"With the lower 2016 crop levels, we believe that supply of flue-cured and burley tobaccos is largely in line with demand on a global basis. However, inventories held by our customers and the leaf quality and pricing of crops yet to come to market may influence near-term demand for leaf tobacco and the desirability of certain types and styles. It is still early in the season, but customer orders and indications to date remain consistent with our expectations. We currently anticipate that our volumes sold in fiscal year 2017 will be lower than those in the prior fiscal year mainly due to reduced Brazilian volumes, and that shipment timing will again be weighted to the second half of the fiscal year. We are continuing to carefully monitor crop purchases this season, and our uncommitted inventories remain within our normal range.
"We also recently announced that we have discontinued processing in our factory in
FLUE-CURED AND BURLEY LEAF TOBACCO OPERATIONS:
OTHER REGIONS:
The Other Regions segment reported an operating loss of
Operating income of
OTHER TOBACCO OPERATIONS:
The Other Tobacco Operations segment operating income for the first quarter of fiscal year 2017 of
OTHER ITEMS:
Cost of goods sold was up by about 7% to
A recently-issued accounting change adopted in the first fiscal quarter of 2017 affected our long-term debt balances, which are now recorded on the balance sheet net of the remaining unamortized debt issuance costs. Interest expense of
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; 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
CONSOLIDATED STATEMENTS OF INCOME (in thousands of dollars, except per share data) | ||||||||
Three Months Ended | ||||||||
2016 |
2015 | |||||||
(Unaudited) | ||||||||
Sales and other operating revenues |
$ |
295,475 |
$ |
275,419 |
||||
Costs and expenses |
||||||||
Cost of goods sold |
243,278 |
227,030 |
||||||
Selling, general and administrative expenses |
60,199 |
51,296 |
||||||
Restructuring and impairment costs |
— |
2,389 |
||||||
Operating income (loss) |
(8,002) |
(5,296) |
||||||
Equity in pretax earnings (loss) of unconsolidated affiliates |
(130) |
(616) |
||||||
Interest income |
363 |
239 |
||||||
Interest expense |
4,054 |
3,884 |
||||||
Income (loss) before income taxes |
(11,823) |
(9,557) |
||||||
Income tax expense (benefit) |
(4,319) |
(3,432) |
||||||
Net income (loss) |
(7,504) |
(6,125) |
||||||
Less: net loss attributable to noncontrolling interests in subsidiaries |
2,028 |
178 |
||||||
Net income (loss) attributable to |
(5,476) |
(5,947) |
||||||
Dividends on |
(3,687) |
(3,687) |
||||||
Earnings (loss) available to |
$ |
(9,163) |
$ |
(9,634) |
||||
Earnings (loss) per share attributable to |
||||||||
Basic |
$ |
(0.40) |
$ |
(0.43) |
||||
Diluted |
$ |
(0.40) |
$ |
(0.43) |
||||
See accompanying notes. |
CONSOLIDATED BALANCE SHEETS (in thousands of dollars) | ||||||||||||
|
|
| ||||||||||
2016 |
2015 |
2016 | ||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ |
316,087 |
$ |
130,439 |
$ |
319,447 |
||||||
Accounts receivable, net |
218,665 |
257,349 |
428,659 |
|||||||||
Advances to suppliers, net |
69,044 |
58,041 |
101,890 |
|||||||||
Accounts receivable—unconsolidated affiliates |
46,794 |
65,821 |
2,316 |
|||||||||
Inventories—at lower of cost or market: |
||||||||||||
Tobacco |
846,356 |
921,920 |
637,132 |
|||||||||
Other |
66,080 |
69,851 |
60,888 |
|||||||||
Prepaid income taxes |
19,948 |
28,828 |
17,814 |
|||||||||
Other current assets |
50,772 |
72,898 |
70,400 |
|||||||||
Total current assets |
1,633,746 |
1,605,147 |
1,638,546 |
|||||||||
Property, plant and equipment |
||||||||||||
Land |
22,927 |
16,853 |
22,987 |
|||||||||
Buildings |
264,438 |
239,218 |
264,838 |
|||||||||
Machinery and equipment |
593,507 |
590,470 |
591,327 |
|||||||||
880,872 |
846,541 |
879,152 |
||||||||||
Less: accumulated depreciation |
(557,856) |
(534,461) |
(553,265) |
|||||||||
323,016 |
312,080 |
325,887 |
||||||||||
Other assets |
||||||||||||
|
99,059 |
99,120 |
99,071 |
|||||||||
Investments in unconsolidated affiliates |
79,510 |
78,450 |
82,441 |
|||||||||
Deferred income taxes |
20,860 |
33,725 |
23,853 |
|||||||||
Other noncurrent assets |
57,693 |
72,336 |
61,379 |
|||||||||
257,122 |
283,631 |
266,744 |
||||||||||
Total assets |
$ |
2,213,884 |
$ |
2,200,858 |
$ |
2,231,177 |
||||||
See accompanying notes.
|
CONSOLIDATED BALANCE SHEETS (in thousands of dollars) | ||||||||||||
|
|
| ||||||||||
2016 |
2015 |
2016 | ||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Notes payable and overdrafts |
$ |
70,753 |
$ |
86,553 |
$ |
66,179 |
||||||
Accounts payable and accrued expenses |
165,651 |
171,963 |
120,527 |
|||||||||
Accounts payable—unconsolidated affiliates |
2,730 |
4,650 |
8,343 |
|||||||||
Customer advances and deposits |
8,406 |
4,328 |
16,438 |
|||||||||
Accrued compensation |
22,863 |
24,597 |
27,593 |
|||||||||
Income taxes payable |
4,057 |
4,033 |
7,190 |
|||||||||
Current portion of long-term debt |
— |
— |
— |
|||||||||
Total current liabilities |
274,460 |
296,124 |
246,270 |
|||||||||
Long-term debt |
368,468 |
368,115 |
368,380 |
|||||||||
Pensions and other postretirement benefits |
88,782 |
95,985 |
92,177 |
|||||||||
Other long-term liabilities |
45,480 |
34,091 |
41,794 |
|||||||||
Deferred income taxes |
11,778 |
22,701 |
29,494 |
|||||||||
Total liabilities |
788,968 |
817,016 |
778,115 |
|||||||||
Shareholders' equity |
||||||||||||
|
||||||||||||
Preferred stock: |
||||||||||||
Series A Junior Participating Preferred Stock, no par value, 500,000 shares |
— |
— |
— |
|||||||||
Series B 6.75% Convertible Perpetual Preferred Stock, no par value, |
211,562 |
211,562 |
211,562 |
|||||||||
Common stock, no par value, 100,000,000 shares authorized, 22,766,040 shares issued and outstanding (22,668,025 at |
209,044 |
206,018 |
208,946 |
|||||||||
Retained earnings |
1,044,674 |
998,560 |
1,066,064 |
|||||||||
Accumulated other comprehensive loss |
(76,959) |
(66,403) |
(72,350) |
|||||||||
Total |
1,388,321 |
1,349,737 |
1,414,222 |
|||||||||
Noncontrolling interests in subsidiaries |
36,595 |
34,105 |
38,840 |
|||||||||
Total shareholders' equity |
1,424,916 |
1,383,842 |
1,453,062 |
|||||||||
Total liabilities and shareholders' equity |
$ |
2,213,884 |
$ |
2,200,858 |
$ |
2,231,177 |
||||||
See accompanying notes. |
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars) | ||||||||
Three Months Ended | ||||||||
2016 |
2015 | |||||||
(Unaudited) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net loss |
$ |
(7,504) |
$ |
(6,125) |
||||
Adjustments to reconcile net loss to net cash provided (used) by operating activities: |
||||||||
Depreciation |
8,642 |
9,145 |
||||||
Net provision for losses (recoveries) on advances and guaranteed loans to suppliers |
(113) |
(2,037) |
||||||
Foreign currency remeasurement loss (gain), net |
9,642 |
2,806 |
||||||
Restructuring and impairment costs |
— |
2,389 |
||||||
Other, net |
8,079 |
8,680 |
||||||
Changes in operating assets and liabilities, net |
(2,690) |
(127,756) |
||||||
Net cash provided (used )by operating activities |
16,056 |
(112,898) |
||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchase of property, plant and equipment |
(7,303) |
(14,900) |
||||||
Proceeds from sale of property, plant and equipment |
252 |
613 |
||||||
Net cash used by investing activities |
(7,051) |
(14,287) |
||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Issuance (repayment) of short-term debt, net |
5,782 |
26,306 |
||||||
Dividends paid on convertible perpetual preferred stock |
(3,687) |
(3,687) |
||||||
Dividends paid on common stock |
(12,040) |
(11,749) |
||||||
Other |
(2,250) |
(2,037) |
||||||
Net cash provided (used) by financing activities |
(12,195) |
8,833 |
||||||
Effect of exchange rate changes on cash |
(170) |
8 |
||||||
Net decrease in cash and cash equivalents |
(3,360) |
(118,344) |
||||||
Cash and cash equivalents at beginning of year |
319,447 |
248,783 |
||||||
Cash and cash equivalents at end of period |
$ |
316,087 |
$ |
130,439 |
||||
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 | ||||||||
(in thousands, except share and per share data) |
2016 |
2015 | ||||||
Basic Earnings (Loss) Per Share |
||||||||
Numerator for basic earnings (loss) per share |
||||||||
Net income (loss) attributable to |
$ |
(5,476) |
$ |
(5,947) |
||||
Less: Dividends on convertible perpetual preferred stock |
(3,687) |
(3,687) |
||||||
Earnings (loss) available to |
(9,163) |
(9,634) |
||||||
Denominator for basic earnings (loss) per share |
||||||||
Weighted average shares outstanding |
22,734,225 |
22,622,930 |
||||||
Basic earnings (loss) per share |
$ |
(0.40) |
$ |
(0.43) |
||||
Diluted Earnings (Loss) Per Share |
||||||||
Numerator for diluted earnings (loss) per share |
||||||||
Earnings (loss) available to |
$ |
(9,163) |
$ |
(9,634) |
||||
Add: Dividends on convertible perpetual preferred stock (if conversion assumed) |
— |
— |
||||||
Earnings (loss) available to |
(9,163) |
(9,634) |
||||||
Denominator for diluted earnings (loss) per share |
||||||||
Weighted average shares outstanding |
22,734,225 |
22,622,930 |
||||||
Effect of dilutive securities (if conversion or exercise assumed) |
||||||||
Convertible perpetual preferred stock |
— |
— |
||||||
Employee share-based awards |
— |
— |
||||||
Denominator for diluted earnings (loss) per share |
22,734,225 |
22,622,930 |
||||||
Diluted earnings (loss) per share |
$ |
(0.40) |
$ |
(0.43) |
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 after allocated overhead expenses (excluding significant non-recurring charges or credits), plus equity in the pretax earnings 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 | ||||||||
(in thousands of dollars) |
2016 |
2015 | ||||||
SALES AND OTHER OPERATING REVENUES |
||||||||
Flue-cured and burley leaf tobacco operations: |
||||||||
|
$ |
72,682 |
$ |
48,572 |
||||
Other regions (1) |
178,016 |
177,401 |
||||||
Subtotal |
250,698 |
225,973 |
||||||
Other tobacco operations (2) |
44,777 |
49,446 |
||||||
Consolidated sales and other operating revenues |
$ |
295,475 |
$ |
275,419 |
||||
OPERATING INCOME (LOSS) |
||||||||
Flue-cured and burley leaf tobacco operations: |
||||||||
|
$ |
6,848 |
$ |
3,416 |
||||
Other regions (1) |
(17,017) |
(7,847) |
||||||
Subtotal |
(10,169) |
(4,431) |
||||||
Other tobacco operations (2) |
2,037 |
908 |
||||||
Segment operating income (loss) |
(8,132) |
(3,523) |
||||||
Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (3) |
130 |
616 |
||||||
Restructuring and impairment costs (4) |
— |
(2,389) |
||||||
Consolidated operating income (loss) |
$ |
(8,002) |
$ |
(5,296) |
(1) |
Includes |
(2) |
Includes Dark Air-Cured, Special Services, and Oriental, as well as inter-company eliminations. Sales and other operating revenues for this reportable segment include limited amounts for Oriental because its financial results consist principally of equity in the pretax earnings (loss) of an unconsolidated affiliate. |
(3) |
Equity in pretax (earnings) loss of unconsolidated affiliates is included in segment operating income (loss) (Other Tobacco Operations segment), but is reported below consolidated operating income (loss) and excluded from that total in the consolidated statements of income and comprehensive income. |
(4) |
Restructuring and impairment costs are excluded from segment operating income (loss), but are included in consolidated operating income (loss) in the consolidated statements of income and comprehensive income. |
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