Page 1 of 10
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, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Transition Period From to
Commission file number 1-652
UNIVERSAL CORPORATION
(Exact name of Registrant as specified in its charter)
VIRGINIA 54-0414210
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1501 North Hamilton Street, Richmond, Virginia 23230
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code - (804) 359-9311
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Common Stock, No par value - 35,031,714 shares outstanding as of
November 9, 1995
<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, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Sales and other operating revenues $842,454 $661,415
Costs and expenses
Cost of goods sold 738,825 567,036
Selling, general and administrative 71,127 70,468
Interest 17,225 17,244
--------------- ---------------
827,177 654,748
--------------- ---------------
Income before income taxes and other items 15,277 6,667
Income taxes 5,806 3,299
Minority interests 181 59
--------------- ---------------
Income from consolidated operations 9,290 3,309
Equity in net income of unconsolidated affiliates 899 670
--------------- ---------------
Net income $10,189 $3,979
============== ==============
Earnings per common share $ .29 $ .11
============== ==============
Retained earnings - Beginning of period $323,595 $332,626
Net income 10,189 3,979
Cash dividends declared ($.25-1995; $.24-1994) (8,758) (8,401)
--------------- ---------------
Retained earnings - End of period $325,026 $328,204
============== ==============
Average common shares outstanding 35,030,314 35,003,055
</TABLE>
<PAGE>
Universal Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
--------------- ---------------
ASSETS
<S> <C> <C>
Current
Cash and cash equivalents $80,121 $158,093
Accounts and notes receivable 444,259 392,797
Accounts receivable - unconsolidated affiliates 7,606 13,230
Inventories - at lower of cost or market:
Tobacco 635,543 458,964
Lumber and building products 118,247 122,613
Agri-products 69,166 72,908
Other 14,644 11,988
Prepaid income taxes 11,154 8,371
Deferred income taxes 6,433 5,625
Other current assets 19,293 17,764
--------------- ---------------
Total current assets 1,406,466 1,262,353
Real estate, plant and equipment - at cost
Land 35,355 35,631
Buildings 213,940 211,146
Machinery and equipment 414,467 405,029
--------------- ---------------
663,762 651,806
Less accumulated depreciation 326,955 317,365
--------------- ---------------
336,807 334,441
Other assets
Goodwill 126,418 127,501
Other intangibles 20,914 21,759
Investments in unconsolidated affiliates 23,295 23,433
Deferred income taxes 10,617 7,832
Other noncurrent assets 30,600 30,646
--------------- ---------------
211,844 211,171
--------------- ---------------
$1,955,117 $1,807,965
=============== ==============
</TABLE>
<PAGE>
Universal Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
--------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current
Notes payable and overdrafts $670,808 $651,140
Accounts payable 226,280 221,574
Accounts payable - unconsolidated affiliates 7,970 6,976
Customer advances and deposits 190,673 46,443
Accrued compensation 13,227 18,286
Income taxes payable 19,204 21,745
Current portion long-term obligations 33,663 31,476
--------------- ---------------
Total current liabilities 1,161,825 997,640
Long - term obligations 260,677 284,948
Postretirement benefits other than pensions 47,633 48,007
Other long - term liabilities 51,364 52,962
Deferred income taxes 15,946 17,211
Minority interests 27,183 17,238
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 35,030,314 shares
(35,030,314 at June 30, 1995) 75,749 75,749
Retained earnings 325,026 323,595
Foreign currency translation adjustments (10,286) (9,385)
--------------- ---------------
Total shareholders' equity 390,489 389,959
--------------- ---------------
$1,955,117 $1,807,965
=============== ==============
</TABLE>
<PAGE>
Universal Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $10,189 $3,979
Adjustments to reconcile net income to net cash provided
by operating activities 4,700 8,600
Changes in operating assets and liabilities net of effects from
purchase of businesses (82,861) (172,516)
------------ -------------
Net cash used in operating activities (67,972) (159,937)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (9,500) (7,700)
Other 700 1,800
------------ -------------
Net cash used in investing activities (8,800) (5,900)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of short-term debt - net 12,600 73,900
Issuance (repayment) of long-term debt (15,000) 5,600
Proceeds from minority investment in a subsidiary 10,000
Dividends paid (8,800) (8,400)
------------ -------------
Net cash provided by (used in) financing activities (1,200) 71,100
------------ -------------
Net decrease in cash and cash equivalents (77,972) (94,737)
Cash and cash equivalents at beginning of period 158,093 166,820
------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $80,121 $72,083
============ ===========
</TABLE>
<PAGE>
Universal Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
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, 1995 are
not necessarily indicative of results to be expected for the year ending June
30, 1996. All adjustments necessary to fairly state the results for such period
have been included and were of a normal recurring nature.
2) The Company provides guarantees for seasonal pre-export crop financing for
some of its subsidiaries and unconsolidated affiliates. In addition, certain
subsidiaries provide guarantees that ensure that Common Market subsidies and
value-added taxes will be repaid if the crops are not exported or if the
subsidies are not properly distributed to Common Market farmers. At September
30, 1995, total exposure under guarantees issued for banking facilities of
unconsolidated affiliates was $3 million. Other contingent liabilities
approximate $55 million and relate principally to Common Market guarantees. The
Company considers the possibility of loss on any of these guarantees to be
remote.
3) Last year's effective tax rate in the quarter was significantly greater than
the Federal statutory tax rate due to the lack of tax benefits on certain
foreign subsidiaries' losses.
4) Effective in fiscal year 1995, the Company consolidated the results of
African operations previously accounted for under the equity or cost methods of
accounting. Financial data for the prior year's quarter has been restated to
reflect the consolidation. Before the effects of the consolidation, reported
consolidated net income for the quarter ended September 30, 1994 was $5.9
million or $.17 per share.
5) The Company recognized in June 1995 a pre-tax restructuring charge of $15.6
million related to the consolidation of certain tobacco operations and a
reduction in the number of employees. The charge included $7.2 million for the
expected costs of severance payments related to approximately 200 employees
throughout the Company. The non-severance portion of the charge was for the
write-down of fixed assets in operations consolidated ($3.7 million), and other
nonoperating restructuring costs ($1.7 million). As of September 30, 1995, cash
payments of $5 million had been made, approximately half of which was for the
termination of leases and the balance to cover severance costs of 50 employees.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Working capital at September 30, 1995, was $245 million compared to
$265 million at June 30, 1995. The 7.5% decline in working capital was accounted
for by increases in current assets of $144 million offset by an increase in
current liabilities of $164 million. The most significant increases were
accounted for by tobacco inventory (up $177 million) and customer advances (up
$144 million). These increases primarily relate to the Company's domestic
tobacco operations. Within the U.S., tobacco working capital needs are normally
at their lowest point at June 30. In mid to late July the U.S. flue-cured
tobacco markets open and the Company's working capital needs increase. As
tobacco is purchased and shipped to factories for processing, inventories
generally rise. This increase in inventories is offset by increases in notes
payable and/or customer advances. The mix of notes payable and customer advances
is dependent on both the Company's and its customers' borrowing capabilities,
interest rates and exchange rates. The Company does not purchase tobacco in the
United States on a speculative basis; thus the increase in inventory represents
tobacco that has been committed to customers.
Generally the Company's international tobacco operations conduct
business in U.S. dollars, thereby limiting foreign exchange risk to local
production and overhead costs. Agri-product and lumber operations enter into
foreign exchange contracts to hedge firm purchase and sales commitments for
terms of less than six months. Interest rate risk is limited because customers
in the tobacco business usually pre-finance purchases or pay market rates of
interest for inventory purchased for their accounts.
The liquidity and capital resources of the Company at September 30,
1995 remain adequate. Over the past two years the Company has announced
restructuring plans related to the consolidation of certain tobacco operations
and a reduction in the number of employees. These efforts will lead to increased
efficiency and streamlined operations. Through the quarter ended September 30,
1995, approximately $2.2 million of severance payments related to the fiscal
year 1995 restructuring had been paid.
Results of Operations
'Sales and Other Operating Revenues' increased $181 million or 27% in
the quarter. Tobacco operations accounted for $159 million of the increases
primarily due to increased domestic flue-cured and dark tobacco orders. The
balance of the increase was attributable to the inclusion of Heuvelmann, which
was acquired in the second quarter last year, in lumber and building product
operations.
Gross profits in the quarter increased almost 10% to $104 million due
to the acquisition of Heuvelmann plus improvements realized in domestic and dark
tobacco operations. In the quarter the total volume of domestic tobacco
purchased and processed was up over 40% primarily due to larger flue-cured
marketings and increased orders from domestic and export customers; however, as
expected, processing volumes for the Flue-cured Stabilization Cooperative were
down in the quarter, as crop surpluses have been reduced in the past year.
Foreign tobacco profits improved in the quarter principally due to improved
contributions from Central American and European operations. African tobacco
results were lower due to old crop shipments carried over into the first quarter
of last year. Similarly, Brazilian results were down in the quarter due to
shipments delayed to subsequent quarters in the current fiscal year. Profits in
dark air-cured tobacco rose on strong sales to the U.S. cigar industry, as
worldwide consumption of cigars, and resulting demand for leaf, continues to
increase. Lumber and building product results benefited from the inclusion of
Heuvelmann, while some erosion of margins and volumes in regional outlets was
more than offset by increased sales to the wholesale and professional markets.
Agri-product results in fiscal year 1996 benefited from improved market
conditions for both tea and confectionery sunflower seeds.
'Selling and General and Administrative Expenses' in the quarter
increased by 1% compared to last year, reflecting the realization of benefits
from restructuring efforts of the past two years. Interest expense was flat
year-to-year as increased borrowing requirements related to higher volumes were
offset by reductions in inventory carried over from the prior fiscal year. The
higher effective tax rate in the prior fiscal year's first quarter was due to
the lack of tax benefits on certain foreign subsidiaries' losses.
The improved tobacco world supply and demand relationship is expected
to lead to better results for the current fiscal year. Although there are
factors beyond management's control, such as fiscal policies in Brazil, the
Company's balance and strength in the major tobacco origins provides a firm base
for growth. Lumber and agri-products activities continue to perform well and
have good potential for the future. As reported in the 1995 annual report to
shareholders, the Company adopted a restructuring plan for its tobacco
operations. As of the date of this report there have been no material changes to
the plan or its underlying assumptions.
<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 9, 1995 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)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000102037
<NAME> UNIVERSAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 80,121
<SECURITIES> 0
<RECEIVABLES> 451,865
<ALLOWANCES> 0
<INVENTORY> 837,600
<CURRENT-ASSETS> 1,406,466
<PP&E> 663,762
<DEPRECIATION> 326,955
<TOTAL-ASSETS> 1,955,117
<CURRENT-LIABILITIES> 1,161,825
<BONDS> 260,677
<COMMON> 75,749
0
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<OTHER-SE> 314,740
<TOTAL-LIABILITY-AND-EQUITY> 1,955,117
<SALES> 842,454
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<CGS> 738,825
<TOTAL-COSTS> 738,825
<OTHER-EXPENSES> 71,127
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,225
<INCOME-PRETAX> 15,277
<INCOME-TAX> 5,806
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</TABLE>
