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, 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 February 5, 1996 the registrant had outstanding 9,041,455
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>
December 31 March 31
-----------------
1995 1994 1995
---- ---- ----
<S> <C> <C> <C>
ASSETS
Cash.................................................. $ 63,305 $ 36,691 $ 56,214
Receivables........................................... 242,537 255,484 210,863
Inventories........................................... 334,191 364,696 345,410
Prepaid expenses...................................... 4,298 8,292 3,995
Marketable securities at cost (approximate market).... 1,280 566 471
-----------------------------------
Current assets.................................... 645,611 665,729 616,953
Property, plant and equipment......................... 139,268 129,873 134,407
Investment in affiliates.............................. 13,360 14,058 12,905
Other assets.......................................... 30,924 35,829 49,224
-----------------------------------
Total assets...................................... $829,163 $845,489 $813,489
===================================
LIABILITIES
Short-term borrowings................................. $404,461 $423,309 $378,955
Current portion of long-term debt..................... 10,699 23,130 11,899
Accounts payable...................................... 156,282 117,472 145,083
Taxes accrued......................................... 21,271 20,279 26,955
-----------------------------------
Current liabilities............................... 592,713 584,190 562,892
Long-term debt........................................ 35,221 33,209 32,403
Convertible subordinated debentures................... 69,000 69,000 69,000
Retirement and other benefits......................... 18,652 17,689 17,791
Deferred taxes........................................ 12,082 11,072 12,585
Commitments and contingencies......................... - - -
-----------------------------------
Total liabilities................................. 727,668 715,160 694,671
-----------------------------------
MINORITY INTERESTS.................................... 25,248 25,858 31,336
-----------------------------------
ESOP redeemable preferred stock....................... 8,748 9,132 9,132
Unearned ESOP compensation............................ (6,165) (7,193) (6,600)
-----------------------------------
SHAREHOLDERS' EQUITY
Preferred stock, $1.65 par value
Authorized shares 1,000,000; issued 91,319 to ESOP
(December 1994 - 92,005).......................... - - -
Common stock, $0.20 par value
Authorized shares 100,000,000; issued 11,506,294
(December 1994 - 11,047,559; March 1995 - 11,160,289) 2,301 2,210 2,232
Unearned restricted stock plan compensation........... (464) (588) (548)
Additional paid-in capital............................ 42,577 36,718 38,288
Treasury stock 2,466,001 shares (2,369,781 at
December 1994 and 2,393,748 at March 1995).......... (2,147) (900) (1,233)
Retained earnings..................................... 38,405 77,469 50,530
Cumulative translation adjustments.................... (7,008) (12,377) (4,319)
-----------------------------------
Total shareholders' equity........................ 73,664 102,532 84,950
-----------------------------------
Total liabilities and equity...................... $829,163 $845,489 $813,489
===================================
</TABLE>
The accompanying notes on page 5 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>
Third Quarter Ended Nine months ended
December 31 December 31
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales - tobacco............................................ $271,745 $196,426 $642,018 $479,898
- nontobacco......................................... 105,810 105,454 314,698 300,280
-------------------------------------------
Total sales............................................ 377,555 301,880 956,716 780,178
Cost of sales.............................................. 351,244 278,630 901,170 725,863
Selling, general and administrative expenses............... 18,701 17,731 55,850 52,767
Restructuring charges...................................... 12,500 - 12,500 -
Other income (expense) - net............................... (1,362) (847) (1,422) 6,403
-------------------------------------------
Income (loss) before taxes............................. (6,252) 4,672 (14,226) 7,951
Income taxes............................................... (1,676) (2,554) (2,522) (7,492)
-------------------------------------------
Income (loss) after taxes.............................. (7,928) 2,118 (16,748) 459
Minority interests......................................... (1,112) (736) (2,263) (4,663)
Equity in earnings (losses) of affiliates.................. - (1,086) 541 (748)
-------------------------------------------
Income (loss) from continuing operations............... (9,040) 296 (18,470) (4,952)
Discontinued operations.................................... 10,799 - 10,050 -
-------------------------------------------
Net income (loss)...................................... 1,759 296 (8,420) (4,952)
ESOP preferred stock dividends net of tax.................. (117) (121) (358) (363)
-------------------------------------------
Net income (loss) applicable to common stock........... 1,642 175 (8,778) (5,315)
Retained earnings at beginning of period................... 37,828 78,395 50,530 84,807
Dividends declared......................................... (1,065) (1,101) (3,347) (2,023)
-------------------------------------------
Retained earnings at end of period..................... $38,405 $77,469 $38,405 $77,469
===========================================
Earnings (loss) per common share
Primary - from continuing operations................... $(1.02) $0.02 $(2.12) $(0.62)
- from discontinued operations................. $1.20 - $1.13 -
- net.......................................... $0.18 $0.02 $(0.99) $(0.62)
- average shares outstanding........................ 8,973,623 8,619,884 8,888,292 8,588,566
Fully diluted - from continuing operations............... * * * *
- from discontinued operations............. * * * *
- net...................................... * * * *
- average shares outstanding............... * * * *
Dividends paid per common share............................ - - - $0.20
</TABLE>
*Not applicable because fully diluted calculations include
antidilutive adjustments.
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)
<TABLE>
Nine months ended
December 31
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................................... $(8,420) $(4,952)
Depreciation and amortization.............................. 19,391 11,904
Minority interests......................................... 2,262 4,663
Deferred income taxes...................................... (502) -
Undistributed earnings (losses) of affiliates.............. (540) 810
Discontinued operations.................................... (10,050) -
Gain on disposition of property, plant and equipment....... (1,145) (8,052)
Other...................................................... (189) 1,108
----------------------
807 5,481
Net changes in working capital
Receivables............................................ (7,170) 14,876
Inventories............................................ 12,753 11,040
Current payables....................................... (1,060) (9,061)
----------------------
CASH PROVIDED BY OPERATING ACTIVITIES...................... 5,330 22,336
----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment - additions.................. (9,349) (12,946)
- dispositions............... 2,883 8,359
Minority interest.......................................... (7,740) -
Business (acquisitions) dispositions....................... 279 (873)
---------------------
CASH USED FOR INVESTING ACTIVITIES......................... (13,927) (5,460)
---------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings......................... 9,658 8,516
Repayment of long-term borrowings.......................... (12,226) (15,081)
Net change in short-term borrowings........................ 20,133 (42,052)
Cash dividends paid........................................ (362) (1,792)
Other...................................................... (1,515) 422
--------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES........... 15,688 (49,987)
--------------------
Increase (decrease) in cash for period..................... 7,091 (33,111)
Cash at beginning of period................................ 56,214 69,802
--------------------
CASH AT END OF PERIOD...................................... $63,305 $36,691
====================
</TABLE>
The accompanying notes on page 5 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. The
interim 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 reversal of provisions relating 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)The financial statements have been restated to reflect
reinstatement of the wool business as a continuing operation.
(BULLET)Reinstatement of the wool division as a continuing
operation resulted in a review of the corporate structure and
determination that a restructuring of nontobacco operations and
certain asset write-offs were necessary with the following effect
on net income:
(In millions)
Restructuring operations (net of $1.5 million tax) $5.9
Reduction of Wool Division goodwill 3.6
Write off deferred wool-sale transaction costs 1.5
----
Total $11.0
====
(BULLET)Inventories for the periods shown were as follows:
December 31 March 31
(In thousands) 1995 1994 1995
Tobacco $230,734 $229,893 $194,344
Nontobacco 103,457 134,803 151,066
------- ------- -------
Total $334,191 $364,696 $345,410
======= ======= =======
(BULLET)There were no changes in accounting policies during the
period ended December 31, 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS
Results of Operations
Sales for the December 1995 quarter increased by 25.1% to $377.6
million from $301.9 million for the same quarter in 1994. Sales
for the most recent nine months were up 22.6% to $956.7 million
from $780.2 million for the comparable 1994 period. Net income
for the 1995 quarter amounted to $1.8 million or $0.18 per share
compared to $296,000 or $0.02 per share a year earlier. The 1995
loss for nine months was $8.4 million compared to a loss of $5.0
million during the corresponding 1994 period.
Tobacco sales increased by 38.3% for the 1995 quarter and 33.8%
for the nine months compared to the same periods in 1994. Tobacco
pretax operating margins for both the 1995 third quarter and nine
months continued to improve over the comparable prior-year
periods. The increase in sales and margins were due to improved
industry conditions and mix of sales, whereas 1994 margins were
adversely affected by the remnants of a worldwide inventory
surplus and the Company's emphasis on inventory reduction.
Nontobacco sales were up by 0.3% and 4.8% during the 1995 third
quarter and nine months over the same prior year periods.
However, exceedingly difficult wool trading conditions in 1995
resulted in a disappointing drop in operating margins compared to
the same 1994 periods.
Before restructuring charges, as explained below, the pretax and
after tax income for the 1995 quarter were $6.2 million and $3.1
million compared to $4.7 million and $2.1 million in the
corresponding 1994 quarter. For the nine months, excluding
restructuring charges, the pretax loss for 1995 was $1.7 million
($5.8 million after tax) compared to a profit of $8.0 million
($459,000 after tax) in 1994. The 1994 nine months included a pretax
gain on asset sales included in other income of $8.1 million
($1.1 million net of tax and minority interest). Interest of
$12.1 million and $35.2 million was expensed in the 1995 quarter
and nine months, respectively, compared with $11.8 million and
$29.4 million in the same prior-year periods.
As announced in December 1995, the Company and Chargeurs, a French
public company, allowed the sale-purchase agreement of Standard's
wool business to lapse due to difficulty in obtaining certain
regulatory approvals. As a result, the Company implemented a
reorganization plan for its nontobacco businesses and determined
that a pretax restructuring charge of $12.5 million was
appropriate. This charge is specifically for closure of
facilities and write-off of certain assets ($7.4 million), writing
down impaired goodwill ($3.6 million) and write-off of deferred
wool-sale transaction costs ($1.5 million). The primary basis for
this charge was the reduced market value of the wool business
determined by third-party negotiations. By reorganizing its
nontobacco operations, the Company expects a quicker return to
profitability of this segment.
Income taxes for the 1995 quarter and nine months include a credit
of $1.5 million relating to restructuring charges whereas the 1994
nine 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. 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 for the 1995 quarter and nine months
include reversal of provisions of $10.8 million and $10.1 million
made during the current year ($759,000) and at March 31, 1995
($10.1 million) towards the estimated net loss on sale of the wool
business.
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 December 31, 1995 was $52.9 million compared to
$81.5 million at December 31, 1994. The decrease was mainly due
to the repayment of long-term borrowings ($14.0 million),
liquidation proceeds due to a minority partner in Korea ($7.7
million) and net capital expenditures ($6.5 million). Capital
expenditures included $8.8 million for the tobacco business, a
major part of which have been financed with a new $6 million long-
term facility arranged by the local subsidiary in Turkey. Despite
paying higher prices for 1995 crop purchases, the December year-
to-year tobacco inventory was up by less than $1 million. March
31 is generally the cyclical low point for inventories.
The Company's credit facilities are believed by management to be
adequate for its projected level of business in fiscal 1996, and
it is expected that the facilities will be renewed for fiscal 1997
prior to the June 1996 expiry.
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 13, 1996 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>
Third quarter ended Nine months ended
December 31 December 31
------------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE
Income (loss) from continuing operations................ $(9,040) $296 $(18,470) $(4,952)
ESOP preferred stock dividends net of tax............... (117) (121) (358) (363)
Income (loss) from continuing operations ---------------------------------------------
applicable to common stock............................ (9,157) 175 (18,828) (5,315)
Income from discontinued operations..................... 10,799 - 10,050 -
---------------------------------------------
Net earnings (loss) applicable to common stock.......... $1,642 $ 175 $(8,778) $(5,315)
=============================================
Primary average shares outstanding...................... 8,973,623 8,619,884 8,888,292 8,588,566
=============================================
Earnings (loss) per common share
- from continuing operations.......................... $(1.02) $0.02 $(2.12) $(0.62)
- from discontinued operations........................ 1.20 - 1.13 -
---------------------------------------------
- net................................................. $0.18 $0.02 $(0.99) $(0.62)
=============================================
FULLY DILUTED EARNINGS PER COMMON SHARE*
Income (loss) from continuing operations
applicable to common stock............................ $(9,157) $175 $(18,828) $(5,315)
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
---------------------------------------------
Adjusted income (loss) from continuing operations....... (8,332) 1,000 (16,353) (2,814)
Income from discontinued operations..................... 10,799 - 10,050 -
---------------------------------------------
Net earnings (loss) applicable to common stock.......... $2,467 $1,000 $(6,303) $(2,814)
=============================================
Primary average shares outstanding...................... 8,979,623 8,619,884 8,888,292 8,588,566
Increase in shares outstanding assuming
- conversion of 7 1/4% convertible subordinated
debentures at November 13, 1991................... 2,212,248 2,126,348 2,183,502 2,126,348
- conversion of ESOP convertible
preferred stock at July 1, 1993................... 269,219 262,871 266,449 262,871
---------------------------------------------
Fully diluted average shares outstanding................ 11,461,090 11,009,103 11,338,243 10,977,785
=============================================
Earnings (loss) per common share
- from continuing operations.......................... $(0.73) $0.09 $(1.44) $(0.26)
- from discontinued operations........................ 0.94 - 0.89 -
---------------------------------------------
- net................................................. $0.21 $0.09 $(0.55) $(0.26)
=============================================
</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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 63,305
<SECURITIES> 1,280
<RECEIVABLES> 242,537<F1>
<ALLOWANCES> 0<F2>
<INVENTORY> 334,191
<CURRENT-ASSETS> 645,611
<PP&E> 139,268<F1>
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 829,163
<CURRENT-LIABILITIES> 592,713
<BONDS> 104,221
<COMMON> 2,301
8,748
0
<OTHER-SE> 71,363
<TOTAL-LIABILITY-AND-EQUITY> 829,163
<SALES> 956,716
<TOTAL-REVENUES> 956,716
<CGS> 901,170
<TOTAL-COSTS> 901,170
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 0<F2>
<INCOME-PRETAX> (14,226)
<INCOME-TAX> (2,522)
<INCOME-CONTINUING> (18,470)
<DISCONTINUED> 10,050
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,420)
<EPS-PRIMARY> (0.99)
<EPS-DILUTED> (0.99)
<FN>
<F1>SHOWN NET IN FINANCIAL STATEMENTS.
<F2>NOT SHOWN SEPARATELY UNDER MATERIALITY GUIDELINES.
</FN>
</TABLE>
