Universal Corporation Reports Nine Month Results
For the third fiscal quarter, ended
Segment operating income was
Mr. Freeman stated, "Consistent with results reported for the first half of our current fiscal year, results through the third quarter of fiscal year 2020 continue to reflect unfavorable variances to the same period in fiscal year 2019, when we benefited from large carryover crop sales volumes, mainly in
"We have also remained focused on solidifying our position as the leading global leaf tobacco supplier. We continue to see and develop opportunities in our leaf tobacco business to gain market share and increase operating efficiencies whether it be by realignment of processing capacity, such as recent steps taken in
"At the same time, we are progressing in our previously announced plans to invest in non-tobacco growth opportunities and announced the completion of our first such acquisition,
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 of
OTHER ITEMS:
Cost of goods sold in the nine months and quarter ended
The following tables set forth certain non-recurring items included in reported results:
Adjusted Operating Income |
|||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||
(in millions) |
2019 |
2018 |
2019 |
2018 |
|||||||||||
As Reported: Consolidated operating income |
$ |
44.1 |
$ |
37.7 |
$ |
94.8 |
$ |
100.4 |
|||||||
FruitSmart acquisition transaction costs(1) |
0.9 |
— |
1.9 |
— |
|||||||||||
Restructuring and impairment costs(2) |
— |
19.4 |
— |
19.5 |
|||||||||||
Adjusted operating income |
$ |
45.0 |
$ |
57.1 |
$ |
96.7 |
$ |
119.9 |
|||||||
Adjusted Net Income and Diluted Earnings Per Share |
|||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||
(in millions and reported net of income taxes) |
2019 |
2018 |
2019 |
2018 |
|||||||||||
As Reported: Net income available to Universal Corporation |
$ |
26.0 |
$ |
28.1 |
$ |
56.1 |
$ |
72.8 |
|||||||
FruitSmart acquisition transaction costs(1) |
0.9 |
— |
1.9 |
— |
|||||||||||
Restructuring and impairment costs(2) |
— |
15.8 |
— |
15.8 |
|||||||||||
Unresolved income tax matter for a foreign subsidiary |
— |
— |
2.8 |
— |
|||||||||||
Income tax benefit from dividend withholding tax liability |
— |
— |
— |
(7.8) |
|||||||||||
Adjusted Net income available to Universal Corporation |
$ |
26.9 |
$ |
43.9 |
$ |
60.8 |
$ |
80.8 |
|||||||
Adjusted diluted earnings per share |
$ |
1.08 |
$ |
1.73 |
$ |
2.41 |
$ |
3.19 |
(1) |
The Company incurred legal and professional fees associated with the acquisition of FruitSmart (effective January 1, 2020). These costs are not deductible for U.S. income tax purposes. |
(2) |
In the third quarter of fiscal year 2019, the Company recognized a restructuring and impairment charge related to the Company's operations in Tanzania. |
(3) |
During fiscal year 2019, the Company reversed a portion of a liability previously recorded for dividend withholding taxes on the cumulative retained earnings of a foreign subsidiary. |
The Company's consolidated effective tax rates for the nine months and quarter ended
The Company's consolidated effective tax rates for the nine months and quarter ended
The effective tax rates for all periods include the benefit of various tax planning opportunities, as well as the net effect of items accounted for on a discrete basis in the respective reporting periods.
Additional information
Amounts included 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, 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
UNIVERSAL CORPORATION |
||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME |
||||||||||||||||
(in thousands of dollars, except per share data) |
||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||||||
Sales and other operating revenues |
$ |
505,049 |
$ |
636,107 |
$ |
1,277,885 |
$ |
1,555,430 |
||||||||
Costs and expenses |
||||||||||||||||
Cost of goods sold |
412,076 |
520,677 |
1,030,233 |
1,268,319 |
||||||||||||
Selling, general and administrative expenses |
48,858 |
58,302 |
152,824 |
167,244 |
||||||||||||
Restructuring and impairment costs |
— |
19,447 |
— |
19,447 |
||||||||||||
Operating income |
44,115 |
37,681 |
94,828 |
100,420 |
||||||||||||
Equity in pretax earnings (loss) of unconsolidated affiliates |
(69) |
5,512 |
2,281 |
5,437 |
||||||||||||
Other non-operating income |
633 |
163 |
1,893 |
549 |
||||||||||||
Interest income |
164 |
233 |
1,412 |
1,044 |
||||||||||||
Interest expense |
5,197 |
4,732 |
14,361 |
13,274 |
||||||||||||
Income before income taxes and other items |
39,646 |
38,857 |
86,053 |
94,176 |
||||||||||||
Income taxes |
10,328 |
7,768 |
26,093 |
17,734 |
||||||||||||
Net income |
29,318 |
31,089 |
59,960 |
76,442 |
||||||||||||
Less: net income attributable to noncontrolling interests in subsidiaries |
(3,352) |
(2,954) |
(3,845) |
(3,682) |
||||||||||||
Net income attributable to Universal Corporation |
25,966 |
28,135 |
56,115 |
72,760 |
||||||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ |
1.04 |
$ |
1.12 |
$ |
2.24 |
$ |
2.90 |
||||||||
Diluted |
$ |
1.04 |
$ |
1.11 |
$ |
2.23 |
$ |
2.87 |
||||||||
See accompanying notes. |
UNIVERSAL CORPORATION |
||||||||||||
CONSOLIDATED BALANCE SHEETS |
||||||||||||
(in thousands of dollars) |
||||||||||||
December 31, |
December 31, |
March 31, |
||||||||||
2019 |
2018 |
2019 |
||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ |
64,734 |
$ |
138,358 |
$ |
297,556 |
||||||
Accounts receivable, net |
271,981 |
336,564 |
368,110 |
|||||||||
Advances to suppliers, net |
120,079 |
98,942 |
106,850 |
|||||||||
Accounts receivable—unconsolidated affiliates |
24,748 |
77,543 |
30,951 |
|||||||||
Inventories—at lower of cost or net realizable value: |
||||||||||||
Tobacco |
937,661 |
867,181 |
629,606 |
|||||||||
Other |
84,621 |
74,360 |
69,611 |
|||||||||
Prepaid income taxes |
13,619 |
21,170 |
14,264 |
|||||||||
Other current assets |
61,450 |
70,309 |
71,197 |
|||||||||
Total current assets |
1,578,893 |
1,684,427 |
1,588,145 |
|||||||||
Property, plant and equipment |
||||||||||||
Land |
22,510 |
23,018 |
22,952 |
|||||||||
Buildings |
255,202 |
253,150 |
261,976 |
|||||||||
Machinery and equipment |
609,976 |
603,752 |
608,191 |
|||||||||
887,688 |
879,920 |
893,119 |
||||||||||
Less accumulated depreciation |
(592,457) |
(572,634) |
(590,625) |
|||||||||
295,231 |
307,286 |
302,494 |
||||||||||
Other assets |
||||||||||||
Operating lease right-of-use assets |
34,230 |
— |
— |
|||||||||
Goodwill and other intangibles |
98,042 |
98,008 |
97,994 |
|||||||||
Investments in unconsolidated affiliates |
77,783 |
80,558 |
80,482 |
|||||||||
Deferred income taxes |
16,354 |
13,959 |
13,357 |
|||||||||
Other noncurrent assets |
50,186 |
44,378 |
50,712 |
|||||||||
276,595 |
236,903 |
242,545 |
||||||||||
Total assets |
$ |
2,150,719 |
$ |
2,228,616 |
$ |
2,133,184 |
||||||
See accompanying notes. |
UNIVERSAL CORPORATION |
||||||||||||
CONSOLIDATED BALANCE SHEETS |
||||||||||||
(in thousands of dollars) |
||||||||||||
December 31, |
December 31, |
March 31, |
||||||||||
2019 |
2018 |
2019 |
||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Notes payable and overdrafts |
$ |
92,592 |
$ |
129,316 |
$ |
54,023 |
||||||
Accounts payable and accrued expenses |
130,165 |
144,107 |
145,506 |
|||||||||
Accounts payable—unconsolidated affiliates |
7,494 |
1,470 |
106 |
|||||||||
Customer advances and deposits |
8,230 |
56,355 |
21,675 |
|||||||||
Accrued compensation |
21,761 |
23,989 |
31,372 |
|||||||||
Income taxes payable |
1,991 |
3,090 |
1,066 |
|||||||||
Current portion of operating lease liabilities |
8,394 |
— |
— |
|||||||||
Current portion of long-term debt |
— |
— |
— |
|||||||||
Total current liabilities |
270,627 |
358,327 |
253,748 |
|||||||||
Long-term debt |
368,698 |
368,438 |
368,503 |
|||||||||
Pensions and other postretirement benefits |
55,305 |
41,601 |
59,257 |
|||||||||
Long-term operating lease liabilities |
23,465 |
— |
— |
|||||||||
Other long-term liabilities |
51,185 |
38,467 |
43,214 |
|||||||||
Deferred income taxes |
28,228 |
32,000 |
28,584 |
|||||||||
Total liabilities |
797,508 |
838,833 |
753,306 |
|||||||||
Shareholders' equity |
||||||||||||
Universal Corporation: |
||||||||||||
Preferred stock: |
||||||||||||
Series A Junior Participating Preferred Stock, no par value, 500,000 shares |
— |
— |
— |
|||||||||
Common stock, no par value, 100,000,000 shares authorized 24,693,557 |
324,388 |
326,323 |
326,600 |
|||||||||
Retained earnings |
1,089,718 |
1,093,829 |
1,106,178 |
|||||||||
Accumulated other comprehensive loss |
(104,310) |
(75,667) |
(95,691) |
|||||||||
Total Universal Corporation shareholders' equity |
1,309,796 |
1,344,485 |
1,337,087 |
|||||||||
Noncontrolling interests in subsidiaries |
43,415 |
45,298 |
42,791 |
|||||||||
Total shareholders' equity |
1,353,211 |
1,389,783 |
1,379,878 |
|||||||||
Total liabilities and shareholders' equity |
$ |
2,150,719 |
$ |
2,228,616 |
$ |
2,133,184 |
||||||
See accompanying notes. |
UNIVERSAL CORPORATION |
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(in thousands of dollars) |
||||||||
Nine Months Ended December 31, |
||||||||
2019 |
2018 |
|||||||
(Unaudited) |
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ |
59,960 |
$ |
76,442 |
||||
Adjustments to reconcile net income to net cash used by operating activities: |
||||||||
Depreciation |
27,500 |
27,651 |
||||||
Net provision for losses (recoveries) on advances and guaranteed loans to suppliers |
93 |
(3,045) |
||||||
Foreign currency remeasurement (gain) loss, net |
(2,179) |
1,790 |
||||||
Restructuring and impairment costs |
— |
19,447 |
||||||
Restructuring payments |
(444) |
(762) |
||||||
Other, net |
2,714 |
6,812 |
||||||
Changes in operating assets and liabilities, net |
(260,542) |
(225,648) |
||||||
Net cash used by operating activities |
(172,898) |
(97,313) |
||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchase of property, plant and equipment |
(21,692) |
(28,370) |
||||||
Proceeds from sale of property, plant and equipment |
2,946 |
1,377 |
||||||
Other |
496 |
2,000 |
||||||
Net cash used by investing activities |
(18,250) |
(24,993) |
||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Issuance of short-term debt, net |
41,201 |
85,893 |
||||||
Dividends paid to noncontrolling interests |
(3,359) |
(1,260) |
||||||
Repurchase of common stock |
(20,125) |
(1,443) |
||||||
Dividends paid on common stock |
(56,601) |
(51,156) |
||||||
Other |
(2,883) |
(4,946) |
||||||
Net cash (used) provided by financing activities |
(41,767) |
27,088 |
||||||
Effect of exchange rate changes on cash |
93 |
(552) |
||||||
Net decrease in cash and cash equivalents |
(232,822) |
(95,770) |
||||||
Cash and cash equivalents at beginning of year |
297,556 |
234,128 |
||||||
Cash and cash equivalents at end of period |
$ |
64,734 |
$ |
138,358 |
||||
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) |
2019 |
2018 |
2019 |
2018 |
||||||||||||
Basic Earnings Per Share |
||||||||||||||||
Numerator for basic earnings per share |
||||||||||||||||
Net income attributable to Universal Corporation |
$ |
25,966 |
$ |
28,135 |
$ |
56,115 |
$ |
72,760 |
||||||||
Denominator for basic earnings per share |
||||||||||||||||
Weighted average shares outstanding |
24,931,711 |
25,162,268 |
25,058,525 |
25,126,595 |
||||||||||||
Basic earnings per share |
$ |
1.04 |
$ |
1.12 |
$ |
2.24 |
$ |
2.90 |
||||||||
Diluted Earnings Per Share |
||||||||||||||||
Numerator for diluted earnings per share |
||||||||||||||||
Net income attributable to Universal Corporation |
25,966 |
28,135 |
56,115 |
72,760 |
||||||||||||
Denominator for diluted earnings per share: |
||||||||||||||||
Weighted average shares outstanding |
24,931,711 |
25,162,268 |
25,058,525 |
25,126,595 |
||||||||||||
Effect of dilutive securities |
||||||||||||||||
Employee share-based awards |
123,343 |
203,498 |
119,992 |
202,878 |
||||||||||||
Denominator for diluted earnings per share |
25,055,054 |
25,365,766 |
25,178,517 |
25,329,473 |
||||||||||||
Diluted earnings per share |
$ |
1.04 |
$ |
1.11 |
$ |
2.23 |
$ |
2.87 |
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 |
Nine Months Ended |
|||||||||||||||
(in thousands of dollars) |
2019 |
2018 |
2019 |
2018 |
||||||||||||
SALES AND OTHER OPERATING REVENUES |
||||||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||||||
North America |
$ |
49,378 |
$ |
78,009 |
$ |
134,649 |
$ |
261,347 |
||||||||
Other Regions (1) |
386,261 |
483,161 |
944,083 |
1,089,180 |
||||||||||||
Subtotal |
435,639 |
561,170 |
1,078,732 |
1,350,527 |
||||||||||||
Other Tobacco Operations (2) |
69,410 |
74,937 |
199,153 |
204,903 |
||||||||||||
Consolidated sales and other operating revenue |
$ |
505,049 |
$ |
636,107 |
$ |
1,277,885 |
$ |
1,555,430 |
||||||||
OPERATING INCOME |
||||||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||||||
North America |
$ |
352 |
$ |
3,147 |
$ |
6,714 |
$ |
20,395 |
||||||||
Other Regions (1) |
39,430 |
53,283 |
68,140 |
96,828 |
||||||||||||
Subtotal |
39,782 |
56,430 |
74,854 |
117,223 |
||||||||||||
Other Tobacco Operations (2) |
4,264 |
6,210 |
22,255 |
8,081 |
||||||||||||
Segment operating income |
44,046 |
62,640 |
97,109 |
125,304 |
||||||||||||
Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (3) |
69 |
(5,512) |
(2,281) |
(5,437) |
||||||||||||
Restructuring and impairment costs (4) |
— |
(19,447) |
— |
(19,447) |
||||||||||||
Consolidated operating income |
$ |
44,115 |
$ |
37,681 |
$ |
94,828 |
$ |
100,420 |
(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 (loss) of an unconsolidated affiliates. |
(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) |
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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SOURCE
Candace C. Formacek, Phone: (804) 359-9311, Fax: (804) 254-3584, Email: investor@universalleaf.com