UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Period Ended September 30, 1994
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Transition Period From to
Commission file number 1-652
UNIVERSAL CORPORATION
(Exact name of registrant as specified in its charter)
State or other jurisdiction of incorporation or organization - VIRGINIA
I.R.S. Employer Identification Number - 54-0414210
Address of principal executive offices - 1501 NORTH HAMILTON STREET
RICHMOND, VIRGINIA 23230
Registrant's telephone number, including area code - (804) 359-9311
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Common Stock, No par value - 35,007,585 shares outstanding as of November 8,
1994
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Universal Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Three Months Ended September 30, 1994 and 1993
1994 1993
Sales and other operating revenues $656,024 $690,739
Costs and expenses
Cost of goods sold 566,620 575,280
Selling, general and administrative 66,184 73,727
Interest 14,900 15,869
647,704 664,876
Income before income taxes and other items 8,320 25,863
Income taxes 2,802 7,918
Minority interests 120 (87)
Income from consolidated operations 5,398 18,032
Equity in net income of unconsolidated
affiliates 470 427
Income before cumulative effect of change in
accounting principle 5,868 18,459
Cumulative effect of change in accounting
principle (29,406)
Net income $5,868 $(10,947)
Per common share
Income before cumulative effect of change
in accounting principle $ .17 $ .52
Cumulative effect of change in accounting
principle (.83)
Net income $ .17 $(.31)
Retained earnings - Beginning of period $317,344 $341,523
Net income 5,868 (10,947)
Cash dividends declared ($.24-1994;
$.22-1993) (8,401) (7,840)
Retained earnings - End of period $314,811 $322,736
Average common shares outstanding 35,003,055 35,631,485
<PAGE>
Universal Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
1994 1994
ASSETS
Current
Cash and cash equivalents $67,658 $164,520
Accounts and notes receivable 469,207 368,989
Accounts receivable - unconsolidated
affiliates 60,691 28,113
Inventories at lower of cost or market:
Tobacco 524,981 436,033
Lumber and building products 92,413 83,441
Agri-products 56,689 60,132
Other 8,357 8,753
Prepaid income taxes 14,848 10,095
Deferred income taxes 4,480 5,530
Other current assets 20,595 20,423
Total current assets 1,319,919 1,186,029
Real estate, plant and equipment - at cost
Land 22,865 22,607
Buildings 169,081 166,111
Machinery and equipment 350,865 350,426
542,811 539,144
Less accumulated depreciation 275,803 269,955
267,008 269,189
Other assets
Goodwill 123,554 124,286
Other intangibles 25,797 27,089
Investments in unconsolidated affiliates 26,781 26,298
Deferred income taxes 3,881 3,494
Other noncurrent assets 31,156 30,658
211,169 211,825
$1,798,096 $1,667,043
<PAGE>
Universal Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
September 30, June 30,
1994 1994
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Notes payable and overdrafts $589,131 $531,209
Accounts payable 206,749 199,280
Accounts payable - unconsolidated affiliates 17,565 34,810
Customer advances and deposits 135,803 51,671
Accrued compensation 11,632 13,366
Provision for restructuring 14,500 15,500
Income taxes payable 3,528 6,217
Current portion long-term obligations 17,850 15,947
Total current liabilities 996,758 868,000
Long - term obligations 301,264 298,117
Postretirement benefits other than pensions 48,656 48,969
Other long - term liabilities 55,252 57,156
Deferred income taxes 12,344 12,361
Minority interests 4,920 4,966
Shareholders' equity
Preferred stock $100 par, 8% cumulative, authorized
75,000 shares, issued and outstanding 4 shares
Additional preferred stock, no par value, authorized
5,000,000 shares, none issued or outstanding
Common stock, no par value, authorized 50,000,000
shares, issued and outstanding 35,003,185 shares
(35,001,185 at June 30, 1994) 75,309 75,287
Retained earnings 314,811 317,344
Foreign currency translation adjustments (11,218) (15,157)
Total shareholders' equity 378,902 377,474
$1,798,096 $1,667,043
</TABLE>
<PAGE>
Universal Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended September 30, 1994 and 1993
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $5,868 $(10,947)
Adjustments to reconcile net income to net
cash provided by operating activities 8,700 13,000
Cumulative effect of change in accounting
principle 29,406
Changes in operating assets and liabilities
net of effects from purchase of businesses (157,830) (196,423)
Net cash used in operating activities (143,262) (164,964)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (6,400) (8,400)
Other 1,800
Net cash used in investing activities (4,600) (8,400)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance (repayment) of short-term debt - net 53,800 137,400
Repayment of short-term debt classified as
long-term June 30,1993 (100,000)
Issuance of long-term debt 5,600 115,000
Dividends paid (8,400) (7,840)
Net cash provided by financing activities 51,000 144,560
Net decrease in cash and cash equivalents (96,862) (28,804)
Cash and cash equivalents at beginning of period 164,520 119,693
CASH AND CASH EQUIVALENTS AT END OF PERIOD $67,658 $90,889
<PAGE>
Universal Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
All figures contained herein are unaudited and stated in thousands of dollars
1) The Company's operating segments of domestic and foreign tobacco, lumber
and building products and agri-products are seasonal by nature. Therefore,
the results of operations for the three-month period ended September 30, 1994
are not necessarily indicative of results to be expected for the year ending
June 30, 1995. All adjustments necessary to fairly state the results for
such period have been included and were of a normal recurring nature.
2) At September 30, 1994, total exposure under guarantees issued for banking
facilities of unconsolidated affiliates was $14 million. Other contingent
liabilities approximate $134 million and relate principally to Common Market
guarantees.
3) The lower effective tax rate for last year's quarter was due to the
reversal of taxes accrued on non-repatriated earnings that were permanently
reinvested in certain foreign subsidiaries and a greater proportion of
earnings taxed at less than the full statutory rate.
4) The Company recognized in June 1994 a pre-tax restructuring charge of
$17.5 million related to the consolidation of tobacco operations and a
reduction in the number of employees. The charge included $16 million for
the expected costs of severance payments related to approximately 700
employees throughout the Company. As of September 30, 1994, payments of $3
million, primarily for severance and related costs of approximately 250
employees, had been recorded as a reduction of the restructuring provision.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Current assets and current liabilities increased $134 million and $129
million, respectively, at September 30, 1994 compared to June 30, 1994,
primarily due to the seasonal requirements of the Company's domestic tobacco
operations, advances of agricultural materials to Brazilian farmers and
advances made to purchase tobacco from unconsolidated affiliates. The June
30 balance sheet generally reflects the low point of working capital needs in
the U.S. while those for South and Central America start to expand. By the
end of the Company's first quarter, U.S. operations related to the current
flue-cured crop are in full swing. The Company is carrying green tobacco
purchases and unshipped processed tobacco in inventory and larger accounts
receivable balances related to shipments made during the quarter. In Brazil,
the first quarter reflects a combination of the working capital requirements
of the prior and current crops, as well as advances to farmers for the next
crop for which deliveries are expected to begin at the end of the fiscal
year. The seasonal expansion of accounts receivable and inventories is
supported by lines of credit and customer advances.
Recently the Brazilian government implemented a new monetary policy.
Subsequently the U.S. dollar declined in value relative to the real, the new
Brazilian currency. The exchange ratio of the dollar to the real, in
combination with the Company's net real monetary position could lead to
material swings in foreign exchange gains and losses. In addition, if the
real does not devalue at a rate in line with Brazilian inflation, there could
be significant dollar cost increases for the next crop. The potential impact
of these factors cannot be determined at this time.
The Company's liquidity position at September 30, 1994, remains strong.
The Company has also reduced its capital expenditure requirements over the
last year and continues to do so in the current year. During the current
quarter the Company acquired a major Dutch softwood distributor that will
strengthen its position in the industry. Results from this acquisition will
begin to appear in the second quarter. The acquisition was financed with
short-term borrowings.
Results of Operations
'Sales and Other Operating Revenues' declined $35 million in the
quarter, primarily due to reduced Brazilian current crop sales with lower
average sales prices. Domestic tobacco sales and operating revenues were
comparable to last year's quarter. Lumber and building product sales in the
quarter were up due to an increase in the number of distribution outlets
resulting from the acquisition of Steffex in fiscal 1994. Agri-product
revenues were down slightly due to the Company's decision last year to
discontinue coffee trading activity.
Gross profits in the quarter declined $26 million to 13.6% of gross
revenues compare to 16.7% in last year's quarter. Operations in Brazil were
a dominant factor in the decline. A number of shipments from Brazil during
the quarter consisted of old crop stocks, which had been written down in the
previous year. These sales were nominally profitable and had the effect of
reducing the overall profit margins reported. In addition, profits from dark
tobacco operations were down due to a poor crop in Northern Brazil and
increased competition for Indonesian leaf styles. Volumes of the current
U.S. flue-cured crop bought and processed increased in the quarter on a
better quality crop than last year's. Although overall tobacco results were
disappointing, the world markets are improving. Production of leaf at the
farmer level is more nearly in line with demand. Gross profits in lumber and
building products for the quarter were lower than the same period last year.
In the prior year the Company was able to take advantage of rising raw
material and finished goods costs, by selling lower cost inventories on hand.
Agri-product gross profits were down slightly in the quarter as the gains
realized from the discontinuance of coffee trading were principally offset by
a decline in tea earnings caused by unfavorable market conditions and less
blending activity.
'Selling, general and administrative expenses' declined $7.5 million or
over 10% in the quarter on reduced sales-related expenses. This decrease was
partially offset by the inclusion of Steffex's selling, general and
administrative expenses in the first quarter of fiscal 1995. 'Interest
expense' reflects the positive impact of a reduction in inventory levels
since September 1993 in certain geographic areas. 'Income Taxes' in the
prior year's quarter reflected an effective tax rate that was approximately
three percentage points lower than that of fiscal 1995 due to the reversal of
taxes previously accrued on earnings from certain foreign subsidiaries and a
greater proportion of earnings taxed at less than full statutory rates.
Currently, conditions in the world tobacco markets are improving.
Inventory levels are lower and tobacco production is more nearly in line with
demand. Because of its commitment to cost effectiveness and the advantage of
improving market conditions, management is cautiously optimistic that
earnings for the full fiscal year will meet or exceed the $50 million that
was earned last year before net of tax restructuring charges and an
accounting change. As reported in the 1994 annual report to shareholders,
the Company adopted a restructuring plan for its tobacco operations in June
1994. As of the date of this report there have been no material changes to
the plan or its underlying assumptions. See Note 4 for more information.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on October 25, 1994, the following
proposals were voted on:
(a) To approve amendments to the Universal Corporation 1989 Executive Stock
Plan to provide that (i) no individual may be granted Stock Incentives in
any calendar year for more than 200,000 shares of Common Stock and (ii) the
exercise price for a stock option shall not be less than the fair market
value of a share of Common Stock on the date of grant.
The proposal was approved with the following vote:
Shares Voted "FOR" Shares Voted "AGAINST" Shares "ABSTAINING"
27,670,244 1,790,653 382,319
(b) To approve the Universal Corporation 1994 Stock Option Plan for Non-
Employee Directors.
The proposal was approved with the following vote:
Shares Voted "FOR" Shares Voted "AGAINST" Shares "ABSTAINING"
26,620,211 2,862,197 360,808
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 8, 1994 UNIVERSAL CORPORATION
(Registrant)
/ s / Hartwell H. Roper
Hartwell H. Roper, Vice President and
Chief Financial Officer
/ s / William J. Coronado
William J. Coronado, Controller
(Principal Accounting Officer)
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<NAME> UNIVERSAL CORPORATION
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