UST Reports First Quarter 2001 EPS Up 6.5 Percent

Apr 19, 2001, 01:00 ET from UST Inc.

    GREENWICH, Conn., April 19 /PRNewswire/ -- UST Inc. (NYSE:   UST) today
 announced that first quarter 2001 net sales increased 4 percent to
 $383 million, net earnings increased 5.9 percent to $108 million and earnings
 per share increased 6.5 percent to $.66 compared to the corresponding 2000
 period.
     "Earnings per share came in better than originally projected due to
 strengthening fundamentals of our core businesses, smokeless tobacco and
 wine," said Vincent A. Gierer, Jr., UST chairman and chief executive officer.
 "I am encouraged by the improving trends in volume and mix in our principal
 businesses.  As we implement our strategic plans, these results make me even
 more confident that we will accomplish our goal of increasing EPS by 10
 percent in 2001."
 
     Smokeless Tobacco
     Smokeless Tobacco segment revenue increased 3.4 percent to $335.2 million.
 Moist smokeless tobacco net unit volume increased 0.1 percent to 152.7 million
 cans, including the effect of the Skoal Long Cut increased value conversion.
 Premium can sales declined 1.9 percent, while non-premium can sales
 contributed an additional 3 million cans in the quarter at substantially
 higher margins.  More profitable promotional can sales contributed 5.9 million
 cans to the quarter, a 16 percent increase.  The resulting $9.4 million
 increase in gross margin was partially offset by on-going bonding costs
 associated with the antitrust case, now on appeal, and increased sales and
 marketing expenses associated with brand building initiatives.  Operating
 profit increased 3.2 percent to $185.3 million.
     Share data based on U.S. Smokeless Tobacco Company's (USSTC) Retail
 Activity Data (RAD) for the period ended March 3, 2001, indicates that on a
 can share basis, the total category increased 0.9 percent versus the year ago
 quarter, with the non-premium segment increasing 2.3 points to 18 percent.
 Total USSTC share decreased 0.6 points to 77.1 percent.  On an equalized basis
 (pounds sold), USSTC estimates the category increased approximately 3 percent
 and USSTC's total share was comparable to the year ago quarter at 78 percent.
     During the quarter, two new products were introduced regionally, Rooster
 Wild Berry and Red Seal Long Cut Straight.  Copenhagen Black, a bourbon
 flavored mid-cut product was launched nationally in early April.
 
     The following trends show improving fundamentals and should contribute to
 future growth:
 
      -- Moist smokeless tobacco unit volume increased 0.1 percent, a
         substantial turnaround from declines of 2.9 percent and 2.3 percent in
         the third and fourth quarters of 2000.
 
      -- Premium can sales showed improvement, declining only 1.9 percent from
         the previous year versus 5.7 percent and 5 percent declines in the
         third and fourth quarters of 2000.
 
      -- Promotional cans sales continue to be reduced in favor of full priced
         can sales from a high of 13.4 million in the second quarter of 2000 to
         5.9 million in the current quarter.
 
      -- Skoal Long Cut began its recovery earlier than anticipated, declining
         at half the rate of the third and fourth quarters of 2000.
 
      -- On an equalized basis (pounds sold), total moist smokeless tobacco
         category sales continued to grow approximately 3 percent in each of
         the last three quarters, while the growth rate of non-premium can
         sales continued to slow.
 
     Wine Segment
     Wine segment revenue increased 10.6 percent to $41 million.  Premium case
 sales advanced 12.4 percent while non-premium case sales declined.  Case sales
 for our best-selling wines -- Chateau Ste. Michelle and Columbia Crest --
 increased over 15 percent.  Gross margin from premium case sales grew
 $1.1 million or 7.7 percent.  However, inventory adjustments and write-downs
 for non-strategic brands significantly lowered the gross margin and gross
 margin percentage.  Overall, lower sales, marketing and administrative
 expenses and the absence of a $0.8 million charge taken in the year-ago period
 for expenses related to a cancelled acquisition resulted in a 63.2 percent
 increase in operating profit to $4 million.
     The Wine segment continued to garner acclaim with Columbia Crest Grand
 Estates Series Chardonnay receiving a 91 rating from Wine Spectator.  This
 bodes well for continuing growth in premium case sales.
 
     All Other Operations, Corporate and Interest
     All other operations improved, posting a loss of $1.2 million versus
 $2.0 million in the prior year, primarily due to lower spending.
     Corporate expenses were significantly lower due to the absence of a
 hedging loss related to debt issued in the first quarter of 2000.
     Net interest expense increased due to higher average debt levels and
 higher average interest rates, partially offset by higher interest income on
 collateral deposits.  Recent and future interest rate reductions by the
 Federal Reserve will negatively impact net interest expense, since floating
 rate investments exceed floating rate debt.
 
     Outlook
     In the second quarter, moist smokeless tobacco unit volume is expected to
 decline slightly in comparison to the year ago period due to the high level of
 promotional units in the second quarter of 2000.  Gross margin should improve
 with higher premium full-priced can sales as the Skoal Long Cut increased
 value conversion is lapped.  Higher sales and marketing expenses related to
 brand building initiatives will hold the second quarter operating profit
 percentage increase for the smokeless segment to first quarter levels.
 Strong wine case sales should result in significantly improved operating
 results for the wine segment.
     Earnings per share should increase 6 percent in the second quarter and
 accelerate in the third and fourth quarters.  Positive factors affecting
 accelerated growth in the second half of 2001 include the recent launch of new
 brands, improving Skoal Long Cut comparisons and an extra shipping day which
 could amount to approximately 10 million cans.  The wine segment should
 continue to experience strong demand for its premium wines, an improving
 product mix resulting from increased case sales of higher margin products and
 increased operating efficiencies.  Therefore the company continues to project
 EPS growth of 10 percent for the year.
 
     A conference call is scheduled for 11 a.m. Eastern time today to discuss
 the quarterly results.  To listen to the call, please visit
 http://www.ustshareholder.com.  A seven-day playback is available by calling
 1-800-252-6030 or 402-220-2491, code #8556129 or by visiting the website.
 
     UST, through its subsidiaries, is a leading producer and marketer of moist
 smokeless tobacco products including Copenhagen, Skoal, Rooster and Red Seal.
 Other consumer products marketed by UST subsidiaries include premium wines
 sold nationally through the Chateau Ste. Michelle, Columbia Crest and Villa
 Mt. Eden wineries as well as sparkling wine produced under the Domaine Ste.
 Michelle label and premium cigars including Don Tomas and Astral.
 
     All statements, other than statements of historical facts, which address
 activities, or actions that the company expects or anticipates will or may
 occur in the future, and other such matters are forward-looking statements.
 To take advantage of the safe harbor provided by the Private Securities
 Litigation Reform Act of 1995, the company is identifying certain factors that
 could cause actual results to differ materially from those expressed in any
 forward-looking statements made by the company.
     Any one, or a combination, of these factors could materially affect the
 results of the company's operations.  These factors include competitive
 pressures, changes in consumer preferences, wholesaler ordering patterns,
 consumer acceptance of new product introductions and other marketing
 initiatives, uncertainties associated with ongoing and future litigation,
 legal and regulatory initiatives (including those described under Items 1 and
 3 of the company's Annual Report on Form 10-K and Form 8-K), and conditions in
 the capital markets.  Forward-looking statements made by the company are based
 on knowledge of its business and the environment in which it operates, but
 because of the factors listed above, as well as other factors beyond the
 control of the company, actual results may differ from those in the
 forward-looking statements.
 
                        CONSOLIDATED SALES AND EARNINGS
                    (In thousands, except per share amounts)
                                  (Unaudited)
 
 
                                               First Quarter
                                        2001            2000      % Change
 
     Net sales                      $382,965        $368,295          +4.0
 
     Costs and expenses
      Costs of products sold          80,789          75,371          +7.2
      Selling, advertising
       and administrative            117,700         119,509          -1.5
        Total costs and expenses     198,489         194,880          +1.9
 
     Operating income                184,476         173,415          +6.4
     Interest, net                     8,887           7,527         +18.1
 
     Earnings before income taxes    175,589         165,888          +5.8
     Income taxes                     67,582          63,924          +5.7
 
     Net earnings                   $108,007        $101,964          +5.9
 
     Net earnings per share:
      Basic                             $.66            $.62          +6.5
      Diluted                           $.66            $.62          +6.5
 
     Cash dividends per common share    $.46            $.44          +4.5
 
     Shares outstanding:
      Basic                          163,029         164,961
      Diluted                        164,115         165,123
 
 

SOURCE UST Inc.
    GREENWICH, Conn., April 19 /PRNewswire/ -- UST Inc. (NYSE:   UST) today
 announced that first quarter 2001 net sales increased 4 percent to
 $383 million, net earnings increased 5.9 percent to $108 million and earnings
 per share increased 6.5 percent to $.66 compared to the corresponding 2000
 period.
     "Earnings per share came in better than originally projected due to
 strengthening fundamentals of our core businesses, smokeless tobacco and
 wine," said Vincent A. Gierer, Jr., UST chairman and chief executive officer.
 "I am encouraged by the improving trends in volume and mix in our principal
 businesses.  As we implement our strategic plans, these results make me even
 more confident that we will accomplish our goal of increasing EPS by 10
 percent in 2001."
 
     Smokeless Tobacco
     Smokeless Tobacco segment revenue increased 3.4 percent to $335.2 million.
 Moist smokeless tobacco net unit volume increased 0.1 percent to 152.7 million
 cans, including the effect of the Skoal Long Cut increased value conversion.
 Premium can sales declined 1.9 percent, while non-premium can sales
 contributed an additional 3 million cans in the quarter at substantially
 higher margins.  More profitable promotional can sales contributed 5.9 million
 cans to the quarter, a 16 percent increase.  The resulting $9.4 million
 increase in gross margin was partially offset by on-going bonding costs
 associated with the antitrust case, now on appeal, and increased sales and
 marketing expenses associated with brand building initiatives.  Operating
 profit increased 3.2 percent to $185.3 million.
     Share data based on U.S. Smokeless Tobacco Company's (USSTC) Retail
 Activity Data (RAD) for the period ended March 3, 2001, indicates that on a
 can share basis, the total category increased 0.9 percent versus the year ago
 quarter, with the non-premium segment increasing 2.3 points to 18 percent.
 Total USSTC share decreased 0.6 points to 77.1 percent.  On an equalized basis
 (pounds sold), USSTC estimates the category increased approximately 3 percent
 and USSTC's total share was comparable to the year ago quarter at 78 percent.
     During the quarter, two new products were introduced regionally, Rooster
 Wild Berry and Red Seal Long Cut Straight.  Copenhagen Black, a bourbon
 flavored mid-cut product was launched nationally in early April.
 
     The following trends show improving fundamentals and should contribute to
 future growth:
 
      -- Moist smokeless tobacco unit volume increased 0.1 percent, a
         substantial turnaround from declines of 2.9 percent and 2.3 percent in
         the third and fourth quarters of 2000.
 
      -- Premium can sales showed improvement, declining only 1.9 percent from
         the previous year versus 5.7 percent and 5 percent declines in the
         third and fourth quarters of 2000.
 
      -- Promotional cans sales continue to be reduced in favor of full priced
         can sales from a high of 13.4 million in the second quarter of 2000 to
         5.9 million in the current quarter.
 
      -- Skoal Long Cut began its recovery earlier than anticipated, declining
         at half the rate of the third and fourth quarters of 2000.
 
      -- On an equalized basis (pounds sold), total moist smokeless tobacco
         category sales continued to grow approximately 3 percent in each of
         the last three quarters, while the growth rate of non-premium can
         sales continued to slow.
 
     Wine Segment
     Wine segment revenue increased 10.6 percent to $41 million.  Premium case
 sales advanced 12.4 percent while non-premium case sales declined.  Case sales
 for our best-selling wines -- Chateau Ste. Michelle and Columbia Crest --
 increased over 15 percent.  Gross margin from premium case sales grew
 $1.1 million or 7.7 percent.  However, inventory adjustments and write-downs
 for non-strategic brands significantly lowered the gross margin and gross
 margin percentage.  Overall, lower sales, marketing and administrative
 expenses and the absence of a $0.8 million charge taken in the year-ago period
 for expenses related to a cancelled acquisition resulted in a 63.2 percent
 increase in operating profit to $4 million.
     The Wine segment continued to garner acclaim with Columbia Crest Grand
 Estates Series Chardonnay receiving a 91 rating from Wine Spectator.  This
 bodes well for continuing growth in premium case sales.
 
     All Other Operations, Corporate and Interest
     All other operations improved, posting a loss of $1.2 million versus
 $2.0 million in the prior year, primarily due to lower spending.
     Corporate expenses were significantly lower due to the absence of a
 hedging loss related to debt issued in the first quarter of 2000.
     Net interest expense increased due to higher average debt levels and
 higher average interest rates, partially offset by higher interest income on
 collateral deposits.  Recent and future interest rate reductions by the
 Federal Reserve will negatively impact net interest expense, since floating
 rate investments exceed floating rate debt.
 
     Outlook
     In the second quarter, moist smokeless tobacco unit volume is expected to
 decline slightly in comparison to the year ago period due to the high level of
 promotional units in the second quarter of 2000.  Gross margin should improve
 with higher premium full-priced can sales as the Skoal Long Cut increased
 value conversion is lapped.  Higher sales and marketing expenses related to
 brand building initiatives will hold the second quarter operating profit
 percentage increase for the smokeless segment to first quarter levels.
 Strong wine case sales should result in significantly improved operating
 results for the wine segment.
     Earnings per share should increase 6 percent in the second quarter and
 accelerate in the third and fourth quarters.  Positive factors affecting
 accelerated growth in the second half of 2001 include the recent launch of new
 brands, improving Skoal Long Cut comparisons and an extra shipping day which
 could amount to approximately 10 million cans.  The wine segment should
 continue to experience strong demand for its premium wines, an improving
 product mix resulting from increased case sales of higher margin products and
 increased operating efficiencies.  Therefore the company continues to project
 EPS growth of 10 percent for the year.
 
     A conference call is scheduled for 11 a.m. Eastern time today to discuss
 the quarterly results.  To listen to the call, please visit
 http://www.ustshareholder.com.  A seven-day playback is available by calling
 1-800-252-6030 or 402-220-2491, code #8556129 or by visiting the website.
 
     UST, through its subsidiaries, is a leading producer and marketer of moist
 smokeless tobacco products including Copenhagen, Skoal, Rooster and Red Seal.
 Other consumer products marketed by UST subsidiaries include premium wines
 sold nationally through the Chateau Ste. Michelle, Columbia Crest and Villa
 Mt. Eden wineries as well as sparkling wine produced under the Domaine Ste.
 Michelle label and premium cigars including Don Tomas and Astral.
 
     All statements, other than statements of historical facts, which address
 activities, or actions that the company expects or anticipates will or may
 occur in the future, and other such matters are forward-looking statements.
 To take advantage of the safe harbor provided by the Private Securities
 Litigation Reform Act of 1995, the company is identifying certain factors that
 could cause actual results to differ materially from those expressed in any
 forward-looking statements made by the company.
     Any one, or a combination, of these factors could materially affect the
 results of the company's operations.  These factors include competitive
 pressures, changes in consumer preferences, wholesaler ordering patterns,
 consumer acceptance of new product introductions and other marketing
 initiatives, uncertainties associated with ongoing and future litigation,
 legal and regulatory initiatives (including those described under Items 1 and
 3 of the company's Annual Report on Form 10-K and Form 8-K), and conditions in
 the capital markets.  Forward-looking statements made by the company are based
 on knowledge of its business and the environment in which it operates, but
 because of the factors listed above, as well as other factors beyond the
 control of the company, actual results may differ from those in the
 forward-looking statements.
 
                        CONSOLIDATED SALES AND EARNINGS
                    (In thousands, except per share amounts)
                                  (Unaudited)
 
 
                                               First Quarter
                                        2001            2000      % Change
 
     Net sales                      $382,965        $368,295          +4.0
 
     Costs and expenses
      Costs of products sold          80,789          75,371          +7.2
      Selling, advertising
       and administrative            117,700         119,509          -1.5
        Total costs and expenses     198,489         194,880          +1.9
 
     Operating income                184,476         173,415          +6.4
     Interest, net                     8,887           7,527         +18.1
 
     Earnings before income taxes    175,589         165,888          +5.8
     Income taxes                     67,582          63,924          +5.7
 
     Net earnings                   $108,007        $101,964          +5.9
 
     Net earnings per share:
      Basic                             $.66            $.62          +6.5
      Diluted                           $.66            $.62          +6.5
 
     Cash dividends per common share    $.46            $.44          +4.5
 
     Shares outstanding:
      Basic                          163,029         164,961
      Diluted                        164,115         165,123
 
 SOURCE  UST Inc.