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, 1996
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 February 10, 1997 the registrant had outstanding 9,438,446 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 information; unaudited)
<TABLE>
<CAPTION>
December 31 March 31
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
ASSETS
Cash............................................ $ 55,849 $ 63,305 $ 78,688
Receivables ..................................... 234,205 242,537 252,117
Inventories ..................................... 331,594 334,191 259,781
Prepaid expenses ................................ 8,037 4,298 3,690
Marketable securities ........................... 971 1,280 5,325
-----------------------------------
Current assets ............................... 630,656 645,611 599,601
Property, plant and equipment ................... 130,797 139,268 134,498
Investment in affiliates ........................ 11,920 13,360 11,442
Other assets .................................... 35,136 30,924 37,283
-----------------------------------
Total assets ................................. $ 808,509 $ 829,163 $ 782,824
===================================
LIABILITIES
Short-term borrowings ........................... $ 402,598 $ 404,461 $ 373,625
Current portion of long-term debt ............... 8,418 10,699 11,665
Accounts payable ................................ 125,554 156,282 133,737
Taxes accrued ................................... 27,284 21,271 24,776
-----------------------------------
Current liabilities .......................... 563,854 592,713 543,803
Long-term debt .................................. 27,042 35,221 31,818
Convertible subordinated debentures ............. 69,000 69,000 69,000
Retirement and other benefits ................... 19,432 18,652 18,498
Deferred taxes .................................. 8,917 12,082 9,632
Commitments and contingencies ................... -- -- --
----------------------------------
Total liabilities ............................ 688,245 727,668 672,751
----------------------------------
MINORITY INTERESTS .............................. 29,706 25,248 27,473
----------------------------------
ESOP redeemable preferred stock ................. 8,748 8,748 8,748
Unearned ESOP compensation ...................... (6,320) (6,165) (6,320)
----------------------------------
SHAREHOLDERS' EQUITY
Preferred stock, $1.65 par value; authorized
1,000,000 shares
Issued 87,477 to ESOP; (Dec 95 - 91,319;
March 96 - 87,477)
Common stock, $0.20 par value; authorized
shares 20,000,000
Issued 11,989,564; (Dec 95 - 11,506,294; ...... 2,398 2,301 2,325
March 96 - 11,624,275)
Additional paid-in capital ...................... 47,786 42,577 43,660
Unearned restricted stock plan compensation ..... (365) (464) (435)
Treasury stock at cost 2,566,129 shares
(Dec 1995 - 2,466,001; March 1996 - 2,490,661) (3,340) (2,147) (2,384)
Retained earnings ............................... 51,900 38,405 46,450
Cumulative translation adjustments .............. (10,249) (7,008) (9,444)
----------------------------------
Total shareholders' equity ................... 88,130 73,664 80,172
----------------------------------
Total liabilities and equity ................. $ 808,509 $ 829,163 $ 782,824
===================================
</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>
Third quarter ended Nine months ended
December 31 December 31
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales.............................................$284,360 $271,745 $669,252 $642,018
tobacco
- nontobacco ................................ 89,770 105,810 264,274 314,698
--------------------------------------
Total sales ................................... 374,130 377,555 933,526 956,716
Cost of sales .................................... 346,186 351,244 861,724 901,170
Selling, general and administrative expenses...... 18,288 18,701 54,556 55,850
Restructuring charges ............................ -- 12,500 -- 12,500
Other income (expense) - net ..................... (1,059) (1,362) (332) (1,422)
---------------------------------------
Income (loss) before taxes .................... 8,597 (6,252) 16,914 (14,226)
Income taxes ..................................... 3,940 1,676 5,996 2,522
---------------------------------------
Income (loss) after taxes ..................... 4,657 (7,928) 10,918 (16,748)
Minority interests ............................... (476) (1,112) (2,680) (2,263)
Equity in earnings of affiliates ................. 299 -- 661 541
---------------------------------------
Income(loss)from continuing operations........ 4,480 (9,040) 8,899 (18,470)
Income from discontinued operations .............. -- 10,799 -- 10,050
---------------------------------------
Net income (loss) ............................. 4,480 1,759 8,899 (8,420)
ESOP preferred stock dividends net of tax ........ (116) (117) (347) (358)
---------------------------------------
Net income(loss)applicable to common stock..... 4,364 1,642 8,552 (8,778)
Retained earnings at beginning of period ......... 48,787 37,828 46,450 50,530
Dividends declared ............................... (1,251) (1,065) (3,102) (3,347)
--------------------------------------
Retained earnings at end of period ............$ 51,900 $ 38,405 $ 51,90 $ 38,405
======================================
Earnings (loss) per common share
Primary - from continuing operations............... $0.47 $(1.02) $0.92 $(2.12)
- from discontinued operations ............ -- 1.20 -- 1.13
- net ..................................... $0.47 $0.18 $0.92 $(0.99)
--------------------------------------
- average shares outstanding............9,360,095 8,973,623 9,263,916 8,888,292
Fully diluted - net $0.43 * * *
- average shares outstanding...........11,930,731
</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>
Nine months ended
December 31
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................... $8,899 $ (8,420)
Depreciation and amortization............................... 14,366 19,391
Minority interests.......................................... 2,680 2,263
Undistributed earnings of affiliates........................ (514) (540)
Gain on disposition of property, plant and equipment........ (199) (1,145)
Income from discontinued operations......................... - (10,050)
Other....................................................... 1,360 (692)
--------------------
26,592 807
Net changes in working capital
Receivables.............................................. 15,085 (7,170)
Inventories.............................................. (73,539) 12,753
Current payables......................................... (5,547) (1,060)
--------------------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES............ (37,409) 5,330
---------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and (9,441) (9,349)
equipment...............................- additions
- dispositions......................... 504 2,883
Minority interests.......................................... - (7,740)
Business dispositions....................................... 2,993 279
--------------------
CASH USED FOR INVESTING ACTIVITIES.......................... (5,944) (13,927)
--------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
Proceeds from long-term borrowings.......................... 10,011 9,658
Repayment of long-term borrowings........................... (18,123) (12,226)
Net change in short-term borrowings......................... 28,973 20,133
Dividends paid.............................................. (347) (362)
Other....................................................... - (1,515)
--------------------
CASH PROVIDED BY FINANCING ACTIVITIES....................... 20,514 15,688
---------------------
Increase (decrease) in cash for period...................... (22,839) 7,091
Cash at beginning of period................................. 78,688 56,214
--------------------
CASH AT END OF PERIOD....................................... $55,849 $63,305
====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. Results
for interim periods are not necessarily indicative of business trends or results
to be expected for other interim periods or the full year.
Inventories were as follows:
December 31 March 31
(In thousands) 1996 1995 1996
---- ---- ----
Tobacco* $255,382 $230,734 $160,721
Nontobacco 76,212 103,457 99,060
------- ------- -------
Total $331,594 $334,191 $259,781
======= ======= =======
*Includes uncommitted
inventories as follows: $ 25,824 $ 38,704 $ 31,489
During the fiscal year ended March 31, 1996, the Company initiated a
reorganization plan for its nontobacco businesses and determined that a pretax
restructuring charge of $12.5 million ($11.0 million after tax) was appropriate.
The costs include $3.6 million for the impairment of goodwill, $2.1 million for
the closure of a processing plant in Argentina, $2.8 million for the settlement
of export incentive programs and $2.5 million for expenses of reorganizing and
consolidating the wool division management structure and various other costs
incurred in the aborted sale of the wool division. With the exception of the
export incentive issue which is expected to be resolved in 1998, it is
anticipated that substantially all other accrued but unpaid amounts related to
the reorganization ($0.6 million at December 31, 1996) will be expended by the
end of fiscal 1997.
There were no material changes in accounting policies during the period
ended December 31, 1996.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Sales of $374.1 million for the December 31, 1996 quarter decreased 0.9%
from the year-earlier quarter. Sales for the nine months ended December 31, 1996
of $933.5 were 2.4% lower than the same period last year. Net income for the
current quarter totaled $4.5 million, an increase of $2.7 million, compared to
$1.8 million a year earlier. Net income for the 1996 nine months period totaled
$8.9 million, an improvement of $17.3 million, compared to a loss of $8.4
million for the same period in 1995.
For the nine months ended December 31, 1996, tobacco sales totaled $669.3
million, up 4.2% from the same period a year earlier. Tobacco volumes were down
by 6.3% as the prior year included sales of past-year inventories while the 1996
sales were mainly current crop tobacco. A better sales mix, combined with higher
prices due to improving industry conditions and lower interest expense, led to
substantially improvedoperating margins. Volume increases in Turkey and the U.S.
partially offset small declines in other areas. Administrative expenses were up
3.1% primarily because of the increased sales and expansion of operations in
Africa. Minority interest was higher due to increased volumes in our 51%-owned
oriental tobacco business. For the nine month, tobacco income from continuing
operations of $9.6 million was $6.0 million better than the same period in the
prior year.
Despite stable wool volumes, nontobacco sales for the 1996 nine months were
down 16.0% as continued soft wool market conditions resulted in lower prices.
Volumes were up in Argentina, South Africa and the United Kingdom. Operating
margins recovered versus the prior year as the worldwide surplus of wool
<PAGE>
STANDARD COMMERCIAL CORPORATION
MANAGEMENT'SDISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
is gradually being reduced and market conditions continue to stabilize. The
Company's initiatives in fiscal 1996 to improve operating efficiencies and
reduce overhead contributed to a significant reduction in the loss from
continuing nontobacco operations to $675,000 in 1996 from $22.0 million in the
same prior-year period. The building supply business produced a modest profit
for the period.
Overall, the Company posted pretax income of $16.9 million for the 1996
nine months compared to a loss of $14.2 million in the same period in 1995.
Interest included in cost of sales and other expenses totaled $31.3 million in
the current nine months compared with $35.2 million in the same prior year
period primarily reflecting lower inventory financing costs.
Prior-year income tax provisions were required for certain jurisdictions
where profits were earned despite overall pretax losses. Tax charges or credits
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 incurred.
As disclosed in prior reports, the Company made a provision of $12.5
million ($11.0 after tax) in fiscal 1996 for restructuring its nontobacco
operations. Major components of the restructuring include closure of the wool
processing facility in Argentina, write-off of goodwill, reorganization of wool
division management and other miscellaneous expenses related to the aborted sale
of the wool business. Thus far in Argentina, the factory has been closed, 181
employees have been terminated and certain impaired assets have been written
down. Additionally, the factory building has been leased to a third party. In
Australia, operations have been consolidated under one management team to better
and more efficiently serve this market. The wool tops departments in the German
and French companies have been reorganized to streamline marketing efforts. A
feasibility study is underway to improve operational efficiencies in the French
topmaking factory. For the current nine months, the restructuring has resulted
in lower depreciation and amortization expenses of approximately $624,000 and
lower personnel costs of approximately $169,000.
Income from discontinued operations in 1995 reflect the reversal of a
provision for the loss on disposal of the wool business. The planned sale of
this business was terminated in December 1995.
Because of the seasonal nature of the Company's businesses, results for
interim periods are not necessarily indicative of results of other interim
periods or the full year.
Working capital at December 31, 1996 was $66.8 million, up from $52.9
million at December 31, 1995 as contributions from operating activities resulted
in reduced borrowings. Compared to March 31, 1996, working capital improved by
$11.0 million due to reductions in the current portion of long-term debt and
seasonal business factors. Capital expenditures of $9.4 million for the 1996
nine months related mostly to expansion of warehouse facilities in Greece and
routine expenditures in the US tobacco division
The Company continued to closely monitor its inventories which were down
$2.6 million year to year, primarily because of reduced uncommitted tobacco
inventories and lower wool prices which offset higher committed tobacco
inventories attributable to increased business activity and higher prices.
The Company's credit facilities for tobacco include $100 million for US
operations and $200 million for European operations expiring in June 1998, and
local lines of approximately $245 million. There are separate credit facilities
for the wool business totaling $145 million. Management believes these
facilities to be adequate for its projected level of business in fiscal 1997.
As a part of its ongoing efforts to deleverage its balance sheet and
strengthen its financial position, the Company is continuing to consider various
alternatives, including offerings of additional equity and/or debt, and
renegotiating or replacing its credit facilities. There can be no assurance,
however, that the Company will be able to complete any such transactions.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - As indicated in the Company's March 31, 1996
Annual Report on Form 10-K, the charges initially brought in Canada
against two of the Company's employees were dismissed in the fall of
1995 and, while that investigation is continuing as to unrelated
parties, no further proceedings against the Company or its employees
are anticipated. With regard to the U.S. portion of the investigation,
the Company was informed in the fall of 1996 that it was being
terminated without any proceedings against the Company or its current
employees.
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 14, 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 EXHIBIT 11
(In thousands, except share information; unaudited)
<TABLE>
<CAPTION>
Third quarter ended Nine months ended
December 31 December 31
----------------------------------- -----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Income (loss) from continuing operations..................... $4,480 $(9,040) $8,899 $(18,470)
Less - ESOP preferred stock dividends net of tax............. (116) (117) (347) (358)
------------------------------------------------------
Income from continuing operations
applicable to common stock.............................. 4,364 (9,157) 8,552 (18,828)
Income from discontinued operations.......................... - 10,799 - 10,050
------------------------------------------------------
Net income (loss) applicable to common stock................. $4,364 $1,642 $8,552 $(8,778)
======================================================
Primary average shares outstanding........................... 9,360,095 8,973,623 9,263,916 8,888,292
======================================================
Earnings (loss) per common share
- from continuing operations............................ $0.47 $(1.02) $0.92 $(2.12)
- from discontinued operations.......................... - 1.20 - 1.13
------------------------------------------------------
- net................................................... $0.47 $0.18 $0.92 $(0.99)
======================================================
FULLY DILUTED EARNINGS PER SHARE
Income (loss) from continuing operations
applicable to common stock.............................. $4,364 $(9,157) $8,552 $(18,828)
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.......................... - - - -
------------------------------------------------------
Adjusted income (loss) from continuing operations............ 5,189 (8,332) 11,027 (16,353)
Income from discontinued operations.......................... - 10,799 - 10,050
------------------------------------------------------
Net income (loss) applicable to common stock................. $5,189 $2,467 $11,027 $(6,303)
======================================================
Primary average shares outstanding........................... 9,360,095 8,979,623 9,263,916 8,888,292
Increase in shares outstanding assuming
- conversion of 7 1/4% convertible subordinated
debentures at November 13, 1991...................... 2,302,302 2,212,248 2,268,697 2,183,502
- conversion of ESOP convertible
preferred stock at July 1, 1993...................... 268,334 269,219 268,334 266,449
------------------------------------------------------
Fully diluted average shares outstanding..................... 11,930,731 11,461,090 11,800,947 11,338,243
======================================================
Earnings (loss) per common share
- from continuing operations............................ $0.43 $(0.73) $0.93 $(1.44)
- from discontinued operations.......................... - 0.94 - 0.89
------------------------------------------------------
- net................................................... $0.43 $0.21 $0.93 $(0.55)
======================================================
</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> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 55,849
<SECURITIES> 971
<RECEIVABLES> 234,205<F1>
<ALLOWANCES> 0<F2>
<INVENTORY> 331,594
<CURRENT-ASSETS> 630,656
<PP&E> 130,797<F1>
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 808,509
<CURRENT-LIABILITIES> 563,854
<BONDS> 96,042
<COMMON> 2,398
8,748
0
<OTHER-SE> 85,732
<TOTAL-LIABILITY-AND-EQUITY> 808,509
<SALES> 933,526
<TOTAL-REVENUES> 433,526
<CGS> 861,724
<TOTAL-COSTS> 861,724
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 0<F2>
<INCOME-PRETAX> 16,914
<INCOME-TAX> 5,996
<INCOME-CONTINUING> 8,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,899
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.93
<FN>
<F1>SHOWN NET IN FINANCIAL STATEMENTS.
<F2>NOT SHOWN SEPARATELY UNDER MATERIALITY GUIDELINES.
</FN>
</TABLE>
