<PAGE>
SECURITIES AND EXCHANGE COMMISSIONWei WanFinancial Printing Group
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, 2000
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
Former name, former address and former fiscal year, if changed since last
report - Not applicable
On August 3, 2000 the registrant had outstanding 13,011,104 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>
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
June 30 March 31
------------------- ----------
2000 1999 2000
-------- -------- ----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Cash.................................................................. $ 29,245 $ 32,279 $ 38,349
Receivables........................................................... 201,214 269,671 227,300
Inventories........................................................... 377,427 386,926 340,444
Prepaid expenses...................................................... 7,092 5,945 5,192
Marketable securities................................................. 988 641 586
-------------------------------
Current assets...................................................... 615,966 695,462 611,871
Property, plant and equipment......................................... 146,634 151,664 146,638
Investment in affiliates.............................................. 16,078 15,861 16,059
Other assets.......................................................... 47,270 53,982 46,262
-------------------------------
Total assets........................................................ $825,948 $916,969 $820,830
===============================
LIABILITIES
Short-term borrowings................................................. $270,886 $328,475 $262,059
Current portion of long-term debt..................................... 10,150 12,697 14,325
Accounts payable...................................................... 131,552 147,977 132,115
Taxes accrued......................................................... 9,784 10,778 9,783
-------------------------------
Current liabilities................................................. 422,372 499,927 418,282
Long-term debt........................................................ 129,506 139,522 130,645
Convertible subordinated debentures................................... 69,000 69,000 69,000
Retirement and other benefits......................................... 21,300 20,599 20,536
Deferred taxes........................................................ 6,029 8,934 6,518
-------------------------------
Total liabilities................................................... 648,207 737,982 644,981
-------------------------------
MINORITY INTERESTS.................................................... 27,402 28,426 26,772
-------------------------------
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 15,622,256 (June 99 - 15,554,772; Mar 00 - 15,605,725)........ 3,124 3,111 3,121
Additional paid-in capital............................................ 103,038 102,755 102,986
Unearned restricted stock plan compensation........................... (1,447) (2,031) (1,603)
Treasury shares, 2,617,707 (June 99 - 2,617,707; Mar 00 - 2,617,707).. (4,250) (4,250) (4,250)
Retained earnings..................................................... 98,215 90,045 97,177
Accumulated other comprehensive income................................ (48,341) (39,069) (48,354)
-------------------------------
Total shareholders' equity.......................................... 150,339 150,561 149,077
-------------------------------
Total liabilities and equity........................................ $825,948 $916,969 $820,830
===============================
</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 data; unaudited)
<TABLE>
<CAPTION>
Three months ended
June 30
-------
2000 1999
---- ----
<S> <C> <C>
Sales - tobacco................................................................ $138,731 $196,253
- nontobacco............................................................. 61,153 50,514
---------------------------
Total sales.................................................................. 199,884 246,767
Cost of sales
- Materials, services and supplies......................................... 167,867 215,847
- Interest................................................................. 6,041 5,430
---------------------------
Gross profit............................................................. 25,976 25,490
Selling, general and administrative expenses.................................... 19,550 18,637
Other interest expense.......................................................... 1,844 4,631
Other income (expense) - net.................................................... 287 816
---------------------------
Income before taxes...................................................... 4,869 3,038
Income taxes.................................................................... 2,624 1,904
---------------------------
Income after taxes....................................................... 2,245 1,134
Minority interests.............................................................. (668) (351)
Equity in earnings of affiliates................................................ 111 479
---------------------------
Net income............................................................... 1,688 1,262
Retained earnings at beginning of period........................................ 97,177 89,430
Common stock dividends ......................................................... (650) (647)
---------------------------
Retained earnings at end of period.............................................. $98,215 $90,045
===========================
Earnings per common share
Basic and diluted - net...................................................... $0.13 $0.10
- average shares outstanding............................... 12,999 12,933
Dividend declared per common share.............................................. $0.05 $0.05
</TABLE>
-3-
<PAGE>
The accompanying notes are an integral part of these financial statements.
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands; unaudited)
<TABLE>
<CAPTION>
Three months ended
June 30
-------
2000 1999
---- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................................................... $1,688 $1,262
Depreciation and amortization................................................ 5,451 5,533
Minority interests........................................................... 668 351
Deferred income taxes........................................................ (491) 132
Undistributed earnings of affiliates net of dividends received............... (74) (479)
Loss/(gain) on disposition of property, plant and equipment.................. 6 (157)
Other........................................................................ 88 2,041
--------------------------------
7,336 8,683
Net changes in working capital other than cash
Receivables.................................................................. 21,223 (43,698)
Inventories.................................................................. (37,859) (10,941)
Current payables............................................................. 1,537 (4,382)
---------------------------------
CASH USED FOR OPERATING ACTIVITIES.............................................. (7,763) (50,338)
---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment - additions...................................... (4,976) (2,362)
- dispositions................................... 73 252
Business acquisitions .......................................................... (3) (2,532)
---------------------------------
Cash used for investing activities.............................................. (4,906) (4,642)
--------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term borrowings............................................. 8,827 47,889
Proceeds from long-term borrowings.............................................. 2,138 810
Repayment of long-term borrowings............................................... (7,456) (5,285)
Other........................................................................... 56 78
--------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES........................................... 3,565 43,492
--------------------------------
Increase (decrease) in cash for period.......................................... (9,104) (11,488)
Cash at beginning of period..................................................... 38,349 43,767
--------------------------------
CASH AT END OF PERIOD........................................................... $ 29,245 $32,279
================================
Cash payments for - interest........................................... $5,722 $5,963
- income taxes............................ $3,126 $4,987
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<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. 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
June 30, 2000. 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.
<TABLE>
<CAPTION>
2.INVENTORIES
June 30 March 31
----------------- --------
(In thousands) 2000 1999 2000
-------- -------- --------
<S> <C> <C> <C>
Tobacco $317,161 $332,176 $278,343
Nontobacco 60,266 54,750 62,101
-------- -------- --------
Total $377,427 $386,926 $340,444
======== ======== ========
</TABLE>
3.COMPREHENSIVE INCOME
The statement on comprehensive income requires that an enterprise (1) classify
items of other comprehensive income by their nature in a financial statement and
(2) 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>
June 30
----------------
<S> <C> <C>
2000 1999
------- ------
(In thousands)
Net income $1,688 $ 1,262
Other comprehensive income:
Translation adjustment 13 (1,283)
------ -------
Total comprehensive income (loss) $1,701 $ (21)
====== =======
</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 the
incremental shares from assumed conversion of 7 1/4% Convertible Subordinated
Debentures and the exercise of outstanding stock options are not included
because the calculations include adjustments which are antidilutive.
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>
June 30
-------------------
2000 1999
-------- --------
<S> <C> <C>
Sales
Tobacco $138,731 $196,253
Nontobacco 61,153 50,514
-------- --------
$199,884 $246,767
-------- --------
Net income
Tobacco $ 1,363 $ 1,840
Nontobacco 325 (578)
-------- --------
$ 1,688 $ 1,262
-------- --------
</TABLE>
-5-
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
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>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING BALANCE SHEET
June 30, 2000 (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> <C> <C> <C> <C> <C>
Assets
Cash $ 8,677 $ - $ 39 $ 20,529 $ - $ 29,245
Receivables 16,077 1,532 27 183,578 - 201,214
Intercompany receivables 95,877 18,996 64 27,681 (142,618) -
Inventories 117,526 - - 259,901 - 377,427
Prepaids and other 148 350 1 6,593 - 7,092
Marketable securities - 1 - 987 - 988
---------------------------------------------------------------------------------------------
Current assets 238,305 20,879 131 499,269 (142,618) 615,966
Property, plant and equipment 21,729 - 20 124,885 - 146,634
Investment in subsidiaries 88,693 185,060 31,918 149,755 (455,426) -
Investment in affiliates - - - 16,078 - 16,078
Other noncurrent assets 1,158 9,567 - 36,545 - 47,270
---------------------------------------------------------------------------------------------
Total assets $349,885 $215,506 $32,069 $826,532 ($598,044) $825,948
=============================================================================================
Liabilities
Short-term borrowings $ - $ 23 $ - $270,863 $ - $270,886
Current portion of long-term debt - - - 10,150 - 10,150
Accounts payable 9,961 2,388 - 119,203 - 131,552
Intercompany accounts payable 45,524 56 1,560 95,478 (142,618) -
Taxes accrued 14,178 (6,883) - 2,489 - 9,784
---------------------------------------------------------------------------------------------
Current liabilities 69,663 (4,416) 1,560 498,183 (142,618) 422,372
Long-term debt 115,000 - - 14,506 - 129,506
Convertible subordinated debentures - 69,000 - - - 69,000
Retirement and other benefits 9,122 713 - 11,465 - 21,300
Deferred taxes (933) (1,557) - 8,519 - 6,029
---------------------------------------------------------------------------------------------
Total liabilities 192,852 63,740 1,560 532,673 (142,618) 648,207
Minority interests - - - 27,402 - 27,402
Shareholders' equity
Common stock 993 3,124 32,404 155,217 (188,614) 3,124
Additional paid-in capital 130,860 103,038 - 60,512 (191,372) 103,038
Unearned restricted stock
plan compensation (502) (20) (6) (919) - (1,447)
Treasury stock at cost - (4,250) - - - (4,250)
Retained earnings 47,386 98,215 6,385 99,988 (153,759) 98,215
Accumulated other comprehensive income (21,704) (48,341) (8,274) (48,341) 78,319 (48,341)
---------------------------------------------------------------------------------------------
Total shareholders' equity 157,033 151,766 30,509 266,457 (455,426) 150,339
---------------------------------------------------------------------------------------------
Total liabilities and equity $349,885 $215,506 $32,069 $826,532 ($598,044) $825,948
=============================================================================================
</TABLE>
-7-
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Three months ended June 30, 2000
(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> <C> <C> <C> <C> <C>
Sales $ 43,493 $ - $ 40 $ 208,752 $(52,401) $199,884
Cost of sales:
Materials services and supplies 34,281 - - 185,987 (52,401) 167,867
Interest 851 - - 5,190 - 6,041
----------------------------------------------------------------------------------------
Gross profit 8,361 - 40 17,575 - 25,976
Selling, general &
administrative expenses 2,524 848 50 16,128 - 19,550
Other interest expense 200 1,319 - 325 - 1,844
Other income (expense) net 205 (11) - 93 - 287
----------------------------------------------------------------------------------------
Income (loss) before taxes 5,842 (2,178) (10) 1,215 - 4,869
Income taxes 1,987 (740) - 1,377 - 2,624
----------------------------------------------------------------------------------------
Income (loss) after taxes 3,855 (1,438) (10) (162) - 2,245
Minority interests - - - (668) - (668)
Equity in earnings of affiliates - - - 111 - 111
Equity in earnings of subsidiaries (1,180) 3,126 461 - (2,407) -
----------------------------------------------------------------------------------------
Net income 2,675 1,688 451 (719) (2,407) 1,688
Retained earnings at beginning
of period 44,711 97,177 5,934 100,707 (151,352) 97,177
Common stock dividends - (650) - - - (650)
----------------------------------------------------------------------------------------
Retained earnings at end of period $ 47,386 $ 98,215 $ 6,385 $ 99,988 $(153,759) $ 98,215
========================================================================================
</TABLE>
-8-
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
Three months ended June 30, 2000 (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> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities $ 21,214 $ (143) $ (3) $ (28,831) $ - $(7,763)
Cash flows from investing activities
Property, plant and equipment
- additions (253) - - (4,723) - (4,976)
- disposals - - - 73 - 73
Business (acquisitions) dispositions - - - (3) - (3)
--------------------------------------------------------------------------------------
Cash provided by (used in)
investing activities (253) - - (4,653) (4,906)
Cash flows from financing activities:
Proceeds from long-term borrowings - - - 2,138 - 2,138
Repayment of long-term borrowings (2,940) - - (4,516) - (7,456)
Net change in short-term borrowings (10,212) 23 - 19,016 - 8,827
Dividends received ( paid) - - - - - -
Other 56 - - - - 56
--------------------------------------------------------------------------------------
Cash provided by (used in)
financing activities (13,096) 23 - 16,638 - 3,565
Increase (decrease) in cash for year 7,865 (120) (3) (16,846) - (9,104)
Cash at beginning of year 812 120 42 37,375 - 38,349
--------------------------------------------------------------------------------------
Cash at end of year $ 8,677 $ - $ 39 $ 20,529 $ - $29,245
======================================================================================
Interest $ 278 $ - $ - $ 5,444 $ 5,722
Income taxes $ 480 $ 572 $ - $ 2,074 $ 3,126
</TABLE>
-9-
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING BALANCE SHEET
June 30, 1999 (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> <C> <C> <C> <C> <C>
Assets
Cash $ 48 $ 9 $ 29 $ 32,193 $ - $ 32,279
Receivables 28,082 2,150 133 239,306 - 269,671
Intercompany receivables 141,748 16,440 9 12,338 (170,535) -
Inventories 118,797 - 653 267,476 - 386,926
Prepaid expenses 401 381 14 5,149 - 5,945
Marketable securities - 1 - 640 - 641
-------------------------------------------------------------------------------------
Current assets 289,076 18,981 838 557,102 (170,535) 695,462
Property, plant and equipment 23,975 - 80 127,609 - 151,664
Investment in subsidiaries 81,124 224,095 36,317 150,230 (491,766) -
Investment in affiliates - - - 15,861 - 15,861
Other noncurrent assets 5,421 10,381 - 38,180 - 53,982
-------------------------------------------------------------------------------------
Total assets $399,596 $253,457 $37,235 $888,982 ($662,301) $916,969
=====================================================================================
Liabilities
Short-term borrowings $ 17,415 $ - $ - $311,060 $ - $328,475
Current portion of long-term debt - - - 12,697 - 12,697
Accounts payable 7,455 2,375 15 138,132 - 147,977
Intercompany accounts payable 49,254 34,724 1,742 84,815 (170,535) -
Taxes accrued 7,462 (4,360) (43) 7,719 - 10,778
-------------------------------------------------------------------------------------
Current liabilities 81,586 32,739 1,714 554,423 (170,535) 499,927
Long-term debt 117,940 - - 21,582 - 139,522
Convertible subordinated debentures - 69,000 - - - 69,000
Retirement and other benefits 8,656 705 - 11,238 - 20,599
Deferred taxes 125 (1,548) - 10,357 - 8,934
-------------------------------------------------------------------------------------
Total liabilities 208,307 100,896 1,714 597,600 (170,535) 737,982
Minority interests - - - 28,426 - 28,426
Shareholders' equity
Common stock 993 3,111 32,404 144,312 (177,709) 3,111
Additional paid-in capital 130,860 102,755 - 60,564 (191,424) 102,755
Unearned restricted stock
plan compensation (685) (31) (8) (1,307) - (2,031)
Treasury stock at cost - (4,250) - - - (4,250)
Retained earnings 77,413 90,045 6,041 98,456 (181,910) 90,045
Accumulated other comprehensive income (17,292) (39,069) (2,916) (39,069) 59,277 (39,069)
-------------------------------------------------------------------------------------
Total shareholders' equity 191,289 152,561 35,521 262,956 (491,766) 150,561
-------------------------------------------------------------------------------------
Total liabilities and equity $399,596 $253,457 $37,235 $888,982 ($662,301) $916,969
=====================================================================================
</TABLE>
-10-
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Three months ended June 30, 1999
(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> <C> <C> <C> <C> <C>
Sales $ 24,568 $ - $ 302 $276,689 $ (54,792) $246,767
Cost of sales:
Materials services and supplies 20,725 - 290 249,624 (54,792) 215,847
Interest - - - 5,430 - 5,430
------------------------------------------------------------------------------------
Gross profit 3,843 - 12 21,635 - 25,490
Selling, general &
administrative expenses 2,746 532 94 15,265 - 18,637
Other interest expense 2,819 1,313 - 499 - 4,631
Other income (expense) net 1,657 123 (45) (919) - 816
------------------------------------------------------------------------------------
Income (loss) before taxes (65) (1,722) (127) 4,952 - 3,038
Income taxes (22) (586) (43) 2,555 - 1,904
------------------------------------------------------------------------------------
Income (loss) after taxes (43) (1,136) (84) 2,397 - 1,134
Minority interests - - - (351) - (351)
Equity in earnings of affiliates - - - 479 - 479
Equity in earnings of subsidiaries 3,001 2,398 (476) - (4,923) -
------------------------------------------------------------------------------------
Net income 2,958 1,262 (560) 2,525 (4,923) 1,262
Retained earnings at beginning
of period 81,455 89,430 6,601 95,931 (183,987) 89,430
Common stock dividends (7,000) (647) - - 7,000 (647)
------------------------------------------------------------------------------------
Retained earnings at end of period $ 77,413 $ 90,045 $ 6,041 $ 98,456 $(181,910) $ 90,045
====================================================================================
</TABLE>
-11-
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
Three months ended June 30, 1999 (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> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities $(17,901) $ - $ (19) $(32,418) $ - $(50,338)
-------------------------------------------------------------------------------------
Cash flows from investing activities
Property, plant and equipment
- additions (489) - (4) (1,869) - (2,362)
- disposals 91 - - 161 - 252
Business (acquisitions) dispositions - - - (2,532) - (2,532)
-------------------------------------------------------------------------------------
Cash provided by (used in)
investing activities (398) - (4) (4,240) - (4,642)
-------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in short-term borrowings 17,415 - - 30,474 - 47,889
Proceeds from long-term borrowings - - - 810 - 810
Repayment of long-term borrowings - - - (5,285) - (5,285)
Net proceeds of equity offering - - - - - -
Other 69 9 - - - 78
-------------------------------------------------------------------------------------
Cash provided by (used in)
financing activities 17,484 9 - 25,999 - 43,492
-------------------------------------------------------------------------------------
Increase (decrease) in cash for year (815) 9 (23) (10,659) - (11,488)
Cash at beginning of year 863 - 52 42,852 - 43,767
-------------------------------------------------------------------------------------
Cash at end of year $ 48 $ 9 $ 29 $ 32,193 $ - $ 32,279
=====================================================================================
Interest $ 128 $ - $ - $ 5,835 $ - $ 5,963
Income taxes 274 1,517 - 3,196 - 4,987
</TABLE>
-12-
<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, 2000 were $199.9 million, versus $246.8
million a year earlier. Sales of $138.7 million for the tobacco division were
down 29.3% from the corresponding period in 1999 and volumes were 29.1% lower
than last year. The reductions were largely due to timing of shipments from
South America and Africa and considerable reduction in the quantity of tobacco
produced in Indonesia. The shipments were late because of a delayed crop in
Brazil and Malawi,and a delay in tobacco being brought to the auction floors
during the early part of the season in Zimbabwe due to internal unrest. In
addition, the change in customer intake pattern due to industry consolidation
also affected the sales for the current quarter. Average sales prices were 6.4%
below the prior year's first quarter. Nontobacco sales of $61.2 million , were
up 21.1% and the volume increased by 21.2%. This was largely due to firming of
wool markets which was influenced by the continuing reduction of Australian wool
stock- pile. The key Australian market price indicator at June 30 this year was
712 cents versus 524 cents at the same time last year.
Gross profit for the quarter of $26.0 million improved 1.9% from the 1999
quarter due primarily to favorable market conditions in the nontobacco segment.
Gross margins were better than in the prior year because of higher processing
income from tobacco and improvements in margins resulting from the firming of
wool markets. Selling, general and administrative expenses increased in line
with inflationary factors. Interest expense was lower primarily due to lower
debt levels. Other income in the prior period included gain on disposition of
assets of $0.2 million and interest income of $0.6 million versus a small loss
on disposition of assets and interest income of $0.4 million in the current
quarter.
Income before taxes was higher mainly due to improved margins from tobacco
processing and favorable trading conditions in the nontobacco segment. The
effective tax rate was 53.9% in the current quarter versus 62.7% in the June
1999 quarter. This was mainly due to differences in tax rates and tax credits
not utilizable in certain areas where losses are incurred. Income attributable
to minority interest increased due to increased contributions from oriental
tobacco operations. Equity in earnings of affilates were lower as a result of
reduced contribution from African affiliates.
Net income was $1.7 million, or $0.13 per share on a basic and diluted basis
with 13.0 million average shares outstanding, versus $1.3 million, or $0.10 per
share on 12.9 million shares outstanding for the June 1999 quarter.
Liquidity and Capital Resources
Working capital at June 30, 2000 was $193.6 million, compared to $195.5 million
a year earlier. Most of the decrease was due to the utilization of working
capital towards additions to property plant and equipment and the repayment of
long-term borrowings. Capital expenditures during the 2000 quarter of $5.0
million consisted of a $3.1 million addition to a tobacco warehousing facility
in Italy and routine expenditures of $1.8 million and $0.1 million in the
tobacco and wool divisions, respectively. Cash used in operating activities
during the first quarter totaled $7.8 million mainly due to increases in
inventories. The Company continues to closely monitor its inventory levels,
which fluctuate, depending on seasonal factors and timing of deliveries to
customers.
On May 19, 1999, the Company's major tobacco subsidiaries amended their global
revolving bank credit facility. The amount of the facility was increased from
$200.0 million to $233.0 million. The maturity date was extended to July 31,
2000 to July 31, 2002. Financial covenants and other terms and conditions are
essentially unchanged. In fiscal 2000, this facility was increased to $250.0
million with the addition of two banks. 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, which could restrict
payment of cash dividends. Under its most restrictive covenant, the Company had
approximately $17.6 million of retained earnings available for distribution as
dividends at June 30, 2000.
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<PAGE>
Year 2000 Matters
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. As the Year 2000 disruptions
could occur throughout the year 2000 and into 2001, the Company will continue to
monitor its systems and will address promptly any problems that occur.
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.
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<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:
4 (i) Fifth Supplemental Agreement dated May 15, 2000 between the
Company and certain subsidiaries and Deutsche Bank A.G. et al.
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 8, 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
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