-----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, Ask1GWUjpFeV9jBe10L9O/m4rosq2ErtO0k7mVpCE11kywjxbSov3mmpnhsLMOMK VDI8srIfgI/fP5WzgfVhOw== 0000916641-99-000851.txt : 19991111 0000916641-99-000851.hdr.sgml : 19991111 ACCESSION NUMBER: 0000916641-99-000851 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991110 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: 99746168 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 FIRST 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 September 30, 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) (Zip code) 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 -30,981,947 shares outstanding as of November 3, 1999 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Universal Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Three Months Ended September 30, 1999 and 1998 (In thousands of dollars, except per share data)
1999 1998 -------------------------------- Sales and other operating revenues $782,988 $879,285 Costs and expenses Cost of goods sold 653,529 742,701 Selling, general and administrative expenses 77,878 78,314 -------------------------------- Operating Income 51,581 58,270 Equity in pretax earnings of unconsolidated affiliates 6,596 570 Interest expense 11,776 15,542 -------------------------------- Income before income taxes and other items 46,401 43,298 Income taxes 16,704 16,021 Minority interests 195 220 -------------------------------- Net income $ 29,502 $27,057 ================================================================================================== Earnings per share $ .93 $ .79 ================================================================================================== Diluted earnings per share $ .93 $ .78 ================================================================================================== Retained earnings - Beginning of period $510,123 $508,137 Net income 29,502 27,057 Cash dividends declared ($.30 - 1999; $.28 - 1998) (9,313) (9,448) Purchase of common stock (24,333) (33,012) -------------------------------- Retained earnings - End of period $505,979 $492,734
See accompanying notes. 2 Universal Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands of dollars)
September 30, June 30, 1999 1999 -------------------- --------------------- ASSETS Current Cash and cash equivalents $ 82,812 $ 92,784 Accounts receivable 340,921 326,055 Advances to suppliers 51,678 72,455 Accounts receivable - unconsolidated affiliates 12,032 17,707 Inventories - at lower of cost or market: Tobacco 570,608 419,256 Lumber and building products 81,213 85,458 Agri-products 71,736 74,114 Other 35,275 33,218 Prepaid income taxes 4,000 20,993 Deferred income taxes 461 6,952 Other current assets 25,328 21,333 ------------------------------------------------ Total current assets 1,276,064 1,170,325 Property, plant and equipment - at cost Land 30,062 29,743 Buildings 240,990 237,054 Machinery and equipment 504,925 491,201 ------------------------------------------------ 775,977 757,998 Less accumulated depreciation 419,766 409,678 ------------------------------------------------ 356,211 348,320 Other assets Goodwill 116,992 117,871 Other intangibles 20,387 20,950 Investments in unconsolidated affiliates 75,997 95,491 Other noncurrent assets 75,710 70,166 ------------------------------------------------ 289,086 304,478 $1,921,361 $1,823,123 =========================================================================================================================
See accompanying notes. 3 Universal Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands of dollars)
September 30, June 30, 1999 1999 -------------------- ---------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Notes payable and overdrafts $ 452,395 $ 497,399 Accounts payable 249,966 235,310 Accounts payable - unconsolidated affiliates 12,998 14,186 Customer advances and deposits 253,025 82,432 Accrued compensation 13,872 24,291 Income taxes payable 17,846 15,836 Current portion of long-term obligations 29,013 29,046 ------------------------------------------------- Total current liabilities 1,029,115 898,500 Long-term obligations 201,518 221,545 Postretirement benefits other than pensions 43,437 42,981 Other long-term liabilities 47,855 45,474 Deferred income taxes 28,448 39,198 Minority interests 36,596 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 31,174,304 shares (32,090,550 at June 30, 1999) 74,437 75,758 Retained earnings 505,979 510,123 Accumulated other comprehensive income (46,024) (46,845) ------------------------------------------------- Total shareholders' equity 534,392 539,036 ------------------------------------------------- $ 1,921,361 $ 1,823,123 ==========================================================================================================================
See accompanying notes. 4 Universal Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended September 30, 1999 and 1998 (In thousands of dollars)
1999 1998 ---------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $29,502 $27,057 Adjustments to reconcile net income to net cash provided by operating activities 6,700 5,600 Changes in operating assets and liabilities 45,826 105,929 ---------------------------------------------- Net cash provided by operating activities 82,028 138,586 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (14,000) (20,000) Proceeds from sale of equity investment 22,000 ---------------------------------------------- Net cash provided (used) in investing activities 8,000 (20,000) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of short-term debt, net (45,000) (43,000) Repayment of long-term debt (20,000) (23,000) Purchases of common stock (25,700) (35,300) Dividends paid (9,300) (9,500) ---------------------------------------------- Net cash used in financing activities (100,000) (110,800) Net increase (decrease) in cash and cash equivalents (9,972) 7,786 Cash and cash equivalents at beginning of year 92,784 79,835 ---------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 82,812 $ 87,621 ===================================================================================================================
See accompanying notes. 5 Universal Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1999 All figures contained herein are unaudited. 1) Universal Corporation, together with its subsidiaries and affiliates, is also referred to as the Company or Universal. The operations of domestic and foreign tobacco, lumber and building products, and agri-products segments are seasonal. Therefore, the results of operations for the periods ended September 30, 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. 2). Contingent liabilities: At September 30, 1999, total exposure under guarantees issued for banking facilities of unconsolidated affiliates and suppliers was approximately $39 million. Other contingent liabilities approximate $33 million and relate principally to performance bonds, Common Market subsidies and accounts receivable sold with recourse. 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 $30 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. At September 30, 1999, the Company had approximately $23 million of loans to a farmer cooperative in Argentina. The loans are secured by tobacco and liens on real property, processing machinery and equipment and other assets of the cooperative. Although management expects to recover amounts represented by these loans, ultimate collection is contingent upon the ability of the farmers to produce competitively priced tobacco suitable for export, the financial condition and management of the cooperative, and the value of the assets pledged as security for the loans. 3) Comprehensive Income: For the three months ended September 30, 1999 1998 ---------------- ----------------- (in thousands of dollars) Net income $29,502 $27,057 Foreign currency translation adjustment 821 1,514 ------------------------------------ Comprehensive income $30,323 $28,571 ==================================== 6 4) The following table sets forth the computation of earnings per share and diluted earnings per share. For the three months ended September 30, 1999 1998 ----------------------------------- Net income (in thousands of dollars) $29,502 $27,057 ----------------------------------- Denominator for earnings per share: Weighted average shares 31,692,282 34,391,290 Effect of dilutive securities: Employee stock options 15,662 92,553 ----------------------------------- Denominator for diluted earnings per share 31,707,944 34,483,843 ----------------------------------- Earnings per share $.93 $.79 =================================== Diluted earnings per share $.93 $.78 =================================== The Company has purchased 992 thousand shares during the quarter. 5) Segments are based on product categories. The Company evaluates performance based on segment operating income, which includes equity in pretax earnings of unconsolidated affiliates. For the three months ended September 30,
SALES AND OTHER OPERATING REVENUES OPERATING INCOME 1999 1998 1999 1998 --------------------------------- ----------------------------- Tobacco $ 509,755 $ 606,402 $ 48,606 $ 49,463 Lumber and building products 142,021 139,264 8,810 7,816 Agri-products. 131,212 133,619 5,058 5,197 - --------------------------------------------------------------------------------------------------------------- Total segments 782,988 879,285 62,474 62,476 Corporate expenses (4,297) (3,636) Equity in pretax earnigns of unconsolidated affiliates (6,596) (570) ----------------------------------------------------------------------- Consolidated total $ 782,988 $ 879,285 $ 51,581 $ 58,270 =======================================================================
6) Certain prior year amounts have been reclassified to be reported on a consistent basis with the current year's presentation. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Working capital at September 30, 1999 was $247 million compared to $272 million at June 30, 1999. The decline in working capital was due to a combination of increased current assets, which were up $106 million (primarily from an increase in tobacco inventories), offset by an increase in current liabilities of $131 million. The components of working capital fluctuate between June and September. In the United States, tobacco working capital needs are normally at their lowest point at June 30. In the first quarter of the fiscal year, the U.S. flue-cured tobacco markets open and tobacco is purchased and shipped to factories for processing. Tobacco inventories generally are financed by notes payable and customer advances. The mix of notes payable and customer advances is dependent on both the Company's and its customers' borrowing capabilities, interest rates and exchange rates. The Company does not purchase material quantities of tobacco in the United States on a speculative basis; thus the increase in tobacco inventory represents tobacco that has been committed to customers. Generally, the Company's international 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 for terms of less than six months. Contracts used to manage foreign currency risks are not material. 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. 8 The Company continues its share purchase program, which has been in progress since May 6, 1998. As of October 26, 1999, the Company had purchased 4.5 million shares of Universal common stock at a total price of approximately $143 million. The program provides for purchases of up to $200 million. Currently, about 31 million shares are outstanding. The liquidity and capital resources of the Company at September 30, 1999, remain adequate to support the Company's short-term and long-term operating needs. Results of Operations - --------------------- 'Sales and Other Operating Revenues' decreased $96 million or 11% in the first quarter of fiscal year 2000. The decline in tobacco revenues accounted for nearly all of the decrease; however a small increase in lumber and building products revenues was virtually offset by a decline in agri-products sales. The lower tobacco revenues were the result of the smaller flue-cured crop in the United States and lower tobacco prices in Brazil caused by lower currency values. Although tobacco in Brazil is purchased and sold in dollars, the devaluation of the Brazilian real reduced the component costs of the tobacco as well as the price to customers. Fiscal year 2000 segment operating income in the first quarter was comparable to the same period last year at $62 million, however, fiscal year 2000 includes a one-time gain of $4 million from the sale of an interest in a tobacco joint venture. Tobacco operating income (excluding the gain) was down almost 10% or $5 million. One factor in those results was the reduction of U.S. crops in response to increased U.S. stabilization inventories and lower demand by manufacturers. Although the effect of flooding from Hurricane Floyd has not yet been fully tallied, it is not expected to cause any significant further reductions in current marketings. Volumes of Brazilian tobacco shipped were also lower than those in the first quarter of fiscal year 1999, despite the large Brazilian crop, because of benefits from shipment timing last year. However, shipments of African tobacco and dark tobaccos were up in the quarter, reflecting shipments that customers delayed from fiscal year 1999. Earnings from an oriental tobacco joint venture improved significantly due to similar customer requested shipment changes. Despite the adverse effect of the stronger U.S. 9 dollar, lumber and building products operating income improved $1 million or 13 percent compared to the same period last year. Improved weather led to a high level of activity in the construction sector after a protracted period of poor conditions. Higher world prices for hardwood further benefited margins. Operating income for the agri-products business was slightly down as strong results from rubber, nuts, and canned and frozen foods partially mitigated the effects of weather and economic difficulties in tea markets. Interest expense decreased in the quarter due to reduced debt. The Company's estimated effective tax rate in fiscal year 2000 is approximately 36%. As reported in the Company's 1999 Annual Report on Form 10-K (refer to Management's Discussion and Analysis of Operations), Universal has developed a plan to mitigate the effects of the year 2000 problem on its operations. As of November 1, 1999, the Company's business units have completed the internal aspects of the Company's year 2000 plan with regard to all mission critical information systems and other computerized technology. The Company's business units have also completed their assessment of key suppliers and have implemented contingency plans where required. During the remainder of the calendar year, each business unit will continue to monitor its key suppliers and any changes in their respective year 2000 status. Universal's year 2000 task force has completed its scheduled reviews of material business units' compliance with the Company's year 2000 plan. The task force's mission for the remainder of the year is to keep various business units informed of any developments on the year 2000 problem. The Company has spent approximately $8 million to address the year 2000 problem through September 30, 1999, and does not expect to spend additional significant amounts. 10 As Universal begins fiscal year 2000, management believes its strategy is proving itself in the face of what have been, and continue to be, very difficult market conditions. The Company expects that uncommitted flue-cured and burley tobacco inventories in the hands of the trade and the U.S. stabilization cooperatives will continue to increase during the fiscal year from the current levels, which are estimated at about 270 thousand tons. However, the Company believes that tobacco leaf inventory levels should begin to moderate during fiscal year 2001 as crops are further reduced. During this two-year period, the Company expects to continue to show strong performance, underlining the fundamental strength of its strategy. Readers are cautioned that the statements contained herein regarding expected earnings and expectations for the Company's performance are forward-looking statements based upon management's current knowledge and assumptions about future events, including anticipated levels of production of tobacco and demand for tobacco and the Company's products and services, costs incurred in providing these products and services, and timing of shipments to customers. Lumber earnings could also be affected by a number of factors, including the translation effects of currency rate changes and unusual weather conditions in the Netherlands. Actual results, therefore, could vary from those expected. Reference is made to Items 1 and 7 and the Notes to the Consolidated Financial Statements in Item 8 of the Company's Form 10-K for the fiscal year ended June 30, 1999, regarding important factors that would cause actual results to differ materially from those contained in any forward-looking statement made by or on behalf of the Company, including forward-looking statements contained in Item 2 of this Form 10-Q. 11 PART II. OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders The Company held its annual meeting of shareholders on October 26, 1999, to elect three directors to serve three-year terms each, one director to serve a two-year term and one director to serve a one-year term and to approve the Universal Corporation Executive Officer Annual Incentive Plan. The names of the five directors and the number of votes cast for them are listed below: Name of Director Votes for Votes withheld - ---------------- --------- -------------- William W. Berry (three year) 27,463,121 192,374 Dr. Ronald E. Carrier (three year) 27,463,840 191,655 Hubert R. Stallard (three year) 27,456,893 198,602 Richard G. Holder (two year) 27,463,458 192,037 Lawrence S. Eagleburger (one year) 26,402,338 1,253,157 No broker non-votes were recorded with regard to the election of any of the five directors listed above. The directors whose terms continued after the meeting were Charles H. Foster, Jr., Joseph C. Farrell, Henry H. Harrell, Allen B. King, and Jeremiah J. Sheehan. The number of shares voted for the approval of the Universal Corporation Executive Officer Annual Incentive Plan was as follows: For Abstained Against - --- --------- ------- 26,495,956 223,673 935,866 No broker non-votes were recorded with regard to the approval of the Universal Corporation Executive Officer Annual Incentive Plan. 12 Item 6. Exhibits and Reports on Form 8-K a. Exhibits -------- 12 Ratio of earnings to Fixed Charges.* 27 Financial Data Schedule.* b. Reports on Form 8-K ------------------- (i) Form 8-K filed on September 22, 1999, filing the press release announcing flood damage caused by Hurricane Floyd. (ii) Form 8-K filed on October 27, 1999, filing the press release announcing first quarter results. * Filed Herewith 13 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: November 10, 1999 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 three months ended For the years ended June 30, Sept. 30, 1999 1999 1998 1997 1996 1995 Pretax income from continuing operations $ 39,805 $ 197,719 $ 231,138 $ 171,941 $ 123,721 $ 55,768 Distribution of earnings from unconsolidated affiliates - 840 602 1,509 690 738 Fixed charges 12,002 57,744 64,881 65,827 69,543 69,819 --------------------------------------------------------------------------------- Earnings $ 51,807 $ 256,303 $ 296,621 $ 239,277 $ 193,954 $ 126,325 Interest $ 11,776 $ 56,837 $ 63,974 $ 64,886 $ 68,754 $ 69,585 Amortization of premiums and other 226 907 907 941 789 234 --------------------------------------------------------------------------------- Fixed Charges $ 12,002 $ 57,744 $ 64,881 $ 65,827 $ 69,543 $ 69,819 Ratio of Earnings to Fixed Charges 4.32 4.44 4.57 3.63 2.79 1.81
EX-27 3 FINANCIAL DATA SCHEDULE
5 0000102037 UNIVERSAL CORPORATION 1,000 3-MOS JUN-30-2000 SEP-30-1999 82,812 0 340,921 0 758,832 1,276,064 775,977 419,766 1,921,361 1,029,115 201,518 74,437 0 0 459,955 1,921,361 782,988 782,988 653,529 653,529 0 0 11,776 46,401 16,704 29,502 0 0 0 29,502 .93 .93
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