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 SEPTEMBER 30, 1995
COMMISSION FILE NUMBER 1-9875
LOGO
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 November 8, 1995 the registrant had outstanding 8,948,735 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
-------- --------
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands; unaudited)
<TABLE> September 30 March 31
------------------
1995 1994 1995
---- ---- ----
<S> <C> <C> <C>
ASSETS
Cash......................................................... $ 40,652 $ 31,677 $ 46,753
Receivables.................................................. 138,326 235,179 154,241
Inventories.................................................. 289,832 382,294 196,037
Net assets of discontinued operations........................ 47,325 - 56,027
Prepaid expenses............................................. 4,554 8,213 2,903
Marketable securities........................................ 1,024 932 453
----------------------------------------
Current assets........................................... 521,713 658,295 456,414
Property, plant and equipment................................ 99,990 133,432 99,102
Investment in affiliates..................................... 12,381 15,133 11,844
Other assets................................................. 41,030 34,043 41,067
----------------------------------------
Total assets............................................. $ 675,114 $840,903 $608,427
========================================
LIABILITIES
Short-term borrowings........................................ $ 334,395 $441,162 $275,429
Current portion of long-term debt............................ 10,355 24,117 11,216
Accounts payable............................................. 97,144 98,153 79,373
Taxes accrued................................................ 16,360 19,780 17,524
----------------------------------------
Current liabilities...................................... 458,254 583,212 383,542
Long-term debt............................................... 28,449 30,291 26,927
Convertible subordinated debentures.......................... 69,000 69,000 69,000
Retirement and other benefits................................ 13,305 17,515 13,005
Deferred taxes............................................... 8,798 11,176 9,028
Commitments and contingencies................................ - - -
----------------------------------------
Total liabilities........................................ 577,806 711,194 501,502
----------------------------------------
MINORITY INTERESTS........................................... 32,155 25,307 31,299
----------------------------------------
ESOP redeemable preferred stock.............................. 9,132 9,200 9,132
Unearned ESOP compensation................................... (6,165) (7,404) (6,600)
----------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock, $1.65 par value; authorized 1,000,000 shares
Issued 91,319 to ESOP; (Sept 94 - 92,005 ; March 95 - 91,319)
Common stock, $0.20 par value; authorized shares 20,000,000
Issued 11,389,072; (Sept 94 - 10,936,160; March 95 - 11,160,289) 2,278 2,187 2,232
Additional paid-in capital................................... 41,209 35,235 38,288
Unearned restricted stock plan compensation.................. (460) (592) (515)
Treasury stock at cost 2,441,586 shares
(Sept 1994 - 2,346,318; March 1995 - 2,393,478)............ (1,857) (583) (1,233)
Retained earnings............................................ 37,828 78,395 50,530
Cumulative translation adjustments........................... (16,812) (12,036) (16,208)
----------------------------------------
Total shareholders' equity............................... 62,186 102,606 73,094
----------------------------------------
Total liabilities and equity............................. $675,114 $840,903 $608,427
========================================
</TABLE>
The accompanying notes are an integral part of these financial
statements.
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(In thousands, except share information; unaudited)
<TABLE>
Second Quarter Ended Six months ended
September 30 September 30
-------------------- ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales - tobacco................................... $186,528 $137,002 $370,273 $283,472
- other..................................... 2,053 5,172 5,022 9,681
--------------------------------------------------
Total sales.................................... 188,581 142,174 375,295 293,153
Cost of sales...................................... 173,862 132,459 347,501 273,566
Selling, general and administrative expenses....... 13,157 12,675 26,111 25,177
Other income (expense) - net....................... (467) 7,334 (1,356) 6,826
--------------------------------------------------
Income before taxes............................ 1,095 4,374 327 1,236
Income taxes....................................... (798) (4,689) (1,229) (4,100)
--------------------------------------------------
Income (loss) after taxes.................... 297 (315) (902) (2,864)
Minority interests................................. 9 (3,938) (1,151) (3,927)
Equity in earnings of affiliates................... 270 169 541 338
--------------------------------------------------
Income (loss) from continuing operations....... 576 (4,084) (1,512) (6,453)
Discontinued operations, net of income taxes:
Income (loss) from operations................ (3,751) 7 (7,918) 1,205
Gain (loss) from disposal.................... 3,751 - (749) -
--------------------------------------------------
Net income (loss).............................. 576 (4,077) (10,179) (5,248)
ESOP preferred stock dividends net of tax.......... (120) (121) (241) (242)
--------------------------------------------------
Net income (loss) applicable to common stock. 456 (4,198) (10,420) (5,490)
Retained earnings at beginning of period........... 38,392 82,593 50,530 84,807
Dividends declared................................. (1,020) - (2,282) (922)
--------------------------------------------------
Retained earnings at end of period............. $37,828 $78,395 $37,828 $78,395
==================================================
Earnings (loss) per common share
Primary - from continuing operations......... $0.05 $(0.49) $(0.20) $(0.78)
- from discontinued operations....... - - (0.98) 0.14
--------------------------------------------------
- net................................ $0.05 $(0.49) $(1.18) $(0.64)
- average shares outstanding......... 8,887,613 8,577,139 8,842,626 8,572,908
Fully diluted - from continuing operations... * * * *
- from discontinued operations. * * * *
- net.......................... * * * *
- average shares outstanding... * * * *
Dividends paid per common share.................... - $0.10 - $0.20
</TABLE>
*Not applicable because fully diluted calculations include adjustments
which are antidilutive.
The accompanying notes are an integral part of these financial
statements.
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands; unaudited)
<TABLE>
Six months ended
September 30
----------------
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................................... $(10,179) $(5,248)
Depreciation and amortization.............................. 7,843 5,460
Minority interests......................................... 1,151 3,927
Undistributed earnings of affiliates....................... (541) (275)
Gain on disposition of property, plant and equipment....... (209) (7,968)
Loss on disposal of discontinued operations................ 749 -
Other...................................................... (4,369) 2,039
----------------------
(5,555) (2,065)
Net changes in working capital
Receivables............................................ 14,719 33,782
Inventories............................................ (95,086) (3,366)
Current payables....................................... 18,901 (36,284)
Discontinued operations
- noncash charges and working capital changes........ 7,952 5,170
----------------------
CASH USED FOR OPERATING ACTIVITIES......................... (59,069) (2,763)
----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment - additions.................. (7,335) (8,565)
- dispositions............... 581 8,127
Payment for business acquisitions.......................... 278 (662)
Investment activities of discontinued operations........... - (744)
----------------------
CASH USED FOR INVESTING ACTIVITIES......................... (6,476) (1,844)
----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings......................... 9,677 3,943
Repayment of long-term borrowings.......................... (9,004) (12,453)
Net change in short-term borrowings........................ 58,966 (18,557)
Dividends paid............................................. (241) (1,164)
Other...................................................... 46 365
Financing activities of discontinued operations............ - (5,652)
----------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES........... 59,444 (33,518)
----------------------
Decrease in cash for period................................ (6,101) (38,125)
Cash at beginning of period................................ 46,753 69,802
----------------------
CASH AT END OF PERIOD...................................... $40,652 $31,677
======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Bullet) The interim statements presented herein 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 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. Except for those related to disposal of the wool business, 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 and
other as follows:
September 30 March 31
---------------
(In thousands) 1995 1994 1995
---- ---- ----
Tobacco $288,517 $274,684 $194,344
Other 1,315 1,501 1,693
------- ------- -------
Total $289,832 $276,185* $196,037
======= ======= =======
*Excludes inventories totaling $106,109 for discontinued wool operations.
(Bullet) There were no changes in accounting policies during the period
ended September 30, 1995.
(Bullet) In April 1995, the Company entered into an agreement in principle
to sell its wool operations to Chargeurs of Paris, France, and a definitive
agreement was executed in September 1995. The Company is also seeking to
dispose of its specialty fibres unit. Therefore, results of the entire
wool business for the second quarter and six months ended September 30,
1995 have been reported as discontinued operations and prior year
comparable periods have been restated accordingly. Because the sales
price of the wool business is subject to certain assumptions, estimates
were necessary in arriving at the estimated loss on disposal shown below.
<TABLE>
Qtr Ended Sept 30 Six Mos Ended Sept 30
<S> ----------------- ---------------------
(In thousands) 1995 1994 1995 1994
---- ---- ---- ----
<C> <C> <C> <C>
Wool sales $93,615 $82,875 $203,865 $185,145
Pretax operating income (loss) (4,697) 279 (8,302) 2,042
Income taxes 946 (272) 384 (837)
------ ------ ------ -------
Operating income (loss) (3,751) 7 (7,918) 1,205
Estimated loss on disposal-net 3,751 - (749) -
----- ------ ------ -------
Income (loss) from
discontinued wool operations $ -0- $ 7 $ (8,667) $ 1,205
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Sales from continuing operations of $188.6 million for the quarter ended
September 30, 1995 increased by 32.6% from $142.2 million for the same
quarter in 1994. For the current six months, sales increased by 28.0%
to $375.3 million from $293.2 million. (Results for 1994 have been
restated to treat the wool division as a discontinued operation.)
Tobacco sales increased 36.1% for the 1995 quarter and 30.6% for the
six months compared to the same periods in 1994 largely reflecting
improved industry conditions resulting in higher average prices for
1995 crop purchases and sales. Changes in the sales mix and increases
in volume of 1.9% and 4.2% for the 1995 quarter and six months,
respectively, also contributed to the rise in sales. Tobacco sales
comprised 98.9% and 98.7% of total sales for the 1995 quarter and
first half. Sales for the building supply and duty free businesses
accounted for the remaining sales.
Pretax operating margins for both the 1995 second quarter and six months
increased over comparable prior year periods, excluding a $7.9 million
gain on sale of property in 1994, primarily due to a change
in sales mix and improved industry conditions. Also, 1994 margins were
adversely affected by a world-wide inventory surplus and the Company's
emphasis on inventory reduction. Income before taxes was $1.1 million
in the current quarter compared to $4.4 million a year earlier. For
the 1995 six months, income before tax was $327,000 versus $1.2 million
in 1994. Interest of $8.8 million and $17.8 million was expensed during
the 1995 quarter and six months, respectively, compared with $7.8 million
and $13.9 million in the same prior-year periods.
Income taxes for the 1994 quarter and six months included a nonrecurring
charge of $1.6 million on dividends remitted by a foreign subsidiary that
could not be offset by foreign tax credits and $3.5 million on the
property sale. Also, tax charges or credits for the periods vary as a
percentage of pretax income or loss due to differences in tax rates and
relief available in areas where profits are earned or losses are incurred.
Minority interest in 1994 includes the effect of the aforementioned sale
of property.
Income from continuing operations for the 1995 quarter totaled $576,000
compared to a loss of $ 4.1 million in the year-earlier quarter. Loss
from continuing operations for the 1995 six months amounted to $1.5
million compared to a loss of $6.5 million in the same 1994 period.
After adjustment for the results of discontinued operations, net income
for the quarter was $576,000 compared to a net loss of $4.1 million in
1994. Net loss for the current six months was $10.2 million, including
a loss on discontinued operations of $8.7 million, compared to a net
loss of $5.2 million in 1994, which included income from discontinued
operations of $1.2 million.
Results for the discontinued wool operations reflect continued difficult
trading conditions in the 1995 second quarter. Though wool sales in the
quarter increased 13.0% and 10.1% year to date over the same periods in
1994, a continued decline in world-wide prices resulted in losses from
operations of $3.8 million and $7.9 million compared to income of $7,000
and $1.2 million for the same periods a year earlier. Because the sale
of the wool business is expected to be completed under the terms of the
definitive agreement announced in September 1995, the operating loss in
the 1995 second quarter was offset against the estimated loss on
disposal recorded in the June quarter. However, the $2.4 million
performance-related portion of the $6 million contingent element
of the $51 million purchase price will not be fully realized unless
there is sharp improvement in wool trading conditions over the next
four months.
Because of the seasonal nature of the Company's businesses, results for
interim periods are not necessarily indicative of results for a full year.
Financial Condition
Working capital at September 30, 1995 was $63.5 million, compared to
$75.1 million at September 30, 1994, and $72.9 million at March 31, 1995.
The decrease from 1994 is primarily attributable to cumulative net losses.
Capital expenditures of $7.3 million for the six months ended September 30,
1995 were primarily for the tobacco business in Turkey which have been
financed with a new $6.0 million long-term facility arranged by the local
subsidiary. Tobacco inventories at September 30, 1995 were up by $13.8
million from September 30, 1994 as a result of higher prices paid for 1995
crop purchases, and up $94.2 million from March 31, 1995, which normally is
the low point in the seasonal cycle.
The Company's credit facilities are believed by management to be adequate
for its projected level of business in fiscal 1996.
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
a. An annual meeting of shareholders was held on
August 8, 1995.
b. Not required.
c. 1. Four persons nominated by management were elected
as directors without opposition as follows:
<TABLE>
Nominee Votes For Votes Withheld Broker Nonvotes
------- --------- -------------- ---------------
<S> <C> <C> <C>
For a two-year term expiring in 1997
Daniel M Sullivan 7,361,084 6,172 -0-
For a three-year term expiring in 1998
William S Barrack Jr 7,352,701 14,555 -0-
Charles H Mullen 7,359,236 8,020 -0-
J Alec G Murray 7,351,697 15,559 -0-
</TABLE>
2. The appointment of Deloitte & Touche LLP as the Company's
independent auditors for fiscal 1996 was approved by a
vote of 7,356,617 shares in favor, 2,645 shares against
and 7,994 shares abstaining. There were no broker nonvotes.
d. 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: November 10, 1995 STANDARD COMMERCIAL CORPORATION
(Registrant)
By /s/ Robert E Harrison
----------------------------
Robert E Harrison
Senior Vice President and
Chief Financial Officer
By /s/ Guy M Ross
----------------------------
Guy M Ross
Vice President and
Chief Accounting Officer
STANDARD COMMERCIAL CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE EXHIBIT 11
(In thousands, except share information; unaudited)
<TABLE>
Second quarter ended Six months ended
September 30 September 30
-------------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C <C>
PRIMARY EARNINGS PER SHARE
Income (loss) from
continuing operations.............................. $ 576 $(4,084) $(1,512) $(6,453)
Less - ESOP preferred stock dividends
net of tax.......................................... 120 121 241 242
----------------------------------------------
Income (loss) from continuing operations
applicable to common stock........................... 456 (4,205) (1,753) (6,695)
Income (loss) from discontinued operations............ - 7 (8,667) 1,205
-----------------------------------------------
Net income (loss) applicable to common stock.......... $ 456 $(4,198) $(10,420) $(5,490)
===============================================
Primary average shares outstanding.................... 8,887,613 8,577,139 8,842,626 8,572,908
===============================================
Earnings (loss) per common share
- from continuing operations.................. $0.05 $(0.49) $(0.20) $(0.78)
- from discontinued operations................ - - (0.98) 0.14
-----------------------------------------------
- net......................................... $0.05 $(0.49) $(1.18) $(0.64)
===============================================
FULLY DILUTED EARNINGS PER SHARE
Income (loss) from continuing operations
applicable to common stock........................ $ 456 $(4,205) $(1,512) $(6,695)
Add - after-tax interest expense on 7 1/4%
convertible subordinated debentures.......... 825 825 1,650 1,650
- dividends payable to ESOP assuming
conversion to common stock................... - - - 26
-----------------------------------------------
Adjusted income (loss) from continuing operations.... 1,281 - (3,380) 138 - (5,019)
Income (loss) from discontinued operations............ - - 7 (8,667) - 1,205
-----------------------------------------------
Net income (loss) applicable to common stock.......... $1,281 $(3,373) $(8,529) $(3,814)
===============================================
Primary average shares outstanding.................... 8,887,613 8,577,139 8,842,626 8,572,908
Increase in shares outstanding assuming
- conversion of 7 1/4% convertible subordinated
debentures at November 13, 1991............... 2,169,129 2,126,348 2,169,129 2,126,348
- conversion of ESOP convertible
preferred stock at July 1, 1993............... 269,219 262,871 265,065 262,871
-----------------------------------------------
Fully diluted average shares outstanding..............11,325,961 10,966,358 11,276,820 10,962,127
===============================================
Earnings (loss) per common share
- from continuing operations...................... $0.11 $(0.31) $0.01 $(0.46)
- from discontinued operations.................... - - (0.77) 0.11
-----------------------------------------------
- net........................................... $0.11 $(0.31) $(0.76) $(0.35)
===============================================
</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, CONSOLIDATED STATEMENT OF
INCOME AND RETAINED EARNINGS, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-30-1995
<CASH> 40,652
<SECURITIES> 1,024
<RECEIVABLES> 138,326<F1>
<ALLOWANCES> 0<F2>
<INVENTORY> 289,832
<CURRENT-ASSETS> 521,713
<PP&E> 99,990<F1>
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 675,114
<CURRENT-LIABILITIES> 458,254
<BONDS> 97,449
<COMMON> 2,278
9,132
0
<OTHER-SE> 59,908
<TOTAL-LIABILITY-AND-EQUITY> 675,114
<SALES> 375,295
<TOTAL-REVENUES> 375,295
<CGS> 347,501
<TOTAL-COSTS> 347,501
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 0<F2>
<INCOME-PRETAX> 327
<INCOME-TAX> (1,229)
<INCOME-CONTINUING> (1,512)
<DISCONTINUED> (8,667)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,179)
<EPS-PRIMARY> (1.18)
<EPS-DILUTED> (1.18)
<FN>
<F1>SHOWN NET IN FINANCIAL STATEMENTS.
<F2>NOT SHOWN SEPARATELY UNDER MATERIALITY GUIDELINES.
</FN>
</TABLE>
