- Net sales increased 1% vs. year ago to $484.6 million
- Diluted EPS was stable vs. year ago at $.84
- Adjusted diluted EPS increased 4.6% vs. year ago to $.91 (see table)
- Successfully responded to increased moist smokeless tobacco competitive activity; premium can sales return to growth, sequential share stabilized
- Moist smokeless tobacco category grew 8.2%
- Ste. Michelle Wine Estates posts strong growth in net sales (+21%) and operating profit (+28%)
- Reaffirming 2008 adjusted diluted E.P.S. target of $3.65, with a range of $3.60 to $3.70
- 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
STAMFORD, Conn., Oct. 24 /PRNewswire-FirstCall/ -- 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.
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
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).
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
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.
Consolidated diluted E.P.S. Full Year
2008 2007
Estimate Actual % Change
GAAP diluted E.P.S. $3.55 $3.27 8.6
Other items (net of taxes):
Antitrust litigation .01 .54 -
Restructuring charges .03 .04 -
Acquisition related costs .06 - -
Impact of sale of corporate
headquarters, net - (.39) -
Adj. non-GAAP diluted E.P.S. $3.65 $3.46 5.5
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.
