RICHMOND, Va., Feb. 7, 2024 /PRNewswire/ -- George C. Freeman, III, Chairman, President, and Chief Executive Officer of Universal Corporation (NYSE:UVV), stated, "Universal Corporation again delivered strong financial and operational performance in the third quarter of fiscal year 2024. Operating income and net income for the quarter were up 13% and 28%, respectively, relative to the third quarter of fiscal year 2023, which helped increase operating income and net income for the nine months of fiscal year 2024 by 20% and 13%, respectively, compared to the same period last fiscal year.
"Our tobacco business continued to perform very well, driven by a favorable product mix and strong demand from our customers. Improved margins, larger crops in Africa, and strong tobacco shipments in line with our expectations benefited our results in the nine months and quarter ended December 31, 2023, compared to the same periods in fiscal year 2023. Global leaf supply for all types of leaf tobacco continues to be tight, and as of December 31, 2023, our uncommitted tobacco inventory was at a low level of 8%. While we expect global leaf tobacco supply to remain tight in fiscal year 2025, in part due to El Nino weather conditions, we believe the strength of our diverse global footprint will help us satisfy our customers' leaf tobacco needs.
"We continue to be encouraged by the solid progress the team is making to expand our ingredients business. The investments we have made to build out the research and development and corporate sales teams are starting to gain momentum and have positioned us for future growth. We are also pleased with the progress we are making on the expansion of our processing capabilities at our ingredients facility in Lancaster, Pennsylvania . We expect those resources to be fully operational in the third quarter of fiscal year 2025 and positively contributing to our earnings as soon as fiscal year 2026.
"Another important achievement in fiscal year 2024 has been the progress we made to advance Universal's global sustainability agenda. These include the December 2023 publication of our 2023 Sustainability Report, and our recently announced participation in a solar project that we believe will help us meet our target to reduce operational greenhouse gas emissions by 30 percent by 2030. We are proud of our sustainability advances, and we continue to seek opportunities to further promote sustainability in our business."
FINANCIAL HIGHLIGHTS | |||||||||||||||||||||||
Nine Months Ended December 31, | Change | ||||||||||||||||||||||
(in millions of dollars, except per share data) | 2023 | 2022 | $ | % | |||||||||||||||||||
Consolidated Results | |||||||||||||||||||||||
Sales and other operating revenue | $ | 1,977.7 | $ | 1,875.8 | $ | 101.9 | 5 | % | |||||||||||||||
Cost of goods sold | $ | 1,592.5 | $ | 1,540.4 | $ | 52.2 | 3 | % | |||||||||||||||
Gross Profit Margin | 19.5 | % | 17.9 | % | 160 bps | ||||||||||||||||||
Selling, general and administrative expenses | $ | 227.8 | $ | 206.8 | $ | 21.0 | 10 | % | |||||||||||||||
Operating income (loss) | $ | 153.8 | $ | 128.7 | $ | 25.1 | 20 | % | |||||||||||||||
Diluted earnings (loss) per share (as reported) | $ | 3.17 | $ | 2.82 | $ | 0.35 | 12 | % | |||||||||||||||
Adjusted diluted earnings (loss) per share (non-GAAP)* | $ | 3.29 | $ | 2.80 | $ | 0.49 | 18 | % | |||||||||||||||
Segment Results | |||||||||||||||||||||||
Tobacco operations sales and other operating revenues | $ | 1,742.5 | $ | 1,642.7 | $ | 99.8 | 6 | % | |||||||||||||||
Tobacco operations operating income | $ | 148.9 | $ | 119.0 | $ | 29.9 | 25 | % | |||||||||||||||
Ingredients operations sales and other operating revenues | $ | 235.2 | $ | 233.2 | $ | 2.1 | 1 | % | |||||||||||||||
Ingredients operations operating income (loss) | $ | 5.0 | $ | 9.9 | $ | (4.9) | (50) | % | |||||||||||||||
*See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below. |
Net income for the nine months ended December 31, 2023, was $79.3 million, or $3.17 per diluted share, compared with $70.3 million, or $2.82 per diluted share, for the nine months ended December 31, 2022 . Excluding restructuring and impairment costs and certain other non-recurring items, as detailed in Other Items below, net income increased by $12.6 million and diluted earnings per share increased by $0.49 for the nine months ended December 31, 2023, compared to the same period in the prior fiscal year. Operating income for the nine months ended December 31, 2023, was $153.8 million, an increase of $25.1 million, compared to operating income of $128.7 million for the nine months ended December 31, 2022 . Adjusted operating income, detailed in Other Items below, was $157.3 million, an increase of $28.7 million, as compared to the same period in fiscal year 2023.
Net income for the quarter ended December 31, 2023, was $53.2 million, or $2.12 per diluted share, compared with $41.7 million, or $1.67 per diluted share, for the quarter ended December 31, 2022 . Excluding restructuring and impairment costs and certain other non-recurring items, as detailed in Other Items below, net income and diluted earnings per share increased by $12.4 million and $0.49, respectively, for the quarter ended December 31, 2023, compared to the quarter ended December 31, 2022 . Operating income for the quarter ended December 31, 2023, was $87.5 million, an increase of $9.9 million, compared to operating income of $77.5 million for the quarter ended December 31, 2022 . Adjusted operating income, detailed in Other Items below, was $88.4 million for the third quarter of fiscal year 2024, an increase of $10.9 million, as compared to adjusted operating income of $77.5 million for the third quarter of fiscal year 2023.
Consolidated revenues increased by $101.9 million to $2.0 billion and by $26.5 million to $821.5 million, respectively, for the nine months and quarter ended December 31, 2023, compared to the same periods in fiscal year 2023. These changes were largely due to higher tobacco sales prices, which more than offset lower tobacco sales volumes, as well as an improved product mix in the Tobacco Operations segment.
TOBACCO OPERATIONS
Revenues for the Tobacco Operations segment were $1.7 billion for the nine months ended December 31, 2023, and $743.9 million for the quarter ended December 31, 2023, up $99.8 million and $19.3 million, respectively, compared to the same periods in the prior fiscal year. These increases were due to higher tobacco sales prices and a favorable product mix, partially offset by lower tobacco sales volumes.
Operating income for the Tobacco Operations segment increased by $29.9 million to $148.9 million and by $10.5 million to $87.6 million, respectively, for the nine months and quarter ended December 31, 2023, compared with the nine months and quarter ended December 31, 2022 . Tobacco Operations segment operating income was up largely on higher prices and a more favorable product mix, partially offset by lower tobacco sales volumes. In the nine months and quarter ended December 31, 2022, a large amount of lower margin carryover tobacco crops was shipped. Larger African crops positively impacted the results for the Tobacco Operations segment in both the nine months and quarter ended December 31, 2023 . Carryover crop shipments from South America were significantly lower in the nine months and quarter ended December 31, 2023, compared to the same periods in fiscal year 2023. In the nine months ended December 31, 2023, our operations in Europe and in Asia had improved product mixes, compared to the nine months ended December 31, 2022 . Equity earnings from our oriental tobacco joint venture were down in the nine months ended December 31, 2023, on unfavorable foreign currency comparisons and higher interest expenses, but increased in the quarter ended December 31, 2023, on an improved product mix, compared to the same periods in the prior fiscal year. Selling, general, and administrative expenses for the Tobacco Operations segment were higher in the nine months and quarter ended December 31, 2023, compared to the nine months and quarter ended December 31, 2022, primarily on higher compensation and benefit costs, as well as unfavorable foreign currency comparisons.
INGREDIENTS OPERATIONS
Revenues for the Ingredients Operations segment of $235.2 million for the nine months ended December 31, 2023, and $77.6 million for the quarter ended December 31, 2023, were up $2.1 million and $7.1 million, respectively, compared to the same periods in the prior fiscal year, as the sale of new products more than offset the impact of lower sales prices on core products.
Operating income for the Ingredients Operations segment was $5.0 million and $2.2 million, respectively, for the nine months and quarter ended December 31, 2023, compared to $9.9 million and $0.8 million, respectively for the nine months and quarter ended December 31, 2022 .
In the quarter ended December 31, 2023, operating income for our Ingredients Operations segment was in line with results for the same quarter in the prior fiscal year, as incremental revenue and margin from sale of new products offset the effects of market challenges for our core products and higher expenses resulting from the investments that we are making to position the segment for future growth.
Operating income for the nine months ended December 31, 2023, was lower as compared to the same period in the prior year, mainly as the result of lower operating income in the first quarter of the current fiscal year, as compared to the same period in the prior fiscal year. Results for the first quarter of fiscal 2024 were negatively impacted by customer inventory recalibrations. Other factors that contributed to lower segment operating income for the nine months ended December 31, 2023, as compared to the same period in the prior fiscal year, include lower new crop raw material prices, inventory write-downs, and higher selling, general, and administrative expenses, partially offset by margins from the sale of new products. In the nine months and quarter ended December 31, 2023, selling, general, and administrative expenses were higher, compared to the same periods in the prior fiscal year, due to higher compensation and other costs related to investment in expanding sales and product development capabilities as well as higher corporate overhead allocations, partially offset by deferred compensation expense incurred during the third quarter of fiscal year 2023.
OTHER ITEMS
Cost of goods sold in the nine months and quarter ended December 31, 2023, increased by 3% to $1.6 billion and by 1% to $654.6 million, respectively, compared with the nine months and quarter ended December 31, 2022, largely due to higher green tobacco costs. Selling, general, and administrative costs for the nine months ended December 31, 2023, increased by $21.0 million to $227.8 million, compared to the nine months ended December 31, 2022, on higher compensation costs. Selling, general, and administrative costs for the quarter ended December 31, 2023, increased by $10.6 million to $78.6 million, compared to the same period in the prior fiscal year, largely on higher compensation costs and unfavorable foreign currency comparisons. Interest expense for the nine months and quarter ended December 31, 2023, increased by $14.9 million to $48.1 million and by $1.3 million to $15.5 million, respectively, compared to the same periods in the prior fiscal year, on increased costs from higher interest rates. Interest income for the nine months and quarter ended December 31, 2023, increased by $3.6 million to $4.0 million and by $1.6 million to $1.7 million, respectively, compared to the same periods in the prior fiscal year, primarily on interest income associated with favorably resolved tax judgements at a subsidiary as well as higher interest rates on cash deposits.
For the nine months and quarter ended December 31, 2023, our effective tax rate on pre-tax income was 19.8% and 19.1%, respectively. For the nine months and quarter ended December 31, 2022, our effective tax rate on pre-tax income was 19.3% and 23.2%, respectively. The consolidated effective income tax rate for the nine months ended December 31, 2022, was affected by the sale of the idled Tanzania operations in the quarter ended June 30, 2022, which resulted in $1.1 million of additional income taxes. Without this item, the consolidated effective income tax rate for the nine months ended December 31, 2022, would have been approximately 22.0%. Additionally, the sale of the idled Tanzania operations resulted in a $1.8 million reduction to consolidated interest expense related to an uncertain tax position.
Reconciliation of Certain Non-GAAP Financial Measures
The following table sets forth certain non-recurring items included in reported results to reconcile adjusted net income to net income attributable to Universal Corporation:
Adjusted Operating Income Reconciliation | |||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
As Reported: Consolidated operating income | $ | 87,464 | $ | 77,526 | $ | 153,811 | $ | 128,678 | |||||||||||||||
Restructuring and impairment costs(1) | 924 | - | 3,523 | - | |||||||||||||||||||
As Adjusted operating income (Non-GAAP) | $ | 88,388 | $ | 77,526 | $ | 157,334 | $ | 128,678 | |||||||||||||||
Adjusted Net Income Attributable to Universal Corporation and Adjusted Diluted Earnings Per Share Reconciliation | |||||||||||||||||||||||
(in thousands except for per share amounts) | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
As Reported: Net income attributable to Universal Corporation | $ | 53,216 | $ | 41,660 | $ | 79,280 | $ | 70,345 | |||||||||||||||
Restructuring and impairment costs(1) | 924 | - | 3,523 | - | |||||||||||||||||||
Interest expense reversal on uncertain tax position from sale of operations in Tanzania | - | - | - | (1,816) | |||||||||||||||||||
Total of Non-GAAP adjustments to income before income taxes | 924 | - | 3,523 | (1,816) | |||||||||||||||||||
Non-GAAP adjustments to income taxes | |||||||||||||||||||||||
Income tax benefit from restructuring and impairment costs | (47) | - | (512) | - | |||||||||||||||||||
Income tax expense from sale of operations in Tanzania | - | - | - | 1,132 | |||||||||||||||||||
Total of income tax impacts for Non-GAAP adjustments to income before income taxes | (47) | - | (512) | 1,132 | |||||||||||||||||||
As adjusted: Net income attributable to Universal Corporation (Non-GAAP) | $ | 54,093 | $ | 41,660 | $ | 82,291 | $ | 69,661 | |||||||||||||||
As reported: Diluted earnings per share | $ | 2.12 | $ | 1.67 | $ | 3.17 | $ | 2.82 | |||||||||||||||
As adjusted: Diluted earnings per share (Non-GAAP) | $ | 2.16 | $ | 1.67 | $ | 3.29 | $ | 2.80 | |||||||||||||||
(1) 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. |
SUSTAINABILITY
Universal is taking important steps to advance its sustainability agenda as Universal continues to monitor and address the environmental and social impacts of its businesses. In December 2023, we published our 2023 Sustainability Report which details efforts we have taken to promote the sustainability of our operations and contribute to global sustainability goals. The report focuses on our primary sustainability topics as well as our environmental, social, and supply chain goals. We also announced in January 2024 an investment in a solar project that is intended to address emissions from 100 percent of Universal's annual purchased electricity demand in the United States . We believe that this is a meaningful step towards meeting our science-based environmental target to reduce operational greenhouse gases emissions by 30 percent by 2030.
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, 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; our 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 including increased transportation costs and delays attributed to global supply chain challenges; timing of shipments to customers; higher inflation rates; changes in market structure; government regulation and other stakeholder expectations; economic and political conditions in the countries in which we and our customers operate, including the ongoing impacts from international conflicts, such as the conflict in Ukraine ; 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, 2023, 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, 2023. 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 February 7, 2024, the Company will host a conference call to discuss these results. Those wishing to listen to the call may do so by visiting www.universalcorp.com at that time. A replay of the webcast will be available at that site through May 7, 2024. A taped replay of the call will be available through February 20, 2023, by dialing (877) 674-7070. The confirmation number to access the replay is 848937.
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 botanical extracts and flavorings 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 | Nine Months Ended | |||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||||
Sales and other operating revenues | $ | 821,507 | $ | 795,039 | $ | 1,977,713 | $ | 1,875,845 | ||||||||||||||||||
Costs and expenses | ||||||||||||||||||||||||||
Cost of goods sold | 654,556 | 649,539 | 1,592,533 | 1,540,368 | ||||||||||||||||||||||
Selling, general and administrative expenses | 78,563 | 67,974 | 227,846 | 206,799 | ||||||||||||||||||||||
Restructuring and impairment costs | 924 | - | 3,523 | - | ||||||||||||||||||||||
Operating income | 87,464 | 77,526 | 153,811 | 128,678 | ||||||||||||||||||||||
Equity in pretax earnings (loss) of unconsolidated affiliates | 1,384 | 345 | (3,495) | 208 | ||||||||||||||||||||||
Other non-operating income (expense) | 726 | (69) | 2,179 | (208) | ||||||||||||||||||||||
Interest income | 1,720 | 77 | 4,038 | 407 | ||||||||||||||||||||||
Interest expense | 15,525 | 14,265 | 48,121 | 33,259 | ||||||||||||||||||||||
Income before income taxes and other items | 75,769 | 63,614 | 108,412 | 95,826 | ||||||||||||||||||||||
Income taxes | 14,482 | 12,253 | 21,498 | 22,258 | ||||||||||||||||||||||
Net income | 61,287 | 51,361 | 86,914 | 73,568 | ||||||||||||||||||||||
Less: net loss (income) attributable to noncontrolling interests in subsidiaries | (8,071) | (9,701) | (7,634) | (3,223) | ||||||||||||||||||||||
Net income attributable to Universal Corporation | $ | 53,216 | $ | 41,660 | $ | 79,280 | $ | 70,345 | ||||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||||
Basic | $ | 2.14 | $ | 1.68 | $ | 3.19 | $ | 2.84 | ||||||||||||||||||
Diluted | $ | 2.12 | $ | 1.67 | $ | 3.17 | $ | 2.82 | ||||||||||||||||||
See accompanying notes. |
UNIVERSAL CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of dollars) | ||||||||||||||||||||
December 31, | December 31, | March 31, | ||||||||||||||||||
2023 | 2022 | 2023 | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 74,102 | $ | 71,283 | $ | 64,690 | ||||||||||||||
Accounts receivable, net | 435,306 | 536,650 | 402,073 | |||||||||||||||||
Advances to suppliers, net | 159,481 | 163,237 | 170,801 | |||||||||||||||||
Accounts receivable-unconsolidated affiliates | 33,109 | 5,920 | 12,210 | |||||||||||||||||
Inventories-at lower of cost or net realizable value: | ||||||||||||||||||||
Tobacco | 1,009,030 | 866,380 | 833,876 | |||||||||||||||||
Other | 196,246 | 211,561 | 202,907 | |||||||||||||||||
Prepaid income taxes | 18,304 | 17,363 | 16,493 | |||||||||||||||||
Other current assets | 88,051 | 79,495 | 99,840 | |||||||||||||||||
Total current assets | 2,013,629 | 1,951,889 | 1,802,890 | |||||||||||||||||
Property, plant and equipment | ||||||||||||||||||||
Land | 26,516 | 24,142 | 24,926 | |||||||||||||||||
Buildings | 319,740 | 305,215 | 311,138 | |||||||||||||||||
Machinery and equipment | 720,816 | 679,970 | 689,220 | |||||||||||||||||
1,067,072 | 1,009,327 | 1,025,284 | ||||||||||||||||||
Less accumulated depreciation | (706,642) | (663,333) | (674,122) | |||||||||||||||||
360,430 | 345,994 | 351,162 | ||||||||||||||||||
Other assets | ||||||||||||||||||||
Operating lease right-of-use assets | 34,913 | 42,337 | 40,505 | |||||||||||||||||
Goodwill, net | 213,891 | 213,881 | 213,922 | |||||||||||||||||
Other intangibles, net | 71,697 | 82,917 | 80,101 | |||||||||||||||||
Investments in unconsolidated affiliates | 75,335 | 72,565 | 76,184 | |||||||||||||||||
Deferred income taxes | 14,855 | 10,005 | 13,091 | |||||||||||||||||
Pension asset | 11,586 | 12,740 | 9,984 | |||||||||||||||||
Other noncurrent assets | 37,538 | 32,575 | 51,343 | |||||||||||||||||
459,815 | 467,020 | 485,130 | ||||||||||||||||||
Total assets | $ | 2,833,874 | $ | 2,764,903 | $ | 2,639,182 | ||||||||||||||
See accompanying notes. |
UNIVERSAL CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of dollars) | ||||||||||||||||||||
December 31, | December 31, | March 31, | ||||||||||||||||||
2023 | 2022 | 2023 | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Notes payable and overdrafts | $ | 365,327 | $ | 348,073 | $ | 195,564 | ||||||||||||||
Accounts payable | 89,301 | 92,305 | 83,213 | |||||||||||||||||
Accounts payable-unconsolidated affiliates | 122 | 57 | 5,830 | |||||||||||||||||
Customer advances and deposits | 19,620 | 5,365 | 3,061 | |||||||||||||||||
Accrued compensation | 27,967 | 21,670 | 33,108 | |||||||||||||||||
Income taxes payable | 5,499 | 3,715 | 3,274 | |||||||||||||||||
Current portion of operating lease liabilities | 10,403 | 11,160 | 11,404 | |||||||||||||||||
Accrued expenses and other current liabilities | 106,635 | 115,882 | 106,533 | |||||||||||||||||
Current portion of long-term debt | - | - | - | |||||||||||||||||
Total current liabilities | 624,874 | 598,227 | 441,987 | |||||||||||||||||
Long-term debt | 617,225 | 616,750 | 616,809 | |||||||||||||||||
Pensions and other postretirement benefits | 43,301 | 50,773 | 42,769 | |||||||||||||||||
Long-term operating lease liabilities | 22,050 | 27,030 | 25,540 | |||||||||||||||||
Other long-term liabilities | 26,609 | 22,797 | 32,512 | |||||||||||||||||
Deferred income taxes | 41,165 | 48,584 | 42,613 | |||||||||||||||||
Total liabilities | 1,375,224 | 1,364,161 | 1,202,230 | |||||||||||||||||
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 24,559,181 shares issued and outstanding at December 31, 2023 (24,555,361 at December 31, 2022 and 24,555,361 at March 31, 2023) | 344,467 | 335,160 | 337,247 | |||||||||||||||||
Retained earnings | 1,152,863 | 1,102,887 | 1,136,898 | |||||||||||||||||
Accumulated other comprehensive loss | (80,254) | (77,255) | (77,057) | |||||||||||||||||
Total Universal Corporation shareholders' equity | 1,417,076 | 1,360,792 | 1,397,088 | |||||||||||||||||
Noncontrolling interests in subsidiaries | 41,574 | 39,950 | 39,864 | |||||||||||||||||
Total shareholders' equity | 1,458,650 | 1,400,742 | 1,436,952 | |||||||||||||||||
Total liabilities and shareholders' equity | $ | 2,833,874 | $ | 2,764,903 | $ | 2,639,182 | ||||||||||||||
See accompanying notes. |
UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars) | ||||||||||||||
Nine Months Ended December 31, | ||||||||||||||
2023 | 2022 | |||||||||||||
(Unaudited) | ||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||
Net income | $ | 86,914 | $ | 73,568 | ||||||||||
Adjustments to reconcile net income (loss) to net cash used by operating activities: | ||||||||||||||
Depreciation and amortization | 43,843 | 42,844 | ||||||||||||
Net provision for losses (recoveries) on advances to suppliers | 9,950 | 6,127 | ||||||||||||
Inventory writedowns | 4,813 | 10,782 | ||||||||||||
Stock-based compensation expense | 10,625 | 6,630 | ||||||||||||
Foreign currency remeasurement (gain) loss, net | 3,227 | (1,335) | ||||||||||||
Foreign currency exchange contracts | 2,655 | 14,600 | ||||||||||||
Deferred income taxes | (2,078) | 470 | ||||||||||||
Equity in net loss (income) of unconsolidated affiliates, net of dividends | 2,055 | 5,717 | ||||||||||||
Restructuring and impairment costs | 3,523 | - | ||||||||||||
Restructuring payments | (999) | - | ||||||||||||
Other, net | 734 | (4,967) | ||||||||||||
Changes in operating assets and liabilities, net: | (211,999) | (338,286) | ||||||||||||
Net cash provided (used) by operating activities | (46,737) | (183,850) | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||
Purchase of property, plant and equipment | (47,732) | (39,430) | ||||||||||||
Proceeds from sale of business, net of cash held by the business | 3,757 | 3,245 | ||||||||||||
Proceeds from sale of property, plant and equipment | 1,932 | 1,634 | ||||||||||||
Net cash used by investing activities | (42,043) | (34,551) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||
Issuance of short-term debt, net | 170,433 | 166,109 | ||||||||||||
Issuance of long-term debt | - | 123,481 | ||||||||||||
Repayment of long-term debt | - | (23,481) | ||||||||||||
Dividends paid to noncontrolling interests | (5,845) | (6,825) | ||||||||||||
Repurchase of common stock | (4,744) | (3,448) | ||||||||||||
Dividends paid on common stock | (58,755) | (57,993) | ||||||||||||
Proceeds from termination of interest rate swap agreements | - | 11,786 | ||||||||||||
Other | (2,973) | (6,337) | ||||||||||||
Net cash provided (used) by financing activities | 98,116 | 203,292 | ||||||||||||
Effect of exchange rate changes on cash, restricted cash and cash equivalents | 76 | (1,256) | ||||||||||||
Net increase (decrease) in cash, restricted cash and cash equivalents | 9,412 | (16,365) | ||||||||||||
Cash, restricted cash and cash equivalents at beginning of year | 64,690 | 87,648 | ||||||||||||
Cash, restricted cash and cash equivalents at end of period | $ | 74,102 | $ | 71,283 | ||||||||||
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, 2023 (the "2023 Annual Report on Form 10-K").
NOTE 2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(in thousands, except share and per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
Basic Earnings Per Share | ||||||||||||||||||||||||||
Numerator for basic earnings per share | ||||||||||||||||||||||||||
Net income attributable to Universal Corporation | $ | 53,216 | $ | 41,660 | $ | 79,280 | $ | 70,345 | ||||||||||||||||||
Denominator for basic earnings per share | ||||||||||||||||||||||||||
Weighted average shares outstanding | 24,849,498 | 24,770,294 | 24,853,774 | 24,772,827 | ||||||||||||||||||||||
Basic earnings per share | $ | 2.14 | $ | 1.68 | $ | 3.19 | $ | 2.84 | ||||||||||||||||||
Diluted Earnings Per Share | ||||||||||||||||||||||||||
Numerator for diluted earnings per share | ||||||||||||||||||||||||||
Net income attributable to Universal Corporation | $ | 53,216 | $ | 41,660 | $ | 79,280 | $ | 70,345 | ||||||||||||||||||
Denominator for diluted earnings per share: | ||||||||||||||||||||||||||
Weighted average shares outstanding | 24,849,498 | 24,770,294 | 24,853,774 | 24,772,827 | ||||||||||||||||||||||
Effect of dilutive securities | ||||||||||||||||||||||||||
Employee and outside director share-based awards | 206,331 | 158,132 | 163,393 | 161,620 | ||||||||||||||||||||||
Denominator for diluted earnings per share | 25,055,829 | 24,928,426 | 25,017,167 | 24,934,447 | ||||||||||||||||||||||
Diluted earnings per share | $ | 2.12 | $ | 1.67 | $ | 3.17 | $ | 2.82 | ||||||||||||||||||
NOTE 3. SEGMENT INFORMATION
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, dehydrated products, flavors, and botanical extracts. Customers for the Ingredients Operations segment include large multinational food and beverage companies, smaller independent manufacturers, and retail organizations. FruitSmart, Silva, and Shank's 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. Shank's manufactures flavors and botanical extracts and also offers bottling and custom packaging for customers.
The Company currently evaluates the performance of its segments based on operating income after allocated overhead expenses, plus equity in the pretax earnings (loss) 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.
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(in thousands of dollars) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
SALES AND OTHER OPERATING REVENUES | ||||||||||||||||||||||||||
Tobacco Operations | $ | 743,933 | $ | 724,589 | $ | 1,742,494 | $ | 1,642,682 | ||||||||||||||||||
Ingredients Operations | 77,574 | 70,450 | 235,219 | 233,163 | ||||||||||||||||||||||
Consolidated sales and other operating revenues | $ | 821,507 | $ | 795,039 | $ | 1,977,713 | $ | 1,875,845 | ||||||||||||||||||
OPERATING INCOME | ||||||||||||||||||||||||||
Tobacco Operations | $ | 87,605 | $ | 77,104 | $ | 148,875 | $ | 119,010 | ||||||||||||||||||
Ingredients Operations | 2,167 | 767 | 4,964 | 9,876 | ||||||||||||||||||||||
Segment operating income | 89,772 | 77,871 | 153,839 | 128,886 | ||||||||||||||||||||||
Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (1) | (1,384) | (345) | 3,495 | (208) | ||||||||||||||||||||||
Restructuring and impairment costs (2) | (924) | - | (3,523) | - | ||||||||||||||||||||||
Consolidated operating income | $ | 87,464 | $ | 77,526 | $ | 153,811 | $ | 128,678 | ||||||||||||||||||
(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. |
SOURCE Universal Corporation
