RICHMOND, Va., Feb. 8, 2021 /PRNewswire/ -- George C. Freeman, III, Chairman, President, and
Chief Executive Officer of Universal Corporation (NYSE: UVV),
stated, "Tobacco shipments in the third quarter of fiscal year 2021
exceeded our previous expectations as customer mandated timing for
some shipments forecast for the fourth fiscal quarter were
accelerated into the third fiscal quarter. As a result, total
tobacco shipment volumes for the nine months ended December 31, 2020, are similar to those of the
prior year's comparable fiscal period. The majority of our
remaining committed tobacco orders for the 2020 crop are packed and
ready to ship, and we expect sustained strong tobacco shipment
volumes in our fourth fiscal quarter of 2021 barring any unforeseen
events including changes in shipment timing. In addition, our
uncommitted tobacco inventory levels remain within our target
range. We continue to believe our adjusted operating income for
fiscal year 2021, which excludes restructurings and certain costs
for acquisitions, will materially exceed that for fiscal year 2020,
barring any unforeseen events including shipment delays due to lack
of vessel or container availability, port congestion, or COVID-19
related uncertainties."
Mr. Freeman reported net income for the quarter ended
December 31, 2020, of $33.3 million, or $1.34 per diluted share, compared with net income
of $26.0 million, or $1.04 per diluted share, for the prior year's
third fiscal quarter. Excluding restructuring and impairment costs
and certain other non-recurring items, detailed in Other Items
below, net income and diluted earnings per share increased by
$27.5 million and $1.11, respectively, for the quarter ended
December 31, 2020, compared to the
quarter ended December 31, 2019.
Operating income for the third quarter of fiscal year 2021
increased to $60.2 million compared
to $44.1 million for the three months
ended December 31, 2019.
Net income for the nine months ended on December 31, 2020, was $48.0 million, or $1.94 per diluted share, compared with
$56.1 million, or $2.23 per diluted share, for the same period of
the prior fiscal year. Excluding restructuring and impairment costs
and certain other non-recurring items, detailed in Other Items
below, net income and diluted earnings per share increased by
$3.4 million and $0.18, respectively, for the nine months ended
December 31, 2020, compared to the
nine months ended December 31, 2019.
Operating income of $85.1 million for
the nine months ended December 31,
2020, decreased by $9.8
million, compared to operating income of $94.8 million for the nine months ended
December 31, 2019. Adjusted operating
income, detailed in Other Items below, of $107.6 million increased by $10.9 million for the nine months ended
December 31, 2020, compared to
adjusted operating income of $96.7
million for the same period in the prior fiscal year.
Segment operating income was $103.0
million for the nine months ended December 31, 2020, an increase of $5.9 million, and for the quarter ended
December 31, 2020, was $81.7 million, an increase of $37.6 million, both compared to the same periods
last fiscal year. Results for the nine months and quarter ended
December 31, 2020, reflected earnings
improvements in the Tobacco Operations segment, primarily on strong
tobacco shipment volumes in the third fiscal quarter, compared to
the same periods in the prior fiscal year. Consolidated revenues
increased by $87.9 million to
$1.4 billion for the nine months
ended December 31, 2021, and by
$167.9 million to $672.9 million for the three months ended
December 31, 2020, compared to the
same periods in fiscal year 2020, on the strong tobacco shipment
volumes in the third fiscal quarter and the addition of businesses
acquired in calendar year 2020 to the Ingredients Operations
segment.
Mr. Freeman continued, "We have also made considerable progress
towards delivering on our capital allocation strategy in the third
fiscal quarter of 2021. One pillar of this strategy is to deliver
shareholder value through building and enhancing our plant-based
ingredients platform. On October 1,
2020, we acquired Silva International, Inc., a natural,
specialty dehydrated vegetable, fruit, and herb processing company.
We have been working diligently throughout the quarter on
integrating and exploring opportunities for synergies between our
recently acquired businesses, FruitSmart, Inc. and Silva. During
this process, we concluded that Carolina Innovative Food
Ingredients, Inc., our sweet potato processing operation which we
built from the ground up, was not a strategic fit for the
platform's long-term objectives due in part to its single-product
focused, high capacity processing line and ongoing international
competitor pricing pressures. We made the difficult but prudent
decision to wind down the operation.
"Given our significant and strategic investments in our
plant-based ingredients platform, we evaluated our operating
segments for financial reporting purposes during the quarter ended
December 31, 2020. Based on our
evaluation, we determined that we conduct our operations across two
primary reportable operating segments, Tobacco Operations and
Ingredients Operations. The revised segments reflect how we manage
the Company, allocate resources, and assess business performance.
Prior period segment information has been recast retrospectively to
reflect these changes.
"We are pleased with the ongoing integration of our plant-based
ingredients platform, and with these acquisitions, we continue to
expect the new platform will generate between 10% and 20% of our
EBITDA in our fiscal year 2022, ahead of our capital allocation
strategy objectives. We are excited about our plant-based
ingredients platform and its potential for future success. We also
remain committed to our role as the leading global leaf tobacco
supplier. Supported by our compliance and sustainability programs,
we continue to see opportunities to increase market share and
enhance our leaf tobacco businesses. Operating and growing our
businesses during the pandemic has not been easy, and our thoughts
go out to all who have been impacted by COVID-19. We are deeply
grateful for the confidence our customers have shown in us as well
as their commitment to our business relationships during the
pandemic. We would like to thank all of our employees, both new and
old, for their hard work and our customers, growers, and other
partners for their continued support, all of which has enabled us
to continue to operate successfully during these unprecedented
times."
TOBACCO OPERATIONS
Operating income for the Tobacco Operations segment increased by
$6.1 million to $107.7 million for the nine months and by
$38.4 million to $84.1 million for the quarter ended December 31, 2020, compared with the same periods
for fiscal year 2020. Strong tobacco shipment volumes in the third
fiscal quarter benefited Tobacco Operations segment results for
both the three and nine months ended December 31, 2020, and year-to-date tobacco
shipment volumes as of December 31,
2020, were similar to those in the same period of fiscal
year 2020. In the nine months ended December
31, 2020, increases in shipments of carryover crop tobaccos
largely offset decreases in shipments of current crop tobacco
caused in part by customer mandated shipment timing that has pushed
some current crop shipments into our fourth fiscal quarter,
compared to the same period in the prior fiscal year.
In the nine months ended December 31,
2020, sales volumes were up in Brazil and the
United States on higher sales of carryover crop tobacco,
while volumes decreased in Africa
on weather reduced crop sizes, compared to the nine months ended
December 31, 2019. In the quarter
ended December 31, 2020, increased
shipments of carryover tobacco from Africa, the United
States, and Brazil, higher
current crop shipments from Africa, and timing of receipt of distributions
from unconsolidated affiliates benefited Tobacco Operations segment
results, compared to the third quarter of fiscal year 2020. Segment
results were also up in the nine months and quarter ended
December 31, 2020, compared to the
same periods in the prior fiscal year, on a favorable product mix
and continued strong demand for wrapper tobaccos. Selling, general,
and administrative costs for the segment were lower for the nine
months and flat for the quarter ended December 31, 2020, compared to the same periods
in the prior fiscal year. In the nine months ended December 31, 2020, selling, general, and
administrative costs for the segment declined largely on favorable
net foreign currency remeasurement comparisons, mainly in
Indonesia, Brazil, and the
Philippines, and lower travel costs. Revenues for the
Tobacco Operations segment of $1.3
billion for the nine months and $623.9 million for the quarter ended December 31, 2020, were flat and up $120.0 million, respectively, compared to the
same periods in the prior fiscal year, on tobacco shipment volumes
and a more favorable sales mix in the third fiscal quarter.
INGREDIENTS OPERATIONS
As part of our capital allocation strategy to build and enhance
our plant-based ingredients platform, we acquired two companies,
FruitSmart on January 1, 2020, and
Silva on October 1, 2020, and results
for these operations are not included in the segment results for
the comparable prior periods ended December
31, 2019. The operating loss for the Ingredients Operations
segment was $4.7 million and
$2.5 million, respectively, for the
nine months and quarter ended December 31,
2020, compared to an operating loss of $4.5 million and $1.4
million, respectively, for the nine months and quarter ended
December 31, 2019. In addition,
results for the segment included costs from amortization of
intangibles related to the acquisitions, which totaled $4.0 million and $2.4
million, respectively, in the nine months and quarter ended
December 31, 2020, as well as a
purchase accounting adjustment of $2.8
million that also reduced our results for the segment in the
nine months and quarter ended December 31,
2020. Although results improved for our CIFI business in the
nine months ended December 31, 2020,
compared to the same period in the prior fiscal year, we made the
strategic decision to wind down that operation in the quarter ended
December 31, 2020. Our FruitSmart
operations results for the first nine months of fiscal year 2021
were dampened by a less favorable product mix due to changes in
customer demand as the ongoing COVID-19 pandemic reduced capacity
at social venues that use FruitSmart products. Selling, general,
and administrative expenses increased in the nine months and
quarter ended December 31, 2020, on
the addition of the acquired businesses. Revenues for the
Ingredients Operations segment of $86.9
million for the nine months and $49.1
million for the quarter ended December 31, 2020, were up $83.9 million and $47.9
million, respectively, compared to the same periods in the
prior fiscal year, on the addition of the revenues for the acquired
businesses.
COVID-19 PANDEMIC IMPACT
On March 11, 2020, the World
Health Organization declared the coronavirus ("COVID-19") a
pandemic. Foreign governmental organizations and governmental
organizations in the United States
have taken various actions to combat the spread of COVID-19,
including imposing stay-at-home orders and closing "non-essential"
businesses and their operations. We continue to closely monitor
developments related to the ongoing COVID-19 pandemic and have
taken and continue to take steps intended to mitigate the potential
risks to us. It is paramount that our employees who operate our
businesses are safe and informed. We have assessed and regularly
update our existing business continuity plans for our business in
the context of this pandemic. For example, we have taken
precautions with regard to employee and facility hygiene, imposed
travel limitations on our employees, directed certain employee
groups to work remotely whenever possible, and we continue to
assess protocols designed to protect our employees, customers and
the public.
We continue to work with our suppliers to mitigate the impacts
to our supply chain due to the ongoing pandemic. To date, we have
not experienced a material impact to our supply chain, although the
ongoing COVID-19 pandemic has resulted in delays in certain
operations. In addition, our plant-based ingredients platform has
seen some shifts in product mix due to the ongoing COVID-19
pandemic related to changes in customer demand. Since March 2020, we have at times also experienced
increased volatility in foreign currency exchange rates, which we
believe is in part related to the continued uncertainties from
COVID-19, as well as actions taken by governments and central banks
in response to COVID-19. We expect continued volatility in foreign
currency exchange rates during fiscal year 2021, though we cannot
reasonably estimate the duration or extent of that volatility.
We continue to monitor the impacts of the ongoing COVID-19
pandemic, which include slower processing of our products due to
controlled staffing in our facilities that could lead to further
delays of shipments to our customers. We believe we currently have
sufficient liquidity to meet our current obligations and our
business operations remain fundamentally unchanged other than
shipping delays, which could continue to impact quarterly
comparisons. This is, however, a rapidly evolving situation, and we
cannot predict the extent, resurgence, or duration of the ongoing
COVID-19 pandemic, the effects of it on the global, national or
local economy, including the impacts on our ability to access
capital, or its effects on our business, financial position,
results of operations, and cash flows. We continue to monitor
developments affecting our employees, customers and operations. We
will take additional steps to address the spread of COVID-19 and
its impacts, as necessary, and remain thankful for the hard work of
our employees and the continued support of our customers, growers,
and other partners during these challenging times.
OTHER ITEMS
Cost of goods sold in the nine months and quarter ended
December 31, 2020, increased by 29%
and 7% to $1.1 billion and
$533.4 million, respectively, both
compared with the same periods in the prior fiscal year, as a
result of tobacco shipment volumes and the acquisition of
businesses in the Ingredients Operations segment. Selling, general,
and administrative costs for the nine months and quarter ended
December 31, 2020, increased by
$8.3 million to $161.2 million and by $10.5 million to $59.3
million, respectively, compared to the same periods in the
prior fiscal year, on the business acquisitions in the Ingredients
Operations segment. Increases in selling, general, and
administrative costs in the nine months ended December 31, 2020, were partially offset by
positive foreign currency remeasurement and exchange variances,
primarily in Indonesia,
Brazil, and the Philippines, and lower travel costs,
compared with the same period in the prior year.
For the nine months and quarter ended December 31, 2020, our consolidated effective tax
rate was 19% and 26%, respectively. For the nine months ended
December 31, 2020, income tax expense
included a $4.4 million benefit for
final tax regulations regarding the treatment of dividends paid by
foreign subsidiaries and a $2.9
million benefit in the third fiscal quarter of 2021 due to
amending and finalizing prior year returns. Without these benefits,
the consolidated effective tax rate for the nine months and quarter
ended December 31, 2020, would have
been approximately 29% and 32%, respectively.
Our consolidated effective tax rates for the nine months and
quarter ended December 31, 2019, were
approximately 30% and 26%, respectively. Income tax expense for the
nine months ended December 31, 2019
included a $2.8 million net tax
accrual for an unresolved tax matter at a foreign subsidiary and a
$1.5 million benefit in the third
fiscal quarter of 2020 due to amending and finalizing prior year
returns. Without the effect of these items, the consolidated
effective tax rate for the nine months and quarter ended
December 31, 2019, would have been
29% and 30%, respectively.
The following tables set forth certain non-recurring items
included in reported results to reconcile adjusted operating income
to consolidated operating income and adjusted net income to net
income attributable to Universal Corporation:
Adjusted Operating
Income Reconciliation
|
|
|
Three Months Ended
December 31,
|
|
Nine Months Ended
December 31,
|
(in
thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
As Reported:
Consolidated operating income
|
$
|
60,186
|
|
|
$
|
44,115
|
|
|
$
|
85,065
|
|
|
$
|
94,828
|
|
Silva acquisition
purchase accounting adjustment (1)
|
2,800
|
|
|
—
|
|
|
2,800
|
|
|
—
|
|
Transaction costs for
acquisitions(2)
|
2,252
|
|
|
939
|
|
|
3,915
|
|
|
1,864
|
|
Restructuring and
impairment costs(3)
|
19,979
|
|
|
—
|
|
|
19,979
|
|
|
—
|
|
Fair value adjustment
to contingent consideration for FruitSmart
acquisition(4)
|
—
|
|
|
—
|
|
|
(4,173)
|
|
|
—
|
|
Adjusted operating
income
|
$
|
85,217
|
|
|
$
|
45,054
|
|
|
$
|
107,586
|
|
|
$
|
96,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income and Diluted Earnings Per Share
|
|
|
|
|
|
|
|
(in thousands and
reported net of income taxes)
|
Three Months Ended
December 31,
|
|
Nine Months Ended
December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
As Reported: Net
income available to Universal Corporation
|
$
|
33,273
|
|
|
$
|
25,966
|
|
|
$
|
48,049
|
|
|
$
|
56,115
|
|
Silva acquisition
purchase accounting adjustment (1)
|
2,800
|
|
|
—
|
|
|
2,800
|
|
|
—
|
|
Transaction costs for
acquisitions(2)
|
2,252
|
|
|
939
|
|
|
3,915
|
|
|
1,864
|
|
Restructuring and
impairment costs(3)
|
16,100
|
|
|
—
|
|
|
16,100
|
|
|
—
|
|
Fair value adjustment
to contingent consideration for FruitSmart
acquisition(4)
|
—
|
|
|
—
|
|
|
(4,173)
|
|
|
—
|
|
Interest expense
related to an uncertain tax matter at a foreign
subsidiary
|
—
|
|
|
—
|
|
|
1,849
|
|
|
—
|
|
Income tax benefit
from dividend withholding tax liability reversal(5)
|
—
|
|
|
—
|
|
|
(4,421)
|
|
|
—
|
|
Income tax settlement
for a foreign subsidiary(6)
|
—
|
|
|
—
|
|
|
—
|
|
|
2,766
|
|
Adjusted net income
available to Universal Corporation
|
$
|
54,425
|
|
|
$
|
26,905
|
|
|
$
|
64,119
|
|
|
$
|
60,745
|
|
|
|
|
|
|
|
|
|
As reported: Diluted
earnings per share
|
$
|
1.34
|
|
|
$
|
1.04
|
|
|
$
|
1.94
|
|
|
$
|
2.23
|
|
As adjusted: Diluted
earnings per share
|
$
|
2.19
|
|
|
$
|
1.08
|
|
|
$
|
2.59
|
|
|
$
|
2.41
|
|
|
|
(1)
|
The Company
recognized an increase in cost of goods sold in the third quarter
of fiscal year 2021, relating to the expensing of a fair value
adjustment to inventory associated with the initial acquisition
accounting for Silva. This cost is not deductible for U.S. income
tax purposes.
|
(2)
|
The Company incurred
selling, general, and administrative expenses for due diligence and
other transaction costs associated with the acquisitions of Silva
(effective October 1, 2020) and FruitSmart (effective January 1,
2020). These costs are not deductible for U.S. income tax
purposes.
|
(3)
|
Restructuring and
impairment costs are included in consolidated operating income in
the consolidated statements of income, but excluded for purposes of
Adjusted operating income, Adjusted net income available to
Universal Corporation, and Adjusted diluted earnings per share. See
Note 4 for additional information.
|
(4)
|
The Company reversed
a portion of the contingent consideration liability for the
FruitSmart acquisition, as a result of certain performance metrics
that are not expected to meet the required threshold stipulated in
the purchase agreement.
|
(5)
|
The Company
recognized an income tax benefit for final U.S. tax regulations on
certain dividends paid by foreign subsidiaries in a prior fiscal
year.
|
(6)
|
During the first
quarter of fiscal year 2020, the Company recognized an income tax
settlement charge related to operations at a foreign
subsidiary.
|
Additional information
Amounts described as net income (loss) and earnings (loss) per
diluted share in the previous discussion are attributable to
Universal Corporation and exclude earnings related to
non-controlling interests in subsidiaries. Adjusted operating
income (loss), adjusted net income (loss) attributable to Universal
Corporation, adjusted diluted earnings (loss) per share, and the
total for segment operating income (loss) referred to in this
discussion are non-GAAP financial measures. These measures are not
financial measures calculated in accordance with GAAP and should
not be considered as substitutes for operating income (loss), net
income (loss) attributable to Universal Corporation, diluted
earnings (loss) per share, cash from operating activities or any
other operating or financial performance measure calculated in
accordance with GAAP, and may not be comparable to similarly-titled
measures reported by other companies. A reconciliation of adjusted
operating income (loss) to consolidated operating (income),
adjusted net income (loss) attributable to Universal Corporation to
consolidated net income (loss) attributable to Universal
Corporation and adjusted diluted earnings (loss) per share to
diluted earnings (loss) per share are provided in Other Items
above. In addition, we have provided a reconciliation of the total
for segment operating income (loss) to consolidated operating
income (loss) in Note 3 "Segment Information" to the consolidated
financial statements. Management evaluates the consolidated Company
and segment performance excluding certain significant charges or
credits. We believe these non-GAAP financial measures, which
exclude items that we believe are not indicative of our core
operating results, provide investors with important information
that is useful in understanding our business results and
trends.
This release includes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
The Company cautions readers that any statements contained herein
regarding financial condition, results of operation, and future
business plans, operations, opportunities, and prospects for its
performance are forward-looking statements based upon management's
current knowledge and assumptions about future events, and involve
risks and uncertainties that could cause actual results,
performance, or achievements to be materially different from any
anticipated results, prospects, performance, or achievements
expressed or implied by such forward-looking statements. Such risks
and uncertainties include, but are not limited to, impacts of the
ongoing COVID-19 pandemic; integration of FruitSmart, Inc.
("FruitSmart") and Silva International ("Silva") and the impact of
the FruitSmart and Silva acquisitions on future results; product
purchased not meeting quality and quantity requirements; reliance
on a few large customers; its ability to maintain effective
information technology systems and safeguard confidential
information; anticipated levels of demand for and supply of its
products and services; costs incurred in providing these products
and services; timing of shipments to customers; changes in market
structure; government regulation; product taxation; industry
consolidation and evolution; changes in exchange rates and interest
rates; impacts of regulation and litigation on its customers;
industry-specific risks related to its plant-based ingredient
businesses; exposure to certain regulatory and financial risks
related to climate change; changes in estimates and assumptions
underlying its critical accounting policies; the promulgation and
adoption of new accounting standards, new government regulations
and interpretation of existing standards and regulations; and
general economic, political, market, and weather conditions. Actual
results, therefore, could vary from those expected. A further list
and description of these risks, uncertainties, and other factors
can be found in the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 2020, and
in other documents the Company files with the Securities and
Exchange Commission. This information should be read in conjunction
with the Annual Report on Form 10-K for the year ended March 31, 2020, and the Form 10-Q for the most
recently ended fiscal quarter. The Company cautions investors not
to place undue reliance on any forward-looking statements as these
statements speak only as of the date when made, and it undertakes
no obligation to update any forward-looking statements made.
At 5:00 p.m. (Eastern Time) on
February 8, 2021, the Company will
host a conference call to discuss these results. Those wishing to
listen to the call may do so by visiting www.universalcorp.com at
that time. A replay of the webcast will be available at that site
through May 8, 2021. A taped replay
of the call will be available through February 23, 2021, by dialing (855) 859-2056. The
confirmation number to access the replay is 7927999.
Universal Corporation (NYSE: UVV), headquartered in Richmond, Virginia, is a global agri-products
supplier, operating in over 30 countries on five continents, that
sources, processes, and supplies leaf tobacco and plant-based
ingredients. Tobacco has been the Company's principal focus since
its founding in 1918, and Universal is the leading global leaf
tobacco supplier. Through the Company's plant-based ingredients
platform, it provides high-quality, specialty vegetable- and
fruit-based ingredients to food and beverage end markets. Universal
has been finding innovative solutions to serve its customers and
meet their agri-product needs for more than 100 years. The
Company's revenues for the fiscal year ended March 31, 2020, were $1.9
billion. Visit universalcorp.com for more information on
Universal Corporation and the latest Company news.
UNIVERSAL
CORPORATION
|
CONSOLIDATED
STATEMENTS OF INCOME
|
(in thousands of
dollars, except per share data)
|
|
|
|
Three Months
Ended
December 31,
|
|
Nine Months
Ended
December 31,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Sales and other
operating revenues
|
|
$
|
672,931
|
|
|
$
|
505,049
|
|
|
$
|
1,365,767
|
|
|
$
|
1,277,885
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
Cost of goods
sold
|
|
533,431
|
|
|
412,076
|
|
|
1,103,744
|
|
|
1,030,233
|
|
Selling, general and
administrative expenses
|
|
59,335
|
|
|
48,858
|
|
|
161,152
|
|
|
152,824
|
|
Other
income
|
|
—
|
|
|
—
|
|
|
(4,173)
|
|
|
—
|
|
Restructuring and
impairment costs
|
|
19,979
|
|
|
—
|
|
|
19,979
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
60,186
|
|
|
44,115
|
|
|
85,065
|
|
|
94,828
|
|
Equity in pretax
earnings (loss) of unconsolidated affiliates
|
|
1,506
|
|
|
(69)
|
|
|
2,089
|
|
|
2,281
|
|
Other non-operating
income (expense)
|
|
30
|
|
|
633
|
|
|
(8)
|
|
|
1,893
|
|
Interest
income
|
|
2
|
|
|
164
|
|
|
262
|
|
|
1,412
|
|
Interest
expense
|
|
6,735
|
|
|
5,197
|
|
|
19,140
|
|
|
14,361
|
|
Income before income
taxes and other items
|
|
54,989
|
|
|
39,646
|
|
|
68,268
|
|
|
86,053
|
|
Income
taxes
|
|
14,548
|
|
|
10,328
|
|
|
12,678
|
|
|
26,093
|
|
Net income
|
|
40,441
|
|
|
29,318
|
|
|
55,590
|
|
|
59,960
|
|
Less: net loss
(income) attributable to noncontrolling interests in
subsidiaries
|
|
(7,168)
|
|
|
(3,352)
|
|
|
(7,541)
|
|
|
(3,845)
|
|
Net income
attributable to Universal Corporation
|
|
$
|
33,273
|
|
|
$
|
25,966
|
|
|
$
|
48,049
|
|
|
$
|
56,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.35
|
|
|
$
|
1.04
|
|
|
$
|
1.95
|
|
|
$
|
2.24
|
|
Diluted
|
|
$
|
1.34
|
|
|
$
|
1.04
|
|
|
$
|
1.94
|
|
|
$
|
2.23
|
|
UNIVERSAL
CORPORATION
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands of
dollars)
|
|
|
|
December
31,
|
|
December
31,
|
|
March
31,
|
|
|
2020
|
|
2019
|
|
2020
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
95,405
|
|
|
$
|
64,734
|
|
|
$
|
107,430
|
|
Accounts receivable,
net
|
|
354,676
|
|
|
271,981
|
|
|
340,711
|
|
Advances to
suppliers, net
|
|
102,795
|
|
|
120,079
|
|
|
133,778
|
|
Accounts
receivable—unconsolidated affiliates
|
|
6,197
|
|
|
24,748
|
|
|
11,483
|
|
Inventories—at lower
of cost or net realizable value:
|
|
|
|
|
|
|
Tobacco
|
|
814,287
|
|
|
937,661
|
|
|
707,298
|
|
Other
|
|
144,333
|
|
|
84,621
|
|
|
99,275
|
|
Prepaid income
taxes
|
|
18,174
|
|
|
13,619
|
|
|
12,144
|
|
|
|
|
|
|
|
|
Other current
assets
|
|
68,928
|
|
|
61,450
|
|
|
67,498
|
|
Total current
assets
|
|
1,604,795
|
|
|
1,578,893
|
|
|
1,479,617
|
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
|
|
|
|
|
Land
|
|
22,499
|
|
|
22,510
|
|
|
21,376
|
|
Buildings
|
|
268,377
|
|
|
255,202
|
|
|
256,488
|
|
Machinery and
equipment
|
|
662,854
|
|
|
609,976
|
|
|
634,395
|
|
|
|
953,730
|
|
|
887,688
|
|
|
912,259
|
|
Less accumulated
depreciation
|
|
(621,928)
|
|
|
(592,457)
|
|
|
(597,106)
|
|
|
|
331,802
|
|
|
295,231
|
|
|
315,153
|
|
Other
assets
|
|
|
|
|
|
|
Operating lease
right-of-use assets
|
|
34,717
|
|
|
34,230
|
|
|
39,256
|
|
Goodwill and other
intangibles, net
|
|
255,365
|
|
|
98,042
|
|
|
144,687
|
|
Investments in
unconsolidated affiliates
|
|
85,610
|
|
|
77,783
|
|
|
77,543
|
|
Deferred income
taxes
|
|
22,281
|
|
|
16,354
|
|
|
20,954
|
|
Other noncurrent
assets
|
|
54,071
|
|
|
50,186
|
|
|
43,711
|
|
|
|
452,044
|
|
|
276,595
|
|
|
326,151
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,388,641
|
|
|
$
|
2,150,719
|
|
|
$
|
2,120,921
|
|
UNIVERSAL
CORPORATION
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands of
dollars)
|
|
|
|
December
31,
|
|
December
31,
|
|
March
31,
|
|
|
2020
|
|
2019
|
|
2020
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Notes payable and
overdrafts
|
|
$
|
129,603
|
|
|
$
|
92,592
|
|
|
$
|
78,033
|
|
Accounts payable and
accrued expenses
|
|
156,421
|
|
|
130,165
|
|
|
140,202
|
|
Accounts
payable—unconsolidated affiliates
|
|
7,416
|
|
|
7,494
|
|
|
55
|
|
Customer advances and
deposits
|
|
14,498
|
|
|
8,230
|
|
|
10,242
|
|
Accrued
compensation
|
|
22,744
|
|
|
21,761
|
|
|
23,710
|
|
Income taxes
payable
|
|
6,650
|
|
|
1,991
|
|
|
5,334
|
|
Current portion of
operating lease liabilities
|
|
9,014
|
|
|
8,394
|
|
|
9,823
|
|
Current portion of
long-term debt
|
|
—
|
|
|
—
|
|
|
—
|
|
Total current
liabilities
|
|
346,346
|
|
|
270,627
|
|
|
267,399
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
518,047
|
|
|
368,698
|
|
|
368,764
|
|
Pensions and other
postretirement benefits
|
|
66,764
|
|
|
55,305
|
|
|
70,680
|
|
Long-term operating
lease liabilities
|
|
22,709
|
|
|
23,465
|
|
|
25,893
|
|
Other long-term
liabilities
|
|
71,346
|
|
|
51,185
|
|
|
69,427
|
|
Deferred income
taxes
|
|
46,414
|
|
|
28,228
|
|
|
29,474
|
|
Total
liabilities
|
|
1,071,626
|
|
|
797,508
|
|
|
831,637
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
Universal
Corporation:
|
|
|
|
|
|
|
Preferred
stock:
|
|
|
|
|
|
|
Series A Junior
Participating Preferred Stock, no par value, 500,000 shares
authorized, none issued or outstanding
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
Common stock, no par
value, 100,000,000 shares authorized 24,514,867 shares issued and
outstanding at December 31, 2020 (24,693,557 at
December 31, 2019 and 24,421,835 at March 31,
2020)
|
|
325,350
|
|
|
324,388
|
|
|
321,502
|
|
Retained
earnings
|
|
1,067,437
|
|
|
1,089,718
|
|
|
1,076,760
|
|
Accumulated other
comprehensive loss
|
|
(122,262)
|
|
|
(104,310)
|
|
|
(151,597)
|
|
Total Universal
Corporation shareholders' equity
|
|
1,270,525
|
|
|
1,309,796
|
|
|
1,246,665
|
|
Noncontrolling
interests in subsidiaries
|
|
46,490
|
|
|
43,415
|
|
|
42,619
|
|
Total shareholders'
equity
|
|
1,317,015
|
|
|
1,353,211
|
|
|
1,289,284
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity
|
|
$
|
2,388,641
|
|
|
$
|
2,150,719
|
|
|
$
|
2,120,921
|
|
UNIVERSAL
CORPORATION
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(in thousands of
dollars)
|
|
|
|
Nine Months Ended
December 31,
|
|
|
2020
|
|
2019
|
|
|
(Unaudited)
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
Net income
|
|
$
|
55,590
|
|
|
$
|
59,960
|
|
Adjustments to
reconcile net income to net cash used by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
32,626
|
|
|
27,500
|
|
|
|
|
|
|
Net provision for
losses (recoveries) on advances and guaranteed loans to
suppliers
|
|
2,753
|
|
|
93
|
|
Foreign currency
remeasurement (gain) loss, net
|
|
(8,823)
|
|
|
(2,179)
|
|
Foreign currency
exchange contracts
|
|
(7,723)
|
|
|
(698)
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and
impairment costs
|
|
19,979
|
|
|
—
|
|
Restructuring
payments
|
|
(5,179)
|
|
|
(444)
|
|
Change in estimated
fair value of contingent consideration for FruitSmart
acquisition
|
|
(4,173)
|
|
|
—
|
|
Other, net
|
|
5,260
|
|
|
3,412
|
|
Changes in operating
assets and liabilities, net
|
|
(51,687)
|
|
|
(260,542)
|
|
Net cash provided
(used) by operating activities
|
|
38,623
|
|
|
(172,898)
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
(33,794)
|
|
|
(21,692)
|
|
Purchase of business,
net of cash held by the business
|
|
(161,095)
|
|
|
—
|
|
Proceeds from sale of
property, plant and equipment
|
|
4,086
|
|
|
2,946
|
|
Other
|
|
(800)
|
|
|
496
|
|
Net cash used by
investing activities
|
|
(191,603)
|
|
|
(18,250)
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
Issuance of
short-term debt, net
|
|
57,207
|
|
|
41,201
|
|
Issuance of long-term
debt
|
|
150,000
|
|
|
—
|
|
|
|
|
|
|
Dividends paid to
noncontrolling interests
|
|
(3,695)
|
|
|
(3,359)
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common
stock
|
|
—
|
|
|
(20,125)
|
|
|
|
|
|
|
Dividends paid on
common stock
|
|
(56,301)
|
|
|
(56,601)
|
|
Other
|
|
(1,949)
|
|
|
(2,883)
|
|
Net cash provided
(used) by financing activities
|
|
145,262
|
|
|
(41,767)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
|
1,693
|
|
|
93
|
|
Net decrease in cash,
restricted cash and cash equivalents
|
|
(6,025)
|
|
|
(232,822)
|
|
Cash, restricted cash
and cash equivalents at beginning of year
|
|
107,430
|
|
|
297,556
|
|
|
|
|
|
|
Cash, restricted
cash and cash equivalents at end of period
|
|
$
|
101,405
|
|
|
$
|
64,734
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
95,405
|
|
|
$
|
64,734
|
|
Restricted cash
(Other noncurrent assets)
|
|
6,000
|
|
|
—
|
|
Total cash,
restricted cash and cash equivalents
|
|
$
|
101,405
|
|
|
$
|
64,734
|
|
NOTE 1. BASIS OF PRESENTATION
Universal Corporation, which together with its subsidiaries is
referred to herein as "Universal" or the "Company," is an
agri-products supplier. The Company is the leading global leaf
tobacco supplier and provides high-quality plant-based ingredients
to food and beverage end markets. Because of the seasonal nature of
the Company's business, 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. During the three
months ended December 31, 2020, the
Company realigned its reportable operating segments. As a result of
this realignment, the Company now reports two reportable operating
segments, Tobacco Operations and Ingredients Operations. See Note 3
for additional information. Certain amounts in prior year
statements have been reclassified to conform to the current year
presentation. These financial statements should be read in
conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 2020.
NOTE 2. EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted earnings per share:
|
|
Three Months
Ended
December 31,
|
|
Nine Months
Ended
December 31,
|
(in thousands,
except share and per share data) (Unaudited)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
|
|
|
|
|
|
|
Numerator for
basic earnings per share
|
|
|
|
|
|
|
|
|
Net income
attributable to Universal Corporation
|
|
$
|
33,273
|
|
|
$
|
25,966
|
|
|
$
|
48,049
|
|
|
$
|
56,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for
basic earnings per share
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
24,677,122
|
|
|
24,931,711
|
|
|
24,646,342
|
|
|
25,058,525
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
$
|
1.35
|
|
|
$
|
1.04
|
|
|
$
|
1.95
|
|
|
$
|
2.24
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
Per Share
|
|
|
|
|
|
|
|
|
Numerator for
diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Universal Corporation
|
|
$
|
33,273
|
|
|
$
|
25,966
|
|
|
$
|
48,049
|
|
|
$
|
56,115
|
|
|
|
|
|
|
|
|
|
|
Denominator for
diluted earnings per share:
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
24,677,122
|
|
|
24,931,711
|
|
|
24,646,342
|
|
|
25,058,525
|
|
Effect of dilutive
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee and outside
director share-based awards
|
|
141,796
|
|
|
123,343
|
|
|
118,097
|
|
|
119,992
|
|
Denominator for
diluted earnings per share
|
|
24,818,918
|
|
|
25,055,054
|
|
|
24,764,439
|
|
|
25,178,517
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
|
$
|
1.34
|
|
|
$
|
1.04
|
|
|
$
|
1.94
|
|
|
$
|
2.23
|
|
NOTE 3. SEGMENT INFORMATION
As a result of recent acquisitions of plant-based ingredients
companies in fiscal year 2020 and 2021, during the three months
ended December 31, 2020 management
evaluated the Company's global business activities, including
product and service offerings to its customers, as well as senior
management's operational and financial responsibilities. This
assessment included an analysis of how its chief operating decision
maker measures business performance and allocates resources. As a
result of this analysis, senior management determined the Company
conducts operations across two reportable operating segments,
Tobacco Operations and Ingredients Operations.
The Tobacco Operations segment activities involve selecting,
procuring, processing, packing, storing, shipping, and financing
leaf tobacco for sale to, or for the account of, manufacturers of
consumer tobacco products throughout the world. Through various
operating subsidiaries located in tobacco-growing countries around
the world and significant ownership interests in unconsolidated
affiliates, the Company processes and/or sells flue-cured and
burley tobaccos, dark air-cured tobaccos, and oriental tobaccos.
Flue-cured, burley, and oriental tobaccos are used principally in
the manufacture of cigarettes, and dark air-cured tobaccos are used
mainly in the manufacture of cigars, pipe tobacco, and smokeless
tobacco products. Some of these tobacco types are also increasingly
used in the manufacture of non-combustible tobacco products that
are intended to provide consumers with an alternative to
traditional combustible products. The Tobacco Operations segment
also provides physical and chemical product testing and smoke
testing for tobacco customers. A substantial portion of the
Company's Tobacco Operations' revenues are derived from sales to a
limited number of large, multinational cigarette and cigar
manufacturers.
The Ingredients Operations segment provides its customers with a
broad variety of plant-based ingredients for both human and pet
consumption. The Ingredients Operations segment utilizes a variety
of value-added manufacturing processes converting raw materials
into a wide spectrum of fruit and vegetable juices, concentrates,
and dehydrated products. Customers for the Ingredients Operations
segment include large multinational food and beverage companies, as
well as smaller independent entities. FruitSmart, Silva, and CIFI
are the primary operations for the Ingredients Operations segment.
FruitSmart manufactures fruit and vegetable juices, purees,
concentrates, essences, fibers, seeds, seed oils, and seed powders.
Silva is primarily a dehydrated product manufacturer of fruit and
vegetable based flakes, dices, granules, powders, and blends. In
December 2020, the Company announced
the wind-down of CIFI, a greenfield operation that primarily
manufactured both dehydrated and liquid sweet potato products. See
Note 4 for additional information about the wind-down of CIFI.
Universal incurs overhead expenses related to senior management,
sales, finance, legal, and other functions that are centralized at
its corporate headquarters, as well as functions performed at
several sales and administrative offices around the world. These
overhead expenses are currently allocated to the reportable
operating segments, generally on the basis of volumes planned to be
purchased and/or processed. Management believes this method of
allocation is currently representative of the value of the related
services provided to the operating segments. The Company currently
evaluates the performance of its segments based on operating income
after allocated overhead expenses, plus equity in the pretax
earnings of unconsolidated affiliates. Operating results for the
Company's reportable segments for each period presented in the
consolidated statements of income and comprehensive income were as
follows, including a recast of the new reportable operating
segments presentation for all periods presented below:
|
|
Three Months
Ended
December 31,
|
|
Nine Months
Ended
December 31,
|
(in thousands of
dollars) (Unaudited)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
SALES AND OTHER
OPERATING REVENUES
|
|
|
|
|
|
|
|
|
Tobacco
Operations
|
|
$
|
623,851
|
|
|
$
|
503,839
|
|
|
$
|
1,278,844
|
|
|
$
|
1,274,853
|
|
Ingredients
Operations
|
|
49,080
|
|
|
1,210
|
|
|
86,923
|
|
|
3,032
|
|
Consolidated sales
and other operating revenue
|
|
$
|
672,931
|
|
|
$
|
505,049
|
|
|
$
|
1,365,767
|
|
|
$
|
1,277,885
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
|
|
|
|
|
|
|
|
Tobacco
Operations
|
|
$
|
84,122
|
|
|
$
|
45,478
|
|
|
$
|
107,658
|
|
|
$
|
101,582
|
|
Ingredients
Operations
|
|
(2,451)
|
|
|
(1,432)
|
|
|
(4,698)
|
|
|
(4,473)
|
|
Segment operating
income
|
|
81,671
|
|
|
44,046
|
|
|
102,960
|
|
|
97,109
|
|
Deduct: Equity in
pretax (earnings) loss of unconsolidated affiliates (1)
|
|
(1,506)
|
|
|
69
|
|
|
(2,089)
|
|
|
(2,281)
|
|
Restructuring
and impairment costs (2)
|
|
(19,979)
|
|
|
—
|
|
|
(19,979)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Add: Other income
(loss)(3)
|
|
—
|
|
|
—
|
|
|
4,173
|
|
|
—
|
|
Consolidated
operating income
|
|
$
|
60,186
|
|
|
$
|
44,115
|
|
|
$
|
85,065
|
|
|
$
|
94,828
|
|
|
|
(1)
|
Equity in pretax
earnings (loss) of unconsolidated affiliates is included in segment
operating income (Tobacco Operations), but is reported below
consolidated operating income and excluded from that total in the
consolidated statements of income and comprehensive
income.
|
(2)
|
Restructuring and
impairment costs are excluded from segment operating income, but
are included in consolidated operating income in the consolidated
statements of income and comprehensive income.
|
(3)
|
Other income
represents the reversal of a portion of the contingent
consideration liability associated with the acquisition of
FruitSmart.
|
NOTE 4. RESTRUCTURING AND IMPAIRMENT COSTS
Universal continually reviews its business for opportunities to
realize efficiencies, reduce costs, and realign its operations in
response to business changes. Restructuring and impairment costs
are periodically incurred in connection with those activities.
Ingredients Operations
During the three months ended December 31, 2020, the
Company committed to a plan to wind-down its subsidiary, Carolina
Innovative Food Ingredients, Inc. ("CIFI"), a sweet potato
processing operation located in Nashville, North Carolina. The CIFI operation
was a start-up project initially undertaken by the Company in
fiscal year 2015. The decision to wind down CIFI is consistent with
the Company's capital allocation strategy to focus on delivering
shareholder value through building and enhancing a plant-based
ingredients platform, which includes integrating and exploring the
synergies of recently acquired businesses FruitSmart and Silva. The
Company determined that CIFI was not a strategic fit for the
platform's long-term objectives. CIFI's single-product focused
processing facility and ongoing international pricing pressures,
among other factors, created challenges that proved insurmountable.
Sales of existing inventory and certain administrative activities
at CIFI will continue into fiscal year 2022, but no manufacturing
occurred subsequent to December 31, 2020. As a result of the
decision to wind down the CIFI operations, the Company will pay
termination benefits totaling approximately $0.6 million to employees whose permanent
positions are being eliminated, with termination benefits due to be
paid before the end of February 2021.
In addition to the termination costs, the Company recognized
various other costs associated with the wind-down of the CIFI
facility. These costs include impairments of property, plant, and
equipment (including the factory building), as well as inventory
and supply write-downs. The restructuring and impairment charge
incurred for the CIFI wind-down was $16.1
million for the three and nine months ended
December 31, 2020.
Tobacco Operations
During the three and nine months ended December 31, 2020,
the Company incurred $2.6 million of termination and impairment
costs associated with restructuring of tobacco buying and
administrative operations in Africa, as well as a $0.9 million charge for the liquidation of an
idled service entity in Tanzania,
and $0.4 million of termination
benefits in North America. Total
restructuring and impairments costs related to the Tobacco
Operations segment for the three and nine months ended
December 31, 2020 were $3.9
million.
A summary of the restructuring and impairment costs recorded in
the quarter ended December 31, 2020 were as follows:
(in thousands)
(Unaudited)
|
|
Three Months
Ended
December 31, 2020
|
|
|
|
Restructuring
costs:
|
|
|
Employee
termination benefits
|
|
$
|
2,625
|
|
Other
|
|
1,766
|
|
Total
restructuring costs
|
|
4,391
|
|
Impairment
costs:
|
|
|
Property, plant
and equipment
|
|
13,886
|
|
Inventory
|
|
1,702
|
|
Total
impairment costs
|
|
15,588
|
|
Total
restructuring and impairment costs
|
|
$
|
19,979
|
|
For the three and nine months ended December 31, 2020, the
restructuring and impairment costs reduced operating income and
income before income taxes by $20.0
million, net income attributable to Universal Corporation by
$16.1 million, and diluted earnings
per share by $0.65.
A reconciliation of the liability for termination benefits
through December 31, 2020 is as follows:
(in
thousands)
|
|
Nine Months
Ended
December 31, 2020
|
|
|
|
Balance at April 1,
2020
|
|
$
|
3,404
|
|
Costs charged to
expense
|
|
2,625
|
|
Payments
|
|
(5,179)
|
|
Balance at December
31, 2020
|
|
$
|
850
|
|
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SOURCE Universal Corporation