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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ x ] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Period Ended March 31, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Transition Period From to
Commission file number 1-652
UNIVERSAL CORPORATION
(Exact name of registrant as specified in its charter)
State or other jurisdiction of incorporation or organization - VIRGINIA
I.R.S. Employer Identification Number - 54-0414210
Address of principal executive offices - 1501 NORTH HAMILTON STREET
RICHMOND, VIRGINIA 23230
Registrant's telephone number, including area code - (804) 359-9311
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Common Stock, No par value - 35,025,135 shares outstanding as of
May 8, 1995
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIVERSAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
THREE AND NINE MONTHS ENDED MARCH 31, 1995 AND 1994
THREE MONTHS NINE MONTHS
1995 1994 1995 1994
SALES AND OTHER OPERATING REVENUES $974,862 $752,587 $2,594,631 $2,306,900
Costs and expenses
Cost of goods sold 867,762 668,942 2,277,285 1,993,225
Selling, general and administrative 73,363 61,317 224,631 206,647
Interest 17,992 14,809 48,063 45,021
959,117 745,068 2,549,979 2,244,893
INCOME BEFORE INCOME TAXES AND
OTHER ITEMS 15,745 7,519 44,652 62,007
Income taxes 6,138 259 16,437 17,745
Minority interests 983 262 1,145 566
INCOME FROM CONSOLIDATED OPERATIONS 8,624 6,998 27,070 43,696
Equity in net income of
unconsolidated affiliates 1,680 2,345 4,051 4,316
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 10,304 9,343 31,121 48,012
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (29,406)
NET INCOME $10,304 $9,343 $31,121 $18,606
PER COMMON SHARE
Income before cumulative effect
of change in accounting principle $.29 $.26 $.89 $1.35
Cumulative effect of change
in accounting principle (.83)
Net income $.29 $.26 $.89 $.52
RETAINED EARNINGS - BEGINNING OF PERIOD $317,344 $341,523
Net income 31,121 18,606
Cash dividends declared
($.74-1995; $.70-1994) (25,918) (24,944)
RETAINED EARNINGS - END OF PERIOD $322,547 $335,185
AVERAGE COMMON SHARES OUTSTANDING 35,009,358 35,631,878
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UNIVERSAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, June 30,
1995 1994
ASSETS
CURRENT
Cash and cash equivalents $64,365 $164,520
Accounts and notes receivable 406,774 368,989
Accounts receivable - unconsolidated affiliates 33,225 28,113
Inventories at lower of cost or market:
Tobacco 472,639 436,033
Lumber and building products 114,274 83,441
Agri-products 66,602 60,132
Other 14,299 8,753
Prepaid income taxes 6,806 10,095
Deferred income taxes 5,566 5,530
Other current assets 21,220 20,423
Total current assets 1,205,770 1,186,029
REAL ESTATE, PLANT AND EQUIPMENT - AT COST
Land 32,266 22,607
Buildings 191,086 166,111
Machinery and equipment 365,557 350,426
588,909 539,144
Less accumulated depreciation 294,056 269,955
294,853 269,189
OTHER ASSETS
Goodwill 127,185 124,286
Other intangibles 23,253 27,089
Investments in unconsolidated affiliates 40,902 26,298
Deferred income taxes 9,916 3,494
Other noncurrent assets 34,803 30,658
236,059 211,825
$1,736,682 $1,667,043
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UNIVERSAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, June 30,
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Notes payable and overdrafts $540,343 $531,209
Accounts payable 206,504 199,280
Accounts payable - unconsolidated affiliates 35,427 34,810
Customer advances and deposits 91,151 51,671
Accrued compensation 12,788 13,366
Provision for restructuring 7,000 15,500
Income taxes payable 8,931 6,217
Current portion long-term obligations 30,072 15,947
Total current liabilities 932,216 868,000
LONG - TERM OBLIGATIONS 285,325 298,117
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 48,027 48,969
OTHER LONG - TERM LIABILITIES 54,073 57,156
DEFERRED INCOME TAXES 22,447 12,361
MINORITY INTERESTS 5,673 4,966
SHAREHOLDERS' EQUITY
Preferred stock $100 par, 8% cumulative,
authorized 75,000 shares, issued and
outstanding 4 shares
Additional preferred stock, no par
value, authorized 5,000,000 shares,
none issued or outstanding
Common stock, no par value, authorized
50,000,000 shares, issued and
outstanding 35,025,135 shares
(35,001,185 at June 30, 1994) 75,707 75,287
Retained earnings 322,547 317,344
Foreign currency translation adjustments (9,333) (15,157)
Total shareholders' equity 388,921 377,474
$1,736,682 $1,667,043
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UNIVERSAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1995 AND 1994
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $31,121 $18,606
Adjustments to reconcile net income to net cash provided
by operating activities 33,300 44,000
Cumulative effect of change in accounting principle 29,406
Changes in operating assets and liabilities net of effects
from purchase of businesses (63,976) (219,032)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 445 (127,020)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (18,900) (19,000)
Purchase of businesses (net of cash acquired) (60,800) (15,200)
Other 1,500
NET CASH USED IN INVESTING ACTIVITIES (78,200) (34,200)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance (repayment) of short-term debt - net (3,800) 122,600
Repayment of short-term debt classified as
long-term June 30,1993 (100,000)
Issuance of long-term debt 6,800 115,000
Issuance (purchase) of common stock 200 (600)
Dividends paid (25,600) (24,200)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (22,400) 112,800
Net decrease in cash and cash equivalents (100,155) (48,420)
Cash and cash equivalents at beginning of period 164,520 119,693
CASH AND CASH EQUIVALENTS AT END OF PERIOD $64,365 $71,273
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UNIVERSAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
All figures contained herein are unaudited and stated in thousands of
dollars
1) The Company's operating segments of domestic and foreign tobacco,
lumber and building products and agri-products are seasonal by nature.
Therefore, the results of operations for the nine month period ended
March 31, 1995 are not necessarily indicative of results to be expected
for the year ending June 30, 1995. All adjustments necessary to fairly
state the results for such period have been included and were of a
normal recurring nature.
2) 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 March 31, 1995, total exposure under
guarantees issued for banking facilities of unconsolidated affiliates
was $21 million. Other contingent liabilities approximate $105 million
and relate principally to Common Market guarantees. The Company
considers the possibility of loss on any of these guarantees to be
remote.
3) Last year's effective tax rate in the quarter was reduced by refunds
from filing amended U.S. tax returns. The nine-month rate last year
also included benefits realized from reversing prior years' taxes on
foreign earnings deemed permanently reinvested.
4) The Company recognized in June 1994 a pre-tax restructuring charge
of $17.5 million related to the consolidation of tobacco operations and
a reduction in the number of employees. The charge included $16 million
for the expected costs of severance payments related to approximately
700 employees throughout the Company. As of March 31, 1995, payments of
$10.5 million, primarily for severance and related costs of
approximately 560 employees, had been recorded as a reduction of the
restructuring provision.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Working capital at March 31, 1995, declined to $274 million, a
14% drop from the level as of June 30, 1994. The decrease was primarily
due to financing a lumber and building product acquisition with
short-term borrowings. The acquired company had current assets of $39
million, non current assets of $36 million and total liabilities of $23
million. Generally, the March 31 consolidated balance sheet reflects
lower working capital requirements for U.S. operations. At the same
point in time Western European requirements are up due to purchasing and
processing of the current crop. The combination of expansion and
contraction of working capital needs in the different geographic regions
mitigates the overall fluctuations in the balances of current assets and
current liabilities from those at June 30.
In July 1994, the Brazilian government implemented a new
monetary policy. Subsequently, the U.S. dollar declined in value
relative to the real, the new Brazilian currency. Since July 1, the
purchasing power of the U.S. dollar in Brazil declined as the average
monthly inflation rate of about 2.5% has been compounded by the
strengthening of the real from parity at July 1 to a high point of U.S.
$1 equivalent to .834 real. Unless the real devalues at a rate at least
equal to the Brazilian inflation rate, there will be increased dollar
costs. To date the increased costs of the tobacco crop being delivered,
due to the stronger real and inflation will be somewhat alleviated by
increased sales prices. The prospects for timely devaluation of the
real are not strong. The overall potential earnings impact of Brazilian
currency movements cannot be determined at this time due to the affect
of future exchange and inflation rates and negotiation of final sales
prices with customers on the remainder of the 1995 crop.
The Company's liquidity position at March 31, 1995, remains
strong. In the current year the Company has been implementing the
restructuring plan announced in June 1994. Through March 31, 1995 the
financial statements reflect payments of approximately $10.5 million
made for severance and other costs related to the restructuring
provision made last year. The Company's capital expenditures continue
to be less than the depreciation of existing assets. The Statement of
Cash Flows includes the net cash outlay for the aforementioned European
lumber acquisition. The acquisition will strengthen the Company's
overall competitive position in the European market.
Results of Operations
'Sales and Other Operating Revenues' increased $222 million and
$288 million in the quarter and nine-month period, respectively. Tobacco
sales increased $178 million in the quarter. The balance of the
increase in the quarter was due to an increase primarily in lumber and
building products revenues, $18 million of which resulted from the
inclusion of acquired operations. Agri-product revenues were up slightly
in both the quarter and nine-month period. The nine-month period for
fiscal year 1994 included approximately $33 million of revenues related
to coffee trading activity which was discontinued late last year. A
significant portion of the coffee revenue decline was offset by
increased revenues from other trading activities.
Gross profits were up by $23 million to $107 million in the
quarter, but were flat year-to-date at approximately $317 million.
Nine-month tobacco results for fiscal year 1994 included $10.5 million
of inventory writedowns compared to $6.6 million in the current year.
In the quarter the comparative writedown amounts were $5.1 million in
1994 and $3.9 million in
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1995. The writedowns in 1995 were primarily related to dark air-cured
operations. Gross profits on sales of oriental tobaccos improved in
both the quarter and nine-month period. Despite the improvements in the
quarter, year-to-date profits were down due to reduced tobacco gross
profits resulting from a significant decline in margins on Brazilian
1994 and old crop sales experienced in the first six months of the year.
Sales of old crop tobacco, that had been written down in the prior
fiscal year, were nominally profitable and had the effect of reducing
the overall profit margins reported. Margins on current crop sales were
lower, despite benefits from restructuring, because of reduced overall
volumes and continued pressure from customers on pricing. For the
nine-month period, the volume of U.S. flue-cured and burley tobacco
bought was up, while processing volumes were comparable with last year.
Domestic gross profits were up in the quarter but down year-to-date due
to a shift in processing mix to lower margin business. Lumber and
building products gross profits improved in the quarter almost $9
million, the majority of which was generated by new outlets.
Agri-product gross profits were up slightly in the quarter and
nine-month period due to improvements in trading activities as well as
comparative improvements realized from having discontinued coffee
activities which reported before tax losses of $1.6 million in the prior
year's nine-month period.
'Selling, general and administrative expenses' increased $12
million in the quarter and $18 million on a year-to-date basis. The
fiscal 1995 year-to-date amounts included a $3.8 million provision
against customer obligations related to Eastern Europe. In addition,
approximately $4 million and $8 million of expenses were included in the
quarter and year-to-date period resulting from the inclusion of the
aforementioned lumber company acquisition. 'Interest expense' reflects
the higher rates in the current year.
'Income Taxes' in the prior year's quarter were reduced by
refunds from filing amended U.S. tax returns. The nine-month tax rate
last year also included $2.1 million of benefits realized from reversing
prior years' taxes on foreign earnings deemed permanently reinvested.
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 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 years subsequent to
fiscal 1995. 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 impact in the future.
Fiscal year 1995 earnings before the effect of accounting
changes are not expected to match 1994's reported results. The
restructuring program begun in fiscal 1994 will be completed before the
end of fiscal 1995. The Company is currently reviewing a number of
areas that may give rise to additional restructuring charges in the
fourth quarter of fiscal 1995. The improved worldwide tobacco supply
and demand relationship has led to favorable marketing conditions for
next year's crops. In Brazil, 1995 crop prices are up and the crop
appears to be selling well, while in Africa the markets have just
opened. In the U.S., customer indications for the next year's crops
exceed those of fiscal 1995. It is too early to forecast the full
effects of the improved supply and demand relationship, but the
significant oversupply which adversely affected results over the last
two years has been corrected.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 8, 1995 UNIVERSAL CORPORATION
(Registrant)
/ s / Hartwell H. Roper
Hartwell H. Roper, Vice President and
Chief Financial Officer
/ s / William J. Coronado
William J. Coronado, Controller
(Principal Accounting Officer)
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<ARTICLE> 5
<CIK> 0000102037
<NAME> UNIVERSAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 64,365
<SECURITIES> 0
<RECEIVABLES> 439,999
<ALLOWANCES> 0
<INVENTORY> 667,814
<CURRENT-ASSETS> 1,205,770
<PP&E> 588,909
<DEPRECIATION> 294,056
<TOTAL-ASSETS> 1,736,682
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<BONDS> 285,325
<COMMON> 75,707
0
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<OTHER-SE> 313,214
<TOTAL-LIABILITY-AND-EQUITY> 1,736,682
<SALES> 2,594,631
<TOTAL-REVENUES> 2,594,631
<CGS> 2,277,285
<TOTAL-COSTS> 2,277,285
<OTHER-EXPENSES> 224,631
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<INCOME-TAX> 16,437
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