1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 0-17506
-------
--------------------------
A: Full title of the plan:
UST INC.
EMPLOYEES' SAVINGS PLAN
B: Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
UST INC.
100 West Putnam Avenue
Greenwich, Connecticut 06830
2
UST Inc.
Employees' Savings Plan
Audited Financial Statements
and
Supplemental Schedules
Years ended December 31, 1999 and 1998
with Report of Independent Auditors
3
UST Inc.
Employees' Savings Plan
(the "Plan")
Audited Financial Statements and Supplemental Schedules
Years ended December 31, 1999 and 1998
INDEX
Report of Independent Auditors...................................................1
Audited Financial Statements
Statements of Net Assets Available for Benefits............................2
Statements of Changes in Net Assets Available for Benefits.................3
Notes to Financial Statements..............................................4
Supplemental Schedules
Schedule of Assets Held for Investment Purposes at End of Year.............9
Schedule of Reportable Transactions.......................................12
4
Report of Independent Auditors
To the UST Inc.
Employee Benefits Administration Committee
We have audited the accompanying statements of net assets available for benefits
of the UST Inc. Employees' Savings Plan as of December 31, 1999 and 1998, and
the related statements of changes in net assets available for benefits for the
years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1999 and 1998, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes at end of year as of December 31, 1999, and
reportable transactions for the year then ended, are presented for purposes of
additional analysis and are not a required part of the financial statements but
are supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in our audits of the financial statements and, in
our opinion, are fairly stated in all material respects in relation to the
financial statements taken as a whole.
Ernst & Young LLP
April 28, 2000
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UST Inc.
Employees' Savings Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
1999 1998
-------------------------------
ASSETS
Investments $127,010,375 $137,814,806
Receivables:
Participant contributions 328,216 710,612
Employer contributions 167,205 462,966
Interest and dividends 85,757 37,646
-------------------------------
Total assets 127,591,553 139,026,030
-------------------------------
LIABILITIES
Due to participants - 1,858,656
Due to trustee 2,654 16,183
-------------------------------
Total liabilities 2,654 1,874,839
-------------------------------
Net assets available for benefits $127,588,899 $137,151,191
===============================
See accompanying notes.
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UST Inc.
Employees' Savings Plan
Statements of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31
1999 1998
---------------------------------
ADDITIONS
Investment income:
Net (depreciation) appreciation in fair value of investments:
Common stock of UST Inc. $(22,916,306) $(4,570,776)
Group trust funds 5,702,567 2,934,067
Interest and dividends 6,339,052 6,543,485
---------------------------------
Investment (loss) income, net (10,874,687) 4,906,776
Contributions:
Participants 7,566,956 7,133,026
Employer 4,388,711 4,486,050
---------------------------------
11,955,667 11,619,076
---------------------------------
Total additions 1,080,980 16,525,852
---------------------------------
DEDUCTIONS
Benefits paid directly to participants 10,174,210 15,436,742
Administrative expenses 469,062 427,385
---------------------------------
Total deductions 10,643,272 15,864,127
---------------------------------
(Decrease) increase in net assets available for benefits (9,562,292) 661,725
Net assets available for benefits:
Beginning of year 137,151,191 136,489,466
---------------------------------
End of year $127,588,899 $137,151,191
=================================
See accompanying notes.
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UST Inc.
Employees' Savings Plan
Notes to Financial Statements
Years Ended December 31, 1999 and 1998
1. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Plan have been prepared in accordance with
accounting principles generally accepted in the United States and, as such,
include amounts based on judgments and estimates made by management, which may
differ from actual results.
Investment in common stock of UST Inc. (the Company) is stated at fair value of
$25.19 and $34.88 per share at December 31, 1999 and 1998, respectively. (At
April 28, 2000 UST Inc. common stock had a fair value of $15.00 per share.)
Group trust funds investments are also stated at fair value. The change in the
difference between the fair value and the cost of such investments is reflected
as unrealized appreciation (depreciation) in the aggregate fair value of
investments. The realized appreciation (depreciation) in the aggregate fair
value of investments is the difference between the proceeds received and the
average cost of the investments sold. The fair values of UST Inc. common stock
and group trust fund investments are determined based on published market data.
Guaranteed investment contracts, which are fully benefit responsive, are stated
at contract value which approximates fair value. Participant loans are valued at
their outstanding principal balances, which approximate fair value.
The fair value of the participation units owned by the Plan in group trust funds
is based on quoted redemption value on the last business day of the Plan year.
The Plan has adopted Statement of Position 99-3, "Accounting for and Reporting
of Certain Defined Contribution Plan Investments and Other Disclosure Matters,"
for the presentation of its 1999 and 1998 financial statements. Accordingly,
certain amounts in the 1998 financial statements have been reclassified to
conform to this presentation.
2. DESCRIPTION OF PLAN
The Plan is a defined contribution employee benefit plan established to
encourage and assist employees to adopt a regular savings program and to help
provide additional security for retirement. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
The Plan is a trusteed plan administered by the UST Inc. Employee Benefits
Administration Committee (EBAC). Effective November 1, 1999, American Express
Trust Company replaced Wachovia Bank, N.A. as the Plan's trustee.
Employees are eligible to participate in the Plan the first day of the month
following the date a year of service has been completed. A year of service shall
be met upon completion of at least 1,000 hours of service during a 12-month
consecutive period measured from the employee's date of hire.
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UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1999 and 1998
2. DESCRIPTION OF PLAN (CONTINUED)
Through October 31, 1999, the majority of participants were able to make an
aggregate contribution to the Plan of 2% to 12% (in 1/2% increments) of base pay
on a before-tax or after-tax basis, of which the first 6% was subject to a 100%
matching contribution by the Company. Through that date, employees of Stimson
Lane Ltd. (Stimson Lane) who were participants of the Plan were able to make an
aggregate contribution to the Plan of 2% to 12% (in 1/2% increments) of base pay
on a before-tax or after-tax basis. The Company's matching contribution for
Stimson Lane employees is 50% of the first 6% of compensation contributed, and
for employees of F.W. Rickard Seeds and Yakima Brewing & Malting Company, the
Company's matching contribution is 50% of the first 3% and 6% of compensation
contributed, respectively. In addition, the Company's matching contribution for
eligible U.S. Cigar Sales, Inc. employees is 50% of the first 6% of employee
compensation contributed.
Effective November 1, 1999, the lower limit for participants' aggregate
contributions to the Plan changed from 2% to 1% of base pay, and the
contribution increments changed from 1/2% to 1%. The Plan's provisions for
Company matching contributions were not affected by these changes.
Prior to November 1, 1999, forfeitures remained in the UST Common Stock Fund.
Subsequent to that date, they are directed to the Stable Value Fund. These
forfeitures are applied to reduce employer contributions and totaled $38,687 and
$87,501 in 1999 and 1998, respectively. At the discretion of the UST Inc. Board
of Directors (the Board), additional matching contributions may be made by the
Company. For the years ended December 31, 1999 and 1998, no additional
discretionary contributions were made. Company matching contributions are
invested in common stock of UST Inc. and are deposited in the UST Common Stock
Fund. Prior to November 1, 1999, participants who were at least 59 1/2 years old
could direct the Company's matching contributions to the Plan's fixed income
fund, rather than the UST Common Stock Fund. Subsequent to that date,
participants who are at least 50 years old and 100 percent vested can choose to
direct the investment of the Company's matching contributions to any of the
Plan's investment options. Participant contributions are always 100% vested,
while vesting of the Company's contributions generally occurs over a period of
five years at a rate of 20% for each year of service. Participants become 100%
vested upon death or attainment of age 55.
The Plan includes a loan feature for participants who are currently employed by
the Company enabling them to borrow from their vested plan balance. Participants
may not obtain a loan if they (i) already have two outstanding loans under the
Plan or (ii) have obtained a loan from the Plan within the six-month period
immediately preceding the application for a new loan. The term of the loan can
range from one to five years as elected by the participant. Loan repayments are
made in equal installments of principal and interest by automatic payroll
deductions. The maximum amount the participant can borrow is the lesser of 50%
of their vested interest in the Plan or $50,000, less the highest outstanding
loan balance over the previous twelve months. The minimum loan amount is $1,000.
The loan interest rate is determined on a monthly basis and is equal to the
prime rate published in the Wall Street Journal on the first business day of the
calendar month. The interest rate is fixed for the term of the loan. In the
event a participant defaults on a Plan loan, the entire unpaid balance of the
loan shall become due and payable immediately. Loans may be prepaid in full at
any time.
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UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1999 and 1998
2. DESCRIPTION OF PLAN (CONTINUED)
Expenses incurred to administer the Plan are paid from Plan assets to the extent
permissible under applicable law. All costs and expenses with regard to the
purchase or sale of investments are paid by the Plan.
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants become 100 percent vested and receive the fair value of their
accounts.
The foregoing description of the Plan provides only general information.
Participants should refer to the Summary Plan Description (SPD) for a more
complete description of the Plans provisions. Copies of the SPD are available
from the Company's Employee Benefits Department.
3. PARTICIPANTS' INTERESTS
A participant's interest in the Plan is based on "Units of Participation", the
value of which is calculated daily (calculated monthly prior to November 1,
1999) for each fund based on the aggregate fair value of the fund's investments.
A participant obtaining a distribution from the Plan receives the fair value of
his or her account. If a participant leaves the Company before becoming fully
vested in the employer's contributions to the Plan, the participant will forfeit
the nonvested portion of the employer's contributions. Under the provisions of
the Plan, a participant may, at the discretion of the EBAC, be permitted to (i)
contribute to the Plan certain distributions received from another qualified
employee benefit plan or (ii) direct the trustee of such other plan to make a
trust-to-trust transfer to the Plan of the participant's account in such other
plan.
4. INVESTMENTS
Individual investments that represent 5% or more of the Plan's net assets
available for benefits are as follows:
DECEMBER 31
-----------------------------
1999 1998
---- ----
UST Inc. Common Stock, at fair value;
1999 - 2,422,831 shares; 1998 - 2,380,554 shares $61,025,056* $83,021,821*
American Express Trust Equity Index II; Common Stock
Fund, at fair value; 1999 - 708,574 shares 28,285,581 -
Guaranteed Investment Contract Fund, at contract value;
1999 - 15,470,902 units; 1998 - 15,476,582 units 15,470,902 15,476,582
MAS Small Capital Value Portfolio; Equity Mutual
Fund, at fair value; 1999 - 395,026 shares 7,975,581 -
State Street Bank & Trust Company; Common Stock
Fund, at fair value; 1998 - 103,479 - 21,182,549
*Nonparticipant-directed
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UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1999 and 1998
4. INVESTMENTS (CONTINUED)
In accordance with the Plan, prior to November 1, 1999, participants could
direct their contributions to invest in one or more of the following: a fixed
income fund, an index fund, UST common stock, a balanced fund and a small
company fund. Subsequent to that date, participants may direct their
contributions to invest in one or more of the following: the Stable Value Fund,
the American Express Trust Equity Index Fund II, the UST Common Stock Fund, the
INVESCO Total Return Fund, the MAS Funds Small Cap Value Portfolio, the BT
Pyramid International Equity Fund, the Massachusetts Investors Trust Fund and
the American Express Trust Bond Index Fund. The Plan allows participants who
invest in more than one fund option to allocate their contributions in 5%
increments (1% increments after November 1, 1999) per fund. In addition, the
Plan permits participants to change their existing account balances by
transferring amounts from any one participant-directed fund to any other such
fund.
The Plan's investments include fully benefit responsive investment contracts
with insurance companies and other financial institutions. Benefit responsive
contracts consist of contributions made under the contract and interest at the
contract rate and provide contract value payments for participant distributions,
loans and investment transfers as allowed by the Plan. There are exceptions for
payments to participants who, as a result of a company event, cease to be
employed by the Company. A company event includes a significant early retirement
program, divestiture or other company action that could be construed as causing
increased plan payments to participants. The interest rates are set at the time
of purchase and provide a stated rate of interest on the principal and accrued
interest balance over the life of the contract. The weighted-average yield for
all guaranteed investment contracts was 6.3% in 1999 and 6.6% in 1998. The
weighted-average crediting interest rate for all guaranteed investment contracts
was 6.3% at December 31, 1999 and 6.3% at December 31, 1998.
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UST Inc.
Employees' Savings Plan
Notes to Financial Statements (continued)
Years Ended December 31, 1999 and 1998
5. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of the changes
in net assets relating to the Plan's nonparticipant-directed investments is as
follows:
DECEMBER 31
------------------------------------
1999 1998
---- ----
NET ASSETS, AT FAIR VALUE
UST Common Stock Fund $61,920,794 $ 81,744,778
============= =============
YEAR ENDED DECEMBER 31
------------------------------------
1999 1998
---- ----
CHANGES IN NET ASSETS
Employee and employer contributions $ 5,186,644 $ 5,546,003
Interest and dividends 3,986,688 3,864,676
Net depreciation (22,916,306) (4,570,776)
Benefits paid directly to participants (5,181,224) (7,982,958)
Administrative expenses (231,016) (223,215)
Transfers to participant-directed investments (668,770) (2,031,507)
------------- -------------
$(19,823,984) $ (5,397,777)
============= =============
Amounts above include both the participant-directed and the
nonparticipant-directed components of the fund's investments and the effects of
changes associated with both components of these investments.
6. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated January 9, 1995, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The EBAC believes the
Plan is being operated in compliance with the applicable requirements of the
Code and, therefore, believes that the Plan is qualified and the related trust
is tax exempt.
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SUPPLEMENTAL SCHEDULES
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UST Inc.
Employees' Savings Plan
EIN 06-1193986, Plan number 002
Schedule of Assets Held for Investment Purposes at End of Year
December 31, 1999
DESCRIPTION OF INVESTMENT
INCLUDING MATURITY DATE,
IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, PAR OR
LESSOR OR SIMILAR PARTY MATURITY VALUE CURRENT VALUE
- ---------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents:
Cash - $ 14,763
American Express Trust
Money Market II 895,738 shares 895,738
-------------
Total Cash and Cash Equivalents 910,501
-------------
UST Inc. (1) 2,422,831 shares -
Common Stock (2) 61,025,056
-------------
Group Trust Funds:
American Express Trust 7,339 shares -
Bond Index II Balanced Fund 72,659
American Express Trust 708,574 shares -
Equity Index II Equity Fund 28,285,581
American Express Trust
Income Fund II 178,865 shares 3,489,906
BT Pyramid International 20 shares -
Equity Fund International Mutual Fund 94,231
INVESCO Total Return Fund 200,432 shares -
Balanced Mutual Fund 5,804,525
Massachusetts Investors Trust 8,430 shares -
Equity Mutual Fund 176,609
MAS Small Capital Value Fund 395,026 shares -
Equity Mutual Fund 7,975,581
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Total Group Trust Funds 45,899,092
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(1) Indicates party-in-interest to the Plan.
(2) Cost $31,672,457.
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UST Inc.
Employees' Savings Plan
EIN 06-1193986, Plan number 002
Schedule of Assets Held for Investment Purposes at End of Year (continued)
December 31, 1999
DESCRIPTION OF INVESTMENT
INCLUDING MATURITY DATE,
IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, PAR OR
LESSOR OR SIMILAR PARTY MATURITY VALUE CURRENT VALUE
- --------------------------------------------------------------------------------------------------------
Guaranteed Investment Contracts:
Allstate Life Insurance Company 1,200,397 units, 6.66%,
due October 1, 2001 $ 1,200,397
Continental Assurance 1,014,061 units, 6.49%,
due April 2, 2001 1,014,061
GE Life Insurance Company 471,659 units, 6.92%,
due September 29, 2000 471,659
GE Life Insurance Company 1,316,559 units, 5.71%,
due December 31, 2002 1,316,559
John Hancock Life Insurance Company 1,176,971 units, 6.72%,
due July 1, 2002 1,176,971
John Hancock Life Insurance Company 901,946 units, 7.12%,
due April 1, 2002 901,946
Metropolitan Life Insurance Company 619,167 units, 6.80%,
due June 30, 2000 619,167
Metropolitan Life Insurance Company 751,771 units, 6.20%,
due December 29, 2000 751,771
Monumental Life Insurance Company 1,058,947 units, 5.61%,
due March 31, 2003 1,058,947
Monumental Life Insurance Company 1,543,813 units, 6.54%,
due March 31, 2003 1,543,813
Monumental Life Insurance Company 211,027 units, 6.78%,
due December 29, 2000 211,027
New York Life Insurance Company 1,040,879 units, 5.86%,
due March 31, 2003 1,040,879
Protective Life Insurance Company 1,081,813 units, 5.97%,
due September 30, 2002 1,081,813
Transamerica Insurance & Investments 635,197 units, 7.08%,
due December 31, 2000 635,197
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UST Inc.
Employees' Savings Plan
EIN 06-1193986, Plan number 002
Schedule of Assets Held for Investment Purposes at End of Year (continued)
December 31, 1999
DESCRIPTION OF INVESTMENT
INCLUDING MATURITY DATE,
IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, PAR OR
LESSOR OR SIMILAR PARTY MATURITY VALUE CURRENT VALUE
- ----------------------------------------------------------------------------------------------------------------
Travelers Insurance Company 1,109,397 units, 6.08%,
due October 1, 2001 $ 1,109,397
Travelers Insurance Company 1,337,298 units, 5.59%,
due June 30, 2003 1,337,298
---------------
Total Guaranteed Investment Contracts 15,470,902
---------------
Participant Loans Receivable 3,704,824
---------------
Total Investments $ 127,010,375
===============
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UST Inc.
Employees' Savings Plan
EIN 06-1193986, Plan number 002
Schedule of Reportable Transactions
Year Ended December 31, 1999
Identity of Purchase Selling Net
Party Involved Description of Assets Price (1) Price (1) Cost of Asset Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
CATEGORY (iii) - A SERIES OF TRANSACTIONS IN EXCESS OF 5 PERCENT OF PLAN ASSETS
UST Inc.(2) Common Stock - Shares:
170,871 $4,790,277 $4,790,277 -
128,594 $3,864,447 1,805,439 $2,059,008
THERE WERE NO CATEGORY (i), (ii) OR (iv) REPORTABLE TRANSACTIONS.
"LEASE RENTAL" AND "EXPENSES INCURRED WITH TRANSACTION" COLUMNS WERE NOT
APPLICABLE.
(1) Purchase and selling prices are equal to current value at dates of
acquisition and disposition, respectively.
(2) Indicates party-in-interest to the Plan.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the UST
Inc. Employee Benefits Administration Committee has duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
UST INC. EMPLOYEES' SAVINGS PLAN
/s/ ALTON W. ADAMS
------------------------------------
Alton W. Adams
Chairman, UST Inc. Employee Benefits
Administration Committee
Dated: May 12, 2000
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment No. 4
to the Registration Statement (Form S-8 No. 2-72410) pertaining to the
Employees' Savings Plan of UST Inc. of our report dated April 28, 2000, with
respect to the financial statements and schedules of the UST Inc. Employees'
Savings Plan included in this Annual Report (Form 11-K) for the year ended
December 31, 1999.
Stamford, Connecticut
May 12, 2000
/s/ ERNST & YOUNG LLP