Universal Corporation Logo
P.O. Box 25099 Richmond, VA 23260 o phone: (804) 359-9311 o fax (804) 254-3594
PRESS RELEASE
CONTACT RELEASE
Karen M. L. Whelan 2:15 p.m.
Phone: (804) 359-9311 October 24, 2000
Fax: (804) 254-3594
Email: [email protected]
Universal Corporation Reports First Quarter Earnings
Richmond, VA, October 24, 2000 / PRNEWSWIRE
Henry H. Harrell, Chairman and Chief Executive Officer of
Universal Corporation, announced today at the company's annual shareholder
meeting that net income for its first quarter of fiscal year 2001, which
ended September 30, 2000, was $25.0 million, or $.89 per share, compared
to $29.5 million, or $.93 per share, in the first quarter of fiscal year
2000. Last year's first quarter earnings were particularly strong due to
favorable timing of leaf shipments and a one-time gain of $2.5 million
after taxes, or $.08 per share, from the sale of the company's interest in
a tobacco joint venture. Earnings in this year's first quarter were also
negatively impacted by an increase in the effective tax rate from 36% to
39% due to a higher proportion of foreign income in the company's
earnings. Revenues were $651 million compared to $787 million in the first
quarter of fiscal year 2000, reflecting smaller U. S. crops, favorable
timing differences last year, and the effect of the stronger U. S. dollar
on the Dutch lumber distribution business.
Tobacco earnings in the first quarter of last year were favorably
affected by several occurrences. In addition to the gain on the joint
venture sale mentioned above, the company also had large shipments held
over from the previous year in its Oriental tobacco joint venture, and
benefited from carryover shipments of African and dark air-cured leaf.
Oriental tobacco shipments for the entire fiscal year 2001 should be at
more normal levels. In addition, due to the late start this year of the
auction markets in Zimbabwe, management expects shipments from Zimbabwe's
large crop to take place late in this fiscal year. Dark tobacco is
experiencing some decline in demand for certain styles of cigar filler,
although wrapper demand remains firm, and the company expects its second
quarter to benefit somewhat from shipments that customers delayed from the
first quarter. Volumes in South America and Western Europe were ahead of
last year's pace in the first quarter.
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Results of the lumber and building product segment suffered during the
first quarter from a 14 percent decline in the guilder relative to the U.
S. dollar, which more than offset improved local currency sales.
Construction activity in the Netherlands continues to be strong although
there are some indications that capacity constraints, particularly a
shortage of skilled labor, may slow future growth in construction. In
agri-products, intense competition in confectionery sunflower seeds and
cashew nuts continued to negatively influence results; however tea volumes
and margins were somewhat improved.
Allen B. King, President and Chief Operating Officer, said, "We are
pleased with our first quarter performance, especially in view of the
difficult conditions prevailing in many of our tobacco and non-tobacco
markets. World leaf markets appear to be improving as cigarette sales
recover in a number of areas and surplus leaf inventories move into the
market. We continue to be concerned about the situation in the United
States where declining crops and non-competitive prices are affecting our
sales volumes. Despite the evident flaws in the leaf tobacco support price
program, no clear consensus for change has yet emerged and we are doubtful
that meaningful reforms will be enacted in time to reverse the current U.
S. leaf market decline. We generally expect the lower U.S. volumes to be
offset by increased business in international markets. It is likely that
movement of volumes from the United States to our international operations
will affect quarterly comparisons in the future, and volatility resulting
from particular crop conditions and shipment timing issues will continue
to make prediction of quarterly earnings difficult."
Mr. King continued, "A move to direct contracting with tobacco farmers
in the United States is appearing increasingly likely, which could lead to
the end of the U.S. auction system and create new difficulties for export
customers. We are well prepared for this outcome should it occur. We are
continuing to pursue our fundamental strategy and despite challenging
conditions particularly in the United States, we expect solid performance
for the remainder of the fiscal year."
Universal's share repurchase program is continuing, and to date 8.5
million shares of Universal common stock have been acquired for a total
cost of approximately $227 million, leaving 27.6 million shares
outstanding. Currently, $73 million out of the total $300 million
authorized by the Board is available for future purchases.
The company cautions readers that any forward-looking statements
contained herein are based upon management's current knowledge and
assumptions about future events, including anticipated levels of demand
for and supply of the company's products and services, costs incurred in
providing these products and services, timing of shipments to customers,
changes in market structure, and general economic, political, market, and
weather conditions. Lumber and building products earnings are also
affected by changes in exchange rates between the U.S. dollar and the
guilder (Euro). Actual results, therefore, could vary from those expected.
For more details on factors that could affect expectations, see the
Management's Discussion and Analysis section of the company's Annual
Report on Form 10-K for the year ended June 30, 2000, as filed with the
Securities and Exchange Commission. For more information, visit
Universal's web site at www.universalcorp.com.
At 4:00 p.m. (Eastern Time), the company will host a conference call to
discuss these results. Those wishing to listen to the call may do so by
visiting www.vcall.com or www.universalcorp,com at that time. A replay of
the call will also be available for seven days at those web sites or by
dialing 888-203-1112 or 719-457-0820, pass code 664932.
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UNIVERSAL CORPORATION
UNAUDITED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED SEPTEMBER 30, 2000 AND 1999
(Dollars in thousands, except per-share amounts)
Three Months
2000 1999
---- ----
Sales and other operating revenues $650,765 $787,006
Costs and expenses
Cost of goods sold 529,182 661,051
Selling, general and administrative 69,647 74,374
-------- --------
Operating income 51,936 51,581
Equity in pretax earnings of unconsolidated
affiliates 1,349 6,596
Interest expense 14,829 11,776
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Income before income taxes and other items 38,456 46,401
Income taxes 14,998 16,704
Minority interests (1,507) 195
-------- --------
Net income $ 24,965 $ 29,502
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Earnings per share $ .89 $ .93
Diluted earnings per share $ .89 $ .93
Denominator for earnings per share
(weighted average shares)
Basic 28,055,105 31,692,282
Diluted 28,060,565 31,707,944
See accompanying notes.
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NOTES
1. Certain amounts in prior year statements have been reclassified to
conform to the current year presentation.
2. Contingencies: At September 30, 2000, total exposure under guarantees
issued for banking facilities of unconsolidated affiliates and suppliers
was approximately $58 million. Other contingent liabilities approximate
$19 million. The company's Brazilian subsidiaries have been notified by
the tax authorities of proposed adjustments to the income tax returns
filed in prior years. The total contingent liability, including penalties
and interest, approximates $23 million. The company believes the
Brazilian tax returns filed were in compliance with the applicable tax
code. The numerous proposed adjustments vary in complexity and amounts.
While it is not feasible to predict the precise amount or timing of each
proposed adjustment, the company believes that the ultimate disposition
will not have a material adverse effect on the company's consolidated
financial position or results of operations.
Comprehensive Income
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Periods ended September 30 Three months
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(in thousands) 2000 1999
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Net income $24,965 $29,502
Foreign currency translation adjustment 226 821
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Comprehensive income $25,191 $30,323
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4. Reportable Segment Data (in thousands)
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Sales and other operating revenues Three months
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Periods ended September 30, 2000 1999
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Tobacco $402,245 $513,773
Lumber and building products 129,662 142,021
Agri-products 118,858 131,212
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Total $650,765 $787,006
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Operating income Three months
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Periods ended September 30, 2000 1999
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Tobacco $46,780 $48,606
Lumber and building products 7,650 8,810
Agri-products 3,757 5,058
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Total segments 58,187 62,474
Less: Corporate expenses 4,902 4,297
Equity in pretax earnings of
unconsolidated affiliates 1,349 6,596
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Operating income $51,936 $51,581
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