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Ust Inc

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Debt Policy at UST, Inc.
Introduction
In 1998 the U.S smokeless tobacco industry generated $2 billion of retail revenue with approximately 5 million consumers of moist tobacco and 7 million consumers of chewing tobacco including loose leaf, twist, plug and dry. Moist smokeless tobacco consumption approximated 50% of the total. The factors contributing to the continuous growth of the moist smokeless tobacco was the increased prevalence of smoking bans which had led customers to switch to smokeless tobacco and the fact that smokeless tobacco was less expensive to use than cigarettes based upon an average per-week usage measurement. Additionally, consumers have been shifting over time to moist smokeless tobacco from loose leaf chewing tobacco. While the consumer base remains primarily male, smokeless tobacco is no longer confined to the stereotypical blue collar or rural users as approximately 30% of users had attended college. The overall moist smokeless tobacco market was expected to continue to grow at an annual rate of 1-3% with a larger portion of the growth expected to be in the price value segment.
UST is the dominant producer of moist smokeless tobacco, or moist snuff controlling approximately 77% of the market. UST also has other business interests such as wine, cigars and international marketing of moist smokeless tobacco. UST has been a driving force in the overall expansion of the moist smokeless tobacco market over the years, primarily through product innovations such as new forms and flavors.
UST has been one of the most profitable companies, not only in the tobacco sector but also in corporate America. UST’s five-year return on capital of 9.21% was nearly 20% higher than the 2nd ranked firm. UST maintained enviable margins with average gross profit, EBITDA, EBIT and net margins of 77%, 53%, 50% and 31% respectively. Annual return on equity...

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