RICHMOND, Va., Feb. 3,
2016 /PRNewswire/ --
HIGHLIGHTS
Nine Months
Operating income down slightly to
$101 million
Revenues of $1.3 billion declined on
lower green prices and volumes
Improved gross margins
Strong shipments expected in fourth fiscal quarter
Third Quarter
Third quarter sales volumes at historic norms
George C. Freeman, III, Chairman,
President, and Chief Executive Officer of Universal Corporation
(NYSE:UVV) reported that net income for the nine months ended
December 31, 2015, was $61.1 million, or $2.18 per diluted share, compared with
$68.8 million, or $2.43 per diluted share for the same period last
year, reflecting changes in shipping patterns discussed below.
Those results included certain non-recurring items, detailed in
Other Items below, which totaled $0.03 and $0.18 per
diluted share for the nine-month periods ended December 31, 2015 and 2014, respectively. For the
quarter ended December 31, 2015, net
income was $44.5 million, or
$1.60 per diluted share, compared
with net income for the prior year's third fiscal quarter of
$53.0 million, or $1.87 per diluted share. Those results also
included certain non-recurring items, detailed in Other Items
below, which totaled $0.08 and
($0.03) per diluted share for the
quarters ended December 31, 2015 and
2014, respectively.
Segment operating income was $102.8
million for the nine months ended December 31, 2015, a decrease of $11.7 million from the prior year's comparable
period, mainly due to lower results in the North America and Other Regions segments.
Consolidated revenues decreased by 12% to $1.3 billion for the nine-month period,
reflecting lower green prices, a modest decline in sales volumes,
and lower processing revenues. Segment operating income was down by
27% to $68.2 million for the three
months ended December 31, 2015,
compared with the prior year's third fiscal quarter, which included
strong volumes from shipments delayed from the first half of that
fiscal year.
Mr. Freeman stated, "As we discussed last quarter, our shipping
patterns continue to be more weighted toward the second half of the
fiscal year. Our volumes increased during the first half of the
current fiscal year compared to the prior year, but as anticipated,
our third fiscal quarter volumes this year were weaker in
comparison to last year's pattern. Last year's high third quarter
volumes reflected shipments delayed from the first and second
fiscal quarters due to a later start to the crop season and slower
timing of shipping instructions that year. In the current fiscal
year, the third quarter volumes returned to more historic norms.
Furthermore, our second half sales volumes this year are heavily
skewed to the fourth fiscal quarter, continuing a trend in customer
shipping patterns that has become more pronounced in recent
years.
"Despite the reduced volumes that impacted our comparable
results for the third fiscal quarter, our fiscal year-to-date gross
profit margin percentage was slightly higher than last year's
comparable period, and our selling, general, and administrative
costs were down about 6%. Our uncommitted inventories were well
within our target range at about 14%, and our net debt at
December 31, 2015 was more than
$120 million lower than the prior
year level. We are still expecting the current fiscal year's lamina
sales volumes to slightly exceed last year's, however, we have a
large amount of tobacco scheduled to ship in the fourth fiscal
quarter. As a result, we may encounter logistical challenges that
could push some of those volumes into the first fiscal quarter of
2017 as carryover crop sales. Our new food ingredient facility has
begun commercial production, and we are working with customers on
the extensive process of qualifying our processing plant and juice
products.
"We have lowered our industry leaf production estimates for the
2016 crop year. We are now forecasting an 11% decline in
flue-cured crops produced outside of China and a 6% decline in burley crops, both
in comparison to the 2015 crop year. The El Nino weather
pattern has negatively impacted crop production levels in
Brazil, and this weather pattern
also has the potential to affect African crops. We believe
that production declines resulting from this weather pattern,
combined with reduced plantings in some origins, will bring markets
largely into balance in fiscal year 2017. While we are pleased to
see the movement away from the oversupplied conditions that have
characterized the past two years, we remain cautious in our future
crop planning and contracting commitments in order to remain in
alignment with the global leaf requirements of our
customers.
"We continue to work with our longstanding customers to find
ways to improve supply chain efficiencies in origins where such
opportunities are available. Our latest such move was the recent
purchase of our former joint venture partner's share of Procesadora
Unitab S.A., the sole leaf processing operation in Guatemala. We expect to continue to fulfill
our former partner's leaf requirements in that origin. We are
pleased to be able to support this market, which is part of our
North America segment."
FLUE-CURED AND BURLEY LEAF TOBACCO OPERATIONS:
OTHER REGIONS:
Operating income for the Other Regions segment decreased by
$2.4 million to $87.7 million for the nine months ended
December 31, 2015, compared to the
same period of the prior fiscal year. Lower sales volumes,
primarily in South America and
lower green leaf prices reduced overall revenues for the segment,
but segment gross margins improved on a percentage basis. While the
segment benefited from higher carryover crop sales in some origins,
the later timing of some current crop shipments, which have been
delayed into the fourth fiscal quarter, reduced sales volumes in
the nine months ended December 31,
2015.
The impact of lower volumes on the segment was partially
mitigated by lower local currency costs in some origins and fewer
inventory writedowns. Reduced selling, general, and administrative
expenses buoyed results significantly for the segment, as benefits
from lower incentive compensation costs, lower customer claims, and
the absence of last year's large value-added tax valuation
provision outweighed higher net currency remeasurement and exchange
losses, primarily in Africa and
Asia. Revenues for the Other
Regions segment for the nine months ended December 31, 2015, were down about 14% to
$1.0 billion, reflecting modestly
lower volumes at lower average green leaf prices for the segment as
a whole.
Operating income for the Other Regions segment declined
$17.6 million to $61.3 million in the quarter ended December 31, 2015, compared with the previous
year's third fiscal quarter. Sales volume decreases in nearly all
of the segment's regions were the primary factor in the decline, in
comparison with the unusually large volumes shipped in the third
quarter of fiscal 2015. A combination of lower inventory
writedowns, lower green leaf costs, and lower local-currency
factory overheads contributed to an improved margin percentage for
the segment. Selling, general, and administrative expenses
increased modestly for this segment in the third fiscal quarter,
mostly driven by unfavorable comparisons to last year's reversal of
accruals for value-added tax reserves and a gain on a sale of
property, largely offset by lower customer claims and incentive
compensation costs. Revenues for the Other Regions segment declined
by 24% to $460.7 million in the
quarter ended December 31, 2015,
compared with the prior fiscal year, on the lower total volumes and
lower average green prices.
NORTH
AMERICA:
North
America segment operating income of $12.9 million for the nine months and
$5.8 million for the three months
ended December 31, 2015, decreased by
$8.9 million and $10.1 million, respectively, compared with the
same periods in the previous fiscal year. Volumes were higher for
the nine-month period in part due to old crop sales in the first
fiscal quarter, but decreased in the three-month period. The
product mix was less favorable in both periods compared with the
prior fiscal year. Significantly lower processing volumes also
impacted both periods in the current fiscal year, due largely to
the previously announced changes in business with Philip Morris
International in the United States
from a toll processing model to sales of processed tobacco. These
changes impact the timing of earnings recognition, as sales under
the new model are recorded when the product ships. The majority of
the 2015 current crop volumes sold under this new arrangement are
expected to ship in the first quarter of fiscal 2017. Selling,
general and administrative costs were flat for the nine-month
period and declined modestly for the third fiscal quarter. Segment
revenues were down by 12% to $179.5
million and by about 31% to $81.5
million for the nine and three-month periods ended
December 31, 2015, respectively. In
both periods, the decline was influenced by the lower toll
processing revenues and a less favorable product mix from higher
by-product sales.
OTHER TOBACCO OPERATIONS:
For the nine months ended December 31,
2015, the Other Tobacco Operations segment's operating
income decreased by $0.4 million to
$2.1 million from results for the
same period last fiscal year. Earnings improved for the dark
tobacco operations on higher volumes, as well as better margins and
lower overhead costs. That improvement was offset by reduced
earnings, despite higher volumes, for the oriental joint venture
mostly due to higher tax accruals and higher currency remeasurement
losses. In addition, the special services group incurred losses
primarily on startup and production testing costs for the new food
ingredients business. Selling, general, and administrative costs
for the segment were up slightly for the nine months ended
December 31, 2015, compared with the
previous fiscal year. Revenues for the Other Tobacco Operations
segment increased by $11.3 million to
$127.8 million for the period, as the
stronger volumes for the dark tobacco operations were partly offset
by lower overall green leaf prices.
The Other Tobacco Operations segment operating income improved
by $2.4 million to $1.1 million for
the quarter ended December 31, 2015,
compared with the same period for the previous fiscal year. Results
for the dark tobacco business improved for the third fiscal
quarter, mainly on higher volumes from earlier timing of shipments
in the current year, as well as lower overhead costs, despite
inventory writedowns in Indonesia
from tobacco damaged by volcanic ash. Results in the third fiscal
quarter also improved for the oriental joint venture on higher
volumes, mostly due to timing of shipments delayed into the third
fiscal quarter this year compared with the prior year. Selling,
general, and administrative costs in the third quarter for the
segment were relatively flat. Revenues for the segment increased by
$7.3 million to $42.4 million for the third fiscal quarter on the
higher volumes for the dark tobacco business, as well as increased
volumes due to the timing of shipments of oriental tobaccos into
the United States compared to the
same period in the prior year.
OTHER ITEMS:
Cost of goods sold decreased by about 13% to $1.1 billion for the nine months, and by about
24% to $464.7 million for the third
fiscal quarter ended December 31,
2015. For both periods, the reductions reflect the lower
sales revenues in the respective periods, from reduced volumes and
lower overall green leaf prices.
Selling, general, and administrative costs decreased by
$10.9 million for the nine months
ended December 31, 2015, and
increased by $0.5 million for the
third fiscal quarter of 2016 compared with the same periods in the
prior fiscal year. In the nine-month period, benefits were achieved
from a combination of items, including favorable comparisons to
last year's accruals for value-added tax reserves, lower loss
provisions on advances to suppliers, lower incentive compensation
costs, and reductions in local currency-denominated expenses from
devaluation of foreign currencies, mainly in South America and Africa. Those benefits were partially offset
by higher currency remeasurement and exchange losses, mainly in
Africa and Asia, and costs incurred to settle third party
challenges to the property rights and valuation of a large tract of
forestry land. The increase in expense in the third fiscal quarter
of 2016 was mostly driven by unfavorable comparisons to last year's
reversal of accruals for value-added tax reserves and a gain on a
sale of property last year, offset in part by lower customer claims
in the current year's third fiscal quarter.
Results for the nine months ended December 31, 2015, included restructuring and
impairment costs of $2.4 million
($0.07 per diluted share) and a gain
of $3.4 million ($0.10 per diluted share) on remeasuring the
Company's interest in a tobacco processing joint venture to fair
value upon acquiring our partner's 50% ownership in the third
fiscal quarter. Last year's results for the nine months ended
December 31, 2014, included an income
tax benefit of $8.0 million
($0.28 per diluted share), arising
from a subsidiary's payment of a portion of a fine, and
restructuring costs of $4.5 million
($0.10 per diluted share). Results
for the three months ended December 31,
2015, included the gain mentioned above, and for the three
months ended December 31, 2014,
results included restructuring costs of $1.1
million ($0.03 per diluted
share).
The consolidated effective income tax rates were approximately
32% and 34% for the quarters ended December
31, 2015 and 2014, respectively. In both periods, rates were
lower than the federal statutory rates due to the favorable impact
of local currency devaluation on deferred income taxes in certain
foreign operations, mainly in Brazil. The consolidated effective tax rate
for the nine-month period ended December 31,
2015, was approximately 29% compared to about 23% for the
prior year comparable period. Income taxes for the nine-month
period of fiscal year 2015 were impacted by a non-recurring benefit
of $8.0 million arising from the
partial payment of the European Commission fine by our Italian
subsidiary in June 2014. In both
years, the nine-month period was also influenced by lower net
effective tax rates on income from certain foreign subsidiaries, as
well as effects of changes in local currency exchange rates on
deferred income tax balances.
Additional information
Amounts included in the previous discussion are attributable to
Universal Corporation and exclude earnings related to
non-controlling interests in subsidiaries. In addition, the total
for segment operating income referred to in this discussion is a
non-GAAP measure. This measure is not a financial measure
calculated in accordance with GAAP and should not be considered as
a substitute for net income, operating income, cash from operating
activities or any other operating performance measure calculated in
accordance with GAAP, and it may not be comparable to similarly
titled measures reported by other companies. A reconciliation of
the total for segment operating income to consolidated operating
income is in Note 3. Segment Information, included in this earnings
release. The Company evaluates its segment performance excluding
certain significant charges or credits. The Company believes this
measure, which excludes these items that it believes are not
indicative of its core operating results, provides investors with
important information that is useful in understanding its business
results and trends.
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; 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 March 31, 2015, and in other documents the
Company files with the Securities and Exchange Commission. This
information should be read in conjunction with the Annual Report on
Form 10-K for the fiscal year ended March 31, 2015.
At 5:00 p.m. (Eastern Time) on
February 3, 2016, the Company will
host a conference call to discuss these results. Those wishing to
listen to the call may do so by visiting www.universalcorp.com at
that time. A replay of the webcast will be available at that site
through May 3, 2016. A taped replay
of the call will be available through February 17, 2016, by dialing (855) 859-2056. The
confirmation number to access the replay is 39559930.
Headquartered in Richmond,
Virginia, Universal Corporation is the leading global leaf
tobacco supplier and conducts business in more than 30 countries.
Its revenues for the fiscal year ended March
31, 2015, were $2.3 billion.
For more information on Universal Corporation, visit its website at
www.universalcorp.com.
UNIVERSAL
CORPORATION
|
CONSOLIDATED
STATEMENTS OF INCOME
|
(in thousands of
dollars, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Nine Months
Ended
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Sales and other
operating revenues
|
|
$
|
584,592
|
|
|
$
|
758,054
|
|
|
$
|
1,316,393
|
|
|
$
|
1,493,642
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
Cost of goods
sold
|
|
464,686
|
|
|
610,482
|
|
|
1,050,004
|
|
|
1,205,459
|
|
Selling, general and
administrative expenses
|
|
54,081
|
|
|
53,539
|
|
|
166,187
|
|
|
177,125
|
|
Other
income
|
|
(3,390)
|
|
|
—
|
|
|
(3,390)
|
|
|
—
|
|
Restructuring and
impairment costs
|
|
—
|
|
|
1,143
|
|
|
2,389
|
|
|
4,493
|
|
Operating
income
|
|
69,215
|
|
|
92,890
|
|
|
101,203
|
|
|
106,565
|
|
Equity in pretax
earnings (loss) of unconsolidated affiliates
|
|
2,326
|
|
|
(527)
|
|
|
2,556
|
|
|
3,391
|
|
Interest
income
|
|
452
|
|
|
148
|
|
|
896
|
|
|
358
|
|
Interest
expense
|
|
3,937
|
|
|
4,637
|
|
|
11,733
|
|
|
13,509
|
|
Income before income
taxes
|
|
68,056
|
|
|
87,874
|
|
|
92,922
|
|
|
96,805
|
|
Income tax
expense
|
|
21,441
|
|
|
29,797
|
|
|
27,368
|
|
|
22,719
|
|
Net income
|
|
46,615
|
|
|
58,077
|
|
|
65,554
|
|
|
74,086
|
|
Less: net income
attributable to noncontrolling interests in subsidiaries
|
|
(2,081)
|
|
|
(5,038)
|
|
|
(4,502)
|
|
|
(5,305)
|
|
Net income
attributable to Universal Corporation
|
|
44,534
|
|
|
53,039
|
|
|
61,052
|
|
|
68,781
|
|
Dividends on
Universal Corporation convertible perpetual preferred
stock
|
|
(3,687)
|
|
|
(3,712)
|
|
|
(11,061)
|
|
|
(11,137)
|
|
Cost in excess of
carrying value on repurchase of convertible perpetual
stock
|
|
—
|
|
|
(18)
|
|
|
—
|
|
|
(18)
|
|
Earnings available to
Universal Corporation common shareholders
|
|
$
|
40,847
|
|
|
$
|
49,309
|
|
|
$
|
49,991
|
|
|
$
|
57,626
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to Universal Corporation common
shareholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.80
|
|
|
$
|
2.13
|
|
|
$
|
2.20
|
|
|
$
|
2.49
|
|
Diluted
|
|
$
|
1.60
|
|
|
$
|
1.87
|
|
|
$
|
2.18
|
|
|
$
|
2.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNIVERSAL
CORPORATION
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands of
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
March 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
167,625
|
|
|
$
|
120,315
|
|
|
$
|
248,783
|
|
Accounts receivable,
net
|
|
267,632
|
|
|
290,234
|
|
|
434,362
|
|
Advances to
suppliers, net
|
|
84,905
|
|
|
106,563
|
|
|
114,883
|
|
Accounts
receivable—unconsolidated affiliates
|
|
762
|
|
|
342
|
|
|
1,907
|
|
Inventories—at lower
of cost or market:
|
|
|
|
|
|
|
Tobacco
|
|
965,917
|
|
|
1,011,234
|
|
|
636,488
|
|
Other
|
|
65,123
|
|
|
74,791
|
|
|
62,195
|
|
Prepaid income
taxes
|
|
16,359
|
|
|
13,842
|
|
|
17,811
|
|
Deferred income
taxes
|
|
25,303
|
|
|
40,588
|
|
|
36,611
|
|
Other current
assets
|
|
67,456
|
|
|
80,683
|
|
|
81,570
|
|
Total current
assets
|
|
1,661,082
|
|
|
1,738,592
|
|
|
1,634,610
|
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
|
|
|
|
|
Land
|
|
22,870
|
|
|
16,868
|
|
|
16,790
|
|
Buildings
|
|
256,970
|
|
|
239,177
|
|
|
238,372
|
|
Machinery and
equipment
|
|
591,292
|
|
|
580,026
|
|
|
576,010
|
|
|
|
871,132
|
|
|
836,071
|
|
|
831,172
|
|
Less: accumulated
depreciation
|
|
(545,518)
|
|
|
(530,731)
|
|
|
(525,783)
|
|
|
|
325,614
|
|
|
305,340
|
|
|
305,389
|
|
Other
assets
|
|
|
|
|
|
|
Goodwill and other
intangibles
|
|
99,035
|
|
|
99,220
|
|
|
99,146
|
|
Investments in
unconsolidated affiliates
|
|
75,351
|
|
|
82,341
|
|
|
76,512
|
|
Deferred income
taxes
|
|
21,999
|
|
|
12,358
|
|
|
6,301
|
|
Other noncurrent
assets
|
|
53,953
|
|
|
60,975
|
|
|
76,515
|
|
|
|
250,338
|
|
|
254,894
|
|
|
258,474
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,237,034
|
|
|
$
|
2,298,826
|
|
|
$
|
2,198,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNIVERSAL
CORPORATION
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands of
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
March 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Notes payable and
overdrafts
|
|
$
|
65,894
|
|
|
$
|
116,771
|
|
|
$
|
59,862
|
|
Accounts payable and
accrued expenses
|
|
132,572
|
|
|
146,516
|
|
|
140,112
|
|
Accounts
payable—unconsolidated affiliates
|
|
21,768
|
|
|
12,500
|
|
|
3,281
|
|
Customer advances and
deposits
|
|
41,209
|
|
|
65,450
|
|
|
30,183
|
|
Accrued
compensation
|
|
20,681
|
|
|
20,469
|
|
|
28,232
|
|
Income taxes
payable
|
|
8,568
|
|
|
12,596
|
|
|
9,243
|
|
Current portion of
long-term obligations
|
|
—
|
|
|
—
|
|
|
—
|
|
Total current
liabilities
|
|
290,692
|
|
|
374,302
|
|
|
270,913
|
|
|
|
|
|
|
|
|
Long-term
obligations
|
|
370,000
|
|
|
370,000
|
|
|
370,000
|
|
Pensions and other
postretirement benefits
|
|
90,643
|
|
|
73,052
|
|
|
97,048
|
|
Other long-term
liabilities
|
|
33,179
|
|
|
34,077
|
|
|
36,790
|
|
Deferred income
taxes
|
|
33,324
|
|
|
42,843
|
|
|
26,628
|
|
Total
liabilities
|
|
817,838
|
|
|
894,274
|
|
|
801,379
|
|
|
|
|
|
|
|
|
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, 220,000
shares authorized, 218,490 shares issued and
outstanding (219,999 at
December 31, 2014, and 218,490 at March 31,
2015)
|
|
211,562
|
|
|
212,633
|
|
|
211,562
|
|
Common stock, no par
value, 100,000,000 shares authorized, 22,717,448
shares issued and outstanding (23,839,717 at December
31, 2014, and
22,593,266 at March 31, 2015)
|
|
206,941
|
|
|
205,699
|
|
|
206,002
|
|
Retained
earnings
|
|
1,033,986
|
|
|
997,380
|
|
|
1,020,155
|
|
Accumulated other
comprehensive loss
|
|
(70,439)
|
|
|
(47,168)
|
|
|
(74,994)
|
|
Total Universal
Corporation shareholders' equity
|
|
1,382,050
|
|
|
1,368,544
|
|
|
1,362,725
|
|
Noncontrolling
interests in subsidiaries
|
|
37,146
|
|
|
36,008
|
|
|
34,369
|
|
Total shareholders'
equity
|
|
1,419,196
|
|
|
1,404,552
|
|
|
1,397,094
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity
|
|
$
|
2,237,034
|
|
|
$
|
2,298,826
|
|
|
$
|
2,198,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNIVERSAL
CORPORATION
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(in thousands of
dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
December 31,
|
|
|
2015
|
|
2014
|
|
|
(Unaudited)
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
Net
income
|
|
$
|
65,554
|
|
|
$
|
74,086
|
|
Adjustments to reconcile net income to
net cash used by operating activities:
|
|
|
|
|
Depreciation
|
|
27,221
|
|
|
26,355
|
|
Amortization
|
|
668
|
|
|
1,635
|
|
Net
provision for losses (recoveries) on advances and guaranteed loans
to suppliers
|
|
(1,026)
|
|
|
668
|
|
Foreign currency remeasurement loss
(gain), net
|
|
21,492
|
|
|
14,231
|
|
Fair value gain upon acquisition of
partner's interest in joint venture
|
|
(3,390)
|
|
|
—
|
|
Restructuring and impairment costs
|
|
2,389
|
|
|
4,493
|
|
Other,
net
|
|
17,336
|
|
|
(719)
|
|
Changes in
operating assets and liabilities, net
|
|
(123,781)
|
|
|
(122,372)
|
|
Net cash used by operating activities
|
|
6,463
|
|
|
(1,623)
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
(38,504)
|
|
|
(43,207)
|
|
Purchase of partner's
interest in joint venture, net of cash held by the
business
|
|
(5,964)
|
|
|
—
|
|
Proceeds from sale of
property, plant and equipment
|
|
1,380
|
|
|
3,791
|
|
Other
|
|
(398)
|
|
|
—
|
|
Net cash used by
investing activities
|
|
(43,486)
|
|
|
(39,416)
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
Issuance (repayment)
of short-term debt, net
|
|
4,168
|
|
|
57,075
|
|
Issuance of long-term
obligations
|
|
—
|
|
|
370,000
|
|
Repayment of
long-term obligations
|
|
—
|
|
|
(356,250)
|
|
Dividends paid to
noncontrolling interests
|
|
(1,260)
|
|
|
(1,977)
|
|
Issuance of common
stock
|
|
—
|
|
|
187
|
|
Repurchase of
perpetual convertible preferred stock
|
|
—
|
|
|
(349)
|
|
Repurchase of common
stock
|
|
—
|
|
|
(20,473)
|
|
Dividends paid on
convertible perpetual preferred stock
|
|
(11,061)
|
|
|
(11,137)
|
|
Dividends paid on
common stock
|
|
(35,349)
|
|
|
(35,485)
|
|
Debt issuance costs
and other
|
|
—
|
|
|
(2,985)
|
|
Net cash provided
by financing activities
|
|
(43,502)
|
|
|
(1,394)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
|
(633)
|
|
|
(784)
|
|
Net decrease in cash
and cash equivalents
|
|
(81,158)
|
|
|
(43,217)
|
|
Cash and cash
equivalents at beginning of year
|
|
248,783
|
|
|
163,532
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
$
|
167,625
|
|
|
$
|
120,315
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes.
|
|
|
|
|
|
|
|
|
NOTE 1. BASIS OF PRESENTATION
Universal Corporation, which together with its subsidiaries is
referred to herein as "Universal" or the "Company," is the leading
global leaf tobacco supplier. Because of the seasonal nature of the
Company's business, the results of operations for any fiscal
quarter will not necessarily be indicative of results to be
expected for other quarters or a full fiscal year. All adjustments
necessary to state fairly the results for the period have been
included and were of a normal recurring nature. Certain amounts in
prior year statements have been reclassified to conform to the
current year presentation. This Form 10-Q should be read in
conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 2015.
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)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
|
|
|
|
|
|
|
Numerator for
basic earnings per share
|
|
|
|
|
|
|
|
|
Net income
attributable to Universal Corporation
|
|
$
|
44,534
|
|
|
$
|
53,039
|
|
|
$
|
61,052
|
|
|
$
|
68,781
|
|
Less: Dividends on
convertible perpetual preferred stock
|
|
(3,687)
|
|
|
(3,712)
|
|
|
(11,061)
|
|
|
(11,137)
|
|
Less: Cost in excess
of carrying value on repurchases of convertible
perpetual preferred stock
|
|
—
|
|
|
(18)
|
|
|
—
|
|
|
(18)
|
|
Earnings available to
Universal Corporation common shareholders for
calculation of basic earnings per share
|
|
40,847
|
|
|
49,309
|
|
|
49,991
|
|
|
57,626
|
|
|
|
|
|
|
|
|
|
|
Denominator for
basic earnings per share
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
22,717,043
|
|
|
23,095,861
|
|
|
22,671,943
|
|
|
23,165,553
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
$
|
1.80
|
|
|
$
|
2.13
|
|
|
$
|
2.20
|
|
|
$
|
2.49
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
Per Share
|
|
|
|
|
|
|
|
|
Numerator for
diluted earnings per share
|
|
|
|
|
|
|
|
|
Earnings available to
Universal Corporation common shareholders
|
|
$
|
40,847
|
|
|
$
|
49,309
|
|
|
$
|
49,991
|
|
|
$
|
57,626
|
|
Add: Dividends on
convertible perpetual preferred stock (if conversion
assumed)
|
|
3,687
|
|
|
3,712
|
|
|
—
|
|
|
11,137
|
|
Add: Cost in excess
of carrying value on repurchases of convertible
perpetual preferred stock
|
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
Earnings available to
Universal Corporation common shareholders for
calculation of diluted earnings per share
|
|
44,534
|
|
|
53,039
|
|
|
49,991
|
|
|
68,781
|
|
|
|
|
|
|
|
|
|
|
Denominator for
diluted earnings per share
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
22,717,043
|
|
|
23,095,861
|
|
|
22,671,943
|
|
|
23,165,553
|
|
Effect of dilutive
securities (if conversion or exercise assumed)
|
|
|
|
|
|
|
|
|
Convertible perpetual
preferred stock
|
|
4,857,262
|
|
|
4,852,940
|
|
|
—
|
|
|
4,845,818
|
|
Employee share-based
awards
|
|
280,603
|
|
|
342,216
|
|
|
285,107
|
|
|
328,060
|
|
Denominator for
diluted earnings per share
|
|
27,854,908
|
|
|
28,291,017
|
|
|
22,957,050
|
|
|
28,339,431
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
|
$
|
1.60
|
|
|
$
|
1.87
|
|
|
$
|
2.18
|
|
|
$
|
2.43
|
|
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 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December
31,
|
|
Nine Months
Ended
December
31,
|
(in thousands of
dollars)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
SALES AND OTHER
OPERATING REVENUES
|
|
|
|
|
|
|
|
|
Flue-cured and burley
leaf tobacco operations:
|
|
|
|
|
|
|
|
|
North
America
|
|
$
|
81,463
|
|
|
$
|
118,844
|
|
|
$
|
179,456
|
|
|
$
|
203,850
|
|
Other
regions (1)
|
|
460,729
|
|
|
604,100
|
|
|
1,009,162
|
|
|
1,173,341
|
|
Subtotal
|
|
542,192
|
|
|
722,944
|
|
|
1,188,618
|
|
|
1,377,191
|
|
Other tobacco
operations (2)
|
|
42,400
|
|
|
35,110
|
|
|
127,775
|
|
|
116,451
|
|
Consolidated sales
and other operating revenues
|
|
$
|
584,592
|
|
|
$
|
758,054
|
|
|
$
|
1,316,393
|
|
|
$
|
1,493,642
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
|
|
|
|
|
|
|
|
Flue-cured and burley
leaf tobacco operations:
|
|
|
|
|
|
|
|
|
North
America
|
|
$
|
5,750
|
|
|
$
|
15,864
|
|
|
$
|
12,949
|
|
|
$
|
21,821
|
|
Other
regions (1)
|
|
61,318
|
|
|
78,958
|
|
|
87,673
|
|
|
90,044
|
|
Subtotal
|
|
67,068
|
|
|
94,822
|
|
|
100,622
|
|
|
111,865
|
|
Other tobacco
operations (2)
|
|
1,083
|
|
|
(1,316)
|
|
|
2,136
|
|
|
2,584
|
|
Segment operating
income
|
|
68,151
|
|
|
93,506
|
|
|
102,758
|
|
|
114,449
|
|
Deduct: Equity in
pretax (earnings) loss of unconsolidated affiliates
(3)
|
|
(2,326)
|
|
|
527
|
|
|
(2,556)
|
|
|
(3,391)
|
|
Restructuring
and impairment costs (4)
|
|
—
|
|
|
(1,143)
|
|
|
(2,389)
|
|
|
(4,493)
|
|
Add: Other income
(5)
|
|
3,390
|
|
|
—
|
|
|
3,390
|
|
|
—
|
|
Consolidated
operating income
|
|
$
|
69,215
|
|
|
$
|
92,890
|
|
|
$
|
101,203
|
|
|
$
|
106,565
|
|
|
|
(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 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.
|
|
|
(5)
|
Other income
represents a gain from remeasuring to fair value the Company's
original 50% ownership interest in Procesadora Unitab, S.A., a
tobacco processing joint
venture in Guatemala, upon acquiring the 50% interest held by the
Company's joint venture partner. This item is excluded from segment
operating income, but is
included in consolidated operating income in the consolidated
statements of income and comprehensive income.
|
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SOURCE Universal Corporation