Universal Corporation Reports Six Month Results
For the second fiscal quarter ended
Segment operating income was
"We have also been focused on and are very excited about our recent acquisition of
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
COVID-19 PANDEMIC IMPACT
On
We continue to work with our suppliers to mitigate the impacts to our supply chain due to the ongoing pandemic. To date, we have not experienced a material impact to our supply chain, although COVID-19 has resulted in delays in certain operations. In addition, our plant-based ingredients platform has seen some shifts in product mix due to COVID-19 related changes in customer demand. Since
We continue to monitor the impacts of COVID-19, which include slower processing of our products due to controlled staffing in our facilities that could lead to further delays of shipments to our customers. We believe we currently have sufficient liquidity to meet our current obligations and our business operations remain fundamentally unchanged other than shipping delays, which could continue to impact quarterly comparisons. This is, however, a rapidly evolving situation, and we cannot predict the extent, resurgence, or duration of the ongoing COVID-19 pandemic, the effects of it on the global, national or local economy, including the impacts on our ability to access capital, or its effects on our business, financial position, results of operations, and cash flows. We continue to monitor developments affecting our employees, customers and operations, will take additional steps to address the spread of COVID-19 and its impacts, as necessary, and remain thankful for the hard work of our employees and the continued support of our customers, growers, and other partners during these challenging times.
OTHER ITEMS
Cost of goods sold in the six months and quarter ended
For the six months and quarter ended
Our consolidated effective tax rates for the six months and quarter ended
The following tables set forth certain non-recurring items included in reported results to reconcile adjusted operating income to consolidated operating income and adjusted net income to net income attributable to
Adjusted Operating Income Reconciliation |
|||||||||||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||||||||||
(in thousands) |
2020 |
2019 |
2020 |
2019 |
|||||||||||||||||||
As Reported: Consolidated operating income |
$ |
16,351 |
$ |
43,199 |
$ |
24,879 |
$ |
50,713 |
|||||||||||||||
Transaction costs for acquisitions(1) |
$ |
1,663 |
$ |
673 |
$ |
1,663 |
$ |
673 |
|||||||||||||||
Fair value adjustment to contingent consideration for FruitSmart acquisition(2) |
— |
— |
(4,173) |
— |
|||||||||||||||||||
Adjusted operating income |
$ |
18,014 |
$ |
43,872 |
$ |
22,369 |
$ |
51,386 |
|||||||||||||||
Adjusted Net Income and Diluted Earnings Per Share |
|||||||||||||||||||||||
(in thousands and reported net of income taxes) |
Three Months Ended |
Six Months Ended |
|||||||||||||||||||||
(all amounts are reported net of income taxes) |
2020 |
2019 |
2020 |
2019 |
|||||||||||||||||||
As Reported: Net income available to |
$ |
7,502 |
$ |
28,077 |
$ |
14,776 |
$ |
30,149 |
|||||||||||||||
Transaction costs for acquisitions(1) |
1,663 |
673 |
1,663 |
673 |
|||||||||||||||||||
Fair value adjustment to contingent consideration for FruitSmart acquisition(2) |
— |
— |
(4,173) |
— |
|||||||||||||||||||
Interest expense related to an uncertain tax matter at a foreign subsidiary |
— |
— |
1,849 |
— |
|||||||||||||||||||
Income tax benefit from dividend withholding tax liability reversal(3) |
— |
— |
(4,421) |
— |
|||||||||||||||||||
Income tax settlement for a foreign subsidiary(4) |
— |
— |
— |
2,766 |
|||||||||||||||||||
Adjusted Net income available to |
$ |
9,165 |
$ |
28,750 |
$ |
9,694 |
$ |
33,588 |
|||||||||||||||
As reported: Diluted earnings per share |
$ |
0.30 |
$ |
1.11 |
$ |
0.60 |
$ |
1.19 |
|||||||||||||||
As adjusted: Diluted earnings per share |
$ |
0.37 |
$ |
1.14 |
$ |
0.40 |
$ |
1.33 |
(1) |
The Company incurred selling, general, and administrative expenses for due diligence and other transaction costs associated with the acquisitions of Silva (effective |
(2) |
The Company reversed a portion of the contingent consideration liability for the |
(3) |
The Company recognized an income tax benefit for the final |
(4) |
During the 1st quarter of fiscal year 2020, the Company recognized an income tax settlement charge related to operations at a foreign subsidiary. |
Additional information
Amounts described as net income (loss) and earnings (loss) per diluted share 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, impacts of the ongoing COVID-19 pandemic; integration of
At
CONSOLIDATED STATEMENTS OF INCOME (in thousands of dollars, except per share data) |
||||||||||||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||||||||||||||||
Sales and other operating revenues |
$ |
377,025 |
$ |
475,921 |
$ |
692,836 |
$ |
772,836 |
||||||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||
Cost of goods sold |
308,267 |
379,892 |
570,313 |
618,157 |
||||||||||||||||||||||
Selling, general and administrative expenses |
52,407 |
52,830 |
101,817 |
103,966 |
||||||||||||||||||||||
Other income |
— |
— |
(4,173) |
— |
||||||||||||||||||||||
Operating income |
16,351 |
43,199 |
24,879 |
50,713 |
||||||||||||||||||||||
Equity in pretax earnings (loss) of unconsolidated affiliates |
590 |
2,310 |
583 |
2,350 |
||||||||||||||||||||||
Other non-operating income (expense) |
(20) |
633 |
(38) |
1,260 |
||||||||||||||||||||||
Interest income |
101 |
240 |
260 |
1,248 |
||||||||||||||||||||||
Interest expense |
5,595 |
5,136 |
12,405 |
9,164 |
||||||||||||||||||||||
Income before income taxes and other items |
11,427 |
41,246 |
13,279 |
46,407 |
||||||||||||||||||||||
Income taxes |
3,178 |
11,499 |
(1,870) |
15,765 |
||||||||||||||||||||||
Net income |
8,249 |
29,747 |
15,149 |
30,642 |
||||||||||||||||||||||
Less: net loss (income) attributable to noncontrolling interests in subsidiaries |
(747) |
(1,670) |
(373) |
(493) |
||||||||||||||||||||||
Net income attributable to |
$ |
7,502 |
$ |
28,077 |
$ |
14,776 |
$ |
30,149 |
||||||||||||||||||
Earnings per share: |
||||||||||||||||||||||||||
Basic |
$ |
0.30 |
$ |
1.12 |
$ |
0.60 |
$ |
1.20 |
||||||||||||||||||
Diluted |
$ |
0.30 |
$ |
1.11 |
$ |
0.60 |
$ |
1.19 |
||||||||||||||||||
See accompanying notes. |
CONSOLIDATED BALANCE SHEETS (in thousands of dollars) |
||||||||||||||||||||
|
|
|
||||||||||||||||||
2020 |
2019 |
2020 |
||||||||||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||||||||||
ASSETS |
||||||||||||||||||||
Current assets |
||||||||||||||||||||
Cash and cash equivalents |
$ |
57,084 |
$ |
53,173 |
$ |
107,430 |
||||||||||||||
Accounts receivable, net |
329,332 |
337,825 |
340,711 |
|||||||||||||||||
Advances to suppliers, net |
65,643 |
75,828 |
133,778 |
|||||||||||||||||
Accounts receivable—unconsolidated affiliates |
47,807 |
82,812 |
11,483 |
|||||||||||||||||
Inventories—at lower of cost or net realizable value: |
||||||||||||||||||||
Tobacco |
888,213 |
918,592 |
707,298 |
|||||||||||||||||
Other |
116,299 |
97,536 |
99,275 |
|||||||||||||||||
Prepaid income taxes |
20,712 |
13,454 |
12,144 |
|||||||||||||||||
Other current assets |
69,564 |
70,338 |
67,498 |
|||||||||||||||||
Total current assets |
1,594,654 |
1,649,558 |
1,479,617 |
|||||||||||||||||
Property, plant and equipment |
||||||||||||||||||||
Land |
21,515 |
22,696 |
21,376 |
|||||||||||||||||
Buildings |
259,875 |
261,599 |
256,488 |
|||||||||||||||||
Machinery and equipment |
657,435 |
609,320 |
634,395 |
|||||||||||||||||
938,825 |
893,615 |
912,259 |
||||||||||||||||||
Less accumulated depreciation |
(617,553) |
(598,184) |
(597,106) |
|||||||||||||||||
321,272 |
295,431 |
315,153 |
||||||||||||||||||
Other assets |
||||||||||||||||||||
Operating lease right-of-use assets |
35,665 |
34,838 |
39,256 |
|||||||||||||||||
|
143,219 |
97,998 |
144,687 |
|||||||||||||||||
Investments in unconsolidated affiliates |
82,628 |
79,072 |
77,543 |
|||||||||||||||||
Deferred income taxes |
22,615 |
16,250 |
20,954 |
|||||||||||||||||
Other noncurrent assets |
42,239 |
45,085 |
43,711 |
|||||||||||||||||
326,366 |
273,243 |
326,151 |
||||||||||||||||||
Total assets |
$ |
2,242,292 |
$ |
2,218,232 |
$ |
2,120,921 |
||||||||||||||
See accompanying notes. |
CONSOLIDATED BALANCE SHEETS (in thousands of dollars) |
||||||||||||||||||||
|
|
|
||||||||||||||||||
2020 |
2019 |
2020 |
||||||||||||||||||
(Unaudited) |
(Unaudited) |
|||||||||||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||||||||||||||
Current liabilities |
||||||||||||||||||||
Notes payable and overdrafts |
$ |
235,413 |
$ |
155,352 |
$ |
78,033 |
||||||||||||||
Accounts payable and accrued expenses |
133,034 |
158,731 |
140,202 |
|||||||||||||||||
Accounts payable—unconsolidated affiliates |
117 |
56 |
55 |
|||||||||||||||||
Customer advances and deposits |
8,049 |
6,513 |
10,242 |
|||||||||||||||||
Accrued compensation |
19,499 |
22,046 |
23,710 |
|||||||||||||||||
Income taxes payable |
2,947 |
1,155 |
5,334 |
|||||||||||||||||
Current portion of operating lease liabilities |
9,105 |
8,591 |
9,823 |
|||||||||||||||||
Current portion of long-term debt |
— |
— |
— |
|||||||||||||||||
Total current liabilities |
408,164 |
352,444 |
267,399 |
|||||||||||||||||
Long-term debt |
368,894 |
368,633 |
368,764 |
|||||||||||||||||
Pensions and other postretirement benefits |
64,947 |
54,113 |
70,680 |
|||||||||||||||||
Long-term operating lease liabilities |
22,813 |
23,331 |
25,893 |
|||||||||||||||||
Other long-term liabilities |
72,657 |
56,146 |
69,427 |
|||||||||||||||||
Deferred income taxes |
25,941 |
24,982 |
29,474 |
|||||||||||||||||
Total liabilities |
963,416 |
879,649 |
831,637 |
|||||||||||||||||
Shareholders' equity |
||||||||||||||||||||
|
||||||||||||||||||||
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 24,514,867 shares issued and outstanding at |
323,761 |
324,927 |
321,502 |
|||||||||||||||||
Retained earnings |
1,053,295 |
1,088,608 |
1,076,760 |
|||||||||||||||||
Accumulated other comprehensive loss |
(137,556) |
(114,876) |
(151,597) |
|||||||||||||||||
|
1,239,500 |
1,298,659 |
1,246,665 |
|||||||||||||||||
Noncontrolling interests in subsidiaries |
39,376 |
39,924 |
42,619 |
|||||||||||||||||
Total shareholders' equity |
1,278,876 |
1,338,583 |
1,289,284 |
|||||||||||||||||
Total liabilities and shareholders' equity |
$ |
2,242,292 |
$ |
2,218,232 |
$ |
2,120,921 |
||||||||||||||
See accompanying notes. |
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars) |
||||||||||||||
Six Months Ended |
||||||||||||||
2020 |
2019 |
|||||||||||||
(Unaudited) |
||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||
Net income |
$ |
15,149 |
$ |
30,642 |
||||||||||
Adjustments to reconcile net income to net cash used by operating activities: |
||||||||||||||
Depreciation and amortization |
20,381 |
18,231 |
||||||||||||
Net provision for losses (recoveries) on advances and guaranteed loans to suppliers |
348 |
(1,885) |
||||||||||||
Foreign currency remeasurement (gain) loss, net |
(5,105) |
1,767 |
||||||||||||
Foreign currency exchange contracts |
(8,169) |
(773) |
||||||||||||
Restructuring payments |
(2,937) |
(298) |
||||||||||||
Change in estimated fair value of contingent consideration for FruitSmart acquisition |
(4,173) |
— |
||||||||||||
Other, net |
3,049 |
472 |
||||||||||||
Changes in operating assets and liabilities, net |
(168,502) |
(327,975) |
||||||||||||
Net cash provided (used) by operating activities |
(149,959) |
(279,819) |
||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||
Purchase of property, plant and equipment |
(22,751) |
(13,308) |
||||||||||||
Proceeds from sale of property, plant and equipment |
1,780 |
1,254 |
||||||||||||
Net cash used by investing activities |
(20,971) |
(12,054) |
||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||
Issuance of short-term debt, net |
162,646 |
104,003 |
||||||||||||
Dividends paid to noncontrolling interests |
(3,695) |
(3,359) |
||||||||||||
Repurchase of common stock |
— |
(12,338) |
||||||||||||
Dividends paid on common stock |
(37,424) |
(37,721) |
||||||||||||
Other |
(1,949) |
(2,883) |
||||||||||||
Net cash provided (used) by financing activities |
119,578 |
47,702 |
||||||||||||
Effect of exchange rate changes on cash |
1,006 |
(212) |
||||||||||||
Net decrease in cash and cash equivalents |
(50,346) |
(244,383) |
||||||||||||
Cash and cash equivalents at beginning of year |
107,430 |
297,556 |
||||||||||||
Cash and cash equivalents at end of period |
$ |
57,084 |
$ |
53,173 |
||||||||||
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) |
2020 |
2019 |
2020 |
2019 |
||||||||||||||||||||||
Basic Earnings Per Share |
||||||||||||||||||||||||||
Numerator for basic earnings per share |
||||||||||||||||||||||||||
Net income attributable to |
$ |
7,502 |
$ |
28,077 |
$ |
14,776 |
$ |
30,149 |
||||||||||||||||||
Denominator for basic earnings per share |
||||||||||||||||||||||||||
Weighted average shares outstanding |
24,658,895 |
25,086,580 |
24,630,886 |
25,122,283 |
||||||||||||||||||||||
Basic earnings per share |
$ |
0.30 |
$ |
1.12 |
$ |
0.60 |
$ |
1.20 |
||||||||||||||||||
Diluted Earnings Per Share |
||||||||||||||||||||||||||
Numerator for diluted earnings per share |
||||||||||||||||||||||||||
Net income attributable to |
$ |
7,502 |
$ |
28,077 |
$ |
14,776 |
$ |
30,149 |
||||||||||||||||||
Denominator for diluted earnings per share: |
||||||||||||||||||||||||||
Weighted average shares outstanding |
24,658,895 |
25,086,580 |
24,630,886 |
25,122,283 |
||||||||||||||||||||||
Effect of dilutive securities |
||||||||||||||||||||||||||
Employee and outside director share-based awards |
111,526 |
110,745 |
106,248 |
118,317 |
||||||||||||||||||||||
Denominator for diluted earnings per share |
24,770,421 |
25,197,325 |
24,737,134 |
25,240,600 |
||||||||||||||||||||||
Diluted earnings per share |
$ |
0.30 |
$ |
1.11 |
$ |
0.60 |
$ |
1.19 |
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) |
2020 |
2019 |
2020 |
2019 |
||||||||||||||||||||||
SALES AND OTHER OPERATING REVENUES |
||||||||||||||||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||||||||||||||||
North America |
$ |
44,858 |
$ |
57,612 |
$ |
84,774 |
$ |
85,271 |
||||||||||||||||||
Other Regions (1) |
250,300 |
355,757 |
455,033 |
557,822 |
||||||||||||||||||||||
Subtotal |
295,158 |
413,369 |
539,807 |
643,093 |
||||||||||||||||||||||
Other Tobacco Operations (2) |
81,867 |
62,552 |
153,029 |
129,743 |
||||||||||||||||||||||
Consolidated sales and other operating revenue |
$ |
377,025 |
$ |
475,921 |
$ |
692,836 |
$ |
772,836 |
||||||||||||||||||
OPERATING INCOME |
||||||||||||||||||||||||||
Flue-Cured and Burley Leaf Tobacco Operations: |
||||||||||||||||||||||||||
North America |
$ |
685 |
$ |
5,472 |
$ |
1,727 |
$ |
6,362 |
||||||||||||||||||
Other Regions (1) |
12,236 |
32,525 |
7,950 |
28,710 |
||||||||||||||||||||||
Subtotal |
12,921 |
37,997 |
9,677 |
35,072 |
||||||||||||||||||||||
Other Tobacco Operations (2) |
4,020 |
7,512 |
11,612 |
17,991 |
||||||||||||||||||||||
Segment operating income |
16,941 |
45,509 |
21,289 |
53,063 |
||||||||||||||||||||||
Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (3) |
(590) |
(2,310) |
(583) |
(2,350) |
||||||||||||||||||||||
Add: Other income (loss)(4) |
— |
— |
4,173 |
— |
||||||||||||||||||||||
Consolidated operating income |
$ |
16,351 |
$ |
43,199 |
$ |
24,879 |
$ |
50,713 |
(1) |
Includes |
(2) |
Includes Dark Air-Cured, Special Services (including |
(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) |
Other income represents the reversal of a portion of the contingent consideration liability associated with the acquisition of |
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SOURCE
Candace C. Formacek, Phone: (804) 359-9311, Fax: (804) 254-3584, Email: investor@universalleaf.com