UST Historical Performance

Sales
Gross Profit
Earnings Before Interest & Tax (EBIT)
Net Income
Dividend Payout
Assets
Equity
Return on Average Equity
Net Margin
Asset Turnover
Financial Leverage
Retention Rate
Sustainable Growth
Sales Growth

EBIT/Sales

1988
611.9
437.3
260.2
162.2
50%
598
453.3
26.5%
1.02
50%

1988
43%

1989
673.9
488.4
298.4
190.5
53%
630.2
482.3
40.7%
28.3%
1.07
1.39
47%
19.8%
10.1%

1990
756.4
564.6
349
223.3
53%
622.6
473.9
46.7%
29.5%
1.21
1.29
47%
21.8%
12.2%

1991
898.4
670.9
423.8
265.9
52%
656.5
482.9
55.6%
29.6%
1.37
1.39
48%
26.9%
18.8%

1992
1032.2
775.4
500.8
312.6
54%
674
516.6
62.6%
30.3%
1.53
1.40
46%
29.8%
14.9%

1993
1097.5
851.1
564.8
347.9
58%
706.2
463
71.0%
31.7%
1.55
1.37
42%
28.3%
6.3%

1989
44%

1990
46%

1991
47%

1992
49%

1993
51%

1994
1204
952
640.7
387.5
58%
741.2
361.7
94.0%
32.2%
1.62
1.60
42%
35.2%
9.7%

1995
1305.8
1043.6
707.8
429.8
59%
784
292.8
131.3%
32.9%
1.67
2.17
41%
48.7%
8.5%

1996
1371.7
1098.9
750.9
464
60%
806.6
281.2
161.7%
33.8%
1.70
2.75
40%
63.4%
5.0%

1997
1401.7
1109.8
719.3
443.9
67%
826.4
436.8
123.6%
31.7%
1.70
2.94
33%
52.1%
2.2%

1998
1423.2
1139.7
753.3
467.9
64%
913.3
468.3
103.4%
32.9%
1.56
2.09
36%
38.6%
1.5%

1994
53%

1995
54%

1996
55%

1997
51%

1998
53%

Compound Annual Interest Rate

5-Year CAGR
Net Sales
5%
EBIT
6%
EPS
9%
5-Year Average
Gross Profit Margin
79.7%
Net Margin
32.7%
ROE
122.8%
Dividend Payout
61.6%
Sustainable Growth
47.6%
Sales Growth
5.4%

10-Year CAGR
9%
11%
13%
10-Year Average
77.9%
31.6%
89.1%
57.8%
36.4%
8.9%

Income Statement Projections

Sales
EBIT
Interest
Pre-Tax earnings
Taxes
Net Income
Net Debt
Interest Rate
Interest Coverage
Debt Rating

PV Tax Shields
Value of UST
Net Debt
Stock Price
Shares Repurchased
Shares
Market Equity
Debt/Market Cap.

No debt Debt initiated

Actual Pro-forma
Pro-forma
Pro-forma Pro-forma
Assumptions
1998
1999
1999
1999
1999
1423.2
1500.1
1500.1
1500.1
1500.1 5.4% annual growth as shown in Hi
753.3
795.0
795.0
795.0
795.0
53% of sales as shown in Historical
-2.2
0.0
70.5
78.2
87.0
Interest Rate * 1000 million
755.5
795.0
724.5
716.8
708.0
287.1
302.1
275.3
272.4
269.1
38% corporate tax rate
467.9
492.9
449.2
444.4
439.0
0
0
1000
1000
1000
7.05%
7.82%
8.70% From Exhibit 8 for 20-year yields
11.3
10.2
9.1
EBIT/Interest
A
BBB
BB
UST is rated A-1 for its commercial

Status- S1 Billion
% Change
Quo
Lev Cap
380
Net Debt*Tax Rate (38%)
6470
6850
5.873% Stock Price * No of Shares
0
1000
34.88
36.929
5.873%
27.08
185.5
158.421
-14.598%
6470
5850
-9.582% Value of UST - Net Debt
0.00
0.17

nual growth as shown in Historical Performance

ales as shown in Historical Performance
Rate * 1000 million

porate tax rate

hibit 8 for 20-year yields

ted A-1 for its commercial paper prior $1B leveraged capitalization
No debt Debt initiated

Debt = $1 billion
Net Income
Shares
EPS
Dividend Payout
Dividends per share
DPS growth
EPS growth

Actual 1999
1998 No debt
467.9
492.9
185.5
185.5
2.52
2.66
301.1
315.5
1.62
1.70
4.98%
5.45%

1999
A rated
449.2
158.421
2.84
287.5
1.81
12.02%
12.52%

1999
1999
BBB rated BB rated
444.4
439.0
158.421
158.421
2.81
2.77
284.4
280.9
1.80
1.77
10.83%
9.47%
11.33%
9.96%

Exhibit 8

Key Financial Ratiosa

Adjusted Key Industrial Financial RatiosSenior Debt Ratings

Industrial Long-Term Debt
Three-Years (1996-1998) Medians

AAA

EBIT interest coverage (x)

EBITDA interest coverage (x)
Fund flow/total debt (%)
Free operating cash flow/total debt (%)
Return on capital (%)
Operating income/sales (%)
Long-term debt/capital (%)
Total debt/capital (including ST debt) (%)

Debt YieldsDecember 22, 1998

10-Year (%)
20-Year (%)

12.9
18.7
89.7
40.5
30.6
30.9
21.4
31.8

Investment Grade
AA
A
9.2

7.2
14.0
67.0

21.6
25.1
25.2
29.3

BBB
4.1

10.0
49.5
17.4
19.6
17.9
33.3

37.0

2.5
6.3
32.2

6.3
15.4
15.8
40.8
39.2

Noninvestment Grade/Speculative
BB
B
CCC
1.2
3.9
20.1
1.0
12.6
14.4
55.3

46.4

9.2
11.2
68.8
58.5

Corporate Bond Yields

BBB
BB+

U.S. Treasury

AAA

AA

4.70
5.45

5.60
6.47

5.84
6.76

6.12
7.05

6.84
7.82

7.70
--

(0.9)
0.2
7.4
(25.4)
(8.8)
5.0

2.3
10.5
(4.0)

71.5
71.4

79.4

BB/BB-

BB

8.72
--

11.19
--

Formulas for Adjusted Key Industrial Financial Ratios

EBIT Interest coverage =

Earnings from continuing operations before interest and taxes/

Gross interest incurred before subtracting capitalized interest and interest income

EBITDA interest coverage =

Earnings from continuing operations before interest, taxes, depreciation and amortization/
Gross interest incurred before subtracting capitalized interest and interest income

Funds from operations/Total debt =

Net income from continuing operations + depreciation, amortization, deferred income taxes, and other
noncash/
Long-term debt + current maturities, commercial paper, and other short-term borrowings

Free operating cash flow/Total debt =

Funds from operations capital expenditures (+) the increase (decrease) in working capital (excluding
changes in cash, marketable securities and ST debt/
Long-term debt + current maturities, commercial paper, and other short-term borrowings

Pretax return on capital =

EBIT + interest expense/

Average of beginning and ending year capital, including short-term debt, current maturities, long-term debt,
noncurrent deferred taxes and equity

Operating income/Sales =

Sales minus cost of goods manufactured (before depreciation and amortization), SG&A and R&D costs/ Sales

Long-term debt/Capitalization =

Long-term debt/
Long-term debt + shareholders equity (including preferred stock) + minority interest

Total debt/Capitalization =

Long-term debt + current maturities, commercial paper, and other short-term borrowings/
Long-term debt + current maturities, commercial paper and other short-term borrowings + shareholders equity
(including preferred stock) + minority interest

Source: Standard & Poors Credit Week, July 28, 1999 and Standard & Poors The Outlook, January 6, 1999.
a

Note:

Excludes discussion of operating lease equivalents ad defined by S&P for simplification purposes.

Exhibit 3

Summary Financial Information for UST Inc. (in millions, except per-share data and ratios)
1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

5-Yr CAGR

10-Yr CAGR

5%

9%

6%
6%

11%
11%

6%

11%

Summary Operating Dataa

Net Sales
Gross Profit
EBITDA
EBIT
Interest Expense (Income)
Pretax Earnings
Net Income

$611.9
437.3
277.9
260.2
(1.1)
261.3
162.2

$673.9
488.4
315.0
298.4
(3.2)
301.6
190.5

$756.4
564.6
368.6
349.0
(3.2)
352.2
223.3

$898.4
670.9
446.4
423.8
(2.3)
426.1
265.9

Free Operating Cash Flow

$135.2

$195.1

$217.8

$247.3

$267.9

$340.7

$399.2

$521.2

$456.4

$287.4

$429.5

5%

12%

-$0.74
$0.71
$0.37
50%

-$0.87
$0.83
$0.46
53%

-$1.04
$0.99
$0.55
53%

-$1.26
$1.20
$0.66
52%

-$1.49
$1.43
$0.80
54%

$(35.0)
$1.67
$1.63
$0.96
58%

-$1.92
$1.88
$1.12
58%

-$2.21
$2.17
$1.30
59%

-$2.48
$2.44
$1.48
60%

$8.0
$2.41
$2.39
$1.62
67%

$21.0
$2.52
$2.50
$1.62
64%

9%
9%
11%

13%
13%
16%

$72.7
$598.0
$21.8
$30.8
$453.3
220.6
$221.1
$20.8
$81.7
$67.4

$54.6
$630.2
$6.8
$14.5
$482.3
219.8
$209.3
$23.7
$101.2
$97.5

$46.6
$622.6
$3.1
$4.8
$473.9
215.2
$197.2
$37.2
$118.3
$151.3

$41.5
$656.5
$1.3
$482.9
211.6
$210.0
$28.4
$139.7
$184.4

$36.4
$674.0
$516.6
209.8
$249.0
$30.1
$168.0
$212.6

$25.3
$706.2
$40.0
$40.0
$463.0
208.5
$228.4
$54.5
$199.7
$236.7

$50.7
$741.2
$125.0
$125.0
$361.7
202
$221.2
$23.7
$225.7
$298.8

$69.4
$784.0
$100.0
$200.0
$292.8
194.4
$144.8
$14.0
$252.4
$274.8

$54.5
$806.6
$100.0
$250.0
$281.2
187.4
$144.0
$36.7
$277.3
$237.8

$6.9
$826.4
$100.0
$110.0
$436.8
183.9
$275.3
$55.8
$298.1
$45.7

$33.2
$913.3
$100.0
$100.0
$468.3
185.5
$309.9
$35.5
$301.1
$151.6

$10.50
$15.38
$18.25
$6.00
$9.63
$12.38
$10.25
$15.31
$18.25
13.9x
17.6x
17.5x
$2,260.6 $3,366.0 $3,926.6

$33.88
$16.38
$32.75
26. 0x
$6,930.0

5%

13%

5-Yr Avg

10-Yr Avg

79.7%
55.5%
53.3%
32.7%
122.8%
55.3%
22.7%
30.2%

77.3%
52.7%
50.4%
31.3%
89.1%
48.2%
12.4%
16.3%

Special Charges/Non-Recurring Items (Gains)b

Basic Earnings per Share
Diluted Earnings per Share
Dividend per Share
Dividend Payout Ratio
Balance Sheet and Cash Flow Data
Cash and Cash Equivalents
Total Assets
Long-Term Debt
Total Debt
Shareholders' Equity
Average Basic Shares Outstanding
Working Capital
Capital Expendituresc
Dividends Paid
Share Repurchases
Stock Price Data
High
Low
Year End
Price/Earnings Ratiod
Market Equitye
Selected Growth Rates and Ratios
Sales Growth
Net Income Growth
Dividend Growth
Gross Profit Margin
EBITDA Margin
EBIT Margin
Net Margin
Return on Average Equity
Return on Average Assets
Long-Term Debt/Capitalization
Total Debt/Capitalization

7.2%
23.9%
23.3%
71.5%
45.4%
42.5%
26.5%
38.0%
28.3%
4.6%
6.4%

10.1%
17.5%
24.3%
72.5%
46.7%
44.3%
28.3%
40.7%
31.0%
1.4%
2.9%

12.3%
17.2%
19.6%
74.6%
48.7%
46.1%
29.5%
46.7%
35.6%
0.6%
1.0%

18.8%
19.1%
20.0%
74.7%
49.7%
47.2%
29.6%
55.6%
41.6%
0.0%
0.3%

$1,032.2 $1,097.5 $1,204.0 $1,305.8 $1,371.7 $1,401.7 $1,423.2

775.4
851.1
952.0 $1,043.6 $1,098.9 $1,109.8 $1,139.7
525.2
591.4
668.9
736.9
779.2
749.8
785
500.8
564.8
640.7
707.8
750.9
719.3
753.3
(1.9)
(2.0)
0.1
3.2
6.4
7.5
(2.2)
502.6
566.8
640.6
704.6
744.5
703.9
755.5
312.6
347.9
387.5
429.8
464.0
443.9
467.9

$35.38
$32.75
$31.50
$36.00
$35.88
$36.94
$36.88
$25.38
$24.38
$23.63
$26.63
$28.25
$25.50
$24.56
$32.00
$27.75
$27.88
$33.38
$32.38
$36.94
$34.88
21.5x
16.6x
14.5x
15.1x
13.1x
15.3x
13.8x
$6,713.7 $5,785.0 $5,630.6 $6,487.2 $6,066.6 $6,794.0 $6,470.8

14.9%
17.5%
21.2%
75.1%
50.9%
48.5%
30.3%
62.5%
47.0%
0.0%
0.0%

6.3%
11.3%
20.0%
77.5%
53.9%
51.5%
31.7%
71.0%
50.4%
8.0%
8.0%

9.7%
11.4%
16.7%
79.1%
55.6%
53.2%
32.2%
94.0%
53.5%
25.7%
25.7%

8.5%
10.9%
16.1%
79.9%
56.4%
54.2%
32.9%
131.3%
56.4%
25.5%
40.6%

5.0%
8.0%
13.8%
80.1%
56.8%
54.7%
33.8%
161.7%
58.3%
26.2%
47.1%

2.2%
(4.3%)
9.5%
79.2%
53.5%
51.3%
31.7%
123.7%
54.4%
18.6%
20.1%

1.5%
5.4%
0.0%
80.1%
55.2%
52.9%
32.9%
103.4%
53.8%
17.6%
17.6%

Source:

Company annual report for fiscal year ended December 31, 1998 and authors adjustments and calculations.

Before the cumulative effect of accounting changes. Excludes settlement charges and other special charges or nonrecurring items. All net income adjustments apply a 40% tax rate.

Authors estimates of pretax settlement charges and other special charges or nonrecurring items. Does not include effect of accounting changes.

Additions for property, plant and equipment net of dispositions.

Based upon year-end stock price and basic earnings per share.

Based upon average basic shares outstanding and year-end stock price.

Exhibit 5

Summary Financial Information for UST Inc. (in millions, except per share data and

UST Inc.
Summary Operating Dataa
Fiscal Year End
Net Sales
Gross Profit
EBITDAb
EBITb
Interest Expense (Income)
Pretax Earnings
Net Income
Free Operating Cash Flow
Special Charges/Non-Recurring Items (Gains)c
Basic Earnings per Share
Diluted Earnings per Share
Dividend per Share (Common)
Dividend Payout Ratio

Tobacco Product Manufacturers

Philip
North Atlantic
Morris
Trading Co.

RJR Nabisco
Holdingsi

Tobacco Leaf Merchants

Standard
Universal
DiMon Inc.
Commercial
Corp

Dec 31, 1998

$1,423.2
1,139.7
785.0
753.3
(2.2)
755.5
467.9
$429.5
$21.0
$2.52
$2.50
$1.62
64%

Dec 31, 1998

$74,391.0
30,993.0
15,501.0
13,811.0
890.0
12,921.0
7,672.4
$6,076.4
$3,834.0
$3.16
$3.14
$1.68
53%

Dec 31, 1998

$93.1
60.9
36.3
29.1
24.9
4.2
1.0
$14.5
$(7.09)g
$(7.09)g
0%

Dec 31, 1998

$20,563.0
9,493.0
3,602.0
2,467.0
880.0
1,455.0
718.0
$2,016.0
$2,069.0
$2.22
$2.22
$2.05
92%

June 30, 1998

$2,171.8
266.9
200.2
156.7
83.8
72.9
52.0
$52.5
$16.9
$1.17
$1.16
$0.66
56%

March 31, 1998

$1,492.8
145.0
85.8
65.3
37.8
37.1
26.9
$(61.3)
$2.18
$2.05
0%

June 30, 1998

$4,287.2
613.6
329.5
278.4
64.0
231.3
130.4
$110.2
$(16.7)
$3.71
$3.68
$1.11
30%

$33.2
$913.3
$100.0
$100.0
$468.3
185.5
$309.9
$35.5

$4,081.0
$59,920.0
$12,615.0
$14,662.0
$16,197.0
2,429.0
$3,851.0
$1,804.0

$2.8
$260.0
$202.6
$215.6
$39.3
$(15.4)
528.2
$42.0
$0.5

$300.0
$28,892.0
$9,982.0
$10,467.0
$957.0
$7,809.0
323.9
$(259.0)
$576.0

$18.7
$1,797.5
$797.0
$1,079.5
$0.5
$421.9
44.5
$706.4
$36.6

$34.1
$839.5
$197.1
$469.9
$30.3
$149.6
12.4
$219.1
$9.7

$79.8
$2,056.7
$263.1
$849.6
$31.7
$547.9
35.2
$328.8
$90.0

Stock Price Data

Fiscal Year End
Price/Earnings Ratioe
Market Equityf

$34.88
13.8x
$6,470.8

$53.50
16.9x
$129,951.5

NAh
NAh
NAh

$29.69
13.4x
$9,614.4

$11.25
9.6x
$500.3

$15.94
7.3x
$197.3

$37.38
10.1x
$1,315.2

Selected Growth Rates and Ratios

Sales Growth
Gross Profit Margin
EBITDA Margin
EBIT Margin
Net Margin
Return on Average Equity
Return on Average Assets
Long-Term Debt/Capitalization
Total Debt/Capitalization

1.5%
80.1%
55.2%
52.9%
32.9%
103.4%
53.8%
17.6%
17.6%

3.2%
41.7%
20.8%
18.6%
10.3%
49.3%
13.2%
43.8%
47.5%

10.2%
65.4%
39.0%
31.3%
1.1%
NM
0.4%
89.4%
90.0%

(0.5%)
46.2%
17.5%
12.0%
3.5%
8.4%
2.4%
53.2%
54.4%

2.2%
12.3%
9.2%
7.2%
2.4%
12.5%
2.7%
65.4%
71.9%

10.2%
9.7%
5.7%
4.4%
1.8%
22.5%
3.4%
52.3%
72.3%

4.2%
14.3%
7.7%
6.5%
3.0%
25.6%
6.5%
31.2%
59.4%

Balance Sheet and Cash Flow Data

Cash and Cash Equivalents
Total Assets
Long-Term Debt
Total Debt
Preferred Stock & Minority Interest
Shareholders' Equity
Average Basic Shares Outstanding
Working Capital
Capital Expendituresd

Source:
Company financial statements and authors calculations and adjustments.
a
Before the cumulative effect of accounting changes and discontinued operations. Excludes settlement charges, special charges, and nonrecurring items. Net income adjustments generally apply a 40% tax rate.
b

Excludes Other Income and Expense.

Median
(excl. UST)

Mean
(excl. UST)

28.0%
13.4%
9.6%
2.7%
22.5%
3.1%
52.8%
65.7%

31.6%
16.7%
13.3%
3.7%
23.7%
4.8%
55.9%
65.9%

Authors estimates of pretax settlement charges and other special charges or nonrecurring items. Does not include discontinued operations or effect of accounting changes.

Additions of property, plant and equipment net of dispositions.

Based upon fiscal year-end stock price and basic earnings per share.

Based upon average basic shares outstanding and fiscal year-end stock price.

Includes impact of preferred stock dividends.

North Atlantic Trading Company is privately held

RJR Nabisco Holdings spun its tobacco business (RJ Reynolds Tobacco) off to shareholders in 1999.

Debt Policy at UST

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Table A

Smokeless Tobacco Products

Category

Definition

Use

Brand/(Manufacturer)

Dry

Powdered dry tobacco

Snorted through nose

(Conwood), (Swisher), (UST) & (B&W)

Moist

Fine, long or powdered cut

moist tobacco

Placed between lower

lip and gum

Copenhagen (UST), Skoal (UST), Kodiak

(Conwood), Silver Creek (Swisher) &
Timber Wolf (Pinkerton)

Loose Leaf

Moist tobacco which is cut into

small strips

Placed between cheek

and gum

Red Man (Pinkerton), Levi Garrett

(Conwood) & Beech Nut (National)

Plug

Moist or dry tobacco

compressed into a chunk

Placed between cheek

and gum

Days Work (Pinkerton), Red Man

(Pinkerton), & Levi Garrett (Conwood)

Twist/Roll

Tobacco fashioned into a roll

Placed between cheek

and gum

(Conwood)

Snuff

Chewing
Tobacco

Source: Credit Suisse First Boston, UST, Inc.: Still Chewing on the Story Stay Tuned, August 27, 1999

Table B

Smokeless Tobacco Brands (1998 Dollar Share)

Copenhagen Fine Cut (UST)

Skoal Fine Cut Wintergreen (UST)
Kodiak Wintergreen (Conwood)
Skoal Long Cut Wintergreen (UST)
Copenhagen Long Cut (UST)
Skoal Long Cut Straight (UST)
Skoal Long Cut Mint (UST)
Skoal Long Cut Cherry (UST)
Skoal Bandits Wintergreen (UST)
Skoal Long Cut Classic (UST)
Skoal Long Cut Spearmint (UST)
Skoal Fine Cut Straight (UST)

Source: 1998 A.C. Nielson data

29.9%
11.8%
9.5%
9.4%
7.2%
5.9%
4.4%
2.9%
2.2%
2.0%
1.8%
1.3%

Exhibit 1

UST Inc. Product Information

Brands

Category

Introduction

% 1998
Sales

1998 Average
Retail Cost per
Can

Description

Competition

Copenhagen

Full Price

1822

48%

$3.13

Top selling brand in the industry. Straight-flavored.

Timberwolf (Swedish Match)
Copenhagen has a "made-date" on bottom of its
and Redwood (Swisher)
container so consumers recognize that it is fresh. Both
fine and long cut varieties. Long cut variety introduced
in the first quarter of 1997.

Skoal Fine Cut

Full Price

1935

18%

$2.98

Second largest selling brand in the industry.

Wintergreen and straight-flavored.

Kodiak (Conwood)

Skoal Long Cut

Full Price

1984

29%

$3.11

Available in six varieties: wintergreen, straight, mint,

cherry, classic and spearmint.

Kodiak (Conwood), Timberwolf

(Swedish Match) and Silver
Creek (Helme)

Skoal Bandits

Full Price

National
introduction in 1983

3%

$3.10

Skoal packed in "tea bags" that are individual portion

packs that make it easy to use and dispose.

Renegades (Swedish Match)

Red Seal

Price Value

Third Qtr 1997

1%

$1.29

Available in wintergreen and straight-flavors. Introduced Timberwolf (Swedish Match),

in a 1.2 oz package.
Cougar, Redwood (Swisher)
and Silver Creek (Helme)

Rooster

Full Price

Test Marketed in
Fourth Qtr 1997;
National
introduction in 1998

<1%

$2.44

Long-cut wintergreen and straight-flavored. Priced

competitively to Copenhagen and Skoal but is
packaged in a 1.5 oz can, offering consumers 25%
more tobacco for their money.

Source: Credit Suisse First Boston research dated August 27, 1999.

Kodiak (Conwood)

Exhibit 2

Market Share Information for UST Inc.

Industry
Premium Market Share %
Price Value Market Share %

1991

1992

1993

1994

1995

1996

1997

1998

7 Yr. CAGR

99.0%
1.0%

97.9%
2.1%

97.2%
2.8%

96.3%
3.7%

94.9%
5.1%

92.7%
7.3%

90.9%
9.1%

89.2%
10.8%

(1.5%)
40.5%

86.2%

84.6%
(1.9%)
84.6%
0.0%

85.1%
83.8%
81.7%
79.5%
78.2%
77.2%
0.6%
(1.5%)
(2.5%)
(2.7%)
(1.6%)
(1.3%)
85.1%
83.8%
81.7%
79.5%
78.2%
76.6%
0.0%
0.0%
0.0%
0.0%
0.0%
0.6%

11.3%
11.9%
11.3%
0.0%

10.8%
11.1%
11.9%
12.8%
13.1%
13.2%
(4.4%)
2.8%
7.2%
7.6%
2.3%
0.8%
10.8%
11.1%
11.9%
12.2%
11.8%
11.6%
0.0%
0.0%
0.0%
0.6%
1.3%
1.6%

UST
Total Market Share %
lncrease/(Decrease)%
Premium Market Share %
Price Value Market Share %
Conwood
Total Market Share %
lncrease/(Decrease)%
Premium Market Share %
Price Value Market Share %
Swedish Match
Total Market Share %
lncrease/(Decrease)%
Premium Market Share %
Price Value Market Share %
Swisher
Total Market Share %
lncrease/(Decrease)%
Premium Market Share %
Price Value Market Share %
Other Manufacturers
Total Market Share %
lncrease/(Decrease)%

86.2%
0.0%

10.1%
10.1%
0.0%

1.8%
1.8%
0.0%

1.0%
0.0%
1.0%

0.9%

2.0%
11.1%
2.0%
0.0%

2.1%
110.0%
0.0%
2.1%

0.0%
(100.0%)

1.0%
(50.0%)
1.0%
0.0%

2.8%
33.3%
0.0%
2.8%

0.3%
NM

1.1%
10.0%
1.0%
0.1%

3.6%
28.6%
0.0%
3.6%

0.4%
33.3%

1.4%
27.3%
0.8%
0.6%

4.5%
25.0%
0.0%
4.5%

0.5%
25.0%

(1.6%)
(1.7%)
--

3.9%
2.0%
--

2.3%
64.3%
0.5%
1.8%

3.0%
30.4%
0.3%
2.7%

4.6%
14.3%
53.3%
0.3%
(22.6%)
4.3%
--

4.9%
8.9%
0.0%
4.9%

5.1%
4.1%
0.0%
5.1%

3.8%
21.0%
(25.5%)
0.0%
-3.8%
21.0%

0.5%
0.0%

0.6%
20.0%

1.2%
100.0%

4.2%

Premium Market Share %

Price Value Market Share %

0.9%
0.0%

0.0%
0.0%

0.3%
0.0%

0.4%
0.0%

0.5%
0.0%

Source: Credit Suisse First Boston Research dated August 27, 1999. Compiled from A.C. Neilson data and estimates.

0.5%
0.0%

0.6%
0.0%

0.7%
0.5%

(3.5%)
-

Exhibit 4

Summary Financial Information (Segment Data) for UST Inc. (in millions)
1996

Net Sales (unaffiliated customers)

Tobacco
Wine
Other
Total Net Sales

% Total

1997

% Total

1998

% Total

$1,167.5
122.5
81.7
$1,371.7

85.1%
8.9%
6.0%

$1,181.8
145.0
74.9
$1,401.7

84.3%
10.3%
5.3%

$1,245.6
148.5
29.2
$1,423.2

87.5%
10.4%
2.1%

Operating Profit
Tobacco
Wine
Other
Total Operating Profit

$745.6
17.9
0.1
$763.5

97.6%
2.3%
0.0%

$700.4
28.2
(1.3)
$727.3

96.3%
3.9%
(0.2%)

$720.6
22.1
1.7
$744.4

96.8%
3.0%
0.2%

Operating Profit Margin

Tobacco
Wine
Other

63.9%
14.6%
0.1%

Identifiable Assets at December 31

Tobacco
Wine
Other
Corporate
Total Identifiable Assets

$458.2
194.9
91.6
61.9
$806.6

56.8%
24.2%
11.4%
7.7%

$468.0
230.9
102.2
25.3
$826.4

56.6%
27.9%
12.4%
3.1%

$497.6
277.2
87.2
51.3
$913.3

54.5%
30.4%
9.5%
5.6%

$29.2
12
2.7
0.8
$44.7

65.3%
26.9%
6.0%
1.8%

$29.4
20.1
6.1
2.5
$58.2

50.6%
34.6%
10.5%
4.3%

$27.7
25.6
2.5
0.5
$56.3

49.2%
45.6%
4.4%
0.8%

Capital Expenditures (Gross)

Tobacco
Wine
Other
Corporate
Total Capital Expenditures

59.3%
19.4%
(1.7%)

57.9%
14.9%
5.9%

Depreciation
Tobacco
Wine
Other
Corporate
Total Depreciation

$15.8
8.9
1.8
1.6
$28.1

56.2%
31.7%
6.4%
5.8%

Source: Company annual report for fiscal year ended December 31, 1998 and authors calculations.

$16.3
10.4
1.8
1.6
$30.1

54.0%
34.6%
6.1%
5.3%

$16.1
12.0
1.7
1.7
$31.4

51.3%
38.1%
5.3%
5.3%

Exhibit 6

Key Financial Ratios for Tobacco Companies

Tobacco Product Manufacturers

Tobacco Leaf Merchants

Philip Morris

North
Atlantic
Trading Co.a

Corporate Credit Rating

Outlook

A
Stable

B+
Stable

BBBStable

BB+
Negative

EBIT interest coverage (x)

EBITDA interest coverage (x)
Fund flow/total debt (%)
Free operating cash flow/total debt (%)
Return on capital (%)
Operating income/sales (%)
Total debt/capital (including ST debt) (%)

11.2
12.7
56.3
41.8
38.4
26.0
49.3

1.3
1.6
6.8
5.6
11.8
38.1
90.6

2.5
3.7
14.5
6.8
10.3
15.6
55.1

2.6
3.3
12.3
10.1
13.4
16.4
67.8

Three-years (1996-1998)

Source: Data provided by Standard & Poors to the casewriter.

a

Data for 1997-1998.

Excludes UST Inc.

RJR Nabisco
Standard
Holdings
DiMon Inc. Commercial
BBPositive
3.3
5.4
6.7

Tobacco
Companies
Universal Corp
Medianb
AStable
3.5
4.4
18.5

(2.6)
6.6
3.6
77.5

UST Inc.

3.0
4.1
13.4
2.9

16.9
7.6
65.8

###
###
###
6.2

12.6
16.0
66.8

296.5
###
55.7
28.2