SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1994
COMMISSION FILE NUMBER 1-9875
STANDARD COMMERCIAL CORPORATION
Incorporated under the laws of I.R.S. Employer
North Carolina Identification No. 13-1337610
2201 Miller Road, Wilson, North Carolina 27893
Telephone Number (919) 291-5507
Former name, former address and former fiscal year, if changed since last report
Not applicable
On August 10, 1994 the registrant had outstanding 8,570,325 shares of Common
Stock ($.20 par value).
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 and (2) had been subject to such filing requirements for
the past 90 days.
YES X NO
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STANDARD COMMERCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands; unaudited)
June 30 March 31
1994 1993 1994
ASSETS
Cash $ 41,677 $ 33,012 $ 69,802
Current receivables 273,954 245,872 264,511
Inventories 351,454 365,934 369,332
Prepaid expenses 6,230 4,134 5,991
Marketable securities at cost
(approximate market) 933 851 828
Current Assets 674,248 649,803 710,464
Property, plant and equipment 133,263 126,684 128,024
Investment in affiliates 14,752 18,889 14,601
Other assets 36,430 28,481 37,682
Total assets $858,693 $823,857 $890,771
LIABILITIES
Short-term borrowings $423,657 $419,897 $465,361
Accounts payable 164,494 86,684 156,917
Taxes accrued 15,698 13,234 17,702
Current liabilities 603,849 519,815 639,980
Long-term debt 30,832 63,549 29,169
Convertible subordinated
debentures 69,000 69,000 69,000
Retirement and other benefits 17,283 17,513 17,182
Deferred taxes 11,141 9,965 10,640
Commitments and contingencies - - -
Total liabilities 732,105 679,842 765,971
MINORITY INTERESTS 21,119 17,646 20,773
ESOP redeemable preferred
stock 9,200 9,200 9,200
Unearned ESOP compensation (7,613) (8,426) (7,822)
SHAREHOLDERS' EQUITY
Preferred stock, $1.65
par value
Authorized shares
1,000,000; issued
92,005 to ESOP - - -
Common stock, $0.20 par value
Authorized shares
20,000,000; issued
10,915,903 (June 1993-
10,866,386; March 1994-
10,913,459) 2,183 2,173 2,183
Unearned restricted stock plan
compensation (623) - (649)
Additional paid-in capital 34,925 33,993 34,875
Treasury stock at cost 2,346,318
shares (583) (583) (583)
Retained earnings 82,593 103,589 84,807
Cumulative translation
adjustments (14,613) (13,577) (17,984)
Total shareholders' equity 103,882 125,595 102,649
Total liabilities and equity $858,693 $823,857 $890,771
The accompanying notes on page 5 are an integral part of these financial
statements.
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STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(In thousands, except share information; unaudited)
Three months ended
June 30
1994 1993
Sales - tobacco $146,470 $147,975
- wool 102,270 78,852
- other 4,509 5,375
Total sales 253,249 232,202
Cost of sales 237,174 233,771
Selling, general and administrative expenses 17,223 21,821
Other income (expense) - net (228) (140)
Loss before taxes (1,376) (23,530)
Income taxes (25) (3,417)
Loss after taxes (1,351) (20,113)
Minority interests 11 121
Equity in earnings of affiliates 169 141
Loss from continuing operations (1,171) (19,851)
Loss from discontinued operations - (114)
Loss before cumulative effect of
accounting changes (1,171) (19,965)
Cumulative effect of accounting changes - 23
Net loss (1,171) (19,942)
ESOP preferred stock dividends net of tax (121) (121)
Net loss applicable to common stock (1,292) (20,063)
Retained earnings at beginning of period 84,807 125,139
Dividends (922) (1,487)
Retained earnings at end of period $82,593 $103,589
Loss per common share
Primary - from continuing operations $(0.15) $(2.35)
- from discontinued operations - $(0.01)
- net $(0.15) $(2.36)
- average shares outstanding 8,568,676 8,524,885
Fully diluted - from continuing
operations * *
- from discontinued operations * *
- net * *
- average shares outstanding * *
Dividends paid per common share $0.10 $0.15
*Not applicable because fully diluted calculations include adjustments which are
antidilutive.
The accompanying notes on page 5 are an integral part of these financial
statements.
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands; unaudited)
Three months ended
June 30
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,171) $(19,942)
Depreciation and amortization 3,558 3,735
Minority interests (11) (121)
Deferred income taxes - 118
Undistributed earnings of affiliates (169) (89)
Gain on disposition of property, plant
and equipment (73) (55)
Other 211 1,408
2,345 (14,946)
Net changes in working capital
Receivables (2,773) 65,689
Inventories 21,966 16,171
Current payables (2,029) (37,867)
CASH PROVIDED BY OPERATING ACTIVITIES 19,509 29,047
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment - additions (7,038) (9,016)
- dispositions 175 454
Payment for business acquisitions - (400)
CASH USED FOR INVESTING ACTIVITIES (6,863) (8,962)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 2,708 9,954
Repayment of long-term borrowings (784) (5,685)
Net change in short-term borrowings (41,703) (37,353)
Dividends paid (1,043) (1,608)
Other 51 67
CASH USED FOR FINANCING ACTIVITIES (40,771) (34,625)
Decrease in cash for period (28,125) (14,540)
Cash at beginning of period 69,802 47,552
CASH AT END OF PERIOD $41,677 $33,012
The accompanying notes on page 5 are an integral part of these financial
statements.
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STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(bullet) Certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to SEC rules and regulations. These
interim financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's latest annual report on
Form 10-K.
(bullet) The interim period financial statements presented herein have been
prepared by the Company without audit and contain all of the adjustments which
are, in the opinion of management, necessary for a fair statement of the
results of operations. All such adjustments are of a normal, recurring
nature. Because of the nature of the Company's businesses, fluctuations in
results for interim periods are not necessarily indicative of business trends
or results to be expected for a full year.
(bullet) Inventories for the periods shown were comprised of tobacco, wool and
other as follows:
June 30 March 31
(In thousands) 1994 1993 1994
Tobacco $261,063 $291,610 $268,948
Wool 88,622 65,720 98,496
Other 1,769 8,604 1,888
Total $351,454 $365,934 $369,332
(bullet) Adoption of Statements of Financial Accounting Standards (SFAS) No
106, Employer's Accounting for Postretirement Benefits other than Pensions,
and No 109, Accounting for Income Taxes, effective April 1, 1993 resulted in a
net benefit of $23,000 in the June 30, 1993 quarter. Adoption of SFAS 109
resulted in a cumulative credit of $3,653,000 and adoption of SFAS 106
resulted in a cumulative charge of $3,630,000.
(bullet) There were no changes in accounting policies during the period ended
June 30, 1994.
In December 1993, the Company completed the sale of its Caro-Green Nursery
business to Zelenka Nursery Inc. Accordingly, results for the quarter ended
June 30, 1993 have been restated to reflect the nursery business as a
discontinued operation. These results included sales of $852,000, a pretax
loss of $172,000 and income tax relief of $58,000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Sales of $253.2 million for the June 1994 quarter increased by 9.1% from
$232.2 million for the same quarter in 1993. Tobacco sales in the current
quarter totaled $146.5 million, down 1.0% from $148.0 million a year earlier.
Tobacco volume in the 1994 quarter increased by 20.8% over the same quarter in
1993 because of a pick up in shipments to manufacturers from the depressed
levels a year earlier. However, unit prices declined by 18.0% due to a change
in the mix of sales and lower unit prices attributable to the worldwide
surplus of tobacco. Quarter-to-quarter wool sales increased by 29.7% from
$78.9 million in 1993 to $102.3 million in 1994 as the result of firmer
pricing and a 12.6% increase in the volume of wool sold. Sales for the 1994
quarter were comprised of 57.8% tobacco, 40.4% wool and 1.8% other businesses,
compared with 63.7%, 34.0% and 2.3% for the respective business segments in
the year-earlier quarter.
A pretax loss after interest of $1.4 million was incurred in the current
quarter compared to $23.5 million in the 1993 first quarter. The 1993 loss
included inventory provisions in cost of sales of $16.3 million, and
nonrecurring selling, general and administrative expenses of $2.7 million.
Interest included in cost of sales and other expenses totaled $8.0 million in
the current quarter compared with $8.7 million in the 1993 first quarter. The
operating improvement was attributable to stronger market conditions for both
tobacco and wool,reduced interest expense and the impact of cost reduction
efforts initiated in the prior year. Tobacco margins in the 1994 quarter were
enhanced by processing a significant quantity of tobacco for the burley
stabilization pool in the United States.
The rate of tax relief available declined from 14.5% in 1993 to 1.7% in 1994,
primarily because of the difference in tax rates and relief available in areas
where profits were earned or losses were incurred.
Quarter-to-quarter variances in minority owners' share of income or loss,
equity in earnings of affiliates and cumulative effect of accounting changes
were immaterial.
The net loss of $1.2 million or $0.15 per share for the current quarter was
down from $19.9 million or $2.36 per share in the same 1993 quarter.
Because of the seasonal nature of the Company's business, results for interim
periods are not necessarily indicative of results for a full year. The
Company anticipates a relatively slow second quarter in line with the previous
year, but expects its results to improve significantly in the last half of its
fiscal year ended March 31, 1995. A profit for the full year is anticipated.
Financial Condition
Working capital at June 30, 1994 was $70.4 million compared with $70.5 million
at March 31, 1994 and down from $130.0 million at June 30, 1993. The decrease
since June 1993 was due to losses, reclassification of $20.0 million of
long-term debt to current, net long-term debt repayments of $11.3 million and
net additions to property, plant and equipment of $16.1 million. Capital
expenditures of $7.0 million for the June 1994 quarter were primarily for the
Tobacco Division in the United States and Turkey.
The Company intends to deleverage by reducing its tobacco inventories and the
borrowings to finance such inventories. Total tobacco inventories at June 30,
1994 compared to March 31, 1994 and June 30, 1993 were down by $8 million and
$31 million, respectively. For the same periods uncommitted tobacco
inventories were down by $5 million and $38 million. Wool inventories at June
30, 1994 were down by $10 million from March 31, 1994, but were up by $23
million from June 30, 1993 mainly as the result of increases in wool prices.
The Company has received commitments in respect of its U.S. 364-day credit
facilities for an amount of $150 million against which the maximum drawing
will be $130 million. The Company also has reached agreement with several
European banks to provide bilateral 364-day credit facilities totaling $250
million. In addition, the Company utilizes uncommitted credit lines in
certain countries. The 364-day facilities are subject to borrowing base
formulae and, in the United States, certain assets have been pledged as
collateral to the syndicate and certain previously unsecured term lenders.
Continuation of the 364-day credit facilities beyond November 15, 1994 is
subject to the closing of a $100 million placement of long-term notes.
Management expects the placement of the notes to be successful, and it
believes that it will have sufficient liquidity to operate its business.
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PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - Not applicable
Item 2. CHANGES IN SECURITIES - Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES - Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not applicable
Item 5. OTHER INFORMATION - Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. The following exhibit is filed as a part of this report:
11 Computation of Earnings per Common Share.
b. Registrant did not file any reports on Form 8-K during the quarter.
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.
Dated: August 12, 1994 STANDARD COMMERCIAL CORPORATION
(Registrant)
By /s/ Guy M Ross
Guy M Ross
Vice President and Chief Accounting Officer
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STANDARD COMMERCIAL CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE EXHIBIT 11
(In thousands, except per share information; unaudited)
Three months ended
June 30
PRIMARY EARNINGS PER SHARE 1994* 1993*
Loss from continuing operations $(1,171) $(19,851)
Less - ESOP preferred stock dividends net of tax (121) (121)
Loss from continuing operations
applicable to common stock (1,292) (19,972)
Loss from discontinued operations - (114)
Cumulative effect of accounting changes - 23
Net loss applicable to common stock $(1,292) $(20,063)
Average number of common shares outstanding 8,568,676 8,518,421
Increase applicable to restricted stock awards - 6,464
Primary average shares outstanding 8,568,676 8,524,885
Loss per common share
- from continuing operations $(0.15) $(2.35)
- from discontinued operations - (0.01)
- cumulative effect of accounting changes - -
- net $(0.15) $(2.36)
FULLY DILUTED EARNINGS PER SHARE
Loss from continuing operations
applicable to common stock $(1,292) $(19,972)
Add - after-tax interest expense on 7 1/4%
convertible subordinated debentures 825 825
- dividends payable to ESOP assuming
conversion to common stock 26 39
Adjusted loss from continuing operations (441) (19,108)
Loss from discontinued operations - (114)
Cumulative effect of accounting changes - 23
Net loss applicable to common stock $(441) $(19,199)
Primary average shares outstanding 8,568,676 8,524,885
Increase in shares outstanding assuming
- conversion of 7 1/4% convertible
subordinated debentures at
November 13, 1991 2,126,348 2,126,348
- conversion of ESOP convertible
preferred stock at July 1, 1992 262,871 262,871
Fully diluted average shares outstanding 10,957,895 10,914,104
Loss per common share
- from continuing operations $(0.04) $(1.75)
- from discontinued operations - (0.01)
- cumulative effect of accounting changes - -
- net $(0.04) $ (1.76)
*The calculations of fully diluted earnings per share for both periods include
adjustments which are antidilutive. Therefore, fully diluted earnings per share
as shown on the face of the income statement are equal to primary earnings per
share.
