SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended June 30, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 1-652
UNIVERSAL CORPORATION
(Exact name of Registrant as specified in its charter)
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<S> <C>
VIRGINIA 54-0414210
(State or other jurisdiction of incorporation organization (I.R.S. Employer Identification Number)
1501 North Hamilton Street, Richmond, Virginia 23230
(Address of principal executive offices) (Zip code)
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Registrant's telephone number, including area code (804) 359-9311
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange Outstanding Shares
Title of each class on which registered at September 20,1995
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8% Cumulative Preferred None 4.00
Additional Preferred Stock None None
Common Stock, no par value New York 35,030,314
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by "X" mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No__
Indicate by "X" mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes X No__
The aggregate market value of Registrant's voting stock held by non-affiliates
was $781,000,000 at September 20, 1995.
INFORMATION INCORPORATED BY REFERENCE
Certain information in the September 22, 1995 Proxy Statement for the Annual
Meeting of Shareholders of Registrant is incorporated by reference into
Part III hereof.
PART I
ITEM 1. BUSINESS
A. The Company
Universal Corporation (which together with its subsidiaries is referred to
herein as "Universal" or the "Company") is the world's largest independent leaf
tobacco merchant and has additional operations in agri-products and lumber and
building products. Universal's tobacco operations have been the principal focus
of the Company since its founding in 1918, and for the fiscal year ended
June 30, 1995, such operations accounted for 70% of revenues and 75% of
operating profits. Its agri-products and lumber and building products
operations accounted for 14% and 16% of revenues and 9% and 16% of operating
profits, respectively, during the same period. See Note 4 to Consolidated
Financial Statements for additional business segment and geographical
information.
B. Description of Tobacco Business
General
Universal's tobacco business involves selecting, buying, shipping, processing,
packing, storing and financing leaf tobacco in the United States and other
tobacco growing countries for the account of, or for resale to, manufacturers of
tobacco products throughout the world. Universal does not manufacture
cigarettes or other consumer tobacco products. Most of its tobacco revenues are
derived from sales of processed tobacco and from fees and commissions for
specific services for its customers.
Timely and efficient processing of leaf tobacco is a service of continuing
importance to the Company's customers, the tobacco product manufacturers, as the
quality of the Company's finished product substantially affects the cost and
quality of the manufacturer's production. The Company's processing includes
grading in the factories, blending, separation of leaf lamina from the stems and
packing to precise moisture targets for proper aging. To accomplish these tasks
according to exacting customer specifications requires considerable skill and
significant investment in plants and machinery.
The Company's sales are predominantly flue-cured and burley tobaccos. Universal
estimates that in fiscal 1995 it purchased or processed approximately 38% of the
flue-cured and burley tobacco produced in the aggregate in the United States,
Brazil, Zimbabwe and Malawi. In addition, Universal maintains a presence, and
in certain cases a leading presence, in virtually all other tobacco growing
regions in the world. Management believes that its leading position in the leaf
tobacco industry is based on its broad market presence, its development of
processing equipment and technologies, its solid financial position and its
ability to meet customer demand through internal growth and selected
acquisitions. During the past fiscal year the Company installed a
state-of-the-art blending facility in one of its Italian factories as part of an
ongoing effort to offer additional services to cigarette manufacturers.
Universal has a leading position in worldwide dark tobacco markets. Its
operations are located in the major producing countries (i.e., the United
States, the Dominican Republic, Indonesia and northern Brazil) and other smaller
markets. These types of tobacco are typically used for cigars and smokeless
tobacco products. After decades of sales volume declines, the cigar industry
has experienced recent growth particularly in the premium segment of the market.
Although consumption of tobacco products in the United States and certain
industrialized countries has been declining, consumption in most developing
countries has been rising. Moreover, as a result of the elimination of trade
barriers in Far Eastern markets and the opening of markets in Eastern and
Central Europe, a significant amount of the world's tobacco markets are open to
free trade compared to ten years ago.
Reports and speculation with respect to the alleged harmful physical effects of
cigarette smoking, restrictions on the use of tobacco products in public places
and in advertising, and increases in sales and excise taxes have all had some
adverse effect upon cigarette sales in the U.S. and in certain foreign
countries. The U.S. Environmental Protection Agency has classified
environmental tobacco smoke as a "Group A" ("known human") carcinogen, which
action has been challenged in court by the Company and others. The U.S.
Occupational Safety and Health Administration has proposed a standard on indoor
air quality which if adopted would substantially limit smoking in the workplace.
Federal legislation has been proposed to increase the excise tax on cigarettes,
and the U.S. Food and Drug Administration (FDA) is proposing to regulate
nicotine as a drug in an effort to deter smoking by minors. The FDA effort has
been challenged in the courts. Numerous other legislative and regulatory
anti-smoking measures have also been proposed at the federal, state and local
levels. It is not possible to predict what, if any, governmental legislation or
regulations will be adopted related to tobacco or smoking. However, if any or
all of the foregoing were to be implemented, the Company's operating revenues
and operating income could be adversely impacted in amounts which cannot be
determined.
Litigation seeking damages for health problems and nicotine addiction alleged to
have resulted from the use of tobacco is pending against the leading United
States manufacturers of consumer tobacco products. It is not possible to
predict the outcome of such litigation or what effect adverse determinations
against the manufacturers might have on the business of the Company.
Domestic Tobacco Business
Universal is represented by its buyers on all significant tobacco markets in the
United States, including flue-cured tobacco markets in Virginia, North Carolina,
South Carolina, Georgia and Florida; Light air-cured (burley and Maryland)
tobacco markets in Kentucky, Tennessee, Virginia, North Carolina and Maryland;
air-cured tobacco markets in Kentucky and Virginia; dark fired and dark
air-cured markets in Virginia, Tennessee and Kentucky; and cigar/chewing tobacco
markets in Connecticut, Pennsylvania and Wisconsin.
In the United States, flue-cured and burley tobacco is generally sold at public
auction to the highest bidder. In addition, the price of such tobacco is
supported under an industry-funded federal program that also restricts tobacco
production through a quota system. The price support system has caused U.S.
grown tobacco to be more expensive than most non-U.S. tobacco, resulting in a
declining trend in exports. Industry leaders continue to explore options
including program changes to improve the competitive position of U.S. leaf.
Other factors affecting the competitive position of U.S. tobacco include
improved methods of production and quality in the U.S. and in foreign countries.
In 1994 and 1995, imports of foreign leaf declined in response to legislation
enacted in 1993 which required that cigarettes manufactured in the U.S. contain
at least 75% U.S. grown tobacco. In September 1995 this legislation was replaced
with a somewhat less restrictive tariff rate quota system. To prevent a
significant reduction in domestic production quotas, in December 1994 the
domestic cigarette manufacturers agreed to purchase 700 million pounds of
surplus flue-cured and burley tobacco from the stabilization cooperatives. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations".
Foreign Tobacco Business
Universal's business of selecting, buying, shipping, processing, packing,
storing, financing, and selling tobacco is, in addition to its domestic
operations, conducted in varying degrees in Argentina, Belgium, Brazil, Canada,
the Commonwealth of Independent States (the former Soviet Union), Colombia, the
Dominican Republic, Ecuador, France, Germany, Greece, Guatemala, Hong Kong,
Hungary, India, Indonesia, Italy, Malawi, Mexico, the Netherlands, Paraguay, the
People's Republic of China, the Philippines, Spain, Switzerland, Tanzania,
Thailand, Turkey, Uganda, the United Kingdom, Zambia and Zimbabwe.
In a number of countries, including Brazil, Hungary, Italy and Mexico, Universal
contracts directly with tobacco farmers, in some cases before harvest, and
thereby takes the risk that the delivered quality and quantity will meet market
requirements. The price may be set by negotiation with farmers' groups or with
agencies of the local government. In some countries Universal also provides
agronomy services and advances for seed, fertilizer and other supplies. Tobacco
in Zimbabwe, Malawi and Canada, and to a certain extent in India, is purchased
under a public auction system.
The Company has made substantial capital investments in Brazil and Africa and
the profitability of the operations there can materially affect the operating
results of the Company. The Company owns three tobacco leaf processing
facilities in Brazil and five in Africa. See "Properties."
Sales to foreign customers are made by Universal's sales force and through the
use of commissioned agents. Most foreign customers are long-established firms
or government monopolies.
Universal's foreign operations are subject to the usual international business
risks, including unsettled political conditions, expropriation, import and
export restrictions, exchange controls and currency fluctuations. During the
tobacco season in many of the countries enumerated above, Universal has advanced
substantial sums, has guaranteed local loans or has guaranteed lines of credit
in substantial amounts for the purchase of tobacco. Most tobacco sales are
denominated in U.S. dollars, thus limiting the Company's currency risk.
Recent Developments and Trends
For recent developments and trends in the Company's tobacco business, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
Seasonality
The purchasing and processing aspects of Universal's tobacco business are
seasonal in nature. The United States flue-cured tobacco markets usually open
the third week of July and last for approximately four months. The United
States burley tobacco markets open in late November and last for approximately
two and one-half months. Tobacco in Brazil is usually purchased from January
through May. Other markets around the world last for similar periods, although
at different times of the year, and this has resulted in less overall
seasonality in the Company's business.
Universal normally operates its processing plants for approximately seven to
nine months of the year. It purchases most of the tobacco which it redries and
packs in the U.S. in the eight-month period, July through February. During this
period, inventories of green tobacco, inventories of redried tobacco and trade
accounts receivable normally reach peak levels in succession. Current
liabilities, particularly short-term notes payable to banks, commercial paper
and customer advances are a means of financing this expansion of current assets
and normally reach their peaks in this period. At the end of the Company's
fiscal year (June 30), these seasonal expansions in the United States are
normally not reflected in the components of working capital. Seasonal expansions
are reflected at that time, however, for Universal's operations in Brazil, Italy
and Mexico.
Customers
A material part of the Company's tobacco business is dependent upon a few
customers, the loss of any one of whom would have an adverse effect on the
Company. The Company has long-term contracts (which under certain circumstances
may be amended or terminated) with a few of these customers, and, while there
are no formal continuing contracts with the others, the Company has done
business with each of its major customers for over 35 years. For the year ended
June 30, 1995, tobacco sales to Philip Morris Companies, Inc. accounted for
greater than 10% of consolidated revenues. See Note 12 to Consolidated
Financial Statements. Five other customers accounted for approximately 14%.
Universal had orders from customers in excess of $278 million for its tobacco
inventories at June 30, 1995. Based upon historical experience, it is expected
that at least 90% of such orders will be delivered during the fiscal year ending
June 30, 1996. Typically, delays in the delivery of orders result from changing
customer requirements. Orders from customers at June 30, 1994, were in excess
of $231 million, of which over 90% was delivered in the following fiscal year.
The level of purchase commitments for tobacco fluctuates from period to period
and is significant only to the extent that it reflects short-term changes in
demand for redried tobacco.
Competitors
Competition among leaf tobacco merchants is based on the price charged for
products and services as well as the firm's ability to meet customer
specifications in the buying, processing, and financing of tobacco. Universal
has many processing plants equipped with the latest technology and a world-wide
buying organization of tobacco specialists which, management believes, give it a
competitive edge. See "Properties." Competition varies depending on the market
or country involved. Normally, there are from five to seven buyers on each of
the United States flue-cured and burley markets. The number of competitors in
foreign markets varies from country to country, but there is competition in all
areas to buy the available tobacco. The principal competitors in the industry
that do not manufacture consumer tobacco products and that compete with the
Company on the United States markets and on foreign markets are as follows:
DiMon Incorporated, Export Leaf Tobacco Company, and Standard Commercial
Corporation. Of the significant competitors in the United States that are not
also manufacturers, Universal believes that it ranks first in total U.S. market
share and also first in total worldwide market share.
C. Description of Agri-Products Business
The Company's agri-products business involves the selecting, buying, shipping,
processing, storing, financing, distribution, importing and exporting of a
number of products including tea, rubber, sunflower seeds, nuts, dried fruit,
canned meats, spices and seasonings. During the past fiscal year, the Company
acquired a leading spice distribution company in Belgium and a small seed
cleaner/merchandiser in the Netherlands.
The emphasis of the Company's agri-products business is on value-adding
activities and/or trading of physical products in markets where a real function
can be performed in the supply system from the countries of origin to the
consuming industries. In a number of countries, longstanding sourcing
arrangements for certain products or value-adding activities through modern
processing facilities (tea, spices and sunflower seeds) contribute to the
stability and profitability of the business. Traders are subject to strict
trading limits to minimize speculative risks and allow effective management
control. Seasonal effects on trading are limited.
The Company provides various products to numerous large and small customers in
the food and food packaging industry and in the rubber and tire manufacturing
industry. Generally, there are no formal continuing contracts with these
customers, although business relationships may be longstanding. No single
customer accounts for 10% or more of the Company's consolidated agri-products
revenues.
Competition among suppliers in the agricultural products in which Universal
deals is based on price as well as the ability to meet customer requirements in
product quality, buying, processing, financing and delivery. The number of
competitors in each market varies from country to country but there is
competition for all products and markets in which the Company operates. Some of
the main competitors are: Agway, Akbar Brothers, Andrew Weir Commodities, Burns
Philip, Ennar, Cargill, Dahlgren, Global, EP Lambert Co., Finlay, Fuchs,
Metallgeschellschaft/SAFIC Alcan, Stassens, Symington, Universal Tea, UTT
(Unilever) and Verstegen.
For recent developments and trends in the Company's agri-products business, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
D. Description of Lumber and Building Products Business
The Company is engaged in the lumber and building products business in the
Netherlands and Belgium. The majority of lumber products are sourced outside
the Netherlands, principally in North America, Scandinavia, Eastern and Western
Europe, and the Far East.
The lumber and building products business is seasonal to the extent that winter
weather may temporarily interrupt the building industry which in turn affects
this segment. The business is also subject to exchange risks and other normal
market and operational risks associated with lumber operations centered in
Europe including general economic conditions in the countries where the Company
is located and related trends in the building and construction industries.
The Company's sales activities in this segment are conducted through three
business units: regional sales, wholesale/do-it-yourself (DIY) sales and
industrial sales. The regional sales unit distributes and sells lumber and
related building products through a network of regional outlets, mainly to the
building and construction market. The wholesale/DIY business unit supplies
timber merchants and DIY chains with a wide range of panel products and doors.
The industrial sales unit consists mainly of Heuvelman, a premier softwood
distributor of value-added products to the construction industry. Both
Heuvelman and a small timber processor in the south of Holland were acquired
during the past fiscal year.
The Company carries inventories to meet customers' demands for rapid delivery.
The level of inventories is based on a balance between providing service and
continuity of supply to customers and achieving the highest possible turnover.
The Company does not provide extended payment terms to its customers. No single
customer accounts for 10% or more of the Company's consolidated lumber and
building products revenues.
The Company's lumber and building products sales accounted for approximately 20%
of the total market volume for the Netherlands, which is slightly above the
market share of its largest competitor, Pont-Meyer N.V. Ten additional
competitors account for approximately 20% to 30% of the market share and the
balance is held by approximately 200 smaller competitors. The primary factors of
competition are quality and price, product range and speed and reliability of
logistic systems. The Company believes that its full geographical market
coverage, its automated inventory control and billing system and its efficient
logistics give it a competitive advantage in the Netherlands. The Company's
share of the highly fragmented Belgium lumber and building products market is
approximately 3%.
For recent developments and trends in the Company's lumber and building products
business, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
E. Employees
The Company employed approximately 30,000 employees throughout the world during
the fiscal year ended June 30, 1995. This figure is estimated because many of
the non-salaried personnel are seasonal employees.
Universal believes that in the United States approximately 1,300 of the
non-salaried employees of its consolidated tobacco subsidiaries are represented
by unions. Most of these are seasonal employees. The Company's labor relations
have been good.
F. Research and Development
No material amounts were expended for research and development during the fiscal
years ended June 30, 1995, 1994, and 1993.
G. Patents, etc.
The Company holds no material patents, licenses, franchises or concessions.
H. Environmental Matters
Compliance with Federal, state and local provisions regarding the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, has not had, and is not anticipated to have, any material effect
upon the capital expenditures, earnings or competitive position of the Company.
ITEM 2. PROPERTIES
Universal owns the land and building located at Hamilton and Broad Streets in
Richmond, Virginia, where it is headquartered. The building contains
approximately 83,000 square feet of floor space. The Company also owns a
smaller office building nearby which contains approximately 11,300 square feet
of floor space.
In its domestic tobacco processing operations, Universal owns six large, modern,
high volume plants which have the capacity to thresh, separate, quality grade
and redry tobacco. Four of these plants are located in North Carolina (Wilson,
Henderson, Rocky Mount and Smithfield), one plant is in Danville, Virginia, and
one plant is in Lexington, Kentucky. The Henderson plant has a production
capacity of over 140 million pounds of green tobacco and 500,000 square feet of
floor space. The Wilson plant has approximately 500,000 square feet of floor
space and a production capacity of over 130 million pounds of green tobacco.
The remaining four plants each have a floor space of 300,000 to 400,000 square
feet and an average annual production capacity of over 100 million pounds of
green tobacco. Universal also owns a processing facility in Dinwiddie County,
Virginia with 250,000 square feet of floor space.
The Company owns tobacco processing plants in the following foreign locations:
a large processing plant in Canada; one large processing plant and one smaller
plant in Malawi; three large processing plants in Italy; three plants in
Zimbabwe; and plants in Hungary and Turkey. In Brazil, Universal owns three
large plants one of which is for sale. Universal operates a plant in the
Philippines. The Company's plant in Thailand has been closed and is for sale
and a plant in Greece is for sale.
The facilities described above are engaged primarily in processing tobacco used
by manufacturers in the production of cigarettes. In addition, Universal owns
plants that process cigar/chewing tobaccos in Lancaster, Pennsylvania;
Kenbridge, Virginia; the Dominican Republic; Colombia; Indonesia; and Brazil.
It operates sheet manufacturing plants in the Netherlands and in Germany.
Universal owns or leases extruder plants (baling operations), packaging stations
and warehouse space in the tobacco-growing states and abroad. Large extruder
plants are owned in Lumberton and Rocky Mount, North Carolina; Danville,
Virginia; Greeneville, Tennessee; and Lexington and Bowling Green, Kentucky.
The processing and extruder plants are operated seasonally. The large
processing plants usually are in operation from seven to nine months out of the
year. A portion of Universal's tobacco inventory is stored in public storages.
The following storages are owned:
(a) Wilson, North Carolina - 12 storages covering 460,000 square
feet;
(b) Smithfield, North Carolina - 7 storages covering 240,000 square
feet;
(c) Henderson, North Carolina - 6 storages covering 178,500 square
feet;
(d) Rocky Mount, North Carolina - 3 storages covering 133,000
square feet;
(e) Danville, Virginia - 4 storages covering 153,000 square feet;
(f) Lexington, Kentucky - 5 storages covering 127,000 square feet;
and
(g) Kenbridge, Virginia - 7 storages covering 243,000 square feet.
Additional storage space is leased in Danville, Virginia; Lexington, Kentucky;
and Smithfield, Henderson and Rocky Mount, North Carolina. Lancaster Leaf
Tobacco Company of Pennsylvania, Inc. owns storage space with a capacity of
19,300 tons of tobacco and leases additional storage space. In other U.S.
tobacco areas, Universal owns or leases storages on a smaller scale. In foreign
areas storage space is owned or leased on a comparable scale.
The Company believes that the above-listed properties are maintained in good
operating condition and are suitable and adequate for its purposes at current
sales levels. Facilities owned are not subject to indebtedness except for those
in Dinwiddie County and Kenbridge, Virginia, which are financed in part through
governmental industrial development authorities.
The Company's agri-products subsidiaries own and operate a tea blending plant in
the Netherlands, a tea warehouse and office in Sri Lanka, spice blending
facilities in the Netherlands, a bean processing plant in Park Rapids,
Minnesota, small grain processing facilities in Delaners, North Dakota and
Zevenbergen, the Netherlands, and sunflower seed processing plants in Lubbock,
Texas; Colby, Kansas; and Fargo, North Dakota. These latter two facilities are
financed in part through governmental industrial development authorities. The
Company has leased agri-products trading offices around the world, including
locations in New York, London, Warsaw, Rotterdam, Belgium, Indonesia, Kenya and
Malawi.
The lumber and building products division owns or leases 38 sales outlets in the
Netherlands and six sales outlets in Belgium. It also has five storage and
distribution warehouses, a softwood facility for large scale sawing, planing and
fingerjointing, and a building components manufacturing facility, all in the
Netherlands. Most of these locations are owned.
ITEM 3. LEGAL PROCEEDINGS
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended June 30, 1995, there were no matters submitted to a
vote of security holders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Dividend and market price information is as follows:
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First Second Third Fourth
Quarter Quarter Quarter Quarter
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1995
Cash dividends declared $ .24 $ .25 $ .25 $ .25
Market price range: High . . . . . . . . . . . . . . . . . 24 3/4 24 1/4 22 1/4 24
Low . . . . . . . . . . . . . . . . . . 18 3/4 19 3/4 18 7/8 20 3/4
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1994
Cash dividends declared .22 .24 .24 .24
Market price range: High . . . . . . . . . . . . . . . . . . 25 1/4 27 7/8 26 1/4 19 5/8
Low . . . . . . . . . . . . . . . . . $21 3/4 $22 3/8 $18 1/2 $17 3/4
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The Company expects the past trend of dividend payments to continue, subject,
however, to its future earnings and financial condition. At June 30, 1995 there
were 3,741 holders of record of the registrant's common stock which is traded on
the New York Stock Exchange.
ITEM 6. SELECTED FINANCIAL DATA
Five-Year Comparison of Selected Financial Data For Years Ended June 30
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<CAPTION>
(In thousands except per share data, ratios,
and number of common shareholders) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Gross revenues $3,280,880 $3,048,515 $3,077,597 $3,156,304 $3,095,089
Income from continuing operations before
extraordinary item and cumulative effect
of change in accounting principle 25,639 42,579 80,066 73,722 58,060
Net income $25,639 $13,173 $80,066 $73,722 $21,910
Return on beginning common shareholders' equity 6.7% 3.1% 26.1% 18.6% 5.4%
Per common share
Income from continuing operations before
extraordinary item and cumulative effect
of change in accounting principle $.73 $1.20 $2.38 $2.25 $1.77
Net income $.73 $ .37 $2.38 $2.25 $ .67
FINANCIAL POSITION AT YEAR END
Current ratio 1.27 1.35 1.34 1.38 1.33
Total assets $1,807,965 $1,735,866 $1,698,937 $1,345,347 $1,346,393
Long-term obligations 284,948 304,149 287,796 194,566 164,159
Working capital 264,713 318,583 309,370 284,870 232,043
Shareholders' equity $389,959 $384,598 $421,022 $306,754 $396,833
GENERAL
Number of common shareholders 3,741 4,022 4,132 4,210 4,157
Weighted average common shares outstanding
(used as basis for computation of E.P.S.) 35,014 35,502 33,599 32,822 32,792
Dividends per common share $ .99 $ .94 $ .86 $ .79 $ .755
Book value per common share $11.13 $10.99 $11.82 $9.33 $12.11
</TABLE>
Fiscal year 1995 includes a $15.6 million ($10.7 million net of tax)
restructuring charge.
Fiscal year 1994 reflects the cumulative effect of the change in accounting
principle ($29.4 million) resulting from the adoption of SFAS 106 "Employer's
Accounting for Postretirement Benefits Other Than Pensions" as well as a $17.5
million ($11.8 million net of tax) restructuring charge.
Fiscal 1994 and prior years have been restated to reflect the consolidation of
certain foreign susidiaries that had been accounted for under the cost or equity
method of accounting.
Amounts for 1991 have been reclassified to include the results of operations and
financial position of Lawyers Title as discontinued operations as a result of a
spinoff to shareholders.
Per common share information reflects December 1991 two-for-one stock split.
Fiscal year 1991 reflects an extraordinary loss ($3.8 million) resulting from a
provision for the uncollectability of a receivable from the Iraqi State Tobacco
Monopoly as a result of the Persion Gulf war.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity & Capital Resources
During a year that reflected the continued impact of adverse market conditions,
the Company maintained its financial strength and improved its operating
efficiency. The restructuring plan announced in fiscal year 1994 has been
implemented and a second program was approved in June 1995. As part of those
programs, a number of facilities have been closed and operations have been
rationalized.
Working capital declined by approximately $54 million to $265 million. Although
this decline related primarily to short-term financing of acquisitions that
occurred during the year, the Company also reduced its tobacco inventories and
receivables. The level of uncommitted inventories was significantly reduced from
the 1994 level.
The Company's capital needs are predominantly short term in nature and relate to
working capital required for financing crop purchases. The working capital
needs of the Company are seasonal within each geographical region. Generally,
the peak need of domestic tobacco operations occurs in the second quarter of the
fiscal year. Foreign tobacco operations tend to have higher requirements in the
remainder of the year. The geographical dispersion and the timing of working
capital needs permit the Company to predict its general level of cash
requirements during the year. Each geographic area follows the cycle of buying,
processing, and shipping of the tobacco crop. The timing of individual customer
shipping requirements may change the level or the duration of crop financing.
The working capital needs of individual agri-products operations fluctuate
during the year, depending on the product, the country of origin, and the
Company's inventory position; however, the total working capital requirements of
agri-products during the year remain relatively stable due to offsetting
seasonal patterns. Working capital needs of lumber and building products in
Europe follow a pattern similar to that of the construction industry in which
the third quarter of the fiscal year is typically sluggish. The Company
finances its working capital needs with short-term lines of credit, exchange
contracts for export prefinance, customer advances, and trade payables.
International tobacco trade generally is conducted in U.S. dollars, thereby
limiting foreign exchange risk to that which is related to product costs and
overhead in the country in which tobacco is sourced. Because there are no
forward foreign currency markets for the currencies of the major countries in
which the Company purchases its tobacco, the Company manages its risk by
matching the currency of funding for inventory purchases with the currency of
the related sales and by minimizing the net investment in these countries. In
addition, it is generally accepted practice in the tobacco processing industry
that customers pay a market rate of interest for inventory purchased to their
order; thus, changes in interest rates do not have a major impact on the
Company's income and are not considered a source of significant risk.
The Company's agri-products and lumber operations, which are based in the United
States and in the Netherlands, do business in a number of foreign countries.
These operations enter into forward exchange contracts to hedge firm purchase
and sales commitments in foreign currencies (principally Dutch guilders, U.S.
dollars, pounds sterling, and Swedish kronas). The term of currency hedges is
generally from one to six months.
Long-term investments are reflected in "Cash flows from investing activities."
Over the last three years, total investment needs of $279 million were provided
by cash flow from operating activities and the issuance of common stock in 1993
supplemented by long-term debt. Investments in fiscal year 1995 included the
acquisition of the premier distributor of value-added softwood products in
Holland as well as two smaller distributors in Belgium and Holland. In
addition, the Company acquired a spice distribution company in Belgium and
is negotiating a related joint venture that is expected to be the market
leader in the Benelux area. These acquisitions required a net cash investment
of $63 million in fiscal year 1995, which was funded primarily with previously
existing credit lines.
The Company's capital expenditures are generally limited to those that add value
to the customer, replace obsolete equipment, increase efficiency, or position
the Company for future growth. During fiscal year 1995, Universal made
substantial progress on the installation of a processing facility in China that
is expected to be completed in late 1995. A state-of-the-art blending facility
was installed in Italy and process improvements were completed in Hungary. In
fiscal year 1994, a new processing line was added to the Company's facility in
Malawi. Management believes that these operations represent significant
opportunities for growth over the long term. At June 30, 1995, the Company had
no material commitments for capital expenditures
The Company believes that its financial resources are adequate to support its
capital needs. The Company and its subsidiaries currently have $1.5 billion in
uncommitted lines of credit of which $900 million was available at June 30,
1995, to support future seasonal working capital needs in the United States and
several foreign countries. In addition, the Company has $100 million in an
unused committed facility under a revolving credit agreement. This facility is
also available to support the future issuance of commercial paper. The
Company's debt ratings are investment grade, and it has reduced the ratio of
long-term debt to total capitalization to approximately 41%. Any excess cash
flow from operations after dividends, capital expenditures, and long-term debt
payments will be available to reduce short-term debt, or fund expansion.
Results of Operations
Fiscal Year 1995 Compared to 1994
In fiscal year 1995, the Company began reporting its African operations on a
consolidated basis. Previously, these operations were reported either on the
cost or equity method. The change in reporting did not materially effect the
results of operations, and all prior years have been restated to reflect this
change.
Consolidated revenues were up $232 million or 7.6% in fiscal year 1995 compared
to 1994. Gross revenues in all three operating segments were up over the prior
year, with lumber and building products accounting for over 60% of the
consolidated increase. The improvement in lumber was due to a combination of
increased sales, the inclusion of full year results of 1994 acquisitions and
results of acquisitions in fiscal year 1995, and exchange rate differences. The
total increase in revenues related to these acquisitions was almost $70 million.
Domestic tobacco revenues were up $137 million because of an increase in sales
and purchasing volume of about 16%. This improvement was due to the improved
quality of the domestic crops as the Company purchased more tobacco for
customers.
Tobacco operating profits were down 15.8% or $19 million compared to fiscal year
1994's results. Tobacco operating profits in fiscal year 1995 included $15.6
million of restructuring charges compared to $17.5 million in 1994. The lower
results in fiscal year 1995 reflect the continued pressure on margins from the
unbalanced supply and demand situation. At the end of fiscal year 1994, the
worldwide leaf oversupply led to reduced prices and margins; shipments of
discounted stocks from that oversupply continued well into fiscal year 1995.
Although worldwide production declined in fiscal year 1995, the positive impact
of an improved balance between supply and demand began to emerge later in the
year and should benefit results in fiscal year 1996. In addition to the reduced
margins on sales of foreign tobacco, the Company recorded a total of $10.7
million of tobacco inventory write-downs. Almost $7 million of the write-downs
was related to Indonesian tobacco and the Company's decision to revise its
operating approach to Eastern Europe in light of the economic instability of the
area. Write-downs in 1994 were $27 million. Domestic tobacco's operating
profits improved on increased volumes despite a significant drop in processing
volume for the stabilization cooperatives. The volumes handled for the
cooperatives in any one year are affected by domestic crop size, its price and
quality, and market demand. Although tobacco results were disappointing in
fiscal year 1995, the Company is confident that, with the implementation of its
restructuring plans, it is well positioned for long-term growth.
Lumber and building products operating income for fiscal year 1995 was up 12.8%
or $2.4 million largely due to the acquisition of Heuvelmann and a strong
performance by the wholesale companies during the year. The acquisition, while
not significant to consolidated operations, had a positive impact on this
segment's results. Operating profits as a percentage of sales decreased from
5.1% in fiscal year 1994 to 4.1% in 1995 due to the adverse effects of a strike
in the Dutch building industry, higher labor costs, and low prices for tropical
plywood and hardwoods; however, improved volumes and acquired operations more
than offset those factors. Agri-products operating income increased $2.7 to
$11.9 million in fiscal year 1995. The majority of this increase was due to the
discontinuation of coffee trading near the end of fiscal year 1994; that
operation had recorded losses during the year. Trading activity in rubber
showed improved results on the strength of higher prices. Tea results improved
despite a flat market from continuing worldwide oversupply. In addition,
improved earnings were reported in confectionery sunflower seeds.
Selling, general and administrative expenses increased $18 million or 5.9%
compared to 1994. Of the increase, $10 million was due to the acquisition of the
Heuvelmann lumber operation in fiscal year 1995, and approximately $5.5 million
of the increase related to provisions for customer obligations in Eastern Europe
and other areas. Interest expense in fiscal year 1995 dropped almost $6 million
compared to last year due to a combination of less crop financing in local
currencies and reduced levels of inventory financing during the year.
Fiscal year 1995's income tax rate increased to 44.6% due to a combinations of
factors. Full statutory benefits were not recognized on the restructuring
charge or on the inventory write-downs and provisions related to Eastern Europe.
In addition, the Company provided for limitations on the realization of foreign
tax credits. The Company's consolidated income tax rate is affected by a number
of factors, including but not limited to: the mix of domestic and foreign
earnings, subsidiary local tax rates, the Company's policy regarding
repatriation of foreign earnings, and its ability to utilize foreign tax
credits. Historically, the Company has been able to fully credit foreign taxes
paid against U.S. taxes on foreign earnings. Due to shifts in the mix of
earnings and increases in foreign effective tax rates, the utilization of
foreign tax credits may be limited in the future. The limitation would have the
effect of increasing the Company's consolidated tax rate. However, the Company,
through the implementation of a number of tax planning strategies, is taking
steps to minimize the potential increase in its tax rate above the statutory
rate.
In fiscal year 1995, the Company continued its effort to streamline operations
by approving the 1995 restructuring plan pursuant to which it recorded a charge
of $15.6 million. The plan is in addition to the rationalization and
consolidation of operations approved in fiscal year 1994. The charge includes
$7.2 million for the expected severance payments related to approximately 200
employees throughout the Company. The remainder of the charge was for the
write-down of fixed assets in newly consolidated operations ($3.7 million),
payments to terminate occupancy of leased facilities ($3 million), and other
nonoperating restructuring costs ($1.7 million). Cash payments of $5 million
had been made as of June 30, 1995, approximately half of which was for the
termination of leases; the balance represented severance costs of 35 employees.
When fully implemented by the end of fiscal year 1996, the plan is expected to
yield annual savings approximating half the amount of the charge.
Fiscal Year 1994 Compared to 1993
Consolidated revenues in fiscal year 1994 declined $29 million, less than 1%
compared to 1993. The decline was mitigated by the inclusion of twelve months
of Casalee's 1994 sales versus the six weeks included in fiscal year 1993.
Tobacco revenues declined $66 million primarily due to the poor quality U.S.
flue-cured crop and reduced worldwide demand for all growths. Lumber and
building product revenues declined in fiscal year 1994 principally due to
exchange rate differences. An increase of $53 million in agri-product revenues
in fiscal year 1994 was attributable to increased nut and canned meat trading.
Tobacco operating profit of $121.8 million in fiscal year 1994 was net of a
$17.5 million restructuring charge. Excluding the restructuring charge, tobacco
operating profits were down $44 million or almost 25% compared to 1993.
Included in fiscal year 1994 results were $27 million of inventory write-downs
compared to approximately $14 million in fiscal year 1993. Tobacco operating
results in fiscal year 1994 reflect a number of adverse factors in the United
States, including a poor quality flue-cured crop and domestic content
legislation, as well as market reactions to the expectation of an increased
excise tax on cigarettes. In addition to these domestic issues, there was a
worldwide glut of tobacco caused by reduced demand in the face of record crops.
Total domestic tobacco purchases in fiscal year 1994 were down primarily due to
lower purchases of the poor quality flue-cured crop. However, processing
volumes were comparable to 1993 as reduced cigarette manufacturer orders were
offset by significantly larger volumes of tobacco processed for the
stabilization cooperatives. In addition to the adverse effects of the 1994
crop volumes, domestic tobacco results in fiscal year 1994 were down on a
comparative basis to 1993 due to customer-mandated hold-over shipments recorded
in the first quarter of fiscal year 1993. International tobacco profits for
fiscal year 1994 were down principally due to the pressure on margins which
reduced sales profits and resulted in significant inventory write-downs.
Lumber and building product operations reported higher operating results in
fiscal year 1994 due to increased prices for hard and softwoods. Operating
profits of the lumber and building products segment in fiscal year 1993 included
a pre-tax gain of $3.8 million realized on the sale of the Company's flatboard
finishing operation. Excluding the gain, lumber and building products
operating profits increased almost 50% in 1994. Agri-product operating results
were down approximately 15% in fiscal year 1994 compared to 1993. Improved
results in nuts and sunflower seeds were more than offset by shortfalls in tea
and coffee. Sunflower seed operations benefited from increased demand and a
smaller crop, while tea operations were adversely affected by a weak market.
Losses in coffee trading in fiscal year 1994 reflected the continuing volatility
of those markets and led to the decision by the Company to terminate this
business.
Selling, general and administrative expenses increased $40 million as a result
of the inclusion of Casalee's operations for the full fiscal year in 1994. This
increase was slightly offset by declines in selling and shipping expenses on
reduced volumes in fiscal year 1994. Interest expense in fiscal year 1994
increased $10 million due to increased inventory levels, longer holding periods,
and increased levels of higher rate long-term financing. The Company's
effective tax rate for fiscal year 1994 was 30.3% compared to 37.7% in 1993.
The decrease in 1994 was due to a higher proportion of foreign earnings which
were deemed permanently reinvested compared to 1993.
In June 1994, the Company recorded a $17.5 million restructuring charge which
included approximately $16 million of severance provisions for approximately 700
of the Company's employees. The plan was implemented in fiscal year 1995 and
funded with cash from operations. Savings from the 1994 plan are expected to
approximate $19 million annually and relate primarily to reduced compensation.
In the first quarter of fiscal year 1994, the Company adopted SFAS 106 and
elected to record a one-time charge of $29.4 million; subsequently, in the third
quarter the Company amended its post-employment benefit plans. The effect of
the amendment is expected to substantially offset the effect on earnings from
SFAS 106. See Note 9 for more information.
Other Information Regarding Trends and Management's Actions
Over the last two years, the worldwide surplus of tobacco has had a
significant impact on the industry and on the Company's results. During fiscal
year 1995, a more balanced supply and demand relationship began to emerge.
Worldwide production of flue-cured and burley tobaccos was estimated to be at
least 20% below the fiscal year 1994 level, and much of the uncommitted
inventory held by merchants at the end of fiscal year 1994 was sold in 1995,
albeit at discounted prices. In December 1994, U.S. cigarette manufacturers and
the stabilization cooperatives negotiated a buy-out of unsold U.S. stocks.
Import restrictions under the U.S. domestic content law are slated to be
replaced by tariff rate quotas, which should permit U.S. tobacco imports to
recover somewhat from the very low levels attained in the past year. In
addition, the threatened U.S. excise tax increase, which had depressed U.S.
market expectations, did not materialize. Reduced world leaf production and the
reduction of uncommitted inventories in the last year has improved the outlook
for the merchant industry.
Over the past few years, particularly in the United States, restrictions on
cigarette smoking in public places and advertising have increase substantially,
and the tobacco industry has been under unprecedented legislative and regulatory
attack. Most recently the U.S. Food and Drug Administration (FDA) has proposed
to regulate nicotine as a drug in an asserted effort to deter smoking by minors.
The FDA effort has been challenged in the courts. Numerous other legislative
and regulatory anti-smoking measures have also been proposed at the federal,
state and local levels, and product liability litigation is pending against the
leading U.S. manufacturers of tobacco products. It is not possible to predict
what, if any, governmental legislation or regulations will be adopted related to
tobacco or smoking, or the outcome of product liability litigation, and the
effect thereof on consumption of tobacco products.
Cigarette consumption has been growing at a 1% annual rate worldwide, and a
number of new or changing markets offer sourcing or sales opportunities for the
Company, especially in Eastern Europe, China, the republics of the former Soviet
Union, and developing countries in the Pacific Rim. China, where Universal is
active, offers potential as the largest consumer of tobacco products in the
world and as a source of low-priced filler style tobaccos for the export
market. The republics of the former Soviet Union offer potentially large leaf
markets as internal production has declined and demand has been artificially
constrained by economic dislocation and lack of foreign exchange.
A key trend in the tobacco industry has been consolidation among manufacturers
and among merchants. This concentration should increase the need for better
quality tobacco and improved processing which provides a good opportunity for
the Company. However, it may also make demand for particular growths of tobacco
less predictable.
The Company has a very large presence in the U.S. market where leaf has not been
price competitive with the world market. If not corrected through tobacco
program reforms and reduced support prices, this could result in a decline in
U.S. production and marketings in the future. Management does not believe that a
significant decline in the United States is imminent. The Company's operations
are well placed to supply leaf from many sources in world markets, and the
business is not capital intensive.
In its lumber and building products area, the Company has been leading a trend
toward consolidation of a fragmented industry in Holland and has proved itself
an attractive business partner in that environment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Universal Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Years Ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
(In thousands of dollars except per share data) 1995 1994 1993
<S> <C> <C> <C>
Sales and other operating revenues $3,280,880 $3,048,515 $3,077,597
Costs and expenses
Cost of goods sold 2,818,431 2,588,060 2,612,277
Selling, general and administrative expenses 321,499 303,459 263,748
Restructuring charge 15,597 17,500
Interest 69,585 75,438 65,468
3,225,112 2,984,457 2,941,493
Income before income taxes and other items 55,768 64,058 136,104
Income taxes 24,866 19,390 51,313
Minority interests 6,633 4,618 4,674
Income from consolidated operations 24,269 40,050 80,117
Equity in net income (loss) of unconsolidated affiliates 1,370 2,529 (51)
Income before cumulative effect of change
in accounting principle 25,639 42,579 80,066
Cumulative effect of change in accounting principle (29,406)
Net income 25,639 13,173 80,066
Per common share
Income before cumulative effect of change
in accounting principle .73 1.20 2.38
Cumulative effect of change in accounting principle (.83)
Net income $ .73 $ .37 $ 2.38
</TABLE>
See accompanying notes.
Universal Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30, 1995 and 1994
<TABLE>
<CAPTION>
(In thousands of dollars) 1995 1994
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 158,093 $ 166,820
Accounts and notes receivable 392,797 370,966
Accounts receivable - unconsolidated affiliates 13,230 26,225
Inventories - at lower of cost or market:
Tobacco 458,964 481,085
Lumber and building products 122,613 83,441
Agri-products 72,908 60,132
Other 11,988 10,697
Prepaid income taxes 8,371 3,684
Deferred income taxes 5,625 5,530
Other current assets 17,764 20,423
Total current assets 1,262,353 1,229,003
Real estate, plant and equipment - at cost
Land 35,631 24,179
Buildings 211,146 176,266
Machinery and equipment 405,029 380,830
651,806 581,275
Less accumulated depreciation 317,365 278,552
334,441 302,723
Other assets
Goodwill 127,501 124,286
Other intangibles 21,759 27,089
Investments in unconsolidated affiliates 23,433 11,752
Deferred income taxes 7,832 9,905
Other noncurrent assets 30,646 31,108
211,171 204,140
$1,807,965 $1,735,866
</TABLE>
See accompanying notes.
Universal Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30, 1995 and 1994
<TABLE>
<CAPTION>
(In thousands of dollars) 1995 1994
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Notes payable and overdrafts $ 651,140 $ 560,524
Accounts payable 211,770 225,365
Accounts payable - unconsolidated affiliates 6,976 17,042
Customer advances and deposits 46,443 51,671
Accrued compensation 18,286 13,366
Provision for restructuring 9,804 15,500
Income taxes payable 21,745 10,429
Current portion of long-term obligations 31,476 16,523
Total current liabilities 997,640 910,420
Long-term obligations 284,948 304,149
Postretirement benefits other than pensions 48,007 48,969
Other long-term liabilities 52,962 58,226
Deferred income taxes 17,211 16,058
Minority interests 17,238 13,446
Commitments and contingent liabilities
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 (35,001,185 at
June 30, 1994) 75,749 75,287
Retained earnings 323,595 332,626
Foreign currency translation adjustments (9,385) (23,315)
Total shareholders' equity 389,959 384,598
$1,807,965 $1,735,866
</TABLE>
Universal Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
(In thousands of dollars) 1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 25,639 $ 13,173 $ 80,066
Adjustments to reconcile net income to net cash provided
by operating activities:
Cumulative effect of change in accounting principle 29,406
Restructuring charge (net of cash payments) 10,597 15,500
Depreciation 39,828 40,184 35,318
Amortization 8,796 8,136 2,878
Translation loss - net 2,563 6,726 2,434
Deferred taxes (16,068) 693 5,351
Minority interests 6,633 4,618 4,674
Other 1,537 (3,318) (4,695)
79,525 115,118 126,026
Changes in operating assets and liabilities net of effects
from purchase of businesses:
Accounts and notes receivable 27,493 (14,206) (54,155)
Inventories and other current assets 16,576 49,516 (7,661)
Income taxes 7,466 (9,436) (3,710)
Accounts payable and other accrued liabilities (70,515) (43,231) 34,779
Net cash provided by operating activities 60,545 97,761 95,279
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (39,024) (38,917) (46,405)
Purchase of businesses (net of cash acquired) (62,702) (21,861) (84,850)
Sales of property, plant and equipment 4,839 7,804 6,935
Other (4,244) 507 (827)
Net cash used in investing activities (101,131) (52,467) (125,147)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of short-term debt - net 69,701 47,236 64,923
Repayment of short-term debt classified as long-term (100,000)
Repayment of long-term debt (10,798) (24,278) (43,959)
Issuance of long-term debt 6,550 120,168 5,820
Issuance (purchase) of common stock 248 (11,437) 70,943
Dividends paid (34,313) (32,775) (28,220)
Net cash provided by (used in) financing activities 31,388 (1,086) 69,507
Effect of exchange rate changes on cash 471 (362) 655
Net increase (decrease) in cash and cash equivalents (8,727) 43,846 40,294
Cash and cash equivalents at beginning of year 166,820 122,974 82,680
CASH AND CASH EQUIVALENTS AT END OF YEAR $158,093 $166,820 $122,974
Supplemental cash flow information:
Cash paid during the year for:
Interest 67,755 70,812 60,864
Income taxes - net of refunds 30,542 26,559 44,705
</TABLE>
See accompanying notes.
Universal Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years Ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
(In thousands of dollars) 1995 1994 1993
<S> <C> <C> <C>
COMMON STOCK:
Balance at beginning of year $ 75,287 $ 86,672 $ 15,597
Issuance of common stock 214 52 70,579
Exercise of stock options 248 496
Common shares repurchased (11,437)
Balance at end of year 75,749 75,287 86,672
RETAINED EARNINGS:
Balance at beginning of year 332,626 352,790 302,209
Net Income 25,639 13,173 80,066
Cash dividends declared ($.99 per share in 1995;
$.94 in 1994; $.86 in 1993) (34,670) (33,337) (29,485)
Balance at end of year 323,595 332,626 352,790
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS:
Balance at beginning of year (23,315) (18,440) (11,052)
Translation adjustments for the year 21,240 (7,552) (10,173)
Allocated income taxes (7,310) 2,677 2,785
Balance at end of year (9,385) (23,315) (18,440)
SHAREHOLDERS' EQUITY AT END OF YEAR $389,959 $384,598 $421,022
</TABLE>
See accompanying notes.
Universal Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts are in thousands, except as otherwise noted)
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The financial statements include the accounts of all controlled
domestic and foreign subsidiaries. All material intercompany items and
transactions have been eliminated. The fiscal years of foreign subsidiaries
generally end March 31 or April 30 to facilitate timely reporting. The Company
uses the equity method of accounting for its investments in affiliates which
generally are owned less than 50%.
Effective fiscal year 1995, the Company consolidated the results of
affiliates located in Malawi and Zimbabwe into its financial statements. After
changes in local governmental policies, the Company can now exercise greater
control over operations including the remittance of dividends. Prior to fiscal
1995, affiliates located in Malawi were accounted for under the equity method
and affiliates in Zimbabwe under the cost method. Financial data for all prior
periods presented has been restated to reflect the consolidation. Before the
effects of consolidation, consolidated net income for the years ended June 30
was as follows:
1995 1994 1993
Net income $23,768 $9,158 $80,242
Earnings per share $ .68 $ .26 $ 2.39
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.
Inventories
Inventories of tobacco and agri-products are valued at the lower of
specific cost or market. In determining lower of cost or market for
agri-products, an entire position, i.e., tea, including forward purchase and
sales contracts, is considered. Net unrealized losses by position are charged
to income. However, no recognition is given to net unrealized gains. All other
inventories are valued principally at lower of average cost or market.
Real Estate, Plant and Equipment
Depreciation of plant and equipment is based upon historical cost and
the estimated useful lives of the assets. Depreciation of property used in
domestic tobacco operations is calculated using the declining balance method in
the early years and the straight-line method thereafter. All other properties
are generally depreciated using the straight-line method. Estimated useful lives
of buildings range from fifteen to forty years and machinery and equipment range
from three to ten years.
Goodwill and Other Intangibles
Goodwill and other intangibles include the excess of the purchase price
of acquired companies over the net assets, covenants not to compete and pension
intangibles. Goodwill and other intangibles are generally amortized using the
straight-line method over periods not exceeding 40 years. Accumulated
amortization at June 30, 1995, and 1994 was $19.6 and $11.3 million,
respectively.
Income Taxes
The Company provides deferred income taxes on temporary differences
arising from employee benefit accruals, depreciation, deferred compensation, and
undistributed earnings of consolidated subsidiaries and unconsolidated
affiliates not permanently reinvested. At June 30, 1995, the cumulative amount
of undistributed earnings of consolidated subsidiaries on which no provision
for U.S. income taxes had been made was $64.6 million.
Fair Values of Financial Instruments
The fair values of the Company's long-term obligations have been
estimated using discounted cash flow analyses based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements.
The carrying amount of all other current assets and liabilities as
reported in the balance sheet at June 30, 1995 and 1994, which qualify as
financial instruments, approximates fair value.
Derivative Financial Instruments
Derivative financial instruments are used by the Company principally in
the management of its foreign currency exposures. Realized and unrealized gains
and losses on the Company's foreign currency contracts that are designated and
effective as hedges are recognized in income in the same period as the foreign
exchange gains and losses on the underlying transactions are recorded. The
carrying amounts, including realized and unrealized gains and losses, of foreign
currency derivatives are reflected under the same balance sheet captions as the
hedged transactions. The Company does not enter into derivative financial
instruments for trading purposes.
Postretirement Benefits Other Than Pensions
On July 1, 1993, the Company adopted SFAS 106 "Employers' Accounting
for Postretirement Benefits Other Than Pensions". The initial effect of adopting
the statement was recorded in fiscal 1994 as a cumulative effect of a change in
accounting principle. See Note 9.
Translation of Foreign Currencies
The financial statements of foreign subsidiaries where the local
currency is the functional currency are translated into U.S. dollars using
exchange rates in effect at period end for assets and liabilities and average
exchange rates during each reporting period for results of operations.
Adjustments resulting from translation of financial statements are reflected as
a separate component of shareholders' equity.
The financial statements of foreign subsidiaries where the U.S dollar
is the functional currency and which have certain transactions denominated in a
local currency are remeasured as if the functional currency were the U.S.
dollar. The remeasurement of local currencies into U.S. dollars creates
translation adjustments which are included in net income. Exchange losses in
1995, 1994 and 1993 resulting from foreign currency transactions were $4.7, $3.7
and $1.0 million, respectively (including $2.6, $6.7 and $2.4 million resulting
from foreign currency translation losses) and are included in the respective
statements of income.
Reclassification
Amounts in prior years' statements have been reclassified to be
reported on a consistent basis with the current year's presentation.
Note 2 - ACQUISITIONS
On February 12, 1993, the Company acquired substantially all of the
tobacco operations of The Casalee Group SA (Casalee) through the purchase of all
of Casalee's capital stock and certain of its subsidiaries at a cost of
approximately $100 million. The acquisition has been accounted for by the
purchase method of accounting. For financial reporting purposes, the accounts
of Casalee are on a March 31 fiscal year basis, and are consolidated with the
Company's June 30 fiscal year. Accordingly, the consolidated results of
operations for the fiscal year ended June 30, 1993 include the results of
Casalee from the acquisition date thru March 31, 1993. Unaudited pro forma
consolidated results of operations for the year ended June 30, 1993 as though
Casalee had been acquired at the beginning of the fiscal year, follow:
1993
Gross revenues $3,290,355
Net income 53,333
Earnings per share* $ 1.50
* Weighted average shares outstanding includes 2.7 million shares assumed to
have been issued at the beginning of 1993.
Note 3 - RESTRUCTURING
In the fourth quarter of fiscal years 1995 and 1994 , plans were developed to
reduce the Company's worldwide cost structure including the consolidation of
certain tobacco operations and a reduction in the number of employees. Fiscal
1995's consolidated statement of income includes an estimated $15.6 million
pretax charge ($10.7 million net of tax benefits, or $.31 per share) related to
the 1995 plan. This charge includes $7.2 million for the expected 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), payments to terminate occupancy of
leased facilities ($3 million), and other nonoperating restructuring costs ($1.7
million). As of June 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 35 employees. In fiscal 1994 the Company had estimated
and recorded a $17.5 million pre-tax restructuring charge. During fiscal 1995
the prior year's plan was implemented. Through June 30, 1995 the actual number
of employees severed was almost equal to the 700 estimated. The total 1994
restructuring charge incurred was approximately $200 thousand less than the
estimate last year and the difference is reported as a reduction of the
restructuring amount in fiscal 1995.
Note 4 - BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates principally in three business segments:
Tobacco
Selecting, buying, shipping, processing, packing, storing and financing
leaf tobacco in the United States and other tobacco growing countries for the
account of, or for resale to, manufacturers of tobacco products throughout the
world.
Lumber and Building Products
Distribution of lumber and building products to the building and
construction market in Europe, primarily in Holland.
Agri-Products
Trading and processing tea and sunflower seeds and trading other
products from the countries of origin to various customers in the consuming
industries throughout the world.
Generally, sales between geographic areas are priced to generate a
reasonable profit margin. Sales between business segments are insignificant.
Operating profit is total revenue less operating expenses. In
computing operating profit, none of the following items have been added or
deducted: general corporate expenses, interest expense, income taxes and equity
in net income of unconsolidated affiliates.
Identifiable assets are those of the Company that are identified with
the operations in each industry group. Corporate assets are principally the
fixed assets of the Company's administrative offices.
U.S. Export Sales by Geographic Area
1995 1994 1993
Europe $266,682 $182,140 $302,733
Asia 179,737 203,197 168,075
Other Areas 51,962 27,321 33,895
$498,381 $412,658 $504,703
<TABLE>
<CAPTION>
Lumber and
Business Segments Tobacco Building Products Agri-products Consolidated
<S> <C> <C> <C> <C>
1995
Gross revenues $2,313,768 $512,375 $454,737 $3,280,880
Operating profit (net of restructuring charge) 102,542 21,162 11,942 135,646
General corporate expenses (10,293)
Interest expense (69,585)
Income before income taxes and other Items 55,768
Identifiable assets 1,305,967 333,379 143,366 1,782,712
Investments in unconsolidated affiliates 23,433
Corporate assets 1,820
Total assets 1,807,965
Depreciation and amortization 39,809 7,051 1,764 48,624
Capital expenditures 28,590 8,537 1,897 39,024
1994
Gross revenues 2,249,109 368,463 430,943 3,048,515
Operating profit (net of restructuring charge) 121,783 16,768 9,224 149,775
General corporate expenses (10,279)
Interest expense (75,438)
Income before income taxes and other items 64,058
Identifiable assets 1,385,218 212,247 124,891 1,722,356
Investments in unconsolidated affiliates 11,752
Corporate assets 1,758
Total assets 1,735,866
Depreciation and amortization 42,387 4,376 1,557 48,320
Capital expenditures 33,829 4,265 823 38,917
1993
Gross revenues 2,315,320 384,631 377,646 3,077,597
Operating profit 183,343 16,427 10,898 210,668
General corporate expenses (9,096)
Interest expense (65,468)
Income before income taxes and other items 136,104
Identifiable assets 1,390,665 184,001 112,373 1,687,039
Investments in unconsolidated affiliates 9,062
Corporate assets 2,836
Total assets 1,698,937
Depreciation and amortization 32,119 4,684 1,393 38,196
Capital expenditures $39,894 $4,931 $1,580 $46,405
</TABLE>
<TABLE>
<CAPTION>
Consolidated Operations United South/Central Other
by Geographic Area States America Europe Areas Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C>
1995
Revenues from unaffiliated customers $1,650,868 $236,496 $1,218,525 $174,991 $3,280,880
Transfers between geographic areas 1,073 93,781 42,316 289,362 $(426,532)
Gross revenues 1,651,941 330,277 1,260,841 464,353 (426,532) 3,280,880
Operating profit (net of restructuring
charge) 47,996 15,643 32,929 41,194 (2,116) 135,646
General corporate expenses (10,293)
Interest expense (69,585)
Income before income taxes and other
items 55,768
Identifiable assets 588,078 454,453 837,085 225,279 (322,183) 1,782,712
Investments in unconsolidated affiliates 23,433
Corporate assets 1,820
Total assets 1,807,965
1994
Revenues from unaffiliated customers 1,530,833 217,534 1,088,693 211,455 3,048,515
Transfers between geographic areas 1,658 123,898 34,588 308,212 (468,356)
Gross revenues 1,532,491 341,432 1,123,281 519,667 (468,356) 3,048,515
Operating profit (net of restructuring
charge) 44,908 20,691 49,221 34,955 149,775
General corporate expenses (10,279)
Interest expense (75,438)
Income before income taxes and other
items 64,058
Identifiable assets 575,425 469,415 754,696 210,031 (287,211) 1,722,356
Investments in unconsolidated affiliates 11,752
Corporate assets 1,758
Total assets 1,735,866
1993
Revenues from unaffiliated customers 1,689,794 187,790 1,014,450 185,563 3,077,597
Transfers between geographic areas 824 102,891 19,580 275,793 (399,088)
Gross revenues 1,690,618 290,681 1,034,030 461,356 (399,088) 3,077,597
Operating profit 71,030 39,930 56,593 44,622 (1,507) 210,668
General corporate expenses (9,096)
Interest expense (65,468)
Income before income taxes and other
items 136,104
Identifiable assets $497,706 $471,892 $613,998 $280,185 (176,742) 1,687,039
Investments in unconsolidated affiliates 9,062
Corporate assets 2,836
Total assets 1,698,937
NOTE 5 - INCOME TAXES
The components of income before income taxes and other items consist of
the following:
Year Ended June 30, 1995 1994 1993
United States $21,386 $12,545 $ 45,772
Foreign 34,382 51,513 90,332
$55,768 $64,058 $136,104
Income taxes consist of the following:
Year Ended June 30, 1995 1994 1993
Current
United States $5,396 $5,089 $17,755
State and local 751 1,065 4,676
Foreign 34,787 12,543 23,531
40,934 18,697 45,962
Deferred
United States (7,322) (5,103) 36
State and local 235 652 (132)
Foreign (8,981) 5,144 5,447
(16,068) 693 5,351
Total $24,866 $19,390 $51,313
A reconciliation of the statutory U.S. federal rates is as follows:
Year Ended June 30, 1995 1994 1993
Tax at statutory rate 35.0% 35.0% 34.0%
State income taxes -
net of federal benefit 1.4 1.7 2.1
Income taxed at other
than the U.S. rate 7.0 (5.8) .2
Increase in federal
statutory rate 1.7
Other- net 1.2 (2.3) 1.4
44.6% 30.3% 37.7%
In August, 1993, Congress passed the "Omnibus Budget Reconciliation Act
of 1993" which, among other things, increased the corporate tax rate from 34% to
35% retroactive to January 1, 1993 which increased tax expense approximately
$1.5 million in the first quarter.
Significant components of deferred tax liabilities and assets as of
June 30 were as follows:
1995 1994
Liabilities
Nonrepatriated earnings $17,713 $29,132
Tax over book depreciation 17,072 10,334
Foreign currency translation 2,135
All other 17,930 8,058
Total deferred tax liability 54,850 47,524
Assets
Employee benefit plans 19,482 20,327
Foreign currency translation 5,175
Foreign tax credits 8,813 6,411
Deferred compensation 4,652 4,220
All other 18,149 10,768
Total deferred tax asset 51,096 46,901
Less current portion (5,625) (5,530)
Net deferred tax asset 45,471 41,371
Net deferred tax liability $9,379 $6,153
NOTE 6 - SHORT-TERM CREDIT FACILITIES
The Company maintains lines of credit in the United States and in a
number of foreign countries. Foreign borrowings are generally in the form of
exchange contracts and overdraft facilities at rates competitive in the
countries in which the Company operates. Generally, each foreign line is
available only for borrowings related to operations of a specific country. At
June 30, 1995, unused, uncommitted lines of credit were approximately $900
million. In addition, the Company maintains a $100 million revolving credit
facility to support short-term borrowings including the issuance of commercial
paper. The weighted average interest rate on short-term borrowings outstanding
as of June 30, 1995 and 1994 was approximately 6.6 % and 6.4%, respectively.
NOTE 7 - LONG-TERM OBLIGATIONS
</TABLE>
<TABLE>
1995 1994
<S> <C> <C>
6.14% Senior notes payable in five annual installments from 1996 to 2000 $100,000 $100,000
9.25% Medium-term notes due February 2001 100,000 100,000
Medium-term notes due January 1997 at an average rate of 7.3% 50,000 50,000
Other notes due through 1999 at various interest rates ranging from 5% to 11 % 30,808 31,817
Notes due through 1998 at variable rates, currently 11% 13,728 16,587
4.26% Promissory note due August 1995 15,000 15,000
Revenue bonds due through 2001 at various interest rates below prime 6,888 7,268
316,424 320,672
Less current portion (31,476) (16,523)
Long-term obligations $284,948 $304,149
</TABLE>
The fair value of the Company's long-term obligations was approximately
$298 million at June 30, 1995 and $310 million at June 30, 1994. Certain notes
are denominated in local currencies of foreign subsidiaries. Effective U.S.
dollar interest rates vary based on exchange rate fluctuations.
In connection with the senior notes, the Company must meet certain
financial covenants including maintainence of $300 million minimum shareholders'
equity and restrictions on the issuance of long-term debt.
OTHER INFORMATION:
Maturities of long-term debt for the fiscal years succeeding June 30,
1995 are as follows: 1996-$31,476; 1997-$89,427; 1998-$23,413; 1999-$24,549;
2000-$20,988; 2001 and after-$126,571.
NOTE 8 - PENSION PLANS
The Company and its subsidiaries have several defined benefit pension
plans covering United States and foreign salaried employees and certain other
employee groups. These plans provide retirement benefits based primarily on
employee compensation and years of service. The Company's funding policy for
domestic plans is to make contributions currently to the extent deductible under
existing tax laws and regulations, subject to the full-funding limits of the
Employee Retirement Income Security Act of 1974. Foreign plans are funded in
accordance with local practices. Domestic and foreign plan assets consist
primarily of fixed income securities and equity investments. Unamortized gains
and losses and prior service costs are amortized equally over the average
remaining service period of employees. Information regarding net pension cost
and the funded status of domestic and foreign plans was as follows:
<TABLE>
<Caption
Pension costs
Domestic Foreign
1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Service cost for benefits earned
during the period $2,923 $2,925 $2,617 $2,803 $2,392 $2,134
Interest cost on projected benefit
obligation 6,626 6,489 6,053 5,784 5,210 5,245
Actual return on plan assets (4,158) (5,872) (7,829) (4,942) (11,629) (5,929)
Net amortization and deferral (967) 1,258 3,358 (1,397) 5,240 (234)
Total pension cost $4,424 $4,800 $4,199 $2,248 $1,213 $1,216
</TABLE>
<TABLE>
<CAPTION>
Funded status
Domestic - March 31 measurement date
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
<S> <C> <C> <C> <C>
1995 1994 1995 1994
Vested benefit obligation $70,611 $68,047 $ 6,239 $ 5,280
Accumulated benefit obligation 71,297 68,888 6,788 6,521
Projected benefit obligation 85,786 84,707 8,792 9,699
Plan assets at fair value 77,580 75,839
Plan assets less than projected benefit obligation (8,206) (8,868) (8,792) (9,699)
Unrecognized net (asset) liability at transition (3,721) (4,320) 557 637
Unrecognized prior service costs 784 949 1,528 1,701
Unrecognized net loss 14,679 16,217 1,445 3,017
Additional minimum liability (1,526) (2,177)
Prepaid (accrued) pension cost $ 3,536 $ 3,978 $(6,788) $(6,521)
</TABLE>
<TABLE>
<CAPTION>
Foreign - April 30 measurement date
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
<S> <C> <C> <C> <C>
1995 1994 1995 1994
Vested benefit obligation $77,921 $62,303 $10,674 $ 8,787
Accumulated benefit obligation 81,934 70,368 13,033 10,609
Projected benefit obligation 88,868 75,916 14,180 11,583
Plan assets at fair value 102,925 81,881 4,219 3,692
Plan assets in excess of (less than) projected
benefit obligation 14,057 5,965 (9,961) (7,891)
Unrecognized net (asset) liability at transition (6,671) (6,309) 92 34
Unrecognized net(gain) loss (5,227) 978 764 142
Additional minimum liability (270) (273)
Prepaid (accrued) pension cost $2,159 $ 634 $(9,375) $(7,988)
</TABLE>
SFAS 87 "Employers' Accounting for Pensions," required the Company to
recognize an additional minimum liability of $1.8 and $2.4 million for the
unfunded accumulated benefit obligation in 1995 and 1994, respectively. An equal
amount was recognized as an intangible asset in those years.
Assumptions used in the computations were:
1995 1994 1993
Discount rate:
Domestic 8.00% 7.25% 7.75%
Foreign 7.00% 6.00% 7.00%
Rate of increase in future compensation levels:
Domestic 5.50% 5.50% 6.00%
Foreign 5.50% 4.50% 5.00%
Expected long-term rate of return on plan assets:
Domestic 8.75% 8.75% 8.50%
Foreign 7.00% 7.00% 7.00%
NOTE 9 - POSTRETIREMENT BENEFITS
The Company provides postretirement health and life insurance benefits
for eligible U.S. employees attaining specific age and service requirements. The
health plan is funded by the Company as the costs of the benefits are incurred
and contains cost-sharing features such as deductibles and coinsurance. The
Company funds the life insurance plan with deposits to a retired life reserve
account held by an insurance company. The Company has made changes to the plans
that have reduced benefits in the past and reserves the right to amend or
discontinue the plans at any time.
Effective July 1, 1993, the Company adopted SFAS 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions" which requires that
the estimated costs of these benefits be expensed over the employees' active
service period rather than as paid. In accordance with SFAS 106, the Company
elected to recognize the obligation as a one-time charge of approximately $29
million (net of $18 million in taxes) or $.83 per share during the first quarter
of fiscal year 1994.
Effective January 1, 1994, the Company amended the benefit plans for
future retirees which reduced the Company's postretirement obligation by
approximately $14 million (net of tax benefits). The amortization of this
reduction is expected to substantially offset the net periodic postretirement
benefit expense from SFAS 106 through fiscal year 2001.
Net periodic postretirement benefit expense was as follows:
1995 1994
Service cost $ 857 $1,288
Interest cost 2,517 3,255
Return on plan assets (219) (141)
Net amortization and deferral (2,925) (1,527)
Net periodic postretirement benefit expense $ 230 $2,855
Prior to fiscal year 1994, the Company recognized expense in the year
the benefits were paid. In fiscal year 1993 approximately $1 million of
expenses were recorded.
The following table sets forth the components of the postretirement
benefit obligation:
June 30 measurement date 1995 1994
Accumulated postretirement benefit obligation:
Retirees $22,841 $21,080
Fully eligible active plan participants 6,082 7,812
Other active plan participants 5,466 5,555
Accumulated postretirement benefit obligation 34,389 34,447
Fair value of plan assets 3,811 3,414
Accumulated postretirement benefit obligation
in excess of plan assets 30,578 31,033
Unrecognized gain on plan amendment 19,060 22,119
Unrecognized net loss (1,631) (4,183)
Accrued postretirement benefit cost $48,007 $48,969
The accumulated postretirement benefit obligation was determined using
an assumed annual health care cost trend rate of 13% for fiscal year 1995 and
12% for fiscal year 1996 and which is assumed to decrease gradually to 6.5% by
fiscal year 2006. A one percentage point increase in the assumed health care
cost trend rate would increase the accumulated benefit obligation by
approximately $3.4 million and the aggregate of the service and interest cost
components of net periodic postretirement benefit expense for the fiscal year by
approximately $400 thousand.
Assumptions used in the computations were:
1995 1994
Discount rate 8.00% 7.25%
Rate of increase in future compensation levels 5.50% 5.50%
Expected long-term rate of return on plan assets 4.30% 4.30%
NOTE 10 - SHARE PURCHASE RIGHTS PLAN
In 1989, the Company distributed as a dividend one preferred share
purchase right for each outstanding share of common stock. As adjusted for the
two-for-one split of the common stock effective December 16, 1991, each right
entitles the shareholder to purchase one-half of one-hundredth of a share of
Series A Junior Participating Preferred Stock ("Preferred Stock") at an exercise
price of $110, subject to adjustment. The rights will become exercisable only
if a person or group acquires or announces a tender offer for 20% or more of the
Company's outstanding common stock. The Board of Directors may reduce this
threshold percentage to 10%. If a person or group acquires the threshold
percentage of common stock, each right will entitle the holder, other than the
acquiring party, to buy shares of common stock or Preferred Stock having a
market value of twice the exercise price. If the Company is acquired in a
merger or other business combination, each right will entitle the holder, other
than the acquiring person, to purchase securities of the surviving company
having a market value equal to twice the exercise price of the rights. Following
the acquisition by any person of more than the threshold percentage of the
Company's outstanding common stock but less than 50% of such shares, the Company
may exchange one share of common stock for each right (other than rights held by
such person). Until the rights become exercisable, they may be redeemed by the
Company at a price of one cent per right. The rights expire on February 13,
1999.
NOTE 11 - EXECUTIVE STOCK PLAN
Under the Company's Executive Stock Plan (the Plan), executives, key
employees, and directors may receive grants and/or awards including common
stock, restricted stock, options qualifying as incentive or non-qualified stock
options and "reload options". Reload options allow a participant to exercise an
option and receive new options by exchanging previously acquired common stock
for the shares received from the exercise. One new option may be granted for
each share exchanged with an exercise price equivalent to the market price at
the date of exchange. Accordingly, the issuance of reload options does not
result in a greater number of shares potentially outstanding than that reflected
in the grant of the orginal option. Up to 2.0 million shares of the Company's
common stock may be issued under the Plan. Pursuant to the Plan, non-qualified
and reload options have been granted to executives and key employees at an
option price equal to the fair market value of a share of common stock on the
date of grant. In addition, restricted stock awards of 8,550 shares were issued
in 1995.
Options granted under the Plan prior to December 5, 1991 became
exercisable one year after date of grant except those granted on December 4,
1991 which became exercisable November 1, 1992. Options granted after December
4, 1991 are fully exercisable six months after the date of grant and qualify for
reload options which are also fully exercisable six months after the date of the
grant. All options expire ten years after date of grant.
Further information regarding options in the Plan for 1995, 1994 and
1993 is summarized as follows:
For the year ended: 1995 1994 1993 Price Range
Outstanding beginning of year 656,064 644,064 689,242 $11.06-28.00
Granted 717,999 12,000 116,805 21.50-28.00
Exercised (78,678) (141,032) 11.06-27.38
Canceled (20,951) 27.38-28.00
Outstanding end of year 1,295,385 656,064 644,064 11.06-28.00
Exercisable 1,235,886 650,064 588,231 11.06-28.00
Available for future grant 2,307,851 2,334,376 1,633,746
Of those available for future grant, 1,738,454, 1,097,929 and 385,299
for 1995, 1994 and 1993, respectively, are reload options.
NOTE 12 - COMMITMENTS AND OTHER MATTERS
A material part of the Company's tobacco business is dependent upon a
few customers, the loss of any one of whom would have an adverse effect on the
Company. For the years ended June 30, 1995, 1994 and 1993, one customer
accounted for revenues of $1.1 billion, $900 million and $1.1 billion,
respectively.
The Company provides guarantees for seasonal pre-export crop financing
for some of its subsidiaries and unconsolidated affiliates. In addition,
certain subsidiaries provide guarantees that ensure that 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 June 30,
1995, total exposure under guarantees issued for banking facilities of
unconsolidated affiliates was $27.8 million. Other commitments and contingent
liabilities were approximately $59 million and relate principally to Common
Market guarantees. The Company considers the possibility of loss on any of
these guarantees to be remote.
As part of its financing of purchases of the Brazilian crop, the
Company advances funds to its subsidiary under pre-export finance provisions of
Brazilian law. When funds are held in Brazil before purchase of the crop, they
are invested in U.S. dollar-indexed instruments issued by Brazilian banks. To
reduce credit risk, investment limits are established with each bank according
to the Company's evaluation of its credit standing. As of March 31, 1995, the
date of consolidation of the Company's Brazilian subsidiaries, approximately $97
million was invested among eleven banks and is included in cash and cash
equivalents in the Company's June 30, 1995 balance sheet. The carrying value of
this investment approximates fair market value. As of June 30, 1995, all such
funds had been fully recovered and utilized for crop purchases.
The Company's operating subsidiaries within each industry segment
perform credit evaluations of customers' financial condition prior to the
extension of credit. Generally, accounts and notes receivable are not secured
with collateral and are due within 30 days. When collection terms are extended
for longer periods, interest and carrying costs are usually recovered. Credit
losses are provided for in the financial statements and such amounts have not
been material except for the write-off of an account receivable from Iraq in
fiscal year 1991. In the lumber and building product operations in Europe, it
is traditional business practice to insure accounts and notes receivable against
uncollectibility. At June 30, accounts and notes receivable by operating
segment were as follows (in millions of dollars):
1995 1994
Tobacco $225 $248
Lumber and Building Products 109 71
Agri-products 59 52
$393 $371
NOTE 13 - DERIVATIVE FINANCIAL INSTRUMENTS
The Company's dominant business, tobacco, is generally conducted in
U.S. dollars. However, the Company conducts its agri-products and lumber and
building products businesses in various foreign currencies. As a result, it is
subject to the transaction exposures that arise from foreign exchange rate
movements between the dates that the foreign currency transactions are initiated
and the date they are settled. To mitigate this risk where such derivative
markets exist, the Company enters into forward exchange contracts, primarily in
Dutch guilders, U.S. dollars, Swedish kronas, and pounds sterling, to hedge
certain foreign currency transactions involving the purchase or sale of
inventory in currencies other than the functional currency of the subsidiary.
The terms of the agreements are for periods that are consistent with the terms
of the underlying transactions, which are rarely longer than six months.
As of June 30, 1995, the Company through its subsidiaries had entered
into foreign exchange contracts with a total notional value of approximately $57
million to hedge known transactions. The unrealized gains and losses were not
material to the Company at June 30, 1995. All such transactions were conducted
with financial institutions of good standing; however, the total credit exposure
related to non-performance by those institutions is not material to the
operations of the Company. At June 30, 1995, the carrying value of these
derivative financial instruments approximates the fair market value.
NOTE 14 - UNAUDITED QUARTERLY FINANCIAL DATA
Due to the seasonal nature of the tobacco, lumber and building
products, and agri-products businesses, it is always more meaningful to focus on
cumulative rather than quarterly results.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1995
Sales and other operating revenues $661,415 $969,532 $991,270 $658,663
Gross profit 94,379 136,594 123,859 107,617
Net income (loss) 3,979 15,505 12,229 (6,074)
Per common share
Net income (loss) .11 .44 .35 (.17)
Cash dividends declared .24 .25 .25 .25
Market price range: High 24 3/4 24 1/4 22 1/4 24
Low 18 3/4 19 3/4 18 7/8 20 3/4
1994
Sales and other operating revenues 718,160 871,631 788,469 670,255
Gross profit 120,322 137,308 101,668 101,157
Income (loss) before cumulative
effect of change in accounting
principle 12,278 25,158 11,503 (6,360)
Net income (loss) (17,128) 25,158 11,503 (6,360)
Per common share
Income (loss) before cumulative
effect of change in accounting
principle .35 .71 .32 (.18)
Net income (loss) (.48) .71 .32 (.18)
Cash dividends declared .22 .24 .24 .24
Market price range: High 25 1/4 27 7/8 26 1/4 19 5/8
Low $21 3/4 $22 3/8 $18 1/2 $17 3/4
</TABLE>
The Company recorded $5.6 and $16.1 million in pre-tax writedowns of
tobacco inventory and purchase commitments in the fourth quarter of 1995 and
1994, respectively. The third quarter of 1995 includes a $6.5 million writedown
relating to Eastern European tobacco operations. The fourth quarter of 1995 and
1994 also included a pre-tax restructuring charge of $15.6 million and $17.5
million, respectively.
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Universal Corporation
We have audited the accompanying consolidated balance sheets of
Universal Corporation and subsidiaries as of June 30, 1995 and 1994, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the three years in the period ended June 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accompanying principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Universal Corporation and subsidiaries at June 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 1, the Company's consolidated financial statements
for 1994 and 1993 have been restated to adopt the consolidation method of
accounting for its African operations. As discussed in Note 9 to the
consolidated financial statements, the Company changed its method of accounting
for postretirement benefits other than pensions in fiscal year 1994.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
August 3, 1995
REPORT OF MANAGEMENT
To the Shareholders of Universal Corporation
The consolidated financial statements of Universal Corporation have
been prepared under the direction of management, which is responsible for their
integrity and objectivity. The statements have been prepared in accordance with
generally accepted accounting principles and, where appropriate, include amounts
based on judgements of management.
Management is also responsible for maintaining an effective system of
internal accounting controls designed to provide reasonable assurance that
assets are safeguarded and that transactions are executed in accordance with
management's authorization and properly recorded. This system is continually
reviewed and is augmented by written policies and procedures, the careful
selection and training of qualified personnel, and an internal audit program to
monitor its effectiveness.
Ernst & Young LLP, independent auditors, are retained to audit our
financial statements. Their audit provides an objective assessment of how well
management discharged its responsibility for fairness in financial reporting.
The Audit Committee of the Board of Directors is composed solely of
outside directors. The committee meets periodically with management, the
internal auditors and the independent auditors to assure that each is properly
discharging its responsibilities. Ernst & Young LLP and the internal auditors
have full and free access to meet privately with the Audit Committee to discuss
accounting controls, audit findings and financial reporting matters.
/s/ HARTWELL H. ROPER
Hartwell H. Roper
Vice President & Chief Financial Officer
August 3, 1995
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
For the three years ended June 30, 1995, there were no changes in and
disagreements between the Company and its independent auditors on any matter of
accounting principles, practices or financial statement disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Refer to the caption, "Election of Directors" in the September 22, 1995 Proxy
Statement which information is incorporated herein by reference.
<TABLE>
<CAPTION>
Fiscal
Year
Name Position Age Elected
<S> <C> <C> <C>
H. H. Harrell Chairman and Chief
Executive Officer 56 1992
A. B. King President and Chief 49 1993
Operating Officer
H. H. Roper Vice President and 47 1993
Chief Financial Officer
W. L. Taylor Vice President and 54 1993
Chief Administrative Officer
K. M. L. Whelan Vice President and Treasurer 48 1994
J. H. Starkey, III Vice President 54 1996
R. J. Zalzneck Vice President 49 1996
J. M. White, III Secretary and General Counsel 56 1988
W. J. Coronado Controller 41 1991
</TABLE>
There are no family relationships between any of the above officers.
Term of Office: All officers are elected until the next annual shareholders
meeting or until their successors are elected.
Footnotes:
(1) H. H. Harrell was elected chairman and chief executive officer of Universal
Leaf Tobacco Company, Incorporated ("Universal Leaf"), a subsidiary of the
Company, in 1991. Prior to that he was president and chief executive
officer of the Company and Universal Leaf.
(2) A. B. King was elected president and chief operating officer of Universal
Leaf in 1992. In 1991 he was president and prior to 1991 he was executive
vice president of the Company and of Universal Leaf.
(3) H. H. Roper was elected vice president of the Company in 1990. He has been
executive vice president and chief financial officer of Universal Leaf since
1995 and prior to that he was senior vice president and chief financial
officer.
(4) W. L. Taylor was elected vice president of the Company in 1991. He joined
Universal Leaf in 1990 as senior vice president and chief administrative
officer and in 1995 was elected executive vice president and chief
administrative officer.
(5) K. M. L. Whelan joined the Company in 1992. She served as treasurer of the
Company until October 1993. She was elected vice president and treasurer of
Universal Leaf in 1992. Prior to joining the Company she was elected vice
president of financial reporting in 1989 of James River Corporation.
(6) J. H. Starkey, III was elected senior vice president of Universal Leaf in
1987.
(7) R. J. Zalzneck was elected senior vice president of Universal Leaf in 1990.
(8) J. M. White, III was elected vice president and general counsel of Universal
Leaf in December 1987.
(9) W. J. Coronado was elected vice president and controller of Universal Leaf
in 1993. Prior to that he was controller of Universal Leaf.
ITEM 11. EXECUTIVE COMPENSATION
Refer to the caption, "Executive Compensation," in the September 22, 1995 Proxy
Statement which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Refer to the caption, "Stock Ownership," in the September 22, 1995 Proxy
Statement which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to the caption, "Certain Relationships," in the September 22, 1995 Proxy
Statement which information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) (1) The following consolidated financial statements of Universal
Corporation and Subsidiaries are included in Item 8:
Consolidated Statements of Income for the years ended June 30,
1995, 1994 and 1993
Consolidated Balance Sheets at June 30, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
June 30, 1995, 1994 and 1993
Consolidated Statements of Changes in Shareholders' Equity for
the years ended June 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements for the years ended
June 30, 1995, 1994 and 1993
Report of Ernst & Young LLP, Independent Auditors
(2) Financial Statement Schedules: None
(3) List of Exhibits:
3.1 Restated Articles of Incorporation (incorporated herein
by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, File No.
1-652).
3.2 Bylaws (incorporated herein by reference to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1993, File No. 1-652).
4.1 Indenture between the Registrant and Chemical Bank, as
trustee (incorporated herein by reference to
Registrant's Current Report on Form 8-K, dated February
25, 1991, File No. 1-652).
4.2 Form of Fixed Rate Medium-Term Note, Series A
(incorporated herein byreference to the Registrant's
Current Report on Form 8-K, dated February 25,1991, File
No. 1-652).
4.3 Form of 9 1/4% Note due February 15, 2001 (incorporated
herein by reference to the Registrant's Current Report
on Form 8-K, dated February 25, 1991, File No. 1-652).
4.4 Rights Agreement, dated February 2, 1989, between the
Registrant and Sovran Bank, N.A., as Rights Agent
(incorporated herein by reference to the Registrant's
Form 8-A Registration Statement, dated February 9, 1989,
File No. 1-652).
4.5 Amendment to Rights Agreement, dated May 2, 1991,
between the Registrant and Sovran Bank, N.A., as Rights
Agent (incorporated herein by reference to the
Registrant's Form 8 Amendment No. 1, dated May 7, 1991,
to Form 8-A Registration Statement, dated February 9,
1989, File No. 1-652).
4.6 Amendment to Rights Agreement, dated July 17, 1992,
between the Registrant, NationsBank, N.A., as Rights
Agent, and Wachovia Bank of North Carolina, N.A., as
Successor Rights Agent (incorporated herein by reference
to the Registrant's Form 8 Amendment No. 2, dated July
17, 1992, to Form 8-A Registration Statement, dated
February 9, 1989, File No. 1-652).
The Registrant, by signing this Report on Form 10-K,
agrees to furnish the Securities and Exchange
Commission, upon its request, a copy of any instrument
which defines the rights of holders of long-term debt of
the Registrant and its consolidated subsidiaries, and
for any unconsolidated subsidiaries for which financial
statements are required to be filed, which authorizes a
total amount of securities not in excess of 10% of the
total assets of the Registrant and its subsidiaries on a
consolidated basis.
10.1 Universal Corporation Restricted Stock Plan for
Non-Employee Directors (incorporated herein by reference
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1991, File No. 1-652).
10.2 Universal Leaf Tobacco Company, Incorporated
Supplemental Stock Purchase Plan, as amended June 24,
1991 (incorporated herein by reference to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1991, File No. 1-652).
10.3 Universal Corporation Management Performance Plan
(incorporated herein by reference to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1990, File No. 1-652).
10.4 Universal Leaf Tobacco Company, Incorporated Management
Performance Plan (incorporated herein by reference to
the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1990, File No. 1-652).
10.5 Universal Leaf Tobacco Company, Incorporated Executive
Life Insurance Agreement (incorporated herein by
reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1994, File No.
1-652).
10.6 Universal Leaf Tobacco Company, Incorporated Deferred
Income Plan (incorporated herein by reference to the
Registrant's Report on Form 8, dated February 8, 1991,
File No. 1-652).
10.7 Universal Leaf Tobacco Company, Incorporated Benefit
Replacement Plan (incorporated herein by reference to
the Registrant's Report on Form 8, dated February 8,
1991, File No. 1-652).
10.8 Universal Leaf Tobacco Company, Incorporated Senior
Executive Severance Plan (incorporated herein by
reference to the Registrant's Report on Form 8, dated
February 8, 1991, File No. 1-652).
10.9 Universal Leaf Tobacco Company, Incorporated
Supplemental Pension Plan (incorporated herein by
reference to the Registrant's Report on Form 8, dated
February 8, 1991, File No. 1-652).
10.10 Universal Corporation 1989 Executive Stock Plan, as
amended as of October 27, 1992 (incorporated herein by
reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1993, File No.
1-652).
10.11 Universal Corporation 1991 Stock Option and Equity
Accumulation Agreement (incorporated herein by reference
to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1991, File No. 1-652).
10.12 Amendment to Universal Corporation 1991 Stock Option and
Equity Accumulation Agreement (incorporated herein by
reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1992, File No.
1-652).
10.13 Deli Universal, Inc. Management Performance Plan
(incorporated herein by reference to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1992, File No. 1-652).
10.14 Universal Leaf Tobacco Company, Incorporated 1994
Deferred Income Plan (incorporated herein by reference
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1994, File No. 1-652).
10.15 Universal Corporation Outside Directors' 1994 Deferred
Income Plan (incorporated herein by reference to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1994, File No. 1-652).
10.16 Universal Leaf Tobacco Company, Incorporated 1994
Benefit Replacement Plan (incorporated herein by
reference to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994, File No.
1-652).
10.17 Universal Corporation 1994 Stock Option and Accumulation
Agreement (incorporated herein by reference to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994, File No. 1-652).
10.18 Universal Corporation 1994 Stock Option Plan for
Non-Employee Directors (incorporated herein by reference
to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994, File No. 1-652).
10.19 Universal Corporation Non-Employee Director
Non-Qualified Stock Option Agreement (incorporated
herein by reference to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1994,
File No. 1-652).
10.20 Amendment to the Universal Leaf Tobacco Company,
Incorporated 1994 Deferred Income Plan effective June 1,
1995.*
21 Subsidiaries of the Registrant.*
23 Consent of Ernst & Young LLP.*
27 Financial Data Schedule.*
* Filed herewith.
(b) Reports on Form 8-K
Form 8-K filed on July 11, 1995. The form describes a press release
announcing that earnings before a restructuring charge for the
1994/1995 fiscal year are expected to slightly exceed earlier
expectations. The press release also announced a plan of further
restructuring measures designed to continue the process of
consolidation and rationalization of operations and services in Company
facilities around the world.
(c) Exhibits
The exhibits listed in Item 14(a)(3) are filed as part of this annual
report.
(d) Financial Statement Schedules
All schedules are omitted since the required information is not present
in amounts sufficient to require submission or because the information
required is included in the consolidated financial statements and notes
therein.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
(REGISTRANT)
September 19, 1995 By /s/ Henry H. Harrell
Henry H. Harrell
Chairman and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Chairman, Chief Executive
/s/ Henry H. Harrell Officer and Director September 19, 1995
Henry H. Harrell (Principal Executive Officer)
/s/ Allen B. King President, Chief Operating September 22, 1995
Allen B. King Officer and Director
/s/ William W. Berry Director September 20, 1995
William W. Berry
/s/ Wallace L. Chandler Director September 22, 1995
Wallace L. Chandler
/s/ Richard G. Holder Director September 22, 1995
Richard G. Holder
/s/ Hubert R. Stallard Director September 21, 1995
Hubert R. Stallard
/s/ Thomas R. Towers Director September 22, 1995
Thomas R. Towers
/s/ Hartwell H. Roper Vice President and September 19, 1995
Hartwell H. Roper Chief Financial Officer
/s/ William J. Coronado Controller (Principal September 19, 1995
William J. Coronado Accounting Officer)
EXHIBIT 10.20
Universal Leaf Tobacco Company, Incorporated amendment to 1994 Deferred Income
Plan Section D, Deferral Accounts Number 9:
"9. Investment Options. The Sponsor has selected the following initial
investment funds which may be modified from time to time by the Committee:
Oppenheimer Capital Appreciation Fund, Oppenheimer Global Fund, Massachusetts
Mutual Equity Fund, Massachusetts Mutual Bond Fund and The Massachusetts Mutual
Money Market Fund (the "Investment Options"). Participants shall designate
quarterly how their deferrals are to be hypothetically invested among the
Investment Options. The Sponsor shall use the Participant's Investment Option
designations to calculate the Adjustment component of the Deferral Account. The
Participant may change his or her investment election designation on a quarterly
basis, both as to amounts then in the Deferral Account and future amounts to be
allocated to the Deferral Account. If a Participant changes his or her
Investment Option designation for either amounts then in the Deferral Account or
future amounts to be allocated to the Deferral Account, then such change shall
supersede the previous designation effective as of the last day of the month
after the date of the changed election. The Sponsor shall begin crediting the
Participant's Deferral Account with the amount deferred by the Participant on
the last day of the month in which the salary or MPP Award would have otherwise
been paid. As to the applicable amount distributed, the Sponsor shall cease
crediting or debiting Adjustments to the Participant's Deferral Account on the
last day of the month of the applicable distribution event set forth in Sections
10, 11, 12, 13, 14, or 15 (the "Valuation Date")."
EXHIBIT 21. SUBSIDIARIES OF THE REGISTRANT
ORGANIZED
UNDER LAW OF
UNIVERSAL CORPORATION Virginia
Universal Leaf Tobacco Company, Incorporated Virginia
K. R. Edwards Leaf Tobacco Company, Incorporated Virginia
Casa Export Limited Virginia
Grassland Holding, Incorporated Kentucky
Tabacos Del Pacifico Norte, S.A. De C.V. Mexico
Tabacos Argentinos S.A. Argentina
Lancaster Leaf Tobacco Company of Pennsylvania, Inc. Virginia
Lancotab, N.V. Belgium
Lancaster Philippines, Incorporated Philippines
Latin America Tobacco Company Virginia
Maclin-Zimmer-McGill Tobacco Company, Incorporated Virginia
Simcoe Leaf Tobacco Company, Limited Canada
Southern Processors, Incorporated Virginia
Southwestern Tobacco Company, Incorporated Virginia
J. P. Taylor Company, Incorporated Virginia
Dunnington-Beach Tobacco Company, Incorporated Virginia
Thorpe & Ricks, Inc. Virginia
Thorpe-Greenville Export Tobacco Company North Carolina
Tobacco Processors, Incorporated Virginia
Universal Leaf Export Company, Incorporated Guam
W. H. Winstead Company, Incorporated Virginia
Universal Leaf International, Inc. Virginia
B. V. European Tobacco Company Netherlands
L'Agricola, S.p.A. Italy
Deltafina, S.p.A. Italy
Forestab, S.p.A. Italy
Itofina, S.A. Switzerland
Orient Leaf Tobacco Co., Inc. Philippines
Greek Tobacco Trading Company Greece
Universal Leaf Tabacos Limitada Brazil
Tebe-Ele S.A. Comercio Exterior Ltda. Brazil
Universal Leaf Far East, Limited Hong Kong
Universal Yaprak Tutun Sanayi Ve Ticaret A.S. Turkey
Continental Tobacco, S.A. Switzerland
Toutiana, S.A. Switzerland
Nyiregyhazi Dohanyfermentalo Rt. Hungary
Ultoco, S.A. Switzerland
Limbe Leaf Tobacco Company, Limited Malawi
Lytton Tobacco Company (Malawi) Limited Malawi
Gebruder Kulenkampff, Inc. Virginia
Gebruder Kulenkampff AG Germany
Tutuntex Ticaret A.S. Turkey
Industria AG Switzerland
Trestina Azienda Tabacchi, S.p.A. Italy
Latina Tabacchi Greggi Italiani, S.p.A. Italy
Zimleaf Holdings (Private), Limited Zimbabwe
Lytton Tobacco Company (Private), Limited Zimbabwe
Zimbabwe Leaf Tobacco Company (Private) Limited Zimbabwe
Casalee, Inc. Virginia
Madison Management Ltd. British Virgin Isles
Tobacco Trading International, Inc. British Virgin Isles
Casalee Transtobac Lieferanten A.G. Switzerland
Casalee Transtobac (PVT) Ltd. Zimbabwe
Universal DC Holdings Ltd. USA/United Kingdom
Universal Eastern Europe Limited United Kingdom
Universal Leaf (UK) Limited USA/United Kingdom
C.G. Services Ltd. United Kingdom
Casalee (UK) Ltd. United Kingdom
Deli Universal, Inc. Virginia
Imperial Commodities Corporation California
Red River Foods, Inc. Virginia
HTC Commodities, Inc. Virginia
Red River Commodities, Incorporated North Dakota
Harkema, Inc. Connecticut
Ermor Tabarama-Tabacos do Brasil Ltda. Brazil
Deli-Mij Holdings Ltd. United Kingdom
Corrie, MacColl & Son Ltd. United Kingdom
Van Rees Ltd. United Kingdom
N.V. Deli Universal Netherlands
Deli Maatschappij B.V. Netherlands
Deli Services B.V. Netherlands
Jongeneel Holding B.V. Netherlands
Jongeneel B.V. Netherlands
Heuvelman Holding B.V. Netherlands
Heuvelman Hout Beheer B.V. Netherlands
Steffex Beheer B.V. Netherlands
Handelmatschappij Steffex B.V. Netherlands
Jadico and Specerijen B.V. * Netherlands
B.V. Deli-HTL Tabak Maatschappij Netherlands
Industria Exportadora de Tabacos
Dominicanos "Inetab" C. por Dominican Republic
Companhia Panamericana de Tabacos "Copata" Dominican Republic
Vriesthee B.V. Netherlands
Van Rees B.V. Netherlands
Van Rees Ceylon B.V. Netherlands
Indoco International B.V. Netherlands
* Company is 20 percent or more owned by parent and earnings of which are
recorded under the equity method of accounting.
EXHIBIT 23.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of our report dated August 3, 1995 with respect to the consolidated
financial statements of Universal Corporation and subsidiaries included in this
Annual Report (Form 10-K) for the year ended June 30, 1995.
Registration Statement
Number Description
33-21781 Form S-8
33-38652 Form S-8
33-55140 Form S-8
33-38148 Form S-8
33-56719 Form S-8
/s/ ERNST & YOUNG LLP
Richmond, Virginia
September 22, 1995
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<CIK> 0000102037
<NAME> UNIVERSAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 158,093
<SECURITIES> 0
<RECEIVABLES> 406,027
<ALLOWANCES> 0
<INVENTORY> 666,473
<CURRENT-ASSETS> 1,262,353
<PP&E> 651,806
<DEPRECIATION> 317,365
<TOTAL-ASSETS> 1,807,965
<CURRENT-LIABILITIES> 997,640
<BONDS> 284,948
<COMMON> 75,749
0
0
<OTHER-SE> 314,210
<TOTAL-LIABILITY-AND-EQUITY> 1,807,965
<SALES> 3,280,880
<TOTAL-REVENUES> 3,280,880
<CGS> 2,818,431
<TOTAL-COSTS> 2,818,431
<OTHER-EXPENSES> 337,096
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<INTEREST-EXPENSE> 69,585
<INCOME-PRETAX> 55,768
<INCOME-TAX> 24,866
<INCOME-CONTINUING> 25,639
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