Attached files
| file | filename |
|---|---|
| 8-K - UNIVERSAL CORP /VA/ | v210390_8k.htm |
| EX-99.1 - UNIVERSAL CORP /VA/ | v210390_ex99-1.htm |
P.O. Box
25099 ▫ Richmond,
VA 23260 ▫ Phone:
(804) 359-9311 ▫ Fax:
(804) 254-3584
P R E S S R E L E A S
E
|
CONTACT: Karen M. L.
Whelan
|
RELEASE: 4:00 p.m.
ET
|
|
Phone:(804) 359-9311
Fax:(804) 254-3584
Email:investor@universalleaf.com
|
Universal Corporation Reports Strong Third Quarter
Results
Richmond, VA, February 8, 2011 / PRNEWSWIRE
HIGHLIGHTS
Quarter
Diluted
earnings per share increased 18% to $1.82 versus $1.54 last
year.
Operating
income improved by $18.6 million or 27%, to $87.6 million.
Operating
income includes net benefit from non-recurring items of $8.4
million.
Revenues
up 4%, to $688 million.
Previously
announced 40th annual
increase in dividends.
Nine
Months
Diluted
earnings per share decreased to $4.46 versus $4.78 last year.
Operating
income down 3%, to $208 million.
Revenues
relatively flat.
Repurchased
3% of outstanding common stock.
George C.
Freeman, III, Chairman, President, and Chief Executive Officer of Universal
Corporation (NYSE:UVV), reported that net income for the third fiscal quarter,
which ended December 31, 2010, was $52.3 million, or $1.82 per diluted share,
14% above last year’s net income of $45.7 million, or $1.54 per diluted
share. Solid operating performance in flue-cured and burley leaf
tobacco operations offset declines in the Other Tobacco Operations segment,
producing an improvement in earnings compared to the prior year’s results.
Revenues for the quarter also increased about 4% to $688.2 million reflecting a
higher proportion of lamina sales and higher green leaf prices.
During
the third quarter, the Company completed the assignment of tobacco production
contracts with approximately 8,100 farmers in Brazil, along with the sale of
related assets, to a subsidiary of Philip Morris International (“PMI”) and
recorded a net gain of $19.4 million before taxes, or $0.44 per diluted
share. In addition, the results for the quarter include combined
restructuring and impairment charges of $11.0 million before taxes, or $0.26 per
diluted share, related primarily to the planned closure and sale of related
assets of the Company’s processing facility in Simcoe, Ontario.
--M
O R E--
Universal
Corporation
Page
2
For the
nine months ended December 31, 2010, net income was $129.4 million, or $4.46 per
diluted share, compared to last year’s net income of $142.0 million, or $4.78
per diluted share, for the same period. Revenues for the nine months
of about $1.9 billion were level with the prior year. In addition to
the gain on the PMI transaction in Brazil, results for the nine months ended
December 31, 2010, also include restructuring and impairment charges of $14.0
million before taxes, or $0.32 per diluted share, and income of $7.4 million
before taxes, or $0.17 per diluted share, for the second quarter reversal of a
portion of a previously recorded European Commission fine due to a favorable
court ruling.
Mr.
Freeman stated, “Our operations continue to perform well although comparisons to
the prior year are difficult given the record results that were achieved last
year. Although transportation challenges remain, some of the
shipments that were delayed due to logistical difficulties earlier in the year
have been completed, with the remainder on track to be completed by fiscal year
end. Except for the effect of the PMI transactions in Brazil, which will begin
to impact operations next year, our comparisons this year reflect the majority
of the impact of recent customer vertical integration efforts, and we continue
to have some success in securing additional sales to replace lost
volumes. We are working to make sure that we adjust our operations to
accurately reflect these and other business changes and are committed to
managing prudently our costs as well as our cash flow. Many of our
global restructuring plans are already underway. We extend our
sincere thanks to the current and past employees of our Simcoe Leaf organization
in Canada. They delivered quality products and provided excellent
customer service for decades, but market realities eventually prevailed. These
types of decisions are never easy as they involve the livelihoods of valued
co-workers, but they are necessary to allow us to adapt profitably and
effectively to changes in our markets and in our customers’ sourcing
requirements.
“Looking
forward, we continue to believe that global leaf markets are moving into
oversupply. We continue our efforts to stabilize markets by working closely with
both farmers and customers to carefully plan for crop
requirements. At the same time, we are actively managing our
uncommitted inventory levels, which remain reasonable at 12% of total
inventories at the end of December 2010. There are many challenges
underway in the global economy as well as in our industry, and we are pleased
with the results we are achieving in this environment.”
FLUE-CURED
AND BURLEY LEAF TOBACCO OPERATIONS:
Third
Quarter
Operating
income for the third quarter of fiscal year 2011, for the flue-cured and burley
operations, which include the North America and Other Regions segments, was
$74.3 million, reflecting an improvement of $8.2 million, or 12%, compared to
the same period last year. Earnings for the quarter were buoyed by
additional sales in the North America segment of carryover crop and increases in
toll processing volumes in the United States. Results increased in
the Asia region on stronger trading volumes and higher volumes sold from the
larger crops in the Philippines, as well as the resolution of earlier shipment
delays and improved margins. The Africa region showed improvement in
the quarter as well, on a combination of benefits from foreign currency
remeasurement and one-time employment cost accruals in the previous
year. Revenues for the group were up 4% at $630.6
million. The North America segment revenues improved by about $23
million, reflecting increased volumes on old crop sales in this year and higher
sales in Mexico. In addition, comparisons benefited from late shipments last
year that were delayed into the fourth fiscal quarter. Sales for the
Other Regions segment were relatively flat as reduced volumes partly due to the
smaller crop in Brazil and lower demand in Argentina were offset by increased
sales in the Asia region.
Nine
Months
Operating
income for the flue-cured and burley tobacco operations decreased by 9% to
$180.9 million for the nine months ended December 31, 2010. Those
results reflect significantly reduced volumes in Brazil, in part due to the
smaller Brazilian crop and lower margins from higher currency-related leaf
costs. Earnings in Europe were also down for the nine-month period on
lower margins and volumes. Results in Africa were also lower,
although the effect of reduced or delayed sales volumes in some origins has been
mitigated by increased processing for third parties. These decreases
were offset somewhat by improved results in the North America segment on
increased sales of carryover crop as well as the effect of prior year shipping
delays, which affected comparisons. Also, the Asia region returned
improved results for the period on higher volumes from the larger Philippine
crops, increased trading earnings, and better experience with the collection of
farmer advances. Revenues were down by 3%, as decreased volumes in
South America, Africa, and Europe were partially offset by stronger trading
results in Asia and the increase from carryover crop sales in North
America.
--M
O R E--
Universal
Corporation
Page
3
OTHER
TOBACCO OPERATIONS:
The Other
Tobacco Operations segment operating income declined in both the quarter and the
nine months versus the prior year, driven primarily by significantly lower
results from the oriental tobacco joint venture. Reduced sales volumes and
margins and smaller currency gains this year have lowered results for this
business for both periods. Dark tobacco results are down for the nine-month
period due to lower volumes and margins in some areas. Dark tobacco earnings for
the third quarter improved, however, on reductions in overhead and some earlier
shipments. Revenues for this segment increased 7% for the nine months, to $179
million, primarily related to higher sales in the just-in-time services group
and increased dark tobacco shipments after a soft beginning to the prior year,
which offset lower imports of oriental tobacco into the United
States. For the quarter, revenues in this segment were
flat.
OTHER
ITEMS:
Cost of
sales increased by 1% to about $1.5 billion for the nine months ended December
31, 2010, and increased 3% for the quarter. Both periods were
affected primarily by the effect of a weaker U.S. dollar and the third quarter
was influenced as well by a higher proportion of lamina in the sales
mix. Selling, general, and administrative costs decreased by $30
million, or 14%, for the nine-month period and were relatively flat for the
third fiscal quarter compared to the prior year. The decrease in the
nine months was due primarily to the $7.4 million effect on the second fiscal
quarter of the reversal of the European Commission fine and a $5 million benefit
from lower currency remeasurement and exchange losses in the current year, as
well as last year’s accruals for costs associated with the recently settled
Foreign Corrupt Practices Act (“FCPA”) matter and for incentive
compensation.
Interest
expense for the third quarter increased about $1 million due to higher average
debt levels in the current year, while interest expense for the nine months
ended December 31, 2010, was down about $3 million in part because of interest
costs accrued in the prior year related to the FCPA matter and in part because
of lower effective interest rates. Interest income in the nine months increased
on the recognition of interest income on funds that had been escrowed to bond
the appeal of the European Commission fine. The effective income tax
rates for the quarter and nine months, at 29% and 30% respectively, were lower
than the 35% U.S. federal statutory rate due to the recognition of foreign tax
credits and the reversal of accruals due to resolution of some uncertain tax
positions. Those rates were slightly lower than the comparable
periods last year.
In
October 2010, Universal’s operating subsidiary in Brazil completed the
assignment of tobacco production contracts with approximately 8,100 farmers to a
subsidiary of Philip Morris International (“PMI”). As part of the
transaction, the PMI subsidiary acquired various related assets and hired
certain employees who previously worked for the Company in agronomy and leaf
procurement functions. The PMI subsidiary also assumed obligations
under guarantees of bank loans to the farmers for crop financing. The farmer
contracts assigned represent approximately 20% of the annual volume handled by
the Company in Brazil during the most recent crop year. The Company
has entered into an agreement with the PMI subsidiary to process tobaccos bought
directly from farmers beginning with the 2011 crop year. In addition,
the Company expects to continue to sell processed leaf from Brazil to PMI and
its subsidiaries. The Company received total cash proceeds of
approximately $34.9 million from the assignment of farmer contracts and sale of
related assets and recorded a net gain of approximately $19.4 million, which is
reported in other income in the consolidated statement of income.
--M
O R E--
Universal
Corporation
Page
4
In
November 2010, Universal decided to close its leaf tobacco processing facility
in Simcoe, Ontario. The Company accrued related employee termination
benefits of approximately $2.7 million as restructuring costs during the quarter
ended December 31, 2010. The Company recorded an impairment charge of
approximately $5.6 million during the quarter ended December 31, 2010, to write
those assets down to their fair values, net of expected selling costs. The
Canadian operations are included in the Company’s North America segment, and
revenues and earnings for these operations have not been material to that
segment in recent years. The Company also recorded other
restructuring costs during the quarter and the nine months ended December 31,
2010, associated with initiatives undertaken to adjust various operations and
reduce costs. Most of the restructuring costs represent accruals for
employee termination benefits at the Company’s corporate headquarters and at
operating locations in the United States, South America, Africa, and Europe that
are part of the Company’s North America and Other Regions reportable
segments. Total restructuring and impairment costs for the quarter
and nine months ended December 31, 2010, were $11.0 million and $14.0 million,
respectively.
On
November 4, 2010, the Company announced its 40th consecutive annual dividend
increase when it declared a $0.48 cent quarterly dividend on the common shares
of the Company, payable February 14, 2011, to the common shareholders of record
at the close of business January 10, 2011. In addition, during the
nine months ended December 31, 2010, the Company purchased approximately 3% of
common shares outstanding at the beginning of the year. That
represents 784,000 shares of common stock, at an aggregate cost of $33.4
million, under the current share repurchase program that expires in November,
2011. At December 31, 2010, the Company had approximately 23.6
million common shares outstanding.
Additional
information
Amounts
included in the previous discussion are attributable to Universal Corporation
and exclude earnings related to non-controlling interests in
subsidiaries.
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; 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, 2010, 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 year ended March 31, 2010.
At 5:00
p.m. (Eastern Time) on February 8, 2011, 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 for three months. A taped
replay of the call will also be available through March 1, 2011, by dialing
(800) 642-1687. The confirmation number to access the replay is 40757665.
Headquartered
in Richmond, Virginia, Universal Corporation is the world's leading leaf tobacco
merchant and processor and conducts business in more than 30
countries. Its revenues for the fiscal year ended March 31, 2010,
were $2.5 billion. For more information on Universal Corporation, visit its web
site at www.universalcorp.com.
--M
O R E--
Universal
Corporation
Page
5
|
UNIVERSAL CORPORATION AND
SUBSIDIARIES
|
||||||||||||||||
|
CONSOLIDATED STATEMENTS OF
INCOME
|
||||||||||||||||
|
(In thousands of dollars, except
per share data)
|
||||||||||||||||
|
Three Months
Ended
December
31,
|
Nine Months
Ended
December
31,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
|
Sales and other operating
revenues
|
$ | 688,208 | $ | 661,205 | $ | 1,891,312 | $ | 1,925,235 | ||||||||
|
Costs and
expenses
|
||||||||||||||||
|
Cost of
goods sold
|
534,164 | 516,541 | 1,501,757 | 1,493,864 | ||||||||||||
|
Selling,
general and administrative expenses
|
74,826 | 75,719 | 186,658 | 216,789 | ||||||||||||
|
Other
income
|
(19,368 | ) | — | (19,368 | ) | — | ||||||||||
|
Restructuring
and impairment costs
|
10,995 | — | 13,964 | — | ||||||||||||
|
Operating
income
|
87,591 | 68,945 | 208,301 | 214,582 | ||||||||||||
|
Equity in
pretax earnings (loss) of unconsolidated affiliates
|
(1,439 | ) | 7,783 | 953 | 17,029 | |||||||||||
|
Interest
income
|
754 | 130 | 2,614 | 926 | ||||||||||||
|
Interest
expense
|
6,257 | 5,438 | 17,245 | 20,287 | ||||||||||||
|
Income before income taxes and
other items
|
80,649 | 71,420 | 194,623 | 212,250 | ||||||||||||
|
Income
taxes
|
23,064 | 22,946 | 58,837 | 65,300 | ||||||||||||
|
Net income
|
57,585 | 48,474 | 135,786 | 146,950 | ||||||||||||
|
Less: net (income) loss
attributable to noncontrolling interests in
subsidiaries
|
(5,287 | ) | (2,778 | ) | (6,337 | ) | (4,994 | ) | ||||||||
|
Net income attributable to
Universal Corporation
|
52,298 | 45,696 | 129,449 | 141,956 | ||||||||||||
|
Dividends on Universal Corporation
convertible perpetual preferred stock
|
(3,712 | ) | (3,712 | ) | (11,137 | ) | (11,137 | ) | ||||||||
|
Earnings available to Universal
Corporation common shareholders
|
$ | 48,586 | $ | 41,984 | $ | 118,312 | $ | 130,819 | ||||||||
|
Earnings per share attributable to
Universal Corporation common shareholders:
|
||||||||||||||||
|
Basic
|
$ | 2.05 | $ | 1.70 | $ | 4.93 | $ | 5.27 | ||||||||
|
Diluted
|
$ | 1.82 | $ | 1.54 | $ | 4.46 | $ | 4.78 | ||||||||
See accompanying
notes.
--M
O R E--
Universal
Corporation
Page
6
|
UNIVERSAL CORPORATION AND
SUBSIDIARIES
|
||||||||||||
|
CONSOLIDATED BALANCE
SHEETS
|
||||||||||||
|
(In thousands of
dollars)
|
||||||||||||
|
December 31,
2010
|
December 31,
2009
|
March 31,
2010
|
||||||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||||||
|
ASSETS
|
||||||||||||
|
Current
|
||||||||||||
|
Cash and
cash equivalents
|
$ | 91,427 | $ | 164,170 | $ | 245,953 | ||||||
|
Accounts
receivable, net
|
292,490 | 255,847 | 266,960 | |||||||||
|
Advances
to suppliers, net
|
132,815 | 134,209 | 167,400 | |||||||||
|
Accounts
receivable - unconsolidated affiliates
|
35,978 | 26,550 | 11,670 | |||||||||
|
Inventories
- at lower of cost or market:
|
||||||||||||
|
Tobacco
|
940,168 | 770,708 | 812,186 | |||||||||
|
Other
|
50,551 | 50,716 | 52,952 | |||||||||
|
Prepaid
income taxes
|
8,633 | 14,632 | 13,514 | |||||||||
|
Deferred
income taxes
|
43,669 | 48,711 | 47,074 | |||||||||
|
Other
current assets
|
65,784 | 64,234 | 75,367 | |||||||||
|
Total
current assets
|
1,661,515 | 1,529,777 | 1,693,076 | |||||||||
|
Land
|
15,490 | 16,147 | 16,036 | |||||||||
|
Buildings
|
265,390 | 259,912 | 266,350 | |||||||||
|
Machinery
and equipment
|
552,575 | 535,278 | 532,824 | |||||||||
| 833,455 | 811,337 | 815,210 | ||||||||||
|
Less
accumulated depreciation
|
(512,413 | ) | (483,349 | ) | (485,723 | ) | ||||||
| 321,042 | 327,988 | 329,487 | ||||||||||
|
Other
assets
|
||||||||||||
|
Goodwill
and other intangibles
|
99,602 | 106,000 | 105,561 | |||||||||
|
Investments
in unconsolidated affiliates
|
103,821 | 124,503 | 106,336 | |||||||||
|
Deferred
income taxes
|
36,373 | 13,961 | 30,073 | |||||||||
|
Other
noncurrent assets
|
96,493 | 122,057 | 106,507 | |||||||||
| 336,289 | 366,521 | 348,477 | ||||||||||
|
Total
assets
|
$ | 2,318,846 | $ | 2,224,286 | $ | 2,371,040 | ||||||
See accompanying
notes.
--M
O R E--
Universal
Corporation
Page
7
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UNIVERSAL CORPORATION AND
SUBSIDIARIES
|
||||||||||||
|
CONSOLIDATED BALANCE
SHEETS
|
||||||||||||
|
(In thousands of
dollars)
|
||||||||||||
|
December 31,
2010
|
December 31,
2009
|
March 31,
2010
|
||||||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||||||
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
||||||||||||
|
Current
|
||||||||||||
|
Notes
payable and overdrafts
|
$ | 204,769 | $ | 151,252 | $ | 177,013 | ||||||
|
Accounts
payable and accrued expenses
|
180,054 | 196,126 | 259,576 | |||||||||
|
Accounts
payable - unconsolidated affiliates
|
15,355 | 17,398 | 6,464 | |||||||||
|
Customer
advances and deposits
|
87,934 | 38,032 | 107,858 | |||||||||
|
Accrued
compensation
|
19,029 | 25,143 | 30,097 | |||||||||
|
Income
taxes payable
|
11,901 | 11,753 | 18,991 | |||||||||
|
Current
portion of long-term obligations
|
95,000 | 15,000 | 15,000 | |||||||||
|
Total
current liabilities
|
614,042 | 454,704 | 614,999 | |||||||||
|
Long-term
obligations
|
322,486 | 414,222 | 414,764 | |||||||||
|
Pensions and other postretirement
benefits
|
100,719 | 90,662 | 96,888 | |||||||||
|
Other long-term
liabilities
|
47,661 | 71,607 | 69,886 | |||||||||
|
Deferred income
taxes
|
44,963 | 41,608 | 46,128 | |||||||||
|
Total
liabilities
|
1,129,871 | 1,072,803 | 1,242,665 | |||||||||
|
Shareholders'
equity
|
||||||||||||
|
Universal
Corporation:
|
||||||||||||
|
Preferred
stock:
|
||||||||||||
|
Series
A Junior Participating Preferred Stock, no par value, 5,000,000
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 December 31, 2009, and March 31, 2010)
|
213,023 | 213,023 | 213,023 | |||||||||
|
Common
stock, no par value, 100,000,000 shares authorized,
23,569,443
|
||||||||||||
|
shares
issued and outstanding (24,617,987 at December 31, 2009,
and
|
||||||||||||
|
24,325,228
at March 31, 2010)
|
193,263 | 195,679 | 195,001 | |||||||||
|
Retained
earnings
|
824,244 | 770,103 | 767,213 | |||||||||
|
Accumulated
other comprehensive loss
|
(53,670 | ) | (36,084 | ) | (52,667 | ) | ||||||
|
Total
Universal Corporation shareholders' equity
|
1,176,860 | 1,142,721 | 1,122,570 | |||||||||
|
Noncontrolling
interests in subsidiaries
|
12,115 | 8,762 | 5,805 | |||||||||
|
Total
shareholders' equity
|
1,188,975 | 1,151,483 | 1,128,375 | |||||||||
|
Total
liabilities and shareholders' equity
|
$ | 2,318,846 | $ | 2,224,286 | $ | 2,371,040 | ||||||
See accompanying
notes.
--M
O R E--
Universal
Corporation
Page
8
|
UNIVERSAL CORPORATION AND
SUBSIDIARIES
|
||||||||
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
||||||||
|
(In thousands of
dollars)
|
||||||||
|
Nine Months
Ended
December
31,
|
||||||||
|
2010
|
2009
|
|||||||
|
(Unaudited)
|
||||||||
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
||||||||
|
Net
income
|
$ | 135,786 | $ | 146,950 | ||||
|
Adjustments to
reconcile net income to net cash used by operating
activities:
|
||||||||
|
Depreciation
|
32,474 | 30,888 | ||||||
|
Amortization
|
1,220 | 1,791 | ||||||
|
Provisions
for losses on advances and guaranteed loans to
suppliers
|
19,554 | 19,148 | ||||||
|
Foreign
currency remeasurement loss (gain), net
|
(1,368 | ) | 7,219 | |||||
|
Gain
on assignment of farmer contracts and sale of related
assets
|
(19,368 | ) | — | |||||
|
Restructuring
and impairment costs
|
13,964 | — | ||||||
|
Other,
net
|
(9,366 | ) | (2,841 | ) | ||||
|
Changes
in operating assets and liabilities, net
|
(262,251 | ) | (148,345 | ) | ||||
|
Net
cash provided (used) by operating activities
|
(89,355 | ) | 54,810 | |||||
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
||||||||
|
Purchase
of property, plant and equipment
|
(31,801 | ) | (42,923 | ) | ||||
|
Proceeds
from assignment of farmer contracts and sale of related
assets
|
34,946 | — | ||||||
|
Proceeds
from sale of property, plant and equipment, and
other
|
2,512 | 3,356 | ||||||
|
Net
cash provided (used) by investing activities
|
5,657 | (39,567 | ) | |||||
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
||||||||
|
Issuance
(repayment) of short-term debt, net
|
22,510 | (23,935 | ) | |||||
|
Issuance
of long-term obligations
|
— | 99,208 | ||||||
|
Repayment
of long-term obligations
|
(15,000 | ) | (79,500 | ) | ||||
|
Dividends
paid to noncontrolling interests
|
(100 | ) | (105 | ) | ||||
|
Issuance
of common stock
|
— | 205 | ||||||
|
Repurchase
of common stock
|
(33,450 | ) | (15,342 | ) | ||||
|
Dividends
paid on convertible perpetual preferred stock
|
(11,137 | ) | (11,137 | ) | ||||
|
Dividends
paid on common stock
|
(34,011 | ) | (34,315 | ) | ||||
|
Other
|
— | (943 | ) | |||||
|
Net
cash used by financing activities
|
(71,188 | ) | (65,864 | ) | ||||
|
Effect of exchange rate changes on
cash
|
360 | 2,165 | ||||||
|
Net decrease in cash and cash
equivalents
|
(154,526 | ) | (48,456 | ) | ||||
|
Cash and cash equivalents at
beginning of year
|
245,953 | 212,626 | ||||||
|
Cash and cash equivalents at end
of period
|
$ | 91,427 | $ | 164,170 | ||||
See accompanying
notes.
--M
O R E--
Universal
Corporation
Page
9
NOTE 1. BASIS OF
PRESENTATION
Universal
Corporation, with its subsidiaries (“Universal” or the “Company”), is the
world’s leading leaf tobacco merchant and processor. 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,
2010.
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 Brazil and support the
farmers’ production of tobacco there. At December 31, 2010, the
Company’s total exposure under guarantees issued by its operating subsidiary in
Brazil for banking facilities of farmers in that country was approximately $77
million ($97 million face amount including unpaid accrued interest, less $20
million recorded for the fair value of the guarantees). About 94% of
these guarantees expire within one year, and all of the remainder expire within
five years. The subsidiary withholds payments due to the farmers on
delivery of tobacco and forwards those payments to the third-party
banks. Failure of farmers to deliver sufficient quantities of tobacco
to the subsidiary to cover their obligations to the third-party banks could
result in a liability for the subsidiary under the related guarantees; however,
in that case, the subsidiary would have recourse against the
farmers. The maximum potential amount of future payments that the
Company’s subsidiary could be required to make at December 31, 2010, was the
face amount, $97 million including unpaid accrued interest ($155 million as of
December 31, 2009, and $112 million at March 31, 2010). The fair
value of the guarantees was a liability of approximately $20 million at December
31, 2010 ($26 million at December 31, 2009, and $26 million at March 31,
2010). In addition to these guarantees, the Company has other
contingent liabilities totaling approximately $51 million, primarily related to
a bank guarantee that bonds an appeal of a 2006 fine in the European
Union.
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.
--M
O R E--
Universal
Corporation
Page
10
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
December
31,
|
Nine Months
Ended
December
31,
|
|||||||||||||||
|
(in thousands, except per share
data)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
Basic Earnings Per
Share
|
||||||||||||||||
|
Numerator for basic earnings per
share
|
||||||||||||||||
|
Net income
attributable to Universal Corporation
|
$ | 52,298 | $ | 45,696 | $ | 129,449 | $ | 141,956 | ||||||||
|
Less: Dividends
on convertible perpetual preferred stock
|
(3,712 | ) | (3,712 | ) | (11,137 | ) | (11,137 | ) | ||||||||
|
Earnings
available to Universal Corporation common
shareholders
|
||||||||||||||||
|
for
calculation of basic earnings per share
|
48,586 | 41,984 | 118,312 | 130,819 | ||||||||||||
|
Denominator for basic earnings per
share
|
||||||||||||||||
|
Weighted
average shares outstanding
|
23,738 | 24,684 | 24,010 | 24,823 | ||||||||||||
|
Basic earnings per
share
|
$ | 2.05 | $ | 1.70 | $ | 4.93 | $ | 5.27 | ||||||||
|
Diluted Earnings Per
Share
|
||||||||||||||||
|
Numerator for diluted earnings per
share
|
||||||||||||||||
|
Earnings
available to Universal Corporation common
shareholders
|
$ | 48,586 | $ | 41,984 | $ | 118,312 | $ | 130,819 | ||||||||
|
Add: Dividends
on convertible perpetual preferred stock (if
|
||||||||||||||||
|
conversion
assumed)
|
3,712 | 3,712 | 11,137 | 11,137 | ||||||||||||
|
Earnings
available to Universal Corporation common
shareholders
|
||||||||||||||||
|
for
calculation of diluted earnings per share
|
52,298 | 45,696 | 129,449 | 141,956 | ||||||||||||
|
Denominator for diluted earnings
per share:
|
||||||||||||||||
|
Weighted
average shares outstanding
|
23,738 | 24,684 | 24,010 | 24,823 | ||||||||||||
|
Effect of
dilutive securities (if conversion or exercise
assumed)
|
||||||||||||||||
|
Convertible
perpetual preferred stock
|
4,752 | 4,735 | 4,747 | 4,731 | ||||||||||||
|
Employee
share-based awards
|
302 | 226 | 262 | 173 | ||||||||||||
|
Denominator
for diluted earnings per share
|
28,792 | 29,645 | 29,019 | 29,727 | ||||||||||||
|
Diluted earnings per
share
|
$ | 1.82 | $ | 1.54 | $ | 4.46 | $ | 4.78 | ||||||||
For the
nine months ended December 31, 2010 and 2009, certain employee share-based
awards were not included in the computation of diluted earnings per share
because their effect would have been anti-dilutive. These awards
included stock appreciation rights and stock options totaling 669,401 shares at
a weighted-average exercise price of $52.48 for the period ended December 31,
2010, and 507,801 shares at a weighted-average exercise price of $56.52 for the
period ended December 31, 2009.
--M
O R E--
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
December
31,
|
Nine Months
Ended
December
31,
|
|||||||||||||||
|
(in thousands of
dollars)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
SALES AND OTHER OPERATING
REVENUES
|
||||||||||||||||
|
Flue-cured and
burley leaf tobacco operations:
|
||||||||||||||||
|
North
America
|
$ | 124,072 | $ | 101,302 | $ | 243,990 | $ | 187,308 | ||||||||
|
Other
regions (1)
|
506,568 | 502,624 | 1,468,326 | 1,570,973 | ||||||||||||
|
Subtotal
|
630,640 | 603,926 | 1,712,316 | 1,758,281 | ||||||||||||
|
Other tobacco
operations (2)
|
57,568 | 57,279 | 178,996 | 166,954 | ||||||||||||
|
Consolidated
sales and other operating revenues
|
$ | 688,208 | $ | 661,205 | $ | 1,891,312 | $ | 1,925,235 | ||||||||
|
OPERATING
INCOME
|
||||||||||||||||
|
Flue-cured and
burley leaf tobacco operations:
|
||||||||||||||||
|
North
America
|
$ | 26,693 | $ | 23,826 | $ | 42,383 | $ | 32,080 | ||||||||
|
Other
regions (1)
|
47,620 | 42,320 | 138,530 | 167,706 | ||||||||||||
|
Subtotal
|
74,313 | 66,146 | 180,913 | 199,786 | ||||||||||||
|
Other tobacco
operations (2)
|
3,466 | 10,582 | 15,492 | 31,825 | ||||||||||||
|
Segment
operating income
|
77,779 | 76,728 | 196,405 | 231,611 | ||||||||||||
|
Deduct: Equity
in pretax (earnings) loss of unconsolidated affiliates
(3)
|
1,439 | (7,783 | ) | (953 | ) | (17,029 | ) | |||||||||
|
Restructuring
and impairment costs (4)
|
(10,995 | ) | — | (13,964 | ) | — | ||||||||||
|
Add: Other
income (4)
|
19,368 | — | 19,368 | — | ||||||||||||
|
Reversal
of European Commission fines (4)
|
— | — | 7,445 | — | ||||||||||||
|
Consolidated
operating income
|
$ | 87,591 | $ | 68,945 | $ | 208,301 | $ | 214,582 | ||||||||
| (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)
|
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.
|
#
# #