SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
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 November 10, 1997 the registrant had outstanding 12,687,700 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>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands, except share information)
<TABLE>
<CAPTION>
September 30 March 31
1997 1996 1997
---- ---- ----
ASSETS (unaudited)
<S> <C> <C> <C>
Cash .................................................... $ 51,278 $ 48,241 $ 41,117
Receivables ............................................. 214,907 198,303 266,560
Inventories ............................................. 421,027 346,020 256,519
Prepaid expenses ........................................ 8,335 7,288 6,285
Marketable securities ................................... 961 1,510 837
------------- ------------- -------------
Current assets ...................................... 696,508 601,362 571,318
Property, plant and equipment ........................... 115,767 133,734 122,013
Investment in affiliates ................................ 12,720 11,791 12,533
Other assets ............................................ 38,376 34,887 29,821
------------- ------------- -------------
Total assets ........................................ $ 863,371 $ 781,774 $ 735,685
============= ============= =============
LIABILITIES
Short-term borrowings ................................... $ 291,725 $ 385,025 $ 272,325
Current portion of long-term debt ....................... 4,212 8,469 8,985
Accounts payable ........................................ 149,283 120,432 141,145
Taxes accrued ........................................... 24,404 26,217 28,758
------------- ------------- -------------
Current liabilities ................................. 469,624 540,143 451,213
Long-term debt .......................................... 128,066 28,923 70,252
Convertible subordinated debentures ..................... 69,000 69,000 69,000
Retirement and other benefits ........................... 19,284 19,173 19,127
Deferred taxes .......................................... 4,974 8,808 5,819
------------- ------------- -------------
Total liabilities ................................... 690,948 666,047 615,411
------------- ------------- -------------
MINORITY INTERESTS ...................................... 31,019 29,605 30,312
------------- ------------- -------------
ESOP redeemable preferred stock ......................... -- 8,748 --
Unearned ESOP compensation .............................. -- (6,320) --
------------- ------------- -------------
SHAREHOLDERS' EQUITY
Preferred stock, $1.65 par value; authorized shares
1,000,000
Issued none (1996 - 87,477 to ESOP)
Common stock, $0.20 par value; authorized shares
100,000,000
Issued 15,304,115; (Sept 96 - 11,867,465; Mar 97 - .... 3,061 2,373 2,425
12,126,270)
Additional paid-in capital .............................. 100,163 46,157 50,324
Unearned restricted stock plan compensation ............. (271) (385) (321)
Treasury shares, 2,617,707 (Sept 96 - 2,540,722; Mar 97 - (4,250) (2,997) (3,799)
2,591,790)
Retained earnings ....................................... 63,150 48,787 58,089
Cumulative translations adjustments ..................... (20,449) (10,241) (16,756)
------------- ------------- -------------
Total shareholders' equity .......................... 141,404 83,694 89,962
------------- ------------- -------------
Total liabilities and equity ........................ $ 863,371 $ 781,774 $ 735,685
============= ============= =============
</TABLE>
The accompanying notes 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>
<CAPTION>
Second quarter ended Six months ended
September 30
September 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales - tobacco................................... $207,686 $169,629 $420,533 $384,892
- nontobacco................................ 79,567 79,376 167,035 174,504
------- ------- ------- -------
Total sales................................... 287,253 249,005 587,568 559,396
Cost of sales
- materials, services and supplies............ 254,128 218,881 527,317 499,775
- interest.................................... 5,414 8,152 12,680 15,763
------- ------- ------- -------
Gross profit.................................. 27,711 21,972 47,571 43,858
Selling, general and administrative expenses...... 17,520 18,272 35,179 36,268
Other interest expense............................ 3,955 2,450 6,171 4,837
Other income (expense) - net...................... 2,082 2,729 4,472 5,564
------- ------- ------- -------
Income before taxes........................... 8,318 3,979 10,693 8,317
Income taxes...................................... (2,243) (944) (2,602) (2,056)
------- ------- ------- -------
Income after taxes............................ 6,075 3,035 8,091 6,261
Minority interests................................ (1,218) (268) (1,509) (2,204)
Equity in earnings of affiliates.................. 424 144 550 362
------- ------- ------- -------
Net income.................................... 5,281 2,911 7,132 4,419
ESOP preferred stock dividends net of tax......... - (116) - (231)
------- ------- ------- -------
Net income applicable to common stock......... 5,281 2,795 7,132 4,188
Retained earnings at beginning of period.......... 57,869 47,051 58,089 46,450
Common stock dividends............................ - (1,059) (2,071) (1,851)
------- ------- ------- -------
Retained earnings at end of period................ $ 63,150 $ 48,787 $ 63,150 $ 48,787
======= ======= ======= =======
Earnings per common share
Primary - net..................................... $0.41 $0.29# $0.60 $0.44#
- average shares outstanding.............. 12,798 9,497# 11,950 9,495#
Fully diluted..................................... $0.40 * * *
- average shares outstanding.............. 15,146
</TABLE>
*Not applicable because fully diluted calculations include adjustments which are
antidilutive.
#Adjusted for subsequent stock dividends.
The accompanying notes are an integral part of these financial statements.
<PAGE>
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands; unaudited)
<TABLE>
<CAPTION>
Six months ended
September 30
-----------------
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income ..................................................... $ 7,132 $ 4,419
Depreciation and amortization ................................ 10,511 9,130
Minority interests ........................................... 1,509 2,204
Deferred income taxes ........................................ (614) --
Undistributed earnings of affiliates net of dividends received (550) (362)
Gain on disposition of property, plant and equipment ......... (3,410) (184)
Other ........................................................ 911 913
--------- ---------
15,489 16,120
Net changes in working capital other than cash
Receivables ................................................ 42,853 50,950
Inventories ................................................ (170,743) (87,701)
Current payables ........................................... 18,283 (10,441)
--------- ---------
CASH USED FOR OPERATING ACTIVITIES ............................. (94,118) (31,072)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and ............................................ (8,928) (7,673)
equipment- additions
- dispositions ........................................ 5,519 334
Business (acquisitions) dispositions ........................... (3,353) 2,993
--------- ---------
CASH USED FOR INVESTING ACTIVITIES ............................. (6,762) (4,346)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term borrowings ............................ (27,642) 11,400
Proceeds from long-term borrowings ............................. 110,028 10,012
Repayment of long-term borrowings .............................. (15,498) (16,210)
Net proceeds of equity offering ................................ 47,043 --
Dividends paid, net of tax ..................................... -- (231)
Other .......................................................... (2,890) --
--------- ---------
CASH PROVIDED BY FINANCING ACTIVITIES .......................... 111,041 4,971
--------- ---------
Increase (decrease) in cash for period ......................... 10,161 (30,447)
Cash at beginning of period .................................... 41,117 78,688
--------- ---------
CASH AT END OF PERIOD .......................................... $ 51,278 $ 48,241
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
o 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.
o 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. All
such adjustments are of a normal, recurring nature. Because of the seasonality
of the Company's businesses, fluctuations in results for interim periods are not
necessarily indicative of business trends or results to be expected for other
interim periods or the full year.
o Prior period earnings per share and weighted average shares outstanding have
been restated to give effect to the increase in shares outstanding resulting
from subsequent stock dividends.
o Inventories for the periods shown were as follows:
September 30 March 31
(In thousands) 1997 1996 1997
---- ---- ----
Tobacco $345,081 $274,997 $181,349
Nontobacco 75,946 71,023 75,170
-------- -------- ---------
Total $421,027 $346,020 $256,519
======= ======= =======
o There were no changes in accounting policies during the period ended September
30, 1997.
o On August 1, 1997, the Company completed a $115.0 million private placement of
8-7/8% Senior Notes due 2005, the net proceeds of which were used to repay
indebtedness under existing bank credit facilities and certain other long-term
debt. The notes were issued by Standard Commercial Tobacco Co., Inc. (the
"Issuer"), a wholly-owned subsidiary of the Company. The Company and Standard
Wool, Inc., a wholly-owned subsidiary of the Company (the "Guarantors"), jointly
and severally, guarantee on a senior basis, the full and prompt performance of
the Issuer's obligations under the terms of the indenture. Management has
determined that full financial statements of the Guarantors would not be
material to investors and such financial statements are not provided. The
following supplemental combining financial statements present information
regarding the Guarantors and the Issuer.
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING BALANCE SHEET
September 30, 1997
(In thousands; unaudited)
<TABLE>
<CAPTION>
Other
Standard Tobacco
Standard Commercial Subsi- Other Wool
Commercial Tobacco diaries Standard Subsidiaries
Corporation Co, Inc (Non- Wool, Inc (Non-Guran- Elimin-
(Guarantor) (Issuer) Guarantors) (Guarantor) tors) ations Total
----------- -------- ----------------------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Cash........................ $ - $ 20,167 $ 23,197 $ 300 $ 7,614 $ - $ 51,278
Receivables................. 3,303 24,284 134,069 867 52,384 - 214,907
Intercompany receivables.... 18,380 142,937 37,491 8 23,459 (222,275) -
Inventories................. - 71,618 288,367 1,178 57,036 2,828 421,027
Prepaids and other.......... 208 53 7,143 13 918 - 8,335
Marketable securities....... 1 - 947 - 13 - 961
--------------------------------------------------------------------------
Current assets.......... 21,892 259,059 491,214 2,366 141,424 (219,447) 696,508
Property, plant and equipment - 21,890 79,997 59 13,821 - 115,767
Investment in subsidiaries.. 211,199 81,460 62,648 34,620 35,451 (425,378) -
Investment in affiliates.... - - 11,519 - 1,201 - 12,720
Other noncurrent assets..... 13,252 7,732 10,138 - 2,635 4,619 38,376
--------------------------------------------------------------------------
Total assets............ $246,343 $370,141 $655,516 $37,045 $194,532 $(640,206) $863,371
==========================================================================
Liabilities
Short-term borrowings....... $ - $ 5,740 $233,179 $ - $ 52,806 $ - $291,725
Current portion of long-term - 328 3,312 - 572 - 4,212
debt........................
Accounts payable............ 308 25,133 109,902 48 21,790 (7,898) 149,283
Intercompany accounts payable 34,811 28,063 129,956 4,713 17,664 (215,207) -
Taxes accrued............... - 3,776 14,892 - 5,736 - 24,404
--------------------------------------------------------------------------
Current liabilities..... 35,119 63,040 491,241 4,761 98,568 (223,105) 469,624
Long-term debt.............. - 120,742 5,182 - 2,142 - 128,066
Convertible subordinated 69,000 - - - - - 69,000
debentures..................
Retirement and other benefits 559 7,990 6,786 - 3,949 - 19,284
Deferred taxes.............. - 82 3,852 - 1,040 - 4,974
--------------------------------------------------------------------------
Total liabilities....... 104,678 191,854 507,061 4,761 105,699 (223,105) 690,948
Minority interests.......... - - 30,986 - 33 - 31,019
Shareholders' equity
Common stock................ 3,061 993 30,856 22,604 35,893 (90,346) 3,061
Additional paid-in capital.. 100,163 132,513 13,780 - 55,710 (202,003) 100,163
Unearned restricted stock
plan compensation....... (10) (80) (169) - (12) - (271)
Treasury stock at cost...... (4,250) - - - - - (4,250)
Retained earnings........... 63,150 44,861 93,707 8,040 (4,391) (142,217) 63,150
Cumulative translation (20,449) - (20,705) 1,640 1,600 17,465 (20,449)
adjustments.................
--------------------------------------------------------------------------
Total shareholders' 141,665 178,287 117,469 32,284 88,800 (417,101) 141,404
equity......................
--------------------------------------------------------------------------
Total liabilities and $246,343 $370,141 $655,516 $37,045 $194,532 $(640,206) $863,371
equity......................
==========================================================================
</TABLE>
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Quarter ended September 30, 1997
(In thousands; unaudited)
<TABLE>
<CAPTION>
Other
Standard Tobacco
Standard Commercial Subsi- Other Wool
Commercial Tobacco diaries Standard Subsidiaries
Corporation Co, Inc (Non- Wool, Inc (Non-Guran- Elimin-
(Guarantor) (Issuer) Guarantors) (Guarantor) tors) ations Total
----------- -------- ----------------------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Sales....................... $ - $ 61,046 $179,938 $ 883 $74,386 $(29,000) $287,253
Cost of sales:
Materials services and - 54,809 157,545 835 69,939 (29,000) 254,128
supplies....................
Interest.................. - 1,009 3,221 - 1,184 - 5,414
-----------------------------------------------------------------------
Gross profit.............. - 5,228 19,172 48 3,263 - 27,711
Selling, general &
administrative expenses.. 545 2,415 10,819 69 3,548 124 17,520
Other interest expense...... 1,378 2,204 345 - 28 - 3,955
Other income (expense) net.. 962 1,093 (742) (78) 723 124 2,082
-----------------------------------------------------------------------
Income (loss) before taxes (961) 1,702 7,266 (99) 410 - 8,318
Income taxes................ (184) 579 2,815 - 98 (1,065) 2,243
-----------------------------------------------------------------------
Income (loss) after taxes. (777) 1,123 4,451 (99) 312 1,065 6,075
Minority interests.......... - - (1,218) - - - (1,218)
Equity in earnings of - - 342 - 82 - 424
affiliates..................
Equity in earnings of 6,058 - - 412 - (6,470) -
subsidiaries................
-----------------------------------------------------------------------
Net income................ 5,281 1,123 3,575 313 394 (5,405) 5,281
Retained earnings at
beginning
of period............... 57,869 43,738 90,132 7,727 (4,785) (136,812) 57,869
Common stock dividends...... - - - - - - -
-----------------------------------------------------------------------
Retained earnings at end $63,150 $44,861 $93,707 $ 8,040 $(4,391)$(142,217) $ 63,150
of period...................
=======================================================================
</TABLE>
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Six Months Ended September 30, 1997
(In thousands; unaudited)
<TABLE>
<CAPTION>
Other
Standard Tobacco
Standard Commercial Subsi- Other Wool
Commercial Tobacco diaries Standard Subsidiaries
Corporation Co, Inc (Non- Wool, Inc (Non-Guran- Elimin-
(Guarantor) (Issuer) Guarantors) (Guarantor) tors) ations Total
----------- -------- ----------------------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Sales....................... $ - $128,830 $376,298 $ 2,188 $156,969 $(76,717) $587,568
Cost of sales
Materials services and - 119,472 334,948 2,047 147,567 (76,717) 527,317
supplies....................
Interest................ - 2,124 8,072 - 2,484 - 12,680
-----------------------------------------------------------------------
Gross profit............ - 7,234 33,278 141 6,918 - 47,571
Selling, general &
administrative
expenses.................. 1,283 5,302 20,942 136 7,242 274 35,179
Other interest expense...... 2,745 2,503 812 - 111 - 6,171
Other income (expense) net.. 1,445 1,076 (402) (153) 2,232 274 4,472
-----------------------------------------------------------------------
Income (loss) before taxes.. (2,583) 505 11,122 (148) 1,797 - 10,693
Income taxes................ (878) 171 2,815 - 494 - 2,602
-----------------------------------------------------------------------
Income (loss) after taxes... (1,705) 334 8,307 (148) 1,303 - 8,091
Minority interests.......... - - (1,509) - - - (1,509)
Equity in earnings of - - 468 - 82 - 550
affiliates..................
Equity in earnings of 8,837 - - 1,385 - (10,222) -
subsidiaries................
-----------------------------------------------------------------------
Net income.................. 7,132 334 7,266 1,237 1,385 (10,222) 7,132
Retained earnings beginning 58,089 44,527 86,441 6,803 (5,776) (131,995) 58,089
of period
Common stock dividends...... (2,071) - - - - - (2,071)
-----------------------------------------------------------------------
Retained earnings end of $63,150 $44,861 $93,707 $ 8,040 $(4,391)$(142,217) $63,150
period......................
=======================================================================
</TABLE>
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
Six Months Ended September 30, 1997
(In thousands; unaudited)
<TABLE>
<CAPTION>
Other
Standard Tobacco
Standard Commercial Subsi- Other Wool
Commercial Tobacco diaries Standard Subsidiaries
Corporation Co, Inc (Non- Wool, Inc (Non-Guran- Elimin-
(Guarantor) (Issuer) Guarantors) (Guarantor) tors) ations Total
----------- -------- ----------------------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Cash provided by (used for)
operating activities...... $(47,186)$ 79,999 $(173,145)$ 214 $ 3,486 $ 42,014 $(94,118)
-----------------------------------------------------------------------
Cash flows from investing
activities
Property, plant and equipment
- additions............... - (2,073) (5,009) (33) (1,813) - (8,928)
- disposals............... - 15 224 - 1,870 3,410 5,519
Minority interests.......... - - (708) - (1) 709 -
Net advances from (to)
group companies........... - (128,548) 128,548 - - - -
Collections of note 500 - - - - - -
receivable..................
Business (acquisitions) - - (3,353) - - - (3,353)
dispositions................
-----------------------------------------------------------------------
Cash provided by (used for)
investing activities...... 500 (130,606) 119,702 (33) 56 4,119 (6,762)
-----------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from long-term - 109,028 106 - 894 - 110,028
borrowings..................
Repayment of long-term - (8,819) (4,279) - (2,400) - (15,498)
borrowings..................
Net change in short-term - (30,537) 54,862 - (4,925) (47,042) (27,642)
borrowings..................
Net proceeds of equity 47,043 - - - - - 47,043
offering....................
Other....................... (684) - (3,005) - (110) 909 (2,890)
-----------------------------------------------------------------------
Cash provided by (used for)
financing activities...... 46,359 69,672 47,684 - (6,541) (46,133) 111,041
-----------------------------------------------------------------------
Net increase (decrease) in (327) 19,065 (5,759) 181 (2,999) - 10,161
cash........................
Cash at beginning of period. 327 1,102 28,956 119 10,613 - 41,117
-----------------------------------------------------------------------
Cash at end of period....... $ - $20,167 $23,197 $300 $ 7,614 $ - $51,278
=======================================================================
</TABLE>
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING BALANCE SHEETS
March 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Other
Standard Tobacco
Standard Commercial Subsi- Other Wool
Commercial Tobacco diaries Standard Subsidiaries
Corporation Co, Inc (Non- Wool, Inc (Non-Guran- Elimin-
(Guarantor) (Issuer) Guarantors) (Guarantor) tors) ations Total
----------- -------- ----------------------- ----- ------ -----
Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Cash........................ $ 327 $ 1,102 $28,956 $ 119 $10,613 $ - $41,117
Receivables................. 1,648 35,737 174,535 1,258 53,382 - 266,560
Intercompany receivables.... 16,606 15,083 26,040 - 36,545 (94,274) -
Inventories................. - 74,309 139,386 1,256 52,675 (11,107) 256,519
Prepaid expenses............ 155 4,190 4,790 5 1,173 (4,028) 6,285
Marketable securities....... - - 823 - 14 - 837
---------------------------------------------------------------------------
Current assets.......... 18,736 130,421 374,530 2,638 154,402 (109,409) 571,318
Property, plant and equipment - 22,513 83,255 35 16,210 - 122,013
Investment in subsidiaries.. 159,014 - 63,714 36,946 34,261 (293,935) -
Investment in affiliates.... - - 11,321 - 1,212 - 12,533
Other assets................ 12,897 1,878 12,373 - 2,673 - 29,821
---------------------------------------------------------------------------
Total assets................ $190,647 $154,812 $545,193 $39,619 $208,758 $(403,344) $735,685
===========================================================================
Liabilities
Short-term borrowings....... $ - $36,277 $178,317 $ - $57,731 $ - $272,325
Current portion of long-term - 2,312 5,633 - 1,040 - 8,985
debt........................
Accounts payable............ 982 14,123 110,675 127 15,238 - 141,145
Intercompany accounts payable 29,895 28,757 15,393 4,734 31,740 (110,519) -
Taxes accrued............... - 2,470 19,723 - 6,565 - 28,758
---------------------------------------------------------------------------
Current liabilities..... 30,877 83,939 329,741 4,861 112,314 (110,519) 451,213
Long-term debt.............. - 12,576 57,195 - 3,451 (2,970) 70,252
Convertible subordinated 69,000 - - - - - 69,000
debentures
Retirement and other benefits 499 7,797 6,734 - 4,097 - 19,127
Deferred taxes.............. - 1,064 7,136 - 783 (3,164) 5,819
---------------------------------------------------------------------------
Total liabilities....... 100,376 105,376 400,806 4,861 120,645 (116,653) 615,411
Minority interests.......... - - 30,278 - 34 - 30,312
Shareholders' equity
Common stock................ 2,425 993 29,681 22,604 35,893 (89,171) 2,425
Additional paid-in capital.. 50,324 4,010 15,414 - 55,710 (75,134) 50,324
Unearned restricted stock
plan compensation....... (12) (94) (198) - (14) (3) (321)
Treasury stock.............. (3,799) - - - - - (3,799)
Retained earnings........... 58,089 44,527 86,441 6,803 (5,776) (131,995) 58,089
Cumulative translation (16,756) - (17,229) 5,351 2,266 9,612 (16,756)
adjustments.................
---------------------------------------------------------------------------
Total shareholders' 90,271 49,436 114,109 34,758 88,079 (286,691) 89,962
equity......................
---------------------------------------------------------------------------
Total liabilities and $190,647 $154,812 $545,193 $39,619 $208,758 $(403,344) $735,685
equity......................
===========================================================================
</TABLE>
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING BALANCE SHEETS
September 30, 1996
(In thousands; unaudited)
<TABLE>
<CAPTION>
Other
Standard Tobacco
Standard Commercial Subsi- Other Wool
Commercial Tobacco diaries Standard Subsidiaries
Corporation Co, Inc (Non- Wool, Inc (Non-Guran- Elimin-
(Guarantor) (Issuer) Guarantors) (Guarantor) tors) ations Total
----------- -------- ----------------------- ----- ------ -----
Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Cash....................... $ 199 $ 7,384 $ 22,946 $ 99 $ 17,613 $ - $ 48,241
Receivables................. 5,806 18,149 119,192 1,679 53,477 - 198,303
Intercompany receivables.... 16,991 20,224 47,963 84 5,863 (91,125) -
Inventories................. - 84,795 208,632 1,515 51,078 - 346,020
Prepaid expenses............ 648 298 4,964 16 1,362 - 7,288
Marketable securities....... - - 1,497 - 13 - 1,510
----------------------------------------------------------------------------
Current assets.......... 23,644 130,850 405,194 3,393 129,406 (91,125) 601,362
Property, plant and equipment - 22,556 92,739 38 18,401 - 133,734
Investment in subsidiaries.. 156,242 - 62,208 38,193 45,075 (307,718) -
Investment in affiliates.... - - 10,590 - 1,201 - 11,791
Other assets................ 9,849 2,408 19,544 - 3,086 - 34,887
----------------------------------------------------------------------------
Total assets............ $189,735 $155,814 $590,275 $41,624 $197,169 $(392,843) $781,774
============================================================================
Liabilities
Short-term borrowings....... - 47,865 289,977 - 47,183 - 385,025
Current portion of long-term - 2,298 5,339 - 832 - 8,469
debt........................
Accounts payable............ 605 12,833 84,912 154 21,928 - 120,432
Intercompany accounts payable 32,886 20,289 8,894 5,220 18,434 (85,723) -
Taxes accrued............... - 4,009 15,433 - 6,775 - 26,217
----------------------------------------------------------------------------
Current liabilities..... 33,491 87,294 404,555 5,374 95,152 (85,723) 540,143
Long-term debt.............. - 13,736 11,281 - 3,906 - 28,923
Convertible subordinated 69,000 - - - - - 69,000
debentures
Retirement and other benefits 751 7,548 6,444 - 4,430 - 19,173
Deferred taxes.............. - 411 7,432 - 965 - 8,808
----------------------------------------------------------------------------
Total liabilities....... 103,242 108,989 429,712 5,374 104,453 (85,723) 666,047
Minority interests.......... - - 29,569 - 36 - 29,605
ESOP redeemable preferred 8,748 - - - - - 8,748
stock.......................
Unearned ESOP compensation.. (6,320) - - - - - (6,320)
Shareholders' equity
Common stock................ 2,373 993 47,848 22,604 27,492 (98,937) 2,373
Additional paid-in capital.. 46,157 4,010 16,606 - 66,716 (87,332) 46,157
Unearned restricted stock
plan compensation....... (14) (109) (241) - (21) - (385)
Treasury stock at cost...... (2,997) - - - - - (2,997)
Retained earnings........... 48,787 41,931 81,314 6,157 (7,579) (121,823) 48,787
Cumulative translation (10,241) - (14,533) 7,489 6,072 972 (10,241)
adjustments.................
----------------------------------------------------------------------------
Total shareholders' 84,065 46,825 130,994 36,250 92,680 (307,120) 83,694
equity......................
Total liabilities and $189,735 $155,814 $590,275 $ 41,624 $197,169 $(392,843) $781,774
equity......................
============================================================================
</TABLE>
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Quarter Ended September 30, 1996
(In thousands; unaudited)
<TABLE>
<CAPTION>
Other
Standard Tobacco
Standard Commercial Subsi- Other Wool
Commercial Tobacco diaries Standard Subsidiaries
Corporation Co, Inc (Non- Wool, Inc (Non-Guran- Elimin-
(Guarantor) (Issuer) Guarantors) (Guarantor) tors) ations Total
----------- -------- ----------------------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Sales...................... $ - $54,378 $162,258 $2,395 $73,314 $(43,340) $249,005
Cost of sales
Materials services and - 48,217 141,667 2,269 69,873 (43,145) 218,881
supplies...................
Interest............... - 1,060 5,528 175 1,389 - 8,152
-----------------------------------------------------------------------
Gross profit........... - 5,101 15,063 (49) 2,052 (195) 21,972
Selling, general &
administrative
expenses................. 752 2,780 10,584 307 3,556 293 18,272
Other interest expense..... 1,378 258 613 - 201 - 2,450
Other income (expense) net. 95 48 1,217 76 1,000 293 2,729
-----------------------------------------------------------------------
Income (loss) before taxes. (2,035) 2,111 5,083 (280) (705) (195) 3,979
Income taxes............... (573) 716 1,129 - (328) - 944
-----------------------------------------------------------------------
Income (loss) after taxes.. (1,462) 1,395 3,954 (280) (377) (195) 3,035
Minority interests......... - - (268) - - - (268)
Equity in earnings of - - 144 - - - 144
affiliates.................
Equity in earnings (losses)
of subsidiaries.......... 4,373 - - (381) - (3,992) -
-----------------------------------------------------------------------
Net income................. 2,911 1,395 3,830 (661) (377) (4,187) 2,911
ESOP preferred stock
dividends
net of tax............... (116) - - - - - (116)
Net income (loss) applicable
to common stock.......... 2,795 1,395 3,830 (661) (377) (4,187) 2,795
Retained earnings beginning 47,051 40,536 77,484 6,818 (7,202) (117,636) 47,051
of period
Common stock dividends..... (1,059) - - - - - (1,059)
-----------------------------------------------------------------------
Retained earnings end of $48,787 $41,931 $81,314 $6,157 $(7,579)$(121,823) $48,787
period.....................
=======================================================================
</TABLE>
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Six Months Ended September 30, 1996
(In thousands; unaudited)
<TABLE>
<CAPTION>
Other
Standard Tobacco
Standard Commercial Subsi- Other Wool
Commercial Tobacco diaries Standard Subsidiaries
Corporation Co, Inc (Non- Wool, Inc (Non-Guran- Elimin-
(Guarantor) (Issuer) Guarantors) (Guarantor) tors) ations Total
----------- -------- ---------- ------------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Sales....................... $ - $90,078 $376,084 $ 4,275 $163,104 $(74,145) $559,396
Cost of sales
Materials services and - 81,146 333,501 4,041 155,037 (73,950) 499,775
supplies....................
Interest................ - 1,637 10,884 175 3,067 - 15,763
---------------------------------------------------------------------------
Gross profit............ - 7,295 31,699 59 5,000 (195) 43,858
Selling, general &
administrative
expenses.................. 1,593 5,583 20,959 422 7,248 463 36,268
Other interest expense...... 2,829 342 1,295 - 371 - 4,837
Other income (expense) net.. (66) 58 3,535 6 1,568 463 5,564
---------------------------------------------------------------------------
Income (loss) before taxes.. (4,488) 1,428 12,980 (357) (1,051) (195) 8,317
Income taxes................ (1,407) 485 3,475 - (497) - 2,056
----------------------------------------------------------------------------
Income (loss) after taxes... (3,081) 943 9,505 (357) (554) (195) 6,261
Minority interests.......... - - (2,204) - - - (2,204)
Equity in earnings of - - 362 - - - 362
affiliates..................
Equity in earnings of 7,500 - - (561) - (6,939) -
subsidiaries................
-----------------------------------------------------------------------------
Net income.................. 4,419 943 7,663 (918) (554) (7,134) 4,419
ESOP preferred stock
dividends
net of tax................ (231) - - - - - (231)
Net income (loss) applicable
to
common stock.............. 4,188 943 7,663 (918) (554) (7,134) 4,188
----------------------------------------------------------------------------
Retained earnings beginning 46,450 40,988 73,651 7,075 (7,025) (114,689) 46,450
of period
Common stock dividends...... (1,851) - - - - - (1,851)
-----------------------------------------------------------------------------
Retained earnings end of $48,787 $41,931 $81,314 $6,157 $(7,579) $(121,823) $48,787
period......................
============================================================================
</TABLE>
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
Six Months Ended September 30, 1996
(In thousands; unaudited)
<TABLE>
<CAPTION>
Other
Standard Tobacco
Standard Commercial Subsi- Other Wool
Commercial Tobacco diaries Standard Subsidiaries
Corporation Co, Inc (Non- Wool, Inc (Non-Guran- Elimin-
(Guarantor) (Issuer) Guarantors) (Guarantor) tors) ations Total
----------- -------- ----------------------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Cash provided by (used for)
operating activities...... $ 7,751 $ 9,746 $(72,581) $ 29 $ 26,301 $ (2,318) $(31,072)
Cash flows from investing
activities:
- additions............. - (1,505) (5,802) - (366) - (7,673)
- disposals............. - 27 54 - 69 184 334
Minority interests.......... - - (2,133) - (1) 2,134 -
Net advances from (to)
group companies........... - (13,882) 13,882 - - - -
Collections of note - - - - - - -
receivable..................
Business (acquisitions) - - 2,993 - - - 2,993
dispositions................
-----------------------------------------------------------------------
Cash provided by (used for)
investing activities...... - (15,360) 8,994 - (298) 2,318 (4,346)
-----------------------------------------------------------------------
Cash flows from financing
activities:
Proceeds from long-term - 10,000 5 - 7 - 10,012
borrowings
Repayment of long-term (11,172) (472) (3,755) - (811) - (16,210)
borrowings
Net change in short-term - (2,551) 39,842 - (25,891) - 11,400
borrowings
Dividends paid net of tax... (231) - - - - - (231)
Purchase and retirement of - - - - - - -
ESOP........................
Preferred stock............. -
Other....................... - - - - - - -
-----------------------------------------------------------------------
Cash provided by (used for)
financing activities...... (11,403) 6,977 36,092 - (26,695) - 4,971
-----------------------------------------------------------------------
Net increase (decrease) in (3,652) 1,363 (27,495) 29 (692) - (30,447)
cash........................
Cash at beginning of period. 3,851 6,021 50,441 70 18,305 - 78,688
-----------------------------------------------------------------------
Cash at end of period....... $ 199 $ 7,384 $ 22,946 $ 99 $17,613 $ - $ 48,241
=======================================================================
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Sales for the quarter ended September 30, 1997 were $287.3 million, an
increase of 15.4% from a year earlier. Sales for the six months were $587.6
million, up 5.0% from the same period last year. Sales for the tobacco division
of $207.7 million and $420.5 million for the second quarter and year to date,
respectively, were up 22.4% and 9.3% from the corresponding periods in 1996.
Tobacco sales for the quarter from Europe, the Far East and South America were
significantly higher than a year earlier. On a year to date basis, the U.S. and
South America provided most of the increase. Overall, tobacco volume was up 1.9%
for the quarter and down 2.1% year to date. The sales increases were the result
of higher average prices due to improved market conditions and a change in mix.
Nontobacco sales were flat for the quarter and down 4.3% for the six months,
primarily as the result of lower volumes of wool sold. These volume declines
were partly offset by improved mix as the wool business continues to stabilize
and the Company continues to focus on the more profitable processing elements of
the business.
Gross profit of $27.7 million and $47.6 million for the quarter and six
months, respectively, increased 26.1% and 8.5% from the 1996 comparable periods
due primarily to the increase in sales and reduced interest expenses resulting
from the application of $47.0 million of equity proceeds in the first quarter
and the application of the proceeds of a $115.0 million senior notes offering in
the second quarter to reduce short-term borrowings.
Selling, general and administrative expenses decreased by 4.1% and 3.0% for
the quarter and six months, respectively, as the Company continues to focus on
operating efficiencies. Higher personnel-related expenses and travel costs
related to the expansion of business in new markets were offset by tighter
control of other costs and expenses and favorable foreign exchange. Other
interest expense was higher for both the quarter and year to date and reflects
the impact of the $115.0 million issue of long-term debt. Other income (expense)
- - - net was lower for both the quarter and year to date due to lower interest
income on short-term deposits as the Company continues to focus on efficient
cash management. Gains on sales of property in Australia and Greece were
slightly higher than the prior year gain on sale of marketable securities.
The effective tax rate for the quarter was slightly higher than a year
earlier and basically level for both six-month periods. The income tax charges
or credits can vary as a percentage of pretax income due to differences in tax
rates and relief available in areas where profits are earned or losses are
incurred.
Earnings attributed to minority interests were $1.0 million higher for the
quarter due mostly to the gain on sale of property in Greece. For the six
months, earnings attributed to minority interests were down $0.7 million because
of the timing of shipments related to the seasonality of the Company's business.
Equity in earnings of affiliates was up for 1997 both periods due to improved
trading conditions in the Far East.
Net income was $5.3 million for the quarter, or $0.41 per share on 12.8
million average shares outstanding, versus $2.9 million, or $0.29 per share on
9.5 million shares outstanding for the September 1996 quarter adjusted for
subsequent stock dividends. Net income for the six months was $7.1 million, or
$0.60 per share on 12.0 million average shares outstanding, versus $4.4 million,
or $.044 per share on 9.5 million average shares outstanding. The increase in
shares outstanding was attributable to the Company's 3.0 million share public
offering during the June 1997 quarter.
Liquidity and Capital Resources
Working capital at September 30, 1997 was $226.9 million, compared to $61.2
million a year earlier. Most of the increase was due to applying the $47.0
million net proceeds of the 3.0 million share public offering completed in the
June 1997 quarter and $103.1 million of the net proceeds of the senior notes
offering completed on August 1, 1997 to reduce short-term borrowings. The
remaining increase was due to contributions from operating activities that
further reduced short-term borrowings and the current portion of long-term debt.
Capital expenditures of $8.9 million consisted primarily of routine expenditures
in the
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (continued)
tobacco and wool divisions, expansion of warehouse facilities in Greece and
Turkey, and new machinery for the French topmaking facility. The Company
continues to closely monitor its inventory levels, which fluctuate depending on
seasonal factors and business conditions. Uncommitted tobacco inventory
decreased to $22.6 million at September 30, 1997 from $29.1 million a year
earlier, while total tobacco inventories increased as a result of recent
expansion of business in Africa and South America.
As a result of the recent equity offering, which appreciably broadened the
Company's shareholder base, the Board of Directors has voted to discontinue
issuing quarterly stock dividends. Certain debt agreements to which the Company
and its subsidiaries are parties contain financial covenants which could
restrict the payment of cash dividends. Under its most restrictive covenant, the
Company had approximately $12.1 million of retained earnings available for
distribution as dividends at September 30, 1997. At this time, it is uncertain
when or if the Board will resume the payment of cash dividends.
On August 1, 1997, the Company completed a $115.0 million Rule 144A private
placement of 8-7/8% Senior Notes due 2005. Concurrently, commitments of $200
million were obtained for a three-year Global Bank Facility, which replaced the
U.S. and certain European bank facilities. These fundings, in combination with
the recent equity offering, have largely accomplished the Company's refinancing
plans. The Company used net proceeds of the funding to repay existing
indebtedness outstanding under certain bank credit facilities and certain other
long-term debt. The Global Bank Facility, in addition to local bank lines of
approximately $265.0 million for tobacco operations in Africa, Europe and Asia
will be used to finance tobacco operations. Separate bank facilities of
approximately $127.0 million exist to finance wool operations.
Based on the outlook for the tobacco and wool divisions, and the recent
refinancing activity, management anticipates that it will be able to service the
interest and principal on its indebtedness, maintain adequate working capital
and provide for capital expenditures out of operating cash flow for at least the
next year.
Forward-Looking Statements
Statements in this report that are not purely statements of historical fact
may be deemed to be forward-looking. Readers are cautioned that any such
forward-looking statements are based upon management's current knowledge and
assumptions, and actual results could be affected in a material way by many
factors, including ones over which the Company has little or no control, e.g.
unforeseen changes in shipping schedules; the balance between supply and demand;
and market, economic, political and weather conditions. More information
regarding certain of these factors is contained in the Company's other SEC
filings, copies of which are available upon request from the Company. The
Company assumes no obligation to update any of these forward-looking statements.
<PAGE>
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 21, 1997 STANDARD COMMERCIAL CORPORATION
(Registrant)
By /s/ Robert E Harrison
-------------------------------
Robert E Harrison
President, Chief Executive
Officer and Chief Financial Officer
