-----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, Vm/gYMkg3hUMsnJwDyPdlI9f956Sc738f8rXT2Silpzu3hIxTDzGL7O15XMjxGor eLHv7BgxeQEvKUfA1yvHcQ== /in/edgar/work/0000950109-00-004052/0000950109-00-004052.txt : 20000928 0000950109-00-004052.hdr.sgml : 20000928 ACCESSION NUMBER: 0000950109-00-004052 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000926 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-K405 SEC ACT: SEC FILE NUMBER: 001-00652 FILM NUMBER: 729103 BUSINESS ADDRESS: STREET 1: 1501 NORTH HAMILTON STREET STREET 2: PO BOX 25099 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-K405 1 0001.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2000 --------------------------------------- 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, 804-359-9311 Richmond, Virginia 23230 ------------ ------------------------ (Registrant's telephone number) (Address of principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- Common Stock, no par value New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by "X" 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 by "X" mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the Registrant's voting stock held by non- affiliates was $690,000,000 and the total number of shares of common stock outstanding was 27,878,097 at September 15, 2000. INFORMATION INCORPORATED BY REFERENCE Certain information in the September 22, 2000 Proxy Statement for the Annual Meeting of Shareholders of Registrant is incorporated by reference into Part III hereof. 2 PART I ITEM 1. BUSINESS A. The Company Universal Corporation (which together with its subsidiaries is referred to herein as "Universal" or the "Company") is the world's largest independent leaf tobacco merchant and has additional operations in agri-products and the distribution of lumber and building products. Universal's tobacco operations have been the principal focus of the Company since its founding in 1918, and for the fiscal year ended June 30, 2000, tobacco operations accounted for 70% of revenues and 85% of segment operating income, as disclosed in Note 10 of 'Notes to Consolidated Financial Statements'. Universal's agri-products and lumber and building products operations accounted for 14% and 16% of revenues and 5% and 10% of operating profits, respectively, during the same period. See Note 10 to Consolidated Financial Statements for additional business segment and geographical information. B. Description of Tobacco Business General - ------- Universal's tobacco business involves selecting, buying, shipping, processing, packing, storing, and financing leaf tobacco in the United States and other tobacco growing countries for the account of, or for resale to, manufacturers of tobacco products throughout the world. Universal does not manufacture cigarettes or other consumer tobacco products. Most of the Company's tobacco revenues are derived from sales of processed tobacco and from fees and commissions for specific services. The Company's tobacco sales consist primarily of flue-cured and burley tobaccos which, along with oriental tobaccos, are the major ingredients in American blend cigarettes. The Company participates in the sales of oriental tobacco through ownership of a minority equity interest in what management believes to be the largest oriental tobacco leaf merchant in the world, Socotab, L.L.C. Despite declines at the end of the period, worldwide cigarette production increased on average, about 1% per year during the ten years that ended in 1998. Since 1999, worldwide cigarette production has declined. American-blend cigarette consumption has been the fastest growing segment with multinational manufacturers expanding their total market share, and it is expected to continue to increase as a percent of the world total. For a discussion of the impact of current trends on the Company, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Information Regarding Trends and Management's Actions." Processing of leaf tobacco is an essential service to the Company's customers, the tobacco product manufacturers, because the quality of processed leaf tobacco substantially affects the cost and quality of their products. The Company's processing of leaf tobacco includes grading in the factories, blending, quality picking, separation of leaf lamina from the stems, drying, and packing to precise moisture targets for proper aging. Accomplishing these tasks in accordance with exacting customer specifications requires considerable skill and investment in plants and machinery. Excluding tobacco purchased by the U.S. stabilization cooperatives, Universal estimates that in fiscal year 2000, it purchased or processed about 39% of the aggregate amount of flue-cured and burley tobacco produced in the United States, Brazil, Zimbabwe, and Malawi, which are the principal export markets of such tobaccos. In addition, Universal maintains a presence, and in certain cases, a leading presence, in virtually all other tobacco growing regions in the world. Management believes that its leading position in the leaf tobacco industry is based on its broad market presence, its development of processing equipment and technologies, its financial position, its ability to meet customer demand, and its long standing relationships with customers. For a description of the factors that may affect Universal's operating revenues, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors That May Affect Future Results." Universal also has a leading position in worldwide dark tobacco markets. Its dark tobacco operations are located in the major producing countries (i.e., the United States, the Dominican Republic, Indonesia and northern Brazil) and other markets. Dark tobaccos are typically used in the manufacture of cigars and smokeless tobacco products. Sales are made by Universal's sales force and through the use of commissioned agents. Most customers are long-established firms or government monopolies. Universal is represented by its buyers on most significant tobacco markets in the United States, including flue-cured tobacco markets in Virginia, North Carolina, South Carolina, Georgia, and Florida; light air-cured (burley and Maryland) tobacco markets in Kentucky, Tennessee, Virginia, North Carolina, and Maryland; air-cured tobacco markets in Kentucky and Virginia; dark fired and dark air-cured markets in Virginia, Tennessee, and Kentucky; and cigar/chewing tobacco markets in Connecticut, Pennsylvania, and Wisconsin. In the United States, flue-cured and burley tobacco is generally sold at public auction to the highest bidder, although some cigarette manufacturers have begun experimental programs to purchase tobacco directly from farmers under contracts. In addition, the price of such tobacco is supported under an industry-funded federal government program that also restricts tobacco production through a quota system. The price support system has caused U.S. grown tobacco to be more expensive than most non-U.S. tobacco, resulting in a declining trend in exports. Other factors affecting the competitive position of U.S. tobacco in the world market include the efficiency of the marketing system, relative costs of production, and leaf quality in the United States and in foreign countries. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." 3 From time to time, the Company processes and stores tobacco acquired by the flue-cured and burley stabilization cooperatives. The Company derives fees for such services. While the volume of such business fluctuates from year to year, revenues from this business in each of the past five years were not greater than 1% of consolidated tobacco revenues. Universal conducts its tobacco business in varying degrees in a number of foreign countries including Argentina, Belgium, Brazil, Canada, Colombia, the Dominican Republic, France, Germany, Greece, Guatemala, Hungary, India, Indonesia, Italy, Malawi, Mexico, Mozambique, the Netherlands, Paraguay, the People's Republic of China, the Philippines, Poland, Portugal, Russia, Singapore, South Africa, Spain, Switzerland, Tanzania, Thailand, Uganda, the United Kingdom, Zambia, and Zimbabwe. In addition, Socotab, L.L.C. has oriental tobacco operations in Bulgaria, Greece, Macedonia, and Turkey. In a number of countries, including Argentina, Brazil, Guatemala, Hungary, Italy, Mozambique, Mexico, Poland, Tanzania, and Zambia, Universal contracts directly with tobacco farmers or groups of farmers, in some cases before harvest, and thereby takes the risk that the delivered quality and quantity will not meet market requirements. The price may be set by negotiation with farmers' groups or with agencies of the local government. In some countries, Universal also provides agronomy services and crop advances of or for seed, fertilizer, and other supplies. Tobacco in Zimbabwe, Malawi, Canada, and to a certain extent in India, is purchased under an auction system. The Company has substantial capital investments in South America and Africa, and the performance of its operations in these regions can materially affect the Company's earnings from tobacco operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Affect Future Results - Tobacco Businesses." Universal's foreign operations are subject to the usual international business risks, including unsettled political conditions, expropriation, import and export restrictions, exchange controls, and currency fluctuations. During the tobacco season in many of the countries listed above, Universal has advanced substantial sums, has guaranteed local loans, or has guaranteed lines of credit in substantial amounts for the purchase of tobacco. Most tobacco sales are denominated in U.S. dollars, thereby limiting some of the Company's foreign currency exchange risk. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Affect Future Results." Recent Developments and Trends; Factors that May Affect Future Results - ----------------------------------------------------------------------- For a discussion of recent developments and trends in, and factors that may affect, the Company's tobacco business, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." Seasonality - ----------- Universal's tobacco business is seasonal in nature. The United States flue-cured tobacco markets usually open the third week of July and last for approximately four months. The United States burley tobacco markets open in late November and last for approximately two and one-half months. Tobacco in Brazil is usually purchased from January through May. Other markets around the world last for similar periods, although at different times of the year, thereby reducing the overall seasonality in the Company's business. Universal normally operates its processing plants for approximately seven to nine months of the year. It purchases most of its U.S. tobacco in the eight- month period from July through February. During this period, inventories of green tobacco, inventories of redried tobacco, and trade accounts receivable normally reach peak levels in succession. Current liabilities, particularly short-term notes payable to banks, commercial paper, and customer advances, are means of financing this expansion of current assets and normally reach their peak in this period. The Company's balance sheet at its fiscal year end, June 30, normally reflects seasonal expansions in South America, Central America, and Western Europe. Customers - --------- A material part of the Company's tobacco business is dependent upon a few customers. The loss of, or a substantial reduction of business from, any one of these major customers would have a material adverse effect on the Company. Although generally there are no formal continuing contracts with these customers, the Company has done business with each of its major customers for over 40 years. For the year ended June 30, 2000, tobacco sales to Philip Morris Companies Inc. accounted for greater than 10% of consolidated revenues. 4 See Note 9 to Consolidated Financial Statements. Collectively, five other customers accounted for approximately 12% of consolidated revenues during the same period. Universal had orders from customers in excess of $311 million for its tobacco inventories at June 30, 2000. Based upon historical experience, it is expected that at least 90% of such orders will be delivered during the fiscal year ending June 30, 2001. Typically, delays in the delivery of orders result from changing customer requirements. Competition - ----------- The leaf tobacco industry is highly competitive. Competition among leaf tobacco merchants is based on the price charged for products and services as well as the firm's ability to meet customer specifications in the buying, processing, and financing of tobacco. Universal has a worldwide buying organization of tobacco specialists and many processing plants equipped with the latest technology, which, management believes, give it a competitive edge. See "Properties." Competition varies depending on the market or country involved. Normally, there are at least four buyers on each of the United States flue-cured and burley auction markets. The number of competitors in foreign markets varies from country to country, but there is competition in all areas to buy the available tobacco. The Company's principal competitors are: DIMON Incorporated and Standard Commercial Corporation. In addition, British American Tobacco Company, a multi-national tobacco product manufacturer, has subsidiaries that compete with the Company in some markets. Of the significant leaf tobacco industry competitors that are not affiliates of manufacturers, Universal believes that it holds the largest worldwide market share. C. Description of Agri-Products Business The Company's agri-products business involves the selecting, buying, shipping, processing, storing, financing, distribution, importing, and exporting of a number of products including tea, rubber, sunflower seeds, nuts, dried fruit, and canned and frozen foods. The emphasis of the Company's agri-products business is on value-adding activities and trading of physical products in markets where a service can be performed in the supply system from the countries of origin to the consuming industries. In a number of countries, long-standing sourcing arrangements for certain products or value-adding activities through modern processing facilities (tea and sunflower seeds) contribute to the stability and profitability of the business. Seasonal effects on trading are limited. The Company provides various products to numerous large and small customers in the food and food packaging industry and in the rubber and tire manufacturing industry. Generally, there are no formal, continuing contracts with these customers, although business relationships may be long-standing. No single customer accounts for 10% or more of the Company's consolidated agri-products revenues. Competition among suppliers in the agricultural products in which Universal deals is based on price as well as the ability to meet customer requirements in product quality, buying, processing, financing, and delivery. The number of competitors in each market varies from country to country, but there is competition for all products and markets in which the Company operates. Some of the main competitors are: Agway, Akbar Brothers, Centrotrade, Cargill, Dahlgren, Ennar, Global, Metallgeschellschaft/ SAFIC Alcan, Stassens,STT/Wurfbain, Symington, Universal Tea, and UTT (Unilever). For a discussion of recent developments and trends in, and factors that may affect, the Company's agri-products business, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." D. Description of Lumber and Building Products Business The Company is engaged in the lumber and building products distribution business in the Netherlands and Belgium. The majority of lumber products are purchased outside the Netherlands, principally in North America, Scandinavia, Eastern and Western Europe, and the Far East. The Company's lumber and building products business is seasonal to the extent that winter weather may temporarily interrupt the operations of its customers in the building industry. The business is also subject to exchange risks and other normal market and operational risks associated with lumber operations centered in Europe, including general economic conditions in the countries where the Company is located and related trends in the building and construction industries. The Company's sales activities in this segment are conducted through three business units: regional sales, wholesale/do-it-yourself (DIY) sales, and industrial sales. The regional sales unit distributes and sells lumber and related building products through a network of regional outlets, mainly to the building and construction market. The wholesale/DIY business unit supplies lumber merchants, ceiling and wall contractors, and DIY chains with a wide range of lumber-related products, including panel products, ceiling tiles, and 5 doors. The industrial sales unit primarily distributes value-added softwood products and window frames to the prefabrication and construction industries. The Company carries inventories to meet customer demands for prompt delivery. The level of inventories is based on a balance between providing service and continuity of supply to customers and achieving the highest possible turnover. It is traditional business practice in this industry to insure most accounts and notes receivable against uncollectibility for the majority of the amount owed. The Company generally does not provide extended payment terms to its customers. No single customer accounts for 10% or more of the Company's consolidated lumber and building products revenues. The Company's lumber and building products sales in fiscal year 2000 accounted for approximately 20% of the total market volume in the Netherlands. That share is similar to the market share of its largest competitor, Pont-Eecen N.V., which was formed in the recent merger of Universal's former two largest competitors Pont-Meyer N.V. and Houtgroep Eecen Nederland N.V. Ten additional competitors accounted for approximately 30% of the market share in this period, and the balance was held by approximately 200 smaller competitors. The primary factors of competition are quality and price, product range, and speed and reliability of logistic systems. The Company believes that its full geographical market coverage, its automated inventory control and billing system, and its efficient logistics give it a competitive advantage in the Netherlands. The Company's share of the highly fragmented Belgian lumber and building products market was approximately 3% in fiscal year 2000. For a discussion of recent developments and trends in, and factors that may affect, the Company's lumber and building products business, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." E. Employees The Company employed over 32,000 employees throughout the world during the fiscal year ended June 30, 2000. This figure is estimated because the majority of the personnel are seasonal employees. Universal believes that in the United States approximately 950 of the non- salaried employees of its consolidated tobacco subsidiaries are represented by unions. Most of these are seasonal employees. The Company believes that its labor relations have been good. F. Research and Development No material amounts were expended for research and development during the fiscal years ended June 30, 2000, 1999, and 1998. G. Patents, etc. The Company holds no material patents, licenses, franchises, or concessions. H. Government Regulation, Environmental Matters and Other Matters The Company's business is subject to extensive governmental regulation in the United States and in foreign jurisdictions where the Company conducts business. Such regulation includes, but is not limited to, matters relating to environmental protection. To date, governmental provisions regulating the discharge of material into the environment have not had a material effect upon the capital expenditures, earnings, or competitive position of the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Affect Future Results" for a discussion of government regulation, environmental compliance, and other factors that may affect the Company's business. ITEM 2. PROPERTIES Universal owns the land and building located at 1501 North Hamilton Street in Richmond, Virginia, where it is headquartered. The building contains approximately 83,000 square feet of floor space. The Company also owns three smaller office buildings located on the block adjacent to the Company's headquarters. These buildings contain in the aggregate approximately 18,500 square feet of floor space. In its domestic tobacco processing operations, Universal currently owns and operates four large, high volume plants that have the capacity to thresh, separate, grade, and redry tobacco. Two of these plants are located in North Carolina (Henderson and Wilson), one plant is in Danville, Virginia, and one plant is in Lexington, Kentucky. In fiscal year 2000, the Company closed one processing plant in Rocky Mount, North Carolina, that had been severely damaged in floods associated with Hurricane Floyd. The reduction in the Company's domestic processing capacity reflects the decrease in U.S. tobacco crops due to, among other things, declining U.S. cigarette consumption, declining exports of U.S. tobacco, and increased amounts of U.S. tobacco held by the stabilization cooperatives that is part of the current worldwide oversupply of tobacco. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." 6 The Company owns processing facilities in the following foreign countries: two processing plants in each of Brazil, Italy, Malawi, and Poland and one processing plant in each of Canada, Hungary, the Netherlands, Tanzania and Zimbabwe. In addition, the Company owns interests in a processing plant in each of Guatemala and Mexico and has access to processing plants in each of Argentina, India, the Philippines, the People's Republic of China, Uganda, and Zambia. Socotab, L.L.C., a joint venture in which Universal owns a minority interest, owns two oriental tobacco processing plants in Turkey, one in Greece, one in Macedonia, and a storage complex with limited processing capabilities. In addition, Socotab, L.L.C. owns minority interests in two processing plants in Bulgaria. The facilities described above are engaged primarily in processing tobacco used by manufacturers in the production of cigarettes. In addition, Universal operates plants that process tobacco used in making cigar and smokeless products in Pennsylvania, Virginia, the Dominican Republic, Colombia, Germany, Indonesia, and Brazil. Universal also owns or leases packaging stations and warehouse space in the tobacco-growing states and abroad. In fiscal year 2000, the Company closed down its remaining domestic extruder plants (baling operations) in Lumberton and Rocky Mount, North Carolina, and in Lexington and Bowling Green, Kentucky in response to increased use of farmer bales in the U.S. flue-cured market and declining U.S. tobacco production volumes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Information Regarding Trends and Management's Actions." The Company believes that the properties currently utilized in its tobacco operations are maintained in good operating condition currently and are suitable and adequate for their purposes at the Company's current sales levels. The facilities owned by the Company are not subject to indebtedness. The Company's agri-products subsidiaries own and operate a tea blending plant in the Netherlands; a tea warehouse and office in Sri Lanka; a bean processing plant in Park Rapids, Minnesota; and small grain processing facilities in Delamere, North Dakota and Zevenbergen, the Netherlands. Sunflower seed processing plants are also owned and operated in Lubbock, Texas; Fargo, North Dakota; and Colby, Kansas. The latter facility is financed in part through a governmental industrial development authority. The Company has leased agri- products trading facilities around the world, including locations in the United States, United Kingdom, Egypt, Indonesia, Kenya, Canada, Poland, Russia, and Malawi. The lumber and building products business owns or leases 44 sales outlets and/or distribution facilities in the Netherlands and six facilities in Belgium. Most of these locations are owned. In the Netherlands, the Company also owns a softwood facility for large scale sawing, planing and fingerjointing, and a manufacturing facility for building components. ITEM 3. LEGAL PROCEEDINGS None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the quarter ended June 30, 2000, there were no matters submitted to a vote of security holders. 7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Company's Common Stock is traded on the New York Stock Exchange ("NYSE") under the symbol "UVV." The following table sets forth the high and low sales prices per share of the Common Stock on the NYSE Composite Tape, based upon published financial sources, and the dividends declared on each share of Common Stock for the quarter indicated. First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- 2000 Cash dividends declared: $ .30 $ .31 $ . 31 $ .31 Market price range: High 31.00 26.50 23.94 24.81 Low 25.13 20.75 13.56 16.00 1999 Cash dividends declared: $ .28 $ .30 $ .30 $ .30 Market price range: High 38.75 38.06 34.69 28.81 Low 31.50 32.94 25.56 23.88 The Company's current dividend policy anticipates the payment of quarterly dividends in the future. The declaration and payment of dividends to holders of Common Stock will be at the discretion of the Board of Directors and will be dependent upon the future earnings, financial condition, and capital requirements of the Company. At September 15, 2000, there were 2,882 holders of record of the registrant's Common Stock. 8 ITEM 6. SELECTED FINANCIAL DATA Five-Year Comparison of Selected Financial Data For Five Years Ended June 30, 2000
FOR THE YEARS ENDED JUNE 30 --------------------------- 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- (in thousands except per share data, ratios and number of shareholders) Summary of Operations Sales and other operating revenues $ 3,401,969 $ 4,004,903 $ 4,287,204 $ 4,112,675 $ 3,570,228 Income before extraordinary item 113,805 127,276 141,258 100,873 71,350 Net income $ 113,805 $ 127,276 $ 141,258 $ 100,873 $ 72,246 Return on beginning common shareholders' equity 21.1% 23.2% 30.1% 24.2% 18.5% Per common share - Basic: Income before extraordinary item $ 3.77 $ 3.81 $ 4.01 $ 2.88 $ 2.04 Net income $ 3.77 $ 3.81 $ 4.01 $ 2.88 $ 2.06 Per common share - Diluted: Income before extraordinary item $ 3.77 $ 3.80 $ 3.99 $ 2.87 $ 2.03 Net income $ 3.77 $ 3.80 $ 3.99 $ 2.87 $ 2.05 Financial Position at Year End Current ratio 1.23 1.30 1.31 1.32 1.29 Total assets $ 1,748,104 $ 1,824,361 $ 1,998,502 $ 1,957,330 $ 1,889,513 Long-term obligations 223,262 221,545 244,080 273,055 309,543 Working capital 204,916 271,825 328,768 347,542 299,778 Shareholders' equity $ 497,779 $ 539,036 $ 547,867 $ 469,593 $ 417,305 General Ratio of earnings to fixed charges 4.13 4.44 4.57 3.63 2.79 Number of common shareholders 2,749 2,951 3,049 3,271 3,420 Weighted average common shares outstanding - Basic 30,199 33,437 35,190 35,076 35,038 Weighted average common shares outstanding - Diluted 30,205 33,477 35,388 35,207 35,901 Dividends per common share $ 1.23 $ 1.18 $ 1.11 $ 1.05 $ 1.02 Book value per common share $ 16.48 $ 16.12 $ 15.57 $ 13.39 $ 11.90
All fiscal years have been restated to conform to Statement of Financial Accounting Standard No. 128 "Earnings per share". Fiscal year 2000 includes a $11 million ($7 million, net of tax) charge for restructuring. Fiscal year 1998 includes a $16.7 million ($10.9 million, net of tax) gain on the sale of an investment. 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY & CAPITAL RESOURCES During the five years since fiscal year 1995, Universal Corporation has reduced its total debt from a peak of about $968 million at the end of fiscal year 1995 to $701 million as of June 30, 2000. During those five years, the Company's cash flow from operating activities aggregated about $790 million, averaging over $155 million annually. Using that cash, it funded capital expenditures and acquisitions of $381 million; share repurchases of $212 million; and dividends of about $187 million. During fiscal year 2000, working capital was reduced by about $67 million to $205 million, and the current ratio fell from 1.3 to 1.23. The primary reason for the reduction is the reclassification of $120 million of maturing long-term debt to current liabilities. Although inventories, primarily tobacco, declined by about $49 million because of lower dark tobacco inventories, that decline was offset by the decrease in funding for those inventories and thus did not reduce net working capital. The Company estimates that its inventories of flue-cured and burley tobaccos that were not committed to customers as of June 30, 2000, were approximately 23 million kilos. Management does not consider these levels excessive. Management believes that the Company has adequate resources available to meet its needs, which are predominantly short term in nature and relate to working capital required for financing tobacco crop purchases. Working capital needs are seasonal within each geographical region. Generally, the peak need of domestic tobacco operations occurs in the second fiscal quarter. Foreign tobacco operations tend to have higher requirements during the remainder of the year. The geographical dispersion and the timing of working capital needs permit Universal to predict its general level of cash requirements. Each geographic area follows the cycle of buying, processing, and shipping of the tobacco crop. The timing of individual customer shipping requirements may change the level or the duration of crop financing. The working capital needs of agri-products operations fluctuate during the year, depending on the product, the country of origin, and the Company's inventory position; however, the total working capital requirements of agri-products remain relatively stable due to offsetting seasonal patterns. Working capital needs of lumber and building products operations in Europe follow a pattern similar to that of the construction industry, where the third quarter of the fiscal year is typically sluggish due to winter weather and the holiday season. The Company finances its working capital needs with short-term lines of credit, customer advances, and trade payables. As of June 30, 2000, Universal and its affiliates had approximately $1.2 billion in uncommitted lines of credit, of which about $800 million were unused and available to support seasonal working capital needs. 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 has been used as support for Universal's commercial paper program, which provides flexibility in the Company's short-term borrowings. In August 2000, the Company filed a registration statement on Form S-3 to register $400 million of debt securities, which could be issued as short-term or long-term debt. Universal's long-term debt, at about $223 million, changed little during the year ended June 30, 2000. However, the components changed significantly. In a public offering on February 16, 2000, Universal issued $120 million of 8.5% Notes due February 2003 (the "Notes"). The proceeds of the issue were used to reduce short-term bank debt and commercial paper in anticipation of the pending maturity of the $100 million in 9.25% medium-term notes due February 2001. The maturing debt was reclassified to current liabilities. Although Universal's total debt declined during the year, its total debt as a percentage of total capitalization (including deferred taxes and minority interest) increased somewhat, from about 55% to 56%. The effect of the decline in total debt was offset by three main factors: (1) larger foreign currency translation adjustments, primarily related to the lumber operations in Holland, were recorded as the U.S. dollar strengthened during the year; (2) share repurchases and dividends slightly exceeded net income for the year; and (3) deferred tax liabilities were reclassified to current taxes payable due to a sale of a joint venture interest and dividends received from offshore operations. 10 Upon issuance of the Notes, the Company entered into interest rate swaps in which it receives a fixed rate of interest and pays a floating rate based on LIBOR. The effective interest rate payable by the Company at June 30, 2000, was 7.67%. The notional amount, maturity, and payment dates of the interest rate swaps match those of the Notes. At June 30, 2000, the fair value of the swaps was immaterial. The differential to be paid or received as interest rates change is accrued and recognized as an adjustment to interest expense. Management does not expect that the adoption of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," with respect to these swaps will materially affect the consolidated financial position or results of operations. The Company's capital expenditures are generally limited to those that add value to the customer, replace obsolete equipment, increase efficiency, or position it for future growth. Universal's capital expenditures were approximately $61 million in fiscal year 2000, down by about $8 million, reflecting the completion of African projects in fiscal year 1999. For fiscal year 2001, management expects its capital expenditures to remain at or below the levels of fiscal year 2000. At June 30, 2000, the Company had no material commitments for capital expenditures. In December 1999, Universal's Board of Directors approved the expansion of its share purchase program to permit the purchase of up to $300 million of the common stock of the Company. The purchases are carried out from time to time on the open market or in privately negotiated transactions at prices not exceeding prevailing market prices. The purchases have been and are expected to be funded primarily from operating cash flow of the Company. At June 30, 2000, Universal had approximately 28.1 million common shares outstanding and had purchased approximately 8 million shares of its common stock for $212 million pursuant to the program. Management believes that its financial resources are adequate to support its capital needs. Any excess cash flow from operations after dividends, capital expenditures, and long-term debt payments will be available to reduce short-term debt, fund expansion, purchase the Company's stock, or otherwise enhance shareholder value. RESULTS OF OPERATIONS Fiscal Year 2000 Compared to 1999 Sales and other operating revenues' for fiscal year 2000 declined $603 million or 15% to $3.4 billion compared to last year. Lower tobacco revenues accounted for a decrease of $572 million or over 95% of the total decline. The reduced level of tobacco sales was due to smaller crops and volumes handled in the United States and Africa. Agri-products revenues were down $27 million or 5% on sharply reduced operations due to adverse market conditions for tea and sunflower seeds. Lumber and building products revenues were adversely affected by the strength of the U.S. dollar, which appreciated, on average, approximately 10% against the Dutch guilder during the year. Segment operating income as disclosed in Note 10 of `Notes to Consolidated Financial Statements' was $264 million in 2000 compared to $282 million in 1999, a decrease of $18 million. Tobacco operating profits in fiscal year 2000 were $223 million and accounted for approximately $17 million of the total decline. Approximately $11 million of the decline was due to the restructuring charge for domestic tobacco operations that was recorded in the fourth quarter. The volume of tobacco that Universal purchased and processed in the United States declined significantly as a result of much smaller U.S. flue-cured and burley crops. Total U.S. flue-cured and burley marketings decreased by 14% compared to the previous year. On the other hand, the Company's aggregate volumes of flue-cured and burley tobaccos handled from markets outside the United States increased for the year, led by Brazil, which had a large flue-cured crop. African volumes were lower due to smaller crops in Zimbabwe and Tanzania. Dark tobacco volumes were adversely affected by delayed shipments from Indonesia and the Dominican Republic and by the lower quality of Indonesian wrapper and binder tobaccos. In addition, the Company's oriental tobacco joint venture experienced very favorable shipment timing. Despite the continued impact of a strong U.S. dollar, operating profits of lumber and building products improved by 7%, to $26 million on higher volumes. That improvement was more than offset by a decline in agri- products to $14 million from $17.5 million last year. 11 The agri-products decrease can be attributed to the adverse conditions in world markets for tea and severe price competition in confectionery sunflower seeds from Argentina and China. 'Selling, general and administrative expenses' for fiscal year 2000 were down slightly to $353 million, primarily reflecting the lower volume of tobacco handled in the fiscal year. In June 2000, the Company adopted a restructuring plan for its U.S. tobacco operations. The plan included the consolidation of certain domestic tobacco processing facilities and resulted in $11 million of restructuring costs. The tobacco dealer industry in the United States continues to go through significant changes due to sharply reduced U. S. crops for which prices are not competitive in the world market. The restructuring charge included approximately $7 million of severance costs related to 108 employees, and $4 million related to assets that will no longer be utilized. The severance costs will be funded by cash provided by operations. As of June 30, 2000, total cash payments of approximately $200,000 had been made to 46 employees. A significant portion of the remaining severance payments will be made in fiscal year 2001. The plan is expected to save approximately $5 million per year, related primarily to reduced total compensation cost. Despite a climate of rising rates, 'Interest expense' was comparable year to year due to a reduction in the levels of amounts borrowed. The Company's consolidated income tax rate was approximately the same as last year's rate. The rate is affected by a number of factors, including but not limited to: the mix of domestic and foreign earnings, subsidiary local tax rates, the repatriation of foreign earnings, and the Company's ability to utilize foreign tax credits. Fiscal Year 1999 Compared to 1998 'Sales and other operating revenues' in fiscal year 1999 were $4.0 billion compared to $4.3 billion in 1998, a drop of $282 million or almost 7%. A decline in tobacco revenues of almost $250 million was due to a combination of lower prices, lower volumes and the Company's oriental leaf tobacco business being conducted by a minority-held joint venture in fiscal year 1999. Lumber and building products revenues were down slightly, less than 1% to $548 million, while a decline of $31 million in agri-products revenues reflected primarily lower volumes of tea. 'Operating income' in fiscal year 1999 was $255 million compared to $278 million in fiscal year 1998, a decline of almost 9%. Tobacco operating profits were down $31 million or 12% in fiscal year 1999. Oversupply of tobacco leaf and unsettled world market conditions for tobacco created a difficult operating environment in 1999. Tobacco results suffered due to this imbalance and the adverse effects of weather in certain areas of the world, quality problems in Argentina, shipment delays in the Company's oriental tobacco joint venture, and lower dark air-cured tobacco volumes. Lumber and building products operating profits were $24 million in fiscal year 1999, an increase of $4 million compared to the prior year. Improved market conditions and higher prices for plywood, softwood and hardwood had a positive impact on results for fiscal year 1999. Agri-products operating profits in fiscal year 1999 were down slightly due to the Company's sale of an investment in a spice joint venture in fiscal year 1998, which generated a gain of $17 million before taxes. On a comparable basis, excluding the spice operations in fiscal year 1998, agri-product's operating income would have been slightly higher in fiscal 1999. 'Selling, general and administrative expenses' were down 3% to $356 million in 1999 primarily due to the reduced levels of tobacco shipments. The reduction in interest expense in fiscal year 1999 reflects lower interest rates and reduced borrowing levels due to lower tobacco prices. In fiscal year 1999, the Company's consolidated income tax rate was almost 36%. The reduction in the effective tax rate compared to fiscal year 1998 was due to the mix of foreign and domestic earnings plus the realization of tax benefits. 12 OTHER INFORMATION REGARDING TRENDS AND MANAGEMENT'S ACTIONS World markets for flue-cured and burley tobacco are generally oversupplied. Uncommitted worldwide flue-cured and burley inventories have been trending upward since mid-1997, but these uncommitted stocks are generally higher priced tobacco, and despite sharp reductions in U.S. crops, the U. S. stabilization cooperatives continue to hold a large portion of the excess. The increases in uncommitted stocks have occurred as decreases in production of flue-cured and burley tobacco since 1997 by exporting countries did not keep pace with declining cigarette production. However, there are indications that the increases in these inventories outside of the United States will slow or that the inventories may begin to decline in the near term. Although large uncommitted inventories continue to be held by dealers and the U.S. cooperatives, world flue-cured and burley markets are in better balance than last year due to smaller crops, and to recovering demand. Management expects world flue-cured and burley crop sizes to decline again in 2000 and 2001. Demand for leaf and manufactured tobacco products appears to be strengthening in Asia in concert with improving economies in much of that region, and in Russia and Eastern Europe. An increase in demand for tobacco in these areas and smaller crops could help reduce the surplus leaf stocks that have been overhanging the market. While cigarette sales continue to decline in the United States, the rate is expected to be less than half of last year's reported 9 percent. However, the potential impact of future price and tax increases, as well as the uncertain outcome of pending litigation against cigarette manufacturers, makes it difficult to predict the outlook for U. S. cigarette sales. The Company has a significant presence in the U.S. market, where the outlook for tobacco production is uncertain. For a number of years, U.S. leaf has not been price competitive in world markets. The situation has reduced exports, and that reduction, combined with declining purchases of U.S. manufacturers and the buildup of leaf inventories in the U.S. stabilization cooperatives, has adversely affected the amount of U.S. tobacco that can be produced and sold in the United States. Domestic leaf purchases appear likely to continue to decline because of lower cigarette consumption. If not corrected through federal tobacco program reforms and reduced support prices, the competitive position of U.S. leaf is unlikely to improve. As a result, foreign manufacturers will likely continue to shift business to other tobacco producing areas, such as Brazil, Zimbabwe and Malawi, where Universal also has operations. The Company has responded to the decrease in demand for, and production of, U.S. tobacco by closing certain plants, consolidating operations and reducing personnel. Despite declines at the end of the period, worldwide cigarette production increased, on average, about 1% per year for the 10 years that ended in 1998. The American-blend cigarette consumption has been the fastest growing segment with multinational manufacturers expanding their market share, and it is expected to continue to increase as a percent of world tobacco consumption. Although management believes that this bodes well for the long-term viability of the tobacco leaf industry, on a year-to-year basis, the Company is susceptible to fluctuations in demand as manufacturers adjust inventories or respond to the cigarette market. Although cigar consumption is still growing in the United States and Europe, the rate of growth continues to be down significantly from levels experienced in recent boom years. The possible effects of regulatory factors and industry litigation, particularly in the United States, are more fully described in "Factors That May Affect Future Results" below. An important trend in the tobacco industry has been consolidation among manufacturers and among leaf tobacco merchants. This trend is expected to continue as further privatization of state monopolies occurs, providing opportunities for acquisitions by international manufacturers. This concentration should intensify the competition for market share within the leaf tobacco industry. A key success factor for leaf dealers in the future will be to provide customers with the quality of leaf and the level of service they desire at the lowest cost possible. Universal's consolidated income tax rate for the current year is 36%. The tax rate is affected by a number of factors, including but not limited to: the mix of domestic and foreign earnings and investments, subsidiary tax rates, repatriation of foreign earnings 13 and the ability to utilize foreign tax credits. In recent years, the Company's domestic income has been declining while foreign income has been increasing. The effective rate of tax on the foreign income has been rising as well.The continuation of this trend may result in higher consolidated income tax rates for the Company in the future. In the Company's non-tobacco businesses, construction activity in the Netherlands continues at a high level; however the strength of the U.S. dollar, if it is sustained over the year, could reduce the performance of the lumber and building products segment. FACTORS THAT MAY AFFECT FUTURE RESULTS The foregoing discussion contains certain forward-looking statements, which may be identified by phrases such as "the Company expects" or "management believes" or words of similar effect. In addition, the Company may publish, from time to time, forward-looking statements relating to such matters as anticipated financial performance, business prospects and similar matters. The following important factors, among other things, in some cases have affected, and in the future could affect, the Company's actual results and could cause the Company's actual results for a fiscal year and any interim period to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Company. The Company assumes no duty to update any of the statements in this report. Tobacco Business - ---------------- Operating Factors Universal's financial results are affected by a number of factors that directly or indirectly impact the tobacco operations of the Company's business. Operating factors that may affect the Company's results of operations include: Competition; Reliance on Significant Customers The leaf tobacco industry is highly competitive. Competition among leaf tobacco merchants is based primarily on the price charged for products and services as well as the firm's ability to meet customer specifications in the buying, processing and financing of tobacco. In addition, there is competition in all countries to buy the available tobacco. There are three major global competitors in the leaf tobacco industry, and they are dependent upon a few large tobacco manufacturing customers. The number of manufacturers has declined in recent years due to consolidation. The loss of, or a substantial reduction in the services provided to, any large or significant customer would have a material adverse effect on the Company's results of operations. Market Balance Universal's financial results can be significantly affected by changes in the overall balance of worldwide supply and demand for leaf tobacco. Customers purchase tobacco based upon their expectations of future requirements, and those expectations can change from time to time depending upon internal and external factors affecting their business. Trends in the global consumption of cigarettes, such as the growth in popularity of American-blend cigarettes, as well as trends in sales of cigars and other tobacco products, influence manufacturers' expectations and thus their demand for leaf tobacco. The total supply of tobacco at any given time is a function of current tobacco production and the volumes of uncommitted stocks of processed tobacco from prior years' production. Production of tobacco in a given year may be significantly affected by the amount of tobacco planted by farmers throughout the world, fluctuations in the weather in geographically dispersed regions, and crop disease. Any material imbalance in the supply and demand for tobacco may impact the Company's results of operations. Methods of Purchasing Tobacco The Company purchases leaf tobacco from farmers, growers and other suppliers through public auction and privately negotiated contract purchases. In a number of countries, including Brazil, Guatemala, Hungary, Italy, Mexico and Tanzania, where the Company contracts directly with and provides financing to tobacco farmers, in some cases before harvest, the Company 14 takes the risk that the tobacco will be delivered and that the delivered quality and quantity will meet market requirements. Company affiliates also have dark tobacco growing operations in Indonesia. In the United States, several domestic manufacturers have initiated experimental programs to purchase tobacco directly from farmers, rather than through leaf merchants at the tobacco auctions. In the event that Universal's domestic customers for U.S. leaf were to buy all their tobacco directly from the farmers, the Company's revenues would be substantially reduced. However, assuming that the Company continues to process a similar volume of tobacco, management believes that the effect on the Company's results of operations would not be material. Timing of Customer Shipments The Company recognizes sales and revenue from tobacco operations at the time that title to the tobacco and risk of loss passes to the customer. Individual shipments may be large and since the customer typically specifies shipping dates, the Company's comparative financial results may vary significantly between reporting periods. Governmental Factors The tobacco business is heavily regulated by federal, state and local governments in the United States and by foreign governments in many jurisdictions where the Company operates. Governmental factors that may affect the Company's results of operations include: Government Efforts to Reduce Tobacco Consumption The U.S. federal and certain state governments have taken or proposed actions that may have the effect of reducing U.S. consumption of tobacco products. These activities have included: (1) the U.S. Environmental Protection Agency's decision to classify environmental tobacco smoke as a "Group A" (known human) carcinogen, which action has been ruled unlawful by a Federal District Court decision that has been appealed; (2) restrictions on the use of tobacco products in public places and places of employment including a proposal by the U.S. Occupational Safety and Health Administration to severely restrict smoking in the work place; (3) proposals by the U.S. Food and Drug Administration ("FDA") to regulate nicotine as a drug and sharply restrict cigarette advertising and promotion, recently determined by the U. S. Supreme Court to be outside the jurisdiction of the FDA; (4) proposals to increase the U.S. and state excise taxes on cigarettes; and (5) the policy of the U.S. government to link certain federal grants to the enforcement of state laws restricting the sale of tobacco products. In addition, several bills have been introduced in previous sessions of Congress that, if they had been enacted into law, would have settled certain lawsuits filed against tobacco manufacturers and limited or capped damages in future lawsuits; provided for payments by the manufacturers to federal and state governments; imposed further restrictions on the sale, advertising and promotion of tobacco products; and imposed regulatory frameworks on tobacco manufacturers operating in the United States. Numerous other legislative and regulatory anti- smoking measures have also been proposed at the federal, state and local levels. In addition, a number of foreign governments have also taken or proposed steps to restrict or prohibit cigarette advertising and promotion, to increase taxes on cigarettes and to discourage cigarette consumption. In some cases, such restrictions are more onerous than those proposed or in effect in the United States. The Company cannot predict the extent to which government efforts to reduce tobacco consumption might affect its business. A significant decrease in worldwide tobacco consumption brought about by existing or future governmental laws and regulations would reduce demand for the Company's products and services and could have a material adverse effect on the Company's results of operations. Political Uncertainties in Foreign Tobacco Operations The Company's international operations are subject to uncertainties and risks relating to the political stability of certain foreign governments, principally in developing countries and emerging markets, and to the effects of changes in the trade policies and 15 economic regulations of foreign governments. These uncertainties and risks include the effects of war, insurrection, expropriation or nationalization of assets, undeveloped or antiquated commercial laws, subsidies for local tobacco growers and companies, issuance of licenses to conduct business in foreign jurisdictions, import and export restrictions, the imposition of excise and other taxes on tobacco, monetary and exchange controls, inflationary economies, and restrictions on repatriation of earnings or proceeds from liquidated assets of foreign subsidiaries. In the past, the Company has experienced significant year-to-year fluctuations in earnings due to changes in the Brazilian government's economic policies. The Company has substantial capital investments in South America and Africa and the performance of its operations in these regions can materially affect the Company's earnings from tobacco operations. For example, the Company has significant operations and assets in Zimbabwe, which is currently experiencing political and economic unrest. Although the Company does not expect any significant impact on fiscal year 2001 earnings, if the political situation in Zimbabwe were to deteriorate significantly, the Company's ability to recover its assets there could be impaired. The Company'sequity in its net assets of subsidiaries in Zimbabwe was $36 million at June 30, 2000. To the extent that the Company could not replace any lost volumes of tobacco with tobacco from other sources, the Company's results of operations could suffer. United States Trade Policies The U.S. tobacco price support system is an industry-funded federal program that is administered by the U.S. Department of Agriculture. The effect of the price support system has been to increase the cost of domestic tobacco relative to most foreign tobacco, resulting in a decline in exports of domestic tobacco. In 1995, Congress repealed certain domestic content legislation that had required that all domestically manufactured cigarettes contain at least 75% domestically grown tobacco and replaced it with a less restrictive tariff rate import quota system, which was also designed to assist domestic tobacco growers by limiting imports. It is not possible to predict the extent to which future trade policies or other governmental activities might affect the Company's business. Tax Matters The Company, through its subsidiaries, is subject to the tax laws of many jurisdictions, and from time to time contests assessments of taxes due. Changes in tax laws or the interpretation of tax laws can affect the Company's earnings as can the resolution of various pending and contested tax issues. The consolidated income tax rate is affected by a number of factors, including but not limited to: the mix of domestic and foreign earnings and investments, subsidiary tax rates, repatriation of foreign earnings and the ability to utilize foreign tax credits. Health Issues; Public Sentiment; Industry Litigation Reports and speculation with respect to the alleged harmful physical effects of cigarette smoking have been publicized for many years and, together with decreased social acceptance of smoking and increased pressure from anti-smoking groups, have had an ongoing adverse effect on sales of tobacco products, particularly in the United States. A significant decrease in global sales of tobacco products brought about by health concerns, decreased social acceptance or other factors would reduce demand for the Company's products and services and could have a material adverse effect on the Company's results of operations. During the past few years, certain U.S. tobacco product manufacturers entered into agreements with states and various U.S. jurisdictions settling asserted and unasserted healthcare cost recovery and other claims. The settlements provide for billions of dollars in annual payments from those manufacturers and place numerous restrictions on their conduct of business operations, including restrictions on the advertising and marketing of cigarettes, which have reduced tobacco consumption and, therefore, demand for the Company's products and services in the United States. Further significant decreases in consumption of tobacco products could have a material adverse effect on the Company's operating results. 16 In September 1999, the U.S. government filed a lawsuit against tobacco product manufacturers to recover healthcare costs, similar to the suits settled by the states. In addition, there are numerous smoking and health cases filed by individual plaintiffs or on behalf of putative classes pending in the United States and other countries against tobacco product manufacturers. It is not possible to predict the outcome of such litigation. However, judgments or settlements in these cases could have a detrimental effect on the consumption of tobacco products and, therefore, could have a material adverse effect on the Company's operating results. Financial Factors Financial factors that may affect the Company's results of operations include: Extensions of Credit Although the Company's credit experience has been excellent and extensions of credit to customers are evaluated carefully, a significant delay in payment or a significant write-off of amounts due the Company could adversely affect its results. In addition, crop advances to farmers are generally secured by the farmer's agreement to deliver green tobacco; in the event of crop failure, recovery of advances could be delayed until deliveries of future crops. Funds held by subsidiaries are generally invested in local banks or loaned to other subsidiaries. To reduce credit risk, investment limits are established with each bank according to the Company's evaluation of credit standing. Fluctuations in Foreign Currency Exchange Rates The international tobacco trade generally is conducted in U.S. dollars, thereby limiting foreign exchange risk to that which is related to production costs and overhead in the source country. Because there is no forward foreign exchange market in many of the Company's major countries of tobacco origin, the Company manages its foreign exchange risk by matching funding for inventory purchases with the currency of sale and by minimizing the net investment in these countries. Interest Rates Interest rate risk in the Company's tobacco operations is limited because customers usually pre-finance purchases or pay market rates of interest for inventory purchased on their order. However, since interest expense is recorded as a period cost, the Company may experience earnings fluctuations on a short- term basis if customers delay shipments of tobacco. Non-Tobacco Business - -------------------- The Company's agri-products and lumber and building products businesses, which are based primarily in the United States and the Netherlands, do business in a number of foreign countries. These operations enter into forward exchange contracts to offset the effect of currency changes on firm purchase and sales commitments in foreign currencies (principally Euros, Dutch guilders, U.S. dollars, German Marks, Swedish Kronas, and pound sterling). The terms of currency contracts are generally from one to six months. This activity is not material. The Company's lumber and building products operations are based in the Netherlands, and their reported earnings are affected by the translation of the Dutch guilder into the U.S. dollar. This business is seasonal to the extent that winter weather may temporarily interrupt the operations of its customers in the building industry. The business is also subject to other normal market and operational risks associated with lumber operations centered in Europe, including economic conditions in the countries where the Company is located, the prices of lumber products, and related trends in the building and construction industry. The agri-products business is affected by operating and other factors that are similar to those that affect the Company's tobacco operations, including crop risks, market balance, and governmental factors such as political uncertainties in countries of crop origin. 17 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information required by this Item, to the extent applicable, is included in "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth elsewhere in this report. See also Note 1 to Consolidated Financial Statements for additional information regarding derivative financial instruments. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CONSOLIDATED STATEMENTS OF INCOME
Years Ended June 30 2000 1999 1998 (in thousands of dollars, except per share data) Sales and other operating revenues $ 3,401,969 $ 4,004,903 $4,287,204 Costs and expenses Cost of goods sold 2,803,957 3,394,419 3,644,100 Selling, general and administrative expenses 353,130 355,928 364,710 Restructuring costs 10,958 --------------------------------------------- Operating income 233,924 254,556 278,394 Equity in pretax earnings of unconsolidated affiliates 12,532 14,066 16,901 Gain on sale of investment 16,718 Interest expense 56,869 56,837 63,974 --------------------------------------------- Income before income taxes and other items 189,587 211,785 248,039 Income taxes 68,221 75,963 98,659 Minority interests 7,561 8,546 8,122 --------------------------------------------- Net income $ 113,805 $ 127,276 $ 141,258 - --------------------------------------------------------------------------------------------------------------------------- Net income: Per common share $3.77 $3.81 $4.01 Per diluted common share $3.77 $3.80 $3.99 - --------------------------------------------------------------------------------------------------------------------------- Basis for per-share calculations: Weighted average common shares outstanding 30,199 33,437 35,190 Dilutive effect of stock options 6 40 198 --------------------------------------------- Average common shares outstanding, assuming dilution 30,205 33,477 35,388 - ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes. 18 CONSOLIDATED BALANCE SHEETS
June30 2000 1999 (in thousands of dollars) ASSETS Current Cash and cash equivalents $ 61,395 $ 92,784 Accounts receivable 358,897 326,055 Advances to suppliers 52,383 72,455 Accounts receivable--unconsolidated affiliates 12,573 17,707 Inventories--at lower of cost or market: Tobacco 379,504 419,256 Lumber and building products 77,096 85,458 Agri-products 73,024 74,114 Other 33,068 33,218 Prepaid income taxes 9,283 20,993 Deferred income taxes 9,008 6,952 Other current assets 21,919 21,333 ------------------------------- Total current assets 1,088,150 1,170,325 Property, plant and equipment--at cost Land 27,377 29,743 Buildings 245,570 237,054 Machinery and equipment 505,323 491,201 ------------------------------- 778,270 757,998 Less accumulated depreciation 430,925 409,678 ------------------------------- 347,345 348,320 Other assets Goodwill 113,498 117,871 Other intangibles 17,145 20,950 Investments in unconsolidated affiliates 77,046 95,491 Deferred income taxes 33,606 1,238 Other noncurrent assets 71,314 70,166 ------------------------------- 312,609 305,716 ------------------------------- $1,748,104 $1,824,361 - -----------------------------------------------------------------------------------------------------------------
See accompanying notes. 19 CONSOLIDATED BALANCE SHEETS
June 30 2000 1999 (in thousands of dollars) LIABILITIES AND SHAREHOLDERS' EQUITY Current Notes payable and overdrafts $ 356,283 $ 497,399 Accounts payable 256,666 235,310 Accounts payable--unconsolidated affiliates 10,169 14,186 Customer advances and deposits 91,414 82,432 Accrued compensation 20,997 24,291 Income taxes payable 26,682 15,836 Current portion of long-term obligations 121,023 29,046 ------------------------- Total current liabilities 883,234 898,500 Long-term obligations 223,262 221,545 Postretirement benefits other than pensions 41,295 42,981 Other long-term liabilities 53,948 45,474 Deferred income taxes 11,749 40,436 Minority interests 36,837 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 28,146,697 shares (32,090,550 at June 30, 1999) 66,274 75,758 Retained earnings 499,490 510,123 Accumulated other comprehensive income (67,985) (46,845) ------------------------- Total shareholders' equity 497,779 539,036 ------------------------- $1,748,104 $1,824,361 - --------------------------------------------------------------------------------------------------------------------------------
See accompanying notes 20 CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30 2000 1999 1998 (in thousands of dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 113,805 $ 127,276 $ 141,258 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 44,182 46,158 43,616 Amortization 7,840 6,604 7,455 Translation loss, net 1,593 2,689 1,739 Restructuring costs 10,958 Deferred taxes (51,728) 13,986 14,439 Minority interests 7,561 8,546 8,122 Gain on sale of investment (16,718) Equity in net income of unconsolidated affiliates (8,248) (9,091) (10,102) Other (5,340) (3,655) 3,061 --------------------------------- 120,623 192,513 192,870 Changes in operating assets and liabilities net of effects from purchase of businesses: Accounts and notes receivable (30,910) 69,969 (54,189) Inventories and other assets 31,196 145,422 (15,434) Income taxes 22,556 (14,503) 1,248 Accounts payable and other accrued liabilities 34,368 (60,971) 8,872 --------------------------------- Net cash provided by operating activities 177,833 332,430 133,367 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (60,837) (69,154) (96,720) Investment in unconsolidated affiliates (41,114) Proceeds from sale of investments 32,063 29,065 Sales of property, plant and equipment and other 5,827 (8,683) 24 --------------------------------- Net cash used in investing activities (22,947) (77,837) (108,745) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance (repayment) of short-term debt, net (137,566) (87,638) 30,137 Repayment of long-term debt (29,920) (28,891) (30,241) Issuance of long-term debt 123,614 6,618 7,767 Dividends paid to minority shareholders (7,236) (1,876) (7,493) Issuance of common stock 1,010 2,268 4,328 Purchases of common stock (98,756) (93,026) (19,824) Dividends paid (37,077) (39,032) (38,390) --------------------------------- Net cash used in financing activities (185,931) (241,577) (53,716) --------------------------------- Effect of exchange rate changes on cash (344) (67) (141) --------------------------------- Net increase (decrease) in cash and cash equivalents (31,389) 12,949 (29,235) Cash and cash equivalents at beginning of year 92,784 79,835 109,070 CASH AND CASH EQUIVALENTS AT END OF YEAR --------------------------------- $ 61,395 $ 92,784 $ 79,835 - -------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL INFORMATION--CASH PAID: Interest $ 54,363 $ 57,387 $ 63,999 Income taxes, net of refunds $ 97,393 $ 85,033 $ 73,048 - --------------------------------------------------------------------------------------------------------------------------
See accompanying notes. 21 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YearsEnded June 30 2000 1999 1998 (in thousands of dollars) COMMON STOCK: Balance at beginning of year $ 75,758 $ 80,122 $ 77,040 Issuance of common stock and exercise of stock options 1,010 2,268 4,328 Purchase of common stock (10,494) (6,632) (1,246) --------------------------------------------------------------- Balance at end of year 66,274 75,758 80,122 --------------------------------------------------------------- RETAINED EARNINGS: Balance at beginning of year 510,123 508,137 424,298 Net income 113,805 $113,805 127,276 $127,276 141,258 $141,258 Cash dividends declared ($1.23 per share in 2000; $1.18 in 1999; $1.105 in 1998) (36,176) (38,896) (38,841) Cost of common shares retired in excess of stated capital amount (88,262) (86,394) (18,578) --------------------------------------------------------------- Balance at end of year 499,490 510,123 508,137 --------------------------------------------------------------- ACCUMULATED COMPREHENSIVE INCOME: Balance at beginning of year (46,845) (40,392) (31,745) Translation adjustments for the year (32,522) (32,522) (9,928) (9,928) (13,298) (13,298) Allocated income taxes 11,382 11,382 3,475 3,475 4,651 4,651 -------- -------- -------- Total comprehensive income $ 92,665 $120,823 $132,611 --------------------------------------------------------------- Balance at end of year (67,985) (46,845) (40,392) --------------------------------------------------------------- SHAREHOLDERS' EQUITY AT END OF YEAR $497,779 $539,036 $547,867 - ------------------------------------------------------------------------------------------------------------------------------- COMMON SHARES OUTSTANDING: (in thousands of shares) Balance at beginning of year 32,091 34,866 35,139 Issuance of common stock and exercise of stock options 620 108 269 Purchase of common stock (4,563) (2,883) (542) --------------------------------------------------------------- Balance at end of year 28,148 32,091 34,866 - -------------------------------------------------------------------------------------------------------------------------------
See accompanying notes. 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (All dollar amounts are in thousands, except as otherwise noted.) Note 1 Summary of Significant Accounting Policies Consolidation The financial statements include the accounts of all controlled domestic and foreign subsidiaries. All material intercompany items and transactions have been eliminated. The fiscal years of foreign subsidiaries generally end March 31 or April 30 to facilitate timely reporting. The Company uses the equity method of accounting for its investments in affiliates, which are owned 50% or less. Net Income per Share and Share Purchase The Company calculates earnings per share in accordance with Statement of Financial Accounting Standard No. 128, "Earnings per Share." The Company uses the weighted average number of common shares outstanding during each period to compute basic earnings per common share. Diluted earnings per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding. Dilutive potential common shares are outstanding dilutive stock options that are assumed to be exercised. Over the course of the past three years, the Board of Directors of the Company approved $300 million in stock purchase programs. The Company had purchased an aggregate of 7,987,714 shares at a total cost of $211,606 by June 30, 2000, and 3,425,161 shares at a cost of $112,850 by June 30, 1999. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Inventories Inventories of tobacco and agri-products are valued at the lower of specific cost or market. Lumber and building products inventory is valued at the lower of cost or market, with cost determined under the first-in, first-out (FIFO) method. All other inventories are valued principally at lower of average cost or market. Property, Plant and Equipment Depreciation of plant and equipment is based upon historical cost and the estimated useful lives of the assets. Depreciation of properties used in tobacco operations is calculated using both the straight line and declining balance methods, while lumber and building products and agri-products utilize the straight line method. Buildings include tobacco and agri-product processing and blending facilities, lumber outlets, offices and warehouses. Machinery and equipment represent processing and packing machinery and transportation, office and computer equipment. Estimated useful lives range as follows: buildings--15 to 40 years; processing and packing machinery--3 to 11 years; transportation equipment--3 to 10 years; and office and computer equipment--3 to 10 years. Goodwill and Other Intangibles Goodwill and other intangibles include principally the excess of the purchase price of acquired companies over the net assets. Goodwill and other intangibles are generally amortized using the straight-line method over periods not exceeding 40 years. Goodwill and other intangible assets are periodically reviewed for impairment, including a determination of whether events or circumstances have changed that may indicate that an impairment of value exists, based upon an assessment of future operations. Accumulated amortization at June 30, 2000 and 1999, was $50.5 and $42.1 million, respectively. Income Taxes The Company provides deferred income taxes on temporary differences arising principally from employee benefit accruals, depreciation, deferred compensation, undistributed earnings of unconsolidated affiliates, and undistributed earnings of foreign subsidiaries not permanently reinvested. At June 30, 2000, the cumulative amount of permanently reinvested earnings of foreign subsidiaries, on which no provision for U.S. income taxes had been made, was $107 million. Fair Values of Financial Instruments The fair values of the Company's long-term obligations have been estimated using discounted cash flow analyses based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount of all other assets and liabilities that qualify as financial instruments, approximates fair value. Derivative Financial Instruments Forward foreign currency exchange contracts are used by the Company in the management of certain foreign currency exposures. The Company does not enter into contracts for trading purposes. 23 Note 1 continued None of these contracts contain multiplier or leverage features. The Company enters into such contracts only with financial institutions of good standing and the total credit exposure related to non-performance by those institutions is not material to the operations of the Company. Realized and unrealized gains and losses on the Company's foreign currency contracts that are designated and effective as hedges are deferred and recognized as a component of the underlying transactions when they occur. Realized gains or losses from matured and terminated hedge contracts are recorded in other assets or liabilities until the underlying hedge transaction is consummated. Realized and unrealized gains or losses on hedge contracts relating to transactions that are not subsequently expected to occur are recognized in results currently. Contracts used to manage foreign currency risks are not material. Translation of Foreign Currencies The financial statements of foreign subsidiaries, for which the local currency is the functional currency, are translated into U.S. dollars using exchange rates in effect at period end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting from translation of financial statements are reflected as a separate component of comprehensive income. The financial statements of foreign subsidiaries, for which the U.S. dollar is the functional currency and which have certain transactions denominated in a local currency, are remeasured into U.S. dollars. The remeasurement of local currencies into U.S. dollars creates remeasurement adjustments that are included in net income. Exchange losses in 2000, 1999, and 1998 resulting from foreign currency transactions were $2.1, $4.8 and $3.0 million, respectively (including $1.6, $2.7 and $1.7 million resulting from remeasurement) and are included in the respective statements of income. Estimates and Assumptions The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Accounting Pronouncements In 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." The statement will require the Company to recognize all derivatives on the balance sheet at fair value. This statement is effective for the Company's fiscal year starting July 1, 2000, and is not expected to materially affect the consolidated financial position or results of operations. Reclassifications Certain amounts in prior years' statements have been reclassified to be reported on a consistent basis with the current year's presentation. Note 2 Restructuring In the fourth quarter of fiscal year 2000, plans were approved to reduce the Company's U.S. cost structure including the consolidation of tobacco processing facilities and a corresponding reduction in the number of employees. The consolidated statement of income includes an $11 million pretax charge related to the plans. The charge includes $7 million of severance costs related to 108 employee in purchasing, processing and sales. The non-severance portion of the charge was for the closure of processing and packing facilities. As of June 30, 2000, total cash payments of approximately $200 thousand had been made to 46 employees. A significant portion of the remaining severance payments will be made in fiscal year 2001. 24 Note 3 Income Taxes Income taxes consist of the following: YEARS ENDED JUNE 30, 2000 1999 1998 - --------------------------------------------------------------------- Current United States $ (1,904) $(8,096) $17,854 State and local 1,675 1,248 3,482 Foreign 104,347 68,511 59,350 ------------------------------------- 104,118 61,663 80,686 Deferred United States (12,592) 10,603 17,332 State and local 2,351 538 887 Foreign (25,656) 3,159 (246) ------------------------------------ (35,897) 14,300 17,973 - --------------------------------------------------------------------- Total $ 68,221 $75,963 $98,659 ===================================================================== A reconciliation of the statutory U.S. federal rate to the effective income tax rate is as follows: YEARS ENDED JUNE 30, 2000 1999 1998 - --------------------------------------------------------------------- Tax at statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal benefit 1.0 0.5 1.0 Income taxed at other than the U.S. rate 0.0 0.4 3.8 - --------------------------------------------------------------------- Total 36.0% 35.9% 39.8% ===================================================================== Significant components of deferred tax liabilities and assets were as follows: AT JUNE 30, 2000 1999 - ---------------------------------------------------------------- Liabilities Undistributed earnings $17,929 $45,916 Tax over book depreciation 13,324 10,603 Goodwill 11,211 9,254 All other 11,275 12,137 - ---------------------------------------------------------------- Total deferred tax liabilities $53,739 $77,910 - ---------------------------------------------------------------- Assets Employee benefit plans $17,839 $14,999 Foreign currency translation 30,359 19,147 Deferred compensation 8,595 6,272 Tax credits 10,493 0 All other 12,250 5,246 - ---------------------------------------------------------------- Total deferred tax assets $79,536 $45,664 ================================================================ The components of income before income taxes and other items consist of the following: YEARS ENDED JUNE 30, 2000 1999 1998 - ---------------------------------------------------------------- United States $(32,707) $ (3,758) $ 43,987 Foreign 222,294 215,543 204,052 - ---------------------------------------------------------------- Total $189,587 $211,785 $248,039 ================================================================ Note 4 Short-Term Credit Facilities The Company maintains lines of credit in the United States and in a number of foreign countries. Foreign borrowings are generally in the form of overdraft facilities at rates competitive in the countries in which the Company operates. Generally, each foreign line is available only for borrowings related to operations of a specific country. At June 30, 2000, unused, uncommitted lines of credit were approximately $800 million. The weighted average interest rate on short-term borrowings outstanding as of June 30, 2000 and 1999, was approximately 6.7% and 5.7%, respectively. 25 Note 5 Long-Term Obligations Long-term obligations consist of the following: AT JUNE 30, 2000 1999 - ----------------------------------------------------------------- 6.14% Senior notes payable in five annual installments from 1996 to August 2000 $ 20,000 $ 40,000 9.25% Medium-term notes due February 2001 100,000 100,000 6.5% Notes due February 2006 100,000 100,000 8.5% Notes due February 2003 120,000 Other notes due through 2004 at various interest rates 4,285 10,591 - ----------------------------------------------------------------- 344,285 250,591 Less current portion (121,023) (29,046) - ----------------------------------------------------------------- Long-term obligations $ 223,262 $221,545 ================================================================= The fair value of the Company's long-term obligations was approximately $214 million at June 30, 2000, and $223 million at June 30, 1999. Certain notes are denominated in local currencies of foreign subsidiaries. The Company maintains a $270 million revolving credit facility issued in two tranches of $180 million and $90 million. The facility is used to support short-term borrowings, including the issuance of commercial paper. Under its terms, each facility may be extended for an additional year on its anniversary date, December 16. In a public offering on February 16, 2000, Universal issued $120 million of 8.5% Notes due in February 2003. The proceeds of this issue were used to reduce short-term bank debt and commercial paper. Upon issuance of the Notes, the Company entered into interest rate swaps in which it receives fixed rate interest and pays a floating rate based on LIBOR. The effective interest rate at June 30, 2000, was 7.67%. The notional amount, maturity and payment dates of the interest rate swaps match those of the Notes. At June 30, 2000, the fair value of the swaps was immaterial. The differential to be paid or received as interest rates change is accrued and recognized as an adjustment to interest expense. It is not expected that the adoption of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," with respect to these swaps will materially affect the consolidated financial position or results of operations. Under certain of the debt agreements, the Company must meet financial covenants relating to minimum tangible net worth, working capital, and restrictions on the issuance of long-term debt. The Company was in compliance with all such covenants at June 30, 2000 and 1999. Maturity of long-term debt for the fiscal years succeeding June 30, 2000, are as follows:2001--$121,023; 2002--$2,522; 2003--$120,385; 2004--$355; 2005-- $0; 2006 and after--$100,000. In August 2000, the Company filed a registration statement on Form S-3 to register $400 million of debt securities, which could be issued as short-term or long-term debt. Note 6 Pension Plans and Postretirement Benefits The Company has several defined benefit pension plans covering United States and foreign salaried employees and certain other employee groups. These plans provide retirement benefits based primarily on employee compensation and years of service. The Company's funding policy for domestic plans is to make contributions currently to the extent deductible under existing tax laws and regulations, subject to the full-funding limits of the Employee Retirement Income Security Act of 1974. Foreign plans are funded in accordance with local practices. Domestic and foreign plan assets consist primarily of fixed income securities and equity investments. Prior service costs are amortized equally over the average remaining service period of employees. The Company provides postretirement health and life insurance benefits for eligible U.S. employees attaining specific age and service requirements. The health benefits are funded by the Company as the costs of the benefits are incurred and contain cost-sharing features such as deductibles and coinsurance. The Company funds the life insurance benefits with deposits to a retired life reserve account held by an insurance company. The Company reserves the right to amend or discontinue these benefits at any time. Assumptions used for financial reporting purposes to compute net benefit income or cost and benefit obligations, as well as the components of net periodic benefit income or cost are as follows: 26 Note 6 continued
Foreign Pension Benefits Domestic Pension Benefits Other Postretirement Benefits (APRIL 30 MEASUREMENT DATE) (MARCH 31 MEASUREMENT DATE) (MARCH 31 MEASUREMENT DATE) - ----------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 2000 1999 1998 2000 1999 1998 Assumptions: Discount rate, end of year 5.00% 5.00% 6.00% 7.50% 6.75% 6.75% 7.50% 6.75% 6.75% Rate of compensation increases, end of year 5.50% 5.50% 5.50% 5.00% 5.00% 5.50% 5.00% 5.00% 5.50% Expected long-term return on plan assets, during the year 5.00% 5.00% 6.00% 8.75% 8.75% 8.75% 4.30% 4.30% 4.30% Rate of increase in per-capita cost of covered health care benefits 9.00% 9.50% 9.50% Components of net periodic benefits Cost (Income): Service cost $ 3,425 $ 3,118 $ 3,192 $ 4,899 $ 4,483 $ 3,481 $ 1,045 $ 1,095 $ 766 Interest cost 5,748 6,052 6,025 9,644 8,872 8,004 2,679 2,651 2,861 Expected return on plan assets (4,942) (9,386) (5,903) (9,416) (8,545) (8,048) (171) (165) (165) Net amortization and deferral (1,884) 2,860 (438) 2,137 1,245 974 (3,059) (3,059) (3,059) - ----------------------------------------------------------------------------------------------------------------------------- Net periodic benefit cost $ 2,347 $ 2,644 $ 2,876 $ 7,264 $ 6,055 $ 4,411 $ 494 $ 522 $ 403 =============================================================================================================================
The following tables reconcile the changes in benefit obligations and plan assets in 2000 and 1999, and reconcile the funded status to prepaid or accrued cost at June 30, 2000 and 1999:
Foreign Pension Benefits Domestic Pension Benefits Other Postretirement Benefits (APRIL 30 MEASUREMENT DATE) (MARCH 31 MEASUREMENT DATE) (MARCH 31 MEASUREMENT DATE) 2000 1999 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Change in projected benefit obligation: Benefit obligation, beginning of year $111,174 $100,325 $146,446 $134,773 $40,914 $39,933 Service cost 3,425 3,118 4,899 4,483 1,045 1,095 Interest cost 5,748 6,052 9,644 8,872 2,679 2,651 Effect of discount rate change 11,687 (12,844) Foreign currency exchange rate changes (14,932) (2,407) Other 1,147 (2,281) (858) 5,338 (3,356) (646) Benefits paid (5,533) (5,320) (8,087) (7,020) (2,172) (2,119) - ----------------------------------------------------------------------------------------------------------------------------- Projected benefit obligation, end of year $101,029 $111,174 $139,200 $146,446 $39,110 $40,914 =============================================================================================================================
27 Note 6 continued
Foreign Pension Benefits Domestic Pension Benefits Other Postretirement Benefits (APRIL 30 MEASUREMENT DATE) (MARCH 31 MEASUREMENT DATE) (MARCH 31 MEASUREMENT DATE) 2000 1999 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Change in plan assets: Plan assets at fair value, beginning of year $106,307 $103,352 $122,987 $124,480 $ 4,493 $ 3,846 Actual return on plan assets 2,685 9,602 15,694 2,561 208 185 Employer contributions 4,015 2,780 4,128 2,966 2,192 2,581 Foreign currency exchange rate changes (13,861) (4,107) Benefits paid (5,533) (5,320) (8,087) (7,020) (2,172) (2,119) - ----------------------------------------------------------------------------------------------------------------------------- Plan assets at fair value, end of year $ 93,613 $106,307 $134,722 $122,987 $ 4,721 $ 4,493 ============================================================================================================================= Reconciliation of prepaid (accrued) cost: Funded status of the plans $ (7,416) $ (4,867) $(4,478) $(23,459) $(34,389) $(36,421) Contributions after measurement date 720 786 Unrecognized net transition (asset) obligation (1,656) (2,392) (253) (782) Unrecognized prior service cost 4,794 5,487 Unrecognized gain on plan amendment (3,763) (6,822) Unrecognized net (gain) loss 7,009 4,775 (4,645) 16,987 (3,143) 262 Additional minimum liability (4,835) (6,176) - ----------------------------------------------------------------------------------------------------------------------------- Prepaid (accrued) cost, end of year $ (2,063) $ (2,484) $(8,697) $ (7,157) $(41,295) $(42,981) =============================================================================================================================
Prepaid pension costs of $8.8 million and $6.9 million at June 30, 2000 and 1999 are included in other noncurrent assets; accrued pension costs of $19.6 million and $16.5 million were included in long-term liabilities at June 30, 2000 and 1999. The accumulated postretirement benefit obligation cost trend rate is assumed to decrease gradually from 9.0% in 2000 to 6.0% for fiscal year 2006. A one percentage point increase in the assumed health care cost trend would increase the accumulated benefit obligation by approximately $1.6 million and the aggregate of the service and interest cost components of the net periodic postretirement benefit expense for the fiscal year by approximately $129 thousand. A one percentage point decrease in the assumed health care cost trend would decrease the accumulated benefit obligation by approximately $1.4 million and the aggregate of the service and interest cost components of the net periodic postretirement benefit expense for the fiscal year by approximately $114 thousand. Amounts included in the table above, which are applicable to the Company's pension plans with benefit obligations in excess of plan assets are as follows: Foreign 2000 1999 - ------------------------------------------------------------------ Projected benefit obligation $ 9,819 $ 8,559 Accumulated benefit obligation 8,671 8,678 Fair value of plan assets 4,207 3,657 Domestic 2000 1999 - ------------------------------------------------------------------ Projected benefit obligation $23,715 $23,337 Accumulated benefit obligation 14,216 11,644 Fair value of plan assets 0 0 ================================================================== 28 Note 7 Share Purchase Rights Plan In 1999, the Company distributed as a dividend one preferred share purchase right for each outstanding share of common stock. Each right entitles the shareholder to purchase 1/200 of a share of Series A Junior Participating Preferred Stock ("Preferred Stock") at an exercise price of $110, subject to adjustment. The rights will become exercisable only if a person or group acquires or announces a tender offer for 15% or more of the Company's outstanding shares of common stock. Under certain circumstances, the Board of Directors may reduce this threshold percentage to not less than 10%. If a person or group acquires the threshold percentage of common stock, each right will entitle the holder, other than the acquiring party, to buy shares of common stock or Preferred Stock having a market value of twice the exercise price. If the Company is acquired in a merger or other business combination, each right will entitle the holder, other than the acquiring person, to purchase securities of the surviving company having a market value equal to twice the exercise price of the rights. Following the acquisition by any person of more than the threshold percentage of the Company's outstanding common stock but less than 50% of such shares, the Company may exchange one share of common stock or 1/200 of a share of Preferred Stock for each right (other than rights held by such person). Until the rights become exercisable, they may be redeemed by the Company at a price of one cent per right. The rights expire on February 13, 2009. Note 8 Executive Stock Plans The Company's 1989 Executive Stock Plan by its terms expired on June 30, 1998, and was replaced by the Company's 1997 Executive Stock Plan (together, the "Plans"). Under the Plans, officers, directors, and employees of the Company and its subsidiaries may receive grants and/or awards of common stock, restricted stock, incentive stock options, non-qualified stock options, and reload options. Reload options allow a participant to exercise an option and receive new options by exchanging previously acquired common stock for the shares received from the exercise. One new option may be granted for each share exchanged with an exercise price equivalent to the market price at the date of exchange. Accordingly, the issuance of reload options does not result in a greater number of shares potentially outstanding than that reflected in the grant of the original option. Up to 2 million shares of the Company's common stock may be issued under each of the Plans. Pursuant to the Plans, non-qualified and reload options have been granted to executives and key employees at an option price equal to the fair market value of a share of common stock on the date of grant. Options granted under the Company's plans become exercisable either one year or six months after the date of grant. Options that become exercisable six months after the date of grant qualify for reload options, which are also exercisable six months after the date of grant. Most options expire ten years after the date of grant. A summary of the Company's stock option activity and related information for the fiscal year ended June 30 follows:
2000 1999 1998 ------------------------- ------------------------ ----------------------- Average Average Average Exercise Exercise Exercise YEARS ENDED JUNE 30, Shares Price Shares Price Shares Price - --------------------------------------------------------------------------------------------------------------------------------- Outstanding, beginning of year 1,700,999 $35.85 1,792,804 $34.55 1,224,473 $25.86 Granted 1,591,500 22.43 265,630 32.79 1,239,978 38.10 Exercised (618,000) 18.69 (357,435) 27.05 (671,647) 25.27 Outstanding, end of year 2,674,499 31.83 1,700,999 35.85 1,792,804 34.55 Exercisable 2,329,999 32.89 1,666,230 36.00 1,534,783 34.42 Available for grant 3,018,969 4,612,569 4,872,599
Of those available for future grant: 2,920,279; 2,920,279; and 3,188,167 for 2000, 1999, and 1998, respectively, are reload options. 29 Note 8 continued The following table summarizes information concerning currently outstanding and exercisable options as of June 30, 2000:
Range of Exercise Prices, per Share $10 - $20 $ 20 - $30 $ 30 - $40 $40 - $50 - ----------------------------------------------------------------------------------------------------------------------------- For options outstanding: Number outstanding 4,842 1,152,423 1,401,077 116,157 Weighted average remaining contractual life 0.5 6.1 7.7 7.5 Weighted average exercise price, per share $ 11.06 $ 24.84 $ 36.96 $ 40.19 For options exercisable: Number exercisable 4,842 807,923 1,401,077 116,157 Weighted average exercise price, per share $ 11.06 $ 24.90 $ 36.96 $ 40.19
Certain potentially dilutive securities outstanding at June 30, 2000, 1999 and 1998, were not included in the computation of earnings per share, assuming dilution, since their exercise prices were greater than the average market price of the common shares during the period and, accordingly, their effect is antidilutive. These shares totaled 2.67 million at a weighted-average exercise price of $32.48 per share for 2000; 1.61 million shares at a weighted-average exercise price of $37.75 per share in 1999; and 900 thousand shares at a weighted-average exercise price of $40.90 per share in 1998. Effective in fiscal year 1997, the Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). As permitted under SFAS 123, the Company will continue to apply the Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its plans. If compensation expense for the Company's stock options issued in 2000, 1999 and 1998 had been determined based on the fair value method of accounting, as defined in SFAS 123, the Company's net income and earnings per basic and diluted share would have been reduced by approximately $2.0 million or $.07 per share in 2000; $2.0 million or $.06 per share in 1999; and $6.4 million or $.18 per share in 1998. These pro forma amounts may not be representative of future disclosures because the estimated fair value of the stock options is amortized to expense over the vesting period, and additional options may be granted in future years. The Black-Scholes option valuation model was used to estimate the fair value of the options granted in fiscal year 2000, 1999 and 1998. Such models include subjective input assumptions that can materially affect the fair value estimates. The model was developed for use in estimating the fair value of traded options that have no vesting restrictions and that are fully transferable. For example, the expected volatility is estimated based on the most recent historical period of time equal to the weighted average life of the options granted. The Plans have characteristics that differ from traded options. In management's opinion, such valuation models do not necessarily provide a reliable single measure of the fair value of its employee stock options. Principle assumptions used in applying the Black-Scholes model along with the results from the model were as follows: YEARS ENDED JUNE 30, 2000 1999 1998 - -------------------------------------------------------------------------- Assumptions: Risk-free interest rate 6.26% 5.72% 5.83% Expected life, in years 4.00 4.11 5.02 Expected volatility .324 .299 .298 Expected dividend yield 5.87% 4.22% 3.15% Results: Fair value of options granted $4.93 $7.08 $9.88 30 Note 9 Commitments and Other Matters A material part of the Company's tobacco business is dependent upon a few customers, the loss of any one of whom would have a material adverse effect on the Company. For the years ended June 30, 2000, 1999, and 1998, one customer accounted for revenues of $1.3 billion, $1.7 billion, and $1.7 billion, respectively. The Company provides guarantees for seasonal pre-export crop financing for some of its subsidiaries and unconsolidated affiliates. In addition, certain subsidiaries provide guarantees that ensure that value-added taxes will be repaid if the crops are not exported. At June 30, 2000, total exposure under guarantees issued for banking facilities of unconsolidated affiliates and suppliers was approximately $53 million. Other contingent liabilities approximate $30 million. The Company considers the possibility of loss on any of these guarantees to be remote. 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 contingent liabilities, including penalties and interest, approximate $23 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. The Company's operating subsidiaries within each industry segment perform credit evaluations of customers' financial condition prior to the extension of credit. Generally, accounts and notes receivable are unsecured and are due within 30 days. When collection terms are extended for longer periods, interest and carrying costs are usually recovered. Credit losses are provided for in the financial statements and such amounts have not been material. In the lumber and building product operations in Europe, it is traditional business practice to insure a major portion of accounts and notes receivable against uncollectibility. At June 30, accounts and notes receivable by operating segment were as follows (in millions of dollars): AT JUNE 30, 2000 1999 - ---------------------------------------------------------------- Tobacco $ 226 $ 184 Lumber and building products 78 87 Agri-products 55 55 ---------------------- $ 359 $ 326 ================================================================ Note 10 Segment Information In 1999, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information." Prior-period amounts have been restated in accordance with the requirements of the new standard. The standard requires reporting information regarding operating segments on the basis used internally by management to evaluate segment performance. Segments are based on product categories. The Company evaluates performance based on operating income and equity in pretax earnings of unconsolidated affiliates. The accounting policies of the segments are the same as those described in Note 1. Sales between segments are insignificant. Sales and other operating revenues are attributable to individual countries based on the location of the subsidiary. Equity in pretax earnings of unconsolidated affiliates relates primarily to the tobacco segment. Reportable segments are as follows: Tobacco Selecting, buying, shipping, processing, packing, storing, and financing leaf tobacco in tobacco growing countries for the account of, or for resale to, manufacturers of tobacco products throughout the world. Lumber and Building Products Distribution of lumber and building products to the building and construction market in Europe, primarily in the Netherlands. Agri-Products Trading and processing tea and sunflower seeds and trading other products from the countries of origin to various customers throughout the world. 31 Note 10 continued
REPORTABLE SEGMENT DATA Sales and Other Operating Revenues Operating Income ----------------------------------- --------------------------- YEARS ENDED JUNE 30, 2000 1999 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------ Tobacco $2,372,851 $2,944,762 $3,193,413 $223,471 $240,561 $272,031 Lumber and building products 543,850 547,794 550,901 26,029 24,427 20,361 Agri-products 485,268 512,347 542,890 14,403 17,538 18,852 ------------------------------------------------------------------------- Total segments 3,401,969 4,004,903 4,287,204 263,903 282,526 311,244 Corporate expenses (17,447) (13,904) (15,949) Equity in pretax earnings of unconsolidated affiliates (12,532) (14,066) (16,901) ------------------------------------------------------------------------- Consolidated total $3,401,969 $4,004,903 $4,287,204 $233,924 $254,556 $278,394 - ------------------------------------------------------------------------------------------------------------------------
Segment Assets Depreciation and Amortization Capital Expenditures ----------------------------------- ----------------------------- -------------------------- YEARS ENDED JUNE 30, 2000 1999 1998 2000 1999 1998 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- Tobacco $1,363,424 $1,411,221 $1,557,825 $42,077 $42,459 $41,516 $51,330 $56,111 $89,407 Lumber and building products 228,531 255,333 267,365 7,800 8,180 7,466 5,355 11,096 4,890 Agri-products 153,667 153,811 171,175 2,145 2,123 2,089 4,152 1,947 2,423 ----------------------------------------------------------------------------------------------------- Total segments 1,745,622 1,820,365 1,996,365 52,022 52,762 51,071 60,837 69,154 96,720 Corporate 2,482 2,758 2,137 ----------------------------------------------------------------------------------------------------- Consolidated total $1,748,104 $1,823,123 $1,998,502 $52,022 $52,762 $51,071 $60,837 $69,154 $96,720 =================================================================================================================================
GEOGRAPHIC DATA (FOR YEARS ENDED JUNE 30)
Sales and Other Operating Revenues 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------- United States $1,594,835 $2,081,159 $2,146,575 The Netherlands 704,194 782,496 827,528 All other countries 1,102,940 1,141,248 1,313,101 ---------------------------------------------------------- Consolidated total $3,401,969 $4,004,903 $4,287,204 Long-Lived Assets 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------- United States $ 213,842 $ 209,422 $ 206,866 The Netherlands 69,411 82,033 78,543 Brazil 77,110 75,563 76,869 All other countries 188,939 190,289 158,026 ---------------------------------------------------------- Consolidated total $ 549,302 $ 557,307 $ 520,304 =================================================================================================================
32 Note 11 Gain on Sale of Investment In 1998, the Company sold its minority interest in a Dutch spice joint venture to the majority owner for total proceeds of $29.1 million and a gain of $16.7 million before taxes. Note 12 Unaudited Quarterly Financial Data Due to the seasonal nature of the tobacco, lumber and building products, and agri-products businesses, it is always more meaningful to focus on cumulative rather than quarterly results.
First Second Third Fourth YEARS ENDED JUNE 30, Quarter Quarter Quarter Quarter - -------------------------------------------------------------------------------------------------------------------------------- 2000 $782,988 $1,032,453 $1,001,207 $585,321 Sales and other operating revenues 129,459 148,648 160,326 159,579 Gross profit 29,502 26,148 38,458 19,697 Net income .93 .85 1.29 .69 Net income per common share-Basic .93 .85 1.29 .69 Net income per common share-Diluted .30 .31 .31 .31 Cash dividends declared per common share 31 26 1/2 23 15/16 24 13/16 Market price range: High 25 1/8 20 3/4 13 9/16 16 Low 1999 $879,285 $1,297,719 $1,222,814 $605,085 Sales and other operating revenues 136,584 168,532 142,752 162,616 Gross profit 27,057 41,424 29,354 29,441 Net income 0.79 1.23 0.88 0.91 Net income per common share-Basic 0.78 1.23 0.88 0.91 Net income per common share-Diluted 0.28 0.30 0.30 0.30 Cash dividends declared per common share 38 3/4 38 1/16 34 11/16 28 13/16 Market price range: High 31 1/2 32 15/16 25 9/16 23 7/8 Low - --------------------------------------------------------------------------------------------------------------------------------
In the fourth quarter of fiscal years 2000 and 1999, the Company recorded approximately $7 million and $6 million, respectively, in charges related to tobacco inventory. In the fourth quarter of fiscal year 2000, the Company recorded a $11 million ($7 million net of tax) charge for restructuring. 33 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS To the Board of Directors and Shareholders of Universal Corporation: We have audited the accompanying consolidated balance sheets of Universal Corporation and subsidiaries as of June 30, 2000 and 1999, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended June 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Universal Corporation and subsidiaries at June 30, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2000, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Richmond, Virginia August 10, 2000 34 REPORT OF MANAGEMENT To the Shareholders of Universal Corporation: The consolidated financial statements of Universal Corporation have been prepared under the direction of management, which is responsible for their integrity and objectivity. The statements have been prepared in accordance with generally accepted accounting principles and, where appropriate, include amounts based on the judgment of management. Management is also responsible for maintaining an effective system of internal accounting controls designed to provide reasonable assurance that assets are safeguarded and that transactions are executed in accordance with management's authorization and properly recorded. This system is continually reviewed and is augmented by written policies and procedures, the careful selection and training of qualified personnel, and an internal audit program to monitor its effectiveness. Ernst & Young LLP, independent auditors, are retained to audit our financial statements. Their audit provides an objective assessment of how well management discharged its responsibility for fairness in financial reporting. The Audit Committee of the Board of Directors is composed solely of outside directors. The committee meets periodically with management, the internal auditors and the independent auditors to assure that each is properly discharging its responsibilities. Ernst & Young LLP and the internal auditors have full and free access to meet privately with the Audit Committee to discuss accounting controls, audit findings and financial reporting matters. /s/ Hartwell H Roper Hartwell H. Roper Vice President and Chief Financial Officer August 10, 2000 35 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE For the three years ended June 30, 2000 there were no changes in and disagreements between the Company and its independent auditors on any matter of accounting principles, practices or financial disclosures. 36 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Refer to the caption, "Election of Directors" in the September 22, 2000 Proxy Statement which information is incorporated herein by reference. The following are Executive Officers as of September 22, 2000. Name Position Age - ---- -------- --- H. H. Harrell Chairman and Chief 61 Executive Officer A. B. King President and Chief 54 Operating Officer H. H. Roper Vice President and 52 Chief Financial Officer W. L. Taylor Vice President and 59 Chief Administrative Officer D.G. Cohen Tervaert Co-President and Co-Chairman of 47 the Board of Deli Universal, Inc. J. M. M. van de Winkel Co-President and Co-Chairman of 51 the Board of Deli-Universal, Inc. J. M. White, III Vice President, Secretary and 61 General Counsel There are no family relationships between any of the above officers. All of the above officers have been employed by the Company in the listed capacities during the last five years, except D.G Cohen Tervaert was President and Chairman of Deli Universal, Inc. prior to August 1998, J.M.M. van de Winkel was Executive Vice President and Vice Chairman of Deli Universal, Inc. prior to August 1998 and J.M. White, III was Secretary and General Counsel of Universal Corp. prior to October 1999. 37 ITEM 11. EXECUTIVE COMPENSATION Refer to the caption, "Executive Compensation," in the Company's September 22, 2000 Proxy Statement, which information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Refer to the caption, "Stock Ownership," in the Company's September 22, 2000 Proxy Statement, which information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Refer to the caption, "Certain Transactions" in the Company's September 22, 2000 Proxy Statement, which information is incorporated herein by reference. 38 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) The following consolidated financial statements of Universal Corporation and Subsidiaries are included in Item 8: Consolidated Statements of Income for the years ended June 30, 2000, 1999 and 1998 Consolidated Balance Sheets at June 30, 2000 and 1999 Consolidated Statements of Cash Flows for the years ended June 30, 2000, 1999 and 1998 Consolidated Statements of Changes in Shareholders' Equity for the years ended June 30, 2000, 1999 and 1998 Notes to Consolidated Financial Statements for the years ended June 30, 2000, 1999 and 1998 Report of Ernst & Young LLP, Independent Auditors (2) Financial Statement Schedules: None (3) List of Exhibits: 3.1 Amended and Restated Articles of Incorporation (incorporated herein by reference to the Registrant's Form 8-A Registration Statement, dated December 22, 1998, File No.1- 652). 3.2 Bylaws.* 4.1 Indenture between the Registrant and Chemical Bank, as trustee (incorporated herein by reference to Registrant's Current Report on Form 8-K, dated February 25, 1991, File No. 1-652). 4.2 Form of Fixed Rate Medium-Term Note, Series A (incorporated herein by reference to the Registrant's Current Report on Form 8-K, dated February 25,1991, File No. 1-652). 4.3 Form of 9 1/4% Note due February 15, 2001 (incorporated herein by reference to the Registrant's Current Report on Form 8-K, dated February 25, 1991, File No. 1-652). 4.4 Rights Agreement, dated as of December 3, 1998, between the Registrant and Wachovia Bank, N.A., as Rights Agent (incorporated herein by reference to the Registrant's Current Report on Form 8-K, dated December 3, 1998, File No. 1-652). 4.5 First Amendment to the Rights Agreement, dated as of April 23, 1999, between the Registrant, Wachovia 39 Bank, N.A., as Rights Agent, and Norwest Bank Minnesota, N.A., as Successor Rights Agent (incorporated herein by reference to the Registrant's Current Report on Form 8-K, dated May 7, 1999, File No. 1-652). 4.6 Specimen Common Stock Certificate (incorporated herein by reference to the Registrant's Amendment No. 1, dated May 7, 1999, to Registrant's Form 8-A Registration Statement dated December 22, 1998, File No. 1-652). 4.7 Form of 6 1/2% Note due February 15, 2006 (incorporated herein by reference to the Registrant's Current Report on Form 8-K, dated February 20, 1996, File No. 1-652). 4.8 Form of 8.5% Note due February 2003.* The Registrant, by signing this Report on Form 10-K, agrees to furnish the Securities and Exchange Commission, upon its request, a copy of any instrument which defines the rights of holders of long-term debt of the Registrant and its consolidated subsidiaries, and for any unconsolidated subsidiaries for which financial statements are required to be filed that authorizes a total amount of securities not in excess of 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. 10.1 Universal Corporation Restricted Stock Plan for Non-Employee Directors (incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1991, File No. 1-652). 10.2 Universal Leaf Tobacco Company, Incorporated Supplemental Stock Purchase Plan, (incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1991, File No. 1-652). 10.3 Universal Leaf Tobacco Company, Incorporated Executive Life Insurance Agreement (incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1994, File No. 1-652). 40 10.4 Universal Leaf Tobacco Company, Incorporated Deferred Income Plan (incorporated herein by reference to the Registrant's Report on Form 8, dated February 8, 1991, File No. 1-652). 10.5 Universal Leaf Tobacco Company, Incorporated Benefit Replacement Plan (incorporated herein by reference to the Registrant's Report on Form 8, dated February 8, 1991, File No. 1-652). 10.6 Universal Leaf Tobacco Company, Incorporated 1996 Benefit Restoration Plan (incorporated herein by reference to the Registrant's Annual Report on Form 10-K, dated September 25, 1998, File No. 1-652). 10.7 Universal Corporation 1989 Executive Stock Plan, as amended on December 2, 1999 (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1999, File No. 1-652). 10.8 Universal Corporation 1991 Stock Option and Equity Accumulation Agreement (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1991, File No. 1-652). 10.9 Amendment to Universal Corporation 1991 Stock Option and Equity Accumulation Agreement (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1992, File No. 1-652). 10.10 Universal Leaf Tobacco Company, Incorporated 1994 Deferred Income Plan, amended and restated as of September 1, 1998 (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, File No. 1-652). 10.11 Universal Corporation Outside Directors' 1994 Deferred Income Plan, restated as of October 1, 1998 (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, File No. 1-652). 10.12 Universal Leaf Tobacco Company, Incorporated 1994 Benefit Replacement Plan (incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1994, File No. 1-652). 41 10.13 Universal Corporation 1994 Stock Option and Equity Accumulation Agreement (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994, File No. 1-652). 10.14 Universal Corporation 1994 Amended and Restated Stock Option Plan for Non-Employee Directors (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1998, File No. 1-652). 10.15 Universal Corporation Non-Employee Director Non-Qualified Stock Option Agreement.* 10.16 Universal Leaf Tobacco Company, Incorporated Benefit Restoration Plan Trust, dated June 25, 1997, among Universal Leaf Tobacco Company, Incorporated, Universal Corporation and Wachovia Bank, N.A., as trustee (incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1997, File No. 1-652). 10.17 First Amendment to the Universal Leaf Tobacco Company, Incorporated Benefit Restoration Trust, dated January 12, 1999, between Universal Leaf Tobacco Company, Incorporated and Wachovia Bank, N.A., as trustee (incorporated herein by reference to Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1998, File No. 1-652). 10.18 Form of Universal Corporation 1997 Restricted Stock Agreement with Schedule of Awards to Executive Officers (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-652). 10.19 Form of Universal Corporation 1997 Stock Option and Equity Accumulation Agreement, with Schedule of Grants to officers (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-652). 10.20 Form of Universal Corporation Non-Employee Director Restricted Stock Agreement (incorporated herein by reference to the Registrant's Quarterly Report on Form 10- Q for the quarter ended December 31, 1998, File No. 1- 652). 10.21 1997 Non-Qualified Stock Option Agreement between Deli- Universal, Inc. and D. G. Cohen Tervaert (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-652). 10.22 Employment Agreement (dated January 15, 1998 between 42 Universal Corporation and Henry H. Harrell, Allen B. King, William L. Taylor, Hartwell H. Roper, Edward M. Schaaf, III, and James M. White, III (incorporated herein by reference to the Registrant's Quarterly Report on Form 10- Q for the quarter ended December 31, 1997, File No. 1- 652). 10.23 364-day Credit Agreement dated December 18, 1997 (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-652). 10.24 Three-Year Credit Agreement dated December 18, 1997 (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-652). 10.25 Universal Corporation Charitable Award Program (incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1998, File No. 1-652). 10.26 Universal Corporation 1997 Executive Stock Plan, as amended on December 2, 1999(incorporated herein by reference to the Registrant's Quarterly Report on Form 10- Q for the quarter ended December 31, 1999, File No. 1- 652). 10.27 1997 Non-Qualified Stock Option Agreement between Deli Universal, Inc. and J. M. M. van de Winkel (incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1998, File No. 1-652). 10.28 Form of Universal Corporation 1999 Stock Option and Equity Accumulation Agreement, with Schedule of Grants to Executive Officers(incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1999, File No. 1-652). 10.29 Form of Universal Corporation Stock Option and Equity Accumulation Agreements(incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1999, File No. 1-652). 10.30 Form of Universal Corporation 2000 Special Non-Qualified Stock Option Agreement, with Schedule of Grants and Exercise Loans to Executive Officers.* 12 Ratio of Earnings to Fixed Charges* 21 Subsidiaries of the Registrant.* 23 Consent of Ernst & Young LLP.* 43 27 Financial Data Schedule.* * Filed herewith. (b) Reports on Form 8-K 1. Form 8-K filed July 27, 2000 filing press release announcing earnings expectations. 2. Form 8-K filed May 8, 2000 filing press release announcing third quarter earnings. (c) Exhibits The exhibits listed in Item 14(a)(3) are filed as part of this annual report. (d) Financial Statement Schedules All schedules are omitted since the required information is not present in amounts sufficient to require submission or because the information required is included in the consolidated financial statements and notes therein. 44 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNIVERSAL CORPORATION September 26, 2000 By:/s/ Henry H. Harrell ----------------------- Henry H. Harrell Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Henry H. Harrell Chairman, Chief Executive September 26, 2000 - ------------------------- Officer and Director ------------------ Henry H. Harrell (Principal Executive Officer) /s/ Allen B. King President, Chief Operating September 26, 2000 - ------------------------- Officer and Director ------------------ Allen B. King /s/ Hartwell H. Roper Vice President and September 26, 2000 - ------------------------- Chief Financial Officer ------------------ Hartwell H. Roper /s/ William J. Coronado Controller (Principal September 26, 2000 - ------------------------- Accounting Officer) ------------------ William J. Coronado /s/ William W. Berry Director September 26, 2000 - ------------------------- ------------------ William W. Berry /s/ Charles H. Foster, Jr. Director September 26, 2000 - -------------------------- ------------------ Charles H. Foster, Jr. /s/ Eddie N. Moore, Jr. Director September 26, 2000 - -------------------------- ------------------ Eddie N. Moore, Jr. /s/ Joseph C. Farrell Director September 26, 2000 - -------------------------- ------------------ Joseph C. Farrell /s/ Hubert R. Stallard Director September 26, 2000 - -------------------------- ------------------ Hubert R. Stallard 45 EXHIBIT INDEX Exhibit Number Document ------- -------- 3.1 Amended and Restated Articles of Incorporation (incorporated herein by reference to the Registrant's Form 8-A Registration Statement, dated December 22, 1998, File No.1- 652). 3.2 Bylaws.* 4.1 Indenture between the Registrant and Chemical Bank, as trustee (incorporated herein by reference to Registrant's Current Report on Form 8-K, dated February 25, 1991, File No. 1-652). 4.2 Form of Fixed Rate Medium-Term Note, Series A (incorporated herein by reference to the Registrant's Current Report on Form 8-K, dated February 25,1991, File No. 1-652). 4.3 Form of 9 1/4% Note due February 15, 2001 (incorporated herein by reference to the Registrant's Current Report on Form 8-K, dated February 25, 1991, File No. 1-652). 4.4 Rights Agreement, dated as of December 3, 1998, between the Registrant and Wachovia Bank, N.A., as Rights Agent (incorporated herein by reference to the Registrant's Current Report on Form 8-K, dated December 3, 1998, File No. 1-652). 4.5 First Amendment to the Rights Agreement, dated as of April 23, 1999, between the Registrant, Wachovia Bank, N.A., as Rights Agent, and Norwest Bank Minnesota, N.A., as Successor Rights Agent (incorporated herein by reference to the Registrant's Current Report on Form 8-K, dated May 7, 1999, File No. 1-652). 4.6 Specimen Common Stock Certificate (incorporated herein by reference to the Registrant's Amendment No. 1, dated May 7, 1999, to Registrant's Form 8-A Registration Statement dated December 22, 1998, File No. 1-652). 4.7 Form of 6 1/2% Note due February 15, 2006 (incorporated herein by reference to the Registrant's Current Report on Form 8-K, dated February 20, 1996, File No. 1-652). 46 4.8 Form of 8.5% Note due February 2003.* The Registrant, by signing this Report on Form 10-K, agrees to furnish the Securities and Exchange Commission, upon its request, a copy of any instrument which defines the rights of holders of long-term debt of the Registrant and its consolidated subsidiaries, and for any unconsolidated subsidiaries for which financial statements are required to be filed that authorizes a total amount of securities not in excess of 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. 10.1 Universal Corporation Restricted Stock Plan for Non-Employee Directors (incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1991, File No. 1-652). 10.2 Universal Leaf Tobacco Company, Incorporated Supplemental Stock Purchase Plan, (incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1991, File No. 1-652). 10.3 Universal Leaf Tobacco Company, Incorporated Executive Life Insurance Agreement (incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1994, File No. 1-652). 10.4 Universal Leaf Tobacco Company, Incorporated Deferred Income Plan (incorporated herein by reference to the Registrant's Report on Form 8, dated February 8, 1991, File No. 1-652). 10.5 Universal Leaf Tobacco Company, Incorporated Benefit Replacement Plan (incorporated herein by reference to the Registrant's Report on Form 8, dated February 8, 1991, File No. 1-652). 10.6 Universal Leaf Tobacco Company, Incorporated 1996 Benefit Restoration Plan (incorporated herein by reference to the Registrant's Annual Report on Form 10-K, dated September 25, 1998, File No. 1-652). 10.7 Universal Corporation 1989 Executive Stock Plan, as amended on December 2, 1999 (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1999, File No. 1-652). 10.8 Universal Corporation 1991 Stock Option and Equity Accumulation Agreement (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1991, File No. 1-652). 10.9 Amendment to Universal Corporation 1991 Stock Option and Equity Accumulation Agreement (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1992, File No. 1-652). 10.10 Universal Leaf Tobacco Company, Incorporated 1994 Deferred Income Plan, amended and restated as of September 1, 1998 (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, File No. 1-652). 10.11 Universal Corporation Outside Directors' 1994 Deferred Income Plan, restated as of October 1, 1998 (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, File No. 1-652). 47 10.12 Universal Leaf Tobacco Company, Incorporated 1994 Benefit Replacement Plan (incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1994, File No. 1-652). 10.13 Universal Corporation 1994 Stock Option and Equity Accumulation Agreement (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994, File No. 1-652). 10.14 Universal Corporation 1994 Amended and Restated Stock Option Plan for Non-Employee Directors (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1998, File No. 1-652). 10.15 Universal Corporation Non-Employee Director Non-Qualified Stock Option Agreement.* 10.16 Universal Leaf Tobacco Company, Incorporated Benefit Restoration Plan Trust, dated June 25, 1997, among Universal Leaf Tobacco Company, Incorporated, Universal Corporation and Wachovia Bank, N.A., as trustee (incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1997, File No. 1-652). 10.17 First Amendment to the Universal Leaf Tobacco Company, Incorporated Benefit Restoration Trust, dated January 12, 1999, between Universal Leaf Tobacco Company, Incorporated and Wachovia Bank, N.A., as trustee (incorporated herein by reference to Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1998, File No. 1-652). 10.18 Form of Universal Corporation 1997 Restricted Stock Agreement with Schedule of Awards to Executive Officers (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-652). 10.19 Form of Universal Corporation 1997 Stock Option and Equity Accumulation Agreement, with Schedule of Grants to officers (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-652). 10.20 Form of Universal Corporation Non-Employee Director Restricted Stock Agreement (incorporated herein by reference to the Registrant's Quarterly Report on Form 10- Q for the quarter ended December 31, 1998, File No. 1- 652). 10.21 1997 Non-Qualified Stock Option Agreement between Deli- Universal, Inc. and D. G. Cohen Tervaert (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-652). 10.22 Employment Agreement (dated January 15, 1998 between Universal Corporation and Henry H. Harrell, Allen B. King, William L. Taylor, Hartwell H. Roper, Edward M. Schaaf, III, and James M. White, III (incorporated herein by reference to the Registrant's Quarterly Report on Form 10- Q for the quarter ended December 31, 1997, File No. 1- 652). 48 10.23 364-day Credit Agreement dated December 18, 1997 (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-652). 10.24 Three-Year Credit Agreement dated December 18, 1997 (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-652). 10.25 Universal Corporation Charitable Award Program (incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1998, File No. 1-652). 10.26 Universal Corporation 1997 Executive Stock Plan, as amended on December 2, 1999(incorporated herein by reference to the Registrant's Quarterly Report on Form 10- Q for the quarter ended December 31, 1999, File No. 1- 652). 10.27 1997 Non-Qualified Stock Option Agreement between Deli Universal, Inc. and J. M. M. van de Winkel (incorporated herein by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1998, File No. 1-652). 10.28 Form of Universal Corporation 1999 Stock Option and Equity Accumulation Agreement, with Schedule of Grants to Executive Officers(incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1999, File No. 1-652). 10.29 Form of Universal Corporation Stock Option and Equity Accumulation Agreements(incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1999, File No. 1-652). 10.30 Form of Universal Corporation 2000 Special Non-Qualified Stock Option Agreement, with Schedule of Grants and Exercise Loans to Executive Officers.* 12 Ratio of Earnings to Fixed Charges* 21 Subsidiaries of the Registrant.* 23 Consent of Ernst & Young LLP.* 27 Financial Data Schedule.* * Filed herewith. EX-3.2 2 0002.txt BYLAWS Exhibit 3.2 August 29, 2000 BYLAWS of UNIVERSAL CORPORATION ****** ARTICLE I Shareholders ------------ Section 1. Shareholders shall be those persons in whose names shares of the Company are registered in its share transfer records, and a listing of the names drawn from such records as of a record date shall serve as conclusive evidence as to those shareholders eligible to vote their shares at any meeting of the shareholders. Section 2. Certificates evidencing shares of the Company shall only be issued for one or more full shares. Such shares shall only be transferable on the share transfer records of the Company by the owner in person, or by his attorney or legal representative, whose written evidence of authority shall be filed with the Company or its transfer agent. Section 3. The share transfer records of the Company shall not be closed following the declaration of a dividend on either the preferred or common shares. A record date shall be established in the resolution declaring such dividend or dividends and the transfer agent shall prepare a listing of the names of all the shareholders entitled to such dividend without actually closing the share transfer records for the transfer of shares. Section 4. Every shareholder of the Company shall be entitled to a stock certificate, signed by the Chairman of the Board, the President, or a Vice President of the Company and by its Secretary, or by any two officers duly authorized to perform this function by the Board of Directors. Where any such certificate is countersigned by its transfer agent and registered by its registrar, the signatures of any of the Company's officers, and the seal of the Company upon such stock certificate, may be facsimiles, engraved or printed, as may be authorized from time to time by the Board of Directors of the Company. Section 5. The annual meeting of the shareholders of the Company shall be held at its principal office located in Richmond, Virginia, or at such other place within or without the Commonwealth of Virginia as may from time to time be designated by the Board of Directors, on the (1)fourth Tuesday in October of each year, for the purpose of electing Directors and for the transaction of such other business as may properly come before the meeting. In order for business to be properly brought before an annual meeting of shareholders, it must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a shareholder. For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Company. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal office of the Company, not less than 60 days nor more than 90 days prior to the meeting. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Company's share transfer records, of the shareholder proposing such business, (iii) the class and number of shares of the Company which are beneficially owned by the shareholder, and (iv) any material interest of the shareholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 5. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that an item of business was not properly brought before the meeting in accordance with the provisions of this Section 5, and shall not be transacted. - ------------------------- (1) At a meeting of the Board of Directors held on August 5, 1993, the Board amended the bylaws to cause the Annual Shareholders Meeting for the year ended June 30, 1993 to be held on the fourth Monday, instead of Tuesday, of October. Following this year, the bylaws shall remain in effect as of the fourth Tuesday of October. 1 Notwithstanding the foregoing provisions of this Section 5, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of l934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 5. Section 6. At the call of the Chairman of the Board, the President, or by order of the Board of Directors, a special meeting of the shareholders of the Company may be held at such time and place as shall be designated in the notice of the meeting. Section 7. Written notice of an annual or special meeting of the shareholders shall be mailed to each shareholder of record entitled to vote under the provisions of the Articles of Incorporation of the Company as now in existence or as may be subsequently amended, at the address as it appears on the share transfer records of the Company, not less than ten nor more than sixty days before the meeting date, except as may otherwise be required by law. Notice of a special meeting shall state the purpose or purposes for which the meeting is called. Notice of any meeting of shareholders may be waived in writing or by attendance at the meeting in person or by proxy. Section 8. At all meetings of the shareholders, a majority of the shares entitled to vote at the record date for such meeting, represented in person or by proxy, shall constitute a quorum, provided that when a specified item of business is required to be voted on by one or more classes of shares, voting as a class, the holders of a majority of the shares of each such class shall constitute a quorum for the transaction of such specified item of business. If no quorum shall be present, the meeting may, without further notice, be adjourned from time to time until a quorum shall be present. (2)At all meetings of the shareholders, a shareholder may vote by proxy executed in writing (or in such manner prescribed by the Virginia Stock Corporation Act) by the shareholder, or by the shareholder's duly authorized attorney-in-fact. Section 9. The Chairman of the Board shall preside at all meetings of the shareholders and, in his absence, the President shall preside. All meetings of the shareholders shall be attended by the Secretary of the Company, and he shall, ex officio be the Secretary of such meetings. In his absence, a Secretary pro tempore may be appointed. ARTICLE II Board of Directors ------------------ Section 1. Only persons who are nominated in accordance with the procedures set forth in this Section l shall be eligible to serve as Directors. Nominations of persons for election to the Board of Directors of the Company may be made at an annual meeting of the shareholders (a) by or at the direction of the Board of Directors or (b) by any shareholder of the Company who is a shareholder of record at the time of giving notice provided for in this Section l, who shall be entitled to vote for the election of Directors at the meeting and who complies with the notice procedures set forth in this Section l. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Company. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal office of the Company not less than 60 days nor more than 90 days prior to the meeting. Such shareholder's notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as a Director, all information relating to such person that is required to be disclosed in the solicitation of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); and (b) as to the shareholder giving the notice (i) the name and address, as they appear on the Company's share transfer records, of such shareholder and (ii) the class and number of shares of the Company which are beneficially owned by such shareholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Company that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a Director of the Company unless nominated in accordance with the procedures set forth in this Section l. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the provisions - ------------------------ (2) By Unanimous Consent of the Board of Directors on August 29, 2000, the Board amended the bylaws to change the language to allow voting of the proxy in such a manner prescribed by the Virginia Stock Corporation Act. 2 of this Section 1 and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 1, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of l934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 1. Section 2. The Board of Directors shall hold its meetings at such times and at such places within or without the Commonwealth of Virginia as it may from time to time designate, or if the Board has fixed no place, then at the principal office of the Company located in the City of Richmond, Virginia. A meeting may be called at any time by the Chairman, the President or by any three Directors. Meetings of the Board of Directors shall be held at least quarterly. Section 3. Immediately following the annual meeting of the shareholders at which the Directors are elected, an organizational meeting of the Board of Directors shall be held for the purpose of electing the officers of the Company and for the transaction of any other business which may be brought before it relating to the management of the business and affairs of the Company. No notice other than this Bylaw provision shall be required for the holding of this organizational meeting and for the transaction of business at such meeting or any adjournment thereof. Regular meetings of the Board of Directors may be held at such designated times and places as may be determined by the Board of Directors, and the notices of such regular meetings shall be in such form as may be prescribed by the Board of Directors. Notice of the time and place of special meetings of the Board of Directors shall be given to each Director by the Secretary of the Company or in his absence or inability to act, by the President, or by the Treasurer or by such other officer as may be designated by the Executive Committee, orally or in writing, in person or by mail, private courier, telephone, telegraph, teletype, or other similar form of wire or wireless communication. Notice of any meeting, regular or special, shall be deemed to have been duly given if delivered in whatever form and in sufficient time to permit the Director to whom the notice is given and received to attend the meeting using the ordinary and usual means of transportation normally available to the Director. If upon the request of any three Directors, the Secretary or other designated officer of the Company shall fail or refuse to call a meeting of the Board of Directors, then the call may be given provided it is in writing and signed by the three Directors requesting the meeting. Such notice, when so given to each other member of the Board of Directors, shall be deemed to be proper notice of the meeting. Section 4. A majority of the number of Directors fixed by the Bylaws shall constitute a quorum, but if upon a call for a meeting, there shall not be a quorum present, the Directors present may adjourn the meeting from time to time until a quorum is present. All questions coming before the Board of Directors shall be determined by the majority vote of the Directors present. ARTICLE III Committees ---------- Section 1. The Board of Directors may designate three or more of their number, of whom the Chief Executive Officer shall ex officio be a member, to constitute an Executive Committee, which shall have and exercise all the powers of the Board that may be lawfully delegated, including the power to authorize the seal of the Company to be affixed to such documents as may require it. The acts and records of the Executive Committee shall at all times be subject to the supervision and control of the Board of Directors when in session. A majority of the number of members of the Executive Committee shall constitute a quorum, and all questions coming before the Executive Committee shall be determined by the majority vote of the members of the Committee. Section 2. The Board of Directors may elect from their number a Finance Committee, consisting of not less than three members. The Chief Executive Officer shall ex officio be a member of the Committee. The Treasurer, who shall 3 be under the control and supervision of the Committee, shall ex officio be entitled to attend all meetings of the Committee. The Finance Committee shall, subject at all times to the control of the Board of Directors, have general and special charge and control of all the financial affairs of the Company and shall have and exercise all of the powers of the Board of Directors in such financial matters when the latter is not in session. (3)Section 3. The Board of Directors shall elect from their number an Audit Committee that shall have such membership requirements, duties and responsibilities as set forth in the Audit Committee Charter adopted by the Board of Directors. Section 4. The Board of Directors may elect from their number an Executive Compensation Committee, consisting of not less than three of its members, a majority of whom shall be independent of management. The Executive Compensation Committee shall receive recommendations from the Chief Executive Officer with respect to the compensation of all officers and then fix such compensation. The Committee shall also review recommendations of the Chief Executive Officer regarding the Management Performance Plan or any similar plan, and make the appropriate allocations among eligible participants. (4)Section 5. The Board of Directors may elect from their number a Pension Investment Committee, consisting of not less than three members. The Pension Investment Committee shall establish pension investment policies, select investment advisors and monitor the performance of pension investments with respect to the following qualified plans: Employee's Retirement Plan of Universal Leaf Tobacco Company, Incorporated and Designated Affiliated Companies, Hourly Employees' Pension Plan of Universal Leaf Tobacco Company, Incorporated and Designated Affiliated Companies, Hourly Employees' Retirement Plan of Universal Leaf Tobacco Company, Incorporated and Designated Affiliated Companies, Employee's 401(k) Savings Plan of Universal Leaf Tobacco Company, Incorporated and Designated Affil iated Companies and such other qualified employee benefit plans as may be added from time to time. This authority shall not cause the Pension Investment Committee to assume the role of "plan administrator," "trustee" or "custodian" for any employee benefit plan. Section 6. The Board of Directors may establish and charge with appropriate duties such other committees as it may deem necessary or desirable. ARTICLE IV Officers -------- Section 1. The Board of Directors, at the organizational meeting following the annual meeting of the shareholders, shall elect the Chief Executive Officer, such officers as may be required by law, and such other officers as they may deem proper. From time to time and as necessary, additional officers may be elected by the Board of Directors. Section 2. The term of office of all officers shall be one year and until their respective successors are elected. Any officer may be removed from office by the Board of Directors at any time and with or without cause, unless otherwise stated by agreement in writing duly authorized by the Board of Directors. The officers of the Company shall have such duties as generally pertain to their respective offices, as well as such powers and duties as from time to time shall be conferred upon them by the Board of Directors. Section 3. In case of the absence or inability to act or disqualification of any officer, his duties shall be discharged by his associate or assistant officer, and if there be none and no other provision has been made therefor, the Board of Directors shall delegate his powers and duties to another officer or shall appoint some other person to act in his stead. - ----------------------- (3) At a meeting of the Board of Directors held on May 4, 2000, the Board amended the bylaws to cause a new Article III, Section 3 to include the Audit Committee Charter. (4) At a meeting of the Board of Directors held on February 13, 1996, the Board amended the bylaws to cause a new Article III, Section 5 to define the responsibilities of the Pension Investment Committee and a renumbering of the old Article III, Section 5 to Article III, Section 6. 4 ARTICLE V Emergency Provisions -------------------- Section 1. The provisions of this Article shall be effective only in the event of and during the period of an emergency. An emergency exists for purposes of this Article if a quorum of the Board of Directors cannot be readily assembled because of some catastrophic event. Section 2. The officers and employees of the Company shall continue to conduct the affairs of the Company under such guidance from the Directors as may be available, except as to matters which by statute, notwithstanding the existence of the emergency, require approval of the Board of Directors and subject to conformance with any governmental directive during the emergency. Section 3. Any senior officer or Director may call a meeting of the Board of Directors, and those who are present at the meeting shall constitute a quorum of the Board for the full conduct and management of the business and affairs of the Company. Notice of the meeting given to those Directors, to whom it may readily be given under the existing circumstances, shall be sufficient and may be given by such means as it is feasible at the time, including by publication or by radio. Section 4. In the absence, disability or refusal to act of any officer, the Board of Directors may delegate such officer's powers to any other officer, or to any Director for the time being. ARTICLE VI Checks and Notes ---------------- Section 1. All checks given by the Company in the course of its business shall be signed in such manner as prescribed from time to time by the Finance Committee. Section 2. All notes and bonds given by the Company in the course of its business shall be signed by any one of the Treasurer, Secretary, an Assistant Treasurer, or an Assistant Secretary, jointly together with any one of the Chairman, Vice Chairman, President, a Vice President, or by such other persons and in such manner as may be prescribed from time to time by the Finance Committee of the Board of Directors. ARTICLE VII Corporate Seal -------------- The corporate seal of the Company shall consist of two concentric circles, around the inner edge of which shall be engraved the words "UNIVERSAL CORPORATION, RICHMOND, VA." and across the center thereof the word "SEAL" and the figures "1918." ARTICLE VIII Use of Masculine ---------------- Whenever a masculine term is used in these Bylaws, it shall be deemed to include the feminine. ARTICLE IX Dividends --------- The Board of Directors may, subject to the provisions of the Articles of Incorporation of the Company, annually, semi-annually, quarterly or monthly, declare dividends as it may deem prudent. 5 ARTICLE X Amendments ---------- These Bylaws may be altered, amended or repealed by vote of the majority of the whole number of Directors at any meeting of the Board of Directors, or by the shareholders at any annual meeting of the shareholders of the Company, or at any special meeting when due notice of such proposed amendment has been given, subject to the provisions of the Articles of Incorporation of the Company. EX-4.8 3 0003.txt PERMANENT GLOBAL SECURITY EXHIBIT 4.8 No. __ CUSIP No. 913456AD1 UNIVERSAL CORPORATION ----------------------------- PERMANENT GLOBAL SECURITY $120,000,000 8 1/2% Note due 2003 ----------------------------- THIS SECURITY IS A BOOK-ENTRY SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A U.S. DEPOSITARY OR A NOMINEE OF A U.S. DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE U.S. DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE U.S. DEPOSITARY TO A NOMINEE OF THE U.S. DEPOSITARY OR BY A NOMINEE OF THE U.S. DEPOSITARY TO THE U.S. DEPOSITARY OR ANOTHER NOMINEE OF THE U.S. DEPOSITARY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED CIRCUMSTANCES. NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS PERMANENT GLOBAL SECURITY SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON EXCEPT PURSUANT TO THE PROVISIONS HEREOF. Unless this Certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC") to the Issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. This permanent global Security is one of a duly authorized issue of securities (herein called the "Securities") of Universal Corporation, a Virginia corporation (hereinafter called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), unlimited as to aggregate principal amount, issued and to be issued in one or more series under an indenture dated as of February 1, 1991, between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank), as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture (as hereinafter defined)), to which indenture and all indentures supplemental hereto (the indenture as supplemented being herein called the "Indenture") reference is hereby made for a statement of the respective rights thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This permanent global Security is one of the series of Securities designated on the face hereof, limited in aggregate principal amount to One Hundred Twenty Million United States Dollars (US$120,000,000). This permanent global Security represents an aggregate initial principal amount of One Hundred Twenty Million United States Dollars (as adjusted from time to time in accordance with the terms and provisions hereof and as set forth on Schedule A hereto, the "Principal Amount") of the Securities of such series, with the Interest Payment Dates, date of original issuance, and date of Maturity specified herein and bearing interest on said Principal Amount at the interest rate specified herein. The Company, for value received, hereby promises to pay to Cede & Co., or registered assigns, the Principal Amount hereof on February 28, 2003, and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) from February 16, 2000, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, or, if the date of this permanent global Security is an Interest Payment Date to which interest has been paid or duly provided for, then from the date hereof semi-annually in arrears on February 28 and August 28 in each year commencing August 28, 2000, and at Maturity, at the rate of 8 1/2% per annum, until the principal hereof is paid or duly made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this permanent global Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15 or August 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and shall be paid to the Person in whose name this permanent global Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date to be fixed by the Trustee for the payment of such Defaulted Interest, notice whereof shall be given to the Holder of this permanent global 2 Security not less than 10 days prior to such Special Record Date, or at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in such Indenture. Notwithstanding the foregoing, interest payable on this Security at Maturity will be payable to the person to whom principal is payable. This permanent global Security is exchangeable for definitive Registered Securities of this series and of like tenor and of an equal aggregate principal amount, registered in the name of, and a transfer of this permanent global security may be registered to, any Person other than the U.S. Depositary or its nominee only if (x) the U.S. Depositary with respect to the Securities of this series (the "U.S. Depositary") notifies the Company that it is unwilling or unable to continue as U.S. Depositary for this permanent global Security or if at any time the U.S. Depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, (y) the Company in its sole discretion determines that this permanent global Security shall be so exchangeable and executes and delivers to the Trustee a Company Order providing that this permanent global Security shall be so exchangeable and the transfer thereof so registrable or (z) there shall have happened and be continuing an Event of Default or any event which, after notice or lapse of time, or both, would become an Event of Default with respect to the Securities of the series of which this permanent global Security is a part. In the event this permanent global Security is exchangeable pursuant to the preceding sentence, it shall be exchanged in whole for definitive Registered Securities of this series, and in the case of clauses (y) and (z) above, be exchangeable for definitive Registered Securities of this series, of like tenor and of an equal aggregate principal amount in denominations of $1,000 and integral multiples of $1,000 in excess thereof provided that, in the case of clauses (y) and (z) above, definitive Registered Securities of this series will be issued in exchange for this permanent global Security only if such definitive Registered Securities were requested by written notice to the Security Registrar by or on behalf of a Person who is a beneficial owner of an interest herein given through the Holder hereof. Any definitive Registered Security of this series issued in exchange for this permanent global Security shall be registered in the name of or names of, and the transfer of such Securities may be registered to, such Person or Persons as the Holder hereof shall instruct the Security Registrar. Except as provided above, owners of beneficial interests in this permanent global Security will not be entitled to receive physical delivery of Securities in definitive form and will not be considered the Holders thereof for any purpose under the Indenture. Any exchange of this permanent global Security or portion hereof for one or more definitive Registered Securities of this series will be made at the New York office of the Security Registrar. Upon exchange of any portion of this permanent global Security for one or more definitive Registered Securities of this series, the Security Registrar shall endorse Schedule A of this permanent global Security to reflect the reduction of its 3 Principal Amount by an amount equal to the aggregate principal amount of the definitive Registered Securities of this series so issued in exchange, whereupon the Principal Amount hereof shall be reduced for all purposes by the amount so exchanged and noted. Except as otherwise provided herein or in the Indenture, until exchanged in full for one or more definitive Registered Securities of this series, this permanent global Security shall in all respects be subject to and entitled to the same benefits and conditions under the Indenture as a duly authenticated and delivered definitive Registered Security of this series. The principal and any premium or interest in respect of any portion of this permanent global Security payable in respect of an Interest Payment Date or at the Maturity thereof, in each case occurring prior to the exchange of such portion for a definitive Registered Security or Securities of this series, will be paid, as provided herein, to the Holder hereof. If a definitive Registered Security or Registered Securities of this series are issued in exchange for any portion of this permanent global Security after the close of business at the office or agency where such exchange occurs on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of such Registered Security, but will be payable on such Interest Payment Date or proposed date for payment, as the case may be, only to the Holder hereof, unless such Interest Payment Date or proposed date of payment is the Maturity hereof. Payment of the principal of (and premium, if any) and any such interest on this permanent global Security will be made at the offices of The Chase Manhattan Bank, as Paying Agent, in the Borough of Manhattan, The City of New York, or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by United States dollar check mailed to the addresses of the Persons entitled thereto as such addresses shall appear in the Security Register or by transfer to a United States dollar account maintained by the payee with, a bank in The City of New York (so long as the applicable Paying Agent has received proper transfer instructions in writing at least five Business Days prior to the applicable Interest Payment Date). Reference is hereby made to the further provisions of this permanent global Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. 4 Unless the certificate of authentication hereon has been executed by or on behalf of The Chase Manhattan Bank (formerly known as Chemical Bank), the Trustee under the Indenture, or its successors thereunder, by the manual signature of one of its authorized officers, this permanent global Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 5 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: February 16, 2000 UNIVERSAL CORPORATION By:_____________________ Name: Title: Attest: _____________________________ Assistant Secretary 6 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities of a series issued under the Indenture described herein. THE CHASE MANHATTAN BANK, as Trustee By: ______________________________ Authorized Officer 7 Reverse The Securities of this series (including this permanent global Security and the interest represented hereby) are subject to redemption at any time, as a whole or in part, at the election of the Company, at a Redemption Price equal to the greater of (x) 100% of the principal amount of the Securities of this series to the redeemed or (y) the sum of the present value of the remaining scheduled payments of principal and interest on the Securities of this series being redeemed, not including interest accrued and paid as of the Redemption Date, discounted to the Redemption Date on a semi-annual basis, at the Adjusted Treasury Rate referred to below plus 25 basis points, assuming a 360-day year comprised of twelve 30-day months, together with accrued interest to the Redemption Date; provided, however, that installments of interest on this permanent global Security whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holder of this permanent global Security, or one or more Predecessor Securities of record at the close of business on the relevant Regular Record Dates referred to on the face hereof, all as provided in the Indenture. For purposes of the preceding paragraph: "Adjusted Treasury Rate" shall mean the rate per annum equal to the semi- annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price equal to the Comparable Treasury Price for the Redemption Date. The semi-annual equivalent yield to maturity will be computed as of the third Business Day immediately preceding the Redemption Date. "Comparable Treasury Issue" shall mean the U.S. treasury security that would be used in accordance with customary financial practice in pricing new issues of corporate debt securities that have a term comparable to the remaining term of the Securities of this series. The U.S. treasury security shall be selected by the Quotation Agent. "Comparable Treasury Price" for a Redemption Date shall mean either (1) the average of the Reference Treasury Dealer Quotations for the Redemption Date, after excluding the highest and lowest quotations, or (2) if the Trustee obtains fewer than four Reference Treasury Dealer Quotations for the Redemption Date, the average of the Reference Treasury Dealer Quotations obtained, as determined by the Quotation Agent. "Quotation Agent" shall mean the Reference Treasury Dealer appointed by the Company. "Reference Treasury Dealer" shall mean: 8 . Warburg Dillon Read LLC, First Union Securities, Inc and SunTrust Equitable Securities Corporation or their successors; if they cease to be primary U.S. government securities dealers in The City of New York, the Company will substitute another primary U.S. government securities dealer in The City of New York, and . any other primary U.S. government securities dealer in The City of New York selected by the Company. "Reference Treasury Dealer Quotations" shall mean the average as determined by the Quotation Agent of the bid and asked prices for the Comparable Treasury Issue, expressed in each case as a percentage of the principal amount, quoted in writing to the Trustee by a Reference Treasury Dealer at 3:30 p.m. on the third Business Day preceding the Redemption Date. The Trustee shall not be responsible for calculating the Redemption Price. The Company shall notify the Trustee of the Redemption Price, promptly after the calculation thereof. The Securities of this series (including this permanent global Security and the interests represented hereby) are not subject to any sinking fund. The provisions of Article Fourteen of the Indenture apply to Securities of this series. Such provisions provide for defeasance at any time of (a) the entire obligations of the Company under this permanent Global Security and (b) certain restrictive covenants and the related defaults and Events of Default, upon compliance with certain conditions set forth therein. Notice of redemption will be given by mail to Holders of Securities, not less than 30 nor more than 60 days prior to the date fixed for redemption, all as provided in the Indenture. Notwithstanding Section 1104 of the Indenture, such notice of redemption need not set forth the Redemption Price, but only the manner of calculation thereof. If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series (including this permanent global Security) may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding of each series affected thereby. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities of each series at the time Outstanding on behalf of the Holders of all Securities 9 of such series to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this permanent global Security shall be conclusive and binding upon such Holder and upon all future Holders of this permanent global Security, and of any Security issued in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this permanent global Security. As set forth in, and subject to, the provisions of the Indenture, no Holder of any Security of this series will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of this series shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee, and the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the Outstanding Securities of this series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days; provided, however, that such limitations do not apply to a suit instituted by the Holder hereof for the enforcement of payment of the principal of (and premium, if any) or any interest on this permanent global Security on or after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this permanent global Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and any interest on this permanent global Security at the times, places and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein and herein set forth, the transfer of Registered Securities of the series of which this permanent global Security is a part may be registered on the Security Register of the Company, upon surrender of such Securities for registration of transfer at the office of the Security Registrar, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder thereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. Prior to due presentment of a Registered Security (including this permanent global Security) for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner thereof for all purposes (except as provided in the Indenture), whether or not such Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. 10 The Securities of this series of which this permanent global Security is a part are issuable only in registered form without coupons, in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and the Officers' Certificate setting forth the terms of the Securities of this series and subject to certain limitations therein set forth, the Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange of Securities as provided above, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Securities of this series (including this permanent global Security) shall be dated the date of their authentication. All terms used in this permanent global Security and not defined herein shall have the meanings assigned to them in the Indenture. 11 SCHEDULE A SCHEDULE OF EXCHANGES
Principal amount Remaining Notation made on exchanged for one principal amount behalf of or more definitive following such the [Trustee] Date exchange made Securities exchange [Security Registrar] ==================== ====================== ===================== ==================== - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- -------------------- - -------------------- ---------------------- --------------------- --------------------
12 EX-10.15 4 0004.txt NON-QUALIFIED STOCK OPTION AGREEMENT EXHIBIT 10.15 UNIVERSAL CORPORATION NON-EMPLOYEE DIRECTOR NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT dated as of ___________________________, between UNIVERSAL CORPORATION, a Virginia corporation (the "Company"), and ___________________ (the "Optionee"), is made pursuant and subject to the provisions of the Company's Amended and Restated 1994 Stock Option Plan for Non-Employee Directors (the "Plan"). All terms used herein that are defined in the Plan have the same meanings given them in the Plan. 1. Grant of Option. Pursuant to the terms of the Plan, the Company, on --------------- _________________________, granted to the Optionee, subject to the terms and conditions of the Plan and subject further to the terms and conditions herein set forth, the right and option to purchase from the Company all or any part of an aggregate of One Thousand (1,000) shares of Common Stock of the Company at the option price of $______ per share. Such option is to be exercisable as hereinafter provided. 2. Terms and Conditions. This option is subject to the following terms and -------------------- conditions: (a) Expiration Date. The Expiration Date of this option is ___(ten --------------- years)____________. (b) Exercise of Option. This option shall be exercisable with ------------------ respect to the total number of shares covered by this option after the expiration of six (6) months from the granting of the option. Once this option has become exercisable with respect to the total number of shares in accordance with the preceding sentence, it shall continue to be exercisable until the termination of the Optionee's rights hereunder pursuant to paragraph 3, 4 or 5 or, otherwise, until the Expiration Date. A partial exercise of this option shall not affect the Optionee's right to exercise subsequently this option with respect to the remaining shares that are exercisable, subject to the six month vesting period set forth in the first sentence of this subparagraph (b) and the conditions of the Plan and this Agreement. (c) Method of Exercising and Payment for Shares. This option may be ------------------------------------------- exercised only by written notice delivered to the attention of the Company's Secretary at the Company's principal office in Richmond, Virginia. The written notice shall specify the number of shares being acquired pursuant to the exercise of the option when such option is being exercised in part in accordance with subparagraph 2(b) hereof. The exercise date shall be the date upon which such notice is received by the Company. Such notice shall be accompanied by payment of the option price in full for each share in cash in United States Dollars, or by the surrender of shares of Common Stock, or by cash equivalent acceptable to the Company or any combination thereof having an aggregate fair market value equal to the total option price for all the shares being purchased. (d) Cashless Exercise. To the extent permitted under the applicable ----------------- laws and regulations, at the request of the Optionee, the Company will cooperate in a "cashless exercise" in accordance with Section 7.03 of the Plan. (e) Limited Transferability. The Optionee shall have the right to ----------------------- transfer this option, in whole or in part, to (i) the spouse, children or grandchildren of Page 2 the Optionee ("Immediately Family Members"), (ii) a trust or trusts for the exclusive benefit of such Immediately Family Members, or (iii) a partnership in which such Immediate Family Members are the only partners, provided that (y) there may be no consideration for any such transfer and (z) subsequent transfers of this option once transferred shall be prohibited except transfers made by will or the laws of descent and distribution, subject to the terms hereof. Following transfer, this option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of this Section 2, the term Optionee shall be deemed to refer to the transferee. The events of resignation from or cessation of Board service of this Agreement shall continue to be applied with respect to the original Optionee to whom this option was granted, following which the option shall be exercisable by the transferee only to the extent, and for the period specified in this Section 2 (e). 3. Exercise in the Event of Death. Subject to the six month ------------------------------ exercisability requirement set forth in Section 2(b) hereof, this option shall remain exercisable with respect to any shares yet unexercised in the event that Optionee dies prior to exercising this option in full and prior to the Expiration Date of this option. In that event, this option may be exercised by Optionee's estate, or the person or persons to whom his rights under this option shall pass by will or by the laws of descent and distribution. Optionee's estate or such persons must exercise this option with respect to Page 3 the remaining shares subject to the option, if at all, within two years of the date of Optionee's death or during the remainder of the period preceding the Expiration Date, whichever is shorter. 4. Exercise in the Event of Permanent and Total Disability. Subject to ------------------------------------------------------- the six month exercisability requirement set forth in Section 2(b) hereof, this option shall remain exercisable with respect to any shares yet unexercised if the Optionee becomes permanently and totally disabled (within the meaning of Section 105(d)(4) of the Code) while serving on the Board prior to exercising this option in full and prior to the Expiration Date of this option. In such event, Optionee must exercise this option with respect to the remaining shares subject to this option, if at all, within two years of the date on which he ceases serving on the Board due to permanent and total disability or during the remainder of the period preceding the Expiration Date, whichever is shorter. 5. Exercise After Resignation, Non-Election or Other Approved ---------------------------------------------------------- Circumstance. Subject to the six month exercisability requirement set forth in - ------------ Section 2(b) hereof, in the event that Optionee resigns from or is not re- elected or does not stand for re-election to the Board or in any other circumstance approved by the Board in its sole discretion, this option shall remain exercisable with respect to any shares yet unexercised, but must be exercised by Optionee, if at all, within two years following the date of his resignation or cessation of service on the Board, or within the period prescribed by the Board in an approved circumstance, or during the remainder of the period preceding the Expiration Date, whichever is shorter. 6. Fractional Shares. Fractional shares shall not be issuable hereunder, ----------------- and when any provision hereof may entitle the Optionee to a fractional share such fraction shall be disregarded. 7. Investment Representation. Optionee agrees that, unless such shares ------------------------- previously have been registered under the Securities Act of 1933 (a) any shares purchased by him hereunder will be Page 4 purchased for investment and not with a view to distribution or resale and (b) until such registration, certificates representing such shares may bear an appropriate legend to assure compliance with such Act. This investment representation shall terminate when such shares have been registered under the Securities Act of 1933. 8. Change in Capital Structure. Subject to any required action by the --------------------------- shareholders of the Company, the number of shares of Common Stock covered by this option, and the price per share thereof, shall be proportionately adjusted and its terms shall be adjusted as the Committee shall determine to be equitably required for any increase or decrease in the number of issued and outstanding shares of Common Stock of the Company resulting from any stock dividend (but only on the Common Stock), stock split, subdivision, combination, reclassification, recapitalization or general issuance to holders of Common Stock of rights to purchase Common Stock at substantially below its then fair market value or any change in the number of such shares outstanding effected without receipt of cash or property or labor or services by the Company for any spin-off, spin-out, split-up, split-off or other distribution of assets to shareholders. In the event of a change in the Common Stock of the Company as presently constituted, which is limited to a change of all of its authorized shares with par or without par value, the shares resulting from any such change shall be deemed to be the Common Stock within the meaning of the Plan. The grant of the option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. Page 5 9. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of the Commonwealth of Virginia, except to the extent that federal law shall be deemed to apply. 10. Conflicts. In the event of any conflict between the provisions of the --------- Plan as in effect on the date hereof and the provisions of this Agreement, the provisions of the Plan shall govern. All references herein to the Plan shall mean the Plan as in effect on the date hereof. 11. Optionee Bound by Plan. The Optionee hereby acknowledges receipt of a ---------------------- copy of the Plan and agrees to be bound by all the terms and provisions thereof. 12. Binding Effect. Subject to the limitations stated above and in the -------------- Plan, this Agreement shall be binding upon and inure to the benefit of the legatees, distributees, and personal representatives of the Optionee and the successors of the Company. IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by a duly authorized officer, and the Optionee has affixed his or her signature hereto. UNIVERSAL CORPORATION OPTIONEE By: __________________________ _____________________________ [Name] Page 6 EX-10.30 5 0005.txt 2000 SPECIAL NON-QUALIFIED STOCK OPTION AGREEMENT Exhibit 10.30 UNIVERSAL CORPORATION 2000 SPECIAL NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT dated as of _________________________, 2000, between Universal Corporation, a corporation organized under the laws of Virginia (the "Company"), and _______________ (the "Optionee"), is made pursuant and subject to the provisions of the Company's 1997 Executive Stock Plan and any future amendments thereto (the "Plan"). Capitalized terms not otherwise defined herein have the meanings given them in the Plan. 1. Grant of Option. Pursuant to the Plan, the Company, on --------------- ________________, 2000, granted to the Optionee, subject to the terms and conditions of the Plan and subject further to the terms and conditions herein set forth, the right and Option to purchase from the Company all or any part of an aggregate of __________ shares of common stock of the Company ("Common Stock") at the Option price of $__________ per share. Such Option will be exercisable as hereinafter provided. 2. Terms and Conditions. This Option is subject to the following terms -------------------- and conditions: (a) Exercise of Option. Unless this Option terminates pursuant to ------------------ paragraph 3, this Option shall be exercisable, in whole or in part, with respect to the total number of shares covered by this Option, on or before May 31, 2000. (b) Method of Exercising and Payment for Shares. This Option shall ------------------------------------------- be exercised by written notice delivered to the attention of the Company's Secretary at the Company's principal office in Richmond, Virginia on or before May 31, 2000. The date of exercise shall be determined by the Company after receipt of such notice but shall be no later than May 31, 2000. The written notice shall specify the number of shares being acquired pursuant to the exercise of the Option when such Option is being exercised in part. Such notice shall be accompanied by payment of the Option price in full for each share of Common Stock being acquired pursuant to such exercise. Five percent (5%) of the Option price may be paid in cash, by delivery of a promissory note in the form of Exhibit A payable for such amount, by the surrender of shares of Common Stock held by the Executive for at least six (6) months with a Fair Market Value at the time of exercise equal to such amount, or by any combination of cash, promissory note or Common Stock equal to such amount. The remaining ninety-five percent (95%) of the Option price shall be paid by delivery of a promissory note in the form of Exhibit B payable for such amount. (c) Nontransferability. The Option granted under this Agreement ------------------ shall be nontransferable except by will or by the laws of descent and distribution; provided, however, that the Optionee shall be entitled, in the manner provided in subparagraph 2(d) hereof, to designate a beneficiary to exercise his or her rights, and to receive any shares of Common Stock issuable, with respect to such Option upon the death of the Optionee. The Option may be exercised during the lifetime of the Optionee only by the Optionee or, if permitted by applicable law, the Optionee's guardian or legal representative. (d) Designation of Beneficiary. The Optionee may designate a -------------------------- beneficiary by completing a beneficiary designation form approved by the Committee and delivering the completed designation form to the Human Resources Department of the Company. The person who is the Optionee's named beneficiary at the time of his or her death (herein referred to as the "Beneficiary") shall be entitled to exercise the Option, to the extent it is exercisable, after the death of the Optionee. The Optionee may from time to Page 2 time revoke or change his or her Beneficiary without the consent of any prior Beneficiary by filing a new designation with the Human Resources Department of the Company. The last such designation received by the Company shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Company prior to the Optionee's death, and in no event shall any designation be effective as of a date prior to such receipt. If the Committee is in doubt as to the right of any person to exercise the Option, the Company may refuse to recognize such exercise, without liability for any interest or dividends thereon, until the Committee determines the person entitled to exercise such Option, which determination shall be final and conclusive. 3. Exercise During Employment. The Optionee's right to exercise this -------------------------- Option shall terminate immediately in the event the Optionee's employment with the Company or an Affiliate is terminated for cause as hereinafter defined or the Optionee is in violation of paragraph 5 hereof. For purposes of the preceding sentence, the Optionee's employment shall be deemed to have been terminated for cause if the Optionee's employment is terminated as a result of fraud, dishonesty or embezzlement from the Company or an Affiliate. 4. Exercise in the Event of Death. In the event of death this Option may ------------------------------ be exercised by the Optionee's estate, or the person or persons to whom his rights under this Option shall pass by will or the laws of descent and distribution. 5. Optionee Covenants. The Optionee recognizes that over a period of many ------------------ years the Company and its Affiliates (including any predecessors or entities from which they might have acquired goodwill) have developed, at considerable expense, relationships with customers and prospective customers which constitute a major part of the value of the goodwill of the Page 3 Company and its Affiliates. During the course of his employment by the Company, the Optionee will have substantial contact with these customers and prospective customers. In order to protect the goodwill of the Company's and the Affiliate's businesses, the Optionee covenants and agrees that, in the event of the termination of his employment, whether voluntary or involuntary, he shall forfeit the Option if he directly or indirectly as an owner, shareholder, director, employee, partner, agent, broker, consultant or other participant, for the period during which the Option is exercisable: (a) calls upon or causes to be called upon, or solicits or assists in the solicitation of any person, firm, association, or corporation, listed as a customer of the Company or any of its Affiliates on the date of termination of the Optionee's employment, for the purpose of selling, renting or supplying any product or service competitive with the products or services of the Company or any of its Affiliates; or (b) performs for a competitor of the Company the same or similar services he or she performed for the Company. Subparagraphs (a) and (b) are separate and divisible covenants; if for any reason any one covenant is held to be invalid or unenforceable, in whole or in part, the same shall not be held to affect the validity or enforceability of the others, or of any provision of this Agreement. The period and scope of the restrictions set forth in this paragraph shall be reduced to the maximum permitted by the law actually applied to determine the validity of each subparagraph. 6. Fractional Shares. Fractional shares shall not be issuable hereunder, ----------------- and when any provision hereof may entitle the Optionee to a fractional share such fraction shall be disregarded. 7. No Right to Continued Employment. This Option does not confer upon -------------------------------- the Optionee any right with respect to continuance of employment by the Company or an Affiliate, Page 4 nor shall it interfere in any way with the right of the Company or an Affiliate to terminate his employment at any time. 8. Investment Representation. The Optionee agrees that unless such shares ------------------------- previously have been registered under the Securities Act of 1933 (i) any shares purchased by him hereunder will be purchased for investment and not with a view to distribution or resale and (ii) until such registration, certificates representing such shares may bear an appropriate legend to assure compliance with such Act. This investment representation shall terminate when such shares have been registered under the Securities Act of 1933. 9. Change in Capital Structure. Subject to any required action by the --------------------------- shareholders of the Company, the number of shares of Common Stock covered by this Option, and the price per share thereof, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock of the Company resulting from a subdivision or consolidation of shares or the payment of a stock dividend (but only on the Common Stock), a stock split-up or any other increase or decrease in the number of such shares effected without receipt of cash or property or labor or services by the Company. Subject to any required action by the shareholders of the Company, if the Company shall be the surviving corporation in any merger or consolidation, this Option shall pertain to and apply to the securities to which a holder of the number of shares of Common Stock subject to this Option would have been entitled. A dissolution or liquidation of the Company or a merger or consolidation in which the Company is not the surviving corporation, shall cause this Option to terminate, provided that the Optionee shall, in such event, have the right immediately prior to such dissolution or liquidation, or merger or consolidation in which the Company is not the surviving corporation, to exercise this Option. In the event of a change in the Common Stock of the Company as presently constituted, which is limited to a change of all of its authorized shares with par value into the same number Page 5 of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the Common Stock within the meaning of the Plan. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. Except as hereinbefore expressly provided in this paragraph 10, the Optionee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation, and any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to this Option. The grant of the Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. 10. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of Virginia. 11. Conflicts. In the event of any conflict between the provisions of --------- the Plan as in effect on the date hereof and the provisions of this Agreement, the provisions of the Plan shall govern. All references herein to the Plan shall mean the Plan as in effect on the date hereof. 12. Optionee Bound by Plan. The Optionee hereby acknowledges receipt of ---------------------- a copy of the Plan and agrees to be bound by all the terms and provisions thereof. Page 6 13. Binding Effect. Subject to the limitations stated above and in the -------------- Plan, this Agreement shall be binding upon and inure to the benefit of the legatees, distributees, and personal representatives of the Optionee and the successors of the Company. IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by a duly authorized officer, and the Optionee has affixed his signature hereto. UNIVERSAL CORPORATION OPTIONEE By: _________________________________ _____________________________ Title:_________________________________ [Name] Page 7 Exhibit A PROMISSORY NOTE --------------- May __, 2000 $_________ For value received, the undersigned, ______________ (the "Maker"), promises to pay to Universal Corporation, a Virginia corporation (the "Company"), or order, at 1501 North Hamilton Street, Richmond, Virginia 23260, or at such other place as the Company may designate in writing, the sum of __________________________________ DOLLARS ($_________), together with interest thereon from May __, 2000 until paid at the rate of six and six one hundredths percent (6.06%). Interest shall be withheld from dividends payable on the shares of Company Common Stock held by the Company as collateral for the Nonrecourse Secured Promissory Note of the Maker to the Company in the amount of $____________ executed on this same date (the "Pledged Shares") to the extent such dividends exceed the interest on that note and any required tax withholdings. If such excess dividends are insufficient to pay the interest due on this Note, any unpaid interest shall be added to the principal. Principal shall be due and payable on May __, 2010 in cash or by the surrender of shares of common stock of Company, other than the Pledged Shares held by the Maker for at least six months with a fair market value at the time of payment equal to the principal due. The Maker shall have the absolute right to prepay without penalty, in whole or in part, the indebtedness hereunder. The Company shall have the right to demand payment of the entire indebtedness immediately upon termination of Maker's employment with the Company; provided such demand is approved by the Compensation Committee of the Board of Directors and by a majority of the members of the Board of Directors of the Company. All payments received under this Note shall be applied first to accrued but unpaid interest and then to the principal balance outstanding. Each of the following shall constitute an "Event of Default" under this Note, upon the happening of any one or more of which all liabilities of the Maker to the Company shall, at the option of the Company, become immediately due and payable, provided that an Event of Default shall not be deemed to have occurred hereunder until the Maker has been notified of such default and failed to cure it within ten (10) days thereafter: (1) Maker shall fail to pay any amount when due hereunder; or (2) Maker shall (a) make an assignment for the benefit of creditors, or petition or apply to any tribunal for the appointment of a custodian, receiver, or trustee for it or a substantial part of his assets; or (b) commence any proceeding under any bankruptcy, reorganization, arrangements, readjustment of debt, dissolution, or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (c) have any such petition or application filed or any such proceeding commenced against him and not dismissed within sixty (60) days. The Maker hereby waives: presentment, protest, and notice of dishonor and protest; any right which it may have to require the Company to proceed against any person before taking action on this Note; and agrees to pay all expenses incurred by the Company in collecting this Note, including reasonable attorneys' fees if this Note is placed with an attorney for collection. Page 2 This Note is made under and shall be construed in accordance with the laws of the Commonwealth of Virginia. ________________________________ _______________ (Maker) ________________________________ Date Acknowledgement and Acceptance Universal Corporation (Company) By:_____________________________ Title:__________________________ Date:___________________________ Page 3 Exhibit B NONRECOURSE SECURED PROMISSORY NOTE ----------------------------------- May __, 2000 $_______ For value received, the undersigned, __________________ (the "Maker"), promises to pay to Universal Corporation, a Virginia corporation (the "Company"), or order, at 1501 North Hamilton Street, Richmond, Virginia 23260, or at such other place as the Company may designate in writing, the sum of ________________________ DOLLARS ($__________), together with interest thereon compounded quarterly from May __, 2000 until paid at the rate of six and six one hundredths percent (6.06%). Interest shall be paid from dividends on the Pledged Shares (as hereinafter defined) at the time such dividends are payable. If such dividends are insufficient to pay the interest due, any unpaid interest shall accrue and remain outstanding and shall be subject to the accrual of additional interest. Principal shall be due and payable on May __, 2010 in cash or by the surrender of shares of common stock of Company, other than the Pledged Shares, held by Maker for at least six (6) months with a fair market value at the time of payment equal to the principal due. With the consent of the Company, the Maker may also pay any amounts due under this Note by delivering a sufficient number of the Pledged Shares to a Securities Broker with instruction to sell such shares and deliver the proceeds, net of any costs and expenses associated with such sale to the Company; provided, however, any such sale proceeds shall first be applied to the principal balance outstanding and then to any accrued but unpaid interest. The Maker shall have the absolute right to prepay without penalty, in whole or in part, the indebtedness hereunder at any time after two years from the date hereof. The Company shall have the right to demand payment of the entire indebtedness immediately upon termination of Maker's employment with the Company; provided such demand is approved by the Compensation Committee of the Board of Directors and by a majority of the members of the Board of Directors of the Company. Except as otherwise provided herein, all payments received under this Note shall be applied first to accrued but unpaid interest and then to the principal balance outstanding. Any payments of principal shall be accompanied by payment by the Executive to the Company of any appropriate withholding taxes. As collateral security for the payment of this Note, Maker hereby pledges with Company and grants to Company a continuing lien and first security interest in the ____________________ (______) shares of Common Stock of Company for which this Note represents partial payment of the exercise price of an option to purchase such shares (the "Pledged Shares"), together with all rights (which may only be exercised upon an Event of Default hereunder) to which the Maker is now or may become entitled by virtue of its ownership of such stock, including, without limitation, cash dividends, stock dividends, and stock rights, all of which shall upon request of the Company be delivered to the Company with written authority to sell, transfer, or rehypothecate the same (all together, the "Collateral"). Maker shall deliver to Company the certificate(s) representing the Pledged Shares, together with stock powers therefor executed in blank. Dividends on the Pledged Shares shall first be used to pay interest due as provided herein, including any interest accrued but unpaid. If the amount of such dividends exceeds the interest due on the Note, such excess, net of any required tax withholdings, shall first be used to pay any interest Page 2 due on the Promissory Note of the Maker to the Company in the amount of $________ executed on this same date and any amount remaining shall be paid to the Maker. This is a nonrecourse note as to the principal balance outstanding. Upon an Event of Default, the sole remedy of Company as to the principal balance outstanding shall be to proceed against the Collateral which shall be applied first against the principal balance outstanding and then to any accrued but unpaid interest. There shall be no personal liability upon Maker for the principal owed. However, the Company shall have full recourse against the Maker for any accrued but unpaid interest. Each of the following shall constitute an "Event of Default" under this Note, upon the happening of any one or more of which all liabilities of the Maker to the Company shall, at the option of the Company, become immediately due and payable, provided that an Event of Default shall not be deemed to have occurred hereunder until the Maker has been notified of such default and failed to cure it within ten (10) days thereafter: (1) Maker shall fail to pay any amount when due hereunder; (2) Maker shall (a) make an assignment for the benefit of creditors, or petition or apply to any tribunal for the appointment of a custodian, receiver, or trustee for it or a substantial part of his assets; or (b) commence any proceeding under any bankruptcy, reorganization, arrangements, readjustment of debt, dissolution, or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (c) have any such petition or application filed or any such proceeding commenced against him and not dismissed within sixty (60) days; or (3) Maker shall fail to deliver to the Company at such time and place as the Company shall reasonably require, share certificate(s) representing the Pledged Shares issued in Maker's name with appropriate stock powers executed in blank by the Maker. Upon the occurrence of any default hereunder, the Company, in Page 3 addition to all other rights, shall have the rights of a secured party under the applicable provisions of the Uniform Commercial Code of the Commonwealth of Virginia. The Maker hereby waives: presentment, protest, and notice of dishonor and protest; any right which it may have to require the Company to proceed against any person before taking action on this Note; and agrees to pay all expenses incurred by the Company in collecting this Note, including reasonable attorneys' fees if this Note is placed with an attorney for collection. This Note is made under and shall be construed in accordance with the laws of the Commonwealth of Virginia. __________________________________ ________________ (Maker) __________________________________ Date Acknowledgement and Acceptance Universal Corporation (Company) By:_____________________________ Title:__________________________ Date:___________________________ Page 4 IRREVOCABLE STOCK POWER In connection with the pledge of stock pursuant to that certain Nonrecourse Secured Promissory Note dated as of May __, 2000, made by the undersigned in favor of Universal Corporation, a Virginia corporation, the undersigned hereby assigns and transfers to: ________________________________, __________ (______) shares of common stock of Universal Corporation, standing in the name of the undersigned, represented by Certificate(s) No. ________. Furthermore, the undersigned does hereby irrevocably constitute and appoint ____________________________________________, attorney to transfer said shares on the books of the issuer with full power of substitution in the premises. __________________________ (Maker) [Name] _____________________________________ Date Page 5 Schedule to Exhibit 10.30
Executive Date of Options Exercise May 31, 2000 Notes Officer Grant Granted Price Recourse Non-Recourse Henry H. Harrell April 19, 2000 71,000 $18.500 $70,853 $1,346,203 May 17, 2000 4,734 $21.875 Allen B. King April 19, 2000 55,000 $18.500 $54,886 $1,042,830 May 17, 2000 3,667 $21.875 William L. Taylor April 19, 2000 34,000 $18.500 $33,930 $ 644,661 May 17, 2000 2,267 $21.875 Hartwell H. Roper April 19, 2000 31,000 $18.500 $30,936 $ 587,780 May 17, 2000 2,067 $21.875
EX-12 6 0006.txt RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 Universal Corporation and Subsidiaries RATIO OF EARNINGS TO FIXED CHARGES Years Ended June 30, 2000, 1999, 1998, 1997 and 1996
2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- Pretax income from continuing operations $177,055 $197,719 $231,138 $171,941 $123,721 Distribution of earnings from unconsolidated affiliates 4,220 840 602 1,509 690 Fixed charges 57,907 57,744 64,881 65,827 69,543 -------- -------- -------- -------- -------- Earnings $239,182 $256,303 $296,621 $239,277 $193,954 Interest $ 56,869 $ 56,837 $ 63,974 $ 64,886 $ 68,754 Amortization of premiums and other 1,038 907 907 941 789 -------- -------- -------- -------- -------- Fixed Charges $ 57,907 $ 57,744 $ 64,881 $ 65,827 $ 69,543 Ratio of Earnings to Fixed Charges 4.13 4.44 4.57 3.63 2.79
EX-21 7 0007.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21
ORGANIZED UNDER LAW OF ---------------------- UNIVERSAL CORPORATION Virginia B. V. European Tobacco Company Netherlands B.V. Deli-HTL Tabak Maatschappij Netherlands Beleggings-en Beheermaatschappij "DE Amstel' B.V. Netherlands Casa Exported Limited Virginia Casalee (UK) Ltd. United Kingdom Casalee Transtobac (PVT) Ltd. Zimbabwe Casalee Transtobac Lieferanten A.G. Switzerland Casalee, Inc. Virginia Companhia Panamericana de Tabacos "Copata" Dominican Republic Continental Tobacco, S.A. Switzerland Corrie, MacColl & Son Ltd. United Kingdom Deli Maatschappij B.V. Netherlands Deli Services B.V. Netherlands Deli Universal, Inc. Virginia Deli-Mij Holdings Ltd. United Kingdom Deltafina, S.p.A. Italy Dunnington-Beach Tobacco Company, Incorporated Virginia Ermor Tabarama-Tabacos do Brasil Ltda. Brazil Gebruder Kulenkampff AG Germany Gebruder Kulenkampff, Inc. Virginia Grassland Holding, Incorporated Kentucky Handelmatschappij Steffex B.V. Netherlands Harkema Services, Inc. Virginia Heuvelman Holding B.V. Netherlands Heuvelman Hout Beheer B.V. Netherlands HTC Commodities, Inc. Virginia Imperial Commodities Corporation California Indoco International B.V. Netherlands Industria AG Switzerland Industria Exportadora de Tabacos Dominicanos "Inetab" C. por Dominican Republic Itofina, S.A. Switzerland J. P. Taylor Company, Incorporated Virginia Jongeneel B.V. Netherlands Jongeneel Holding B.V. Netherlands L'Agricola, S.p.A. Italy Lancaster Leaf Tobacco Company of Pennsylvania, Inc. Virginia Lancaster Philippines, Incorporated Philippines Lancotab, N.V. Belgium Latin America Tobacco Company Virginia Limbe Leaf Tobacco Company, Limited Malawi Lytton Tobacco Company (Malawi) Limited Malawi Lytton Tobacco Company (Private), Limited Zimbabwe Maclin-Zimmer-McGill Tobacco Company, Incorporated Virginia Madison Management Ltd. British Virgin Isles N.V. Deli Universal Netherlands Nyiregyhazi Dohanyfermentalo Rt. Hungary Orient Leaf Tobacco Co., Inc. Philippines
Procesadora Unitab, S.A. Guatemala Red River Commodities, Incorporated North Dakota Red River Foods, Inc. Virginia Simcoe Leaf Tobacco Company, Limited Canada Southern Processors, Incorporated Virginia Southwestern Tobacco Company, Incorporated Virginia Steffex Beheer B.V. Netherlands Tabacos Argentinos S.A. Argentina Tabacos Del Pacifico Norte, S.A. De C.V. Mexico Tanzania Leaf Tobacco Co., Ltd Tanzania Tanzania Tobacco Processors LTD Tanzania Timmerfabriek Bouter En Zonen B. V. Netherlands Tobacco Processors, Incorporated Virginia Tobacco Trading International, Inc. British Virgin Isles Toutiana, S.A. Switzerland Ultoco, S.A. Switzerland Universal DC Holdings Ltd. USA/United Kingdom Universal Eastern Europe Limited United Kingdom Universal Leaf (UK) Limited USA/United Kingdom Universal Leaf Export Company, Incorporated Guam Universal Leaf Far East, Limited Hong Kong Universal Leaf International, Inc. Virginia Universal Leaf North America NC, Inc. North Carolina Universal Leaf P.H., Inc Virginia Universal Leaf Services International United Kingdom Universal Leaf Tabacos Limitada Brazil Universal Leaf Tobacco Company, Incorporated Virginia Universal Leaf Tobacco Poland Sp. z o.o. Poland Van Rees B.V. Netherlands Van Rees Ceylon B.V. Netherlands Van Rees Ltd. United Kingdom W. H. Winstead Company, Incorporated Virginia Zimbabwe Leaf Tobacco Company (Private) Limited Zimbabwe Zimleaf Holdings (Private), Limited Zimbabwe
EX-23 8 0008.txt CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the following Registration Statements of our report dated August 10, 2000 with respect to the consolidated financial statements of Universal Corporation and subsidiaries included in this Annual Report (Form 10-K) for the year ended June 30, 2000. Registration Statement Number Description ---------------- ----------- 33-55140 Form S-8 33-38148 Form S-8 33-56719 Form S-8 333-39297 Form S-8 333-45497 Form S-8 333-43522 Form S-3 /s/ ERNST & YOUNG LLP Richmond, Virginia September 21, 2000 EX-27 9 0009.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF UNIVERSAL CORPORATION AS OF AND FOR THE FISCAL YEAR ENDED JUNE 30, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR JUN-30-2000 JUN-30-2000 61,395 0 358,897 0 562,692 1,088,150 778,270 430,925 1,748,104 883,234 223,262 0 0 66,274 431,505 1,748,104 3,401,969 3,401,969 2,803,957 2,803,957 0 0 56,869 189,587 68,221 113,805 0 0 0 113,805 3.77 3.77
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