RICHMOND, Va., Nov. 3, 2021 /PRNewswire/ -- George C. Freeman, III, Chairman, President, and
Chief Executive Officer of Universal Corporation (NYSE:UVV),
stated, "I am pleased with our results for the first six months of
fiscal year 2022. Our tobacco operations have continued to perform
well, and our ingredients operations, which include our
October 2020 acquisition of Silva
International, Inc. ("Silva"), are making solid contributions to
our results.
"In the six months ended September 30,
2021, tobacco operations results improved on a favorable
product mix consisting of a higher percentage of lamina tobacco and
fewer carryover sales of lower margin tobaccos, compared to the
same period in the prior fiscal year. In addition, our uncommitted
inventory level of 11% of tobacco inventories at September 30, 2021, was significantly below our
uncommitted inventory level of 16% of tobacco inventories at
September 30, 2020. At the same time,
we continue to have logistical challenges related to worldwide
shipping availability stemming from the ongoing COVID-19 pandemic.
To address these challenges, we are working closely with our
customers to accelerate tobacco shipments in some origins where
vessels and containers have been available while diligently
managing slower tobacco shipments in origins with reduced container
and vessel availability. Our lamina tobacco sales volumes for the
first half of fiscal year 2022 were just slightly below those in
the first half of fiscal year 2021, and we expect our tobacco crop
shipments to be heavily weighted to the second half of fiscal year
2022. I credit our ability to successfully adapt in this constantly
changing environment to our talented and dedicated employees and
our strong relationships with our customers.
"We are continuing to monitor global supply chain constraints.
However, at this time, we do not know if we will encounter
significant shipment timing delays which may push shipments into
fiscal year 2023. We are also seeing rising rates of inflation,
increases in freight costs, and labor constraints in some locations
which are driving up costs. Although we currently do not know the
significance of the impact at this time, we are anticipating these
increased costs will especially affect our ingredient operations
later in the fiscal year.
"On October 4, 2021, we announced
the closing of our purchase of Shank's Extracts, Inc. ("Shank's").
We are very excited about this acquisition as it enhances our
plant-based ingredients platform through growing the value-added
services available to our customers by adding flavors, custom
packaging and bottling, and product development capabilities.
"As we move into the second half of fiscal year 2022, we look to
maintain our strong level of performance despite ongoing global
supply chain challenges. At the same time, we remain committed to
setting high standards of social and environmental performance
essential to supporting a sustainable supply chain, and recently
released goals and targets around agricultural labor practices and
environmental impacts, which are available on our website."
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FINANCIAL
HIGHLIGHTS
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Six Months Ended
September 30,
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Change
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(in millions of
dollars, except per share data)
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2021
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2020
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$
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%
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Consolidated
Results
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Sales and other
operating revenue
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$
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804.0
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$
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692.8
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$
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111.1
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16
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%
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Cost of goods
sold
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$
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648.8
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$
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570.3
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$
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78.5
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14
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%
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Gross Profit
Margin
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19.3
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%
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17.7
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%
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160 bps
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Selling, general and
administrative expenses
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$
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115.2
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$
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101.8
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$
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13.4
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13
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%
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Restructuring and
impairment costs
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$
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2.0
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$
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—
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$
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2.0
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(100)
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%
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Operating income (as
reported)
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$
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40.4
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$
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24.9
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$
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15.5
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62
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%
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Adjusted operating
income (non-GAAP)*
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$
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41.6
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$
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22.4
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$
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19.3
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86
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%
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Diluted earnings per
share (as reported)
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$
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1.04
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$
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0.60
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$
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0.44
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73
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%
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Adjusted diluted
earnings per share (non-GAAP)*
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$
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0.96
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$
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0.40
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$
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0.56
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140
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%
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Segment
Results
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Tobacco operations
sales and other operating revenues
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$
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690.6
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$
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655.0
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$
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35.6
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5
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%
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Tobacco operations
operating income
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$
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35.8
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$
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23.5
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$
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12.3
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52
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%
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Ingredients
operations sales and other operating revenues
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$
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113.4
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$
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37.8
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$
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75.5
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200
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%
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Ingredient operations
operating income
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$
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7.1
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$
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(2.2)
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$
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9.3
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415
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%
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*See Reconciliation of Certain Non-GAAP Financial Measures in
Other Items below.
Net income for the six months ended September 30, 2021, was $25.9 million, or $1.04 per diluted share, compared with
$14.8 million, or $0.60 per diluted share, for the six months ended
September 30, 2020. Excluding
restructuring and impairment costs and certain other non-recurring
items, detailed in Other Items below, net income and diluted
earnings per share increased by $14.2
million and $0.56,
respectively, for the six months ended September 30, 2021, compared to the six months
ended September 30, 2020. Operating
income of $40.4 million for the six
months ended September 30, 2021,
increased by $15.5 million, compared
to operating income of $24.9 million
for the six months ended September 30,
2020. Adjusted operating income, detailed in Other Items
below, of $41.6 million increased by
$19.3 million for the first half of
fiscal year 2022, compared to adjusted operating income of
$22.4 million for the first half of
fiscal year 2021.
Net income for the quarter ended September 30, 2021, was $19.5 million, or $0.78 per diluted share, compared with
$7.5 million, or $0.30 per diluted share, for the quarter ended
September 30, 2020. Excluding
restructuring and impairment costs and certain other non-recurring
items, detailed in Other Items below, net income and diluted
earnings per share increased by $7.4
million and $0.29,
respectively, for the quarter ended September 30, 2021, compared to the quarter ended
September 30, 2020. Operating income
of $29.8 million for the quarter
ended September 30, 2021, increased
by $13.4 million, compared to
operating income of $16.4 million for
the quarter ended September 30, 2020.
Adjusted operating income, detailed in Other Items below, of
$29.0 million increased by
$11.0 million for the second quarter
of fiscal year 2022, compared to adjusted operating income of
$18.0 million for the second quarter
of fiscal year 2021.
Consolidated revenues increased by $111.1
million to $804.0 million and
by $76.9 million to $454.0 million, respectively, for the six months
and quarter ended September 30, 2021,
compared to the same periods in fiscal year 2021, on the addition
of the business acquired in October
2020 in the Ingredients Operations segment and a better
product mix and higher sales prices in the Tobacco Operations
segment.
TOBACCO OPERATIONS
Operating income for the Tobacco Operations segment increased by
$12.3 million to $35.8 million and by $8.4
million to $26.9 million,
respectively, for the six months and quarter ended September 30, 2021, compared to the same periods
in fiscal year 2021. Tobacco Operations segment results improved
largely due to a favorable product mix consisting of a higher
percentage of lamina tobacco and a reduced amount of carryover
sales of lower margin tobaccos, as well as increased value-added
services to customers, in the six months and quarter ended
September 30, 2021, compared to the
six months and quarter ended September 30,
2020. Africa sales volumes
were higher in the six months and quarter ended September 30, 2021, compared to the same periods
in fiscal year 2021, on accelerated shipments as well as some
shipments of carryover tobacco. In contrast, sales volumes for
Brazil were lower in the six
months and quarter ended September 30,
2021, compared to the same periods in the prior year, when
high volumes of lower margin carryover tobaccos shipped. In
addition, reduced vessel availability slowed shipments out of
Brazil. Our operations in
Asia saw a more favorable product
mix, as well as increased value-added services for customers during
the quarter ended September 30, 2021,
compared to the quarter ended September 30,
2020. Selling, general, and administrative expenses for the
Tobacco Operations segment were higher in the six months and
quarter ended September 30, 2021,
compared to the six months and quarter ended September 30, 2020, primarily due to unfavorable
foreign currency comparisons, mainly remeasurement. Revenues for
the Tobacco Operations segment of $690.6
million for the six months and $396.8
million for the quarter ended September 30, 2021, were up $35.6 million and $40.1
million, respectively, compared to the same periods in the
prior fiscal year, on a more favorable product mix as well as
higher sales prices.
INGREDIENTS OPERATIONS
Operating income for the Ingredients Operations segment was
$7.1 million and $2.7 million, respectively, for the six months
and quarter ended September 30, 2021,
compared to operating losses of $2.2
million and $1.5 million,
respectively, for the six months and quarter ended September 30, 2020. Results for the segment
improved in the six months and quarter ended September 30, 2021, compared to the same periods
in the prior fiscal year, on the inclusion of the October 2020 Silva acquisition. For both the six
months and quarter ended September 30,
2021, our Ingredients Operations saw strong volumes in both
human and pet food categories as well as some rebound in demand
from sectors that have been suffering during the ongoing COVID-19
pandemic. Selling, general, and administrative expenses for the
segment increased in the six months and quarter ended September 30, 2021, compared to the same periods
in the prior fiscal year, on the addition of the acquired business.
Revenues for the Ingredients Operations segment increased by
$75.5 million to $113.4 million and by $36.8 million to $57.2
million, respectively, for the six months and quarter ended
September 30, 2021, compared to the
six months and quarter ended September 30,
2020, primarily on the addition of the revenues for the
acquired business.
COVID-19 PANDEMIC IMPACT
On March 11, 2020, the World
Health Organization declared the coronavirus ("COVID-19") a
pandemic. Foreign governmental organizations and governmental
organizations in the United States
have taken various actions to combat the spread of COVID-19,
including imposing stay-at-home orders and closing "non-essential"
businesses and their operations. We continue to closely monitor
developments related to the ongoing COVID-19 pandemic and have
taken and continue to take steps intended to mitigate the potential
risks to us. It is paramount that our employees who operate our
businesses are safe and informed. We have assessed and regularly
update our existing business continuity plans for our business in
the context of this pandemic. For example, we have taken
precautions with regard to employee and facility hygiene, imposed
travel limitations on our employees, implemented work-from-home
procedures, and we continue to assess and reevaluate protocols
designed to protect our employees, customers and the public.
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 the
ongoing COVID-19 pandemic resulted in delays in certain operations
during fiscal year 2021. In addition, our plant-based ingredients
platform has seen some shifts in product mix due to the ongoing
COVID-19 pandemic related to changes in customer demand. Since
March 2020, we have at times also
experienced increased volatility in foreign currency exchange
rates, which we believe is in part related to the continued
uncertainties from COVID-19, as well as actions taken by
governments and central banks in response to COVID-19. We are
currently seeing and monitoring some logistical constraints around
worldwide vessel and container availability and increased costs
stemming from the ongoing COVID-19 pandemic.
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. We will take additional steps and
reevaluate current protocols 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
September 30, 2021, increased by 14%
and 17% to $648.8 million and
$361.3 million, respectively,
compared with the same periods in the prior fiscal year, as a
result of the acquisition of Silva in the Ingredients Operations
segment as well as variances in product mix in the Tobacco
Operations segment. Selling, general, and administrative costs for
the six months and quarter ended September
30, 2021, increased by $13.4
million to $115.2 million and
by $13.0 million to $65.4 million, respectively, compared to the same
periods in the prior fiscal year, on unfavorable foreign currency
comparisons, mainly remeasurement, as well as additional costs from
the acquisition of Silva in the Ingredients Operations segment.
Unfavorable foreign currency comparisons were approximately
$6.4 million and $1.4 million, respectively, in the six months and
quarter ended September 30, 2021,
compared to the same periods in the prior year. Interest expense
for the six months and quarter ended September 30, 2021, increased by $0.9 million to $13.3
million and by $1.5 million to
$7.1 million, respectively, largely
on increased costs from higher debt balances. Interest expense for
the six months ended September 30,
2020, included a non-recurring interest expense item of
$1.8 million associated with the
settlement of an uncertain tax matter at a foreign subsidiary.
For the six months and quarter ended September 30, 2021, the Company's effective tax
rate on pre-tax income was 15.1% and 16.5% respectively. In the
three months ended September 30,
2021, the Company recognized a $1.7
million income tax benefit related to a foreign subsidiary.
Without this income tax benefit, the adjusted effective tax rates
were 22.0% and 21.7% for the six months and quarter ended
September 30, 2021, respectively. For
the six months and quarter ended September
30, 2020, the Company's effective tax rate on pre-tax income
was (14%) and 28%, respectively. For the six months ended
September 30, 2020, income taxes
included a $4.4 million benefit for
final tax regulations regarding the treatment of dividends paid by
foreign subsidiaries. Without this benefit, income taxes for the
six months ended September 30, 2020,
would have been an expense of approximately $2.5 million, or a consolidated effective tax
rate of approximately 19%.
Reconciliation of Certain Non-GAAP Financial Measures
The following tables set forth certain non-recurring items
included in reported results to reconcile adjusted operating income
to consolidated operating income and adjusted net income to net
income attributable to Universal Corporation:
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Adjusted Operating
Income Reconciliation
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Three Months Ended
September 30,
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Six Months Ended
September 30,
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(in
thousands)
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2021
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2020
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2021
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2020
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As Reported:
Consolidated operating income
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$
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29,813
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$
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16,351
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$
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40,418
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$
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24,879
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Transaction costs for
acquisitions(1)
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1,713
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1,663
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1,713
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1,663
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Restructuring and
impairment costs(2)
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—
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—
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2,024
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—
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Fair value adjustment
to contingent
consideration for FruitSmart acquisition(3)
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(2,532)
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—
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(2,532)
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(4,173)
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Adjusted operating
income
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$
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28,994
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$
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18,014
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$
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41,623
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$
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22,369
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Adjusted Net
Income and Diluted Earnings
Per Share
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(in thousands and
reported net of income taxes)
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Three Months Ended
September 30,
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Six Months Ended
September 30,
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2021
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2020
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2021
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2020
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As Reported: Net
income available to Universal
Corporation
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$
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19,510
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$
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7,502
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$
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25,867
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$
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14,776
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Transaction costs for
acquisitions(1)
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1,713
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1,663
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1,713
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1,663
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Restructuring and
impairment costs(2)
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—
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—
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1,005
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—
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Fair value adjustment
to contingent
consideration for FruitSmart acquisition(3)
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(2,532)
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—
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(2,532)
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(4,173)
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Interest (income)
expense related to tax matters
at foreign subsidiaries
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(470)
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—
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(470)
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1,849
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Income tax benefit on
a final tax ruling (fiscal
year 2022) and dividends paid from foreign
subsidiaries (fiscal year 2021)(4)
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(1,686)
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—
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(1,686)
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(4,421)
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Adjusted net income
available to Universal
Corporation
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$
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16,535
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$
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9,165
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$
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23,897
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$
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9,694
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As reported: Diluted
earnings per share
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$
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0.78
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$
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0.30
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$
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1.04
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$
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0.60
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As adjusted: Diluted
earnings per share
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$
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0.66
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$
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0.37
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$
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0.96
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$
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0.40
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(1)
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The Company incurred
selling, general, and administrative expenses for due diligence and
other transaction costs associated with the acquisitions of Shank's
(effective October 4, 2021) and Silva (effective October 1, 2020).
These costs are not deductible for U.S. income tax
purposes.
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(2)
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Restructuring and
impairment costs are included in consolidated operating income in
the consolidated statements of income, but excluded for purposes of
Adjusted operating income, Adjusted net income available to
Universal Corporation, and Adjusted diluted earnings per share. See
Note 4 for additional information.
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(3)
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The Company reversed
the contingent consideration liability for the FruitSmart
acquisition, as a result of certain performance metrics that did
not meet the required threshold stipulated in the purchase
agreement.
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(4)
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The Company
recognized an income tax benefit in both fiscal years presented
related to a favorable final income tax ruling at a foreign
subsidiary (fiscal year 2022) and final U.S. tax regulations on
certain dividends paid by foreign subsidiaries (fiscal year
2021).
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Additional information
Amounts described as net income (loss) and earnings (loss) per
diluted share in the previous discussion are attributable to
Universal Corporation and exclude earnings related to
non-controlling interests in subsidiaries. Adjusted operating
income (loss), adjusted net income (loss) attributable to Universal
Corporation, adjusted diluted earnings (loss) per share, and the
total for segment operating income (loss) referred to in this
discussion are non-GAAP financial measures. These measures are not
financial measures calculated in accordance with GAAP and should
not be considered as substitutes for operating income (loss), net
income (loss) attributable to Universal Corporation, diluted
earnings (loss) per share, cash from operating activities or any
other operating or financial performance measure calculated in
accordance with GAAP, and may not be comparable to similarly-titled
measures reported by other companies. A reconciliation of adjusted
operating income (loss) to consolidated operating (income),
adjusted net income (loss) attributable to Universal Corporation to
consolidated net income (loss) attributable to Universal
Corporation and adjusted diluted earnings (loss) per share to
diluted earnings (loss) per share are provided in Other Items
above. In addition, we have provided a reconciliation of the
total for segment operating income (loss) to consolidated operating
income (loss) in Note 3 "Segment Information" to the consolidated
financial statements. Management evaluates the consolidated Company
and segment performance excluding certain significant charges or
credits. We believe these non-GAAP financial measures, which
exclude items that we believe are not indicative of our core
operating results, provide investors with important information
that is useful in understanding our business results and
trends.
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; success in pursuing strategic
investments or acquisitions and integration of new businesses and
the impact of these new businesses on future results; product
purchased not meeting quality and quantity requirements; reliance
on a few large customers; its ability to maintain effective
information technology systems and safeguard confidential
information; anticipated levels of demand for and supply of its
products and services; costs incurred in providing these products
and services; timing of shipments to customers; changes in market
structure; government regulation and other stakeholder
expectations; product taxation; industry consolidation and
evolution; changes in exchange rates and interest rates; impacts of
regulation and litigation on its customers; industry-specific risks
related to its plant-based ingredient businesses; exposure to
certain regulatory and financial risks related to climate change;
changes in estimates and assumptions underlying its critical
accounting policies; the promulgation and adoption of new
accounting standards, new government regulations and interpretation
of existing standards and regulations; and general economic,
political, market, and weather conditions. Actual results,
therefore, could vary from those expected. A further list and
description of these risks, uncertainties, and other factors can be
found in the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 2021, 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 years ended March 31, 2021. The Company cautions
investors not to place undue reliance on any forward-looking
statements as these statements speak only as of the date when made,
and it undertakes no obligation to update any forward-looking
statements made.
At 5:00 p.m. (Eastern Time) on
November 3, 2021, 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 February 3,
2022. A taped replay of the call will be available through
November 16, 2021, by dialing (866)
813-9403. The confirmation number to access the replay is
042764.
Universal Corporation (NYSE: UVV), headquartered in Richmond, Virginia, is a global
business-to-business agri-products supplier to consumer product
manufacturers, operating in over 30 countries on five
continents. We strive to be the supplier of choice for our
customers by leveraging our farmer base, our commitment to a
sustainable supply chain, and our ability to provide high-quality,
customized, traceable, value-added agri-products essential for our
customers' requirements. We find innovative solutions to serve
our customers and have been meeting their agri-product needs for
more than 100 years. Our principal focus since our founding in
1918 has been tobacco, and we are the leading global leaf tobacco
supplier. Through our plant-based ingredients platform, we provide
a variety of value-added manufacturing processes to produce
high-quality, specialty vegetable- and fruit-based ingredients as
well as flavorings and extracts for the food and beverage end
markets. For more information, visit www.universalcorp.com.
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|
UNIVERSAL
CORPORATION
CONSOLIDATED
STATEMENTS OF INCOME
(in thousands of
dollars, except per share data)
|
|
|
Three Months
Ended
September 30,
|
|
Six Months
Ended
September 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Sales and other
operating revenues
|
|
$
|
453,955
|
|
|
$
|
377,025
|
|
|
$
|
803,984
|
|
|
$
|
692,836
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
Cost of goods
sold
|
|
361,272
|
|
|
308,267
|
|
|
648,828
|
|
|
570,313
|
|
Selling, general and
administrative expenses
|
|
65,402
|
|
|
52,407
|
|
|
115,246
|
|
|
101,817
|
|
Other
income
|
|
(2,532)
|
|
|
—
|
|
|
(2,532)
|
|
|
(4,173)
|
|
Restructuring and
impairment costs
|
|
—
|
|
|
—
|
|
|
2,024
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
29,813
|
|
|
16,351
|
|
|
40,418
|
|
|
24,879
|
|
Equity in pretax
earnings (loss) of unconsolidated affiliates
|
|
2,363
|
|
|
590
|
|
|
2,972
|
|
|
583
|
|
Other non-operating
income (expense)
|
|
54
|
|
|
(20)
|
|
|
102
|
|
|
(38)
|
|
Interest
income
|
|
517
|
|
|
101
|
|
|
590
|
|
|
260
|
|
Interest
expense
|
|
7,130
|
|
|
5,595
|
|
|
13,338
|
|
|
12,405
|
|
Income before income
taxes and other items
|
|
25,617
|
|
|
11,427
|
|
|
30,744
|
|
|
13,279
|
|
Income
taxes
|
|
3,862
|
|
|
3,178
|
|
|
5,077
|
|
|
(1,870)
|
|
Net income
|
|
21,755
|
|
|
8,249
|
|
|
25,667
|
|
|
15,149
|
|
Less: net loss
(income) attributable to noncontrolling interests in
subsidiaries
|
|
(2,245)
|
|
|
(747)
|
|
|
200
|
|
|
(373)
|
|
Net income
attributable to Universal Corporation
|
|
$
|
19,510
|
|
|
$
|
7,502
|
|
|
$
|
25,867
|
|
|
$
|
14,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.79
|
|
|
$
|
0.30
|
|
|
$
|
1.05
|
|
|
$
|
0.60
|
|
Diluted
|
|
$
|
0.78
|
|
|
$
|
0.30
|
|
|
$
|
1.04
|
|
|
$
|
0.60
|
|
|
See accompanying
notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNIVERSAL
CORPORATION
CONSOLIDATED
BALANCE SHEETS
(in thousands of
dollars)
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
September
30,
|
|
March
31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
100,682
|
|
|
$
|
57,084
|
|
|
$
|
197,221
|
|
Accounts receivable,
net
|
|
297,442
|
|
|
329,332
|
|
|
367,482
|
|
Advances to
suppliers, net
|
|
82,192
|
|
|
65,643
|
|
|
121,618
|
|
Accounts
receivable—unconsolidated affiliates
|
|
63,112
|
|
|
47,807
|
|
|
584
|
|
Inventories—at lower
of cost or net realizable value:
|
|
|
|
|
|
|
Tobacco
|
|
854,331
|
|
|
888,213
|
|
|
640,653
|
|
Other
|
|
161,001
|
|
|
116,299
|
|
|
145,965
|
|
Prepaid income
taxes
|
|
23,112
|
|
|
20,712
|
|
|
15,029
|
|
|
|
|
|
|
|
|
Other current
assets
|
|
76,050
|
|
|
69,564
|
|
|
66,806
|
|
Total current
assets
|
|
1,657,922
|
|
|
1,594,654
|
|
|
1,555,358
|
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
|
|
|
|
|
Land
|
|
22,502
|
|
|
21,515
|
|
|
22,400
|
|
Buildings
|
|
289,939
|
|
|
259,875
|
|
|
284,430
|
|
Machinery and
equipment
|
|
653,789
|
|
|
657,435
|
|
|
658,826
|
|
|
|
966,230
|
|
|
938,825
|
|
|
965,656
|
|
Less accumulated
depreciation
|
|
(630,766)
|
|
|
(617,553)
|
|
|
(616,146)
|
|
|
|
335,464
|
|
|
321,272
|
|
|
349,510
|
|
Other
assets
|
|
|
|
|
|
|
Operating lease
right-of-use assets
|
|
33,790
|
|
|
35,665
|
|
|
31,230
|
|
Goodwill,
net
|
|
172,964
|
|
|
126,910
|
|
|
173,051
|
|
Other intangibles,
net
|
|
67,510
|
|
|
16,309
|
|
|
72,304
|
|
Investments in
unconsolidated affiliates
|
|
84,517
|
|
|
82,628
|
|
|
84,218
|
|
Deferred income
taxes
|
|
17,193
|
|
|
22,615
|
|
|
12,149
|
|
Pension
asset
|
|
13,381
|
|
|
—
|
|
|
11,950
|
|
Other noncurrent
assets
|
|
43,057
|
|
|
42,239
|
|
|
52,154
|
|
|
|
432,412
|
|
|
326,366
|
|
|
437,056
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,425,798
|
|
|
$
|
2,242,292
|
|
|
$
|
2,341,924
|
|
|
See accompanying
notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNIVERSAL
CORPORATION
CONSOLIDATED
BALANCE SHEETS
(in thousands of
dollars)
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
September
30,
|
|
March
31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Notes payable and
overdrafts
|
|
$
|
184,982
|
|
|
$
|
235,413
|
|
|
$
|
101,294
|
|
Accounts payable and
accrued expenses
|
|
157,082
|
|
|
133,034
|
|
|
139,484
|
|
Accounts
payable—unconsolidated affiliates
|
|
2,414
|
|
|
117
|
|
|
1,282
|
|
Customer advances and
deposits
|
|
25,219
|
|
|
8,049
|
|
|
8,765
|
|
Accrued
compensation
|
|
19,591
|
|
|
19,499
|
|
|
29,918
|
|
Income taxes
payable
|
|
1,136
|
|
|
2,947
|
|
|
4,516
|
|
Current portion of
operating lease liabilities
|
|
8,985
|
|
|
9,105
|
|
|
7,898
|
|
Current portion of
long-term debt
|
|
—
|
|
|
—
|
|
|
—
|
|
Total current
liabilities
|
|
399,409
|
|
|
408,164
|
|
|
293,157
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
518,422
|
|
|
368,894
|
|
|
518,172
|
|
Pensions and other
postretirement benefits
|
|
54,598
|
|
|
64,947
|
|
|
57,637
|
|
Long-term operating
lease liabilities
|
|
22,530
|
|
|
22,813
|
|
|
19,725
|
|
Other long-term
liabilities
|
|
55,174
|
|
|
72,657
|
|
|
59,814
|
|
Deferred income
taxes
|
|
42,239
|
|
|
25,941
|
|
|
44,994
|
|
Total
liabilities
|
|
1,092,372
|
|
|
963,416
|
|
|
993,499
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
Universal
Corporation:
|
|
|
|
|
|
|
Preferred
stock:
|
|
|
|
|
|
|
Series A Junior
Participating Preferred Stock, no par value, 500,000 shares
authorized, none issued or outstanding
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
Common stock, no par
value, 100,000,000 shares authorized 24,607,384
shares issued and outstanding at September 30, 2021
(24,514,867 at
September 30, 2020 and 24,514,867 at March 31,
2021)
|
|
328,836
|
|
|
323,761
|
|
|
326,673
|
|
Retained
earnings
|
|
1,074,629
|
|
|
1,053,295
|
|
|
1,087,663
|
|
Accumulated other
comprehensive loss
|
|
(106,133)
|
|
|
(137,556)
|
|
|
(107,037)
|
|
Total Universal
Corporation shareholders' equity
|
|
1,297,332
|
|
|
1,239,500
|
|
|
1,307,299
|
|
Noncontrolling
interests in subsidiaries
|
|
36,094
|
|
|
39,376
|
|
|
41,126
|
|
Total shareholders'
equity
|
|
1,333,426
|
|
|
1,278,876
|
|
|
1,348,425
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity
|
|
$
|
2,425,798
|
|
|
$
|
2,242,292
|
|
|
$
|
2,341,924
|
|
|
See accompanying
notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNIVERSAL
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands of
dollars)
|
|
|
|
|
|
Six Months Ended
September 30,
|
|
|
2021
|
|
2020
|
|
|
(Unaudited)
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
Net income
|
|
$
|
25,667
|
|
|
$
|
15,149
|
|
Adjustments to
reconcile net income to net cash used by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
25,096
|
|
|
20,381
|
|
Net provision for
losses (recoveries) on advances to suppliers
|
|
(44)
|
|
|
348
|
|
Foreign currency
remeasurement (gain) loss, net
|
|
6,955
|
|
|
(5,105)
|
|
Foreign currency
exchange contracts
|
|
2,486
|
|
|
(8,169)
|
|
Restructuring and
impairment costs
|
|
2,024
|
|
|
—
|
|
Restructuring
payments
|
|
(3,203)
|
|
|
(2,937)
|
|
Change in estimated
fair value of contingent consideration for FruitSmart
acquisition
|
|
(2,532)
|
|
|
(4,173)
|
|
Other, net
|
|
(4,916)
|
|
|
3,049
|
|
Changes in operating
assets and liabilities, net
|
|
(172,304)
|
|
|
(168,502)
|
|
Net cash provided
(used) by operating activities
|
|
(120,771)
|
|
|
(149,959)
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
(18,645)
|
|
|
(22,751)
|
|
Proceeds from sale of
property, plant and equipment
|
|
6,767
|
|
|
1,780
|
|
Net cash used by
investing activities
|
|
(11,878)
|
|
|
(20,971)
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
Issuance of
short-term debt, net
|
|
82,250
|
|
|
162,646
|
|
Dividends paid to
noncontrolling interests
|
|
(4,676)
|
|
|
(3,695)
|
|
Dividends paid on
common stock
|
|
(38,047)
|
|
|
(37,424)
|
|
Other
|
|
(2,996)
|
|
|
(1,949)
|
|
Net cash provided
(used) by financing activities
|
|
36,531
|
|
|
119,578
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash, restricted cash and cash
equivalents
|
|
(421)
|
|
|
1,006
|
|
Net decrease in cash,
restricted cash and cash equivalents
|
|
(96,539)
|
|
|
(50,346)
|
|
Cash, restricted cash
and cash equivalents at beginning of year
|
|
203,221
|
|
|
107,430
|
|
|
|
|
|
|
Cash, restricted
cash and cash equivalents at end of period
|
|
$
|
106,682
|
|
|
$
|
57,084
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
100,682
|
|
|
$
|
57,084
|
|
Restricted cash
(Other noncurrent assets)
|
|
6,000
|
|
|
—
|
|
Total cash,
restricted cash and cash equivalents
|
|
$
|
106,682
|
|
|
$
|
57,084
|
|
|
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 a global
business-to-business agri-products supplier to consumer product
manufacturers. The Company is the leading global leaf tobacco
supplier and provides high-quality plant-based ingredients to food
and beverage end markets. 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. These financial
statements 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, 2021.
NOTE 2. EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Six Months
Ended
September 30,
|
(in thousands,
except share and per share data) (Unaudited)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
|
|
|
|
|
|
|
Numerator for
basic earnings per share
|
|
|
|
|
|
|
|
|
Net income
attributable to Universal Corporation
|
|
$
|
19,510
|
|
|
$
|
7,502
|
|
|
$
|
25,867
|
|
|
$
|
14,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for
basic earnings per share
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
24,776,930
|
|
|
24,658,895
|
|
|
24,745,827
|
|
|
24,630,886
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
$
|
0.79
|
|
|
$
|
0.30
|
|
|
$
|
1.05
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
Per Share
|
|
|
|
|
|
|
|
|
Numerator for
diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Universal Corporation
|
|
$
|
19,510
|
|
|
$
|
7,502
|
|
|
$
|
25,867
|
|
|
$
|
14,776
|
|
|
|
|
|
|
|
|
|
|
Denominator for
diluted earnings per share:
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
24,776,930
|
|
|
24,658,895
|
|
|
24,745,827
|
|
|
24,630,886
|
|
Effect of dilutive
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee and outside
director share-based awards
|
|
139,416
|
|
|
111,526
|
|
|
148,539
|
|
|
106,248
|
|
Denominator for
diluted earnings per share
|
|
24,916,346
|
|
|
24,770,421
|
|
|
24,894,366
|
|
|
24,737,134
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
|
$
|
0.78
|
|
|
$
|
0.30
|
|
|
$
|
1.04
|
|
|
$
|
0.60
|
|
NOTE 3. SEGMENT INFORMATION
As a result of recent acquisitions of plant-based ingredients
companies, during the three months ended December 31, 2020 management evaluated the
Company's global business activities, including product and service
offerings to its customers, as well as senior management's
operational and financial responsibilities. This assessment
included an analysis of how its chief operating decision maker
measures business performance and allocates resources. As a result
of this analysis, senior management determined the Company conducts
operations across two reportable operating segments, Tobacco
Operations and Ingredients Operations.
The Tobacco Operations segment activities involve selecting,
procuring, processing, packing, storing, shipping, and financing
leaf tobacco for sale to, or for the account of, manufacturers of
consumer tobacco products throughout the world. Through various
operating subsidiaries located in tobacco-growing countries around
the world and significant ownership interests in unconsolidated
affiliates, the Company processes and/or sells flue-cured and
burley tobaccos, dark air-cured tobaccos, and oriental tobaccos.
Flue-cured, burley, and oriental tobaccos are used principally in
the manufacture of cigarettes, and dark air-cured tobaccos are used
mainly in the manufacture of cigars, pipe tobacco, and smokeless
tobacco products. Some of these tobacco types are also increasingly
used in the manufacture of non-combustible tobacco products that
are intended to provide consumers with an alternative to
traditional combustible products. The Tobacco Operations segment
also provides physical and chemical product testing and smoke
testing for tobacco customers. A substantial portion of the
Company's Tobacco Operations' revenues are derived from sales to a
limited number of large, multinational cigarette and cigar
manufacturers.
The Ingredients Operations segment provides its customers with a
broad variety of plant-based ingredients for both human and pet
consumption. The Ingredients Operations segment utilizes a variety
of value-added manufacturing processes converting raw materials
into a wide spectrum of fruit and vegetable juices, concentrates,
and dehydrated products. Customers for the Ingredients Operations
segment include large multinational food and beverage companies, as
well as smaller independent entities. FruitSmart and Silva are the
primary operations for the Ingredients Operations segment.
FruitSmart manufactures fruit and vegetable juices, purees,
concentrates, essences, fibers, seeds, seed oils, and seed powders.
Silva is primarily a dehydrated product manufacturer of fruit and
vegetable based flakes, dices, granules, powders, and blends. In
fiscal year 2021, the Company announced the wind-down of CIFI, a
greenfield operation that primarily manufactured both dehydrated
and liquid sweet potato products.
The Company currently evaluates the performance of its segments
based on operating income after allocated overhead expenses, 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, including a recast of the new
reportable operating segments presentation for all periods
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Six Months
Ended
September 30,
|
(in thousands of
dollars)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
SALES AND OTHER
OPERATING REVENUES
|
|
|
|
|
|
|
|
|
Tobacco
Operations
|
|
$
|
396,765
|
|
|
$
|
356,619
|
|
|
$
|
690,608
|
|
|
$
|
654,992
|
|
Ingredients
Operations
|
|
57,190
|
|
|
20,406
|
|
|
113,376
|
|
|
37,844
|
|
Consolidated sales
and other operating revenues
|
|
$
|
453,955
|
|
|
$
|
377,025
|
|
|
$
|
803,984
|
|
|
$
|
692,836
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
|
|
|
|
|
|
|
|
Tobacco
Operations
|
|
$
|
26,914
|
|
|
$
|
18,487
|
|
|
$
|
35,803
|
|
|
$
|
23,536
|
|
Ingredients
Operations
|
|
2,730
|
|
|
(1,546)
|
|
|
7,079
|
|
|
(2,247)
|
|
Segment operating
income
|
|
29,644
|
|
|
16,941
|
|
|
42,882
|
|
|
21,289
|
|
Deduct: Equity in
pretax (earnings) loss of unconsolidated affiliates (1)
|
|
(2,363)
|
|
|
(590)
|
|
|
(2,972)
|
|
|
(583)
|
|
Restructuring
and impairment costs (2)
|
|
—
|
|
|
—
|
|
|
(2,024)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Add: Other income
(loss)(3)
|
|
2,532
|
|
|
—
|
|
|
2,532
|
|
|
4,173
|
|
Consolidated
operating income
|
|
$
|
29,813
|
|
|
$
|
16,351
|
|
|
$
|
40,418
|
|
|
$
|
24,879
|
|
|
|
(1)
|
Equity in pretax
earnings (loss) of unconsolidated affiliates is included in segment
operating income (Tobacco Operations), but is reported below
consolidated operating income and excluded from that total in the
consolidated statements of income and comprehensive
income.
|
(2)
|
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. See Note 4 for
additional information.
|
(3)
|
Other income
represents the reversal of a portion of the contingent
consideration liability associated with the acquisition of
FruitSmart.
|
NOTE 4. RESTRUCTURING AND IMPAIRMENT COSTS
Universal continually reviews its business for opportunities to
realize efficiencies, reduce costs, and realign its operations in
response to business changes. Restructuring and impairment costs
are periodically incurred in connection with those activities.
Tobacco Operations
In the six months ended September 30, 2021, the Company
incurred and paid $1.5 million of
termination costs associated with restructuring of tobacco
processing and administrative operations in Africa.
Ingredients Operations
In the six months ended September 30, 2021, the Company
incurred $0.5 million of impairment
costs on property, plant, and equipment associated with the
wind-down of the Carolina Innovative Food Ingredients, Inc.
("CIFI") operations that was announced in fiscal year 2021.
There were no restructuring and impairment costs incurred for
the three and six months ended September 30, 2020.
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SOURCE Universal Corporation