10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the Period Ended December 31, 2003

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 incorporation or organization)	(I.R.S. Employer Identification Number)

1501 North Hamilton Street, Richmond, Virginia	23230
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code - (804) 359-9311

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x No ¨

Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock as of the latest practicable date:

Common Stock, no par value – 25,141,364 shares outstanding as of January 30, 2004

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNIVERSAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

Three and Six Months Ended December 31, 2003 and 2002

(In thousands of dollars, except share and per share data)

	THREE MONTHS						SIX MONTHS
	2003			2002			2003			2002
	(Unaudited)						(Unaudited)
Sales and other operating revenues	$	801,011		$	708,578		$	1,587,612		$	1,365,854
Costs and expenses
Cost of goods sold		640,893			576,644			1,287,901			1,102,215
Selling, general and administrative expenses		83,621			74,942			163,560			142,141
Restructuring costs		—			—			—			13,498
Operating income		76,497			56,992			136,151			108,000
Equity in pretax earnings (loss) of unconsolidated affiliates		(1,880	)		(1,448	)		1,896			94
Interest expense		12,198			11,798			23,274			22,282
Income before income taxes and other items		62,419			43,746			114,773			85,812
Income taxes		22,471			15,528			41,318			30,463
Minority interests		2,581			1,475			1,660			129
Net income	$	37,367		$	26,743		$	71,795		$	55,220
Earnings per common share - basic	$	1.49		$	1.04		$	2.88		$	2.14
Earnings per common share - diluted	$	1.48		$	1.04		$	2.85		$	2.13
Retained earnings - beginning of period							$	592,673		$	569,059
Net income								71,795			55,220
Cash dividends declared ($.75 - 2003, $.70 - 2002)								(18,781	)		(17,891	)
Purchase of common stock, net of shares issued								(3,268	)		(31,591	)
Retained earnings - end of period							$	642,419		$	574,797

See accompanying notes.

UNIVERSAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

	December 31, 2003		December 31, 2002		June 30, 2003
	(Unaudited)		(Unaudited)
ASSETS
Current
Cash and cash equivalents	$	135,793	$	149,477	$	44,659
Accounts receivable		356,835		222,338		370,784
Advances to suppliers		124,870		121,609		115,928
Accounts receivable - unconsolidated affiliates		6,681		4,243		7,595
Inventories - at lower of cost or market:
Tobacco		565,635		548,391		529,736
Lumber and building products		134,190		84,913		140,647
Agri-products		82,276		66,574		82,527
Other		28,969		28,973		30,377
Prepaid income taxes		4,031		18,109		12,375
Deferred income taxes		6,249		6,637		6,168
Other current assets		23,613		20,727		34,201
Total current assets		1,469,142		1,271,991		1,374,997
Property, plant and equipment - at cost
Land		59,105		34,631		57,310
Buildings		348,153		291,648		338,115
Machinery and equipment		689,277		575,700		639,157
		1,096,535		901,979		1,034,582
Less accumulated depreciation		552,073		466,360		521,201
		544,462		435,619		513,381
Other assets
Goodwill and other intangibles		132,853		125,629		132,903
Investments in unconsolidated affiliates		92,510		82,722		90,119
Deferred income taxes		51,900		47,085		45,466
Other noncurrent assets		89,085		89,835		86,208
		366,348		345,271		354,696
	$	2,379,952	$	2,052,881	$	2,243,074

See accompanying notes.

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UNIVERSAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

	December 31, 2003			December 31, 2002			June 30, 2003
	(Unaudited)			(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Notes payable and overdrafts	$	172,393		$	124,656		$	265,742
Accounts payable		329,872			307,430			361,058
Accounts payable - unconsolidated affiliates		4,783			4,159			2,073
Customer advances and deposits		111,973			109,180			42,093
Accrued compensation		30,691			17,730			31,959
Income taxes payable		15,726			25,673			20,969
Current portion of long-term obligations		64,418			183,365			100,387
Total current liabilities		729,856			772,193			824,281
Long-term obligations		775,358			514,527			614,994
Postretirement benefits other than pensions		40,989			39,335			40,305
Other long-term liabilities		98,059			74,432			96,522
Deferred income taxes		18,691			25,387			12,348
Minority interests		33,356			23,927			34,346
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, 24,983,745 issued and outstanding shares (25,278,217 at December 31, 2002, and 24,920,083 at June 30, 2003)		94,912			87,920			90,665
Retained earnings		642,419			574,797			592,673
Accumulated other comprehensive loss		(53,688	)		(59,637	)		(63,060	)
Total shareholders’ equity		683,643			603,080			620,278
	$	2,379,952		$	2,052,881		$	2,243,074

See accompanying notes.

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UNIVERSAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended December 31, 2003 and 2002

(In thousands of dollars)

	SIX MONTHS
	2003			2002
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	71,795		$	55,220
Depreciation		26,000			23,000
Amortization		2,000			2,000
Other adjustments to reconcile net income to net cash provided by operating activities		(4,000	)		14,000
Changes in operating assets and liabilities		11,339			(27,746	)
Net cash provided by operating activities		107,134			66,474
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(38,000	)		(61,000	)
Net cash used in investing activities		(38,000	)		(61,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term debt, net		(93,000	)		(2,000	)
Issuance of long-term debt		203,000			138,000
Repayment of long-term debt		(69,500	)		—
Issuance of common stock		4,000			—
Purchases of common stock		(3,500	)		(32,000	)
Dividends paid		(19,000	)		(18,000	)
Net cash provided by financing activities		22,000			86,000
Net increase in cash and cash equivalents		91,134			91,474
Cash and cash equivalents at beginning of year		44,659			58,003
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	135,793		$	149,477

See accompanying notes.

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Universal Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2003

All figures contained herein are unaudited.

1). Universal Corporation, with its subsidiaries (the “Company” or “Universal”), has operations in tobacco, lumber and building products, and agri-products. Because of the seasonal nature of these businesses, the results of operations for any fiscal quarter will not necessarily be indicative of results to be expected for other quarters or a full fiscal year. All adjustments necessary to state fairly the results for the period have been included and were of a normal recurring nature. Certain amounts in prior year statements have been reclassified to conform to the current year presentation.

2). Universal has decided to change its fiscal year-end to March 31 from June 30 effective for the current fiscal year. This change will bring all consolidated subsidiaries to the same reporting date and will better match the fiscal reporting period with the crop and operating cycles of the Company’s largest operations. The Company plans to file a Transitional Report on Form 10-K for the nine months ending March 31, 2004.

Universal recognizes its fixed factory overhead expense in the United States in the quarters in which the tobacco is processed. Since processing does not normally occur during the period between April 1 and June 30, the projected overhead expense for that period has historically been allocated to the preceding three quarters of each fiscal year, based on volumes processed. Because of the change in fiscal year end to March 31, the factory overhead expense for the period April 1 through June 30, 2004, will be reported in fiscal year 2005 results, and will be allocated to the subsequent quarters of that fiscal year. As a result, operating income for each quarter of the nine-month transitional year ending March 31, 2004, reflects favorable comparisons to the prior fiscal year. Had fiscal year 2004 included the estimated fixed factory overhead expense for April 1 through June 30, 2004, tobacco segment operating income would have been $6 million lower for the second quarter and $8 million lower for the six months. For the nine-month transitional year, management estimates that the impact on operating income would be a reduction of approximately $11 million to $12 million.

3). In January 2004, the Financial Accounting Standards Board (FASB) issued Staff Position No. 106-1 (FSP No. 106-1), “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003.” FSP No. 106-1 provides accounting and disclosure guidance related to the effects on a company’s postretirement benefit costs and obligations of recent legislation that adds a prescription drug benefit to the federal Medicare program, and provides a federal subsidy to companies that sponsor retiree medical programs with drug benefits that are actuarially equivalent to those now available under Medicare. Because the FASB has not yet issued authoritative guidance on accounting for the federal subsidy, FSP No. 106-1 allows companies to elect deferral of accounting recognition until such guidance is issued (or earlier if an amendment, settlement, or curtailment of a company’s plan occurs). Universal has chosen to defer recognition and, accordingly, the costs and obligations for retiree benefits currently included in its financial statements do not reflect the effects of the federal subsidy. The Company may be required to change previously

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reported information when authoritative accounting guidance is issued. At the present time, the Company does not expect that amendments to its postretirement benefits plan will be required to qualify for the subsidy.

4). Guarantees of bank loans to growers for crop financing and construction of curing barns and other tobacco producing assets are industry practice in Brazil. At December 31, 2003, total exposure under subsidiaries’ guarantees issued for banking facilities of Brazilian farmers was approximately $139 million. About 63% of these guarantees expire within one year, and the remainder expire within 5 years. The Company withholds payments due to the farmer on delivery of tobacco and forwards those payments to the third-party bank. Failure of farmers to deliver sufficient quantities of tobacco to the Company to cover their obligations to third-party banks could result in a liability for the Company; however, in that case, the Company would have recourse against the farmers. In addition, the Company has contingent liabilities of approximately $9 million that consist primarily of bid and performance bonds. The Company considers the possibility of a material loss on any of the guarantees and other contingencies to be remote, and the accrual recorded for the value of the guarantees was not material at December 31, 2003.

In recent years, economic and political changes in Zimbabwe have led to a significant decline in tobacco production in that country. Universal has been able to offset the effect of this decline on its business with increased production in other countries and growing regions. If the political situation in Zimbabwe were to further deteriorate significantly, the Company’s ability to recover its assets there could be impaired. The Company’s equity in its net assets of subsidiaries in Zimbabwe was approximately $61 million at December 31, 2003. Net monetary assets denominated in Zimbabwe dollars represent a portion of this amount and include local currency deposits that have grown due to the country’s financial policies. The U.S. dollar value of these net monetary assets is exposed to changes in the value of the Zimbabwe dollar, and approximates $8.5 million when remeasured using the export exchange rate of approximately ZWD 800 to USD 1. Recently, the Zimbabwe dollar has traded in government-sponsored auctions in a range between ZWD 3,613 and ZWD 4,197 to USD 1. The auction rate will be used to remeasure the Company’s net monetary assets denominated in Zimbabwe dollars in the financial statements reported for the period ending March 31, 2004. If the recent auction exchange rate was applied to those assets at December 31, 2003, the Company’s equity in its net assets of subsidiaries in Zimbabwe would fall to approximately $56 million. The Company’s ability to reduce or limit further growth in the net monetary assets exposed to the value of the Zimbabwe dollar is dependent in part on the ability of its subsidiaries to utilize local currency deposits to pay costs and expenses.

5). The Competition Directorate-General of the European Commission (“DG Comp”) is investigating the buying practices of Spanish tobacco processors with the stated aim of determining to what extent the tobacco processing companies have jointly agreed on raw tobacco qualities and prices offered to Spanish tobacco growers. After conducting an investigation, the Company believes that Spanish tobacco processors, including the Company’s Spanish subsidiary, Tabacos Espanoles, S.L. (“TAES”), have jointly agreed to the terms of sale of green tobacco and quantities to be purchased from associations of farmers and have jointly negotiated with those associations. TAES is cooperating

6

fully with the DG Comp in its investigation and believes that there are unusual, mitigating circumstances peculiar to the highly structured market for green tobacco in Spain. Current guidelines allow the DG Comp to assess fines in this case in amounts that would be material to the Company’s earnings. Although the Company expects to be assessed a fine, management is unable to estimate an amount at this time, and no liability has been recorded in the financial statements.

6). During fiscal year 2003, the Company recorded about $33.0 million in restructuring charges associated with consolidation of U.S. and African tobacco operations. Approximately $28 million of the charges were to record the severance cost associated with 941 hourly employees and 366 salaried employees. The severance costs included $13.5 million recorded in the first quarter of fiscal year 2003 related to the U.S. operations. During the six months ended December 31, 2003, the Company paid approximately $2.7 million to 81 employees in connection with the restructuring plan.

Changes in severance liabilities are shown below:

Severance Liabilities (in thousands of dollars)	Six months ended December 31, 2003			Six months ended December 31, 2002			Fiscal year ended June 30, 2003
Beginning balance	$	13,399		$	2,079		$	2,079
Restructuring charges		—			13,498			27,981
Payments		(2,719	)		(1,819	)		(16,661	)
Ending balance	$	10,680		$	13,758		$	13,399

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7). As permitted under Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” the Company applies the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” to stock options granted to employees. Under Statement No 123, as amended by Statement No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” the Company discloses pro forma net income and basic and diluted earnings per share as if a fair value-based method had been applied to all awards.

	THREE MONTHS						SIX MONTHS
Periods ended December 31,	2003			2002			2003			2002
Net income (in thousands of dollars)	$	37,367		$	26,743		$	71,795		$	55,220
Stock-based employee compensation cost, net of tax effect, under fair value accounting		(1,163	)		(962	)		(2,141	)		(1,924	)
Pro forma net income under fair value method	$	36,204		$	25,781		$	69,654		$	53,296
Earnings per share - basic	$	1.49		$	1.04		$	2.88		$	2.14
Per share stock-based employee compensation cost, net of tax effect, under fair value accounting		(0.05	)		(0.04	)		(0.09	)		(0.07	)
Pro forma earnings per share - basic	$	1.44		$	1.00		$	2.79		$	2.07
Earnings per share - diluted	$	1.48		$	1.04		$	2.85		$	2.13
Per share stock-based employee compensation cost, net of tax effect, under fair value accounting		(0.05	)		(0.04	)		(0.09	)		(0.07	)
Pro forma earnings per share - diluted	$	1.43		$	1.00		$	2.76		$	2.06

8). The following table sets forth the computation of basic and diluted earnings per share.

	THREE MONTHS				SIX MONTHS
Periods ended December 31,	2003		2002		2003		2002
Net income (in thousands of dollars)	$	37,367	$	26,743	$	71,795	$	55,220
Denominator for basic earnings per share:
Weighted average shares		24,998,868		25,618,912		24,970,504		25,840,475
Effect of dilutive securities:
Employee stock options		166,754		40,569		180,228		42,452
Denominator for diluted earnings per share		25,165,622		25,659,481		25,150,732		25,882,927
Earnings per share - basic	$	1.49	$	1.04	$	2.88	$	2.14
Earnings per share - diluted	$	1.48	$	1.04	$	2.85	$	2.13

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9). Comprehensive Income:

	THREE MONTHS				SIX MONTHS
Periods ended December 31,	2003		2002		2003		2002
	(in thousands of dollars)
Net income	$	37,367	$	26,743	$	71,795	$	55,220
Foreign currency translation adjustment		7,525		1,275		9,372		11,584
Comprehensive income	$	44,892	$	28,018	$	81,167	$	66,804

10). Segments are based on product categories. The Company evaluates performance based on segment operating income and equity in pretax earnings of unconsolidated affiliates.

	THREE MONTHS						SIX MONTHS
Periods ended December 31,	2003			2002			2003		2002
	(in thousands of dollars)
SALES AND OTHER OPERATING REVENUES
Tobacco	$	473,026		$	455,979		$	929,715	$	857,757
Lumber and building products distribution		193,937			140,430			390,268		283,334
Agri-products		134,048			112,169			267,629		224,763
Consolidated total	$	801,011		$	708,578		$	1,587,612	$	1,365,854
OPERATING INCOME
Tobacco	$	70,463		$	51,955		$	128,692	$	112,485
Lumber and building products distribution		7,824			6,882			15,787		13,852
Agri-products		2,675			2,557			5,518		6,346
Total segment operating income		80,962			61,394			149,997		132,683
Less:
Corporate expenses		6,345			5,850			11,950		11,091
Restructuring costs		—			—			—		13,498
Equity in pretax earnings of unconsolidated affiliates		(1,880	)		(1,448	)		1,896		94
Consolidated total	$	76,497		$	56,992		$	136,151	$	108,000

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

During the six months that ended on December 31, 2003, our cash flow from operations exceeded our requirements for capital spending and dividends because capital spending has declined and because most of the expenditures for working capital requirements, which are usually heavy during this period, had been made before the fiscal year began. Taking advantage of good markets in early October, we issued $200 million in medium-term notes to provide for expected funding needs for the rest of the year, resulting in lower short-term debt and higher cash balances. We expect cash balances to decline and short-term borrowing to increase over the remainder of fiscal year 2004.

Working capital at December 31, 2003, was $739.3 million, up $188.6 million from the level at June 30, 2003, but net of cash and debt, working capital declined from $872.2 million at June 30, 2003, to $840.3 million at December 31, 2003. Seasonal increases in working capital components are normal as tobacco inventories usually increase during the first half of the fiscal year when tobacco is received and processed in Africa and the United States, and is awaiting shipment to customers. During the third quarter, the balance usually begins to decline. However, as of June 30, 2003, inventories were nearly as high as those of the seasonal peak, due to early purchases in Brazil and delayed shipments from Africa. Thus, the six-month working capital increase in fiscal year 2004 was not primarily related to inventory and other operating assets, but rather to the issuance of $200 million in long-term debt, the proceeds of which were used to repay short-term borrowing and to retire maturing debt that had been classified as current. Remaining proceeds were held as cash equivalents as of December 31, 2003, pending their use to retire additional maturing debt and to finance new crop purchases. The reduction in current debt balances and increase in current cash balances produced an increase in working capital. We expect cash balances to decline as the larger crops in South America will come to market during the quarter ending March 31.

Inventory is usually financed with a mix of cash, notes payable, and customer deposits, depending on our borrowing capabilities, interest rates, and exchange rates, as well as those of our customers. We generally do not purchase material quantities of tobacco on a speculative basis. Thus, the $35.9 million six-month increase in inventory to $566 million represents primarily tobacco that has been committed to customers. This increase was more than offset by the nearly $70 million increase in customer advances and deposits, which brought the advance balance to $112.0 million at December 31, 2003. Customer advances were unusually low as of June 30, 2003, in part because relative interest rates made funding by Universal more attractive than it had been earlier in 2003. The level of customer advances can vary from year to year as they review their circumstances. Accordingly, we treat such advances as borrowings when we review our balance sheet structure.

During the twelve months ended December 31, 2003, working capital increased by $239.5 million to $739.3 million, and net of cash and debt, it increased by $182.0 million primarily due to the increase in accounts receivable. Accounts receivable increased with the increase in revenues, which also included the effect of the weaker U.S. dollar and the operations of JéWé, a Dutch company acquired by our lumber distribution business in January 2003.

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We generated excess cash during the first six months of the year. We used $107.1 million in cash flow from operations to fund $38 million of capital expenditures, $3.5 million in share repurchases, and $19 million in dividend payments. The remainder was primarily invested in cash equivalents. Capital expenditures were down from the $61 million that we spent in the first half of fiscal year 2003, as construction of the U.S. processing facility in Nash County, North Carolina, was completed.

In early October 2003, we issued $200 million in 5.2% medium-term notes due October 15, 2013. The proceeds were used to repay maturing long-term debt of $63 million in 8% medium-term notes and for other general corporate purposes.

During the quarter, we terminated interest rate swaps on $123.5 million notional amount of long-term debt for a gain of approximately $1.4 million, which will be amortized over the remaining life of the underlying debt. We entered new interest rate swaps for a notional amount of $200 million at the same time that we issued the medium-term notes. Under these swaps, we receive fixed rate payments matching the 5.2% fixed rate interest of our debt, and we pay floating rate amounts based on LIBOR to be set as of the payment date. As of December 31, 2003, the projected average floating rate to be paid on the $200 million notional amount was 1.91%.

As of December 31, 2003, we were in compliance with the covenants of our debt agreements. We had $250 million in back-up committed credit lines and $135.8 million in cash. In addition, we had $200 million available on our shelf registration. Our short-term debt and current maturities of long-term debt totaled $236.8 million, and we had no significant contractual commitments. Thus, we believe that our liquidity and capital resources at December 31, 2003, remained adequate to support our foreseeable operating needs.

Results of Operations

Earnings for the second quarter and the first six months of fiscal year 2004 were up significantly compared to the same periods a year ago. For the three-month period ended December 31, 2003, net income was $37.4 million, or $1.48 per diluted share, compared to $26.7 million, or $1.04 per diluted share, in the second quarter of fiscal year 2003. Net earnings for the first six months of fiscal year 2004 were $71.8 million, or $2.85 per diluted share, compared to $55.2 million, or $2.13 per diluted share, in the prior year. Six-month earnings in fiscal year 2003 are net of a $13.5 million before-tax restructuring charge ($8.7 million after taxes, or $0.34 per share) recorded in the first quarter of that year related to the consolidation of U.S. operations. Revenues were $801 million in the quarter and $1.6 billion for the first six months of fiscal year 2004, compared to $709 million and $1.4 billion, respectively, in the quarter and six-month periods last year.

Tobacco earnings were higher in both the quarter and the six months. U.S. operations reflected the benefit of a one-time shift in the allocation of fixed factory overhead associated with the change in the Company’s fiscal year end. Universal recognizes its fixed factory overhead expense in the United States in the quarters in which the tobacco is processed. Since processing does not normally occur during the period between April 1 and June 30, the projected overhead expense for that period has historically been allocated to the preceding three quarters of each fiscal year, based on volumes processed. Because of the change in fiscal year end to March 31, the factory overhead expense for the period from April 1 through June 30, 2004, will be reported in fiscal year 2005 results, and will be allocated to the subsequent quarters of that fiscal year. As a result, operating income for each quarter of the

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nine-month transitional year ending March 31, 2004, reflects favorable comparisons to the prior fiscal year. Had fiscal year 2004 included the estimated fixed factory overhead expense for April 1 though June 30, 2004, tobacco segment operating income would have been $6 million lower for the second quarter and $8 million lower for the six months. For the nine-month transitional year, management estimates that the impact on operating income would be a reduction of approximately $11 million to $12 million.

U.S. operations also benefited from significant operating efficiencies and yield improvements realized from the tobacco processing operations at the new Nash County facility and the refurbished Danville plant. Plant throughput was also higher due to significant volumes processed for the Flue-Cured Tobacco Cooperative Stabilization Corporation in the second quarter.

South American volumes, which include shipments from both Brazil and Argentina, were higher in both periods. Volumes in Zimbabwe continue to decline as tobacco production shrinks in that country. As we have noted before, flue-cured marketings in the current fiscal year were only about 80 million kilos, and the upcoming crop is expected to decline further. These shortfalls have led customers to seek sources of supply in other African countries and in Brazil, where the Company has significant operations. Shipments from Malawi were also lower in both periods due to a smaller burley crop and reduced sales of carryover tobacco.

Including the estimated effect of the U.S. fixed factory overhead allocation for the transitional year, adjusted tobacco segment operating earnings were up $12.5 million for the quarter and $8.2 million for the six months.

	THREE MONTHS					SIX MONTHS
Periods ended December 31,	2003			2002		2003			2002
(in thousands of dollars)
Tobacco segment operating income, as reported	$	70,463		$	51,955	$	128,692		$	112,485
Adjustments for U.S. overhead allocation		(6,000	)		—		(8,000	)		—
Adjusted tobacco segment operating income	$	64,463		$	51,955	$	120,692		$	112,485

Lumber and building product revenues and earnings for the quarter and the six-month period continued to benefit from the strong euro and the inclusion of JéWé. The euro has strengthened by 16% for the quarter and by 18% for the six months compared to last year. Lumber and building product revenues were up $54 million in the quarter and $107 million for the six months. Excluding JéWé, euro revenues and results were down in both periods, reflecting continued weakness in sales volumes due to the lingering recession in the Netherlands and other European markets.

Agri-products results were up slightly in the quarter but down for the six months. Improvements were recorded in confectionery sunflower seeds and rubber, but nuts and dried fruit continue to lag last year’s record results. Agri-product revenues were up $22 million for the quarter and $43 million for the six months, primarily due to small acquisitions made last year.

The earnings outlook for the full nine-month fiscal year has improved. Growth in international cigarette sales appears to be generating increased leaf demand, at least outside the United States. Demand for U.S. leaf continues to fall reflecting non-competitive prices. The absence of any meaningful program reform while growers wait for a quota buyout means that the pricing of U.S. tobacco will not improve significantly in the near term. However, U.S. operations will

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benefit from new processing business from the Kentucky burley pool, which has moved some of its processing business out of Kentucky for the first time. The euro remains strong against the U.S. dollar, and the effects of the euro’s strength coupled with the results from JéWé, are expected to outweigh the impact of the sluggish European economy on our lumber and building products distribution operations. Our agri-products segment continues to do well despite difficult market conditions for a number of the products that we handle.

We are pleased with the earnings recorded through the first six months, and we now believe that net income for the nine months ending March 31, 2004, will be in the range of $95 to $105 million compared to our previous estimate of $85 to $95 million. Earnings for the first nine months of fiscal year 2003 were $79 million.

The Company cautions readers that any statements contained herein regarding earnings and expectations for our performance are forward-looking statements based upon management’s current knowledge and assumptions about future events, including anticipated levels of demand for and supply of the Company’s products and services; costs incurred in providing these products and services; timing of shipments to customers; changes in market structure; and general economic, political, market, and weather conditions. Earnings of the lumber and building products segment are also affected by changes in exchange rates between the U.S. dollar and the euro. Actual results, therefore, could vary from those expected. For more details on important factors that could cause actual results to differ from our expectations, see Item 1, Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7, and Notes to the Consolidated Financial Statements in Item 8 of the Company’s Annual Report on Form 10-K for the year ended June 30, 2003, as filed with the Securities and Exchange Commission.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rates

Interest rate risk is limited in the tobacco business because customers usually pre-finance purchases or pay market rates of interest for inventory purchased for their accounts. Our tobacco customers pay interest on tobacco purchased for their order at rates based on current markets for variable rate debt. If we fund our committed tobacco inventory with fixed-rate debt, we may not be able to recover interest at that fixed rate if current market interest rates fall. As of December 31, 2003, tobacco inventory of $566 million comprised about $491 million in inventory that was committed for sale to customers and about $75 million that was not committed. Committed inventory, after deducting $112.0 million in customer deposits, represents our net exposure of $379 million. To manage this risk, we maintain a substantial portion of our debt at variable interest rates either directly or through interest-rate exchange agreements. Our aggregate debt carried at variable interest rates either on its face or through derivative instruments was about $600 million, in order to mitigate interest rate risk related to carrying fixed-rate debt. Of the $600 million in variable-rate debt, $200 million represented hedges of fixed rate debt in which we receive fixed rate payments and pay variable rate payments based on LIBOR. Although a hypothetical 1% change in short-term interest rates would result in a change in annual interest expense of approximately $6 million, about 63% of that amount should be offset with changes in customer charges.

Currency

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. Most of the operations are accounted for using the U.S. dollar as the functional currency. Because there is no forward foreign exchange market in many major origins of our tobacco, we manage our foreign exchange risk by matching funding for inventory purchases with the currency of sale, which is usually the U.S. dollar, and by minimizing our net investment in individual countries. In these countries, we are vulnerable to currency gains and losses to the extent that any local currency balances do not offset each other. While these net exposures are typically small and vary seasonally, the Company has experienced more significant effects in certain instances where currency exchange rates in certain countries were adjusted dramatically. For example, Zimbabwe’s financial policies have caused the Company’s subsidiaries there to accumulate a significant balance of cash in Zimbabwe dollars. The Company is currently using the export exchange rate of approximately ZWD 800 to translate these balances, as well as Zimbabwe-dollar payables, into U.S. dollars, the functional currency of its subsidiaries in Zimbabwe. In January 2004, the Reserve Bank of Zimbabwe began a program of financial management that includes an auction process. The published results of the auctions include average exchange rates between ZWD 3,613 and ZWD 4,197 to USD 1.

Our balance sheet at December 31, 2003, includes net monetary assets in Zimbabwe dollars that are remeasured to $8.5 million using the export exchange rate. These assets are exposed to changes in the value of the Zimbabwe dollar. If we were to remeasure those net monetary assets using recent auction exchange rates, they would be valued at about $1.8 million, approximately $6.7 million below current valuation. However, our exposure changes as the season progresses, and as we are able to use those assets, the exposure falls. Our ability to use the assets depends, among other things, on local inflation and financial policies as well as the relative amount of cash generated by operations.

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Our lumber and building products operations, which are based in the Netherlands, use the euro as their functional currency. In certain non-export tobacco markets, we also use the local currency as the functional currency. Examples of these primarily domestic markets are Canada, Hungary, and Poland. In each case, reported earnings are affected by the translation of the local currency into the U.S. dollar.

Commodity

We use commodity futures in our rubber business to reduce the risk of price fluctuations. We do not enter into rubber contracts for trading purposes. All forward commodity contracts are adjusted to fair market value during the year, and gains and losses are recorded in income at that time. The amount recorded during the quarter was not material.

Derivatives Policies

Hedging interest rate exposure using swaps and hedging foreign exchange exposure using forward contracts are specifically contemplated to manage risk in keeping with management’s policies. We may use derivative instruments, such as swaps, forwards, or futures, which are based directly or indirectly upon interest rates, currencies, and commodities, to manage and reduce the risks inherent in interest rate, currency, and price fluctuations.

We do not utilize derivatives for speculative purposes, and we do not enter into market risk sensitive instruments for trading purposes. Derivatives are transaction specific so that a specific debt instrument, contract, or invoice determines the amount, maturity, and other specifics of the hedge. Counterparty risk is limited to institutions with long-term debt ratings of A or better.

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ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports we file under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer evaluated, with the participation of other members of management, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 15d-15(e)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, management concluded that our disclosure controls and procedures were effective. There were no significant changes in our internal control over financial reporting identified in connection with this evaluation that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In May 2003, Universal Leaf Tobacco Company, Incorporated, J.P. Taylor Company, Incorporated, and Southwestern Tobacco Company, Incorporated, which are subsidiaries of Universal Corporation (the “Company Subsidiaries”), along with several other domestic cigarette manufacturers and tobacco-leaf dealers entered into a settlement agreement with the plaintiffs in DeLoach, et al. v. Philip Morris Inc., et al., a suit originally filed against U.S. cigarette manufacturers in the United States District Court for the District of Columbia and subsequently moved to the United States District Court for the Middle District of North Carolina, Greensboro Division (Case No. 00-CV-1235) (the “DeLoach Suit”). Under the settlement agreement, the Company Subsidiaries agreed to pay $12 million for distribution to members of the class. The total amount to be paid by all the settling defendants, of which there are five in addition to the Company Subsidiaries, to the class is approximately $212 million, plus commitments by the three settling cigarette manufacturers (i) to purchase certain volumes of domestic flue-cured and burley tobacco for at least ten years and (ii) to pay the fees of plaintiffs’ counsel when approved by the court. The court approved the settlement agreement in October 2003, dismissing the case against the settling defendants, and Universal completed its payment on October 20, 2003.

The Competition Directorate-General of the European Commission (“DG Comp”) is investigating the buying practices of Spanish tobacco processors with the stated aim of determining to what extent the tobacco processing companies have jointly agreed on raw tobacco qualities and prices offered to Spanish tobacco growers. After conducting an investigation, the Company believes that Spanish tobacco processors, including the Company’s Spanish subsidiary, Tabacos Espanoles, S.L. (“TAES”), have jointly agreed to the terms of sale of green tobacco and quantities to be purchased from associations of farmers and have jointly negotiated with those associations. TAES is cooperating fully with the DG Comp in its investigation and believes that there are unusual, mitigating circumstances peculiar to the highly structured market for green tobacco in Spain. Current guidelines allow the DG Comp to assess fines in this case in amounts that would be material to the Company’s earnings. Although the Company expects to be assessed a fine, management is unable to estimate an amount at this time, and no liability has been recorded in the financial statements.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The Annual Meeting of Shareholders of the Company (the “Meeting”) was held on October 28, 2003.

(b) At the Meeting, the shareholders elected four directors to serve three-year terms. The voting with respect to each nominee was as follows:

Nominee	Term	Votes For	Votes Withheld	Broker Non-Votes
John B. Adams, Jr.	3	23,004,126.464	196,309.892	0
Joseph C. Farrell	3	22,226,921.046	973,515.310	0
Walter A. Stosch	3	23,039,694.604	160,741.752	0
Eugene P. Trani	3	23,022,139.030	178,297.326	0

The terms of office of the following directors continued after the Meeting: Allen B. King, Eddie N. Moore, Jr., Hubert R. Stallard, Charles H. Foster, Jr., Thomas H. Johnson and Jeremiah J. Sheehan.

No other matters were voted upon at the Meeting or during the quarter for which this report is filed.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits

10.1.	Form of Employment Agreement dated October 23, 2003, between Universal Corporation and named executive officers (George C. Freeman III and James H. Starkey III)*
31.1.	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as amended*
31.2.	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as amended*
32.1.	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350*
32.2.	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350*

b. Reports on Form 8-K

Form 8-K dated October 1, 2003, filing under Item 7 a Distribution Agreement and forms of notes to be used in connection with continuous medium-term note offering.

Form 8-K dated October 28, 2003, reporting Item 12 concerning earnings for period ended September 30, 2003, and furnishing related press release under Item 7.

Form 8-K dated October 28, 2003, reporting Item 5 concerning new Chairman of the Board of Directors and filing related press release under Item 7.

Form 8-K dated October 30, 2003, reporting Item 5 concerning new corporate officers and filing related press release under Item 7.

Form 8-K dated December 4, 2003, reporting Item 5 concerning increase in dividends and filing related press release under Item 7.

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: February 10, 2004	UNIVERSAL CORPORATION
	(Registrant)
	/s/ Hartwell H. Roper
	Hartwell H. Roper, Vice President and Chief Financial Officer
	/s/ Robert M. Peebles
	Robert M. Peebles, Controller (Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

AGREEMENT by and between Universal Corporation, a Virginia corporation (the “Company”), and                      (the “Executive”), dated as of the 23rd day of October, 2003.

The Board of Directors of the Company (the “Board”), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive’s full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement.

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1. Certain Definitions.

(a) The “Effective Date” shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive’s employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the “Effective Date” shall mean the date immediately prior to the date of such termination of employment.

(b) The “Change of Control Period” shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the “Renewal Date”), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended.

(c) “Subsidiary” shall mean any corporation that is directly, or indirectly though one or more intermediaries, controlled by the Company.

2. Change of Control. For the purpose of this Agreement, a “Change of Control” shall mean:

(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or

(b) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of

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the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

3. Employment Period; Guaranty. If the Executive is employed by the Company and/or a Subsidiary on the Effective Date, the Company hereby agrees to continue to employ and to cause such Subsidiary to continue to employ the Executive, and the Executive hereby agrees to remain in the employ of the Company and/or such Subsidiary, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of such date (the “Employment Period”). For purposes of this Agreement, unless expressly limited to Universal Corporation, “Company” hereinafter shall mean each of Universal Corporation and/or any of its Subsidiaries that employ the Executive. A Subsidiary that executes this Agreement absolutely and unconditionally guarantees to the Executive the performance of all obligations of the Company under this Agreement.

4. Terms of Employment.

(a) Position and Duties.

(i) During the Employment Period, (A) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location.

(ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.

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(b) Compensation.

(i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Company.

(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the Executive’s highest bonus under annual incentive plans of the Company and its affiliated companies or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the “Recent Annual Bonus”). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus.

(iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.

(iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical,

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prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.

(v) Expenses. During the Employment Period the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

(vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

(vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

(viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

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5. Termination of Employment.

(a) Death or Disability. The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.

(b) Cause. The Company may terminate the Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” shall mean:

(i) the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive’s duties, or

(ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.

For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board,

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the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.

(c) Good Reason. The Executive’s employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, “Good Reason” shall mean:

(i) the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

(ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

(iii) the Company’s requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company’s requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date;

(iv) any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; or

(v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.

For purposes of this Section 5(c), any good faith determination of “Good Reason” made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement.

(d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the

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Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

(e) Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.

6. Obligations of the Company upon Termination.

(a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive’s employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason:

(i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:

A. the sum of (1) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid and (2) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof which has been earned but deferred (and annualized for any fiscal year consisting of less than twelve full months or during which the Executive was employed for less than twelve full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount being referred to as the “Highest Annual Bonus”) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the “Accrued Obligations”); and

B. the amount equal to the product of (1) three and (2) the sum of (x) the Executive’s Annual Base Salary and (y) the Highest Annual Bonus; and

C. an amount equal to the excess of (a) the actuarial equivalent of the benefit under the qualified defined benefit retirement plan of the Company or any of its affiliated companies (the “Retirement Plan”) (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Retirement Plan immediately prior to the Effective Date), and any excess or supplemental retirement plan of the Company or any of its affiliated companies in which the Executive participates (together, the “BRP”) which the Executive would

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receive if the Executive’s employment continued for three years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, and, assuming that the Executive’s compensation in each of the three years is that required by Section 4(b)(i) and Section 4(b)(ii), over (b) the actuarial equivalent of the Executive’s actual benefit (paid or payable), if any, under the Retirement Plan and the BRP as of the Date of Termination;

(ii) for three years after the Executive’s Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive’s family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive’s employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period;

(iii) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion; and

(iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”).

(b) Death. If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive’s estate and/or the Executive’s

Page 9

beneficiaries, as in effect on the date of the Executive’s death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries.

(c) Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families.

(d) Cause; Other than for Good Reason. If the Executive’s employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination.

7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.

8. Full Settlement. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the

Page 10

Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”).

9. Certain Additional Payments by the Company.

(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 9(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount that could be paid to the Executive such that the receipt of Payments would not give rise to any Excise Tax (the “Reduced Amount”), then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount.

(b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized certified public accounting firm as may be designated by the Executive (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within

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five days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.

(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

(i) give the Company any information reasonably requested by the Company relating to such claim,

(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

(iii) cooperate with the Company in good faith in order effectively to contest such claim, and

(iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties), incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or

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more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.

11. Successors.

(a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

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(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

12. Miscellaneous.

(a) This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

If to the Company:

Universal Corporation

1501 North Hamilton Street

Richmond, Virginia 23260

Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

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(d) The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(e) The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

(f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive’s employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.

[SIGNATURES ON NEXT PAGE]

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IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

UNIVERSAL CORPORATION

By:

Title:

[Name of Subsidiary]

By:

Title:

[Name of Executive]

Page 16

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER REGARDING

UNIVERSAL CORPORATION’S QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED DECEMBER 31, 2003

I, Allen B. King, President and Chief Executive Officer of Universal Corporation, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Universal Corporation;

2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(c) Disclosed in this Quarterly Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 10, 2004
	/s/ Allen B. King
	Allen B. King President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER REGARDING

UNIVERSAL CORPORATION’S QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED DECEMBER 31, 2003

I, Hartwell H. Roper, Vice President and Chief Financial Officer of Universal Corporation, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Universal Corporation;

2. Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(c) Disclosed in this Quarterly Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 10, 2004
	/s/ Hartwell H. Roper
	Hartwell H. Roper Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Universal Corporation (the “Company”) on Form 10-Q for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Allen B. King, President and Chief Executive Officer of the Company, certify, to the best of my knowledge and belief, that

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 10, 2004	/s/ Allen B. King
	Allen B. King President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Universal Corporation (the “Company”) on Form 10-Q for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Hartwell H. Roper, Vice President and Chief Financial Officer of the Company, certify, to the best of my knowledge and belief, that

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 10, 2004	/s/ Hartwell H. Roper
	Hartwell H. Roper Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.