-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TeeOS06UyO3VIH5kOmq3aY94reMCXRgzouN83UdffGG0uTdeQVrdPn+skuEZGf8P XU9nfxlWgON2YxF92m972Q== 0000916641-00-000068.txt : 20000208 0000916641-00-000068.hdr.sgml : 20000208 ACCESSION NUMBER: 0000916641-00-000068 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL CORP /VA/ CENTRAL INDEX KEY: 0000102037 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-FARM PRODUCT RAW MATERIALS [5150] IRS NUMBER: 540414210 STATE OF INCORPORATION: VA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00652 FILM NUMBER: 525939 BUSINESS ADDRESS: STREET 1: P O BOX 25099 STREET 2: 1501 N HAMILTON ST CITY: RICHMOND STATE: VA ZIP: 23230 BUSINESS PHONE: 8043599311 MAIL ADDRESS: STREET 1: PO BOX 25099 CITY: RICHMOND STATE: VA ZIP: 23260 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSAL LEAF TOBACCO CO INC DATE OF NAME CHANGE: 19880314 10-Q 1 SECOND QUARTER REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [ x ] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Period Ended December 31, 1999 ----------------- OR [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Transition Period From_________________to_________________ Commission file number 1-652 ----- UNIVERSAL CORPORATION ------------------------------------------------------ (Exact name of Registrant as specified in its charter) VIRGINIA 54-0414210 - ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1501 North Hamilton Street, Richmond, Virginia 23230 - ----------------------------------------------------- ------------ (Address of principal executive offices) (Zipcode) Registrant's telephone number, including area code - (804) 359-9311 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock as of the latest practicable date: Common Stock, No par value-30,050,347 shares outstanding as of February 1, 2000 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Universal Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Three and Six Months Ended December 31, 1999 and 1998 (In thousands of dollars, except per share data)
THREE MONTHS SIX MONTHS THREE AND SIX MONTHS ENDED DECEMBER 31, 1999 1998 1999 1998 ----------------------------------------------------------------- (In thousands of dollars, except share and per share data) Sales and other operating revenues $1,032,453 $1,297,719 $1,815,441 $2,177,004 Costs and expenses Cost of goods sold 883,805 1,129,187 1,537,334 1,871,888 Selling, general and administrative expenses 89,241 85,670 167,119 163,984 ----------------------------------------------------------------- Operating Income 59,407 82,862 110,988 141,132 Equity in pretax earnings of unconsolidated affiliates (674) 1,212 5,922 1,782 Interest expense 14,764 13,146 26,540 28,688 ----------------------------------------------------------------- Income before income taxes and other items 43,969 70,928 90,370 114,226 Income taxes 15,829 26,243 32,533 42,264 Minority interests 1,992 3,261 2,187 3,481 ----------------------------------------------------------------- Net Income $26,148 $41,424 $55,650 $68,481 ============================================================================================================================ Earnings per common share $0.85 $1.23 $1.78 $2.02 ============================================================================================================================ Diluted earnings per share $0.85 $1.23 $1.78 $2.01 ============================================================================================================================ Cash dividends declared per share $0.31 $0.30 $0.61 $0.58 ============================================================================================================================ Retained earnings - Beginning of period $510,123 $508,137 Net income 55,650 68,481 Cash dividends declared (18,656) (19,415) Purchase of common stock (45,006) (54,004) -------------------------------- Retained earnings - End of period $502,111 $503,199 ============================================================================================================================ See accompanying notes. 2 Universal Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands of dollars) December 31, June 30, 1999 1999 -------------------- --------------------- ASSETS Current Cash and cash equivalents $ 87,102 $ 92,784 Accounts receivable 365,111 326,055 Advances to suppliers 65,947 72,455 Accounts receivable - unconsolidated affiliates 16,848 17,707 Inventories - at lower of cost or market: Tobacco 671,370 419,256 Lumber and building products 74,801 85,458 Agri-products 64,023 74,114 Other 29,359 33,218 Prepaid income taxes 9,382 20,993 Deferred income taxes 7,347 6,952 Other current assets 14,971 21,333 ------------------------------------------------ Total current assets 1,406,261 1,170,325 Property, plant and equipment - at cost Land 29,613 29,743 Buildings 241,064 237,054 Machinery and equipment 513,795 491,201 ------------------------------------------------ 784,472 757,998 Less accumulated depreciation 427,210 409,678 ------------------------------------------------ 357,262 348,320 Other assets Goodwill 116,597 117,871 Other intangibles 19,695 20,950 Investments in unconsolidated affiliates 80,484 95,491 Other noncurrent assets 79,417 70,166 ------------------------------------------------ 296,193 304,478 ------------------------------------------------ $2,059,716 $1,823,123 ========================================================================================================================= See accompanying notes. 3 Universal Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands of dollars) December 31, June 30, 1999 1999 -------------------- ---------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Notes payable and overdrafts $ 543,241 $ 497,399 Accounts payable 275,971 235,310 Accounts payable - unconsolidated affiliates 13,438 14,186 Customer advances and deposits 282,024 82,432 Accrued compensation 17,462 24,291 Income taxes payable 13,369 15,836 Current portion of long-term obligations 28,807 29,046 ------------------------------------------------- Total current liabilities 1,174,312 898,500 Long-term obligations 201,450 221,545 Postretirement benefits other than pensions 42,126 42,981 Other long-term liabilities 48,081 45,474 Deferred income taxes 34,507 39,198 Minority interests 35,340 36,389 Shareholders' equity Preferred stock, no par value, authorized 5,000,000 shares none issued or outstanding Common stock, no par value, authorized 100,000,000 shares, issued and outstanding 30,249,947 shares (32,090,550 at June 30, 1999) 72,474 75,758 Retained earnings 502,111 510,123 Accumulated other comprehensive income (50,685) (46,845) ------------------------------------------------- Total shareholders' equity 523,900 539,036 ------------------------------------------------- $ 2,059,716 $ 1,823,123 ========================================================================================================================== See accompanying notes. 4 Universal Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended December 31, 1999 and 1998 (In thousands of dollars) December 31, December 31, 1999 1998 -------------------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 55,650 $ 68,481 Adjustments to reconcile net income to net cash provided by operating activities 14,000 29,000 Changes in operating assets and liabilities (26,332) 101,163 ---------------------------------------------- Net cash provided by operating activities 43,318 198,644 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (30,000) (39,000) Proceeds from sale of equity investment 22,000 - ---------------------------------------------- Net cash provided (used) in investing activities (8,000) (39,000) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance (repayment) of short-term debt, net 46,000 (61,000) Repayment of long-term debt (20,000) (23,000) Purchases of common stock (49,000) (58,000) Issuance of common stock 1,000 2,000 Dividends paid (19,000) (19,000) ---------------------------------------------- Net cash used in financing activities (41,000) (159,000) ---------------------------------------------- Net increase (decrease) in cash and cash equivalents (5,682) 644 Cash and cash equivalents at beginning of year 92,784 79,835 ---------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 87,102 $ 80,479 ===================================================================================================================
See accompanying notes. 5 Universal Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1999 All figures contained herein are unaudited. 1). Universal Corporation, with its subsidiaries (the "Company"), has seasonal operations in tobacco, lumber and building products, and agri-products. Therefore, the results of operations for the periods ended December 31, 1999 are not necessarily indicative of results to be expected for the year ending June 30, 2000. All adjustments necessary to state fairly the results for such period have been included and were of a normal recurring nature. Certain amounts in prior year statements have been reclassified to conform to the current year's presentation. 2). Contingent liabilities: At December 31, 1999, total exposure under guarantees issued for banking facilities of unconsolidated affiliates and suppliers was approximately $56 million. Other contingent liabilities approximate $29 million and relate principally to performance bonds and Common Market guarantees. The Company's Brazilian subsidiaries have been notified by the tax authorities of proposed adjustments to the income tax returns filed in prior years. The total proposed adjustments, including penalties and interest, approximate $25 million. The Company believes the Brazilian tax returns filed were in compliance with the applicable tax code. The numerous proposed adjustments vary in complexity and amount. While it is not feasible to predict the precise amount or timing of each proposed adjustment, the Company believes that the ultimate disposition will not have a material adverse effect on the Company's consolidated financial position or results of operations. 3). The following table sets forth the computation of earnings per share and diluted earnings per share.
Three Months Six Months Periods ended December 31, 1999 1998 1999 1998 -------------- -------------- -------------- --------------- Net income (in thousands of dollars) $26,148 $41,424 $55,650 $ 68,481 Denominator for earnings per share: Weighted average shares 30,803,630 33,571,791 31,247,956 33,981,541 Effect of dilutive securities: Employee stock options 5,521 42,832 10,592 67,693 -------------- -------------- -------------- --------------- Denominator for diluted earnings per share 30,809,151 33,614,623 31,258,548 34,049,234 Earnings per share $.85 $1.23 $1.78 $2.02 ============== ============== ============== =============== Diluted earnings per share $.85 $1.23 $1.78 $2.01 ============== ============== ============== =============== 6 On December 2, 1999, the Company announced that the Board of Directors had increased the authorization to repurchase the company's common stock to a total of $300 million. As of February 1 2000, nearly 5.5 million shares have been purchased at a total price of approximately $167 million, leaving about 30 million common shares outstanding 4). Comprehensive Income: Three Months Six Months Periods ended December 31, 1999 1998 1999 1998 -------------- ------------- ----------- ------------ (in thousands of dollars) Net income $26,148 $41,424 $55,650 $68,481 Foreign currency translation adjustment (4,661) 8,145 (3,840) 9,659 -------------- ------------- ----------- ------------ Comprehensive income $21,487 $49,569 $51,810 $78,140 ============== ============= =========== ============ 5) Segments are based on product categories. The Company evaluates performance based on segment operating income and equity in pretax earnings of unconsolidated affiliates. Three Months Six Months Period ended December 31 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------------- Sales and other operating revenues Tobacco $ 767,945 $ 1,024,350 $ 1,277,700 $ 1,630,754 Lumber/building products 138,801 138,762 280,822 278,026 Agri-products 125,707 134,607 256,919 268,225 - ---------------------------------------------------------------------------------------------------------- Total $ 1,032,453 $ 1,297,719 $ 1,815,441 $ 2,177,005 ========================================================================================================== Three Months Six Months Period ended December 31 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------------- Operating income by segment Tobacco $ 52,964 $ 78,323 $ 102,213 $ 126,031 Lumber/building products 6,724 6,215 15,533 14,031 Agri-products 3,578 4,773 8,636 9,971 - ---------------------------------------------------------------------------------------------------------- Total 63,266 89,311 126,382 150,033 Corporate expenses 4,533 5,237 9,472 7,119 Interest expense 14,764 13,146 26,540 28,688 Income before income taxes and other items $ 43,969 $ 70,928 $ 90,370 $ 114,226 ==========================================================================================================
6). Short- and Long Term-Debt: Effective December 16, 1999, the Company replaced its $300 million revolving credit facility with a new $270 million facility issued in tranches of $180 million and $90 million. In addition, uncommitted lines of credit available to the Company in the United States were reduced by $170 million in December 1999 primarily because one major bank exited the bid line segment of the credit markets. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources - ------------------------------- Working capital declined from $272 million at June 30, 1999, to $232 million at December 31, 1999. The components of working capital on a comparative basis fluctuated to varying degrees compared to June 30th primarily due to the seasonality of tobacco operations. The majority of the increase in current assets was reflected in tobacco inventory, which was supported by an increase in customer advances. The increases primarily represent purchases of crops that have not been processed and/or shipped due to customer requirements. In the United States, tobacco inventory at December 31 represent a combination of processed flue-cured tobacco that has not yet been shipped, and purchases from the burley crop, for which the season begins in mid-November. A significant percentage of the U.S. burley crop is purchased in the second quarter of the fiscal year. Processing begins shortly after purchase of the tobacco and continues through the beginning of the fourth quarter. June 30th usually represents the low point of U.S. tobacco inventory and receivables as most of the current crop has been shipped. Variations may occur quarter to quarter in the proportion of notes payable and customer advances that support inventories, depending on the Company's and its customers' borrowing capabilities, interest rates and exchange rates. The Company generally does not purchase tobacco in the U.S. on a speculative basis. In some of the foreign sourcing origins, the Company may advance funds for the purchase of leaf tobacco. Generally, the Company's tobacco operations conduct business in U.S. dollars, thereby limiting foreign exchange risk to local production and overhead costs. Agri-product and lumber operations enter into foreign exchange contracts to hedge firm purchase and sales commitments with terms of less than six months. Contracts used to manage foreign currency risks are not material. The Company's interest rate risk is limited because customers in the tobacco business usually pre-finance purchases or pay market rates of interest for inventory purchased for their accounts. On December 2, 1999, the Company announced that the Board of Directors had increased the authorization to repurchase the company's common stock to a total of $300 million. As of February 1, 2000, nearly 5.5 million shares have been purchased at a total price of approximately $167 million, leaving about 30 million common shares outstanding. The buyback plans have been and are expected to continue to be funded from operating cash flows. Effective December 16, 1999, the Company replaced its $300 million revolving credit facility with a new $270 million facility issued in tranches of $180 million and $90 million. The new facility is expected to be used as support for the Company's commercial paper program, which provides flexibility in the Company's short-term borrowings. In addition, uncommitted lines of credit available to the Company in the United States were reduced by $170 million in December 1999 primarily because one major bank exited the bid line segment of the credit markets. The Company is currently working to replace the borrowing capacity, and management believes that the Company's liquidity and capital resources at December 31, 1999, remain adequate to support the Company's foreseeable operating needs. 8 In February 2001, $100 million of the Company's long-term debt will mature; thus it will be reclassified from long-term debt to current liabilities in the next quarter. The Company intends to maintain its long-term debt structure. Results of Operations - --------------------- 'Sales and Other Operating Revenues' for the second quarter of fiscal year 2000 were down $265 million or 20% compared to last year. For the six-month period the decrease was $362 million or 17%. In both periods, the declines primarily reflect a reduction in volume of leaf tobacco handled and processed during the periods. Reduced tobacco sales accounted for over 97% of the decline in each of the respective periods. Revenues for lumber and building products were comparable for the three and six-month periods while agri-product revenues were down slightly in both periods. `Operating Income' for the quarter and six-month periods ended December 31, 1999, declined 29% and 21% respectively compared to the same periods last year. Tobacco operations performed well under the difficult conditions that have characterized world tobacco markets in recent months. The volume of tobacco purchased and processed in the United States was down significantly in the quarter and the six months in response to much smaller U. S. flue-cured and burley crops. Flue-cured marketings for 1999 totaled 653 million pounds compared to 814 million pounds a year ago, a decline of almost 20 percent. The burley markets are currently winding down and it now appears that the volume of marketings could be as much as 10 percent below last year's level and, due to adverse weather and curing conditions, the quality of the crop is much lower than normal. In addition, the one-week delay in the opening of U.S. burley markets has shifted some processing revenues into the third quarter. The Company's results for the quarter were also negatively affected by a significant crop shortfall in Tanzania and costs associated with the establishment of an international customer service office in Europe. In addition, the Company's earnings suffered in the quarter due to reduced shipments out of a poor quality dark tobacco crop in Indonesia and lower sales of cigar leaf from the Dominican Republic. This was partially offset in the quarter and six months by shipments of oriental leaf that were delayed, by customers, from last year into the current year. Non-tobacco operating profits were off in the quarter, but they remain slightly ahead of last year's pace for the six months. Results in lumber and building products distribution continue to demonstrate good growth due to improved volumes despite the continued impact of a strong U.S. dollar on both revenues and earnings of these Euro-based operations. Agri-products results lagged last year's excellent performance because of the continuation of adverse conditions in world markets for tea and rubber, which affected both volumes and margins. This was partially offset by good results in nuts and in canned and frozen foods. The uncertain environment in world tobacco markets has negatively impacted results in the quarter and for the first six months. Sales of both manufacturers and leaf merchants have suffered in response to the continuing economic difficulties in parts of Asia and the former Soviet Union, and higher cigarette prices and excise taxes in the United States. While these developments have clearly had an effect on the Company's performance during the first six months of the year, the Company has performed well under these circumstances. Management believes that the Company's strategy is working and expects to achieve satisfactory results for the remainder of the year. Interest expense is higher in the quarter due to higher interest rates. However, for the six-month period ended December 31, 1999, interest expense is below the comparable period last year due to lower borrowing levels during the first quarter of the current fiscal year. 10 The Company cautions readers that any forward-looking statements contained herein are based upon management's current knowledge and assumptions about future events, including anticipated levels of demand for and supply of the Company's products and services, costs incurred in providing these products and services, timing of shipments to customers and general economic, political, market and weather conditions. Lumber and building products earnings are also affected by changes in exchange rates between the U.S. dollar and the Euro. Actual results, therefore, could vary from those expected. For more details on factors that could affect expectations, see the Management's Discussion and Analysis section of the Company's Annual Report on Form 10-K for the year ended June 30, 1999, as filed with the Securities and Exchange Commission. 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings. In September 1998, the Company received subpoenas for documents and information in connection with an investigation of cigarette tobacco leaf purchases. The investigation was being conducted by the United States Department of Justice Antitrust Division in the Eastern District of Pennsylvania. Similar subpoenas were received by cigarette manufacturers and other leaf tobacco merchants. On February 1, 2000 the Company received notice from the United States Department of Justice that the investigation was closed and the Company was relieved of its ongoing obligations under the subpoena. Item 6. Exhibits and Reports on Form 8-K a. Exhibits 10.1 Universal Corporation 1989 Executive Stock Plan, as amended on December 2, 1999. 10.2 Universal Corporation 1997 Executive Stock Plan, as amended on December 2, 1999. 10.3 Form of Universal Corporation 1999 Stock Option and Equity Accumulation Agreement, with schedule of grants to executive officers. 10.4 Form of Amendment to Stock Option and Equity Accumulation Agreements. 12 Ratio of earnings to fixed charges. 27 Financial Data Schedule* b. Report on Form 8-K. Form 8-K filed on December 2, 1999, filing the press release announcing dividend increase and additional shares purchase. * Filed herewith 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 7, 2000 UNIVERSAL CORPORATION -------------------------------------------- (Registrant) /s/ Hartwell H. Roper -------------------------------------------- Hartwell H. Roper, Vice President and Chief Financial Officer /s/ William J. Coronado -------------------------------------------- William J. Coronado, Vice President and Controller (Principal Accounting Officer) EX-12 2 RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12. RATIO OF EARNINGS TO FIXED CHARGES
(in thousands of dollars) For the Six Months ended For the years ended June 30, Dec. 31, 1999 1999 1998 1997 1996 1995 Pretax income from continuing operations $84,448 $ 197,719 $ 231,138 $ 171,941 $ 123,721 $ 55,768 Distribution of earnings from unconsolidated affiliates - 840 602 1,509 690 738 Fixed charges 26,992 57,744 64,881 65,827 69,543 69,819 --------------------------------------------------------------------------------- Earnings $111,440 $ 256,303 $ 296,621 $ 239,277 $ 193,954 $ 126,325 ================================================================================= Interest $26,540 $ 56,837 $ 63,974 $ 64,886 $ 68,754 $ 69,585 Amortization of premiums and other 452 907 907 941 789 234 --------------------------------------------------------------------------------- Fixed Charges $ 26,992 $ 57,744 $ 64,881 $ 65,827 $ 69,543 $ 69,819 ================================================================================= Ratio of Earnings to Fixed Charges 4.13 4.44 4.57 3.63 2.79 1.81
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS JUN-30-2000 DEC-31-1999 87,102 0 365,111 0 839,553 1,406,261 784,472 427,210 2,059,716 1,174,312 201,450 72,474 0 0 451,426 2,059,716 1,815,441 1,815,441 1,537,334 1,537,334 0 0 26,540 90,370 32,533 55,650 0 0 0 55,650 1.78 1.78
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