Universal Corporation Reports Six Month Results
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 |
(2,532) |
— |
(2,532) |
(4,173) |
|||||||||||||||||||
Adjusted operating income |
$ |
28,994 |
$ |
18,014 |
$ |
41,623 |
$ |
22,369 |
|||||||||||||||
Adjusted Net Income and Diluted Earnings |
|||||||||||||||||||||||
(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 |
$ |
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 |
(2,532) |
— |
(2,532) |
(4,173) |
|||||||||||||||||||
Interest (income) expense related to tax matters |
(470) |
— |
(470) |
1,849 |
|||||||||||||||||||
Income tax benefit on a final tax ruling (fiscal |
(1,686) |
— |
(1,686) |
(4,421) |
|||||||||||||||||||
Adjusted net income available to Universal |
$ |
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 |
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 |
Six Months Ended |
|||||||||||||||||||||||||
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 |
— |
— |
— |
|||||||||||||||||
Common stock, no par value, 100,000,000 shares authorized 24,607,384 |
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 |
Six Months Ended |
|||||||||||||||||||||||||
(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 |
Six Months Ended |
|||||||||||||||||||||||||
(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.
SOURCE Universal Corporation
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