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 DECEMBER 31, 1994
COMMISSION FILE NUMBER 1-9875
[LOGO]
STANDARD COMMERCIAL CORPORATION
Incorporated under the laws I.R.S. Employer
of 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 February 1, 1995 the registrant had outstanding 8,678,676 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
<PAGE>
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands; unaudited)
December 31 March 31
1994 1993 1994
ASSETS
Cash . . . . . . . . . . . . . . . . $36,691 $ 31,425 $ 69,802
Current receivables . . . . . . . . . 255,484 253,529 264,511
Inventories . . . . . . . . . . . . . 364,696 423,916 369,332
Prepaid expenses . . . . . . . . . . 8,292 6,105 5,991
Marketable securities at cost
(approximate market) 566 1,917 828
Current assets . . . . . . . . . . 665,729 716,892 710,464
Property, plant and equipment . . . . 129,873 128,461 128,024
Investment in affiliates . . . . . . 14,058 18,920 14,601
Other assets . . . . . . . . . . . . 35,829 33,746 37,682
Total assets . . . . . . . . . . . $845,489 $898,019 $890,771
LIABILITIES
Short-term borrowings . . . . . . . . $423,309 $487,046 $465,361
Accounts payable . . . . . . . . . . 140,602 98,795 156,917
Taxes accrued . . . . . . . . . . . . 20,279 15,508 17,702
Current liabilities . . . . . . . 584,190 601,349 639,980
Long-term debt . . . . . . . . . . . 33,209 58,857 29,169
Convertible subordinated debentures . 69,000 69,000 69,000
Retirement and other benefits . . . . 17,689 18,084 17,182
Deferred taxes . . . . . . . . . . . 11,072 8,963 10,640
Commitments and contingencies . . . . -- -- --
Total liabilities . . . . . . . . 715,160 756,253 765,971
MINORITY INTERESTS . . . . . . . . . 25,858 19,759 20,773
ESOP redeemable preferred stock . . . 9,132 9,200 9,200
Unearned ESOP compensation . . . . . (7,193) (8,026) (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 100,000,000;
issued 11,047,559 (December 1993 -
10,909,523; March 1994 - 10,913,459) 2,210 2,182 2,183
Unearned restricted stock plan
compensation (588) -- (649)
Additional paid-in capital . . . . . 36,718 34,818 34,875
Treasury stock 2,369,781 shares
(2,346,318 at December 1993 and
March 1994) . . . . . . . . . . . (900) (583) (583)
Retained earnings . . . . . . . . . . 77,469 101,326 84,807
Cumulative translation adjustments . (12,377) (16,910) (17,984)
Total shareholders' equity . . . . 102,532 120,833 102,649
Total liabilities and equity . . . $845,489 $898,019 $890,771
The accompanying notes on page 5 are an integral part of these financial
statements.
<PAGE>
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(In thousands, except share information; unaudited)
<TABLE>
Third Quarter Ended Nine months ended
December 31 December 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Sales - tobacco . . . . $196,426 $148,759 $479,898 $455,442
- wool . . . . . 101,397 84,154 286,542 231,015
- other . . . . . 4,057 5,555 13,738 17,237
Total sales . . . . 301,880 238,468 780,178 703,694
Cost of sales . . . . . 278,630 217,308 725,863 667,229
Selling, general and
administrative expenses 17,731 16,774 52,767 56,265
Other income (expense) - net (847) 84 6,403 3,818
Income (loss) before taxes 4,672 4,470 7,951 (15,982)
Income taxes . . . . . . . . (2,554) (2,622) (7,492) (1,121)
Income (loss) after taxes 2,118 1,848 459 (17,103)
Minority interests . . . . . (736) (1,623) (4,663) (2,607)
Equity in losses of affiliates (1,086) (637) (748) (1,151)
Income (loss) from continuing
operations 296 (412) (4,952) (20,861)
Income from discontinued
operations -- 631 -- 592
Income (loss) before cumulative
effect of accounting changes 296 219 (4,952) (20,269)
Cumulative effect of accounting
changes -- -- -- 23
Net income (loss) . . . . . . 296 219 (4,952) (20,246)
ESOP preferred stock dividends
net of tax (121) (121) (363) (363)
Net income (loss) applicable to
common stock 175 98 (5,315) (20,609)
Retained earnings at beginning
of period 78,395 101,960 84,807 125,139
Dividends declared . . . . . (1,101) (732) (2,023) (3,204)
Retained earnings at end of
period $77,469 $101,326 $77,469 $101,326
Earnings (loss) per common
share
Primary - from continuing
operations $0.02 $(0.06) $(0.62) $(2.48)
- from discontinued
operations -- $0.07 -- $0.07
- net . . . . . . . $0.02 $0.01 $(0.62) $(2.41)
- average shares
outstanding 8,619,884 8,562,042 8,588,566 8,548,462
Fully diluted - from continuing
operations * * * *
- from discontinued
operations * * * *
- net * * * *
- average shares
outstanding * * * *
Dividends paid per common share . -- $0.10 $0.20 $0.40
</TABLE>
*Not applicable because fully diluted calculations include adjustments which are
antidilutive (see Exhibit 11).
The accompanying notes on page 5 are an integral part of these
financial statements
<PAGE>
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands; unaudited)
Nine months ended
December 31
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss . . . . . . . . . . . . . . . . . $(4,952) $(20,246)
Depreciation and amortization . . . . . . . 11,904 11,492
Minority interests . . . . . . . . . . . . 4,663 2,607
Deferred income taxes . . . . . . . . . . . - (71)
Undistributed earnings of affiliates . . . 810 1,689
Gain on disposition of property, plant and
equipment (8,052) (4,571)
Other . . . . . . . . . . . . . . . . . . . 1,108 (772)
5,481 (9,872)
Net changes in working capital
Receivables . . . . . . . . . . . . . . 14,876 47,220
Inventories . . . . . . . . . . . . . . 11,040 (48,174)
Current payables . . . . . . . . . . . . (9,061) (13,631)
CASH PROVIDED BY (USED FOR) OPERATING
ACTIVITIES 22,336 (24,457)
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment - additions (12,946) (23,771)
- dispositions 8,359 8,423
Payment for business acquisitions . . . . . (873) (2,595)
CASH USED FOR INVESTING ACTIVITIES . . . . (5,460) (17,943)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings . . . . 8,516 13,180
Repayment of long-term borrowings . . . . . (15,081) (13,306)
Net change in short-term borrowings . . . . (42,052) 29,796
Cash dividends paid* . . . . . . . . . . . (1,792) (3,567)
Other . . . . . . . . . . . . . . . . . . . 422 170
CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES (49,987) 26,273
Decrease in cash for period . . . . . . . . (33,111) (16,127)
Cash at beginning of period . . . . . . . . 69,802 47,552
CASH AT END OF PERIOD . . . . . . . . . . . $36,691 $31,425
*Excludes value of dividends paid in kind . . $294 $57
The accompanying notes on page 5 are an integral part of these financial
statements.
<PAGE>
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:
December 31 March 31
(In thousands) 1994 1993 1994
Tobacco $229,893 $332,217 $268,948
Wool 133,359 90,028 98,496
Other 1,444 1,671 1,888
Total $364,696 $423,916 $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 nine months ended
December 31, 1993. 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) In December 1993, the Company completed the sale of its
Caro-Green Nursery business to Zelenka Nursery Inc. Accordingly,
results for the quarter and nine months ended December 31, 1993
reflect the nursery business as a discontinued operation with the
following effect:
Period ended December 31, 1993
(In thousands) Quarter Nine Months
Sales $1,532 $4,978
Pretax operating loss -- (59)
Income tax benefit from
operating loss -- 20
Gain on disposal, less
income taxes of $325 631 631
Income from discontinued
operations $ 631 $ 592
(bullet) As discussed in Note 10 to the March 31, 1994 consolidated
financial statements, availability beyond September 15, 1994
under credit facilities with various United States and European
Banks for a total of up to $400 million had been subject to the
closing of a $100 million private placement of long-term, senior
secured notes. Because of market conditions, the Company has now
abandoned its plan for a debt offering.
The Company is in the process of restructuring all of its short-term
credit facilities. The existing syndicated credit facilities in
the U.S. have been extended until March 31, 1995, by which time
management expects to have in place an asset-based credit facility in
the amount of $125 million which will replace the existing U.S.
credit facilities. Outside of the United States, the Company has
traditionally utilized unsecured offering lines without specific
maturity dates. These lines are being restructured into one-year,
secured credit facilities which will be committed for specific
business purposes. Management believes that the establishment of
separate-purpose credit facilities along business and geographic
lines will improve the Company's relations with its banks and ensure
adequate liquidity for its trading needs.
(bullet) There were no changes in accounting policies during the period ended
December 31, 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Sales for the December 1994 quarter increased by 26.6% to $301.9
million from $238.5 million for the same quarter in 1993. Sales for
the most recent nine months were up 10.9% to $780.2 million from
$703.7 million for the comparable 1993 period. Net income for the
1994 quarter amounted to $296,000 or $0.02 per share compared to
$219,000 or $0.01 per share a year earlier. The 1994 net loss for
nine months was reduced to $5.0 million from $20.2 million for the
same 1993 period.
Tobacco sales in 1994 increased by 32.0% for the quarter and 5.4% for
the nine months compared to the same periods in 1993 because of higher
volumes up -- 23.2% for the quarter and 17.9% for the nine months.
Higher volumes reflected continued improvement in demand compared to
depressed levels in 1993. Average unit prices for the 1994 quarter
were up 9.9%, but down 11.0% for the nine months compared to 1993 as a
result of the Company's emphasis on inventory reduction, changed
product mix and the remains of a worldwide surplus of tobacco.
Wool sales for the 1994 quarter increased by 20.5% compared to the
same 1993 quarter as a result of firmer pricing and a 9.6% increase in
the volume of wool sold. A 24.0% increase in wool sales for the nine
months was attributed to firmer pricing and volume being up 5.4%
versus the same period in 1993.
Sales for the 1994 third quarter were comprised of 65.1% tobacco,
33.6% wool and 1.3% other businesses compared with 62.4%, 35.3% and
2.3% for the respective components a year earlier. For the 1994 nine
months tobacco accounted for 61.5%, wool 36.7% and other businesses
1.8% versus 64.7%, 32.8% and 2.5%, respectively, for the same 1993
period.
Selling, general and administrative expenses increased in the 1994
quarter compared to the same 1993 period primarily because of a $1.2
million reserve for redundancies and writeoff of deferred expenses
related to the abandoned bond offering.
For the 1994 nine months, other income included a gain of $8.1 million
on asset sales, primarily land and buildings in Korea, compared to
$4.6 million for the same period in 1993, which included a gain of
approximately $3.2 million on the sale of land and buildings in
Turkey. The resulting effect on net income after taxation and the
allocation to minority shareholders was $1.1 million in 1994 and $1.6
million in 1993.
Pretax income of $4.7 million for the quarter and $8.0 million for the
nine months ended December 31, 1994 compared to a pretax profit of
$4.5 million for the 1993 quarter and a $16.0 million pretax loss for
the 1993 nine months. The pretax loss for the 1993 nine months
included an inventory provision in cost of sales of $15.8 million and
nonrecurring selling, general and administrative expenses of $1.8
million. Interest of $11.8 million and $29.4 million was expensed
during the current quarter and nine months, respectively, compared to
$8.4 million and $24.9 million in the same prior year periods.
Income taxes for the 1994 nine months included a nonrecurring charge
of $1.6 million on dividends remitted by a foreign subsidiary that
cannot be offset by foreign tax credits. Also, all four periods were
adversely affected by tax charges in areas where profits were earned
and minimal relief available in areas where losses were incurred.
Discontinued operations in the 1993 periods included an after-tax gain
on sale of Caro-Green Nursery.
Subsequent to September 30, 1994, a one percent stock dividend was
declared in lieu of a cash dividend. The stock dividend was
distributed on December 29 to shareholders of record on December 2,
1994. Another one percent stock dividend in lieu of a cash dividend
was declared on December 2, 1994. This dividend will be distributed
on March 15 to shareholders of record on March 1, 1995.
Because of the seasonal nature of the Company's businesses, results
for interim periods are not necessarily indicative of results for a
full year. The recovery in demand for tobacco continues to improve
and business should progressively get back to satisfactory levels.
Wool prices and orders have firmed, and favorable market conditions
continue.
Financial Condition
Working capital at December 31, 1994 was $81.5 million, down from
$115.5 million at December 31, 1993. The decrease since December 1993
was mainly due to net long-term debt repayment of $15 million, net
additions to property, plant and equipment of $7 million, and
reclassification of $10 million from long-term debt to current. Net
additions to property, plant and equipment of $4.6 million for the
nine months ended December 31, 1994 included expenditures of $9.3
million for the tobacco business in the United States and Turkey, $3.6
for the wool business in France less $8.4 million for the carrying
value of tobacco assets in Korea which were sold.
The Company is continuing to deleverage by reducing its tobacco
inventories and related borrowings. Tobacco inventories at December
31, 1994 were down by $102.3 million from December 31, 1993 and down
by $39.1 million from the level at March 31, 1994. Wool inventories
at December 31, 1994 were up $34.9 million from March 31, 1994 and
$43.3 million from December 31, 1993 mainly due to increased wool
prices.
As previously announced, the Company has been having discussions with potential
acquirers which could result in the sale of its wool business. Although a firm
sales price has not been established, a price acceptable to the Company would
strengthen its balance sheet and improve its current ratio. It is intended that
proceeds of such a sale would be redeployed mainly in the tobacco business,
thereby significantly reducing its short-term debt and borrowing costs. At
December 31, 1994 the wool business had a net book value of $70 million and
short-term borrowings of $126 million.
As discussed in Note 10 to the March 31, 1994 consolidated financial
statements, availability beyond September 15, 1994 under credit
facilities with various United States and European Banks for a total
of up to $400 million had been subject to the closing of a $100
million private placement of long-term, senior secured notes. Because
of market conditions, the Company has now abandoned its plan for a
debt offering.
The Company is in the process of restructuring all of its short-term
credit facilities. The existing syndicated credit facilities in the
U.S. have been extended until March 31, 1995, by which time management
expects to have in place an asset-based credit facility in the amount
of $125 million which will replace the existing U.S. credit facilities.
Outside of the United States, the Company has traditionally utilized
unsecured offering lines without specific maturity dates. These lines
are being restructured into one-year, secured credit facilities which
will be committed for specific business purposes. Management believes
that the establishment of separate-purpose credit facilities along
business and geographic lines will improve the Company's relations
with its banks and ensure adequate liquidity for its trading needs.
<PAGE>
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. Exhibit 11 Computation of Earnings per Common Share.
b. Exhibit 27 Financial Data Schedule
c. The Company 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: February 17, 1995 STANDARD COMMERCIAL CORPORATION
(Registrant)
By /s/ Guy M Ross
Guy M Ross
Vice President and Chief Accounting Officer
<PAGE>
STANDARD COMMERCIAL CORPORATION
EXHIBIT INDEX
Exhibit Description Page No.
11 Computation of Earnings Per Common Share 10
27 Financial Data Schedule 11
STANDARD COMMERCIAL CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE EXHIBIT 11
(In thousands, except share information; unaudited)
<TABLE>
Third quarter ended Nine months ended
December 31 December 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
Income (loss) from continuing operations $296 $(412) $(4,952) $(20,861)
Less - ESOP preferred stock dividends net
of tax 121 121 363 363
Income (loss) from continuing operations
applicable to common stock 175 (533) (5,315) (21,224)
Income from discontinued operations -- 631 -- 592
Cumulative effect of accounting changes -- -- -- 23
Net earnings (loss) applicable to common stock $175 $ 98 $(5,315) $(20,609)
Average number of common shares outstanding 8,619,884 8,537,603 8,588,566 8,525,976
Increase applicable to restricted stock awards -- 24,439 -- 22,486
Primary average shares outstanding 8,619,884 8,562,042 8,588,566 8,548,462
Earnings (loss) per common share
- from continuing operations $0.02 $(0.06) $(0.62) $(2.48)
- from discontinued operations -- 0.07 -- 0.07
- cumulative accounting changes -- -- -- --
- net $0.02 $0.01 $(0.62) $(2.41)
FULLY DILUTED EARNINGS PER COMMON SHARE*
Income (loss) from continuing operations
applicable to common stock . . $175 $(533) $(5,315) $(21,224)
Add - after-tax interest expense on 7 1/4%
convertible subordinated debentures 825 825 2,475 2,475
- dividends payable to ESOP assuming
conversion to common stock -- 26 26 91
Adjusted income (loss) from continuing operations 1,000 318 (2,814) (18,658)
Income from discontinued operations -- 631 -- 592
Cumulative effect of accounting changes -- -- -- 23
Net earnings (loss) applicable to common stock $1,000 $949 $(2,814) $(18,043)
Primary average shares outstanding 8,619,884 8,562,042 8,588,566 8,548,462
Increase in shares outstanding assuming
- conversion of 7 1/4% convertible
subordinated debentures at November 13, 1991 2,126,348 2,126,348 2,126,348 2,126,348
- conversion of ESOP convertible
preferred stock at July 1, 1993 262,871 262,871 262,871 262,871
Fully diluted average shares outstanding 11,009,103 10,951,261 10,977,785 10,937,681
Earnings (loss) per common share
- from continuing operations $0.09 $0.03 $(0.26) $(1.70)
- from discontinued operations -- 0.06 -- 0.05
- cumulative accounting changes -- -- -- --
- net $0.09 $0.09 $(0.26) $(1.65)
</TABLE>
*The calculations of fully diluted earnings per share for all periods are
antidilutive. Therefore, no fully diluted earnings per share are shown on
the face of the income statement.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME AND
RETAINED EARNINGS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> DEC-31-1994
<CASH> 36,691
<SECURITIES> 566
<RECEIVABLES> 255,484<F1>
<ALLOWANCES> 0<F2>
<INVENTORY> 364,696
<CURRENT-ASSETS> 665,729
<PP&E> 129,873<F1>
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 845,489
<CURRENT-LIABILITIES> 584,190
<BONDS> 102,209
<COMMON> 2,210
9,132
0
<OTHER-SE> 100,322
<TOTAL-LIABILITY-AND-EQUITY> 845,489
<SALES> 780,178
<TOTAL-REVENUES> 780,178
<CGS> 725,863
<TOTAL-COSTS> 725,863
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 0<F2>
<INCOME-PRETAX> 7,951
<INCOME-TAX> 7,492
<INCOME-CONTINUING> (4,952)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,952)
<EPS-PRIMARY> (.62)
<EPS-DILUTED> (.62)
<FN>
<F1>SHOWN NET IN FINANCIAL STATEMENTS.
<F2>NOT SHOWN SEPARATELY UNDER MATERIALITY GUIDELINES.
</FN>
</TABLE>
