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, 1998
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 252-291-5507
Former name, former address and former fiscal year, if changed since last report
- - Not applicable
On August 1, 1998 the registrant had outstanding 12,813,499 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 1 FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30 March 31
------------- ---------
1998 1997 1998
---- ---- ----
(unaudited)
<S> <C>
ASSETS
Cash............................................
Receivables..................................... $ 45,138 $40,037 $ 34,116
Inventories..................................... 272,966 240,694 254,469
Prepaid expenses................................ 373,244 334,550 361,418
Marketable securities........................... 7,190 8,286 8,674
1,131 798 656
-----------------------------
Current assets...............................
699,669 624,365 659,333
Property, plant and equipment...................
Investment in affiliates........................ 107,310 118,956 113,572
Other assets.................................... 14,751 12,252 12,647
57,247 28,763 53,921
-----------------------------
Total assets.................................
$878,977 $784,336 $839,473
=============================
LIABILITIES
Short-term borrowings...........................
Current portion of long-term debt............... $297,842 $144,306 $267,799
Accounts payable................................ 4,509 7,831 4,987
Taxes accrued................................... 158,960 208,681 144,585
20,960 24,637 22,863
-----------------------------
Current liabilities..........................
482,271 385,455 440,234
Long-term debt..................................
Convertible subordinated debentures............. 125,776 134,559 128,083
Retirement and other benefits................... 69,000 69,000 69,000
Deferred taxes.................................. 19,577 19,048 19,479
2,502 6,672 2,776
-----------------------------
Total liabilities............................
699,126 614,734 659,572
-----------------------------
MINORITY INTERESTS..............................
28,537 30,110 30,271
-----------------------------
SHAREHOLDERS' EQUITY
Preferred stock, $1.65 par value; authorized shares 1,000,000
Issued none (1997 - none)
Common stock, $0.20 par value; authorized shares 100,000,000
Issued 15,429,220 (June 97 - 15,300,862; Mar 98 - 15,424,555)... 3,086 3,060 3,085
Additional paid-in capital......................................... 101,853 100,102 101,788
Unearned restricted stock plan compensation......................... (1,896) (297) (1,996)
Treasury shares, 2,617,707 (June 97 - 2,617,707; Mar 98 - 2,617,707) (4,250) (4,250) (4,250)
Retained earnings................................................... 84,958 57,869 82,943
Cumulative translation adjustments.................................. (32,437) (16,992) (31,940)
-----------------------------
Total shareholders' equity....................................... 151,314 139,492 149,630
-----------------------------
Total liabilities and equity..................................... $878,977 $784,336 $839,473
=============================
</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)
Three months ended
June 30
------------------
1998 1997
---- ----
Sales - tobacco ...................................... $226,257 $212,847
- nontobacco.................................... 64,151 87,468
-----------------------
Total sales......................................... 290,408 300,315
Cost of sales
- Materials, services and supplies................. 260,640 273,189
- Interest......................................... 5,213 7,266
-----------------------
Gross profit..................................... 24,555 19,860
Selling, general and administrative expenses.......... 17,997 17,659
Other interest expense................................ 4,317 2,216
Other income (expense) - net.......................... 2,640 2,391
-----------------------
Income before taxes.............................. 4,881 2,376
Income taxes.......................................... 2,210 358
-----------------------
Income after taxes............................... 2,671 2,018
Minority interests.................................... (749) (291)
Equity in earnings of affiliates...................... 93 126
-----------------------
Net income....................................... 2,015 1,853
Retained earnings at beginning of period.............. 82,943 58,089
Common stock dividends................................ - (2,073)
------------------------
Retained earnings at end of period.................... $84,958 $57,869
=======================
Earnings per common share
Basic and dilulted - net............................ $0.16 $0.17
- average shares outstanding..... 12,810 11,103
The accompanying notes are an integral part of these financial statements.
<PAGE>
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands; unaudited)
Three months ended
June 30
------------------
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................ $2,015 $1,853
Depreciation and amortization....................... 4,702 4,951
Minority interests.................................. 749 291
Deferred income taxes............................... (386) 969
Undistributed earnings of affiliates net of dividends
received......................................... (93) (126)
Gain on disposition of property, plant and equipment (1,889) (1,177)
Other............................................... (1,714) (1,075)
------------------------
3,384 5,686
Net changes in working capital other than cash
Receivables......................................... (19,084) 21,043
Inventories......................................... (15,126) (80,641)
Current payables.................................... 15,505 71,082
-----------------------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES...... (15,321) 17,170
-----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment - additions........... (2,422) (2,909)
- dispositions.......... 6,916 1,516
Business (acquisitions) .............................. (5,342) -
-----------------------
CASH USED FOR INVESTING ACTIVITIES.................... (848) (1,393)
-----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term borrowings................... 30,043 (60,061)
Proceeds from long-term borrowings.................... 66 -
Repayment of long-term borrowings..................... (2,983) (4,639)
Net proceeds of equity offering....................... - 47,043
Other................................................. 65 800
-----------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES..... 27,191 (16,857)
------------------------
Increase (decrease) in cash for period................ 11,022 (1,080)
Cash at beginning of period........................... 34,116 41,117
-----------------------
CASH AT END OF PERIOD................................. $ 45,138 $40,037
=======================
Cash payments for - interest.................... $6,423 $8,673
- income taxes................ $3,460 $3,207
The accompanying notes are an integral part of these financial statements.
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.BASIS OF PRESENTATION
The 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 the management, necessary for a fair statement of the
results of operations. All such adjustments are of normal, recurring nature and
there were no material changes in accounting policies during the period ended
June 30, 1998. 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.
2.INVENTORIES
June 30 March 31
------------------- --------
(In thousands) 1998 1997 1998
---- ---- ----
Tobacco $311,549 $255,991 $284,822
Nontobacco 61,695 78,559 76,596
------ -------- --------
Total $373,244 $334,550 $361,418
========== ======= =======
3.COMPREHENSIVE INCOME
Effective June 1997, the Company adopted Statement of Financial Accounting
Standards No.130, Reporting comprehensive income ("SFAS 130"). This statement
requires that an enterprise (a) classify items of other comprehensive income by
their nature in a financial statement and (b) display the accumulated balance
of other comprehensive income separately from retained earnings and additional
paid in capital in the equity section of the balance sheet . Reclassification
of financial statements for earlier periods provided for comparative purposes
is required.
The components of comprehensive income were as follows:
June 30
1998 1997
------- ----
(In thousands)
Net income $2,015 $1,853
Other comprehensive income:
Translation adjustment (497) (236)
------ --------
Total comprehensive income $1,518 $1,617
------ ------
4.EARNINGS PER SHARE
Earnings per share has been presented in conformity with Statement of Financial
Accounting Standards No.128. In computing the diluted per-share amounts the
incremental shares from assumed conversion of 7 1/4% Convertible Subordinated
Debentures are not included because the calculations include adjustments which
are antidilutive.
5.SENIOR NOTES
On August 1, 1997 the Company completed a $115 million Rule 144A private
placement of 8 7/8% Senior Notes Due 2005. The Senior Notes were subsequently
Registered with the Securities & Exchange Commission and an exchange offer was
completed on December 31, 1997. The proceeds were used to repay indebtedness
under existing bank credit facilities and certain long-term debt. Consequently
$115 million short-term borrowings were classified as long-term debt at June
30, 1997.
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
issuers'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 issuer and the Guarantors.
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING BALANCE SHEET
June 30, 1998 (In thousands.)
<TABLE>
<CAPTION>
Standard
Commercial Standard Other
Tobacco Co. Commercial Standard Subsidiaries
Inc. Corporation Wool Inc. (Non-
(Issuer) (Guarantor) (Guarantor) Guarantors) Eliminations Total
<S> <C>
Assets
Cash $ 16,796 $ 24 $ 230 $ 28,088 $ - $ 45,138
Receivables 15,020 589 421 256,936 - 272,966
Intercompany receivables 170,572 17,783 37 17,780 (206,172) -
Inventories 53,401 - 1,137 318,706 - 373,244
Prepaids and other 621 - 15 6,554 - 7,190
Marketable securities - 1 - 1,130 - 1,131
-------------------------------------------------------------------------------------------
Current assets 256,410 18,397 1,840 629,194 (206,172) 699,669
Property, plant and equipment 21,015 - 71 86,224 - 107,310
Investment in subsidiaries 68,271 223,373 36,318 169,089 (497,051) -
Investment in affiliates 3,527 - - 11,224 - 14,751
Other noncurrent assets 6,755 13,585 - 36,907 - 57,247
-------------------------------------------------------------------------------------------
Total assets $355,978 $255,355 $38,229 $932,638 ($703,223) $878,977
===========================================================================================
Liabilities
Short-term borrowings $ - $ - $ - $ 297,842 $ - $ 297,842
Current portion of long-term debt - - - 4,509 - 4,509
Accounts payable 11,352 1,624 45 145,939 - 158,960
Intercompany accounts payable 21,853 35,691 1,839 146,789 (206,172) -
Taxes accrued 7,063 (2,472) (42) 16,411 - 20,960
-------------------------------------------------------------------------------------------
Current liabilities 40,268 34,843 1,842 611,490 (206,172) 482,271
Long-term debt 117,940 - - 7,836 - 125,776
Convertible subordinated debentures - 69,000 - - - 69,000
Retirement and other benefits 8,218 645 - 10,714 - 19,577
Deferred taxes 221 (2,316) - 4,597 - 2,502
-------------------------------------------------------------------------------------------
Total liabilities 166,647 102,172 1,842 634,637 (206,172) 699,126
Minority interests - - - 28,537 - 28,537
Shareholders' equity
Common stock 993 3,086 25,404 136,305 (162,702) 3,086
Additional paid-in capital 130,860 101,853 - 64,839 (195,699) 101,853
Unearned restricted stock
plan compensation (659) (27) (8) (1,202) - (1,896)
Treasury stock at cost - (4,250) - - - (4,250)
Retained earnings 72,305 84,958 10,794 101,959 (185,058) 84,958
Cumulative translation adjustments (14,168) (32,437) 197 (32,437) 46,408 (32,437)
-------------------------------------------------------------------------------------------
Total shareholders' equity 189,331 153,183 36,387 269,464 (497,051) 151,314
-------------------------------------------------------------------------------------------
Total liabilities and equity $355,978 $255,355 $38,229 $932,638 ($703,223) $878,977
===========================================================================================
</TABLE>
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Three months ended June 30, 1998
(In thousands.)
<TABLE>
<CAPTION>
Standard
Commercial Standard Other
Tobacco Co. Commercial Standard Subsidiaries
Inc. Corporation Wool Inc. (Non-
(Issuer) (Guarantor) (Guarantor) Guarantors) Eliminations Total
<S> <C>
Sales $ 29,334 $ - $ 591 $ 295,583 $ (35,100) $ 290,408
Cost of sales:
Materials services and supplies 25,872 - 554 269,314 (35,100) 260,640
Interest 102 - - 5,111 - 5,213
--------------------------------------------------------------------------------------------
Gross profit 3,360 - 37 21,158 - 24,555
Selling, general &
administrative expenses 2,956 642 101 14,298 - 17,997
Other interest expense 2,790 1,307 2 218 - 4,317
Other income (expense) net 4,555 134 (56) (1,993) - 2,640
--------------------------------------------------------------------------------------------
Income (loss) before taxes 2,169 (1,815) (122) 4,649 - 4,881
Income taxes 738 (617) (42) 2,131 - 2,210
--------------------------------------------------------------------------------------------
Income (loss) after taxes 1,431 (1,198) (80) 2,518 - 2,671
Minority interests - - - (749) - (749)
Equity in earnings of affiliates - - - 93 - 93
Equity in earnings of subsidiaries 2,306 3,213 (444) - (5,075) -
--------------------------------------------------------------------------------------------
Net income 3,737 2,015 (524) 1,862 (5,075) 2,015
Retained earnings at beginning
of period 68,568 82,943 11,318 100,097 (179,983) 82,943
Common stock dividends - - - - - -
--------------------------------------------------------------------------------------------
Retained earnings at end of period $ 72,305 $ 84,958 $ 10,794 $ 101,959 (185,058) $ 84,958
============================================================================================
</TABLE>
STANDARD COMMERCIAL CORPORATION SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
Three months ended June 30, 1998.
(In thousands.)
<TABLE>
<CAPTION>
Standard
Commercial Standard Other
Tobacco Co. Commercial Standard Subsidiaries
Inc. Corporation Wool Inc. (Non-
(Issuer) (Guarantor) (Guarantor) Guarantors) Eliminations Total
<S> <C>
Cash provided by (used in)
operating activities $ 6,131 $ (99) $ 9 $ (21,362) $ - $ (15,321)
-----------------------------------------------------------------------------------------
Cash flows from investing activities
Property, plant and equipment
- additions (489) - (21) (1,912) - (2,422)
- disposals 4,406 - - 2,510 - 6,916
Business (acquisitions) dispositions - - - (5,342) - (5,342)
-----------------------------------------------------------------------------------------
Cash provided by (used in)
investing activities 3,917 - (21) (4,744) - (848)
-----------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in short-term borrowings - - - 30,043 - 30,043
Proceeds from long-term borrowings - - - 66 - 66
Repayment of long-term borrowings (83) - - (2,900) - (2,983)
Net proceeds of equity offering - - - - - -
Other - 65 - - - 65
-----------------------------------------------------------------------------------------
Cash provided by (used in)
financing activities (83) 65 - 27,209 - 27,191
-----------------------------------------------------------------------------------------
Increase (decrease) in cash for year 9,965 (34) (12) 1,103 - 11,022
Cash at beginning of year 6,831 58 242 26,985 - 34,116
-----------------------------------------------------------------------------------------
Cash at end of year $ 16,796 $ 24 $ 230 $ 28,088 $ - $ 45,138
=========================================================================================
Interest $ 62 $ 5 $ - $ 6,356 $ - $ 6,423
Income taxes 183 1,743 - 1,534 - 3,460
</TABLE>
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING BALANCE SHEET
June 30, 1997
(In thousands.)
<TABLE>
<CAPTION>
Standard
Commercial Standard Other
Tobacco Co. Commercial Standard Subsidiaries
Inc. Corporation Wool Inc. (Non-
(Issuer) (Guarantor) (Guarantor) Guarantors) Eliminations Total
<S> <C>
Assets
Cash $ - $ 384 $ 81 $ 39,572 $ - $ 40,037
Receivables 22,776 1,376 1,351 215,191 - 240,694
Intercompany receivables 126,272 64,498 21 54,921 (245,712) -
Inventories 52,910 - 1,248 280,392 - 334,550
Prepaids and other 403 - 19 7,864 - 8,286
Marketable securities - - - 798 - 798
-----------------------------------------------------------------------------------------
Current assets 202,361 66,258 2,720 598,738 (245,712) 624,365
Property, plant and equipment 18,112 - 61 100,783 - 118,956
Investment in subsidiaries 78,274 161,554 40,385 120,940 (401,153) -
Investment in affiliates - - - 12,252 - 12,252
Other noncurrent assets 1,693 11,015 - 16,055 - 28,763
-----------------------------------------------------------------------------------------
Total assets $300,440 $238,827 $43,166 $848,768 ($646,865) $784,336
=========================================================================================
Liabilities
Short-term borrowings $ - $ - $ - $ 144,306 $ - $ 144,306
Current portion of long-term debt 2,000 - - 5,831 - 7,831
Accounts payable 12,361 2,023 131 194,166 - 208,681
Intercompany accounts payable 23,908 31,608 4,889 185,307 (245,712) -
Taxes accrued 3,114 (1,851) (17) 23,391 - 24,637
-----------------------------------------------------------------------------------------
Current liabilities 41,383 31,780 5,003 553,001 (245,712) 385,455
Long-term debt 124,107 - - 10,452 - 134,559
Convertible subordinated debentures - 69,000 - - - 69,000
Retirement and other benefits 7,896 529 - 10,623 - 19,048
Deferred taxes 160 (2,260) - 8,772 - 6,672
-----------------------------------------------------------------------------------------
Total liabilities 173,546 99,049 5,003 582,848 (245,712) 614,734
Minority interests - - - 30,110 - 30,110
Shareholders' equity
Common stock 993 3,060 22,604 90,536 (114,133) 3,060
Additional paid-in capital 85,470 100,102 - 78,164 (163,634) 100,102
Unearned restricted stock
plan compensation (87) (11) - (199) - (297)
Treasury stock at cost - (4,250) - - - (4,250)
Retained earnings 46,365 57,869 7,744 84,301 (138,410) 57,869
Cumulative translation adjustments (5,847) (16,992) 7,815 (16,992) 15,024 (16,992)
-----------------------------------------------------------------------------------------
Total shareholders' equity 126,894 139,778 38,163 235,810 (401,153) 139,492
-----------------------------------------------------------------------------------------
Total liabilities and equity $300,440 $238,827 $43,166 $848,768 ($646,865) $784,336
=========================================================================================
</TABLE>
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Three months ended June 30, 1997.
(In thousands.)
<TABLE>
<CAPTION>
Standard
Commercial Standard Other
Tobacco Co. Commercial Standard Subsidiaries
Inc. Corporation Wool Inc. (Non-
(Issuer) (Guarantor) (Guarantor) Guarantors) Eliminations Total
<S> <C>
Sales $ 66,255 $ - $ 1,305 $ 280,472 $ (47,717) $ 300,315
Cost of sales:
Materials services and supplies 63,577 - 1,212 256,117 (47,717) 273,189
Interest 1,035 - - 6,231 - 7,266
-----------------------------------------------------------------------------------------
Gross profit 1,643 - 93 18,124 - 19,860
Selling, general &
administrative expenses 2,887 738 69 13,965 - 17,659
Other interest expense 299 1,367 - 550 - 2,216
Other income (expense) net 297 484 (75) 1,685 - 2,391
-----------------------------------------------------------------------------------------
Income (loss) before taxes (1,246) (1,621) (51) 5,294 - 2,376
Income taxes (423) (695) (17) 1,493 - 358
-----------------------------------------------------------------------------------------
Income (loss) after taxes (823) (926) (34) 3,801 - 2,018
Minority interests - - - (291) - (291)
Equity in earnings of affiliates - - - 126 - 126
Equity in earnings of subsidiaries 2,661 2,779 975 - (6,415) -
-----------------------------------------------------------------------------------------
Net income 1,838 1,853 941 3,636 (6,415) 1,853
Retained earnings at beginning
of period 44,527 58,089 6,803 80,665 (131,995) 58,089
Common stock dividends - (2,073) - - - (2,073)
-----------------------------------------------------------------------------------------
Retained earnings at end of period $ 46,365 $ 57,869 $ 7,744 $ 84,301 (138,410) $ 57,869
=========================================================================================
</TABLE>
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
Three months ended June 30, 1997.
(In thousands.)
<TABLE>
<CAPTION>
Standard
Commercial Standard Other
Tobacco Co. Commercial Standard Subsidiaries
Inc. Corporation Wool Inc. (Non-
(Issuer) (Guarantor) (Guarantor) Guarantors) Eliminations Total
<S> <C>
Cash provided by (used in)
operating activities $ 24,980 $ (46,986) $ (6) $ 39,182 $ - $ 17,170
------------------------------------------------------------------------------------------------
Cash flows from investing activities
Property, plant and equipment
- additions (264) - (31) (2,614) - (2,909)
- disposals 4 - - 1,512 - 1,516
Business (acquisitions) dispositions - - - - - -
-----------------------------------------------------------------------------------
Cash provided by (used in)
investing activities (260) - (31) (1,102) - (1,393)
-----------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in short-term borrowings (25,249) - - (34,812) - (60,061)
Proceeds from long-term borrowings - - - - - -
Repayment of long-term borrowings - - - (4,639) - (4,639)
Net proceeds of equity offering - 47,043 - - - 47,043
Other - - - 800 - 800
- -----------------------------------------------------------------------------------
Cash provided by (used in)
financing activities (25,249) 47,043 - (38,651) - (16,857)
- -----------------------------------------------------------------------------------
Increase (decrease) in cash for year (529) 57 (37) (571) - (1,080)
Cash at beginning of year 1,102 327 119 39,569 - 41,117
- -----------------------------------------------------------------------------------
Cash at end of year $ 573 $ 384 $ 82 $ 38,998 $ - $ 40,037
= ===================================================================================
Interest $ 1,031 $ 27 $ - $ 7,615 $ 8,673
Income taxes - 106 - 3,101 3,207
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Sales for the quarter ended June 30, 1998 were $290.4 million, a decrease of
3.3% from a year earlier. Sales of $226.3 million for the tobacco division
were up 6.3% from the corresponding period in 1997. Tobacco sales from Africa,
Europe and the Far East were higher due to volume increases. Overall, tobacco
volume was up 26.7%. However volume gains were partly offset by lower average
prices worldwide. Nontobacco sales of $64.1 million were down 26.6% primarily
as the result of depressed market conditions as the wool industry continues to
deal with the impact of the currency crisis in Asia.
Gross profit for the quarter of $24.6 million improved 23.6% from the 1997
quarter due primarily to the improvement in tobacco sales and a reduction in
interest expense resulting from the proceeds from the public offering of
shares and the inclusion of interest on senior notes issue in other interest
expense. Selling, general and administrative expenses increased slightly due
to inflationary factors. Other income was basically level with the prior
period.
Income before taxes increased due to higher volume of tobacco sales. This was
offset by a higher effective tax rate and increased 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 tax credits
not utilisable in certain areas where losses are incurred resulted in an
effective tax rate of 45.3% in the current quarter compared to 15.1% a year
earlier.
Net income was $2.0 million, or $0.16 per share on a basic and diluted basis
with 12.8 million average shares outstanding versus $1.9 million, or $0.17 per
share on 11.1 million shares outstanding for the June 1997 quarter. The
quarter-to-quarter increase in shares outstanding was primarily attributable
to the Company's secondary issue of 3.0 million shares during the June 1997
quarter.
Liquidity and Capital Resources
Working capital at June 30, 1998 was $217.4 million, compared to $238.9 million
a year earlier. Most of the decrease was due to the utilisation of working
capital towards business acquistions and additions to property plant and
equipment. Capital expenditures during the 1998 quarter of $2.4 million
consisted primarily of routine expenditures of $1.8 million in the tobacco
division and $0.6 million in the wool division. During the same period the
Company increased its holding in its Spanish operations from 66.33% to 96.31%
and also invested an addtional amount in its Tanzanian operations. Cash used
in operating activities during the current quarter totaled $15.3 million
mainly due to increase in receivables and inventories partially offset by
increase in payables. The Company continues to closely monitor its inventory
levels which fluctuate depending on seasonal factors and business conditions.
During the first quarter of fiscal 1998 the Company completed a secondary issue
of 3,022,500 shares, from which the company received $47 million. 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 $27.3 million of
retained earnings available for distribution as dividends at June 30, 1998.
On August 1, 1997 the Company completed a $115 million Rule 144A private
placement of 8 7/8% Senior Notes Due 2005. The Senior Notes were subsequently
registered with the Securities & Exchange Commission and an exchange offer was
completed on December 31, 1997. The proceeds were used to repay indebtedness
under existing bank credit facilities and certain long-term debt. Consequently
$115 million short-term borrowings were classified as long-term debt at June
30, 1997.
<PAGE>
Other Matters
The company is continuing to address year 2000 issues. A project team is
coordinating the review of both internal systems and interfaces with third
party suppliers/vendors to evaluate the incremental costs or any potential
investment required to ensure an efficient transition to the new century. The
team has now completed the assessment of its key systems and is working
towards assesement and resolution of facilities issues to insure full
compliance. Based on the findings to date, management is of the opinion that
any modifications, if necessary, will be completed in fiscal 1999 and will not
have a material impact on the consolidated results of the company.
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 5. OTHER INFORMATION
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING:
Any shareholder proposal submitted with respect to the Company's 1999 Annual
Meeting of shareholders, which is submitted outside the process of Rule 14a-8
under the Securities Exchange Act of 1934, will be considered ultimately for
purposes of Rule 14a-4 and 14a-5 ( and therefore the persons appointed as
proxies may exercise discretionary voting power on those items) if notice
therefore is received by the company after May 12, 1999, or such earlier date as
may apply under company's By-laws. The Company's by-laws provide that a
stockholder proposal with respect to any Annual Meeting of shareholders will be
considered untimely unless written notice of the proposal to the secretary is
received at the Company's principal executive office "not less than 120 days
prior to the meeting, provided however, that if the date of the meeting is first
publicly announced or disclosed (in a public filing or otherwise) less than 70
days prior to the date of the meeting, such notice shall be given not more than
10 days after such date is first so announced or disclosed."
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 14, 1998 STANDARD COMMERCIAL CORPORATION
(Registrant)
By /s/ Robert E Harrison
--------------------------
Robert E Harrison
President, Chief Executive Officer
By /s/ Robert A Sheets
------------------------
Robert A Sheets
Vice President and Chief Financial Officer
<TABLE>
<CAPTION>
STANDARD COMMERCIAL CORPORATION EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE (In thousands, except per share
information; unaudited)
First quarter ended
June 30
---------------------
1998 1997
---- ----
<S> <C>
BASIC AND DILUTED EARNINGS PER SHARE
Net income applicable to common stock........................................... $2,015 $1,853
=====================
Basic average shares outstanding................................................ 12,809,842 11,103,202
=========================
Earnings per common share
- net..................................................................... $0.16 $0.17
====================
</TABLE>
Note: The incremental shares from assumed conversion of 7 1/4% convertible
subordinated debentures are not included in computing the diluted per-share
amounts because the calculations include adjustments which are antidilutive.
<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 FINANICAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 45,138
<SECURITIES> 1,131
<RECEIVABLES> 272,966<F1>
<ALLOWANCES> 0<F2>
<INVENTORY> 373,244
<CURRENT-ASSETS> 699,669
<PP&E> 107,310<F1>
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 878,977
<CURRENT-LIABILITIES> 482,271
<BONDS> 194,776
0
0
<COMMON> 3,086
<OTHER-SE> 148,228
<TOTAL-LIABILITY-AND-EQUITY> 878,977
<SALES> 290,408
<TOTAL-REVENUES> 290,408
<CGS> 265,853
<TOTAL-COSTS> 265,853
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,881
<INCOME-TAX> 2,210
<INCOME-CONTINUING> 2,015
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,015
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
<FN>
<F1>SHOWN NET IN FINANCIAL STATEMENTS.
<F2>NOT SHOWN SEPARATELY UNDER MATERIALITY GUIDELINES.
</FN>
</TABLE>
