Universal Corporation Reports First Quarter Results
"Despite COVID related slowdowns, tobacco volumes in the first quarter of fiscal year 2021 exceeded those of the first quarter of fiscal year 2020. Volumes shipped out of
"We have seen some reductions in projected global crop sizes for both burley and flue-cured tobaccos for crop year 2020. We believe that these reflect a positive adjustment to market conditions and that burley tobacco remains in a balanced supply position and that flue-cured tobacco is now in a slight oversupply position. We are also continuing to see very strong demand for natural wrapper tobaccos.
"We are prudently monitoring COVID developments around the world, and are projecting that our sales volumes for fiscal year 2021 will be weighted to the back half of the fiscal year in part due to COVID related processing slowdowns and later customer mandated shipment timing. We also have experienced some increased volatility in foreign currency rates, which we believe is related to the uncertainties from COVID.
"I am very proud of the success we continue to achieve while operating safely in more than 30 countries around the world during a time of unprecedented and disparate challenges. I believe our commitment to strong local management in our key operating areas has enabled us to react quickly and effectively to these new conditions. Our business is also built on relationships. Having these strong relationships with our customers and suppliers has allowed us to make the new remote interactions work well. I am very pleased and thankful for the hard work of our employees and the continued support of our customers, growers, and other partners during these challenging times.
"As we move forward in fiscal year 2021, we are focused on keeping our employees safe and running our business efficiently while positioning both our tobacco and non-tobacco businesses for future success. As part of our capital allocation strategy, we have made and will continue to explore disciplined investments in both tobacco opportunities and non-tobacco businesses that we believe will be able to deliver shareholder value."
FLUE-CURED AND BURLEY LEAF TOBACCO OPERATIONS:
OTHER REGIONS:
The Other Regions segment operating loss of
Operating income for the
OTHER TOBACCO OPERATIONS:
The Other Tobacco Operations segment operating income of
OTHER ITEMS:
Cost of goods sold in the quarter ended
The following tables set forth certain non-recurring items included in reported results to reconcile adjusted operating income to consolidated operating income and adjusted net income to net income attributable to
Adjusted Operating Income Reconciliation |
||||||||
Three Months Ended |
||||||||
(in millions) |
2020 |
2019 |
||||||
As Reported: Consolidated operating income |
$ |
8,528 |
$ |
7,514 |
||||
Fair value adjustment to contingent consideration for FruitSmart acquisition(1) |
(4,173) |
— |
||||||
Adjusted operating income |
$ |
4,355 |
$ |
7,514 |
||||
Adjusted Net Income and Diluted Earnings Per Share |
||||||||
Three Months Ended |
||||||||
(in millions and reported net of income taxes) |
2020 |
2019 |
||||||
As Reported: Net income available to |
$ |
7,274 |
$ |
2,072 |
||||
Fair value adjustment to contingent consideration for FruitSmart acquisition(1) |
(4,173) |
— |
||||||
Interest expense related to an uncertain tax matter at a foreign subsidiary |
1,849 |
— |
||||||
Income tax benefit from dividend withholding tax liability reversal(2) |
(4,421) |
— |
||||||
Income tax settlement for a foreign subsidiary(3) |
— |
2,766 |
||||||
Adjusted Net income available to |
$ |
529 |
$ |
4,838 |
||||
As reported: Diluted earnings per share |
$ |
0.29 |
$ |
0.08 |
||||
As adjusted: Diluted earnings per share |
$ |
0.02 |
$ |
0.19 |
(1) |
The Company reversed a portion of the contingent consideration liability for the |
(2) |
The Company recognized an income tax benefit for final |
(3) |
During the 1st quarter of fiscal year 2020, the Company recognized an income tax settlement charge related to operations at a foreign subsidiary. |
For the three months ended
COVID-19 Pandemic Impact
On
We continue to work with our suppliers to mitigate the impacts to our supply chain due to the ongoing pandemic. To date, we have not experienced a material impact to our supply chain. Since
We continue to monitor the impacts of COVID, which include slower processing of our products due to controlled staffing in our facilities that could lead to later timing of shipments to our customers. We currently have sufficient liquidity to meet our current obligations and business operations remain fundamentally unchanged other than shipping delays, which could impact quarterly comparisons. This is, however, a rapidly evolving situation, and we cannot predict the extent or duration of the ongoing COVID pandemic, the effects of it on the global, national or local economy, including the impacts on our ability to access capital, or its effects on our business, financial position, results of operations, and cash flows. We continue to monitor developments affecting our employees, customers and operations and will take additional steps to address the spread of COVID and its impacts, as necessary.
Additional information
Amounts described as net income (loss) and earnings (loss) per diluted share in the previous discussion are attributable to
This release 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 financial condition, results of operation, and future business plans, operations, opportunities, and prospects for its performance are forward-looking statements based upon management's current knowledge and assumptions about future events, and involve risks and uncertainties that could cause actual results, performance, or achievements to be materially different from any anticipated results, prospects, performance, or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, impacts of the ongoing COVID-19 pandemic; integration of FruitSmart and the impact of the FruitSmart acquisition on future results; product purchased not meeting quality and quantity requirements; reliance on a few large customers; its ability to maintain effective information technology systems and safeguard confidential information; 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; product taxation; industry consolidation and evolution; changes in exchange rates and interest rates; impacts of regulation and litigation on its customers; industry-specific risks related to its food ingredient business; exposure to certain regulatory and financial risks related to climate change; changes in estimates and assumptions underlying its critical accounting policies; the promulgation and adoption of new accounting standards, new government regulations and interpretation of existing standards and regulations; 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
|
||||||||
CONSOLIDATED STATEMENTS OF INCOME |
||||||||
(in thousands of dollars, except per share data) |
||||||||
Three Months Ended |
||||||||
2020 |
2019 |
|||||||
(Unaudited) |
||||||||
Sales and other operating revenues |
$ |
315,811 |
$ |
296,915 |
||||
Costs and expenses |
||||||||
Cost of goods sold |
262,046 |
238,265 |
||||||
Selling, general and administrative expenses |
49,410 |
51,136 |
||||||
Other income |
(4,173) |
— |
||||||
Operating income |
8,528 |
7,514 |
||||||
Equity in pretax earnings (loss) of unconsolidated affiliates |
(7) |
40 |
||||||
Other non-operating income (expense) |
(18) |
627 |
||||||
Interest income |
159 |
1,008 |
||||||
Interest expense |
6,810 |
4,028 |
||||||
Income before income taxes and other items |
1,852 |
5,161 |
||||||
Income taxes |
(5,048) |
4,266 |
||||||
Net income |
6,900 |
895 |
||||||
Less: net loss (income) attributable to noncontrolling interests in subsidiaries |
374 |
1,177 |
||||||
Net income attributable to |
$ |
7,274 |
$ |
2,072 |
||||
Earnings per share: |
||||||||
Basic |
$ |
0.30 |
$ |
0.08 |
||||
Diluted |
$ |
0.29 |
$ |
0.08 |
See accompanying notes. |
|
||||||||||||
CONSOLIDATED BALANCE SHEETS |
||||||||||||
(in thousands of dollars) |
||||||||||||
|
|
|
||||||||||
2020 |
2019 |
2020 |
||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ |
100,015 |
$ |
167,996 |
$ |
107,430 |
||||||
Accounts receivable, net |
222,162 |
217,905 |
340,711 |
|||||||||
Advances to suppliers, net |
65,221 |
80,032 |
133,778 |
|||||||||
Accounts receivable—unconsolidated affiliates |
32,827 |
63,388 |
11,483 |
|||||||||
Inventories—at lower of cost or net realizable value: |
||||||||||||
Tobacco |
858,940 |
898,409 |
707,298 |
|||||||||
Other |
104,399 |
77,654 |
99,275 |
|||||||||
Prepaid income taxes |
13,426 |
20,985 |
12,144 |
|||||||||
Other current assets |
65,675 |
75,689 |
67,498 |
|||||||||
Total current assets |
1,462,665 |
1,602,058 |
1,479,617 |
|||||||||
Property, plant and equipment |
||||||||||||
Land |
21,454 |
22,785 |
21,376 |
|||||||||
Buildings |
258,306 |
262,688 |
256,488 |
|||||||||
Machinery and equipment |
644,092 |
611,209 |
634,395 |
|||||||||
923,852 |
896,682 |
912,259 |
||||||||||
Less accumulated depreciation |
(608,173) |
(597,257) |
(597,106) |
|||||||||
315,679 |
299,425 |
315,153 |
||||||||||
Other assets |
||||||||||||
Operating lease right-of-use assets |
37,576 |
34,472 |
39,256 |
|||||||||
|
143,976 |
98,029 |
144,687 |
|||||||||
Investments in unconsolidated affiliates |
79,198 |
80,985 |
77,543 |
|||||||||
Deferred income taxes |
23,085 |
15,582 |
20,954 |
|||||||||
Other noncurrent assets |
44,661 |
47,333 |
43,711 |
|||||||||
328,496 |
276,401 |
326,151 |
||||||||||
Total assets |
$ |
2,106,840 |
$ |
2,177,884 |
$ |
2,120,921 |
See accompanying notes. |
|
||||||||||||
CONSOLIDATED BALANCE SHEETS |
||||||||||||
(in thousands of dollars) |
||||||||||||
|
|
|
||||||||||
2020 |
2019 |
2020 |
||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Notes payable and overdrafts |
$ |
92,758 |
$ |
73,640 |
$ |
78,033 |
||||||
Accounts payable and accrued expenses |
133,621 |
179,297 |
140,202 |
|||||||||
Accounts payable—unconsolidated affiliates |
— |
10 |
55 |
|||||||||
Customer advances and deposits |
10,575 |
4,397 |
10,242 |
|||||||||
Accrued compensation |
16,373 |
23,084 |
23,710 |
|||||||||
Income taxes payable |
2,359 |
1,576 |
5,334 |
|||||||||
Current portion of operating lease liabilities |
9,914 |
8,938 |
9,823 |
|||||||||
Current portion of long-term debt |
— |
— |
— |
|||||||||
Total current liabilities |
265,600 |
290,942 |
267,399 |
|||||||||
Long-term debt |
368,829 |
368,568 |
368,764 |
|||||||||
Pensions and other postretirement benefits |
70,473 |
59,364 |
70,680 |
|||||||||
Long-term operating lease liabilities |
24,040 |
23,098 |
25,893 |
|||||||||
Other long-term liabilities |
75,130 |
52,387 |
69,427 |
|||||||||
Deferred income taxes |
24,435 |
31,447 |
29,474 |
|||||||||
Total liabilities |
828,507 |
825,806 |
831,637 |
|||||||||
Shareholders' equity |
||||||||||||
|
||||||||||||
Preferred stock: |
||||||||||||
Series A Junior Participating Preferred Stock, no par value, 500,000 shares authorized, none issued or outstanding |
— |
— |
— |
|||||||||
Common stock, no par value, 100,000,000 shares authorized 24,488,964 shares issued and outstanding at |
322,449 |
325,515 |
321,502 |
|||||||||
Retained earnings |
1,064,927 |
1,084,987 |
1,076,760 |
|||||||||
Accumulated other comprehensive loss |
(151,132) |
(100,161) |
(151,597) |
|||||||||
|
1,236,244 |
1,310,341 |
1,246,665 |
|||||||||
Noncontrolling interests in subsidiaries |
42,089 |
41,737 |
42,619 |
|||||||||
Total shareholders' equity |
1,278,333 |
1,352,078 |
1,289,284 |
|||||||||
Total liabilities and shareholders' equity |
$ |
2,106,840 |
$ |
2,177,884 |
$ |
2,120,921 |
See accompanying notes. |
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(in thousands of dollars) |
||||||||
Three Months Ended |
||||||||
2020 |
2019 |
|||||||
(Unaudited) |
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ |
6,900 |
$ |
895 |
||||
Adjustments to reconcile net income to net cash used by operating activities: |
||||||||
Depreciation and amortization |
10,105 |
9,067 |
||||||
Net provision for losses (recoveries) on advances and guaranteed loans to suppliers |
57 |
(165) |
||||||
Foreign currency remeasurement (gain) loss, net |
(4,691) |
(1,497) |
||||||
Foreign currency exchange contracts |
(13,951) |
733 |
||||||
Restructuring payments |
(2,937) |
— |
||||||
Change in estimated fair value of contingent consideration for FruitSmart acquisition |
(4,173) |
— |
||||||
Other, net |
(3,350) |
3,047 |
||||||
Changes in operating assets and liabilities, net |
12,087 |
(128,819) |
||||||
Net cash provided (used) by operating activities |
47 |
(116,739) |
||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchase of property, plant and equipment |
(8,386) |
(5,679) |
||||||
Proceeds from sale of property, plant and equipment |
218 |
226 |
||||||
Net cash used by investing activities |
(8,168) |
(5,453) |
||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Issuance of short-term debt, net |
20,688 |
19,257 |
||||||
Repurchase of common stock |
— |
(5,214) |
||||||
Dividends paid on common stock |
(18,567) |
(18,742) |
||||||
Other |
(1,930) |
(2,883) |
||||||
Net cash provided (used) by financing activities |
191 |
(7,582) |
||||||
Effect of exchange rate changes on cash |
515 |
214 |
||||||
Net decrease in cash and cash equivalents |
(7,415) |
(129,560) |
||||||
Cash and cash equivalents at beginning of year |
107,430 |
297,556 |
||||||
Cash and cash equivalents at end of period |
$ |
100,015 |
$ |
167,996 |
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) |
2020 |
2019 |
||||||
Basic Earnings Per Share |
||||||||
Numerator for basic earnings per share |
||||||||
Net income attributable to |
$ |
7,274 |
$ |
2,072 |
||||
Denominator for basic earnings per share |
||||||||
Weighted average shares outstanding |
24,602,610 |
25,158,369 |
||||||
Basic earnings per share |
$ |
0.30 |
$ |
0.08 |
||||
Diluted Earnings Per Share |
||||||||
Numerator for diluted earnings per share |
||||||||
Net income attributable to |
$ |
7,274 |
$ |
2,072 |
||||
Denominator for diluted earnings per share: |
||||||||
Weighted average shares outstanding |
24,602,610 |
25,158,369 |
||||||
Effect of dilutive securities |
||||||||
Employee and outside director share-based awards |
100,969 |
125,889 |
||||||
Denominator for diluted earnings per share |
24,703,579 |
25,284,258 |
||||||
Diluted earnings per share |
$ |
0.29 |
$ |
0.08 |
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 and comprehensive income were as follows:
Three Months Ended |
||||||||
(in thousands of dollars) |
2020 |
2019 |
||||||
SALES AND OTHER OPERATING REVENUES |
||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||
North America |
$ |
39,916 |
$ |
27,659 |
||||
Other Regions (1) |
204,733 |
202,065 |
||||||
Subtotal |
244,649 |
229,724 |
||||||
Other Tobacco Operations (2) |
71,162 |
67,191 |
||||||
Consolidated sales and other operating revenue |
$ |
315,811 |
$ |
296,915 |
||||
OPERATING INCOME |
||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||
North America |
$ |
1,042 |
$ |
890 |
||||
Other Regions (1) |
(4,286) |
(3,815) |
||||||
Subtotal |
(3,244) |
(2,925) |
||||||
Other Tobacco Operations (2) |
7,592 |
10,479 |
||||||
Segment operating income |
4,348 |
7,554 |
||||||
Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (3) |
7 |
(40) |
||||||
Add: Other income (loss)(4) |
4,173 |
— |
||||||
Consolidated operating income |
$ |
8,528 |
$ |
7,514 |
(1) |
Includes |
(2) |
Includes Dark Air-Cured, Special Services (including |
(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 and comprehensive income. |
(4) |
Other income represents the reversal of a portion of the contingent consideration liability associated with the acquisition of |
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SOURCE
Candace C. Formacek, Phone: (804) 359-9311, Fax: (804) 254-3584, Email: investor@universalleaf.com