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 December 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)
VIRGINIA 54-0414210
- --------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1501 North Hamilton Street, Richmond, Virginia 23230
- ----------------------------------------------- --------------------
(Address of principal executive offices (Zip code)
Registrant's telephone number, including area code - (804) 359-9311
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Common Stock, No par value - 35,042,051 shares
outstanding as of February 12, 1996
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIVERSAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
THREE AND SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
1995 1994 1995 1994
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
SALES AND OTHER OPERATING REVENUES $1,032,829 $969,532 $1,875,283 $1,630,947
COSTS AND EXPENSES
Cost of goods sold 883,128 832,938 1,621,953 1,399,974
Selling, general and administrative 85,630 90,703 156,757 161,171
Interest 15,087 17,431 32,312 34,675
-------------- ------------- -------------- --------------
983,845 941,072 1,811,022 1,595,820
-------------- ------------- -------------- --------------
INCOME BEFORE INCOME TAXES AND OTHER ITEMS 48,984 28,460 64,261 35,127
Income taxes 19,903 10,742 25,709 14,041
Minority interests 2,684 2,186 2,865 2,245
-------------- ------------- -------------- --------------
INCOME FROM CONSOLIDATED OPERATIONS 26,397 15,532 35,687 18,841
Equity in net income (loss) of
unconsolidated affiliates 1,006 (27) 1,905 643
-------------- ------------- -------------- --------------
NET INCOME $27,403 $15,505 $37,592 $19,484
-------------- ------------- -------------- --------------
EARNINGS PER COMMON SHARE
$.78 $.44 $1.07 $.56
-------------- ------------- -------------- --------------
RETAINED EARNINGS - BEGINNING OF PERIOD $323,595 $332,626
Net income 37,592 19,484
Cash dividends declared ($.505-1995; $.49-1994) (17,693) (17,162)
-------------- --------------
RETAINED EARNINGS - END OF PERIOD $343,494 $334,948
-------------- --------------
AVERAGE COMMON SHARES OUTSTANDING 35,032,284 35,005,823
</TABLE>
<PAGE>
UNIVERSAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 June 30,
1995 1995
--------------- ---------------
ASSETS
CURRENT
<S> <C> <C>
Cash and cash equivalents $147,741 $158,093
Accounts and notes receivable 465,693 392,797
Accounts receivable - unconsolidated affiliates 11,235 13,230
Inventories - at lower of cost or market:
Tobacco 649,888 458,964
Lumber and building products 103,664 122,613
Agri-products 61,179 72,908
Other 13,482 11,988
Prepaid income taxes 5,178 8,371
Deferred income taxes 6,002 5,625
Other current assets 12,160 17,764
--------------- ---------------
Total current assets 1,476,222 1,262,353
REAL ESTATE, PLANT AND EQUIPMENT - AT COST
Land 35,226 35,631
Buildings 215,203 211,146
Machinery and equipment 415,869 405,029
--------------- ---------------
666,298 651,806
Less accumulated depreciation 335,465 317,365
--------------- ---------------
330,833 334,441
OTHER ASSETS
Goodwill 125,240 127,501
Other intangibles 30,527 21,759
Investments in unconsolidated affiliates 28,113 23,433
Deferred income taxes 12,258 7,832
Other noncurrent assets 46,398 30,646
--------------- ---------------
242,536 211,171
--------------- ---------------
$2,049,591 $1,807,965
--------------- ---------------
</TABLE>
<PAGE>
Universal Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
--------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
<S> <C> <C>
Notes payable and overdrafts $637,139 $651,140
Accounts payable 239,189 221,574
Accounts payable - unconsolidated affiliates 3,007 6,976
Customer advances and deposits 274,954 46,443
Accrued compensation 15,026 18,286
Income taxes payable 22,440 21,745
Current portion long-term obligations 43,162 31,476
--------------- ---------------
Total current liabilities 1,234,917 997,640
LONG - TERM OBLIGATIONS 266,752 284,948
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 47,259 48,007
OTHER LONG - TERM LIABILITIES 49,565 52,962
DEFERRED INCOME TAXES 17,533 17,211
MINORITY INTERESTS 26,588 17,238
SHAREHOLDERS' EQUITY
Preferred stock $100 par, 8% cumulative, authorized
75,000 shares, issued and outstanding 4 shares
Additional preferred stock, no par value, authorized
5,000,000 shares, none issued or outstanding
Common stock, no par value, authorized 50,000,000
shares, issued and outstanding 35,042,051 shares
(35,030,314 at June 30, 1995) 75,929 75,749
Retained earnings 343,494 323,595
Foreign currency translation adjustments (12,446) (9,385)
--------------- ---------------
Total shareholders' equity 406,977 389,959
--------------- ---------------
$2,049,591 $1,807,965
--------------- ---------------
</TABLE>
<PAGE>
UNIVERSAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $37,592 $19,484
Adjustments to reconcile net income to net cash provided
by operating activities 22,200 27,000
Changes in operating assets and liabilities net of effects from
purchase of businesses (4,594) (124,435)
------------ -------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIEs 55,198 (77,951)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (17,700) (16,500)
Purchase of businesses (net of cash acquired) (17,600) (60,600)
Other (2,300) 2,100
------------ -------------
NET CASH USED IN INVESTING ACTIVITIES (37,600) (75,000)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance (repayment) of short-term debt - net (15,000) 65,000
Repayment of long-term debt (21,800)
Issuance of long-term debt 16,300 6,700
Proceeds from minority investment in a subsidiary 10,000
Issuance of common stock 50 200
Dividends paid (17,500) (16,800)
------------ -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (27,950) 55,100
------------ -------------
Net decrease in cash and cash equivalents (10,352) (97,851)
Cash and cash equivalents at beginning of period 158,093 166,820
------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $147,741 $68,969
------------ -------------
</TABLE>
<PAGE>
UNIVERSAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 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 six-month period ended December 31, 1995 are not
necessarily indicative of results to be expected for the year ending June 30,
1996. All adjustments necessary to fairly state the results for such period have
been included and were of a normal recurring nature.
2) The Company provides guarantees for seasonal pre-export crop financing for
some of its subsidiaries and unconsolidated affiliates. In addition, certain
subsidiaries provide guarantees that ensure that Common Market subsidies and
value-added taxes will be repaid if the crops are not exported or if the
subsidies are not properly distributed to Common Market farmers. At December 31,
1995, total exposure under guarantees issued for banking facilities of
unconsolidated affiliates was $3 million. Other contingent liabilities
approximate $53 million and relate principally to Common Market guarantees. The
Company considers the possibility of loss on any of these guarantees to be
remote.
3) Effective in fiscal year 1995, the Company consolidated the results of
African operations previously accounted for under the equity or cost methods of
accounting. Financial data for the prior year's second quarter and six months
has been restated to reflect the consolidation. Before the effects of the
consolidation, reported consolidated net income for the quarter and six months
ended December 31, 1994 was $14.9 million or $.43 per share and $20.8 million or
$.59 per share, respectively.
4) The Company recognized in June 1995 a pre-tax restructuring charge of $15.6
million related to the consolidation of certain tobacco operations and a
reduction in the number of employees. The charge included $7.2 million for the
expected costs of severance payments related to approximately 200 employees
throughout the Company. The non-severance portion of the charge was for the
write-down of fixed assets in operations consolidated ($3.7 million), and other
nonoperating restructuring costs ($1.7 million). As of December 31, 1995, cash
payments of $6 million had been made, approximately half of which was for the
termination of leases and the balance to cover severance costs of 75 employees.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Working capital at December 31, 1995, was $241 million compared to $265
million at June 30, 1995. The decline in working capital was accounted for by
increases in current assets of $214 million offset by an increase in current
liabilities of $237 million. The most significant increases related to inventory
(up $191 million) and customer advances (up $229 million) in the Company's
tobacco operations. Within the U.S., tobacco working capital needs are normally
at their lowest point at June 30. Domestic tobacco balances at December 31,
generally reflect current U.S. burley crop purchases and processing activity,
and any unshipped current year flue-cured crop. This increases inventories which
are funded by notes payable and customer advances. Generally the Company does
not purchase tobacco in the United States on a speculative basis; thus the
increase in inventory represents tobacco that has been committed to customers.
Generally the Company's international tobacco operations conduct
business in U.S. dollars, thereby limiting foreign exchange risk to local
production and overhead costs. Agri-product and lumber operations enter into
foreign exchange contracts to hedge firm purchase and sales commitments for
terms of less than six months. Interest rate risk is limited because customers
in the tobacco business usually pre-finance purchases or pay market rates of
interest for inventory purchased for their accounts.
The liquidity and capital resources of the Company at December 31, 1995
remain adequate. Over the past two years the Company has announced restructuring
plans related to the consolidation of certain tobacco operations and a reduction
in the number of employees. These efforts have led to increased efficiency and
streamlined operations. Through the six months ended December 31, 1995,
approximately $3 million of severance payments related to the fiscal year 1995
restructuring had been paid.
In the first quarter of fiscal 1996, the Company made some minor
structural changes in its U.S. tobacco operations. The $10 million of "Proceeds
from minority investment in a subsidiary" in the Statement of Cash Flows
represents cash proceeds from the issuance of stock in a newly formed
subsidiary. The Company treated the issuance of these shares as an equity
transaction and no gain or loss was recognized.
In December 1995, the Company's Board of Directors authorized the
execution and filing of a registration statement for the purpose of registering
$200 million of debt securities of the Company for sale from time to time. In
February 1996 the Company plans to sell $100 million of notes to provide
long-term funding to repay long-term debt, which will mature over the next 18
months. Pending such use, the net proceeds from the sale will be used to repay a
portion of the Company's short-term bank debt.
Results of Operations
'Sales and Other Operating Revenues' increased $63 million or 6.5% in
the quarter and $244 million or 15% year-to-date. Tobacco operations accounted
for 70% of the year-to-date increase while agri-products, and lumber and
building products accounted for over 75% of the increase in the quarter. The
six-month tobacco revenues in the current fiscal year reflect the increase in
domestic and dark tobacco orders. The revenue increase in the quarter related to
lumber and building products was due to the inclusion of Heuvelman, a softwood
distributor acquired last year, for the entire quarter in the current year
compared to a portion in the prior fiscal year's quarter.
Gross profits in the quarter increased $13 million to $150 million and
increased year-to-date $22 million to $253 million. In the quarter and six month
periods the aforementioned acquisition of Heuvelman, accounted for $4 million
and $11 million of the increases respectively. The balance of the gross profit
improvement was realized in tobacco operations. In the United States the volumes
of flue-cured and burley tobacco bought and processed were up in both the
quarter and the six-month period due to an increase in marketings and orders
from domestic and export customers. Foreign tobacco gross profits in the quarter
increased primarily because of improving market conditions and because the
quarter ended December 31, 1994 included approximately $2.7 million of inventory
write-downs due to sharply depressed economic conditions in Eastern Europe which
led to reduced sales activity in the region. Although lumber and building
product gross profits benefited from the inclusion of Heuvelman for the full
period, the gross profit percentages in the quarter and six-month period
continued to lag those of last year. In late fiscal 1995 softwood prices began
to decline due to high inventory levels in Western European markets. This led to
increasing pressure on prices (20-year lows) and reduced margins. In the second
quarter of fiscal year 1996, inventory levels were reduced and the decline in
softwood prices has stabilized. Lower purchase prices for raw lumber are
expected to lead to improvement in softwood margins in the near term.
Agri-product gross profits were down slightly in the quarter and six-month
periods.
'Selling and General and Administrative Expenses' decreased $5.1
million in the quarter and $4.4 million for the six months primarily due to a
$3.8 million provision against Eastern European customer obligations that was
included in the second quarter last year. In addition the Company has begun to
realize the benefits of its restructuring efforts initiated over the past two
years.
The improved tobacco world supply and demand relationship is expected
to lead to better results for the current fiscal year. Although there are
factors beyond management's control, such as fiscal policies in Brazil, the
Company's balance and strength in the major tobacco origins provides a firm base
for growth. The Brazilian government has reduced inflation rates to 20-year lows
through fiscal policies included in its Plano Real economic plan, which entails
financial control of items such as interest rates and exchange rates. In
addition, the Brazilian government exercises control over taxation, trade
policies, foreign investment and banking. Although there have been benefits
realized from enacting the Plano Real, export industries have been adversely
impacted. The long-term viability of the government's plan is dependent on
various factors, including whether the current administration can continue to
hold office in the future, the level of foreign currency reserves and the
confidence of the Brazilian business sector. There were no significant changes
in Brazil's fiscal policies during the six months ended December 31, 1995, and
none have been announced that would lead the Company to believe there would be a
significant impact for the Company's fiscal year ending June 30, 1996.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
12 Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K
None filed for the quarter ended December 31, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 12, 1996 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)
EXHIBIT 12.
UNIVERSAL CORPORATION AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
------------- --------------
Pretax income from continuing operations $64,261 $35,127
Pretax income of unconsolidated affiliates 2,592 768
Fixed charges 32,972 35,204
------------- --------------
Earnings $99,825 $71,099
------------- --------------
Interest $32,312 $34,675
Interest of unconsolidated affiliates 543 412
Debt discount amortization 117 117
------------- --------------
Fixed Charges $32,972 $35,204
------------- --------------
Ratio of Earnings to Fixed Charges
3.0 2.0
------------- --------------
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000102037
<NAME> UNIVERSAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 147,741
<SECURITIES> 0
<RECEIVABLES> 476,928
<ALLOWANCES> 0
<INVENTORY> 828,213
<CURRENT-ASSETS> 1,476,222
<PP&E> 666,298
<DEPRECIATION> 335,465
<TOTAL-ASSETS> 2,049,591
<CURRENT-LIABILITIES> 1,234,917
<BONDS> 266,752
<COMMON> 75,929
0
0
<OTHER-SE> 331,048
<TOTAL-LIABILITY-AND-EQUITY> 2,049,591
<SALES> 1,875,283
<TOTAL-REVENUES> 1,875,283
<CGS> 1,621,953
<TOTAL-COSTS> 1,621,953
<OTHER-EXPENSES> 156,757
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,312
<INCOME-PRETAX> 64,261
<INCOME-TAX> 25,709
<INCOME-CONTINUING> 37,592
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,592
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 0
</TABLE>
