Universal Corporation Reports Nine Month Results
For the third fiscal quarter ended
Mr. Freeman stated, "As we have moved into the seasonally stronger back half of our fiscal year, we have continued to perform well. In the nine months ended
"As the leading global leaf supplier, we remain committed to strengthening our market share and investing for growth in our core tobacco business. As we recently announced, we are expanding our leaf purchasing, processing, and grower support services in
"Another aspect of improving efficiencies and reducing costs in the supply chain is ensuring that our operations and footprint support and reflect global market demand for leaf. Customer demand over recent years for tobacco sourced from
"Looking forward, we expect that our fourth quarter shipments will be strong. We are, however, continuing to monitor container and vessel availability, particularly in
"As we close out the celebration of our 100th anniversary year, we want to express our sincere thanks to our employees, customers, and investors for their long-standing support. Our mission remains to continue our role as the leading global leaf supplier. We are also focused on our capital allocation strategy that reflects the strength of our balance sheet and demonstrates our commitment to sustainable shareholder value creation."
FLUE-CURED AND BURLEY LEAF TOBACCO OPERATIONS:
OTHER REGIONS:
Operating income for the Other Regions segment decreased by
Operating income for the
OTHER TOBACCO OPERATIONS:
The Other Tobacco Operations segment operating income increased by
OTHER ITEMS:
Cost of goods sold increased by 8% to
For the nine months ended
Results for the nine months and third fiscal quarter ended
On
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 the U.S. federal income tax rates and legislation; 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
UNIVERSAL CORPORATION |
||||||||||||||||
Three Months Ended December 31, |
Nine Months Ended December 31, |
|||||||||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||||||
Sales and other operating revenues |
$ |
636,107 |
$ |
653,581 |
$ |
1,555,430 |
$ |
1,426,451 |
||||||||
Costs and expenses |
||||||||||||||||
Cost of goods sold |
520,677 |
545,063 |
1,268,319 |
1,171,000 |
||||||||||||
Selling, general and administrative expenses |
58,302 |
49,017 |
167,244 |
144,768 |
||||||||||||
Restructuring and impairment costs |
19,447 |
— |
19,447 |
— |
||||||||||||
Operating income |
37,681 |
59,501 |
100,420 |
110,683 |
||||||||||||
Equity in pretax earnings of unconsolidated affiliates |
5,512 |
6,404 |
5,437 |
6,636 |
||||||||||||
Other non-operating income (expense) |
163 |
178 |
549 |
526 |
||||||||||||
Interest income |
233 |
166 |
1,044 |
1,362 |
||||||||||||
Interest expense |
4,732 |
4,020 |
13,274 |
11,916 |
||||||||||||
Income before income taxes and other items |
38,857 |
62,229 |
94,176 |
107,291 |
||||||||||||
Income taxes |
7,768 |
12,010 |
17,734 |
25,445 |
||||||||||||
Net income |
31,089 |
50,219 |
76,442 |
81,846 |
||||||||||||
Less: net income attributable to noncontrolling interests in subsidiaries |
(2,954) |
(4,819) |
(3,682) |
(6,702) |
||||||||||||
Net income attributable to Universal Corporation |
28,135 |
45,400 |
72,760 |
75,144 |
||||||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ |
1.12 |
$ |
1.80 |
$ |
2.90 |
$ |
2.97 |
||||||||
Diluted |
$ |
1.11 |
$ |
1.78 |
$ |
2.87 |
$ |
2.94 |
||||||||
See accompanying notes. |
UNIVERSAL CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of dollars) |
||||||||||||
December 31, |
December 31, |
March 31, |
||||||||||
2018 |
2017 |
2018 |
||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ |
138,358 |
$ |
146,578 |
$ |
234,128 |
||||||
Accounts receivable, net |
336,564 |
347,175 |
377,119 |
|||||||||
Advances to suppliers, net |
98,942 |
108,952 |
122,786 |
|||||||||
Accounts receivable—unconsolidated affiliates |
77,543 |
1,799 |
2,040 |
|||||||||
Inventories—at lower of cost or net realizable value: |
||||||||||||
Tobacco |
867,181 |
796,165 |
679,428 |
|||||||||
Other |
74,360 |
69,687 |
69,301 |
|||||||||
Prepaid income taxes |
21,170 |
14,459 |
16,032 |
|||||||||
Other current assets |
70,309 |
92,959 |
88,209 |
|||||||||
Total current assets |
1,684,427 |
1,577,774 |
1,589,043 |
|||||||||
Property, plant and equipment |
||||||||||||
Land |
23,018 |
22,885 |
23,180 |
|||||||||
Buildings |
253,150 |
269,670 |
271,757 |
|||||||||
Machinery and equipment |
603,752 |
621,051 |
634,660 |
|||||||||
879,920 |
913,606 |
929,597 |
||||||||||
Less accumulated depreciation |
(572,634) |
(596,722) |
(605,803) |
|||||||||
307,286 |
316,884 |
323,794 |
||||||||||
Other assets |
||||||||||||
Goodwill and other intangibles |
98,008 |
98,981 |
98,927 |
|||||||||
Investments in unconsolidated affiliates |
80,558 |
86,246 |
89,302 |
|||||||||
Deferred income taxes |
13,959 |
21,049 |
17,118 |
|||||||||
Other noncurrent assets |
44,378 |
49,033 |
50,448 |
|||||||||
236,903 |
255,309 |
255,795 |
||||||||||
Total assets |
$ |
2,228,616 |
$ |
2,149,967 |
$ |
2,168,632 |
||||||
See accompanying notes. |
UNIVERSAL CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of dollars) |
||||||||||||
December 31, |
December 31, |
March 31, |
||||||||||
2018 |
2017 |
2018 |
||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Notes payable and overdrafts |
$ |
129,316 |
$ |
50,804 |
$ |
45,421 |
||||||
Accounts payable and accrued expenses |
144,107 |
138,161 |
163,763 |
|||||||||
Accounts payable—unconsolidated affiliates |
1,470 |
16,184 |
16,072 |
|||||||||
Customer advances and deposits |
56,355 |
23,939 |
7,021 |
|||||||||
Accrued compensation |
23,989 |
19,387 |
27,886 |
|||||||||
Income taxes payable |
3,090 |
8,052 |
7,557 |
|||||||||
Current portion of long-term debt |
— |
— |
— |
|||||||||
Total current liabilities |
358,327 |
256,527 |
267,720 |
|||||||||
Long-term debt |
368,438 |
368,998 |
369,086 |
|||||||||
Pensions and other postretirement benefits |
41,601 |
74,577 |
64,843 |
|||||||||
Other long-term liabilities |
38,467 |
47,289 |
45,955 |
|||||||||
Deferred income taxes |
32,000 |
31,903 |
35,726 |
|||||||||
Total liabilities |
838,833 |
779,294 |
783,330 |
|||||||||
Shareholders' equity |
||||||||||||
Universal Corporation: |
||||||||||||
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 24,968,799 shares issued and outstanding (25,114,349 at December 31, 2017, and 24,930,725 at March 31, 2018) |
326,323 |
321,832 |
321,559 |
|||||||||
Retained earnings |
1,093,829 |
1,058,556 |
1,080,934 |
|||||||||
Accumulated other comprehensive loss |
(75,667) |
(55,444) |
(60,064) |
|||||||||
Total Universal Corporation shareholders' equity |
1,344,485 |
1,324,944 |
1,342,429 |
|||||||||
Noncontrolling interests in subsidiaries |
45,298 |
45,729 |
42,873 |
|||||||||
Total shareholders' equity |
1,389,783 |
1,370,673 |
1,385,302 |
|||||||||
Total liabilities and shareholders' equity |
$ |
2,228,616 |
$ |
2,149,967 |
$ |
2,168,632 |
||||||
See accompanying notes. |
UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars) |
||||||||
Nine Months Ended December 31, |
||||||||
2018 |
2017 |
|||||||
(Unaudited) |
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ |
76,442 |
$ |
81,846 |
||||
Adjustments to reconcile net income to net cash used by operating activities: |
||||||||
Depreciation |
27,651 |
26,106 |
||||||
Net provision for losses (recoveries) on advances and guaranteed loans to suppliers |
(3,045) |
4,375 |
||||||
Foreign currency remeasurement (gain) loss, net |
1,790 |
(3,430) |
||||||
Deferred income taxes |
(5,471) |
(18,967) |
||||||
Restructuring and impairment costs, net of payments |
18,685 |
— |
||||||
Other, net |
12,283 |
12,131 |
||||||
Changes in operating assets and liabilities, net |
(225,648) |
(151,429) |
||||||
Net cash used by operating activities |
(97,313) |
(49,368) |
||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchase of property, plant and equipment |
(28,370) |
(23,567) |
||||||
Proceeds from sale of property, plant and equipment |
1,377 |
5,072 |
||||||
Other |
2,000 |
(550) |
||||||
Net cash used by investing activities |
(24,993) |
(19,045) |
||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Issuance (repayment) of short-term debt, net |
85,893 |
(12,195) |
||||||
Issuance of long-term debt |
41,147 |
— |
||||||
Repayment of long-term debt |
(41,147) |
— |
||||||
Dividends paid to noncontrolling interests |
(1,260) |
(1,260) |
||||||
Repurchase of common stock |
(1,443) |
(12,639) |
||||||
Dividends paid on common stock |
(51,156) |
(40,886) |
||||||
Debt issuance costs and other |
(4,946) |
(2,828) |
||||||
Net cash provided (used) by financing activities |
27,088 |
(69,808) |
||||||
Effect of exchange rate changes on cash |
(552) |
806 |
||||||
Net decrease in cash and cash equivalents |
(95,770) |
(137,415) |
||||||
Cash and cash equivalents at beginning of year |
234,128 |
283,993 |
||||||
Cash and cash equivalents at end of period |
$ |
138,358 |
$ |
146,578 |
||||
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 December 31, |
Nine Months Ended December 31, |
|||||||||||||||
(in thousands, except share and per share data) |
2018 |
2017 |
2018 |
2017 |
||||||||||||
Basic Earnings Per Share |
||||||||||||||||
Numerator for basic earnings per share |
||||||||||||||||
Net income attributable to Universal Corporation |
$ |
28,135 |
$ |
45,400 |
$ |
72,760 |
$ |
75,144 |
||||||||
Denominator for basic earnings per share |
||||||||||||||||
Weighted average shares outstanding |
25,162,268 |
25,230,336 |
25,126,595 |
25,323,796 |
||||||||||||
Basic earnings per share |
$ |
1.12 |
$ |
1.80 |
$ |
2.90 |
$ |
2.97 |
||||||||
Diluted Earnings Per Share |
||||||||||||||||
Numerator for diluted earnings per share |
||||||||||||||||
Net income attributable to Universal Corporation |
28,135 |
45,400 |
72,760 |
75,144 |
||||||||||||
Denominator for diluted earnings per share: |
||||||||||||||||
Weighted average shares outstanding |
25,162,268 |
25,230,336 |
25,126,595 |
25,323,796 |
||||||||||||
Effect of dilutive securities |
||||||||||||||||
Employee share-based awards |
203,498 |
230,073 |
202,878 |
222,274 |
||||||||||||
Denominator for diluted earnings per share |
25,365,766 |
25,460,409 |
25,329,473 |
25,546,070 |
||||||||||||
Diluted earnings per share |
$ |
1.11 |
$ |
1.78 |
$ |
2.87 |
$ |
2.94 |
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 (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 December 31, |
Nine Months Ended December 31, |
|||||||||||||||
(in thousands of dollars) |
2018 |
2017 |
2018 |
2017 |
||||||||||||
SALES AND OTHER OPERATING REVENUES |
||||||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||||||
North America |
$ |
78,009 |
$ |
99,452 |
$ |
261,347 |
$ |
211,444 |
||||||||
Other Regions (1) |
483,161 |
474,351 |
1,089,180 |
1,039,927 |
||||||||||||
Subtotal |
561,170 |
573,803 |
1,350,527 |
1,251,371 |
||||||||||||
Other Tobacco Operations (2) |
74,937 |
79,778 |
204,903 |
175,080 |
||||||||||||
Consolidated sales and other operating revenue |
$ |
636,107 |
$ |
653,581 |
$ |
1,555,430 |
$ |
1,426,451 |
||||||||
OPERATING INCOME |
||||||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||||||
North America |
$ |
3,147 |
$ |
3,588 |
$ |
20,395 |
$ |
13,784 |
||||||||
Other Regions (1) |
53,283 |
56,895 |
96,828 |
98,225 |
||||||||||||
Subtotal |
56,430 |
60,483 |
117,223 |
112,009 |
||||||||||||
Other Tobacco Operations (2) |
6,210 |
5,422 |
8,081 |
5,310 |
||||||||||||
Segment operating income |
62,640 |
65,905 |
125,304 |
117,319 |
||||||||||||
Deduct: Equity in pretax earnings of unconsolidated affiliates (3) |
(5,512) |
(6,404) |
(5,437) |
(6,636) |
||||||||||||
Restructuring and impairment costs (4) |
(19,447) |
— |
(19,447) |
— |
||||||||||||
Consolidated operating income |
$ |
37,681 |
$ |
59,501 |
$ |
100,420 |
$ |
110,683 |
(1) |
Includes South America, Africa, Europe, and Asia regions, as well as inter-region eliminations. |
(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. |
NOTE 5. RESTRUCTURING AND IMPAIRMENT COSTS
Universal began sourcing tobacco from
In addition to the actions being taken with respect to the workforce in
A summary of the restructuring and impairment costs recorded in the quarter ended December 31, 2018 related to the Company's operations in
(in thousands, except share and per share data) |
Three Months Ended December 31, 2018 |
|||||
Restructuring costs: |
||||||
Employee termination benefits |
$ |
3,974 |
||||
Impairment costs: |
||||||
Property, plant and equipment |
14,584 |
|||||
Goodwill |
889 |
|||||
15,473 |
||||||
Total restructuring and impairment costs |
$ |
19,447 |
The
A reconciliation of the liability for termination benefits through December 31, 2018 is as follows:
(in thousands, except share and per share data) |
Three Months Ended December 31, 2018 |
|||||
Costs charged to expense |
$ |
3,974 |
||||
Payments |
(734) |
|||||
Balance at December 31, 2018 |
$ |
3,240 |
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SOURCE
Candace C. Formacek, Phone: (804) 359-9311, Fax: (804) 254-3584, Email: investor@universalleaf.com