-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, AoxlpzgvNmgfK2KhFIxn5no1LgJelauWiMPJ9SDC/1ocg+Kq6wwKNq30xV10CAvJ cvXg+XjasHJs7NEh1XwAoQ== 0000916641-94-000012.txt : 19940520 0000916641-94-000012.hdr.sgml : 19940520 ACCESSION NUMBER: 0000916641-94-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL CORP /VA/ CENTRAL INDEX KEY: 0000102037 STANDARD INDUSTRIAL CLASSIFICATION: 5150 IRS NUMBER: 540414210 STATE OF INCORPORATION: VA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00652 FILM NUMBER: 94527686 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 UNIVERSAL CORP. 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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 March 31, 1994 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) State or other jurisdiction of incorporation or organization -VIRGINIA I.R.S. Employer Identification Number - 54-0414210 Address of principal executive offices - 1501 NORTH HAMILTON STREET RICHMOND, VIRGINIA 23230 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 Common Stock, No par value - 35,001,185 shares outstanding as of May 11, 1994 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Universal Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Three and Nine Months Ended March 31, 1994 and 1993 Three Months Nine Months 1994 1993 1994 1993 Sales and other operating revenues $749,587 $836,688 $2,304,000 $2,551,563 Costs and expenses Cost of goods sold 668,942 746,663 1,998,025 2,219,783 Selling, general and administrative 58,317 50,755 198,947 179,387 Interest 14,809 10,366 45,021 34,976 742,068 807,784 2,241,993 2,434,146 Income before income taxes and other items 7,519 28,904 62,007 117,417 Income taxes 259 11,565 17,745 42,270 Minority interests 262 (477) 566 (312) Income from consolidated operations 6,998 17,816 43,696 75,459 Equity in net income of unconsolidated affiliates 2,345 1,266 4,316 2,648 Income before cumulative effect of change in accounting principle 9,343 19,082 48,012 78,107 Cumulative effect of change in accounting principle (29,406) Net income $9,343 $19,082 $18,606 $78,107 Per common share Income before cumulative effect of change in accounting principle $.26 $.58 $1.35 $2.37 Cumulative effect of change in accounting principle (.83) Net income $.26 $.58 $.52 $2.37 Retained earnings - Beginning of period $341,523 $290,766 Net income 18,606 78,107 Cash dividends declared ($.70-1994; $.64-1993) (24,944) (21,044) Retained earnings - End of period $335,185 $347,829 Average common shares outstanding 35,631,878 32,923,811 Universal Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS March 31, June 30, 1994 1993 ASSETS Current Cash and cash equivalents 71,273 $119,693 Accounts and notes receivable 384,252 345,766 Accounts receivable - unconsolidated affiliates 96,325 20,098 Inventories at lower of cost or market: Tobacco 487,050 431,140 Lumber and building products 77,413 63,386 Agri-products 63,577 56,004 Other 10,751 18,811 Prepaid income taxes 6,963 Deferred income taxes 3,397 3,606 Other current assets 25,140 28,431 Total current assets 1,226,141 1,086,935 Real estate, plant and equipment - at cost Land 22,561 21,004 Buildings 158,747 155,652 Machinery and equipment 361,394 347,569 542,702 524,225 Less accumulated depreciation 261,606 246,450 281,096 277,775 Other assets Goodwill 119,502 119,717 Other intangibles 27,808 20,080 Investments in unconsolidated affiliates 30,438 25,745 Deferred income taxes 13,077 2,193 Other noncurrent assets 33,518 31,743 224,343 199,478 $1,731,580 $1,564,188 Universal Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS March 31, June 30, 1994 1993 LIABILITIES AND SHAREHOLDERS' EQUITY Current Notes payable and overdrafts 555,410 $426,251 Accounts payable 214,659 237,574 Accounts payable - unconsolidated affiliates 19,015 25,402 Customer advances and deposits 75,811 52,672 Accrued compensation 13,184 21,017 Income taxes payable 3,936 Current portion long-term obligations 10,287 19,552 Total current liabilities 888,366 786,404 Long - term obligations 301,685 281,807 Postretirement benefits other than pensions 48,650 Other long - term liabilities 48,760 40,592 Deferred income taxes 33,717 35,020 Minority interests 5,484 2,452 Shareholders' equity Preferred stock $100 par, 8% cumulative, authorized 75,000 shares, issued and outstanding 4 shares Additional preferred stock, no par value, authorized 5,000,000 shares, none issued or outstanding Common stock, no par value, authorized 50,000,000 shares, issued and outstanding 35,604,485 shares (35,631,485 at June 30, 1993) 86,169 86,672 Retained earnings 335,185 341,523 Foreign currency translation adjustments (16,436) (10,282) Total shareholders' equity 404,918 417,913 $1,731,580 $1,564,188 Universal Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended March 31, 1994 and 1993 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $18,606 $78,107 Adjustments to reconcile net income to net cash provided by operating activities 44,000 24,400 Cumulative effect of change in accounting principle 29,406 Changes in operating assets and liabilities net of effects from purchase of businesses (219,032) 11,865 Net cash provided by (used in) operating activities (127,020) 114,372 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (19,000) (29,800) Purchase of businesses (net of cash acquired) (15,200) (84,900) Increase in other intangibles (10,600) Proceeds from long-term investment 14,100 Other (3,500) 6,200 Net cash used in investing activities (34,200) (108,500) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance (repayment) of short-term debt - net 122,600 (15,200) Repayment of short-term debt classified as long-term June 30, 1993 (100,000) Repayment of long-term debt (24,000) Issuance of long-term debt 115,000 Issuance (purchase) of common stock (600) 70,900 Dividends paid (24,200) (20,400) Net cash provided by financing activities 112,800 11,300 Net increase (decrease) in cash and cash equivalents (48,420) 17,172 Cash and cash equivalents at beginning of period 119,693 82,674 CASH AND CASH EQUIVALENTS AT END OF PERIOD $71,273 $99,846 Universal Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1994 All figures contained herein are unaudited and stated in thousands of dollars 1) The Company's major operating segments of domestic and foreign tobacco, lumber and building products and agri-products are seasonal by nature. Therefore, the results of operations for the nine-month period ended March 31, 1994 are not necessarily indicative of results to be expected for the year ending June 30, 1994. All adjustments necessary to fairly state the results for such period have been included and were of a normal recurring nature. 2) At March 31, 1994, total exposure under guarantees issued for banking facilities of unconsolidated affiliates was $18 million. Other contingent liabilities approximate $160 million and relate principally to Common Market guarantees, joint venture overdraft and other guarantees. 3) In August, 1993, Congress passed the "Omnibus Budget Reconciliation Act of 1993" which, among other things, increased the corporate tax rate from 34% to 35% retroactive to January 1, 1993. The cumulative impact was to increase tax expense approximately $1.5 million in the first quarter. The reduction in the effective tax rate for the nine months to 29% was primarily attributable to prior years' non-repatriated earnings that have been deemed permanently reinvested in the current year, a greater proportion of earnings taxed at less than the full statutory rate and amendments of prior years' income tax returns. 4) The Company provides postemployment health and life insurance benefits for eligible U.S. employees attaining specific age and service requirements. The plans contain cost-sharing features such as deductibles and coinsurance. In the past the Company has made changes to the plans that have reduced benefits. The Company reserves the right to amend or discontinue the plans at any time. Effective July 1, 1993, the Company adopted SFAS 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" which requires that the estimated costs of these benefits be expensed over the employee's active service period rather than as paid. The standard permits an employer to recognize the unrecorded postretirement obligation as a one-time charge to earnings or to be amortized over a period of up to 20 years. In the first quarter of the current fiscal year, the Company elected to recognize the obligation as a one-time charge of approximately $29 million or $.83 per share (net of $18 million in taxes). For the nine months ended March 31, 1994, the effect of adopting SFAS 106 was a decrease in 'Income Before Cumulative Effect Of Change In Accounting Principle' of approximately $1.4 million. The after-tax cost for the nine months ended March 31, 1993 was approximately $450 thousand recorded on a cash basis. The accumulated postretirement benefit obligation was determined using an assumed health care cost trend rate of 15% as of July 1, 1993 decreasing gradually to 6.5% by fiscal year 2005. A one percentage point increase in the assumed health care cost trend rate would increase the accumulated benefit obligation by approximately $8 million and the aggregate of the service and interest cost components of net periodic postretirement benefit expense for the fiscal year by approximately $1 million. The assumed discount rate used in determining the benefit obligation at July 1, 1993 was 8%. Effective January 1, 1994, the Company amended the aforementioned medical benefit plan for future retirees. The change reduces the Company's postretirement obligation by approximately $14 million (net of tax benefits). For reporting periods subsequent to January 1, the change is expected to substantially offset the impact on pre-tax earnings resulting from the adoption of SFAS 106. 5) Unaudited pro forma consolidated results of operations for the nine months ended March 31, 1993 as though Casalee had been acquired at July 1, 1992 are: Gross revenues - $2.7 billion; Net income $64.2 million or $1.80 per common share. Prior year balance sheet amounts have been reclassified to reflect the allocation of the purchase price of Casalee. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources In August 1993 the Company in a private placement issued $100 million of 6.14% notes with a final maturity in the year 2000. The proceeds were used to reduce short-term borrowings that had been classified as long-term. The Company also replaced its $100 million revolving credit facility and with a more favorable facility. The Company's liquidity and strong capital structure have been supported by these actions. Current assets and current liabilities increased $139 million and $102 million, respectively, at March 31, 1994 compared to June 30, 1993, primarily due to the seasonal requirements of the Company's tobacco operations and advances made to purchase tobacco from affiliates. The June 30 balance sheet generally reflects the low point of working capital needs in the U.S. while those for South and Central America start to expand. At March 31 the reverse is true, with the domestic operations carrying unshipped current crops. Inventories and accounts receivable are generally supported by trade payables, lines of credit, and customer advances. Results of Operations 'Sales and Other Operating Revenues' declined $87 million and $248 million in the quarter and nine-month periods respectively, primarily due to short-term adverse conditions in the world markets, as well as from an unsettled domestic tobacco situation. Domestic purchases and sales were down in the U.S., reflecting high support prices and the poor quality of the flue-cured crop. Processing volumes in the U.S. were comparable to last year due to higher volumes of stabilization tobaccos, as the cooperatives purchased a higher proportion of the crop marketed. Foreign tobacco revenues were up year-to-date due to the inclusion of Casalee's operations in the current fiscal year. Lumber and building product revenues were down year-to-date due primarily to exchange rates, while agri-product revenues were up in the quarter and year-to-date due to increased nut and sunflower seed volumes. Gross profits in the quarter and nine-month periods declined $9 million and $26 million respectively. Domestic tobacco results reflect reduced orders related in part to uncertainty over pending excise tax legislation. Processing volume was similar to last year's due to increased processing of tobacco purchased by the stabilization cooperative, but higher costs of handling the poor quality flue-cured crop and lower yields overall adversely affected processing earnings. Foreign tobacco results were adversely affected by a combination of U.S. legislation restricting foreign leaf content in U.S. made cigarettes, and a worldwide supply/demand imbalance. In recognition of the effects of world prices on its inventories, the Company recorded a $3.5 million pre-tax writedown of its foreign source inventory in the third quarter of the current fiscal year. In addition, results for last year's nine months benefited from profits on shipments that were accelerated at the request of customers. There are encouraging signs of improvement in the worldwide tobacco supply situation with production declines in virtually all market areas. Excluding the operating results of a laminating division sold last year, lumber and building product gross profits were up in the quarter and comparable year-to-date on improved margins. Agri-product results were adversely effected by losses in coffee trading which are not expected to recur. Nut and sunflower seed operations improved during the quarter and year-to-date while other products reported mixed results due to varying market conditions. 'Selling, general and administrative expenses' increased $7.6 million and $19.6 million for the quarter and nine-month periods, respectively, primarily due to the inclusion of Casalee's operations. Included in those operations are the costs of developing markets in both Eastern Europe and China, which will lay the basis for significant opportunities in the long-term but adversely affect current earnings. Fiscal year 1994 includes an increase in expense of approximately $2.4 million year-to date related to the adoption of SFAS 106 "Employers' Accounting for Postemployment Benefits Other Than Pensions." 'Interest expense' reflects increased inventory, working capital needs of Casalee and the financing cost related to the acquisition of Casalee not covered by the issuance of common stock. 'Income Taxes' for the nine months ended March 31, 1994, reflect the combined effects of new tax legislation in the United States, non-repatriated earnings that have been deemed permanently reinvested, a greater proportion of earnings taxed at less than the full statutory rate and amendments of prior years' income tax returns. In aggregate the Company's effective tax rate in the nine months was 29% compared to 36% in the prior year. See note 3 for additional information. As previously mentioned (see note 4), the Company has adopted SFAS 106 which required a one-time charge of $29.4 million in the first quarter of the current fiscal year. As previously reported, the world supply situation appears to be improving. However, the industry must continue to deal with U.S. legislative uncertainties as well as with higher than optimum inventory levels held by the trade. We cautiously expect a gradual return to a more normal operating environment in fiscal year 1995 and beyond. In the meantime we are implementing efficiencies throughout the organization, which are expected to result in a leaner and more focused company for the future. 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. UNIVERSAL CORPORATION (Registrant) / s / Hartwell H. Roper Hartwell H. Roper, Vice President and Chief Financial Officer / s / William J. Coronado William J. Coronado, Controller (Principal Accounting Officer) Date: May 11, 1994 -----END PRIVACY-ENHANCED MESSAGE-----