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."

























FINANCIAL HIGHLIGHTS









Six Months Ended September 30,


Change

(in millions of dollars, except per share data)

2021


2020


$


%









Consolidated Results








Sales and other operating revenue

$

804.0



$

692.8



$

111.1



16

%

Cost of goods sold

$

648.8



$

570.3



$

78.5



14

%

Gross Profit Margin

19.3

%


17.7

%




160 bps

Selling, general and administrative expenses

$

115.2



$

101.8



$

13.4



13

%

Restructuring and impairment costs

$

2.0



$



$

2.0



(100)

%

Operating income (as reported)

$

40.4



$

24.9



$

15.5



62

%

Adjusted operating income (non-GAAP)*

$

41.6



$

22.4



$

19.3



86

%

Diluted earnings per share (as reported)

$

1.04



$

0.60



$

0.44



73

%

Adjusted diluted earnings per share (non-GAAP)*

$

0.96



$

0.40



$

0.56



140

%

Segment Results








Tobacco operations sales and other operating revenues

$

690.6



$

655.0



$

35.6



5

%

Tobacco operations operating income

$

35.8



$

23.5



$

12.3



52

%

Ingredients operations sales and other operating revenues

$

113.4



$

37.8



$

75.5



200

%

Ingredient operations operating income

$

7.1



$

(2.2)



$

9.3



415

%

*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:

 

























Adjusted Operating Income Reconciliation



Three Months Ended September 30,


Six Months Ended September 30,

(in thousands)

2021


2020


2021


2020

As Reported: Consolidated operating income

$

29,813



$

16,351



$

40,418



$

24,879










Transaction costs for acquisitions(1)

1,713



1,663



1,713



1,663


Restructuring and impairment costs(2)





2,024




Fair value adjustment to contingent
consideration for FruitSmart acquisition(3)

(2,532)





(2,532)



(4,173)


Adjusted operating income

$

28,994



$

18,014



$

41,623



$

22,369










Adjusted Net Income and Diluted Earnings
Per Share








(in thousands and reported net of income taxes)

Three Months Ended September 30,


Six Months Ended September 30,


2021


2020


2021


2020

As Reported: Net income available to Universal
Corporation

$

19,510



$

7,502



$

25,867



$

14,776










Transaction costs for acquisitions(1)

1,713



1,663



1,713



1,663


Restructuring and impairment costs(2)





1,005




Fair value adjustment to contingent
consideration for FruitSmart acquisition(3)

(2,532)





(2,532)



(4,173)


Interest (income) expense related to tax matters
at foreign subsidiaries

(470)





(470)



1,849


Income tax benefit on a final tax ruling (fiscal
year 2022) and dividends paid from foreign
subsidiaries (fiscal year 2021)(4)

(1,686)





(1,686)



(4,421)










Adjusted net income available to Universal
Corporation

$

16,535



$

9,165



$

23,897



$

9,694










As reported: Diluted earnings per share

$

0.78



$

0.30



$

1.04



$

0.60


As adjusted: Diluted earnings per share

$

0.66



$

0.37



$

0.96



$

0.40




(1)

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.

(2)

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.

(3)

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.

(4)

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).

 

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.

 





























 

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.

 

Universal Corporation logo (PRNewsFoto/Universal Corporation)

 

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