Universal Corporation Reports Annual Results
Net income for the fourth fiscal quarter ended
Mr. Freeman stated, "Fiscal year 2019 was another strong year for Universal. We increased our tobacco volumes handled, earned additional business with our customers by expanding the services we provide, and have continued to improve our market share. Net income for fiscal year 2019, excluding non-recurring items, was up 12% over fiscal year 2018.
"During fiscal year 2019, we benefitted from the recovery of African burley production, strong carryover volumes in the first half of the year, and robust demand for wrapper tobacco. Our revenues were up about 10% on those higher volumes, compared to fiscal year 2018. Our gross margin percentage remained flat, even though our product mix was less favorable as we handled a higher percentage of by-products this year. In addition, results in our
"We are deeply saddened by the loss of life and the devastating damage in
"We remain committed to maintaining our position as the leading global leaf supplier and believe that opportunities exist to expand our business to help mitigate the impact of consumption declines. In fiscal year 2019, we increased leaf purchasing, processing, and grower support services we provide in
"In keeping with our capital allocation strategy announced last year, we continue to explore growth opportunities outside of leaf tobacco in adjacent industries and markets that we believe will utilize our assets and capabilities and deliver value to our shareholders. During the past year, we hired a dedicated business development officer, developed an investment pipeline, and have been actively engaged in assessing numerous private and public targeted opportunities in a variety of agribusiness arenas around the world. Our approach remains the same, and we are progressing in a thoughtful and prudent manner to ensure that we make investments that are financially sound, fit well with our organization, and will deliver value to our shareholders.
"As we move into fiscal year 2020, we are forecasting larger flue-cured and burley tobacco global crop production than those grown in our fiscal year 2019, and believe that both flue-cured and burley tobacco may be in slight oversupply positions compared with anticipated market demand. It is still early in the fiscal year 2020 crop cycle, but we are expecting lower carryover crop volumes and reduced North American volumes.
"We have entered fiscal year 2020 with a strong balance sheet in part from the cash flow generated in fiscal year 2019. We are well positioned financially to fund upcoming working capital needs and to take advantage of investment opportunities. We also remain committed to our industry leadership and continuing to deliver value to our shareholders as evidenced by the announcement of our 49th annual dividend increase today."
FLUE-CURED AND BURLEY LEAF TOBACCO OPERATIONS:
OTHER REGIONS:
Operating income for the Other Regions segment increased by
In the quarter ended
Operating income for the
OTHER TOBACCO OPERATIONS:
The Other Tobacco Operations segment operating income increased by
OTHER ITEMS:
Cost of goods sold increased by 10% to
For the fiscal year and quarter ended
Results for the fiscal year and quarter ended
Additional information
Amounts included in the previous discussion are attributable to
This information includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company cautions readers that any statements contained herein regarding earnings and expectations for its performance are forward-looking statements based upon management's current knowledge and assumptions about future events, including anticipated levels of demand for and supply of its products and services; costs incurred in providing these products and services; timing of shipments to customers; changes in market structure; government regulation, including the impact of regulations on tobacco products; product taxation; changes in the U.S. federal income tax rates and legislation; industry consolidation and evolution; changes in global supply and demand positions for tobacco products; and general economic, political, market, and weather conditions. Actual results, therefore, could vary from those expected. A further list and description of these risks, uncertainties, and other factors can be found in the Company's Annual Report on Form 10-K for the fiscal year ended
At
Headquartered in
UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (in thousands of dollars, except per share data) |
|||||||||||||||
Three Months Ended |
Fiscal Year Ended |
||||||||||||||
2019 |
2018 |
2019 |
2018 |
||||||||||||
Sales and other operating revenues |
$ |
671,723 |
$ |
607,496 |
$ |
2,227,153 |
$ |
2,033,947 |
|||||||
Costs and expenses |
|||||||||||||||
Cost of goods sold |
552,243 |
490,999 |
1,820,562 |
1,661,999 |
|||||||||||
Selling, general and administrative expenses |
57,874 |
56,355 |
225,118 |
201,123 |
|||||||||||
Restructuring and impairment costs |
857 |
— |
20,304 |
— |
|||||||||||
Operating income |
60,749 |
60,142 |
161,169 |
170,825 |
|||||||||||
Equity in pretax earnings (loss) of unconsolidated affiliates |
(138) |
2,489 |
5,299 |
9,125 |
|||||||||||
Other non-operating income (expense) |
283 |
136 |
832 |
662 |
|||||||||||
Interest income |
488 |
324 |
1,532 |
1,686 |
|||||||||||
Interest expense |
4,236 |
3,705 |
17,510 |
15,621 |
|||||||||||
Income before income taxes |
57,146 |
59,386 |
151,322 |
166,677 |
|||||||||||
Income taxes |
23,454 |
25,064 |
41,188 |
50,509 |
|||||||||||
Net income |
33,692 |
34,322 |
110,134 |
116,168 |
|||||||||||
Less: net income attributable to noncontrolling interests in |
(2,331) |
(3,804) |
(6,013) |
(10,506) |
|||||||||||
Net income attributable to Universal Corporation |
31,361 |
30,518 |
104,121 |
105,662 |
|||||||||||
Earnings per share attributable to Universal Corporation common |
|||||||||||||||
Basic |
$ |
1.25 |
$ |
1.21 |
$ |
4.14 |
$ |
4.18 |
|||||||
Diluted |
$ |
1.24 |
$ |
1.20 |
$ |
4.11 |
$ |
4.14 |
See accompanying notes.
UNIVERSAL CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of dollars) |
||||||||
March 31, |
||||||||
2019 |
2018 |
|||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ |
297,556 |
$ |
234,128 |
||||
Accounts receivable, net |
368,110 |
377,119 |
||||||
Advances to suppliers, net |
106,850 |
122,786 |
||||||
Accounts receivable—unconsolidated affiliates |
30,951 |
2,040 |
||||||
Inventories—at lower of cost or net realizable value: |
||||||||
Tobacco |
629,606 |
679,428 |
||||||
Other |
69,611 |
69,301 |
||||||
Prepaid income taxes |
14,264 |
16,032 |
||||||
Other current assets |
71,197 |
88,209 |
||||||
Total current assets |
1,588,145 |
1,589,043 |
||||||
Property, plant and equipment |
||||||||
Land |
22,952 |
23,180 |
||||||
Buildings |
261,976 |
271,757 |
||||||
Machinery and equipment |
608,191 |
634,660 |
||||||
893,119 |
929,597 |
|||||||
Less accumulated depreciation |
(590,625) |
(605,803) |
||||||
302,494 |
323,794 |
|||||||
Other assets |
||||||||
Goodwill and other intangibles |
97,994 |
98,927 |
||||||
Investments in unconsolidated affiliates |
80,482 |
89,302 |
||||||
Deferred income taxes |
13,357 |
17,118 |
||||||
Other noncurrent assets |
50,712 |
50,448 |
||||||
242,545 |
255,795 |
|||||||
Total assets |
$ |
2,133,184 |
$ |
2,168,632 |
See accompanying notes.
UNIVERSAL CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of dollars) |
||||||
March 31, |
||||||
2019 |
2018 |
|||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||
Current liabilities |
||||||
Notes payable and overdrafts |
$ |
54,023 |
$ |
45,421 |
||
Accounts payable and accrued expenses |
145,506 |
163,763 |
||||
Accounts payable—unconsolidated affiliates |
106 |
16,072 |
||||
Customer advances and deposits |
21,675 |
7,021 |
||||
Accrued compensation |
31,372 |
27,886 |
||||
Income taxes payable |
1,066 |
7,557 |
||||
Current portion of long-term debt |
— |
— |
||||
Total current liabilities |
253,748 |
267,720 |
||||
Long-term debt |
368,503 |
369,086 |
||||
Pensions and other postretirement benefits |
59,257 |
64,843 |
||||
Other long-term liabilities |
43,214 |
45,955 |
||||
Deferred income taxes |
28,584 |
35,726 |
||||
Total liabilities |
753,306 |
783,330 |
||||
Shareholders' equity |
||||||
Universal Corporation: |
||||||
Preferred stock: |
||||||
Series A Junior Participating Preferred Stock, no par value, 500,000 |
— |
— |
||||
Common stock, no par value, 100,000,000 shares authorized, |
326,600 |
321,559 |
||||
Retained earnings |
1,106,178 |
1,080,934 |
||||
Accumulated other comprehensive loss |
(95,691) |
(60,064) |
||||
Total Universal Corporation shareholders' equity |
1,337,087 |
1,342,429 |
||||
Noncontrolling interests in subsidiaries |
42,791 |
42,873 |
||||
Total shareholders' equity |
1,379,878 |
1,385,302 |
||||
Total liabilities and shareholders' equity |
$ |
2,133,184 |
$ |
2,168,632 |
See accompanying notes.
UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars) |
||||||
Fiscal Year Ended March 31, |
||||||
2019 |
2018 |
|||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||
Net income |
$ |
110,134 |
$ |
116,168 |
||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||
Depreciation |
37,104 |
34,836 |
||||
Provision for losses (recoveries) on advances and guaranteed loans to suppliers |
(2,339) |
3,730 |
||||
Inventory write-downs |
4,002 |
7,687 |
||||
Stock-based compensation expense |
8,152 |
7,610 |
||||
Foreign currency remeasurement loss (gain), net |
1,786 |
(184) |
||||
Deferred income taxes |
3,873 |
(11,132) |
||||
Equity in net income of unconsolidated affiliates, net of dividends |
3,659 |
(1,521) |
||||
Restructuring and impairment costs |
20,304 |
— |
||||
Restructuring payments |
(4,014) |
(315) |
||||
Other, net |
5,613 |
(7,866) |
||||
Changes in operating assets and liabilities, net: |
(23,752) |
(67,768) |
||||
Net cash provided by operating activities |
164,522 |
81,245 |
||||
Cash Flows From Investing Activities: |
||||||
Purchase of property, plant and equipment |
(38,760) |
(34,037) |
||||
Proceeds from sale of property, plant and equipment |
2,061 |
5,194 |
||||
Other |
2,000 |
1,450 |
||||
Net cash used by investing activities |
(34,699) |
(27,393) |
||||
Cash Flows From Financing Activities: |
||||||
Issuance (repayment) of short-term debt, net |
12,036 |
(18,159) |
||||
Issuance of long-term debt |
41,147 |
— |
||||
Repayment of long-term debt |
(41,147) |
— |
||||
Dividends paid to noncontrolling interests in subsidiaries |
(5,938) |
(7,350) |
||||
Repurchase of common stock |
(1,443) |
(21,610) |
||||
Dividends paid on common stock |
(69,883) |
(54,699) |
||||
Proceeds from termination of interest rate swap agreements |
5,428 |
— |
||||
Debt issuance costs and other |
(5,987) |
(2,828) |
||||
Net cash used by financing activities |
(65,787) |
(104,646) |
||||
Effect of exchange rate changes on cash |
(608) |
929 |
||||
Net increase (decrease) in cash and cash equivalents |
63,428 |
(49,865) |
||||
Cash and cash equivalents at beginning of year |
234,128 |
283,993 |
||||
Cash and Cash Equivalents at End of Year |
$ |
297,556 |
$ |
234,128 |
See accompanying notes.
NOTE 1. BASIS OF PRESENTATION
NOTE 2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended |
Fiscal Year Ended |
||||||||||||||
(in thousands, except per share data) |
2019 |
2018 |
2019 |
2018 |
|||||||||||
Basic Earnings Per Share |
|||||||||||||||
Numerator for basic earnings per share |
|||||||||||||||
Net income attributable to Universal Corporation |
$ |
31,361 |
$ |
30,518 |
$ |
104,121 |
$ |
105,662 |
|||||||
Denominator for basic earnings per share |
|||||||||||||||
Weighted average shares outstanding |
25,137,253 |
25,125,776 |
25,129,192 |
25,274,975 |
|||||||||||
Basic earnings per share |
$ |
1.25 |
$ |
1.21 |
$ |
4.14 |
$ |
4.18 |
|||||||
Diluted Earnings Per Share |
|||||||||||||||
Numerator for diluted earnings per share |
|||||||||||||||
Net income attributable to Universal Corporation |
$ |
31,361 |
$ |
30,518 |
$ |
104,121 |
$ |
105,662 |
|||||||
Denominator for diluted earnings per share: |
|||||||||||||||
Weighted average shares outstanding |
25,137,253 |
25,125,776 |
25,129,192 |
25,274,975 |
|||||||||||
Effect of dilutive securities (if conversion or exercise assumed) |
|||||||||||||||
Employee and outside director share-based awards |
196,347 |
265,855 |
201,245 |
233,169 |
|||||||||||
Denominator for diluted earnings per share |
25,333,600 |
25,391,631 |
25,330,437 |
25,508,144 |
|||||||||||
Diluted earnings per share |
$ |
1.24 |
$ |
1.20 |
$ |
4.11 |
$ |
4.14 |
NOTE 3. SEGMENT INFORMATION
The principal approach used by management to evaluate the Company's performance is by geographic region, although the dark air-cured and oriental tobacco businesses are each evaluated on the basis of their worldwide operations. The Company evaluates the performance of its segments based on operating income (loss) after allocated overhead expenses, plus equity in the pretax earnings (loss) of unconsolidated affiliates.
Operating results for the Company's reportable segments for each period presented in the consolidated statements of income were as follows:
Three Months Ended |
Fiscal Year Ended |
|||||||||||||||
(in thousands of dollars) |
2019 |
2018 |
2019 |
2018 |
||||||||||||
SALES AND OTHER OPERATING REVENUES |
||||||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||||||
North America |
$ |
121,284 |
$ |
97,247 |
$ |
382,631 |
$ |
308,691 |
||||||||
Other Regions (1) |
480,558 |
442,261 |
1,569,738 |
1,482,188 |
||||||||||||
Subtotal |
601,842 |
539,508 |
1,952,369 |
1,790,879 |
||||||||||||
Other Tobacco Operations (2) |
69,881 |
67,988 |
274,784 |
243,068 |
||||||||||||
Consolidated sales and other operating revenues |
$ |
671,723 |
$ |
607,496 |
$ |
2,227,153 |
$ |
2,033,947 |
||||||||
OPERATING INCOME |
||||||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||||||
North America |
$ |
2,674 |
$ |
9,307 |
$ |
23,069 |
$ |
23,091 |
||||||||
Other Regions (1) |
54,699 |
48,536 |
151,527 |
146,761 |
||||||||||||
Subtotal |
57,373 |
57,843 |
174,596 |
169,852 |
||||||||||||
Other Tobacco Operations (2) |
4,095 |
4,788 |
12,176 |
10,098 |
||||||||||||
Segment operating income |
61,468 |
62,631 |
186,772 |
179,950 |
||||||||||||
Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (3) |
138 |
(2,489) |
(5,299) |
(9,125) |
||||||||||||
Restructuring and impairment costs (4) |
(857) |
— |
(20,304) |
— |
||||||||||||
Consolidated operating income |
$ |
60,749 |
$ |
60,142 |
$ |
161,169 |
$ |
170,825 |
(1) |
Includes South America, Africa, Europe, and Asia regions, as well as inter-region eliminations. |
(2) |
Includes Dark Air-Cured, Special Services, and Oriental, as well as intercompany eliminations. Sales and other operating revenues for this reportable segment include limited amounts for Oriental because the business is accounted for on the equity method and its financial results consist principally of equity in the pretax earnings of the unconsolidated affiliate. |
(3) |
Equity in pretax earnings (loss) of unconsolidated affiliates is included in segment operating income (Other Tobacco Operations segment), but is reported below consolidated operating income and excluded from that total in the consolidated statements of income. |
(4) |
Restructuring and impairment costs are excluded from segment operating income, but are included in consolidated operating income in the consolidated statements of income. |
NOTE 4. RESTRUCTURING AND IMPAIRMENT COSTS
During the fiscal year ended March 31, 2019, Universal recorded restructuring and impairment costs related to business changes and various initiatives to adjust certain operations and reduce costs. Those costs primarily related to operations that are part of the Other Regions reportable segment of the Company's flue-cured and burley leaf tobacco operations. There were no restructuring or impairment costs recorded for the fiscal year ended March 31, 2018.
Fiscal Year Ended
Universal began sourcing tobacco from
In addition to the actions taken with respect to the workforce in
Additional restructuring costs of approximately
A summary of the restructuring and impairment costs incurred during the fiscal year ended March 31, 2019 is as follows:
Fiscal Years |
||||
2019 |
||||
Restructuring Costs: |
||||
Employee termination benefits |
$ |
4,608 |
||
Other restructuring costs |
223 |
|||
4,831 |
||||
Impairment Costs: |
||||
Property, plant, and equipment and farmer loans |
14,584 |
|||
Goodwill |
889 |
|||
$ |
15,473 |
|||
Total restructuring and impairment costs |
$ |
20,304 |
A reconciliation of the Company's liability for employee termination benefits and other restructuring costs for fiscal year 2019 is as follows:
Employee Termination Benefits |
Other Costs |
Total |
||||||||||
Balance at March 31, 2018 |
29 |
— |
29 |
|||||||||
Fiscal Year 2019 Activity: |
||||||||||||
Costs charged to expense |
4,608 |
223 |
4,831 |
|||||||||
Payments |
(4,014) |
— |
(4,014) |
|||||||||
Balance at March 31, 2019 |
$ |
623 |
$ |
223 |
$ |
846 |
The restructuring liability at March 31, 2019 is expected to be paid during fiscal year 2020. Universal continually reviews its business for opportunities to realize efficiencies, reduce costs, and realign its operations in response to business changes. The Company may incur additional restructuring and impairment costs in future periods as business changes occur and additional cost savings initiatives are implemented.
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SOURCE
Candace C. Formacek, Phone: (804) 359-9311, Fax: (804) 254-3584, Email: investor@universalleaf.com