"After consecutive years of leaf tobacco supply and demand imbalance, global demand remains soft and may contribute to delays in some customer purchase and shipment timing decisions. Consequently, our shipments are still expected to be weighted to the second half of the year, and we anticipate that total lamina sales volumes in fiscal year 2017 will be lower than those of last year. Reduced crop purchases in
"At the same time, the lower current crop levels have reduced our working capital needs this year, decreasing our seasonal borrowing requirements and increasing our cash reserves. Our uncommitted inventories have been well-managed and remained within our target range at 14% for the end of the second fiscal quarter. As a result, we have continued to maintain our very strong balance sheet and are pleased to reward our shareholders with an annual dividend increase for the 46th consecutive year, as announced earlier today."
FLUE-CURED AND BURLEY LEAF TOBACCO OPERATIONS:
OTHER REGIONS:
Operating income for the Other Regions segment decreased by
OTHER TOBACCO OPERATIONS:
The Other Tobacco Operations segment's operating income increased by
OTHER ITEMS:
Cost of goods sold increased by about 5% to
The consolidated effective income tax rates were approximately 35% and 34% for the quarter and six months ended
Results for the second fiscal quarter and six months 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; 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
| ||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||||||
Sales and other operating revenues |
$ |
456,942 |
$ |
456,382 |
$ |
752,417 |
$ |
731,801 |
||||||||
Costs and expenses |
||||||||||||||||
Cost of goods sold |
369,098 |
358,288 |
612,376 |
585,318 |
||||||||||||
Selling, general and administrative expenses |
40,834 |
60,810 |
101,033 |
112,106 |
||||||||||||
Restructuring and impairment costs |
3,682 |
-- |
3,682 |
2,389 |
||||||||||||
Operating income |
43,328 |
37,284 |
35,326 |
31,988 |
||||||||||||
Equity in pretax earnings of unconsolidated affiliates |
1,260 |
846 |
1,130 |
230 |
||||||||||||
Interest income |
271 |
205 |
634 |
444 |
||||||||||||
Interest expense |
4,335 |
3,912 |
8,389 |
7,796 |
||||||||||||
Income before income taxes |
40,524 |
34,423 |
28,701 |
24,866 |
||||||||||||
Income tax expense |
14,026 |
9,359 |
9,707 |
5,927 |
||||||||||||
Net income |
26,498 |
25,064 |
18,994 |
18,939 |
||||||||||||
Less: net (income) loss attributable to noncontrolling interests in subsidiaries |
(1,234) |
(2,599) |
794 |
(2,421) |
||||||||||||
Net income attributable to |
25,264 |
22,465 |
19,788 |
16,518 |
||||||||||||
Dividends on |
(3,687) |
(3,687) |
(7,374) |
(7,374) |
||||||||||||
Earnings available to |
$ |
21,577 |
$ |
18,778 |
$ |
12,414 |
$ |
9,144 |
||||||||
Earnings per share attributable to |
||||||||||||||||
Basic |
$ |
0.95 |
$ |
0.83 |
$ |
0.55 |
$ |
0.40 |
||||||||
Diluted |
$ |
0.90 |
$ |
0.81 |
$ |
0.54 |
$ |
0.40 |
||||||||
See accompanying notes. |
| ||||||||||||
|
|
|
||||||||||
2016 |
2015 |
2016 |
||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ |
294,894 |
$ |
68,970 |
$ |
319,447 |
||||||
Accounts receivable, net |
251,805 |
303,963 |
428,659 |
|||||||||
Advances to suppliers, net |
47,841 |
40,627 |
101,890 |
|||||||||
Accounts receivable--unconsolidated affiliates |
51,558 |
59,370 |
2,316 |
|||||||||
Inventories--at lower of cost or market: |
||||||||||||
Tobacco |
827,936 |
999,312 |
637,132 |
|||||||||
Other |
86,472 |
85,222 |
60,888 |
|||||||||
Prepaid income taxes |
24,448 |
19,779 |
17,814 |
|||||||||
Other current assets |
56,026 |
75,122 |
70,400 |
|||||||||
Total current assets |
1,640,980 |
1,652,365 |
1,638,546 |
|||||||||
Property, plant and equipment |
||||||||||||
Land |
22,914 |
16,583 |
22,987 |
|||||||||
Buildings |
266,107 |
252,153 |
264,838 |
|||||||||
Machinery and equipment |
599,897 |
585,466 |
591,327 |
|||||||||
888,918 |
854,202 |
879,152 |
||||||||||
Less: accumulated depreciation |
(566,686) |
(539,749) |
(553,265) |
|||||||||
322,232 |
314,453 |
325,887 |
||||||||||
Other assets |
||||||||||||
|
99,033 |
99,049 |
99,071 |
|||||||||
Investments in unconsolidated affiliates |
81,441 |
79,995 |
82,441 |
|||||||||
Deferred income taxes |
25,720 |
46,633 |
23,853 |
|||||||||
Other noncurrent assets |
49,107 |
54,179 |
61,379 |
|||||||||
255,301 |
279,856 |
266,744 |
||||||||||
Total assets |
$ |
2,218,513 |
$ |
2,246,674 |
$ |
2,231,177 |
||||||
See accompanying notes. |
| ||||||||||||
|
|
|
||||||||||
2016 |
2015 |
2016 |
||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Notes payable and overdrafts |
$ |
71,002 |
$ |
86,095 |
$ |
66,179 |
||||||
Accounts payable and accrued expenses |
133,133 |
155,824 |
120,527 |
|||||||||
Accounts payable--unconsolidated affiliates |
-- |
98 |
8,343 |
|||||||||
Customer advances and deposits |
37,334 |
67,100 |
16,438 |
|||||||||
Accrued compensation |
18,885 |
18,423 |
27,593 |
|||||||||
Income taxes payable |
1,240 |
6,126 |
7,190 |
|||||||||
Current portion of long-term debt |
-- |
-- |
-- |
|||||||||
Total current liabilities |
261,594 |
333,666 |
246,270 |
|||||||||
Long-term debt |
368,556 |
368,203 |
368,380 |
|||||||||
Pensions and other postretirement benefits |
80,005 |
93,588 |
92,177 |
|||||||||
Other long-term liabilities |
41,413 |
37,472 |
41,794 |
|||||||||
Deferred income taxes |
28,047 |
26,034 |
29,494 |
|||||||||
Total liabilities |
779,615 |
858,963 |
778,115 |
|||||||||
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 (218,490 at |
211,562 |
211,562 |
211,562 |
|||||||||
Common stock, no par value, 100,000,000 shares authorized, 22,783,633 shares issued and outstanding (22,680,233 at |
210,569 |
207,349 |
208,946 |
|||||||||
Retained earnings |
1,054,004 |
1,005,353 |
1,066,064 |
|||||||||
Accumulated other comprehensive loss |
(73,579) |
(71,657) |
(72,350) |
|||||||||
|
1,402,556 |
1,352,607 |
1,414,222 |
|||||||||
Noncontrolling interests in subsidiaries |
36,342 |
35,104 |
38,840 |
|||||||||
Total shareholders' equity |
1,438,898 |
1,387,711 |
1,453,062 |
|||||||||
Total liabilities and shareholders' equity |
$ |
2,218,513 |
$ |
2,246,674 |
$ |
2,231,177 |
||||||
See accompanying notes. |
| ||||||||
Six Months Ended |
||||||||
2016 |
2015 |
|||||||
(Unaudited) |
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ |
18,994 |
$ |
18,939 |
||||
Adjustments to reconcile net loss to net cash provided (used) by operating activities: |
||||||||
Depreciation |
17,324 |
18,362 |
||||||
Net provision for losses (recoveries) on advances and guaranteed loans to suppliers |
(2,038) |
(4,354) |
||||||
Foreign currency remeasurement loss (gain), net |
11,119 |
21,981 |
||||||
Restructuring and impairment costs |
3,682 |
2,389 |
||||||
Other, net |
(1,108) |
927 |
||||||
Changes in operating assets and liabilities, net |
(25,548) |
(200,010) |
||||||
Net cash provided (used) by operating activities |
22,425 |
(141,766) |
||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchase of property, plant and equipment |
(17,567) |
(28,457) |
||||||
Proceeds from sale of property, plant and equipment |
447 |
1,155 |
||||||
Net cash used by investing activities |
(17,120) |
(27,302) |
||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Issuance (repayment) of short-term debt, net |
5,210 |
23,827 |
||||||
Dividends paid to noncontrolling interests |
(1,260) |
(1,260) |
||||||
Dividends paid on convertible perpetual preferred stock |
(7,374) |
(7,374) |
||||||
Dividends paid on common stock |
(24,106) |
(23,536) |
||||||
Other |
(2,245) |
(2,037) |
||||||
Net cash used by financing activities |
(29,775) |
(10,380) |
||||||
Effect of exchange rate changes on cash |
(83) |
(365) |
||||||
Net decrease in cash and cash equivalents |
(24,553) |
(179,813) |
||||||
Cash and cash equivalents at beginning of year |
319,447 |
248,783 |
||||||
Cash and cash equivalents at end of period |
$ |
294,894 |
$ |
68,970 |
||||
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) |
2016 |
2015 |
2016 |
2015 |
||||||||||||
Basic Earnings Per Share |
||||||||||||||||
Numerator for basic earnings per share |
||||||||||||||||
Net income attributable to |
$ |
25,264 |
$ |
22,465 |
$ |
19,788 |
$ |
16,518 |
||||||||
Less: Dividends on convertible perpetual preferred stock |
(3,687) |
(3,687) |
(7,374) |
(7,374) |
||||||||||||
Earnings available to |
21,577 |
18,778 |
12,414 |
9,144 |
||||||||||||
Denominator for basic earnings per share |
||||||||||||||||
Weighted average shares outstanding |
22,777,394 |
22,675,323 |
22,755,927 |
22,649,270 |
||||||||||||
Basic earnings per share |
$ |
0.95 |
$ |
0.83 |
$ |
0.55 |
$ |
0.40 |
||||||||
Diluted Earnings Per Share |
||||||||||||||||
Numerator for diluted earnings per share |
||||||||||||||||
Earnings available to |
$ |
21,577 |
$ |
18,778 |
$ |
12,414 |
$ |
9,144 |
||||||||
Add: Dividends on convertible perpetual preferred stock (if conversion assumed) |
3,687 |
3,687 |
-- |
-- |
||||||||||||
Earnings available to |
25,264 |
22,465 |
12,414 |
9,144 |
||||||||||||
Denominator for diluted earnings per share |
||||||||||||||||
Weighted average shares outstanding |
22,777,394 |
22,675,323 |
22,755,927 |
22,649,270 |
||||||||||||
Effect of dilutive securities (if conversion or exercise assumed) |
||||||||||||||||
Convertible perpetual preferred stock |
4,883,372 |
4,848,766 |
-- |
-- |
||||||||||||
Employee share-based awards |
307,390 |
326,539 |
317,414 |
287,361 |
||||||||||||
Denominator for diluted earnings per share |
27,968,156 |
27,850,628 |
23,073,341 |
22,936,631 |
||||||||||||
Diluted earnings per share |
$ |
0.90 |
$ |
0.81 |
$ |
0.54 |
$ |
0.40 |
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) |
2016 |
2015 |
2016 |
2015 |
||||||||||||
SALES AND OTHER OPERATING REVENUES |
||||||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||||||
|
$ |
80,789 |
$ |
49,421 |
$ |
153,471 |
$ |
97,993 |
||||||||
Other Regions (1) |
318,576 |
371,032 |
496,592 |
548,433 |
||||||||||||
Subtotal |
399,365 |
420,453 |
650,063 |
646,426 |
||||||||||||
Other Tobacco Operations (2) |
57,577 |
35,929 |
102,354 |
85,375 |
||||||||||||
Consolidated sales and other operating revenues |
$ |
456,942 |
$ |
456,382 |
$ |
752,417 |
$ |
731,801 |
||||||||
OPERATING INCOME |
||||||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||||||
|
$ |
13,531 |
$ |
3,783 |
$ |
20,379 |
$ |
7,199 |
||||||||
Other Regions (1) |
32,342 |
34,202 |
15,325 |
26,355 |
||||||||||||
Subtotal |
45,873 |
37,985 |
35,704 |
33,554 |
||||||||||||
Other Tobacco Operations (2) |
2,397 |
145 |
4,434 |
1,053 |
||||||||||||
Segment operating income |
48,270 |
38,130 |
40,138 |
34,607 |
||||||||||||
Deduct: Equity in pretax earnings of unconsolidated affiliates (3) |
(1,260) |
(846) |
(1,130) |
(230) |
||||||||||||
Restructuring and impairment costs (4) |
(3,682) |
-- |
(3,682) |
(2,389) |
||||||||||||
Consolidated operating income |
$ |
43,328 |
$ |
37,284 |
$ |
35,326 |
$ |
31,988 |
(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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