SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1997
COMMISSION FILE NUMBER 1-9875
[GRAPHIC OMITTED]
STANDARD COMMERCIAL CORPORATION
Incorporated under the laws of I.R.S. Employer
North Carolina Identification No. 13-1337610
2201 MILLER ROAD, WILSON, NORTH CAROLINA 27893
Telephone Number 919-291-5507
Former name, former address and former fiscal year, if changed since last report
- - Not applicable
On August 1, 1997 the registrant had outstanding 12,683,155 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, except share data)
<TABLE>
<CAPTION>
June 30 March 31
------- ---------
1997 1996 1997
---- ---- ----
ASSETS (unaudited)
<S> <C> <C> <C>
Cash............................................. $ 40,037 $132,188 $ 41,117
Receivables...................................... 240,694 206,344 266,560
Inventories...................................... 334,550 286,453 256,519
Prepaid expenses................................. 8,286 5,521 6,285
Marketable securities............................ 798 1,311 837
----------------------------
Current assets............................. 624,365 631,817 571,318
Property, plant and equipment.................... 118,956 133,055 122,013
Investment in affiliates......................... 12,252 11,657 12,533
Other assets..................................... 28,763 37,849 29,821
Total assets............................... $784,336 $814,378 $735,685
============================
LIABILITIES
Short-term borrowings............................ $144,306 $348,894 $272,325
Current portion of long-term debt................ 7,831 10,453 8,985
Accounts payable................................. 208,681 188,160 141,145
Taxes accrued.................................... 24,637 28,528 28,758
----------------------------
Current liabilities........................ 385,455 576,035 451,213
Long-term debt................................... 134,559 29,022 70,252
Convertible subordinated debentures.............. 69,000 69,000 69,000
Retirement and other benefits.................... 19,048 18,651 19,127
Deferred taxes................................... 6,672 8,714 5,819
----------------------------
Total liabilities.......................... 614,734 701,422 615,411
----------------------------
MINORITY INTERESTS 30,110 29,342 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 3,060 2,349 2,425
100,000,000
Issued 15,300,862 (June 96 - 11,745,872;
Mar 97 - 12,126,270).............................
Additional paid-in capital....................... 100,102 44,722 50,324
Unearned restricted stock plan compensation...... (297) (408) (321)
Treasury shares, 2,617,707 (June 96 - 2,515,567; (4,250) (2,633) (3,799)
Mar 97 - 2,591,790)..............................
Retained earnings................................ 57,869 47,051 58,089
Cumulative translation adjustments............... (16,992) (9,895) (16,756)
----------------------------
Total shareholders' equity................. 139,492 81,186 89,962
----------------------------
Total liabilities and equity............... $784,336 $814,378 $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 per share data; unaudited)
<TABLE>
<CAPTION>
Three months ended
June 30
-----------------------
1997 1996
<S> <C> <C>
Sales - tobacco..................................... $212,847 $215,263
- nontobacco.................................. 87,468 95,128
-----------------------
Total sales................................... 300,315 310,391
Cost of sales
- Materials, services and supplies........... 273,189 280,894
- Interest................................... 7,266 7,611
-----------------------
Gross profit.................................. 19,860 21,886
Selling, general and administrative expenses.......... 17,659 17,996
Other interest expense................................ 2,216 2,387
Other income (expense) - net.......................... 2,391 2,835
-----------------------
Income before taxes........................... 2,376 4,338
Income taxes.......................................... (358) (1,112)
-----------------------
Income after taxes............................ 2,018 3,226
Minority interests.................................... (291) (1,936)
Equity in earnings of affiliates...................... 126 218
-----------------------
Net income.................................... 1,853 1,508
ESOP preferred stock dividends net of tax............. - (115)
-----------------------
Net income applicable to common stock......... 1,853 1,393
Retained earnings at beginning of period.............. 58,089 46,450
Common stock dividends................................ (2,073) (792)
-----------------------
Retained earnings at end of period $57,869 $47,051
=======================
Earnings per common share
$0.17 $0.15
Primary.......................................- net
- average shares outstanding............ 11,103 9,493
Fully diluted................................. * *
</TABLE>
*Not applicable because fully diluted calculations include adjustments which
are antidilutive.
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>
Three months ended
----------------------
June 30
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income............................................ $1,853 $1,508
Depreciation and amortization....................... 4,951 4,395
Minority interests.................................. 291 1,936
Deferred income taxes............................... 969 -
Undistributed earnings of affiliates net of
dividends received................................ (126) (218)
Gain on disposition of property, plant and
equipment......................................... (1,177) (185)
Other............................................... (1,075) 2,421
-----------------------
5,686 9,857
Net changes in working capital other than cash
Receivables......................................... 21,043 43,114
Inventories......................................... .(80,641) (27,498)
Current payables.................................... 71,082 58,967
-----------------------
CASH PROVIDED BY OPERATING ACTIVITIES................. 17,170 84,440
-----------------------
CASH FLOWS FROM INVESTING ACTIVITIES..................
Property, plant and equipment - additions............. (2,909) (2,265)
- dispositions.......... 1,516 247
Business (acquisitions) dispositions.................. - -
-----------------------
Cash used for investing activities.................... (1,393) (2,018)
-----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term borrowings................... (60,061) (24,731)
Proceeds from long-term borrowings.................... - -
Repayment of long-term borrowings..................... (4,639) (4,076)
Net proceeds of equity offering....................... 47,043 -
Dividends paid, net of tax............................ - (115)
Other................................................. 800 -
-----------------------
CASH USED FOR FINANCING ACTIVITIES.................... (16,857) (28,922)
-----------------------
Increase (decrease) in cash for period................ (1,080) 53,500
Cash at beginning of period........................... 41,117 78,688
-----------------------
CASH AT END OF PERIOD................................. $ 40,037 $132,188
=======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
oThe interim statements presented herein should be read in conjunction with the
audited financial statements and notes thereto included in the Company's latest
Annual Report on Form 10-K.
oThe 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 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.
oSubsequent to June 30, 1997, the Company completed a $115.0 million private
placement of 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. As of June 30, 1997, these amounts have been reclassified
in the balance sheet.
oPrior 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.
oInventories for the periods shown were as follows:
June 30 March 31
(In thousands) 1997 1996 1997
---- ---- ----
Tobacco $255,991 $206,675 $181,349
Nontobacco 78,559 79,778 75,170
-------- -------- --------
Total $334,550 $286,453 $256,519
======= ======= =======
oThere were no material changes in accounting policies during the period ended
June 30, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations Sales for the quarter ended June 30, 1997 were $300.3
million, a decrease of 3.2% from a year earlier. Sales of $212.8 million for the
tobacco division were down 1.1% from the corresponding period in 1996. Tobacco
sales from the U.S. and South America increased while sales from Turkey were
down due to the timing of shipments in the June 1996 quarter. Overall, tobacco
volume was down 5.6% and average prices were higher as a result of market
conditions and the change in mix. Nontobacco sales of $87.5 million were down
8.1% primarily as the result of a 10.9% decrease in the volume of wool sold
which was attributable to focusing on the more profitable processing elements of
the business.
Gross profit for the quarter of $19.9 million was down 9.3% from the 1996
quarter due primarily to the reduced level of sales and a change in the tobacco
business mix. Selling, general and administrative expenses decreased by 1.9% to
$17.7 million as the Company continues to focus on operating efficiencies.
Reductions in personnel related costs and lower legal and professional fees
contributed to the favorable variance. A decrease in other interest expense and
in the interest income element of other income (net) were both attributed to
improved application of cash to reduce borrowings.
The effect on net income of changes in sales mix and other factors contributing
to a reduction in income before taxes was offset by a lower effective tax rate
and reduced earnings applicable to minority interests. The variation in income
tax charges or credits 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 resulted in an effective rate tax rate of 15.1% in the current quarter
compared to 25.6% a year earlier.
Earnings attributed to minority interests were $1.6 million lower than a year
ago because of a change in business mix. Equity in earnings of affiliates were
down slightly from a year earlier.
<PAGE>
STANDARD COMMERCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Net income was $1.9 million, or $0.17 per share on 11.1 million average shares
outstanding versus $1.5 million, or $0.15 per share on 9.5 million shares
outstanding for the June 1996 quarter adjusted for subsequent stock dividends.
The quarter-to-quarter increase in shares outstanding was primarily attributable
to the Company's 3.0 million share public offering during the June 1997 quarter.
Liquidity and Capital Resources
Working capital at June 30, 1997 was $123.9 million, before reclassification of
the Senior Notes proceeds received subsequent to June 30, compared to $55.8
million a year earlier. Most of the increase was due to applying the $47.0
million net proceeds of a 3.0 million share public offering completed in the
June 1997 quarter to reduce short-term borrowings. The remaining increase was
due to contributions from operating activities that further reduced short-term
borrowings. Working capital will be further improved as a result of the Senior
Notes offering completed after June 30, 1997. Capital expenditures of $2.9
million consisted primarily of routine expenditures in the 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 $20.4 million at
June 30, 1997 from $30.7 million a year earlier.
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 $57.9 million ($27.3 million under new covenants) of
retained earnings available for distribution as dividends at June 30, 1997. At
this time, it is uncertain when the Board will resume the payment of cash
dividends.
Subsequent to June 30, 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. These
fundings, in combination with the recent equity offering have largely
accomplished the Company's current refinancing plans. The Company used net
proceeds of the funding to repay indebtedness outstanding under existing 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. The Senior Notes have not been registered under the
Securities Act of 1933, as amended, or applicable state securities laws, and may
not be offered or sold absent registration under the Securities Act and
applicable state securities laws or applicable exemptions from registration
requirements.
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.
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>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - Not applicable
Item 2. CHANGES IN SECURITIES - Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES - Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not
applicable
Item 5. OTHER INFORMATION - Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. The following exhibits are filed as a part of this report:
11 Computation of Earnings per Common Share.
27 Financial Data Schedule
b. 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: August 6, 1997 STANDARD COMMERCIAL CORPORATION
(Registrant)
By /s/ Robert E Harrison
---------------------------------------
Robert E Harrison
President, Chief Executive Officer 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
(In thousands, except share information; unaudited)
<TABLE>
<CAPTION>
First quarter ended
June 30
-----------------------
1997* 1996
----- ----
PRIMARY EARNINGS PER SHARE
<S> <C> <C>
Income from continuing operations............................. $1,853 $1,508
Less - ESOP preferred stock dividends net of tax.............. - 115
-----------------------
Net income applicable to common stock......................... $1,853 $1,393
=======================
Primary average shares outstanding............................ 11,103,202 9,492,570
=======================
Earnings per common share
- net....................................................... $0.17 $0.15
=======================
FULLY DILUTED EARNINGS PER SHARE
Income from continuing operations
applicable to common stock.................................. $1,853 $1,393
Add - after-tax interest expense on 7 1/4%
convertible subordinated debentures................... 825 825
-----------------------
Net income applicable to common stock......................... $2,678 $2,218
=======================
Primary average shares outstanding............................ 11,103,202 9,492,570
Increase in shares outstanding assuming
- conversion of 7 1/4% convertible subordinated
debentures at November 13, 1991........................... 2,348,536 2,257,115
- conversion of ESOP convertible
preferred stock at July 1, 1993........................... - 257,892
-----------------------
Fully diluted average shares outstanding...................... 13,451,738 12,007,577
=======================
Earnings per common share
- net....................................................... $0.20 $0.18
=======================
</TABLE>
*Calculation of fully diluted earnings per share includes adjustments which 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
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 40,037
<SECURITIES> 798
<RECEIVABLES> 240,694<F1>
<ALLOWANCES> 0<F2>
<INVENTORY> 334,550
<CURRENT-ASSETS> 624,365
<PP&E> 118,956<F1>
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 784,336
<CURRENT-LIABILITIES> 385,455
<BONDS> 88,559
<COMMON> 3,060
0
0
<OTHER-SE> 136,432
<TOTAL-LIABILITY-AND-EQUITY> 784,336
<SALES> 300,315
<TOTAL-REVENUES> 300,315
<CGS> 280,455
<TOTAL-COSTS> 280,455
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,376
<INCOME-TAX> 358
<INCOME-CONTINUING> 1,853
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,853
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.20
<FN>
<F1>SHOWN NET IN FINANCIAL STATEMENTS.
<F2>NOT SHOWN SEPARATELY UNDER MATERIALITY GUIDELINES.
</FN>
</TABLE>
