<PAGE>
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, 1999
Commission file number 1-9875
[Standard 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
On February 1, 2000 the registrant had outstanding 12,976,172 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
--------- ---------
1
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31 March 31
-------------------
1999 1998 1999
-------- -------- --------
<S> <C>
(unaudited)
ASSETS
Cash............................................................ $ 30,476 $ 38,345 $ 43,767
Receivables..................................................... 232,421 185,238 228,910
Inventories..................................................... 397,508 473,152 376,922
Prepaid expenses................................................ 6,254 5,050 5,353
Marketable securities........................................... 621 762 656
-------- -------- --------
Current assets................................................ 667,280 702,547 655,608
Property, plant and equipment................................... 151,644 111,251 155,389
Investment in affiliates........................................ 16,012 17,413 12,782
Other assets.................................................... 50,199 57,658 54,618
-------- -------- --------
Total assets.................................................. $885,135 $888,869 $878,397
======== ======== ========
LIABILITIES
Short-term borrowings........................................... $326,094 $353,013 $280,587
Current portion of long-term debt............................... 11,095 4,050 12,646
Accounts payable................................................ 131,187 110,943 149,433
Taxes accrued................................................... 7,589 15,668 14,159
-------- -------- --------
Current liabilities........................................... 475,965 483,674 456,825
Long-term debt.................................................. 134,120 125,262 144,161
Convertible subordinated debentures............................. 69,000 69,000 69,000
Retirement and other benefits................................... 20,364 20,244 20,224
Deferred taxes.................................................. 7,388 2,474 8,875
-------- -------- --------
Total liabilities............................................. 706,837 700,654 699,085
-------- -------- --------
MINORITY INTERESTS.............................................. 27,393 29,621 28,307
-------- -------- --------
SHAREHOLDERS' EQUITY
Preferred stock, $1.65 par value; authorized shares 1,000,000
Issued none
Common stock, $0.20 par value; authorized shares 100,000,000
Issued 15,588,995 (Dec. 98 - 15,436,402; Mar 99 - 15,540,078).. 3,118 3,089 3,108
Additional paid-in capital...................................... 102,898 101,989 102,680
Unearned restricted stock plan compensation..................... (1,747) (1,719) (2,177)
Treasury shares, 2,617,707...................................... (4,250) (4,250) (4,250)
Retained earnings............................................... 93,503 88,454 89,430
Accumulated other comprehensive income.......................... (42,617) (28,969) (37,786)
-------- -------- --------
Total shareholders' equity.................................... 150,905 158,594 151,005
-------- -------- --------
Total liabilities and equity.................................. $885,135 $888,869 $878,397
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(In thousands, except per share information; unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31 December 31
---------------------------- ----------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales - tobacco............................................ $221,769 $215,123 $600,445 $607,614
- nontobacco......................................... 56,147 53,570 152,716 160,531
-------- -------- -------- --------
Total sales............................................... 277,916 268,693 753,161 768,145
Cost of sales - materials, services and supplies........... 243,765 242,336 655,702 683,524
- interest................................... 8,621 5,839 19,125 14,892
-------- -------- -------- --------
Gross profit.............................................. 25,530 20,518 78,334 69,729
Selling, general and administrative expenses................ 19,493 18,167 59,429 54,013
Other interest expense...................................... 2,691 4,362 10,199 13,253
Other income (expense) - net................................ 508 2,571 1,947 8,877
-------- -------- -------- --------
Income before taxes....................................... 3,854 560 10,653 11,340
Income taxes................................................ 1,693 637 5,937 4,018
-------- -------- -------- --------
Income after taxes........................................ 2,161 (77) 4,716 7,322
Minority interests.......................................... 31 792 268 (1,103)
Equity in earnings of affiliates............................ 351 45 1,031 574
-------- -------- -------- --------
Net income................................................ 2,543 760 6,015 6,793
Retained earnings at beginning of period.................... 91,585 88,335 89,430 82,943
Common stock dividends...................................... (625) (641) (1,942) (1,282)
-------- -------- -------- --------
Retained earnings at end of period.......................... $ 93,503 $ 88,454 $ 93,503 $ 88,454
======== ======== ======== ========
Earnings per common share
Basic - net............................................... $0.20 $0.06 $0.46 $0.53
- average shares outstanding......................... 12,964 12,824 12,948 12,816
Diluted - net.............................................. $0.20 $0.06 $0.46 $0.53
- average shares outstanding........................ 15,312 15,173 15,297 15,165
Dividends paid per common share $0.05 $0.05 $0.15 $0.10
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands; unaudited)
<TABLE>
<CAPTION>
Nine months ended
December 31
--------------------------
1999 1998
----- -----
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................ $ 6,015 $ 6,793
Depreciation and amortization.................... 16,287 13,593
Minority interests............................... (268) 1,103
Deferred income taxes............................ (1,295) (693)
Undistributed earnings of affiliates net of dividends received (1,031) (574)
Gain on disposition of property, plant and equipment (282) (3,614)
Other............................................ 1,086 3,024
-------------------------
20,512 19,632
Net changes in working capital other than cash
Receivables...................................... (5,212) 67,081
Inventories...................................... (23,811) (120,061)
Current payables................................. (21,974) (32,760)
--------------------------
CASH USED FOR OPERATING ACTIVITIES................ (30,485) (66,108)
--------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment - additions (14,363) (11,992)
- dispositions. 1,538 9,982
Business (acquisitions) dispositions.............. (2,420) (7,387)
--------------------------
CASH USED FOR INVESTING ACTIVITIES................ (15,245) (9,397)
--------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term borrowings............... 45,508 85,214
Proceeds from long-term borrowings................ 2,123 535
Repayment of long-term borrowings................. (13,477) (4,938)
Dividends paid.................................... (1,942) (1,282)
Other............................................. 227 205
--------------------------
CASH PROVIDED BY FINANCING ACTIVITIES............. 32,439 79,734
--------------------------
Increase (decrease) in cash for period............ (13,291) 4,229
Cash at beginning of period....................... 43,767 34,116
--------------------------
CASH AT END OF PERIOD............................. $ 30,476 $ 38,345
==========================
Cash payments for - interest...................... $ 24,785 $ 24,859
- income taxes.................................. $ 12,088 $ 10,663
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
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. 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 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
December 31, 1999. 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
December 31 March 31
------------------ --------
(In thousands) 1999 1998 1999
---- ----- -----
Tobacco $333,654 $402,909 $315,506
Nontobacco 63,854 70,243 61,416
-------- -------- --------
Total $397,508 $473,152 $376,922
======== ======== ========
3.COMPREHENSIVE INCOME
The statement on comprehensive income 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.
The components of comprehensive income were as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31 December 31
------------ -----------
1999 1998 1999 1998
-------- ------- ------- -------
<S> <C>
(In thousands)
Net income $ 2,543 $ 760 $ 6,015 $6,793
Other comprehensive income:
Translation adjustment (2,680) 387 (4,831) 2,971
------- ------ ------ ------
Total comprehensive income $ (137) $1,147 $ 1,184 $9,764
------- ------ ------- ------
</TABLE>
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 for the
three and nine months ended December 31, 1999, the incremental shares from
assumed conversion of 7-1/4% Convertible Subordinated Debentures are not
included because the calculations include adjustments which are antidilutive.
Options to purchase shares of common stock were outstanding during the six
months ended December 31, 1999 but were not included in the computation of
diluted earnings per share because the exercise price was greater than the
average market price of common shares.
5
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5.SEGMENT INFORMATION
The company is engaged in purchasing, processing and selling leaf tobacco and
wool. Its activities other than these are minimal. Segment revenue and net
income are as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31 December 31
------------------- -----------------
1999 1998 1999 1998
-------- -------- -------- -------
<S> <C>
(In thousands)
Sales
Tobacco $221,769 $215,123 $600,445 $607,614
Nontobacco 56,147 53,570 152,716 160,531
-------- -------- -------- --------
$277,916 $268,693 $753,161 $768,145
-------- -------- -------- --------
Net income (loss)
Tobacco $ 2,932 $ 2,724 $ 8,429 $ 10,637
Nontobacco (389) (1,964) (2,414) (3,844)
-------- -------- --------- ---------
$ 2,543 $ 760 $ 6,015 $ 6,793
-------- -------- --------- ---------
</TABLE>
6.SENIOR NOTES
The 8-7/8% Senior Notes due 2005 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 Issuer and the Guarantors.
6
<PAGE>
SUPPLEMENTAL COMBINING BALANCE SHEET
December 31, 1999
(In thousands; unaudited)
<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 $ - $ 75 $ 65 $ 30,336 $ - $ 30,476
Receivables 33,475 2,067 140 196,739 0 232,421
Intercompany receivables 138,004 16,511 38 20,415 (174,968) 0
Inventories 152,902 0 377 244,229 0 397,508
Prepaids and other 981 291 11 4,971 0 6,254
Marketable securities 0 1 0 620 0 621
-------------------------------------------------------------------------------------------
Current assets 325,362 18,945 631 497,310 (174,968) 667,280
Property, plant and equipment 22,946 0 79 128,619 0 151,644
Investment in subsidiaries 93,803 228,156 30,483 166,214 (518,656) 0
Investment in affiliates 0 0 0 16,012 0 16,012
Other noncurrent assets 4,982 10,068 3 35,146 0 50,199
-------------------------------------------------------------------------------------------
Total assets $447,093 $257,169 $31,196 $843,301 $(693,624) $885,135
===========================================================================================
Liabilities
Short-term borrowings $ 32,887 $ - $ - $293,207 $ - $326,094
Current portion of long-term debt 0 0 0 11,095 0 11,095
Accounts payable 17,354 1,876 10 111,947 0 131,187
Intercompany payables 62,539 40,490 1,813 70,126 (174,968) 0
Taxes accrued 8,871 (6,040) 0 4,758 0 7,589
-------------------------------------------------------------------------------------------
Current liabilities 121,651 36,326 1,823 491,133 (174,968) 475,965
Long-term debt 117,940 0 0 16,180 0 134,120
Convertible subordinated debentures 0 69,000 0 0 0 69,000
Retirement and other benefits 8,813 765 0 10,786 0 20,364
Deferred taxes 125 (1,548) 0 8,811 0 7,388
-------------------------------------------------------------------------------------------
Total liabilities 248,529 104,543 1,823 526,910 (174,968) 706,837
-------------------------------------------------------------------------------------------
Minority interests - - - 27,393 - 27,393
-------------------------------------------------------------------------------------------
Shareholders' equity
Common stock 993 3,118 32,404 164,389 (197,786) 3,118
Additional paid-in capital 130,860 102,898 0 64,839 (195,699) 102,898
Unearned restricted stock
plan compensation (594) (26) (7) (1,120) 0 (1,747)
Treasury stock at cost 0 (4,250) 0 0 0 (4,250)
Retained earnings 86,848 93,503 4,216 103,507 (194,571) 93,503
Accumulated other comprehensive income (19,543) (42,617) (7,240) (42,617) 69,400 (42,617)
-------------------------------------------------------------------------------------------
Total shareholders' equity 198,564 152,626 29,373 288,998 (518,656) 150,905
-------------------------------------------------------------------------------------------
Total liabilities and equity $447,093 $257,169 $31,196 $843,301 $(693,624) $885,135
===========================================================================================
</TABLE>
7
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS Quarter ended
December 31, 1999.
(In thousands; unaudited)
<TABLE>
<CAPTION>
Standard
Commercial Standard Other Wool
Tobacco Co. Commercial Standard Subsidiaries
Inc. Corporation Wool Inc. (Non-
(Issuer) (Guarantor) (Guarantor) Guarantors) Eliminations Total
-------- ----------- ----------- ----------- ------------ -----
<S> <C>
Sales $107,664 $ - $ 265 $ 245,130 $ (75,143) $277,916
Cost of sales:
Materials services and supplies 97,650 - 281 220,977 (75,143) 243,765
Interest 2,247 - - 6,374 - 8,621
----------------------------------------------------------------------------------------
Gross profit 7,767 - (16) 17,779 - 25,530
Selling, general &
administrative expenses 3,406 775 98 15,214 - 19,493
Other interest expense 1,050 1,313 - 328 - 2,691
Other income (expense)- net 681 111 (46) (238) - 508
----------------------------------------------------------------------------------------
Income (loss) before taxes 3,992 (1,977) (160) 1,999 - 3,854
Income taxes 1,357 (671) 81 926 - 1,693
----------------------------------------------------------------------------------------
Income (loss) after taxes 2,635 (1,306) (241) 1,073 - 2,161
Minority interests - - - 31 - 31
Equity in earnings of affiliates - - - 351 - 351
Equity in earnings of subsidiaries 1,574 3,849 (119) - (5,304) -
----------------------------------------------------------------------------------------
Net income 4,209 2,543 (360) 1,455 (5,304) 2,543
Retained earnings at beginning
of period 82,639 91,585 4,576 102,052 (189,267) 91,585
Common stock dividends - (625) - - - (625)
----------------------------------------------------------------------------------------
Retained earnings at end of period $ 86,848 $ 93,503 $ 4,216 $ 103,507 $ (194,571) $ 93,503
========================================================================================
</TABLE>
8
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Nine months ended December 31, 1999
(In thousands; unaudited)
<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 $ 174,453 $ - $ 850 $ 762,724 $ (184,866) $753,161
Cost of sales:
Materials services and supplies 155,450 - 835 684,283 (184,866) 655,702
Interest 2,607 - - 16,518 - 19,125
---------------------------------------------------------------------------------------
Gross profit 16,396 - 15 61,923 - 78,334
Selling, general &
administrative expenses 9,470 2,231 276 47,452 - 59,429
Other interest expense 4,927 3,940 - 1,332 - 10,199
Other income (expense)- net 2,290 122 (138) (327) - 1,947
---------------------------------------------------------------------------------------
Income (loss) before taxes 4,289 (6,049) (399) 12,812 - 10,653
Income taxes 1,458 (2,056) - 6,535 - 5,937
---------------------------------------------------------------------------------------
Income (loss) after taxes 2,831 (3,993) (399) 6,277 - 4,716
Minority interests - - - 268 - 268
Equity in earnings of affiliates - - - 1,031 - 1,031
Equity in earnings of subsidiaries 9,562 10,008 (1,986) - (17,584) -
---------------------------------------------------------------------------------------
Net income 12,393 6,015 (2,385) 7,576 (17,584) 6,015
Retained earnings at beginning
of period 81,455 89,430 6,601 95,931 (183,987) 89,430
Common stock dividends (7,000) (1,942) - - 7,000 (1,942)
---------------------------------------------------------------------------------------
Retained earnings at end of period $ 86,848 $ 93,503 $ 4,216 $ 103,507 $ (194,571) $ 93,503
=======================================================================================
</TABLE>
9
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
Nine months ended December 31, 1999
(In thousands; unaudited)
<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 $ (32,673) $ 1,789 $ 26 $ 373 $ - $ (30,485)
---------------------------------------------------------------------------------------
Cash flows from investing activities
Property, plant and equipment
- additions (1,167) - (13) (13,183) - (14,363)
- disposals 91 - - 1,447 - 1,538
Business (acquisitions) dispositions - - - (2,420) - (2,420)
---------------------------------------------------------------------------------------
Cash provided by (used in)
investing activities (1,076) - (13) (14,156) - (15,245)
---------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in short-term borrowings 32,887 - - 12,621 - 45,508
Proceeds from long-term borrowings - - - 2,123 - 2,123
Repayment of long-term borrowings - - - (13,477) - (13,477)
Dividends paid - (1,942) - - - (1,942)
Other (1) 228 - - - 227
---------------------------------------------------------------------------------------
Cash provided by (used in)
financing activities 32,886 (1,714) - 1,267 - 32,439
---------------------------------------------------------------------------------------
Increase (decrease) in cash for year (863) 75 13 (12,516) - (13,291)
Cash at beginning of year 863 - 52 42,852 - 43,767
---------------------------------------------------------------------------------------
Cash at end of year $ - $ 75 $ 65 $ 30,336 $ - $ 30,476
=======================================================================================
Cash payments for - Interest $ 5,759 $ 2,501 $ - $ 16,525 $ - $ 24,785
- Income taxes 345 1,710 - 10,033 - 12,088
</TABLE>
10
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING BALANCE SHEET
December 31, 1998
(In thousands.Unaudited)
<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 $ 8,368 $ 124 $ 216 $ 29,637 $ - $ 38,345
Receivables 14,373 2,136 246 168,483 0 185,238
Intercompany receivables 107,375 16,826 64 23,329 (147,594) 0
Inventories 139,987 0 929 332,236 0 473,152
Prepaids and other 947 0 17 4,086 0 5,050
Marketable securities 0 1 0 761 0 762
-------------------------------------------------------------------------------------------
Current assets 271,050 19,087 1,472 558,532 (147,594) 702,547
Property, plant and equipment 23,508 0 73 87,670 0 111,251
Investment in subsidiaries 77,189 230,214 37,391 169,548 (514,342) 0
Investment in affiliates 0 0 0 17,413 0 17,413
Other noncurrent assets 6,152 9,382 0 42,124 0 57,658
-------------------------------------------------------------------------------------------
Total assets $ 377,899 $ 258,683 $ 38,936 $ 875,287 $(661,936) $ 888,869
===========================================================================================
Liabilities
Short-term borrowings $ 12,025 $ - $ - $ 340,988 $ - $ 353,013
Current portion of long-term debt 0 0 0 4,050 0 4,050
Accounts payable 17,404 1,860 42 91,637 0 110,943
Intercompany payables 19,817 32,056 1,765 93,956 (147,594) 0
Taxes accrued 6,734 (2,912) (140) 11,986 0 15,668
-------------------------------------------------------------------------------------------
Current liabilities 55,980 31,004 1,667 542,617 (147,594) 483,674
Long-term debt 117,940 0 0 7,322 0 125,262
Convertible subordinated debentures 0 69,000 0 0 0 69,000
Retirement and other benefits 8,397 705 0 11,142 0 20,244
Deferred taxes 221 (2,316) 0 4,569 0 2,474
-------------------------------------------------------------------------------------------
Total liabilities 182,538 98,393 1,667 565,650 (147,594) 700,654
-------------------------------------------------------------------------------------------
Minority interests - - - 29,621 - 29,621
-------------------------------------------------------------------------------------------
Shareholders' equity
Common stock 993 3,089 25,404 139,530 (165,927) 3,089
Additional paid-in capital 130,860 101,989 0 64,839 (195,699) 101,989
Unearned restricted stock
plan compensation (595) (23) (8) (1,093) 0 (1,719)
Treasury stock at cost 0 (4,250) 0 0 0 (4,250)
Retained earnings 78,619 88,454 7,854 105,709 (192,182) 88,454
Accumulated other comprehensive income (14,516) (28,969) 4,019 (28,969) 39,466 (28,969)
-------------------------------------------------------------------------------------------
Total shareholders' equity 195,361 160,290 37,269 280,016 (514,342) 158,594
-------------------------------------------------------------------------------------------
Total liabilities and equity $ 377,899 $ 258,683 $ 38,936 $ 875,287 $(661,936) $ 888,869
===========================================================================================
</TABLE>
11
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS Quarter ended
December 31, 1998.
(In thousands; unaudited)
<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 $ 104,824 $ - $ 494 $ 210,695 $ (47,320) $ 268,693
Cost of sales:
Materials services and supplies 98,011 - 458 191,187 (47,320) 242,336
Interest - - - 5,839 5,839
-----------------------------------------------------------------------------------------
Gross profit 6,813 - 36 13,669 20,518
Selling, general &
administrative expenses 3,241 569 135 14,222 18,167
Other interest expense 2,738 1,306 - 318 4,362
Other income (expense)- net 2,385 1,367 (54) (1,127) 2,571
-----------------------------------------------------------------------------------------
Income (loss) before taxes 3,219 (508) (153) (1,998) 560
Income taxes 1,231 (736) (52) 194 637
-----------------------------------------------------------------------------------------
Income (loss) after taxes 1,988 228 (101) (2,192) (77)
Minority interests - - - 792 792
Equity in earnings of affiliates - - - 45 45
Equity in earnings of subsidiaries 248 532 (1,603) - 823 -
-----------------------------------------------------------------------------------------
Net income 2,236 760 (1,704) (1,355) 823 760
Retained earnings at beginning
of period 76,383 88,335 9,558 107,064 (193,005) 88,335
Common stock dividends - (641) - - (641)
-----------------------------------------------------------------------------------------
Retained earnings at end of period $ 78,619 $ 88,454 $ 7,854 $ 105,709 $(192,182) $ 88,454
=========================================================================================
</TABLE>
12
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Nine months ended December 31, 1998
(In thousands.Unaudited)
<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 $ 164,735 $ - $ 1,449 $ 723,421 $ (121,460) $ 768,145
Cost of sales:
Materials services and supplies 151,232 - 1,362 652,390 (121,460) 683,524
Interest 58 - - 14,834 14,892
---------------------------------------------------------------------------------------
Gross profit 13,445 - 87 56,197 69,729
Selling, general &
administrative expenses 9,932 1,949 341 41,791 54,013
Other interest expense 8,305 3,920 - 1,028 13,253
Other income (expense)- net 6,680 5,328 (157) (2,974) 8,877
---------------------------------------------------------------------------------------
Income (loss) before taxes 1,888 (541) (411) 10,404 11,340
Income taxes 642 (747) (140) 4,263 4,018
---------------------------------------------------------------------------------------
Income (loss) after taxes 1,246 206 (271) 6,141 7,322
Minority interests - - - (1,103) (1,103)
Equity in earnings of affiliates - - - 574 574
Equity in earnings of subsidiaries 8,805 6,587 (3,193) - (12,199) -
---------------------------------------------------------------------------------------
Net income 10,051 6,793 (3,464) 5,612 (12,199) 6,793
Retained earnings at beginning
of period 68,568 82,943 11,318 100,097 (179,983) 82,943
Common stock dividends - (1,282) - - (1,282)
---------------------------------------------------------------------------------------
Retained earnings at end of period $ 78,619 $ 88,454 $ 7,854 $ 105,709 $ (192,182) $ 88,454
=======================================================================================
</TABLE>
13
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
Nine months ended December 31, 1998
(In thousands.Unaudited)
<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 $ (10,238) $ 1,143 $ 5 $ (57,018) $ - $ (66,108)
-------------------------------------------------------------------------------------
Cash flows from investing activities
Property, plant and equipment
- additions (4,497) - (31) (7,464) - (11,992)
- disposals 4,415 - - 5,567 - 9,982
Business (acquisitions) dispositions - - - (7,387) - (7,387)
-------------------------------------------------------------------------------------
Cash provided by (used in)
investing activities (82) - (31) (9,284) - (9,397)
-------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in short-term borrowings 12,025 - - 73,189 - 85,214
Proceeds from long-term borrowings - - - 535 - 535
Repayment of long-term borrowings (168) - - (4,770) - (4,938)
Dividends paid - (1,282) - - - (1,282)
Other - 205 - - - 205
-------------------------------------------------------------------------------------
Cash provided by (used in)
financing activities 11,857 (1,077) - 68,954 - 79,734
-------------------------------------------------------------------------------------
Increase (decrease) in cash for year 1,537 66 (26) 2,652 - 4,229
Cash at beginning of year 6,831 58 242 26,985 - 34,116
-------------------------------------------------------------------------------------
Cash at end of year $ 8,368 $ 124 $ 216 $ 29,637 $ - $ 38,345
=====================================================================================
Cash payments for - Interest $ 5,564 $ 2,506 $ - $ 16,789 $ - $ 24,859
- Income taxes 336 2,053 - 8,274 - 10,663
</TABLE>
14
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Sales for the quarter ended December 31, 1999 were $277.9 million, an increase
of 3.4% from a year earlier. Sales for the nine months period were $753.2
million, a decrease of 2.0% from same period a year earlier. Most of the changes
were due to sales mix in the tobacco and nontobacco segments. Tobacco division
sales of $221.8 million and $600.4 million for the current quarter and nine
months, respectively, were up 3.1% for the quarter and down 1.2% for the nine
months from the corresponding periods in 1998. For the current quarter and nine
months tobacco volume was up 10.1% and 2.6% due to increased shipments from
South America and CIS, and average prices were lower due to sales mix.
Nontobacco sales of $56.1 million and $152.7 million for the current quarter and
nine months, respectively, were up 4.8% and down 4.9% from the same periods a
year earlier. Volume of wool sold during the quarter and nine months were up
14.0% and 13.7% respectively from prior year periods due to increase in sales of
scoured and carbonized wool.
Gross profit for the quarter and nine months of $25.5 million and $78.3 million
improved 24.4% and 12.3% from the corresponding periods in 1998 due primarily to
improvements in margins in wool and sales mix. Selling general and
administrative expenses increased due to inflationary factors, and the write-off
of an export credit note arrangement with a Brazilian bank that filed for
bankruptcy. Current quarter selling, general and administrative expenses include
the write-off of a receivable from a wool affiliate that is in liquidation.
Other income for the quarter and nine months were lower as the prior year
quarter included $1.7 million gain on proceeds of a life insurance policy and in
addition the prior year nine months included gains on disposition of assets of
$3.7 million.
The effective tax rates for the current quarter and nine months were 43.9% and
55.7% against 113.8% and 35.4% in prior year periods, due to differences in tax
rates and credits not utilizable in certain areas where losses are incurred. As
in 1998, for the periods ended December 31, 1999, losses were incurred in the
wool segment where tax relief was not available.
Net income was $2.5 million or $0.20 per share on a basic and diluted basis for
the current quarter, versus $0.8 million, or $0.06 per share during the prior
period quarter. For the nine months, net income was $6.0 million, or $0.46 per
share on a basic and diluted basis, versus $6.8 million, or $0.53 per share
during the same period a year earlier. Basic and diluted earnings are the same
for all periods because the calculation of diluted earnings per share includes
adjustments that are antidilutive.
Liquidity and Capital Resources
Working capital at December 31, 1999 was $191.3 million, compared to $218.9
million a year earlier. Most of the decrease was due to the use of working
capital for business acquisitions and additions to property, plant and
equipment. Capital expenditures for the nine months to December 31, 1999 of
$14.4 million consisted of $12.8 million in the tobacco division that included
investments in our St. Petersburg, Russia factory and routine capital
expenditures and $1.6 million in the wool division. During the same period the
wool division invested $2.5 million in an Australian wool washing operation.
Cash used in operating activities totaled $30.5 million mainly due to an
increase in inventories and a decrease in payables. The Company continues to
closely monitor its inventory levels, which are down from $473.2 million a year
ago to $397.5 million at December 31, 1999.
On May 19, 1999 the Company's major tobacco subsidiaries successfully completed
the amendment of their global revolving bank credit facility. The facility was
increased from $200.0 million to $223.0 million and the maturity date was
extended to July 31, 2002. Financial covenants and other terms and conditions
are essentially unchanged. Borrowings under the facility continue to be
guaranteed by the Company and are secured by substantially all of the assets of
the borrowers. Certain debt agreements to which the Company and its subsidiaries
are parties contain financial covenants that could restrict the payment of cash
dividends. Under its most restrictive covenant, the Company had approximately
$15.9 million of retained earnings available for distribution as dividends at
December 31, 1999.
15
<PAGE>
STANDARD COMMERCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Liquidity and Capital Resources (continued)
Based on the current outlook for the tobacco and wool divisions, 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.
Year 2000 Update
The Company's plans to address the possible exposures related to the impact on
its computer systems of the Year 2000 was described in the Form 10-Q for the
quarter ended September 30, 1999. Since entering the year 2000 the Company has
not experienced any major disruptions to its business nor is it aware of any
significant Year 2000 related disruptions impacting its customers and suppliers.
The Company will continue to monitor its systems over the next several months.
The Company does not anticipate any significant impacts due to Year 2000
exposure from its internal systems as well from the activities of its suppliers
and customers. The cost incurred for addressing Year 2000 issues, which include
the cost of installing internally developed manufacturing software in the
European subsidiary, software upgrades from vendors necessary to be compliant,
and the cost of consultants and employees assigned to implement, were expensed
as incurred. Such costs totaled approximately $1.4 million.
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.
16
<PAGE>
PART II - OTHER INFORMATION
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: February 10, 2000
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
17
<PAGE>
STANDARD COMMERCIAL CORPORATIONCOMPUTATION 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
-------------------------------- --------------------------------
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C>
BASIC EARNINGS PER SHARE
Net income applicable to common stock........................ $ 2,543 $ 760 $ 6,015 $ 6,793
=========== =========== =========== ===========
Basic average shares outstanding............................. 12,963,659 12,824,281 12,948,005 12,816,663
Basic earnings per common share - net....................... $ 0.20 $ 0.06 $ 0.46 $ 0.53
DILUTED EARNINGS PER SHARE
Net income applicable to common stock....................... $ 2,543 $ 760 $ 6,015 $ 6,793
Add - after-tax interest expense on 7 1/4% convertible
subordinated debentures at November 1.............. 825 825 2,475 2,475
----------- ----------- ----------- -----------
Net income applicable to common stock........................ $ 3,368 $ 1,585 $ 8,490 $ 9,268
=========== =========== =========== ===========
Basic average shares outstanding............................. 12,963,659 12,824,281 12,948,005 12,816,663
Increase in shares outstanding assuming
- conversion of 7 1/4% convertible subordinated
debentures at November 13, 1991..................... 2,348,536 2,348,536 2,348,536 2,348,536
Diluted average shares outstanding........................... 15,312,195 15,172,817 15,296,541 15,165,199
Diluted earnings per common share - net...................... $ 0.22* $ 0.10* $ 0.56* $ 0.61*
</TABLE>
*Calculation of diluted earnings per share includes adjustments, which are
antidilutive. Therefore, basic and diluted are shown as the same on the face of
the income statement.
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> SEP-30-1999
<PERIOD-END> DEC-31-1999
<CASH> 30,476
<SECURITIES> 621
<RECEIVABLES> 232,421<F1>
<ALLOWANCES> 0<F2>
<INVENTORY> 397,508
<CURRENT-ASSETS> 667,280
<PP&E> 151,644<F1>
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 885,135
<CURRENT-LIABILITIES> 475,965
<BONDS> 203,120
0
0
<COMMON> 3,118
<OTHER-SE> 147,787
<TOTAL-LIABILITY-AND-EQUITY> 885,135
<SALES> 753,161
<TOTAL-REVENUES> 753,161
<CGS> 674,827
<TOTAL-COSTS> 674,827
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,653
<INCOME-TAX> 5,937
<INCOME-CONTINUING> 4,716
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,015
<EPS-BASIC> 0.46
<EPS-DILUTED> 0.46
<FN>
<F1>SHOWN NET IN FINANCIAL STATEMENTS
<F2>NOT SHOWN SEPARATELY UNDER MATERIALITY GUIDELINES
</FN>
</TABLE>
