters set forth on page 37 of its Annual Report, which page is
included in Exhibit 13. Registrant's Common Stock is listed on the New York
Stock Exchange and the Pacific Exchange, Inc. As of February 1, 1999, there were
approximately 9,500 stockholders of record of its Common Stock.
ITEM 6 -- SELECTED FINANCIAL DATA
Registrant hereby incorporates by reference the Consolidated Selected
Financial Data -- 11 Years set forth on pages 42 and 43 of its Annual Report,
which pages are included in Exhibit 13.
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Registrant hereby incorporates by reference the Management's Discussion and
Analysis of Results of Operations and Financial Condition set forth on pages
15-22 of its Annual Report, which pages are included in Exhibit 13.
ITEM 7A -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk refers to the potential effects of unfavorable changes in
certain prices and rates on Registrant's financial results and condition,
primarily foreign currency exchange rates, interest rates on borrowings and
prices of leaf tobacco and grapes. Registrant does not utilize derivative
instruments in managing its exposure to such changes.
Registrant does not believe that near-term changes in foreign currency
exchange rates, interest rates or leaf tobacco and grape prices will have a
material effect on its future earnings, fair values or cash flows.
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Registrant hereby incorporates by reference the report of independent
auditors and the information contained in the consolidated financial statements,
including the notes thereto set forth on pages 23-41 of its Annual Report, which
pages are included in Exhibit 13.
ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Registrant hereby incorporates by reference the information with respect to
the names, ages and business histories of the directors of Registrant which is
contained in Table I and the accompanying text set forth under the caption
"Election of Directors" in its Notice of 1999 Annual Meeting and Proxy
Statement. Information concerning executive officers of Registrant is set forth
herein following Item 4 of this Report.
ITEM 11 -- EXECUTIVE COMPENSATION
Registrant hereby incorporates by reference the information with respect to
executive compensation which is contained in Tables II through V (including the
notes thereto) and the accompanying text set forth under the caption
"Compensation of Executive Officers" in its Notice of 1999 Annual Meeting and
Proxy Statement.
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Registrant hereby incorporates by reference the information with respect to
the security ownership of management which is contained in Table I and the
accompanying text set forth under the caption "Election of Directors" in its
Notice of 1999 Annual Meeting and Proxy Statement.
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Registrant hereby incorporates by reference information with respect to
indebtedness of management which is contained in Table VI and the accompanying
text set forth under the caption "Indebtedness of Management" in its Notice of
1999 Annual Meeting and Proxy Statement.
PART IV
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
(1) The following consolidated financial statements of Registrant included
in the Annual Report are incorporated by reference in Item 8 and included in
Exhibit 13:
Consolidated Statement of Earnings -- Years ended December 31, 1998,
1997 and 1996
Consolidated Statement of Financial Position -- December 31, 1998 and
1997
Consolidated Statement of Cash Flows -- Years ended December 31, 1998,
1997 and 1996
Consolidated Statement of Changes in Stockholders' Equity -- Years ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
(2) All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
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(3) The following exhibits are filed by Registrant pursuant to Item 601 of
Regulation S-K:
3.1 -- Restated Certificate of Incorporation dated May 5, 1992,
incorporated by reference to Exhibit 3.1 to Form 10-Q for
the quarter ended March 31, 1992.
3.2 -- By-Laws adopted on December 23, 1986, and amended and
restated effective October 22, 1998, incorporated by
reference to Exhibit 3.2 to Form 10-Q for the quarter ended
September 30, 1998.
10.1* -- Form of Employment Agreement entered into on July 23, 1987
between Registrant and Vincent A. Gierer, Jr., an Executive
Officer, incorporated by reference to Exhibit 10.1 to Form
10-Q for the quarter ended September 30, 1986.
10.2* -- Form of Severance Agreement dated October 27, 1986 between
Registrant and certain officers, incorporated by reference
to Exhibit 10.2 to Form 10-Q for the quarter ended September
30, 1986.
10.3* -- 1982 Stock Option Plan restated as of March 22, 1989,
incorporated by reference to Exhibit 4.1 to Form S-8
Registration Statement filed on April 14, 1989.
10.4* -- 1992 Stock Option Plan, as amended and restated as of
December 12, 1996, incorporated by reference to Exhibit 10.6
to Form 10-K for the fiscal year ended December 31, 1996.
10.5* -- Incentive Compensation Plan, as amended and restated as of
January 1, 1996, incorporated by reference to Exhibit 10.7
to Form 10-K for the fiscal year ended December 31, 1996.
10.6* -- Amendment to Incentive Compensation Plan, effective
September 25, 1997, incorporated by reference to Exhibit
10.6 to Form 10-K for the fiscal year ended December 31,
1997.
10.7* -- Officers' Supplemental Retirement Plan, as restated as of
December 1, 1992, incorporated by reference to Exhibit 10.7
to Form 10-K for the fiscal year ended December 31, 1992.
10.8* -- Nonemployee Directors' Retirement Plan, as amended and
restated as of January 1, 1998, incorporated by reference to
Exhibit 10.8 to Form 10-K for the period ended December 31,
1997.
10.9 -- Directors' Supplemental Medical Plan, as amended and
restated as of February 16, 1995, incorporated by reference
to Exhibit 10.10 to Form 10-K for the fiscal year ended
December 31, 1994.
10.10* -- Nonemployee Directors' Stock Option Plan effective May 2,
1995, incorporated by reference to Exhibit A to 1995 Notice
of Annual Meeting and Proxy Statement dated March 24, 1995.
10.11* -- Nonemployee Directors' Restricted Stock Award Plan effective
January 1, 1999.
13 -- Pages 15-43 of the Annual Report, but only to the extent set
forth in Items 1, 5, 6, 7 and 8 hereof.
21 -- Subsidiaries of UST.
23 -- Consent of Independent Auditors.
27 -- Financial Data Schedules.
- ---------------
(b) On November 25, 1998, Registrant filed a Current Report on Form 8-K which
reported the execution by its subsidiary, United States Tobacco Company, of
the Smokeless Tobacco Master Settlement Agreement with attorneys general of
various states and U.S. territories to resolve health care cost
reimbursement claims.
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of the rules governing the preparation
of this Report.
11
13
SIGNATURE PAGE
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Date: February 17, 1999
By: /s/ VINCENT A. GIERER, JR.
----------------------------------
VINCENT A. GIERER, JR.
CHAIRMAN OF THE BOARD, CHIEF
EXECUTIVE
OFFICER AND PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF REGISTRANT
AND IN THE CAPACITIES AND ON THE DATES INDICATED.
Chairman of the Board,
Chief Executive Officer
and President (Principal
February 17, 1999 Executive Officer) /s/ VINCENT A. GIERER, JR.
--------------------------------------------------------
VINCENT A. GIERER, JR.
Senior Vice President
and Controller
(Principal Accounting
Officer and Principal
February 17, 1999 Financial Officer) /s/ ROBERT T. D'ALESSANDRO
--------------------------------------------------------
ROBERT T. D'ALESSANDRO
February 17, 1999 Director /s/ JAMES W. CHAPIN
--------------------------------------------------------
JAMES W. CHAPIN
February 17, 1999 Director /s/ JOHN P. CLANCEY
--------------------------------------------------------
JOHN P. CLANCEY
February 17, 1999 Director /s/ EDWARD H. DEHORITY, JR.
--------------------------------------------------------
EDWARD H. DEHORITY, JR.
February 17, 1999 Director /s/ ELAINE J. EISENMAN
--------------------------------------------------------
ELAINE J. EISENMAN
February 17, 1999 Director /s/ EDWARD T. FOGARTY
--------------------------------------------------------
EDWARD T. FOGARTY
February 17, 1999 Chairman of the Board /s/ VINCENT A. GIERER, JR.
--------------------------------------------------------
VINCENT A. GIERER, JR.
February 17, 1999 Director /s/ P.X. KELLEY
--------------------------------------------------------
P.X. KELLEY
February 17, 1999 Director /s/ PETER J. NEFF
--------------------------------------------------------
PETER J. NEFF
February 17, 1999 Director /s/ LOWELL P. WEICKER, JR.
--------------------------------------------------------
LOWELL P. WEICKER, JR.
12
14
EXHIBIT INDEX
3.1 -- Restated Certificate of Incorporation dated May 5, 1992,
incorporated by reference to Exhibit 3.1 to Form 10-Q for
the quarter ended March 31, 1992.
3.2 -- By-Laws adopted on December 23, 1986, and amended and
restated effective October 22, 1998, incorporated by
reference to Exhibit 3.2 to Form 10-Q for the quarter ended
September 30, 1998.
10.1* -- Form of Employment Agreement entered into on July 23, 1987
between Registrant and Vincent A. Gierer, Jr., an Executive
Officer, incorporated by reference to Exhibit 10.1 to Form
10-Q for the quarter ended September 30, 1986.
10.2* -- Form of Severance Agreement dated October 27, 1986 between
Registrant and certain officers, incorporated by reference
to Exhibit 10.2 to Form 10-Q for the quarter ended September
30, 1986.
10.3* -- 1982 Stock Option Plan restated as of March 22, 1989,
incorporated by reference to Exhibit 4.1 to Form S-8
Registration Statement filed on April 14, 1989.
10.4* -- 1992 Stock Option Plan, as amended and restated as of
December 12, 1996, incorporated by reference to Exhibit 10.6
to Form 10-K for the fiscal year ended December 31, 1996.
10.5* -- Incentive Compensation Plan, as amended and restated as of
January 1, 1996, incorporated by reference to Exhibit 10.7
to Form 10-K for the fiscal year ended December 31, 1996.
10.6* -- Amendment to Incentive Compensation Plan, effective
September 25, 1997, incorporated by reference to Exhibit
10.6 to Form 10-K for the fiscal year ended December 31,
1997.
10.7* -- Officers' Supplemental Retirement Plan, as restated as of
December 1, 1992, incorporated by reference to Exhibit 10.7
to Form 10-K for the fiscal year ended December 31, 1992.
10.8* -- Nonemployee Directors' Retirement Plan, as amended and
restated as of January 1, 1998, incorporated by reference to
Exhibit 10.8 to Form 10-K for the period ended December 31,
1997.
10.9 -- Directors' Supplemental Medical Plan, as amended and
restated as of February 16, 1995, incorporated by reference
to Exhibit 10.10 to Form 10-K for the fiscal year ended
December 31, 1994.
10.10* -- Nonemployee Directors' Stock Option Plan effective May 2,
1995, incorporated by reference to Exhibit A to 1995 Notice
of Annual Meeting and Proxy Statement dated March 24, 1995.
10.11* -- Nonemployee Directors' Restricted Stock Award Plan effective
January 1, 1999.
13 -- Pages 15-43 of the Annual Report, but only to the extent set
forth in Items 1, 5, 6, 7 and 8 hereof.
21 -- Subsidiaries of UST.
23 -- Consent of Independent Auditors.
27 -- Financial Data Schedules.
- ---------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of the rules governing the preparation of
this Report.