<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 SEPTEMBER 30, 2000
Commission file number 1-9875
[LOGO]
STANDARD COMMERCIAL CORPORATION
Incorporated under the laws of I.R.S. Employer Identification No.
North Carolina 13-1337610
2201 Miller Road, Wilson, North Carolina 27893
Telephone Number 252-291-5507
On November 1, 2000 the registrant had outstanding 13,174,370 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 I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
<TABLE>
<CAPTION>
September 30 March 31
-------------------
2000 1999 2000
-------- -------- --------
(unaudited)
<S> <C>
ASSETS
Cash............................................................. $ 23,703 $ 37,277 $ 38,349
Receivables...................................................... 195,295 223,890 227,300
Inventories...................................................... 343,731 385,741 340,444
Prepaid expenses................................................. 9,160 7,577 5,192
Marketable securities............................................ 535 640 586
-------- -------- --------
Current assets................................................. 572,424 655,125 611,871
Property, plant and equipment.................................... 142,140 154,301 146,638
Investment in affiliates......................................... 15,644 15,983 16,059
Other assets..................................................... 45,171 51,712 46,262
-------- -------- --------
Total assets................................................... $775,379 $877,121 $820,830
======== ======== ========
LIABILITIES
Short-term borrowings............................................ $255,238 $351,919 $262,059
Current portion of long-term debt................................ 9,982 12,931 14,325
Accounts payable................................................. 103,283 92,045 132,115
Taxes accrued.................................................... 10,284 9,045 9,783
-------- -------- --------
Current liabilities............................................ 378,787 465,940 418,282
Long-term debt................................................... 127,866 134,400 130,645
Convertible subordinated debentures.............................. 66,500 69,000 69,000
Retirement and other benefits.................................... 21,105 20,751 20,536
Deferred taxes................................................... 5,632 7,817 6,518
-------- -------- --------
Total liabilities.............................................. 599,890 697,908 644,981
-------- -------- --------
MINORITY INTERESTS............................................... 26,670 27,757 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 15,788,188 (Sept. 99 - 15,570,240; Mar 00 - 15,605,725).. 3,128 3,114 3,121
Additional paid-in capital....................................... 103,115 102,834 102,986
Unearned restricted stock plan compensation...................... (1,308) (1,890) (1,603)
Treasury shares, 2,617,707....................................... (4,250) (4,250) (4,250)
Retained earnings................................................ 103,220 91,585 97,177
Accumulated other comprehensive income........................... (55,086) (39,937) (48,354)
-------- -------- --------
Total shareholders' equity..................................... 148,819 151,456 149,077
-------- -------- --------
Total liabilities and equity................................... $775,379 $877,121 $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 information; unaudited)
<TABLE>
<CAPTION>
Second quarter ended Six months ended
September 30 September 30
---------------------------- ----------------------------
<S> <C>
2000 1999 2000 1999
-------- -------- -------- --------
Sales - tobacco............................................ $208,179 $182,423 $346,910 $378,676
- nontobacco......................................... 44,485 46,055 105,638 96,569
-------- -------- -------- --------
Total sales............................................... 252,664 228,478 452,548 475,245
Cost of sales - materials, services and supplies........... 213,803 196,090 381,670 411,937
- interest................................... 10,747 5,074 16,788 10,504
-------- -------- -------- --------
Gross profit.............................................. 28,114 27,314 54,090 52,804
Selling, general and administrative expenses................ 18,732 21,299 38,282 39,936
Other interest expense...................................... 1,807 2,877 3,651 7,508
Other income (expense) - net................................ 394 623 681 1,439
-------- -------- -------- --------
Income before taxes....................................... 7,969 3,761 12,838 6,799
Income taxes................................................ (2,956) (2,340) (5,580) (4,244)
-------- -------- -------- --------
Income after taxes........................................ 5,013 1,421 7,258 2,555
Minority interests.......................................... 24 588 (644) 237
Equity in earnings of affiliates............................ (20) 201 91 680
-------- -------- -------- --------
Income before extraordinary gain.......................... 5,017 2,210 6,705 3,472
Extraordinary gain due to buyback of convertible
subordinated debentures, net of income tax
charge of $329,000........................................ 639 -0- 639 -0-
-------- -------- -------- --------
Net income................................................ 5,656 2,210 7,344 3,472
Retained earnings at beginning of period.................... 98,215 90,045 97,177 89,430
Common stock dividends...................................... (651) (670) (1,301) (1,317)
-------- -------- -------- --------
Retained earnings at end of period.......................... $103,220 $ 91,585 $103,220 $ 91,585
======== ======== ======== ========
Earnings per common share
Basic and diluted...........................................
Income before extraordinary gain.......................... $ 0.38 $ 0.17 $ 0.51 $ 0.27
Etraordinary gain......................................... $ 0.05 $ 0.00 $ 0.05 $ 0.00
-------- -------- -------- --------
Net income................................................ $ 0.43 $ 0.17 $ 0.56 $ 0.27
-------- -------- -------- --------
- average shares outstanding........................... 13,065 12,947 13,032 12,940
Dividends paid per common share $ 0.05 $ 0.05 $ 0.10 $ 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>
Six months ended
September 30
-----------------
2000 1999
-----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................................................. $ 7,344 $ 3,472
Depreciation and amortization.......................................... 10,749 11,082
Minority interests..................................................... 644 (237)
Deferred income taxes.................................................. (682) (966)
Undistributed earnings of affiliates net of dividends received......... (31) (680)
Gain on buyback of subordinated debentures............................. (639) 0
Gain on disposition of property, plant and equipment................... (114) (242)
Other.................................................................. (82) 2,459
---------------------
17,189 14,888
Net changes in working capital other than cash
Receivables............................................................ 18,789 1,713
Inventories............................................................ (11,202) (10,138)
Current payables....................................................... (15,122) (62,098)
---------------------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES........................ 9,654 (55,635)
---------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment - additions............................. (7,806) (10,607)
- dispositions.......................... 254 1,439
Business (acquisitions) dispositions.................................... 12 (2,501)
---------------------
CASH USED FOR INVESTING ACTIVITIES...................................... (7,540) (11,669)
---------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term borrowings..................................... (6,821) 71,332
Proceeds from long-term borrowings...................................... 5,491 1,172
Repayment of long-term borrowings....................................... (12,404) (10,534)
Buyback of convertible subordinated debentures.......................... (1,861) 0
Dividends paid.......................................................... (1,301) (1,316)
Other................................................................... 136 160
---------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES....................... (16,760) 60,814
---------------------
Increase (decrease) in cash for period.................................. (14,646) (6,490)
Cash at beginning of period............................................. 38,349 43,767
---------------------
CASH AT END OF PERIOD................................................... $23,703 $ 37,277
=====================
Cash payments for - interest............................................ $19,387 $ 18,970
- income taxes........................................ $ 5,181 $ 5,628
</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
September 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.
2.INVENTORIES
September 30 March 31
---------------- --------
(In thousands) 2000 1999 2000
-------- -------- --------
Tobacco $282,744 $329,883 $278,343
Nontobacco 60,987 55,858 62,101
-------- -------- --------
Total $343,731 $385,741 $340,444
======== ======== ========
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:
Quarter ended Six months ended
September 30 September 30
------------- -----------------
2000 1999 2000 1999
---- ---- ---- ----
(In thousands)
Net income $ 5,656 $2,210 $ 7,344 $ 3,472
Other comprehensive income:
Translation adjustment (6,745) (868) (6,732) (2,151)
-------- ------- -------- --------
Total comprehensive income (loss) $(1,089) $1,342 $ 612 $ 1,321
-------- ------- -------- --------
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
second quarter and six months ended September 30, 2000, 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
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
Quarter ended Six months ended
September 30 September 30
------------- ----------------
2000 1999 2000 1999
---- ---- ---- ----
(In thousands)
Sales
Tobacco $208,179 $182,423 $346,910 $378,676
Nontobacco 44,485 46,055 105,638 96,569
-------- -------- -------- --------
$252,664 $228,478 $452,548 $475,245
-------- -------- -------- --------
Net income (loss)
Tobacco $ 5,456 $ 3,657 $ 6,819 $ 5,497
Nontobacco 200 (1.447) 525 (2,025)
-------- -------- -------- --------
$ 5,656 $ 2,210 $ 7,344 $ 3,472
-------- -------- -------- --------
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
September 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>
Assets
Cash $ 502 $ 20 $ 35 $ 23,146 $ - 23,703
Receivables 24,663 1,523 18 169,091 - 195,295
Intercompany receivables 139,465 12,261 93 17,724 (169,543) -
Inventories 92,591 - - 251,140 - 343,731
Prepaids and other 273 254 1 8,632 - 9,160
Marketable securities - 1 - 534 - 535
-------------------------------------------------------------------------------------
Current assets 257,494 14,059 147 470,267 (169,543) 572,424
Property, plant and equipment 21,473 - 16 120,651 - 142,140
Investment in subsidiaries 88,039 184,753 27,706 149,866 (450,364) -
Investment in affiliates - - - 15,644 - 15,644
Other noncurrent assets 939 9,615 - 34,617 - 45,171
-------------------------------------------------------------------------------------
Total assets $367,945 $208,427 $27,869 $791,045 ($619,907) $775,379
=====================================================================================
Liabilities
Short-term borrowings $ 7,915 $ - $ - $ 247,323 $ - $ 255,238
Current portion of long-term debt - - - 9,982 - 9,982
Accounts payable 18,601 516 - 84,166 - 103,283
Intercompany accounts payable 42,444 167 1,574 125,358 (169,543) -
Taxes accrued 15,625 (8,051) - 2,710 - 10,284
-------------------------------------------------------------------------------------
Current liabilities 84,585 (7,368) 1,574 469,539 (169,543) 378,787
Long-term debt 115,000 - - 12,866 - 127,866
Convertible subordinated debentures - 66,500 - - - 66,500
Retirement and other benefits 9,204 743 - 11,158 - 21,105
Deferred taxes (933) (1,557) - 8,122 - 5,632
-------------------------------------------------------------------------------------
Total liabilities 207,856 58,318 1,574 501,685 (169,543) 599,890
Minority interests - - - 26,670 - 26,670
Shareholders' equity
Common stock 993 3,128 32,404 155,213 (188,610) 3,128
Additional paid-in capital 130,860 103,115 - 60,435 (191,295) 103,115
Unearned restricted stock
plan compensation (464) (18) (5) (821) - (1,308)
Treasury stock at cost - (4,250) - - - (4,250)
Retained earnings 53,736 103,220 6,473 102,949 (163,158) 103,220
Accumulated other comprehensive income (25,036) (55,086) (12,577) (55,086) 92,699 (55,086)
-------------------------------------------------------------------------------------
Total shareholders' equity 160,089 150,109 26,295 262,690 (450,364) 148,819
-------------------------------------------------------------------------------------
Total liabilities and equity $367,945 $208,427 $27,869 $791,045 ($619,907) $775,379
=====================================================================================
</TABLE>
7
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Second quarter ended September 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>
Sales $ 83,387 $ - $ 46 $ 247,368 $(78,137) $252,664
Cost of sales:
Materials services and supplies 70,197 - - 221,743 (78,137) 213,803
Interest 5,904 - - 4,843 - 10,747
--------------------------------------------------------------------------------------
Gross profit 7,286 - 46 20,782 - 28,114
Selling, general &
administrative expenses 2,944 936 56 14,796 - 18,732
Other interest expense 149 1,304 - 354 - 1,807
Other income (expense) net 1,077 86 8 (777) - 394
--------------------------------------------------------------------------------------
Income (loss) before taxes 5,270 (2,154) (2) 4,855 - 7,969
Income taxes 1,791 (733) - 1,898 - 2,956
--------------------------------------------------------------------------------------
Income (loss) after taxes 3,479 (1,421) (2) 2,957 - 5,013
Minority interests - - - 24 - 24
Equity in earnings of affiliates - - - (20) - (20)
Equity in earnings of subsidiaries 2,871 6,438 90 - (9,399) -
--------------------------------------------------------------------------------------
Income before extraordinary gain 6,350 5,017 88 2,961 (9,399) 5,017
Extaordinary gain due to buyback of
Convertible subordinated debentures net
of income tax charge of $329,000 - 639 - - - 639
--------------------------------------------------------------------------------------
Net income 6,350 5,656 88 2,961 (9,399) 5,656
Retained earnings at beginning
of period 47,386 98,215 6,385 99,988 (153,759) 98,215
Common stock dividends - (651) - - - (651)
--------------------------------------------------------------------------------------
Retained earnings at end of period $ 53,736 $ 103,220 $ 6,473 $ 102,949 $(163,158) $103,220
======================================================================================
</TABLE>
8
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Six months ended September 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>
Sales $126,880 $ - $ 86 $456,120 $(130,538) $452,548
Cost of sales:
Materials services and supplies 104,478 - - 407,730 (130,538) 381,670
Interest 6,755 - - 10,033 - 16,788
------------------------------------------------------------------------------------
Gross profit 15,647 - 86 38,357 - 54,090
Selling, general &
administrative expenses 5,468 1,784 106 30,924 - 38,282
Other interest expense 349 2,623 - 679 - 3,651
Other income (expense) net 1,282 75 8 (684) - 681
------------------------------------------------------------------------------------
Income (loss) before taxes 11,112 (4,332) (12) 6,070 - 12,838
Income taxes 3,778 (1,473) - 3,275 - 5,580
------------------------------------------------------------------------------------
Income (loss) after taxes 7,334 (2,859) (12) 2,795 - 7,258
Minority interests - - - (644) - (644)
Equity in earnings of affiliates - - - 91 - 91
Equity in earnings of subsidiaries 1,691 9,564 551 - (11,806) -
------------------------------------------------------------------------------------
Income before extraordinary gain 9,025 6,705 539 2,242 (11,806) 6,705
Extaordinary gain due to buyback of
Convertible subordinated debentures net
of income tax charge of $329,000 - 639 - - - 639
------------------------------------------------------------------------------------
Net income 9,025 7,344 539 2,242 (11,806) 7,344
Retained earnings at beginning
of period 44,711 97,177 5,934 100,707 (151,352) 97,177
Common stock dividends - (1,301) - - - (1,301)
------------------------------------------------------------------------------------
Retained earnings at end of period $ 53,736 $ 103,220 $ 6,473 $102,949 (163,158) $103,220
====================================================================================
</TABLE>
9
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
Six months ended September 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>
Cash provided by (used in)
operating activities $ 5,611 $ - $ (7) $ 4,050 $ - $ 9,654
Cash flows from investing activities
Property, plant and equipment
- additions (821) - - (6,985) - (7,806)
- disposals 1 - - 253 - 254
Business (acquisitions) dispositions - - - 12 - 12
------------------------------------------------------------------------------------
Cash provided by (used in)
investing activities (820) - - (6,720) (7,540)
Cash flows from financing activities:
Proceeds from long-term borrowings - - - 5,491 - 5,491
Repayment of long-term borrowings (2,940) - - (9,464) - (12,404)
Net change in short-term borrowings (2,297) - - (4,524) - (6,821)
Buyback of debentures - (1,861) - - - (1,861)
Dividends received /( paid) - (1,301) - - - (1,301)
Other 136 3,062 - (3,062) - 136
------------------------------------------------------------------------------------
Cash provided by (used in)
financing activities (5,101) (100) - (11,559) - (16,760)
Increase (decrease) in cash for year (310) (100) (7) (14,229) - (14,646)
Cash at beginning of year 812 120 42 37,375 - 38,349
------------------------------------------------------------------------------------
Cash at end of year $ 502 $ 20 $ 35 $ 23,146 - $ 23,703
====================================================================================
Interest $ 5,241 $ 2,486 $ - $ 11,660 $ 19,387
Income taxes 823 1,700 - 2,658 5,181
</TABLE>
10
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING BALANCE SHEET
September 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>
Assets
Cash $ 3,044 $ - $ 45 $ 34,188 $ - $ 37,277
Receivables 32,001 2,029 213 189,647 - 223,890
Intercompany receivables 138,320 16,477 31 23,160 (177,988) 0
Inventories 121,376 0 507 263,858 - 385,741
Prepaids and other 1,009 429 14 6,125 - 7,577
Marketable securities - 1 - 639 - 640
----------------------------------------------------------------------------------
Current assets 295,750 18,936 810 517,617 (177,988) 655,125
Property, plant and equipment 23,336 - 80 130,885 - 154,301
Investment in subsidiaries 93,037 226,988 35,223 166,766 (522,014) 0
Investment in affiliates - - - 15,983 - 15,983
Other noncurrent assets 5,203 9,966 - 36,543 - 51,712
----------------------------------------------------------------------------------
Total assets $ 417,326 $ 255,890 $ 36,113 $ 867,794 $(700,002) $ 877,121
==================================================================================
Liabilities
Short-term borrowings $ 9,373 $ 173 $ - $ 342,373 $ - $ 351,919
Current portion of long-term debt - - - 12,931 - 12,931
Accounts payable 15,820 466 20 75,739 - 92,045
Intercompany payables 62,133 39,114 1,821 74,920 (177,988) 0
Taxes accrued 7,519 (5,368) (81) 6,975 - 9,045
----------------------------------------------------------------------------------
Current liabilities 94,845 34,385 1,760 512,938 (177,988) 465,940
Long-term debt 117,940 - - 16,460 - 134,400
Convertible subordinated debentures - 69,000 - - - 69,000
Retirement and other benefits 8,745 735 - 11,271 - 20,751
Deferred taxes 125 (1,548) - 9,240 - 7,817
----------------------------------------------------------------------------------
Total liabilities 221,655 102,572 1,760 549,909 (177,988) 697,908
Minority interests - - - 27,757 - 27,757
----------------------------------------------------------------------------------
Shareholders' equity
Common stock 993 3,114 32,404 164,389 (197,786) 3,114
Additional paid-in capital 130,860 102,834 - 64,839 (195,699) 102,834
Unearned restricted stock
plan compensation (639) (28) (8) (1,215) - (1,890)
Treasury stock at cost - (4,250) - - - (4,250)
Retained earnings 82,639 91,585 4,576 102,052 (189,267) 91,585
Accumulated other comprehensive income (18,182) (39,937) (2,619) (39,937) 60,738 (39,937)
----------------------------------------------------------------------------------
Total shareholders' equity 195,671 153,318 34,353 290,128 (522,014) 151,456
----------------------------------------------------------------------------------
Total liabilities and equity $ 417,326 $ 255,890 $ 36,113 $ 867,794 $(700,002) $ 877,121
==================================================================================
</TABLE>
11
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Second quarter ended September 30, 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 $ 42,221 $ - $ 283 $240,905 $ (54,931) $228,478
Cost of sales:
Materials services and supplies 37,075 - 264 213,682 (54,931) 196,090
Interest 360 - - 4,714 5,074
----------------------------------------------------------------------------------------
Gross profit 4,786 - 19 22,509 27,314
Selling, general &
administrative expenses 3,318 924 84 16,973 21,299
Other interest expense 1,058 1,314 - 505 2,877
Other income (expense)- net (48) (112) (47) 830 623
----------------------------------------------------------------------------------------
Income (loss) before taxes 362 (2,350) (112) 5,861 3,761
Income taxes 123 (799) (38) 3,054 2,340
----------------------------------------------------------------------------------------
Income (loss) after taxes 239 (1,551) (74) 2,807 1,421
Minority interests - - - 588 588
Equity in earnings of affiliates - - - 201 201
Equity in earnings of subsidiaries 4,987 3,761 (1,391) - (7,357) -
----------------------------------------------------------------------------------------
Net income 5,226 2,210 (1,465) 3,596 (7,357) 2,210
Retained earnings at beginning
of period 77,413 90,045 6,041 98,456 (181,910) 90,045
Common stock dividends - (670) - - (670)
----------------------------------------------------------------------------------------
Retained earnings at end of period $ 82,639 $ 91,585 $ 4,576 $102,052 $(189,267) $ 91,585
========================================================================================
</TABLE>
12
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
Six months ended September 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>
Sales $ 66,789 $ - $ 585 $517,594 $(109,723) $475,245
Cost of sales:
Materials services and supplies 57,800 - 554 463,306 (109,723) 411,937
Interest 360 - - 10,144 - 10,504
----------------------------------------------------------------------------------------
Gross profit 8,629 - 31 44,144 - 52,804
Selling, general &
administrative expenses 6,064 1,456 178 32,238 - 39,936
Other interest expense 3,877 2,627 - 1,004 - 7,508
Other income (expense)- net 1,609 11 (92) (89) - 1,439
----------------------------------------------------------------------------------------
Income (loss) before taxes 297 (4,072) (239) 10,813 - 6,799
Income taxes 101 (1,385) (81) 5,609 - 4,244
----------------------------------------------------------------------------------------
Income (loss) after taxes 196 (2,687) (158) 5,204 - 2,555
Minority interests - - - 237 - 237
Equity in earnings of affiliates - - - 680 - 680
Equity in earnings of subsidiaries 7,988 6,159 (1,867) - (12,280) -
----------------------------------------------------------------------------------------
Net income 8,184 3,472 (2,025) 6,121 (12,280) 3,472
Retained earnings at beginning
of period 81,455 89,430 6,601 95,931 (183,987) 89,430
Common stock dividends (7,000) (1,317) - - 7,000 (1,317)
----------------------------------------------------------------------------------------
Retained earnings at end of period $ 82,639 $ 91,585 $ 4,576 $102,052 $(189,267) $ 91,585
========================================================================================
</TABLE>
13
<PAGE>
STANDARD COMMERCIAL CORPORATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
Six months ended September 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>
Cash provided by (used in)
operating activities $ (6,650) $ - $ 2 $(48,987) $ - $(55,635)
Cash flows from investing activities
Property, plant and equipment
- additions (703) - (9) (9,895) - (10,607)
- disposals 91 - - 1,348 - 1,439
Business (acquisitions) dispositions - - - (2,501) - (2,501)
----------------------------------------------------------------------------------
Cash provided by (used in)
investing activities (612) - (9) (11,048) - (11,669)
----------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in short-term borrowings 9,373 174 - 61,785 - 71,332
Proceeds from long-term borrowings - - - 1,172 - 1,172
Repayment of long-term borrowings - - - (10,534) - (10,534)
Dividends paid - (1,316) - - - (1,316)
Other 70 1,142 - (1,052) - 160
----------------------------------------------------------------------------------
Cash provided by (used in)
financing activities 9,443 - - 51,371 - 60,814
----------------------------------------------------------------------------------
Increase (decrease) in cash for year 2,181 - (7) (8,664) - (6,490)
Cash at beginning of year 863 - 52 42,852 - 43,767
----------------------------------------------------------------------------------
Cash at end of year $ 3,044 $ - $ 45 $ 34,188 $ - $ 37,277
==================================================================================
Cash payments for - Interest $ 5,537 $ 2,501 $ - $ 10,932 $ - $ 18,970
- Income taxes 340 1,710 - 3,578 - 5,628
</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 September 30, 2000 were $252.7 million, an increase
of 10.6% from a year earlier. Sales for the six months period were $452.5
million, a decrease of 4.8% from same period a year earlier. Tobacco division
sales of $208.2 million and $346.9 million for the current quarter and six
months respectively, were up 14.1% for the quarter and 8.4% down for the six
months from the corresponding periods in 1999. Overall, for the quarter, tobacco
volume was up 15.4%, largely due to increases in North America, Europe, Far East
and South America, and average prices worldwide were marginally lower. For the
current six month period, volume was 8.2% lower than the corresponding period in
fiscal 2000 despite the increased volume during the current quarter. Shipments
from Zimbabwe and Malawi were lower than the fiscal 2000 corresponding six month
period because of the late start of auction floors in Zimbabwe due to internal
unrest and delayed crop in Malawi. In addition, the industry is also
experiencing the change in customer intake patterns due to industry
consolidation. Looking forward for the full year, sales revenues will be
negatively impacted by the decision of several large cigarette manufacturers in
the U.S. to contract some of their burley requirements directly from farmers.
This should not materially impact income however, as we will continue to receive
and process these contracted tobaccos. Nontobacco sales of $44.5 million and
$105.6 million for the current quarter and six months, respectively, were down
3.4% and up 9.4% from the same periods a year earlier. The September quarter is
usually weak due to Europe's summer holiday season. The improvement in the
current six months was largely due to the firming of wool markets which was
influenced by strong demand from China, increased demand for superfine wools,
cashmere and mohair from the fashion industry and a steady reduction of
Australian wool stock-pile.
Gross profit for the quarter and six months of $28.1 million and $54.1 million
improved 2.9% and 2.4% from the corresponding periods in fiscal 2000 due
primarily to sales mix. Selling general and administrative expenses in the prior
year periods included the write-off of an export credit note arrangement with a
Brazilian bank that filed for bankruptcy.
The effective tax rate decreased to 37.1% and 43.5% in the current second
quarter and six months from 62.2% and 62.4% in the corresponding periods a year
earlier. This was due to differences in tax rates and credits not utilized in
some areas where losses were incurred. For the periods ended September 30, 1999
losses were incurred in the nontobacco segment where tax relief was not
available. This segment recorded a small profit during the current year
periods.
Net income for the quarter was $5.7 million or $0.43 per share on a basic and
diluted basis, versus $2.2 million, or $0.17 per share for the corresponding
prior year quarter. For the six months period, net income was $7.3 million, or
$0.56 per share on a basic and diluted basis, versus $3.5 million, or $0.27 per
share in the prior year period. The current periods net income included an
extraordinary gain of $0.05 per share due to buyback of Convertible subordinated
debentures. 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 September 30, 2000 was $193.6 million, compared to $189.2
million a year earlier. Most of the increase was due to contributions from
operating activities. During the current six months the Company bought $2.5
million of its convertible subordinated debentures using internally generated
working capital. Capital expenditures during the current year of $7.8 million
consisted of $7.1 million in the tobacco division that included $3.1 million
addition to a tobacco warehousing facility in Italy and routine capital
expenditures, and $0.7 million in the wool division. The Company continues to
closely monitor its inventory levels, which are down from $385.7 million a year
ago to $343.7 million at September 30, 2000.
15
<PAGE>
STANDARD COMMERCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued)
Liquidity and Capital Resources (continued)
On May 19, 1999 the Company's major tobacco subsidiaries amended their global
revolving bank credit facility. The facility was increased from $200.0 million
to $233.0 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 $17.3 million of retained earnings
available for distribution as dividends at September 30, 2000.
Based on the 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.
Subsequent Events
The Company has continued to purchase its convertible subordinated debentures
pursuant to the program announced in June 2000. As of November 1, 2000, an
additional $5.7 million face amount of debentures had been purchased at a
discount. Assuming no additional repurchases, a gain will be reported as an
extraordinary item, net of tax of approximately $1.5 million in the third fiscal
quarter ended December 31, 2000. This brings the total repurchased for the
fiscal year to date to $8.2 million. Purchases will continue to be made as
opportunities become available at a discount and working capital is available.
The Company is restricted by certain of its debt covenants to the amount it can
allocate for such repurchases. This amount is currently limited to
approximately $25.0 million of face amount. We will continue to update progress
of this program in our quarterly and annual reports.
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. An annual meeting of shareholders was held on August 8, 2000.
b. Three persons nominated by management were elected as directors
for terms expiring in 2003, as follows:
Nominee Votes For Votes Withheld
------- --------- --------------
J. Alec G. Murray 10,620,726 946,807
Daniel M. Sullivan 10,619,787 947,746
B. Clyde Preslar 10,620,686 946,847
Mark W. Kehaya 10,620,318 947,215
In addition the following directors remained in office after the meeting:
William S. Barrack, Jr., Charles H. Mullen, William S. Sheridan,
Marvin W. Coghill, Robert E. Harrison and William A. Ziegler.
c. The appointment of Deloitte & Touche LLP as the company's independent
auditors for fiscal 2001 was approved by a vote of 11,536,767 shares
in favor, 26,361 shares against and 4,405 shares abstaining.
d. The amendment to the Performance Improvement Compensation Plan to
increase the number of shares available for issuance there under from
682,850 to 1,432,850 was defeated by a vote of 5,117,149 shares
against, 4,643,818 shares in favor and 15,197 shares abstaining.
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: November 3, 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
