"Our earnings for the quarter and nine-month period ended
"Working capital requirements have been higher this year and reflect higher current crop purchases on recovered Brazilian crop levels. At the same time, uncommitted inventories at 16% of total inventory on
"We also anticipate that our volumes for the fourth quarter of fiscal year 2018 will be lower than those achieved in the fourth quarter of the prior year, given reduced crop volumes available for sale in
"In January, we celebrated an important milestone -- the 100th anniversary of our Company. For 100 years, we have been finding innovative solutions to serve our customers and meet their leaf tobacco needs, and stand today as the leading global leaf supplier. As we move into our next 100 years, we will build on our history by seeking opportunities to leverage both our assets and expertise and to deliver value to our shareholders. We will continue our commitment to leadership in setting industry standards, operating with transparency, providing products that are responsibly-sourced, and investing in and strengthening the communities where we operate."
FLUE-CURED AND BURLEY LEAF TOBACCO OPERATIONS:
OTHER REGIONS:
Operating income for the Other Regions segment improved by
Segment operating income for the Other Regions segment for the quarter ended
OTHER TOBACCO OPERATIONS:
The Other Tobacco Operations segment operating income decreased by
OTHER ITEMS:
Cost of goods sold increased by about 2% to
The consolidated effective income tax rates for the quarter and nine months ended
Results for the nine months and third fiscal 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
At
Headquartered in
|
||||||||||||||||
Three Months Ended |
Nine Months Ended | |||||||||||||||
2017 |
2016 |
2017 |
2016 |
|||||||||||||
(Unaudited) |
(Unaudited) | |||||||||||||||
Sales and other operating revenues |
$ |
653,581 |
$ |
668,771 |
$ |
1,426,451 |
$ |
1,421,188 |
||||||||
Costs and expenses |
||||||||||||||||
Cost of goods sold |
545,063 |
533,318 |
1,171,000 |
1,145,694 |
||||||||||||
Selling, general and administrative expenses |
48,839 |
52,068 |
144,242 |
153,101 |
||||||||||||
Restructuring and impairment costs |
— |
178 |
— |
3,860 |
||||||||||||
Operating income |
59,679 |
83,207 |
111,209 |
118,533 |
||||||||||||
Equity in pretax earnings of unconsolidated affiliates |
6,404 |
4,495 |
6,636 |
5,625 |
||||||||||||
Interest income |
166 |
482 |
1,362 |
1,116 |
||||||||||||
Interest expense |
4,020 |
4,051 |
11,916 |
12,440 |
||||||||||||
Income before income taxes and other items |
62,229 |
84,133 |
107,291 |
112,834 |
||||||||||||
Income taxes |
12,010 |
27,071 |
25,445 |
36,778 |
||||||||||||
Net income |
50,219 |
57,062 |
81,846 |
76,056 |
||||||||||||
Less: net (income) loss attributable to noncontrolling interests in subsidiaries |
(4,819) |
(3,415) |
(6,702) |
(2,621) |
||||||||||||
Net income attributable to |
45,400 |
53,647 |
75,144 |
73,435 |
||||||||||||
Dividends on |
— |
(3,687) |
— |
(11,061) |
||||||||||||
Earnings available to |
$ |
45,400 |
$ |
49,960 |
$ |
75,144 |
$ |
62,374 |
||||||||
Earnings per share attributable to |
||||||||||||||||
Basic |
$ |
1.80 |
$ |
2.17 |
$ |
2.97 |
$ |
2.73 |
||||||||
Diluted |
$ |
1.78 |
$ |
1.92 |
$ |
2.94 |
$ |
2.63 |
||||||||
See accompanying notes. |
| ||||||||||||
|
|
| ||||||||||
2017 |
2016 |
2017 | ||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ |
146,578 |
$ |
411,507 |
$ |
283,993 |
||||||
Accounts receivable, net |
347,175 |
280,978 |
439,288 |
|||||||||
Advances to suppliers, net |
108,952 |
93,175 |
103,750 |
|||||||||
Accounts receivable—unconsolidated affiliates |
1,799 |
2,073 |
2,373 |
|||||||||
Inventories—at lower of cost or net realizable value: |
||||||||||||
Tobacco |
796,165 |
736,368 |
565,943 |
|||||||||
Other |
69,687 |
67,638 |
68,087 |
|||||||||
Prepaid income taxes |
14,459 |
11,419 |
16,713 |
|||||||||
Other current assets |
92,959 |
61,856 |
81,252 |
|||||||||
Total current assets |
1,577,774 |
1,665,014 |
1,561,399 |
|||||||||
Property, plant and equipment |
||||||||||||
Land |
22,885 |
22,760 |
22,852 |
|||||||||
Buildings |
269,670 |
264,485 |
266,802 |
|||||||||
Machinery and equipment |
621,051 |
603,860 |
597,213 |
|||||||||
913,606 |
891,105 |
886,867 |
||||||||||
Less accumulated depreciation |
(596,722) |
(569,697) |
(569,527) |
|||||||||
316,884 |
321,408 |
317,340 |
||||||||||
Other assets |
||||||||||||
|
98,981 |
98,869 |
98,888 |
|||||||||
Investments in unconsolidated affiliates |
86,246 |
75,574 |
78,457 |
|||||||||
Deferred income taxes |
21,049 |
24,266 |
25,422 |
|||||||||
Other noncurrent assets |
49,033 |
41,798 |
41,899 |
|||||||||
255,309 |
240,507 |
244,666 |
||||||||||
Total assets |
$ |
2,149,967 |
$ |
2,226,929 |
$ |
2,123,405 |
||||||
See accompanying notes. |
| ||||||||||||
|
|
|
||||||||||
2017 |
2016 |
2017 |
||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Notes payable and overdrafts |
$ |
50,804 |
$ |
52,052 |
$ |
59,133 |
||||||
Accounts payable and accrued expenses |
138,161 |
131,925 |
153,515 |
|||||||||
Accounts payable—unconsolidated affiliates |
16,184 |
10,522 |
7,231 |
|||||||||
Customer advances and deposits |
23,939 |
14,201 |
11,007 |
|||||||||
Accrued compensation |
19,387 |
22,800 |
32,007 |
|||||||||
Income taxes payable |
8,052 |
7,239 |
5,103 |
|||||||||
Current portion of long-term debt |
— |
— |
— |
|||||||||
Total current liabilities |
256,527 |
238,739 |
267,996 |
|||||||||
Long-term debt |
368,998 |
368,645 |
368,733 |
|||||||||
Pensions and other postretirement benefits |
74,577 |
78,930 |
80,689 |
|||||||||
Other long-term liabilities |
47,289 |
30,038 |
31,424 |
|||||||||
Deferred income taxes |
31,903 |
29,075 |
47,985 |
|||||||||
Total liabilities |
779,294 |
745,427 |
796,827 |
|||||||||
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, |
— |
104,012 |
— |
|||||||||
Common stock, no par value, 100,000,000 shares authorized 25,114,349 |
321,832 |
319,509 |
321,207 |
|||||||||
Retained earnings |
1,058,556 |
1,090,148 |
1,034,841 |
|||||||||
Accumulated other comprehensive loss |
(55,444) |
(71,723) |
(69,559) |
|||||||||
|
1,324,944 |
1,441,946 |
1,286,489 |
|||||||||
Noncontrolling interests in subsidiaries |
45,729 |
39,556 |
40,089 |
|||||||||
Total shareholders' equity |
1,370,673 |
1,481,502 |
1,326,578 |
|||||||||
Total liabilities and shareholders' equity |
$ |
2,149,967 |
$ |
2,226,929 |
$ |
2,123,405 |
||||||
See accompanying notes. |
UNIVERSAL CORPORATION | ||||||||
Nine Months Ended | ||||||||
2017 |
2016 | |||||||
(Unaudited) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ |
81,846 |
$ |
76,056 |
||||
Adjustments to reconcile net income to net cash provided (used) by operating activities: |
||||||||
Depreciation |
26,106 |
26,107 |
||||||
Net provision for losses (recoveries) on advances and guaranteed loans to suppliers |
4,375 |
414 |
||||||
Foreign currency remeasurement (gain) loss, net |
(3,430) |
12,493 |
||||||
Deferred income taxes |
(18,967) |
(308) |
||||||
Restructuring and impairment costs |
— |
3,860 |
||||||
Other, net |
12,131 |
7,598 |
||||||
Changes in operating assets and liabilities, net |
(151,429) |
56,533 |
||||||
Net cash provided (used) by operating activities |
(49,368) |
182,753 |
||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchase of property, plant and equipment |
(23,567) |
(28,544) |
||||||
Proceeds from sale of property, plant and equipment |
5,072 |
665 |
||||||
Other |
(550) |
— |
||||||
Net cash used by investing activities |
(19,045) |
(27,879) |
||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Issuance (repayment) of short-term debt, net |
(12,195) |
(11,299) |
||||||
Dividends paid to noncontrolling interests |
(1,260) |
(1,260) |
||||||
Repurchase of common stock |
(12,639) |
— |
||||||
Dividends paid on convertible perpetual preferred stock |
— |
(11,061) |
||||||
Dividends paid on common stock |
(40,886) |
(36,181) |
||||||
Other |
(2,828) |
(2,256) |
||||||
Net cash used by financing activities |
(69,808) |
(62,057) |
||||||
Effect of exchange rate changes on cash |
806 |
(757) |
||||||
Net increase (decrease) in cash and cash equivalents |
(137,415) |
92,060 |
||||||
Cash and cash equivalents at beginning of year |
283,993 |
319,447 |
||||||
Cash and cash equivalents at end of period |
$ |
146,578 |
$ |
411,507 |
||||
Non-cash Financing Transaction - The consolidated financial statements for the nine months ended | ||||||||
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 |
Nine Months Ended | |||||||||||||||
(in thousands, except share and per share data) |
2017 |
2016 |
2017 |
2016 | ||||||||||||
Basic Earnings Per Share |
||||||||||||||||
Numerator for basic earnings per share |
||||||||||||||||
Net income attributable to |
$ |
45,400 |
$ |
53,647 |
$ |
75,144 |
$ |
73,435 |
||||||||
Less: Dividends on convertible perpetual preferred stock |
— |
(3,687) |
— |
(11,061) |
||||||||||||
Earnings available to |
45,400 |
49,960 |
75,144 |
62,374 |
||||||||||||
Denominator for basic earnings per share |
||||||||||||||||
Weighted average shares outstanding |
25,230,336 |
22,982,473 |
25,323,796 |
22,831,717 |
||||||||||||
Basic earnings per share |
$ |
1.80 |
$ |
2.17 |
$ |
2.97 |
$ |
2.73 |
||||||||
Diluted Earnings Per Share |
||||||||||||||||
Numerator for diluted earnings per share |
||||||||||||||||
Earnings available to |
$ |
45,400 |
$ |
49,960 |
$ |
75,144 |
$ |
62,374 |
||||||||
Add: Dividends on convertible perpetual preferred stock (if conversion assumed) |
— |
3,687 |
— |
11,061 |
||||||||||||
Earnings available to |
45,400 |
53,647 |
75,144 |
73,435 |
||||||||||||
Denominator for diluted earnings per share: |
||||||||||||||||
Weighted average shares outstanding |
25,230,336 |
22,982,473 |
25,323,796 |
22,831,717 |
||||||||||||
Effect of dilutive securities (if conversion or exercise assumed) |
||||||||||||||||
Convertible perpetual preferred stock |
— |
4,693,155 |
— |
4,816,904 |
||||||||||||
Employee share-based awards |
230,073 |
320,955 |
222,274 |
318,594 |
||||||||||||
Denominator for diluted earnings per share |
25,460,409 |
27,996,583 |
25,546,070 |
27,967,215 |
||||||||||||
Diluted earnings per share |
$ |
1.78 |
$ |
1.92 |
$ |
2.94 |
$ |
2.63 |
All outstanding shares of the Company's convertible perpetual preferred stock were converted for common stock or cash in the third and fourth quarters of fiscal year 2017, and therefore none were outstanding for the three- and nine-month periods ended
NOTE 3. INCOME TAXES
On
Under the applicable accounting guidance, corporations are required to account for the effects of changes in income tax law on their financial statements as a component of taxes provided on income from continuing operations in the period those changes are enacted, which for Universal is the fiscal quarter and nine-month period ended
The most significant effects of the new law on Universal's financial statements for the current reporting periods are:
(1) an adjustment of recorded deferred tax assets and liabilities to the tax rates at which they are expected to reverse in the future, including:
(2) a reduction of the liability previously recorded for
The following table outlines consolidated income tax expense and the effective tax rates on pretax earnings for the quarter and nine months ended
Three Months Ended December 31, 2017 |
Nine Months Ended December 31, 2017 | |||||||||||||
(in thousands of dollars) |
Amount |
Effective Tax Rate |
Amount |
Effective Tax Rate | ||||||||||
Income before income taxes |
$ |
62,229 |
$ |
107,291 |
||||||||||
Income tax expense: |
||||||||||||||
Determined under previous tax law |
$ |
22,506 |
36.2% |
$ |
35,941 |
33.5% | ||||||||
Effect of new law: |
||||||||||||||
Adjustment of deferred tax assets and liabilities: |
||||||||||||||
- Initially recorded in net income |
(5,426) |
(8.7)% |
(5,426) |
(5.1)% | ||||||||||
- Initially recorded in other comprehensive income |
9,800 |
15.7% |
9,800 |
9.1% | ||||||||||
Reduction of |
(14,528) |
(23.4)% |
(14,528) |
(13.5)% | ||||||||||
All other effects |
(342) |
(0.5)% |
(342) |
(0.3)% | ||||||||||
Total effect of new law |
$ |
(10,496) |
(16.9)% |
$ |
(10,496) |
(9.8)% | ||||||||
Total income tax expense under new law |
$ |
12,010 |
19.3% |
$ |
25,445 |
23.7% |
As noted above, the effect of the new law includes a
Prior to the enactment of the new law, under its accounting for income taxes, the Company had no undistributed earnings of consolidated foreign subsidiaries that were classified as permanently reinvested. Accordingly, the Company had recorded the full tax liability on those earnings, including both the local country taxes and the
In determining the recorded effect of the new law presented above, the Company was able to develop what it considers to be reasonable estimates and make what it considers to be reasonable interpretations with respect to the application of the law in areas that may receive future clarification. As a result, the Company has not continued to account for any specific items under the previous tax law. The three primary component effects of the new law on the Company's financial statements for the current reporting periods, as reflected in the above table, are considered provisional at this time in order to allow additional time to complete the final accounting. The Company continues to analyze certain aspects of the new law, and future treasury regulations, tax law technical corrections, notices, rulings, and other guidance issued by the government could result in changes or refinements to
amounts recorded in the current reporting period. These include potential refinements of the Company's calculations of the adjustments to deferred tax assets and liabilities and the
In future reporting periods under the new law, the Company's consolidated income tax expense will generally be determined by the aggregation of tax expense recorded in the
As noted in the above table, with the effect of the tax law changes, the Company's consolidated effective income tax rates were 19.3% and 23.7% for the three and nine months ended
NOTE 4. 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 (excluding significant non-recurring charges or credits), 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 and comprehensive income were as follows:
Three Months Ended |
Nine Months Ended | |||||||||||||||
(in thousands of dollars) |
2017 |
2016 |
2017 |
2016 | ||||||||||||
SALES AND OTHER OPERATING REVENUES |
||||||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||||||
North America |
$ |
99,452 |
$ |
93,198 |
$ |
211,444 |
$ |
246,669 |
||||||||
Other Regions (1) |
474,351 |
495,982 |
1,039,927 |
992,574 |
||||||||||||
Subtotal |
573,803 |
589,180 |
1,251,371 |
1,239,243 |
||||||||||||
Other Tobacco Operations (2) |
79,778 |
79,591 |
175,080 |
181,945 |
||||||||||||
Consolidated sales and other operating revenue |
$ |
653,581 |
$ |
668,771 |
$ |
1,426,451 |
$ |
1,421,188 |
||||||||
OPERATING INCOME |
||||||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||||||
North America |
$ |
3,623 |
$ |
1,025 |
$ |
13,887 |
$ |
21,404 |
||||||||
Other Regions (1) |
57,029 |
81,074 |
98,622 |
96,399 |
||||||||||||
Subtotal |
60,652 |
82,099 |
112,509 |
117,803 |
||||||||||||
Other Tobacco Operations (2) |
5,431 |
5,781 |
5,336 |
10,215 |
||||||||||||
Segment operating income |
66,083 |
87,880 |
117,845 |
128,018 |
||||||||||||
Deduct: Equity in pretax earnings of unconsolidated affiliates (3) |
(6,404) |
(4,495) |
(6,636) |
(5,625) |
||||||||||||
Restructuring and impairment costs (4) |
— |
(178) |
— |
(3,860) |
||||||||||||
Consolidated operating income |
$ |
59,679 |
$ |
83,207 |
$ |
111,209 |
$ |
118,533 |
(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 the business is accounted for on the equity method and 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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