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UST Inc. News
UST Posts Record Volume, Sales and E.P.S. for the Fourth Quarter and Full Year 2007 Behind Strong Fundamentals
STAMFORD, Conn.,
"We began the year with a commitment to build on the momentum we started gaining in 2006. The goal was to accelerate profitable volume growth while at the same time, deliver a 10 percent shareholder return by using more of the tools in our toolbox to grow earnings," said Murray S. Kessler, chairman and chief executive officer. "I believe our underlying results, which ultimately delivered a 13 percent shareholder return, are the best demonstration of just how effective the plan was and how well the UST team executed it."
Consolidated Results
For the fourth quarter ended
Fourth quarter 2007 and 2006 results included restructuring charges related to Project Momentum and antitrust litigation settlement charges. Combined, these items totaled
Adjusting for these items in each year, underlying fourth quarter 2007 operating income increased 7.7 percent to
The 9.2 percent increase in fourth quarter 2007 adjusted diluted earnings per share was driven by moist smokeless tobacco net can volume growth, which benefited from an extra billing day versus the year ago period, strong results for wine operations, Project Momentum cost savings, and a reduction in shares outstanding as a result of the company's share repurchase program.
Separately, during the quarter the company accelerated its investment in share repurchases, spending
For the year ended
For the year, 2007 results included antitrust litigation settlement and restructuring charges, partially offset by a net gain on the sale of the company's headquarters. These items adversely impacted diluted earnings per share by
The 2006 total year period included antitrust litigation settlement and restructuring charges, partially offset by income from discontinued operations related to the company's previously disposed cigar business. These items adversely impacted 2006 diluted earnings per share by
Adjusting for these items in each year, underlying total year 2007 operating income increased 5.2 percent to
For the year 2007, the company repurchased 11 million shares at a cost of
Smokeless Tobacco Segment
Fourth quarter 2007 net sales increased 4.2 percent to
In the quarter, total moist smokeless tobacco net can volume increased 7.3 percent to 168.8 million, with premium increasing 5.9 percent to 142.0 million and price value increasing 14.9 percent to 26.8 million, versus the prior year period.
The fourth quarter 2007 reported volume benefited from an extra billing day on
The company attributes continued strong can volume growth to ongoing initiatives to grow the category by converting adult smokers to smokeless tobacco, investment in premium brand-building programs, more effective participation in the price value segment and continued successful new product introductions.
"We are very pleased that for the year our premium brands delivered consistent volume growth above our original expectations," said Daniel W. Butler, president, U.S. Smokeless Tobacco Company. "Our powerful
Another indication of U.S. Smokeless Tobacco Company's consistent volume growth is reflected in its Retail Account Data Share & Volume Tracking System (RAD-SVT). For the 26-week period ended
For the twelve-month period ended
Wine Segment
In the fourth quarter 2007, net sales for Ste.
"The strong results for the year are a great indication that our 'string of pearls' strategy is working," said Theodor P. Baseler, president, Ste.
For the year ended
Outlook
For 2008, diluted earnings per share are targeted at
Consolidated Diluted E.P.S. Full Year 2008 2007 % Estimate Actual Change GAAP diluted E.P.S. $3.65 $3.27 +11.6 Other items (net of taxes): Antitrust litigation - .54 - Restructuring charges - .04 - Impact of sale of corporate headquarters, net - (.39) - Adj. non-GAAP diluted E.P.S. $3.65 $3.46 +5.5
The 2008 guidance is consistent with the company's long-term goal of providing an average annual shareholder return of 10 percent, including diluted earnings per share growth and a strong dividend. Strong fundamentals in both the Smokeless Tobacco and Wine segments, coupled with the Project Momentum cost savings initiative, provide confidence that this goal can be achieved, while at the same time allowing for investment to continue enhancing the company's performance in vibrant and growing categories.
A conference call is scheduled for
UST Inc. is a holding company for its principal subsidiaries: U.S. Smokeless Tobacco Company and Ste.
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; 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
UST CONSOLIDATED SALES AND EARNINGS (In thousands, except per share amounts) (Unaudited) Fourth Quarter 2007 2006 % Change Net sales $532,895 $485,721 + 9.7 Costs and expenses Cost of products sold 155,604 133,609 + 16.5 Selling, advertising and administrative 133,920 126,194 + 6.1 Restructuring charges 1,699 4,502 - Antitrust litigation 11,853 675 - Total costs and expenses 303,076 264,980 + 14.4 Operating income 229,819 220,741 + 4.1 Interest, net 13,162 9,567 + 37.6 Earnings before income taxes 216,657 211,174 + 2.6 Income tax expense 77,468 73,971 + 4.7 Net earnings $139,189 $137,203 + 1.4 Net earnings per share: Basic $.90 $.86 + 4.7 Diluted $.89 $.85 + 4.7 Dividends per share $.60 $.57 + 5.3 Average number of shares: Basic 154,288 160,275 Diluted 155,613 162,062 UST CONSOLIDATED SALES AND EARNINGS (In thousands, except per share amounts) (Unaudited) Year ended Dec. 31, 2007 2006 % Change Net sales $1,950,779 $1,850,911 + 5.4 Costs and expenses Cost of products sold 524,575 466,088 + 12.5 Selling, advertising and administrative 529,795 525,990 + 0.7 Restructuring charges 10,804 21,997 - Antitrust litigation 137,111 2,025 - Total costs and expenses 1,202,285 1,016,100 + 18.3 Gain on sale of corporate headquarters 105,143 - - Operating income 853,637 834,811 + 2.3 Interest, net 40,600 41,785 - 2.8 Earnings from continuing operations before income taxes 813,037 793,026 + 2.5 Income tax expense 292,764 291,060 + 0.6 Earnings from continuing operations 520,273 501,966 + 3.6 Income from discontinued operations, including income tax effect - 3,890 - Net earnings $520,273 $505,856 + 2.9 Net earnings per basic share: Earnings from continuing operations $3.30 $3.13 + 5.4 Income from discontinued operations - .02 - Net earnings per basic share $3.30 $3.15 + 4.8 Net earnings per diluted share: Earnings from continuing operations $3.27 $3.10 + 5.5 Income from discontinued operations - .02 - Net earnings per diluted share $3.27 $3.12 + 4.8 Dividends per share $2.40 $2.28 + 5.3 Average number of shares: Basic 157,854 160,772 Diluted 159,295 162,280 UST CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Dollars in thousands) December 31, December 31, 2007 2006 (Unaudited) Assets Current assets: Cash and cash equivalents $47,161 $254,393 Short-term investments - 20,000 Accounts receivable 60,318 52,501 Inventories: Leaf tobacco 202,137 201,035 Products in process 258,814 233,741 Finished goods 163,247 145,820 Other materials and supplies 22,365 20,662 Total inventories 646,563 601,258 Deferred income taxes 26,737 11,370 Income taxes receivable 8,663 - Assets held for sale - 31,452 Prepaid expenses and other current assets 30,296 27,136 Total current assets 819,738 998,110 Property, plant and equipment, net 505,101 389,810 Deferred income taxes 35,972 26,239 Goodwill 28,304 6,547 Intangible assets 56,221 4,723 Other assets 15,206 14,919 Total assets $1,460,542 $1,440,348 Liabilities and Stockholders' (deficit) equity: Current liabilities: Accounts payable and accrued expenses $298,278 $268,254 Income taxes payable - 18,896 Litigation liability 75,360 12,927 Total current liabilities 373,638 300,077 Long-term debt 1,090,000 840,000 Postretirement benefits other than pensions 81,668 86,413 Pensions 150,318 142,424 Income taxes payable 38,510 - Other liabilities 18,610 5,608 Total liabilities 1,752,744 1,374,522 Contingencies Minority interest and put arrangement 28,000 - Stockholders' (deficit) equity: Capital stock(1) 105,635 104,956 Additional paid-in capital 1,096,923 1,036,237 Retained earnings 773,829 635,272 Accumulated other comprehensive loss (45,083) (56,871) 1,931,304 1,719,594 Less treasury stock - 60,322,966 shares in 2007 and 49,319,673 shares in 2006 2,251,506 1,653,768 Total stockholders' (deficit) equity (320,202) 65,826 Total liabilities and stockholders' (deficit) equity $1,460,542 $1,440,348 (1) Common Stock par value $.50 per share: Authorized - 600 million shares; issued - 211,269,622 shares in 2007 and 209,912,510 shares in 2006. Preferred Stock par value $.10 per share: Authorized - 10 million shares; Issued - None. UST CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) (Unaudited) Year ended Dec. 31, 2007 2006 Operating Activities: Net earnings $520,273 $505,856 Adjustment to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 46,622 45,839 Share-based compensation expense 11,784 10,403 Excess tax benefits from share-based compensation (9,035) (9,863) Gain on sale of corporate headquarters building (105,143) - (Gain) loss on disposition of property, plant and equipment 576 (327) Amortization of imputed rent on corporate headquarters building 6,740 - Deferred income taxes (16,146) (16,922) Changes in operating assets and liabilities: Accounts receivable (2,153) 1,685 Inventories (5,517) (15,780) Prepaid expenses and other assets (1,002) 14,703 Accounts payable, accrued expenses, pensions and other liabilities 52,112 40,541 Income taxes 4,645 22,945 Litigation liability 62,433 (2,224) Net cash provided by operating activities 566,189 596,856 Investing Activities: Short-term investments, net 20,000 (10,000) Purchases of property, plant and equipment (82,256) (37,044) Proceeds from dispositions of property, plant and equipment 130,725 6,179 Acquisition of business (155,197) (10,578) Loan to minority interest holder (27,096) - Minority interest holder loan payment 27,096 - Investment in joint venture (425) (3,620) Net cash used in investing activities (87,153) (55,063) Financing Activities: Repayment of debt (7,095) - Proceeds from credit facility borrowings 250,000 - Excess tax benefits from share-based compensation 9,035 9,863 Proceeds from the issuance of stock 37,855 68,214 Dividends paid (378,325) (367,499) Stock repurchased (597,738) (200,003) Net cash used in financing activities (686,268) (489,425) (Decrease) increase in cash and cash equivalents (207,232) 52,368 Cash and cash equivalents at beginning of year 254,393 202,025 Cash and cash equivalents at end of period $47,161 $254,393
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 and antitrust litigation charges. 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
Fourth Quarter Consolidated Operating Income Fourth Quarter 2007 2006 % Change GAAP operating income $229,819 $220,741 +4.1 Other items: Antitrust litigation 11,853 675 - Restructuring charges 1,699 4,502 - Adj. non-GAAP operating income $243,371 $225,918 +7.7 Consolidated Net Earnings Fourth Quarter 2007 2006 % Change GAAP net earnings $139,189 $137,203 +1.4 Other items (net of taxes): Antitrust litigation 7,616 439 - Restructuring charges 1,092 2,926 - Adj. non-GAAP net earnings $147,897 $140,568 +5.2 Consolidated Diluted E.P.S. Fourth Quarter 2007 2006 % Change GAAP diluted E.P.S. $.89 $.85 +4.7 Other items (net of taxes): Antitrust litigation .05 - - Restructuring charges .01 .02 - Adj. non-GAAP diluted E.P.S. $.95 $.87 +9.2 Smokeless Tobacco Segment Operating Profit Fourth Quarter 2007 2006 % Change GAAP operating profit $207,878 $207,835 - Other items: Antitrust litigation 11,853 675 - Restructuring charges 1,341 4,097 - Adj. non-GAAP operating profit $221,072 $212,607 +4.0 Twelve Months Consolidated Operating Income Year ended Dec. 31, 2007 2006 % Change GAAP operating income $853,637 $834,811 +2.3 Other items: Antitrust litigation 137,111 2,025 - Restructuring charges 10,804 21,997 - Impact of sale of corporate headquarters, net (98,403) - - Adj. non-GAAP operating income $903,149 $858,833 +5.2 Consolidated Net Earnings Year ended Dec. 31, 2007 2006 % Change GAAP net earnings $520,273 $505,856 +2.9 Income from discontinued operations - (3,890) - GAAP net earnings from continuing operations 520,273 501,966 +3.6 Other items (net of taxes): Antitrust litigation 87,386 1,292 - Restructuring charges 6,910 14,034 - Impact of sale of corporate headquarters, net (62,890) - - Adj. non-GAAP net earnings $551,679 $517,292 +6.6 Consolidated Diluted E.P.S. Year ended Dec. 31, 2007 2006 % Change GAAP diluted E.P.S. $3.27 $3.12 +4.8 Income from discontinued operations - (.02) - GAAP diluted E.P.S. from continuing operations 3.27 3.10 +5.5 Other items (net of taxes): Antitrust litigation .54 .01 - Restructuring charges .04 .08 - Impact of sale of corporate headquarters, net (.39) - - Adj. non-GAAP diluted E.P.S. $3.46 $3.19 +8.5 Smokeless Tobacco Segment Operating Profit Year ended Dec. 31, 2007 2006 % Change GAAP operating profit $715,699 $805,130 -11.1 Other items: Antitrust litigation 137,111 2,025 - Restructuring charges 8,230 19,542 - Adj. non-GAAP operating profit $861,040 $826,697 +4.2 UST SUPPLEMENTAL SCHEDULE (Unaudited) Fourth Quarter Year ended Dec. 31, Smokeless Tobacco 2007 2006 % Chg. 2007 2006 % Chg. Net Sales (mil) $396.1 $380.0 +4.2 $1,546.6 $1,522.7 +1.6 Adj. Non-GAAP Oper. Profit (mil) $221.1 $212.6 +4.0 $861.0 $826.7 +4.2 MST Net Can Sales Premium (mil) 142.0 134.0 +5.9 556.9 541.4 +2.9 Price Value (mil) 26.8 23.4 +14.9 102.1 91.3 +11.9 Total (mil) 168.8 157.4 +7.3 659.0 632.7 +4.2 Volume % Point MST Share Data Chg. vs. Chg. vs. RAD-SVT 26 wks ended 12/1/07(1) YAGO Share YAGO Total Category +7.1% Total Premium Segment +1.7% 55.1% -3.0 pts Total Value Segments +14.7% 44.7% +3.0 pts USSTC Share of Total Category + 3.5% 59.9% -2.1 pts USSTC Share of Premium Segment +2.2% 90.9% +0.5 pts USSTC Share of Value Segments +10.9% 21.9% -0.8 pts (1) 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. Fourth Quarter Year ended Dec. 31, Wine 2007 2006 % Chg. 2007 2006 % Chg. Net Sales (mil) $123.4 $94.6 +30.5 $354.0 $282.4 +25.4 Operating Profit (mil) $24.8 $16.7 +48.6 $59.9 $44.1 +35.9 Premium Case Sales (thou) 1,797 1,494 +20.2 5,338 4,563 +17.0 Other Net Sales (mil) $13.4 $11.1 +20.1 $50.1 $45.8 +9.4 Operating Profit (mil) $4.7 $4.0 +18.2 $17.9 $16.0 +12.0
SOURCE UST Inc.
