HIGHLIGHTS
Fiscal Year 2011
Diluted earnings per share decreased 5% to
Revenues up 3%, to
Operating income down slightly, to
Operating income includes net benefit from non-recurring items of
Previously announced 40th annual increase in dividends and repurchased 4.6% of outstanding shares
Fourth Fiscal Quarter
Diluted earnings per share increased to
Operating income up 9%, to
Revenues increased 20%, to
Results for fiscal year 2011 also include the effects of several non-recurring items, which provided a net pretax benefit of
For the fourth quarter of fiscal year 2011, net income was
"At the same time, we are experiencing the effects of leaf oversupply that we have been predicting, and we expect to see the financial impact of lower leaf prices and tighter margins that typify such cycles in fiscal year 2012. We believe that during the two prior fiscal years of higher than normal demand, a number of customers increased their leaf inventory levels. Those higher inventories, combined with softer cigarette sales in some markets, have led to reduced leaf demand for current crops, evidenced by slower than normal purchasing in major markets.
"Periodic cycles of under- and oversupply of leaf are not unusual in our business, and we have successfully navigated oversupplied markets throughout the history of the company. Although dealer unsold inventories are currently not excessive, we expect them to grow significantly during this season. Our uncommitted inventories are still at a manageable level, and we are working aggressively to avoid accumulating excess inventories during the oversupply period. However, we will not be able to avoid some accumulation of unsold inventory or the inevitable pressure on margins that comes with an oversupply.
"We believe that our discipline and conservative capital structure will stand us in good stead during this period. In addition, our cost-saving restructuring initiatives are well underway, and we will continue to review our operations to control or reduce costs. We have continued to assert the value that the dealer industry adds to the system, both to the manufacturer and the farmer, and that is especially important in today's markets."
FLUE-CURED AND BURLEY LEAF TOBACCO OPERATIONS:
Fiscal Year 2011
For the fiscal year ended
Operating income of
The
Fourth Quarter
In the fourth quarter ended
OTHER TOBACCO OPERATIONS:
In the Other Tobacco Operations segment, operating income for fiscal year 2011 declined by 28% to about
For the fourth quarter, Other Tobacco Operations segment operating results increased by
OTHER ITEMS:
Cost of goods sold increased by nearly 6% due to the influence on leaf prices of a weaker U.S. dollar and higher farm input costs, as well as a lower proportion of stem in the sales mix. Selling, general, and administrative expenses decreased by more than
The consolidated effective income tax rate for the twelve months 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; product taxation; industry consolidation and evolution; 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 AND SUBSIDIARIES | |||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||
(In thousands of dollars, except per share data) | |||||||||
Three Months Ended | Fiscal Year Ended | ||||||||
2011 | 2010 | 2011 | 2010 | ||||||
Sales and other operating revenues | $ 680,215 | $ 566,503 | $ 2,571,527 | $ 2,491,738 | |||||
Costs and expenses | |||||||||
Cost of goods sold | 561,437 | 455,609 | 2,063,194 | 1,949,473 | |||||
Selling, general and administrative expenses | 64,939 | 68,267 | 251,597 | 285,056 | |||||
Other income | — | — | (19,368) | — | |||||
Restructuring and impairment costs | 7,540 | — | 21,504 | — | |||||
Operating income | 46,299 | 42,627 | 254,600 | 257,209 | |||||
Equity in pretax earnings of unconsolidated affiliates | 7,681 | 5,347 | 8,634 | 22,376 | |||||
Interest income | 109 | 327 | 2,723 | 1,253 | |||||
Interest expense | 5,813 | 3,923 | 23,058 | 24,210 | |||||
Income before income taxes | 48,276 | 44,378 | 242,899 | 256,628 | |||||
Income taxes | 19,512 | 20,983 | 78,349 | 86,283 | |||||
Net income | 28,764 | 23,395 | 164,550 | 170,345 | |||||
Less: net (income) loss attributable to noncontrolling interests in subsidiaries | (1,648) | 3,046 | (7,985) | (1,948) | |||||
Net income attributable to Universal Corporation | 27,116 | 26,441 | 156,565 | 168,397 | |||||
Dividends on Universal Corporation convertible perpetual preferred stock | (3,713) | (3,713) | (14,850) | (14,850) | |||||
Earnings available to Universal Corporation common shareholders | $ 23,403 | $ 22,728 | $ 141,715 | $ 153,547 | |||||
Earnings per share attributable to Universal Corporation common shareholders: | |||||||||
Basic | $ 1.00 | $ 0.93 | $ 5.94 | $ 6.21 | |||||
Diluted | $ 0.95 | $ 0.90 | $ 5.42 | $ 5.68 | |||||
See accompanying notes. | |||||||||
UNIVERSAL CORPORATION AND SUBSIDIARIES | |||||
CONSOLIDATED BALANCE SHEETS | |||||
(In thousands of dollars) | |||||
March 31, | |||||
2011 | 2010 | ||||
ASSETS | |||||
Current assets | |||||
Cash and cash equivalents | $ 141,007 | $ 245,953 | |||
Accounts receivable, net | 335,575 | 266,960 | |||
Advances to suppliers, net | 160,616 | 167,400 | |||
Accounts receivable - unconsolidated affiliates | 10,433 | 11,670 | |||
Inventories - at lower of cost or market: | |||||
Tobacco | 742,422 | 812,186 | |||
Other | 48,647 | 52,952 | |||
Prepaid income taxes | 18,661 | 13,514 | |||
Deferred income taxes | 47,009 | 47,074 | |||
Other current assets | 73,864 | 75,367 | |||
Total current assets | 1,578,234 | 1,693,076 | |||
Property, plant and equipment | |||||
Land | 14,851 | 16,036 | |||
Buildings | 257,380 | 266,350 | |||
Machinery and equipment | 555,316 | 532,824 | |||
827,547 | 815,210 | ||||
Less accumulated depreciation | (510,844) | (485,723) | |||
316,703 | 329,487 | ||||
Other assets | |||||
Goodwill and other intangibles | 99,546 | 105,561 | |||
Investments in unconsolidated affiliates | 115,478 | 106,336 | |||
Deferred income taxes | 18,177 | 30,073 | |||
Other noncurrent assets | 99,729 | 106,507 | |||
332,930 | 348,477 | ||||
Total assets | $ 2,227,867 | $ 2,371,040 | |||
UNIVERSAL CORPORATION AND SUBSIDIARIES | |||||
CONSOLIDATED BALANCE SHEETS--(Continued) | |||||
(In thousands of dollars) | |||||
March 31, | |||||
2011 | 2010 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
Current liabilities | |||||
Notes payable and overdrafts | $ 149,291 | $ 177,013 | |||
Accounts payable and accrued expenses | 213,014 | 259,576 | |||
Accounts payable - unconsolidated affiliates | 4,154 | 6,464 | |||
Customer advances and deposits | 8,426 | 107,858 | |||
Accrued compensation | 30,201 | 30,097 | |||
Income taxes payable | 12,265 | 18,991 | |||
Current portion of long-term obligations | 95,000 | 15,000 | |||
Total current liabilities | 512,351 | 614,999 | |||
Long-term obligations | 320,193 | 414,764 | |||
Pensions and other postretirement benefits | 102,858 | 96,888 | |||
Other long-term liabilities | 50,213 | 69,886 | |||
Deferred income taxes | 42,847 | 46,128 | |||
Total liabilities | 1,028,462 | 1,242,665 | |||
Shareholders' equity | |||||
Universal Corporation: | |||||
Preferred stock: | |||||
Series A Junior Participating Preferred Stock, no par value, 500,000 shares | |||||
authorized, none issued or outstanding | — | — | |||
Series B 6.75% Convertible Perpetual Preferred Stock, no par value, | |||||
5,000,000 shares authorized, 219,999 shares issued and outstanding | |||||
(219,999 at March 31, 2010) | 213,023 | 213,023 | |||
Common stock, no par value, 100,000,000 shares authorized, 23,240,503 | |||||
shares issued and outstanding (24,325,228 at March 31, 2010) | 191,608 | 195,001 | |||
Retained earnings | 825,751 | 767,213 | |||
Accumulated other comprehensive loss | (44,776) | (52,667) | |||
Total Universal Corporation shareholders' equity | 1,185,606 | 1,122,570 | |||
Noncontrolling interests in subsidiaries | 13,799 | 5,805 | |||
Total shareholders' equity | 1,199,405 | 1,128,375 | |||
Total liabilities and shareholders' equity | $ 2,227,867 | $ 2,371,040 | |||
See accompanying notes. | |||||
UNIVERSAL CORPORATION AND SUBSIDIARIES | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
(In thousands of dollars) | |||||
Fiscal Year Ended March 31, | |||||
2011 | 2010 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||
Net income | $ 164,550 | $ 170,345 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation | 43,654 | 41,288 | |||
Amortization | 1,618 | 2,208 | |||
Provisions for losses on advances and guaranteed loans to suppliers | 18,666 | 18,514 | |||
Foreign currency remeasurement (gain) loss, net | (4,424) | 9,309 | |||
Gain on assignment of farmer contracts and sale of related assets | (19,368) | — | |||
Restructuring and impairment costs | 21,504 | — | |||
Other, net | 4,593 | 16,254 | |||
Changes in operating assets and liabilities, net | (176,575) | (95,684) | |||
Net cash provided by operating activities | 54,218 | 162,234 | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||
Purchase of property, plant and equipment | (39,129) | (57,577) | |||
Proceeds from assignment of farmer contracts and sale of related assets | 34,946 | — | |||
Proceeds from sale of property, plant and equipment, and other | 5,575 | 5,019 | |||
Other | 260 | 536 | |||
Net cash provided (used) by investing activities | 1,652 | (52,022) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||
Issuance (repayment) of short-term debt, net | (39,350) | (5,250) | |||
Issuance of long-term debt | — | 99,208 | |||
Repayment of long-term debt | (15,000) | (79,500) | |||
Dividends paid to noncontrolling interests | (100) | (104) | |||
Issuance of common stock | — | 729 | |||
Repurchase of common stock | (46,929) | (32,194) | |||
Dividends paid on convertible perpetual preferred stock | (14,850) | (14,850) | |||
Dividends paid on common stock | (45,321) | (45,882) | |||
Other | — | (1,193) | |||
Net cash used by financing activities | (161,550) | (79,036) | |||
Effect of exchange rate changes on cash | 734 | 2,151 | |||
Net increase (decrease) in cash and cash equivalents | (104,946) | 33,327 | |||
Cash and cash equivalents at beginning of year | 245,953 | 212,626 | |||
Cash and cash equivalents at end of year | $ 141,007 | $ 245,953 | |||
See accompanying notes. | |||||
NOTE 1. BASIS OF PRESENTATION
NOTE 2. GUARANTEES AND OTHER CONTINGENT LIABILITIES
Guarantees of bank loans to growers for crop financing and construction of curing barns or other tobacco producing assets are industry practice in
Various subsidiaries of the Company are involved in other litigation and tax examinations incidental to their business activities. While the outcome of these matters cannot be predicted with certainty, management is vigorously defending the matters and does not currently expect that any of them will have a material adverse effect on the Company's financial position. However, should one or more of these matters be resolved in a manner adverse to management's current expectation, the effect on the Company's results of operations for a particular fiscal reporting period could be material.
NOTE 3. EARNINGS PER SHARE
The following table sets forth the computation of earnings per share for the periods presented in the consolidated statements of income.
Three Months Ended | Fiscal Year Ended | ||||||||
(in thousands, except per share data) | 2011 | 2010 | 2011 | 2010 | |||||
Basic Earnings Per Share | |||||||||
Numerator for basic earnings per share | |||||||||
Net income attributable to Universal Corporation | $ 27,116 | $ 26,441 | $ 156,565 | $ 168,397 | |||||
Less: Dividends on convertible perpetual preferred stock | (3,713) | (3,713) | (14,850) | (14,850) | |||||
Earnings available to Universal Corporation common shareholders | |||||||||
for calculation of basic earnings per share | 23,403 | 22,728 | 141,715 | 153,547 | |||||
Denominator for basic earnings per share | |||||||||
Weighted average shares outstanding | 23,400 | 24,455 | 23,859 | 24,732 | |||||
Basic earnings per share | $ 1.00 | $ 0.93 | $ 5.94 | $ 6.21 | |||||
Diluted Earnings Per Share | |||||||||
Numerator for diluted earnings per share | |||||||||
Earnings available to Universal Corporation common shareholders | $ 23,403 | $ 22,728 | $ 141,715 | $ 153,547 | |||||
Add: Dividends on convertible perpetual preferred stock (if | |||||||||
conversion assumed) | 3,713 | 3,713 | 14,850 | 14,850 | |||||
Earnings available to Universal Corporation common shareholders | |||||||||
for calculation of diluted earnings per share | 27,116 | 26,441 | 156,565 | 168,397 | |||||
Denominator for diluted earnings per share: | |||||||||
Weighted average shares outstanding | 23,400 | 24,455 | 23,859 | 24,732 | |||||
Effect of dilutive securities (if conversion or exercise assumed) | |||||||||
Convertible perpetual preferred stock | 4,758 | 4,739 | 4,750 | 4,733 | |||||
Employee share-based awards | 327 | 270 | 279 | 197 | |||||
Denominator for diluted earnings per share | 28,484 | 29,464 | 28,888 | 29,662 | |||||
Diluted earnings per share | $ 0.95 | $ 0.90 | $ 5.42 | $ 5.68 | |||||
NOTE 4. SEGMENT INFORMATION
The principal approach used by management to evaluate the Company's performance is by geographic region, although some components of the business are 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 pretax earnings of unconsolidated affiliates.
Operating results for the Company's reportable segments for each period presented in the consolidated statements of income were as follows:
Three Months Ended | Fiscal Year Ended | ||||||||
(in thousands of dollars) | 2011 | 2010 | 2011 | 2010 | |||||
SALES AND OTHER OPERATING REVENUES | |||||||||
Flue-cured and burley leaf tobacco operations: | |||||||||
North America | $ 96,376 | $ 169,887 | $ 340,366 | $ 357,195 | |||||
Other regions (1) | 476,084 | 324,856 | 1,944,410 | 1,895,829 | |||||
Subtotal | 572,460 | 494,743 | 2,284,776 | 2,253,024 | |||||
Other tobacco operations (2) | 107,755 | 71,760 | 286,751 | 238,714 | |||||
Consolidated sales and other operating revenues | $ 680,215 | $ 566,503 | $ 2,571,527 | $ 2,491,738 | |||||
OPERATING INCOME | |||||||||
Flue-cured and burley leaf tobacco operations: | |||||||||
North America | $ 16,895 | $ 24,926 | $ 59,278 | $ 57,006 | |||||
Other regions (1) | 31,459 | 14,807 | 169,989 | 182,513 | |||||
Subtotal | 48,354 | 39,733 | 229,267 | 239,519 | |||||
Other tobacco operations (2) | 13,166 | 8,241 | 28,658 | 40,066 | |||||
Segment operating income | 61,520 | 47,974 | 257,925 | 279,585 | |||||
Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (3) | (7,681) | (5,347) | (8,634) | (22,376) | |||||
Restructuring and impairment costs (4) | (7,540) | — | (21,504) | — | |||||
Add: Other income (4) | — | — | 19,368 | — | |||||
Reversal of European Commission fines (4) | — | — | 7,445 | — | |||||
Consolidated operating income | $ 46,299 | $ 42,627 | $ 254,600 | $ 257,209 | |||||
(1) Includes South America,
(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 its financial results consist principally of equity in the pretax earnings of an unconsolidated affiliate.
(3) Item is included in segment operating income, but not included in consolidated operating income.
(4) Item is not included in segment operating income, but is included in consolidated operating income.
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