HIGHLIGHTS
Six Months
Operating income up
Revenues were flat, at
Dividend increase announced for the 45th consecutive year
Second Quarter
Operating income up
Net income up 50%, to
Diluted earnings per share of
Segment operating income for the first half of fiscal year 2016 was
"We still anticipate that total lamina sales volumes from the current year's crops will slightly exceed those of last year. Similar to last year, we expect strong shipments in the second half of the fiscal year, but this year we expect much heavier volumes will ship in the fourth fiscal quarter. Due to this later timing, and depending upon factors such as port and container availability, some shipments may fall into the first fiscal quarter of 2017.
"We are monitoring weather conditions around the world that will likely have a negative impact on 2016 crop quality and production levels. As a result of the recent heavy rains and hail in southern
"Construction of the processing facility for our new food ingredients business has been substantially completed, and we expect to begin commercial production in our third fiscal quarter. In addition, as we begin the second half of our fiscal year, we believe we are well-positioned with low uncommitted inventories and a strong balance sheet, and we continue to reward our shareholders as evidenced by our 45th consecutive annual dividend increase announced earlier today."
FLUE-CURED AND BURLEY LEAF TOBACCO OPERATIONS:
OTHER REGIONS:
Operating income for the Other Regions segment increased by
Revenues for the Other Regions segment for the six months ended
Operating income for the Other Regions segment increased
Segment operating income for the second quarter of fiscal year 2016 of
OTHER TOBACCO OPERATIONS:
For the first half of fiscal year 2016, the Other Tobacco Operations segment's operating income decreased by
The Other Tobacco Operations segment operating income declined by
OTHER ITEMS:
Cost of goods sold decreased by about 2% to
Selling, general, and administrative costs decreased by
The consolidated effective income tax rates were approximately 27% and 24% for the quarters 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; product taxation; industry consolidation and evolution; 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
| |||||||||||||||
Three Months Ended |
Six Months Ended | ||||||||||||||
2015 |
2014 |
2015 |
2014 | ||||||||||||
(Unaudited) |
(Unaudited) | ||||||||||||||
Sales and other operating revenues |
$ |
456,382 |
$ |
464,116 |
$ |
731,801 |
$ |
735,588 | |||||||
Costs and expenses |
|||||||||||||||
Cost of goods sold |
358,288 |
379,045 |
585,318 |
594,977 | |||||||||||
Selling, general and administrative expenses |
60,810 |
59,809 |
112,106 |
123,586 | |||||||||||
Restructuring and impairment costs |
- |
3,350 |
2,389 |
3,350 | |||||||||||
Operating income |
37,284 |
21,912 |
31,988 |
13,675 | |||||||||||
Equity in pretax earnings of unconsolidated affiliates |
846 |
3,317 |
230 |
3,918 | |||||||||||
Interest income |
205 |
67 |
444 |
210 | |||||||||||
Interest expense |
3,912 |
4,852 |
7,796 |
8,872 | |||||||||||
Income before income taxes |
34,423 |
20,444 |
24,866 |
8,931 | |||||||||||
Income tax expense (benefit) |
9,359 |
4,960 |
5,927 |
(7,078) | |||||||||||
Net income |
25,064 |
15,484 |
18,939 |
16,009 | |||||||||||
Less: net income attributable to noncontrolling interests in subsidiaries |
(2,599) |
(459) |
(2,421) |
(267) | |||||||||||
Net income attributable to |
22,465 |
15,025 |
16,518 |
15,742 | |||||||||||
Dividends on |
(3,687) |
(3,713) |
(7,374) |
(7,425) | |||||||||||
Earnings available to |
$ |
18,778 |
$ |
11,312 |
$ |
9,144 |
$ |
8,317 | |||||||
Earnings per share attributable to |
|||||||||||||||
Basic |
$ |
0.83 |
$ |
0.49 |
$ |
0.40 |
$ |
0.36 | |||||||
Diluted |
$ |
0.81 |
$ |
0.48 |
$ |
0.40 |
$ |
0.35 | |||||||
See accompanying notes. |
|
||||||||
|
|
| ||||||
2015 |
2014 |
2015 | ||||||
(Unaudited) |
(Unaudited) |
|||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ |
68,970 |
$ |
29,567 |
$ |
248,783 | ||
Accounts receivable, net |
303,963 |
290,162 |
434,362 | |||||
Advances to suppliers, net |
40,627 |
70,296 |
114,883 | |||||
Accounts receivable - unconsolidated affiliates |
59,370 |
98,707 |
1,907 | |||||
Inventories - at lower of cost or market: |
||||||||
Tobacco |
999,312 |
1,164,293 |
636,488 | |||||
Other |
85,222 |
100,516 |
62,195 | |||||
Prepaid income taxes |
19,779 |
28,138 |
17,811 | |||||
Deferred income taxes |
31,491 |
34,560 |
36,611 | |||||
Other current assets |
75,122 |
83,754 |
81,570 | |||||
Total current assets |
1,683,856 |
1,899,993 |
1,634,610 | |||||
Property, plant and equipment |
||||||||
Land |
16,583 |
17,022 |
16,790 | |||||
Buildings |
252,153 |
239,568 |
238,372 | |||||
Machinery and equipment |
585,466 |
577,064 |
576,010 | |||||
854,202 |
833,654 |
831,172 | ||||||
Less: accumulated depreciation |
(539,749) |
(528,722) |
(525,783) | |||||
314,453 |
304,932 |
305,389 | ||||||
Other assets |
||||||||
|
99,049 |
99,291 |
99,146 | |||||
Investments in unconsolidated affiliates |
79,995 |
88,841 |
76,512 | |||||
Deferred income taxes |
20,661 |
18,861 |
6,301 | |||||
Other noncurrent assets |
55,976 |
68,973 |
76,515 | |||||
255,681 |
275,966 |
258,474 | ||||||
Total assets |
$ |
2,253,990 |
$ |
2,480,891 |
$ |
2,198,473 | ||
See accompanying notes. |
|
||||||||
|
|
| ||||||
2015 |
2014 |
2015 | ||||||
(Unaudited) |
(Unaudited) |
|||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||
Current liabilities |
||||||||
Notes payable and overdrafts |
$ |
86,095 |
$ |
359,349 |
$ |
59,862 | ||
Accounts payable and accrued expenses |
155,824 |
154,826 |
140,112 | |||||
Accounts payable-unconsolidated affiliates |
98 |
1,150 |
3,281 | |||||
Customer advances and deposits |
67,100 |
57,723 |
30,183 | |||||
Accrued compensation |
18,423 |
20,272 |
28,232 | |||||
Income taxes payable |
5,612 |
11,164 |
9,243 | |||||
Current portion of long-term obligations |
- |
118,750 |
- | |||||
Total current liabilities |
333,152 |
723,234 |
270,913 | |||||
Long-term obligations |
370,000 |
230,000 |
370,000 | |||||
Pensions and other postretirement benefits |
93,588 |
74,975 |
97,048 | |||||
Other long-term liabilities |
37,472 |
34,567 |
36,790 | |||||
Deferred income taxes |
32,067 |
39,235 |
26,628 | |||||
Total liabilities |
866,279 |
1,102,011 |
801,379 | |||||
Shareholders' equity |
||||||||
|
||||||||
Preferred stock: |
||||||||
Series A Junior Participating Preferred Stock, no par value, 500,000 shares authorized, none issued or outstanding |
- |
- |
- | |||||
Series B 6.75% Convertible Perpetual Preferred Stock, no par value, 220,000 shares authorized, 218,490 shares issued and outstanding (219,999 at |
211,562 |
213,023 |
211,562 | |||||
Common stock, no par value, 100,000,000 shares authorized, 22,680,233 shares issued and outstanding (23,183,259 at |
207,349 |
207,552 |
206,002 | |||||
Retained earnings |
1,005,353 |
971,391 |
1,020,155 | |||||
Accumulated other comprehensive loss |
(71,657) |
(44,001) |
(74,994) | |||||
Total |
1,352,607 |
1,347,965 |
1,362,725 | |||||
Noncontrolling interests in subsidiaries |
35,104 |
30,915 |
34,369 | |||||
Total shareholders' equity |
1,387,711 |
1,378,880 |
1,397,094 | |||||
Total liabilities and shareholders' equity |
$ |
2,253,990 |
$ |
2,480,891 |
$ |
2,198,473 | ||
See accompanying notes. |
|
||||||
Six Months Ended | ||||||
2015 |
2014 | |||||
(Unaudited) | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||
Net income |
$ |
18,939 |
$ |
16,009 | ||
Adjustments to reconcile net income to net cash used by operating activities: |
||||||
Depreciation |
18,362 |
17,298 | ||||
Amortization |
446 |
816 | ||||
Net provision for losses (recoveries) on advances and guaranteed loans to suppliers |
(4,354) |
(2,497) | ||||
Foreign currency remeasurement loss (gain), net |
21,981 |
7,156 | ||||
Restructuring and impairment costs |
2,389 |
3,350 | ||||
Other, net |
481 |
(9,470) | ||||
Changes in operating assets and liabilities, net |
(202,046) |
(386,404) | ||||
Net cash used by operating activities |
(143,802) |
(353,742) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||
Purchase of property, plant and equipment |
(28,457) |
(30,571) | ||||
Proceeds from sale of property, plant and equipment |
1,155 |
983 | ||||
Net cash used by investing activities |
(27,302) |
(29,588) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||
Issuance (repayment) of short-term debt, net |
23,826 |
297,507 | ||||
Repayment of long-term obligations |
- |
(7,500) | ||||
Dividends paid to noncontrolling interests |
(1,260) |
(1,977) | ||||
Issuance of common stock |
- |
187 | ||||
Repurchase of common stock |
- |
(7,202) | ||||
Dividends paid on convertible perpetual preferred stock |
(7,374) |
(7,425) | ||||
Dividends paid on common stock |
(23,536) |
(23,661) | ||||
Net cash provided (used) by financing activities |
(8,344) |
249,929 | ||||
Effect of exchange rate changes on cash |
(365) |
(564) | ||||
Net decrease in cash and cash equivalents |
(179,813) |
(133,965) | ||||
Cash and cash equivalents at beginning of year |
248,783 |
163,532 | ||||
Cash and cash equivalents at end of period |
$ |
68,970 |
$ |
29,567 | ||
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 |
Six Months Ended | ||||||||||||||
(in thousands, except share and per share data) |
2015 |
2014 |
2015 |
2014 | |||||||||||
Basic Earnings Per Share |
|||||||||||||||
Numerator for basic earnings per share |
|||||||||||||||
Net income attributable to |
$ |
22,465 |
$ |
15,025 |
$ |
16,518 |
$ |
15,742 | |||||||
Less: Dividends on convertible perpetual preferred stock |
(3,687) |
(3,713) |
(7,374) |
(7,425) | |||||||||||
Earnings available to |
18,778 |
11,312 |
9,144 |
8,317 | |||||||||||
Denominator for basic earnings per share |
|||||||||||||||
Weighted average shares outstanding |
22,675,323 |
23,178,082 |
22,649,270 |
23,200,589 | |||||||||||
Basic earnings per share |
$ |
0.83 |
$ |
0.49 |
$ |
0.40 |
$ |
0.36 | |||||||
Diluted Earnings Per Share |
|||||||||||||||
Numerator for diluted earnings per share |
|||||||||||||||
Earnings available to |
$ |
18,778 |
$ |
11,312 |
$ |
9,144 |
$ |
8,317 | |||||||
Add: Dividends on convertible perpetual preferred stock |
3,687 |
- |
- |
- | |||||||||||
Earnings available to |
22,465 |
11,312 |
9,144 |
8,317 | |||||||||||
Denominator for diluted earnings per share |
|||||||||||||||
Weighted average shares outstanding |
22,675,323 |
23,178,082 |
22,649,270 |
23,200,589 | |||||||||||
Effect of dilutive securities (if conversion or exercise assumed) |
|||||||||||||||
Convertible perpetual preferred stock |
4,848,766 |
- |
- |
- | |||||||||||
Employee share-based awards |
326,539 |
330,445 |
287,361 |
320,982 | |||||||||||
Denominator for diluted earnings per share |
27,850,628 |
23,508,527 |
22,936,631 |
23,521,571 | |||||||||||
Diluted earnings per share |
$ |
0.81 |
$ |
0.48 |
$ |
0.40 |
$ |
0.35 |
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 |
Six Months Ended | ||||||||||||||
(in thousands of dollars) |
2015 |
2014 |
2015 |
2014 | |||||||||||
SALES AND OTHER OPERATING REVENUES |
|||||||||||||||
Flue-cured and burley leaf tobacco operations: |
|||||||||||||||
|
$ |
49,421 |
$ |
53,308 |
$ |
97,993 |
$ |
85,006 | |||||||
Other regions (1) |
371,032 |
371,669 |
548,433 |
569,241 | |||||||||||
Subtotal |
420,453 |
424,977 |
646,426 |
654,247 | |||||||||||
Other tobacco operations (2) |
35,929 |
39,139 |
85,375 |
81,341 | |||||||||||
Consolidated sales and other operating revenues |
$ |
456,382 |
$ |
464,116 |
$ |
731,801 |
$ |
735,588 | |||||||
OPERATING INCOME |
|||||||||||||||
Flue-cured and burley leaf tobacco operations: |
|||||||||||||||
|
$ |
3,783 |
$ |
4,278 |
$ |
7,199 |
$ |
5,957 | |||||||
Other regions (1) |
34,202 |
21,661 |
26,355 |
11,086 | |||||||||||
Subtotal |
37,985 |
25,939 |
33,554 |
17,043 | |||||||||||
Other tobacco operations (2) |
145 |
2,640 |
1,053 |
3,900 | |||||||||||
Segment operating income |
38,130 |
28,579 |
34,607 |
20,943 | |||||||||||
Deduct: Equity in pretax earnings of unconsolidated affiliates (3) |
(846) |
(3,317) |
(230) |
(3,918) | |||||||||||
Restructuring and impairment costs (4) |
- |
(3,350) |
(2,389) |
(3,350) | |||||||||||
Consolidated operating income |
$ |
37,284 |
$ |
21,912 |
$ |
31,988 |
$ |
13,675 |
(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 of an unconsolidated affiliate. |
(3) |
Equity in pretax earnings 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) |
Restructuring and impairment costs are excluded from segment operating income, but are included in consolidated operating income in the consolidated statements of income and comprehensive income. |
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