Universal Corporation Reports Six Month Results
For the second fiscal quarter ended
Mr. Freeman stated, "Large carryover crop sales, particularly in
"As the leading global leaf tobacco supplier and in line with our capital allocation strategy, we continue to make disciplined investments in our leaf tobacco business where we see opportunities to grow and strengthen that business. We have recently agreed in principle with one of our major customers to provide additional sustainable tobacco supply and value-added services in
"We also continue, in a disciplined and deliberate manner, to actively engage with potential targets in our pipeline for growth opportunities outside of leaf tobacco in adjacent industries and markets that we believe will utilize our assets and capabilities and deliver value to our shareholders. We consider adjacencies to be industries and markets where we can leverage our strengths such as country knowledge, agricultural expertise, and complex grower management and logistic network management. As we look to adjacent industries and explore growth opportunities within tobacco, we are dedicated to remaining the leading global leaf tobacco supplier and building on our strong history.
"At the same time that we have been making investments in our leaf tobacco business and progress on our investment pipeline in adjacent industries, we have also returned value to our shareholders through dividends and share repurchases. In the first half of fiscal year 2020, we returned just over
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 six months and quarter ended
The Company's consolidated effective tax rates for the six months and quarter ended
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, 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 September 30, |
Six Months Ended September 30, |
|||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||
(Unaudited) |
(Unaudited) |
|||||||||||
Sales and other operating revenues |
$ |
475,921 |
$ |
539,604 |
$ |
772,836 |
$ |
919,323 |
||||
Costs and expenses |
||||||||||||
Cost of goods sold |
379,892 |
440,144 |
618,157 |
747,642 |
||||||||
Selling, general and administrative expenses |
52,830 |
45,090 |
103,966 |
108,942 |
||||||||
Operating income |
43,199 |
54,370 |
50,713 |
62,739 |
||||||||
Equity in pretax earnings of unconsolidated affiliates |
2,310 |
(614) |
2,350 |
(75) |
||||||||
Other non-operating income |
633 |
196 |
1,260 |
386 |
||||||||
Interest income |
240 |
299 |
1,248 |
811 |
||||||||
Interest expense |
5,136 |
4,593 |
9,164 |
8,542 |
||||||||
Income before income taxes and other items |
41,246 |
49,658 |
46,407 |
55,319 |
||||||||
Income taxes |
11,499 |
15,365 |
15,765 |
9,966 |
||||||||
Net income |
29,747 |
34,293 |
30,642 |
45,353 |
||||||||
Less: net income attributable to noncontrolling interests in subsidiaries |
(1,670) |
(2,847) |
(493) |
(728) |
||||||||
Net income attributable to Universal Corporation |
28,077 |
31,446 |
30,149 |
44,625 |
||||||||
Earnings per share: |
||||||||||||
Basic |
$ |
1.12 |
$ |
1.25 |
$ |
1.20 |
$ |
1.78 |
||||
Diluted |
$ |
1.11 |
$ |
1.24 |
$ |
1.19 |
$ |
1.76 |
||||
See accompanying notes. |
UNIVERSAL CORPORATION |
|||||||||
CONSOLIDATED BALANCE SHEETS |
|||||||||
(in thousands of dollars) |
|||||||||
September 30, |
September 30, |
March 31, |
|||||||
2019 |
2018 |
2019 |
|||||||
(Unaudited) |
(Unaudited) |
||||||||
ASSETS |
|||||||||
Current assets |
|||||||||
Cash and cash equivalents |
$ |
53,173 |
$ |
67,876 |
$ |
297,556 |
|||
Accounts receivable, net |
337,825 |
355,674 |
368,110 |
||||||
Advances to suppliers, net |
75,828 |
53,823 |
106,850 |
||||||
Accounts receivable—unconsolidated affiliates |
82,812 |
107,198 |
30,951 |
||||||
Inventories—at lower of cost or net realizable value: |
|||||||||
Tobacco |
918,592 |
935,406 |
629,606 |
||||||
Other |
97,536 |
87,958 |
69,611 |
||||||
Prepaid income taxes |
13,454 |
17,131 |
14,264 |
||||||
Other current assets |
70,338 |
73,862 |
71,197 |
||||||
Total current assets |
1,649,558 |
1,698,928 |
1,588,145 |
||||||
Property, plant and equipment |
|||||||||
Land |
22,696 |
23,020 |
22,952 |
||||||
Buildings |
261,599 |
269,738 |
261,976 |
||||||
Machinery and equipment |
609,320 |
642,915 |
608,191 |
||||||
893,615 |
935,673 |
893,119 |
|||||||
Less accumulated depreciation |
(598,184) |
(613,130) |
(590,625) |
||||||
295,431 |
322,543 |
302,494 |
|||||||
Other assets |
|||||||||
Operating lease right-of-use assets |
34,838 |
— |
— |
||||||
Goodwill and other intangibles |
97,998 |
98,860 |
97,994 |
||||||
Investments in unconsolidated affiliates |
79,072 |
83,962 |
80,482 |
||||||
Deferred income taxes |
16,250 |
20,473 |
13,357 |
||||||
Other noncurrent assets |
45,085 |
47,480 |
50,712 |
||||||
273,243 |
250,775 |
242,545 |
|||||||
Total assets |
$ |
2,218,232 |
$ |
2,272,246 |
$ |
2,133,184 |
|||
See accompanying notes. |
UNIVERSAL CORPORATION |
|||||||||
CONSOLIDATED BALANCE SHEETS |
|||||||||
(in thousands of dollars) |
|||||||||
September 30, |
September 30, |
March 31, |
|||||||
2019 |
2018 |
2019 |
|||||||
(Unaudited) |
(Unaudited) |
||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||||
Current liabilities |
|||||||||
Notes payable and overdrafts |
$ |
155,352 |
$ |
148,049 |
$ |
54,023 |
|||
Accounts payable and accrued expenses |
158,731 |
162,972 |
145,506 |
||||||
Accounts payable—unconsolidated affiliates |
56 |
4,862 |
106 |
||||||
Customer advances and deposits |
6,513 |
45,098 |
21,675 |
||||||
Accrued compensation |
22,046 |
22,610 |
31,372 |
||||||
Income taxes payable |
1,155 |
6,668 |
1,066 |
||||||
Current portion of operating lease liabilities |
8,591 |
— |
— |
||||||
Current portion of long-term debt |
— |
— |
— |
||||||
Total current liabilities |
352,444 |
390,259 |
253,748 |
||||||
Long-term debt |
368,633 |
369,262 |
368,503 |
||||||
Pensions and other postretirement benefits |
54,113 |
56,347 |
59,257 |
||||||
Long-term operating lease liabilities |
23,331 |
— |
— |
||||||
Other long-term liabilities |
56,146 |
41,758 |
43,214 |
||||||
Deferred income taxes |
24,982 |
36,202 |
28,584 |
||||||
Total liabilities |
879,649 |
893,828 |
753,306 |
||||||
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 24,841,863 shares issued and outstanding at September 30, 2019 (24,968,799 at September 30, 2018 and 24,989,946 at March 31, 2019) |
324,927 |
324,626 |
326,600 |
||||||
Retained earnings |
1,088,608 |
1,084,763 |
1,106,178 |
||||||
Accumulated other comprehensive loss |
(114,876) |
(73,048) |
(95,691) |
||||||
Total Universal Corporation shareholders' equity |
1,298,659 |
1,336,341 |
1,337,087 |
||||||
Noncontrolling interests in subsidiaries |
39,924 |
42,077 |
42,791 |
||||||
Total shareholders' equity |
1,338,583 |
1,378,418 |
1,379,878 |
||||||
Total liabilities and shareholders' equity |
$ |
2,218,232 |
$ |
2,272,246 |
$ |
2,133,184 |
|||
See accompanying notes. |
UNIVERSAL CORPORATION |
||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||
(in thousands of dollars) |
||||||
Six Months Ended September 30, |
||||||
2019 |
2018 |
|||||
(Unaudited) |
||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||
Net income |
$ |
30,642 |
$ |
45,353 |
||
Adjustments to reconcile net income to net cash used by operating activities: |
||||||
Depreciation |
18,231 |
18,440 |
||||
Net provision for losses (recoveries) on advances and guaranteed loans to suppliers |
(1,885) |
(5,408) |
||||
Foreign currency remeasurement (gain) loss, net |
1,767 |
3,952 |
||||
Restructuring payments |
(298) |
(27) |
||||
Other, net |
(301) |
(2,459) |
||||
Changes in operating assets and liabilities, net |
(327,975) |
(272,847) |
||||
Net cash used by operating activities |
(279,819) |
(212,996) |
||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||
Purchase of property, plant and equipment |
(13,308) |
(20,043) |
||||
Proceeds from sale of property, plant and equipment |
1,254 |
858 |
||||
Other |
— |
2,000 |
||||
Net cash used by investing activities |
(12,054) |
(17,185) |
||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||
Issuance of short-term debt, net |
104,003 |
102,489 |
||||
Dividends paid to noncontrolling interests |
(3,359) |
(1,260) |
||||
Repurchase of common stock |
(12,338) |
(1,443) |
||||
Dividends paid on common stock |
(37,721) |
(32,430) |
||||
Other |
(2,883) |
(2,657) |
||||
Net cash provided by financing activities |
47,702 |
64,699 |
||||
Effect of exchange rate changes on cash |
(212) |
(770) |
||||
Net decrease in cash and cash equivalents |
(244,383) |
(166,252) |
||||
Cash and cash equivalents at beginning of year |
297,556 |
234,128 |
||||
Cash and cash equivalents at end of period |
$ |
53,173 |
$ |
67,876 |
||
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 September 30, |
Six Months Ended September 30, |
|||||||||||
(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 |
$ |
28,077 |
$ |
31,446 |
$ |
30,149 |
$ |
44,625 |
||||
Denominator for basic earnings per share |
||||||||||||
Weighted average shares outstanding |
25,086,580 |
25,152,864 |
25,122,283 |
25,108,724 |
||||||||
Basic earnings per share |
$ |
1.12 |
$ |
1.25 |
$ |
1.20 |
$ |
1.78 |
||||
Diluted Earnings Per Share |
||||||||||||
Numerator for diluted earnings per share |
||||||||||||
Net income attributable to Universal Corporation |
28,077 |
31,446 |
30,149 |
44,625 |
||||||||
Denominator for diluted earnings per share: |
||||||||||||
Weighted average shares outstanding |
25,086,580 |
25,152,864 |
25,122,283 |
25,108,724 |
||||||||
Effect of dilutive securities |
||||||||||||
Employee share-based awards |
110,745 |
184,856 |
118,317 |
202,568 |
||||||||
Denominator for diluted earnings per share |
25,197,325 |
25,337,720 |
25,240,600 |
25,311,292 |
||||||||
Diluted earnings per share |
$ |
1.11 |
$ |
1.24 |
$ |
1.19 |
$ |
1.76 |
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 |
Six Months Ended |
|||||||||||
(in thousands of dollars) |
2019 |
2018 |
2019 |
2018 |
||||||||
SALES AND OTHER OPERATING REVENUES |
||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||
North America |
$ |
57,612 |
$ |
67,782 |
$ |
85,271 |
$ |
183,338 |
||||
Other Regions (1) |
355,757 |
398,087 |
557,822 |
606,019 |
||||||||
Subtotal |
413,369 |
465,869 |
643,093 |
789,357 |
||||||||
Other Tobacco Operations (2) |
62,552 |
73,735 |
129,743 |
129,966 |
||||||||
Consolidated sales and other operating revenue |
$ |
475,921 |
$ |
539,604 |
$ |
772,836 |
$ |
919,323 |
||||
OPERATING INCOME |
||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||
North America |
$ |
5,472 |
$ |
8,296 |
$ |
6,362 |
$ |
17,248 |
||||
Other Regions (1) |
32,525 |
45,562 |
28,710 |
43,545 |
||||||||
Subtotal |
37,997 |
53,858 |
35,072 |
60,793 |
||||||||
Other Tobacco Operations (2) |
7,512 |
(102) |
17,991 |
1,871 |
||||||||
Segment operating income |
45,509 |
53,756 |
53,063 |
62,664 |
||||||||
Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (3) |
(2,310) |
614 |
(2,350) |
75 |
||||||||
Consolidated operating income |
$ |
43,199 |
$ |
54,370 |
$ |
50,713 |
$ |
62,739 |
(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. |
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SOURCE
Candace C. Formacek, Phone: (804) 359-9311, Fax: (804) 254-3584, Email: investor@universalleaf.com