Operating Segments

12 Months Ended

Mar. 31, 2019

OPERATING SEGMENTS

Universal’s operations 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. A substantial portion of the Company’s revenues are derived from sales to a limited number of large, multinational cigarette manufacturers.

The principal approach used by management to evaluate the Company’s performance is by geographic region, although the dark air-cured and oriental tobacco businesses are each evaluated on the basis of their worldwide operations. Oriental tobacco operations consist principally of a 49% interest in an affiliate, and the performance of those operations is evaluated based on the Company’s equity in the pretax earnings of that affiliate. Under this structure, the Company has the following primary operating segments: North America, South America, Africa, Europe, Asia, Dark Air-Cured, Oriental, and Special Services. North America, South America, Africa, Europe, and Asia are primarily involved in flue-cured and/or burley leaf tobacco operations for supply to cigarette manufacturers. The Dark Air-Cured group supplies dark air-cured tobacco principally to manufacturers of cigars, pipe tobacco, and smokeless tobacco products, and the Oriental business supplies oriental tobacco to cigarette manufacturers. From time to time, the segments may trade in tobaccos that differ from their main varieties, but those activities are not significant to their overall results. Special Services includes the Company's laboratory services business, which provides physical and chemical product testing and smoke testing for customers, its food ingredients business, and its liquid nicotine business.

The five regional operating segments serving the Company’s cigarette manufacturer customer base share similar characteristics in the nature of their products and services, production processes, class of customer, product distribution methods, and regulatory environment. Based on the applicable accounting guidance, four of the regions – South America, Africa, Europe, and Asia – are aggregated into a single reporting segment, “Other Regions”, because they also have similar economic characteristics. North America is reported as an individual operating segment because its economic characteristics differ from the other regions, generally because its operations require lower working capital investments for crop financing and inventory. The Dark Air-Cured, Oriental and Special Services segments, which have dissimilar characteristics in some of the categories mentioned above, are reported together as “Other Tobacco Operations” because each is below the measurement threshold for separate reporting.

Universal incurs overhead expenses related to senior management, sales, finance, legal, and other functions that are centralized at its corporate headquarters, as well as functions performed at several sales and administrative offices around the world. These overhead expenses are allocated to the various operating segments, generally on the basis of tobacco volumes planned to be purchased and/or processed. Management believes this method of allocation is representative of the value of the related services provided to the operating segments. The Company evaluates the performance of its segments based on operating income after allocated overhead expenses, plus equity in the pretax earnings of unconsolidated affiliates.

Reportable segment data as of, or for, the fiscal years ended March 31, 2019, 2018, and 2017, is as follows:



	Sales and Other Operating Revenues						Operating Income
	Fiscal Year Ended March 31,						Fiscal Year Ended March 31,
	2019		2018		2017		2019			2018			2017
Flue-Cured and Burley Leaf Tobacco Operations:
North America	$	382,631	$	308,691	$	416,438	$	23,069		$	23,091		$	35,221
Other Regions ⁽¹⁾	1,569,738		1,482,188		1,422,991		151,527			146,761			143,294
Subtotal	1,952,369		1,790,879		1,839,429		174,596			169,852			178,515
Other Tobacco Operations ⁽²⁾	274,784		243,068		231,789		12,176			10,098			10,019
Segment total	2,227,153		2,033,947		2,071,218		186,772			179,950			188,534
Deduct: Equity in pretax earnings of unconsolidated affiliates ⁽³⁾							(5,299		)	(9,125		)	(5,774		)
Restructuring and impairment costs ⁽⁴⁾							(20,304		)	—			(4,359		)
Consolidated total	$	2,227,153	$	2,033,947	$	2,071,218	$	161,169		$	170,825		$	178,401

	Segment Assets						Goodwill
	March 31,						March 31,
	2019		2018		2017		2019			2018			2017
Flue-Cured and Burley Leaf Tobacco Operations:
North America	$	294,064	$	368,672	$	357,406	$	—		$	—		$	—
Other Regions ⁽¹⁾	1,473,100		1,460,961		1,465,109		96,194			97,094			97,159
Subtotal	1,767,164		1,829,633		1,822,515		96,194			97,094			97,159
Other Tobacco Operations ⁽²⁾	366,020		338,999		300,890		1,713			1,713			1,644
Segment and consolidated totals	$	2,133,184	$	2,168,632	$	2,123,405	$	97,907		$	98,807		$	98,803

	Depreciation and Amortization						Capital Expenditures
	Fiscal Year Ended March 31,						Fiscal Year Ended March 31,
	2019		2018		2017		2019			2018			2017
Flue-Cured and Burley Leaf Tobacco Operations:
North America	$	4,756	$	4,772	$	4,626	$	3,137		$	3,316		$	4,202
Other Regions ⁽¹⁾	24,088		24,547		26,106		22,569			21,820			21,619
Subtotal	28,844		29,319		30,732		25,706			25,136			25,821
Other Tobacco Operations ⁽²⁾	8,306		5,574		5,238		13,054			8,901			9,809
Segment and consolidated totals	$	37,150	$	34,893	$	35,970	$	38,760		$	34,037		$	35,630


⁽¹⁾	Includes South America, Africa, Europe, and Asia regions, as well as inter-region eliminations.

⁽²⁾

Includes Dark Air-Cured, Oriental, and Special Services, as well as intercompany eliminations. Sales and other operating revenues, goodwill, depreciation and amortization, and capital expenditures include limited amounts or no amounts for Oriental because the business is accounted for on the equity method and its financial results consist principally of equity in the pretax earnings of the unconsolidated affiliate. The investment in the unconsolidated affiliate is included in segment assets and was approximately $79.2 million, $89.3 million, and $78.1 million, at March 31, 2019, 2018, and 2017, respectively.


⁽³⁾	Equity in pretax earnings of unconsolidated affiliates is included in segment operating income (Other Tobacco Operations segment), but is reported below consolidated operating income and excluded from that total in the consolidated statements of income.


⁽⁴⁾	Restructuring and impairment costs are excluded from segment operating income, but are included in consolidated operating income in the consolidated statements of income (see Note 3).

Geographic data as of, or for, the fiscal years ended March 31, 2019, 2018, and 2017, is presented below. Sales and other operating revenues are attributed to individual countries based on the final destination of the shipment. Long-lived assets generally consist of net property, plant, and equipment, goodwill, and other intangibles.



Geographic Data	Sales and Other Operating Revenues
	Fiscal Year Ended March 31,
	2019		2018		2017
Belgium	$	390,433	$	339,391	$	320,735
United States	227,771		249,281		320,731
China	115,174		120,859		137,855
Germany	166,397		114,386		123,649
Poland	145,478		110,445		94,681
Indonesia	104,268		73,544		57,206
Philippines	69,820		52,902		92,288
Mexico	64,700		62,891		50,540
All other countries	943,112		910,248		873,533
Consolidated total	$	2,227,153	$	2,033,947	$	2,071,218

	Long-Lived Assets
	March 31,
	2019		2018		2017
United States	$	81,270	$	88,196	$	85,145
Brazil	139,624		141,087		134,074
Mozambique	45,051		47,800		50,311
All other countries	134,543		145,638		146,698
Consolidated total	$	400,488	$	422,721	$	416,228