RICHMOND, Va., May 24, 2023
/PRNewswire/ -- George C. Freeman, III, Chairman, President,
and Chief Executive Officer of Universal Corporation (NYSE:UVV),
stated, "Fiscal year 2023 was a good year for Universal. Tobacco
shipments were strong, as logistical constraints eased in fiscal
year 2023, and despite tight tobacco supply conditions, we were
able to secure the leaf tobacco needed by our customers. Our
plant-based ingredients platform continued to perform well, and we
are excited about our progress in integrating our ingredients
companies and executing on our strategies. During fiscal year 2023,
we enhanced and increased the scope of our platform by adding sales
and research and development resources, and we recently announced
plans to expand our plant-based ingredients platform's
manufacturing capabilities.
"Our operating income and net income for fiscal year 2023 were
up 13% and 43%, respectively, compared to fiscal year 2022, in part
due to higher tobacco shipments and sales volumes. Our results for
fiscal year 2023 and the quarter ended March
31, 2023, included a favorable final ruling on a legal case
involving one of our subsidiaries in Brazil regarding the exclusion of certain tax
credits on exported goods in the calculation of taxable income. As
a result of the favorable ruling, we recognized $5.0 million of interest income and a
$24.2 million net income tax benefit
in the quarter ended March 31,
2023.
"We were pleased to see a return to more normal shipping
conditions, particularly for our tobacco operations, in fiscal year
2023. Due to this improved logistical environment, we were able to
ship a large amount of carryover tobacco from prior crops, notably
from Brazil. Some of the tobacco
shipped in fiscal year 2023 was lower margin tobacco due to sales
mix and sales of tobacco written down in prior quarters, however,
operating income for our Tobacco Operations segment was up about
10% in fiscal year 2023, compared to fiscal year 2022, largely on
the higher tobacco shipments. Results for our Tobacco Operations
segment were also up in the quarter ended March 31, 2023, compared to the quarter
ended March 31, 2022, as lower tobacco inventory write-downs
offset slightly lower tobacco sales volumes. Tobacco supply was
tight for virtually all types of tobacco in fiscal year 2023, and
African burley crops sizes were particularly small, largely due to
weather conditions. Our uncommitted tobacco inventory levels
remained low at 11% of tobacco inventory as of March 31, 2023.
"Both worldwide flue-cured and burley tobacco crops to be grown
in our fiscal year 2024 are forecast to be larger than those
produced in our fiscal year 2023, but we still expect flue-cured
and burley tobaccos to remain in undersupply positions. The tobacco
marketing season is underway in Brazil, and the Brazilian flue-cured crop is
larger than the crop produced in our fiscal year 2023. We are
carefully monitoring the burley crops in Africa where above average rainfall was
received in some of our key growing areas even before Cyclone
Freddy arrived. Although weather has reduced burley crop sizes,
especially in Mozambique, we are
still forecasting that the fiscal year 2024 African burley crops
will be larger compared to those grown in our fiscal year 2023.
"While gross margins for the Ingredients Operations segment were
flat for fiscal year 2023, compared to fiscal year 2022, operating
income for our Ingredients Operations segment was lower in the
fiscal year and quarter ended March 31,
2023, compared to the same periods in fiscal year 2022, on
higher costs related to an increase in corporate overhead
allocation and the expansion of sales and product development
capabilities, as well as some softening of demand and margin
pressures from our customers during the second half of fiscal year
2023. We believe that the softening in demand and margin pressures
are temporary and related to our customers adjusting their
inventories to reflect both current supply chain conditions and
inflationary pricing pressures on the end consumer. We are
continuing to enhance and increase the capabilities of our
plant-based ingredients platform and have made considerable
progress on our vision for the segment, providing a total
solution-based approach for our customers that utilizes our broad
spectrum of capabilities in fruits, vegetables and botanical
extracts and flavorings.
"Returning value to our shareholders in our operations remains
an important priority for Universal. We were very pleased to
announce our 53rd annual common dividend increase today, continuing
our commitment to deliver shareholder value.
"We also achieved important milestones in our sustainability
efforts during fiscal year 2023. Notably, we are proud to have
substantially met 2022 supply chain goals outlined in our
Sustainability Report. For example, we provide access to personal
protective equipment to our contracted farmers and their workers.
In addition, we were named a Supplier Engagement Leader by CDP for
the second consecutive year, earning recognition for our work in
engaging our suppliers on climate change. We are excited about the
opportunities within our operations to improve our environmental
performance and look forward to continuing to achieve our
sustainability goals in fiscal year 2024."
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March
31,
|
|
Change
|
(in millions of
dollars, except per share data)
|
2023
|
|
2022
|
|
$
|
|
%
|
|
|
|
|
|
|
|
|
Consolidated
Results
|
|
|
|
|
|
|
|
Sales and other
operating revenue
|
$
|
2,569.8
|
|
|
$
|
2,103.6
|
|
|
$
|
466.2
|
|
|
22
|
%
|
Cost of goods
sold
|
2,111.5
|
|
|
1,694.7
|
|
|
416.9
|
|
|
25
|
%
|
Gross profit
margin
|
17.83
|
%
|
|
19.44
|
%
|
|
---
|
|
|
-161 bps
|
Selling, general and
administrative expenses
|
277.2
|
|
|
240.7
|
|
|
36.5
|
|
|
15
|
%
|
Restructuring and
impairment costs
|
—
|
|
|
10.5
|
|
|
(10.5)
|
|
|
(100)
|
%
|
Operating income (as
reported)
|
181.1
|
|
|
160.3
|
|
|
20.8
|
|
|
13
|
%
|
Adjusted operating
income (Non-GAAP)*
|
181.1
|
|
|
173.6
|
|
|
7.5
|
|
|
4
|
%
|
Diluted earnings per
share (as reported)
|
4.97
|
|
|
3.47
|
|
|
1.50
|
|
|
43
|
%
|
Adjusted diluted
earnings per share (Non-GAAP)*
|
3.77
|
|
|
3.79
|
|
|
(0.02)
|
|
|
(1)
|
%
|
Segment
Results
|
|
|
|
|
|
|
|
Tobacco operations
sales and other operating revenues
|
$
|
2,258.3
|
|
|
$
|
1,835.8
|
|
|
$
|
422.5
|
|
|
23
|
%
|
Tobacco operations
operating income
|
172.9
|
|
|
157.8
|
|
|
15.1
|
|
|
10
|
%
|
Ingredients operations
sales and other operating revenues
|
311.6
|
|
|
267.8
|
|
|
43.8
|
|
|
16
|
%
|
Ingredients operations
operating income
|
10.6
|
|
|
16.6
|
|
|
(6.0)
|
|
|
(36)
|
%
|
|
*See Reconciliation of
Certain Non-GAAP Financial Measures in Other Items below
|
Net income for the year ended March 31,
2023, was $124.1 million, or
$4.97 per diluted share, compared
with $86.6 million, or $3.47 per diluted share, for the year ended
March 31, 2022. Excluding certain
non-recurring items detailed in Other Items below, net income and
diluted earnings per share decreased by $0.2
million and $0.02,
respectively, for the fiscal year ended March 31, 2023, compared to the fiscal year ended
March 31, 2022. Operating income of
$181.1 million for the fiscal year
ended March 31, 2023, increased by
$20.8 million, compared to operating
income of $160.3 million for the
fiscal ended March 31, 2022. Adjusted
operating income, detailed in Other Items below, of $181.1 million increased by $7.5 million for the fiscal year ended
March 31, 2023, compared to adjusted
operating income of $173.6 million
for the fiscal year ended March 31,
2022.
Net income for the quarter ended March
31, 2023, was $53.7 million,
or $2.15 per diluted share, compared
with $25.8 million, or $1.03 per diluted share, for the quarter ended
March 31, 2022. Excluding certain
non-recurring items detailed in Other Items below, net income and
diluted earnings per share decreased by $1.3
million and $0.06,
respectively, for the quarter ended March
31, 2023, compared to the quarter ended March 31, 2022. Operating income of $52.4 million for the quarter ended March 31, 2023, decreased by $4.7 million, compared to operating income of
$57.1 million for the quarter ended
March 31, 2022.
Consolidated revenues increased by $466.2
million to $2.6 billion for
the fiscal year ended March 31, 2023,
compared to the fiscal year 2022, on higher tobacco sales volumes
and prices as well as the addition of the business acquired in
October 2021 in the Ingredients
Operations segment. For the quarter ended March 31, 2023, consolidated revenues were
$694.0 million, an increase of
$47.0 million compared to
$647.0 million for the quarter ended
March 31, 2022, on higher tobacco
sales prices.
TOBACCO OPERATIONS
Operating income for the Tobacco Operations segment increased by
$15.1 million to $172.9 million for the fiscal year ended
March 31, 2023, compared to the
fiscal year ended March 31, 2022.
Tobacco Operations segment results improved in fiscal year 2023,
compared to fiscal year 2022, primarily due to increased tobacco
shipments, which included a large amount of carryover crop tobacco.
While sales volumes were higher for the Tobacco Operations segment
in fiscal year 2023, compared to fiscal year 2022, gross profit and
operating margins were lower due to sales mix and sales of tobaccos
that were written down in prior quarters. Tobacco shipments from
Brazil of both carryover and
current crops were up significantly in fiscal year 2023, compared
to fiscal year 2022. The increased Brazilian shipments were
partially offset by lower African burley tobacco volumes in fiscal
year 2023. African burley tobacco crop sizes were smaller largely
due to weather conditions in fiscal year 2023, compared to fiscal
year 2022. Results for our oriental tobacco joint venture were
down, compared to fiscal year 2022, on lower sales volumes, higher
interest expense, and unfavorable foreign currency comparisons.
Selling, general, and administrative expenses for the Tobacco
Operations segment were higher in fiscal year 2023, compared to
fiscal year 2022, primarily due to higher compensation costs;
higher provisions on advances to suppliers, in part due to
weather-related lower crop yields; and unfavorable foreign currency
comparisons. Revenues for the Tobacco Operations segment of
$2.3 billion for fiscal year 2023,
were up $422.5 million, compared to
fiscal year 2022, on higher tobacco sales volumes and prices.
Operating income for the Tobacco Operations segment increased by
$1.7 million to $53.9 million, for the quarter ended March 31, 2023, compared to the quarter ended
March 31, 2022, on lower tobacco
inventory write-downs which offset slightly lower tobacco sales
volumes. Tobacco inventory write-downs in the quarter ended
March 31, 2023, were lower compared
to the fourth quarter of fiscal year 2022, when tobacco inventory
was written down due to volatile market conditions in Brazil. Tobacco sales volumes in the quarter
ended March 31, 2023, were slightly
lower than sales volumes in the quarter ended March 31, 2022, as higher sales volumes for
the United States were outweighed
by lower sales volumes in other origins, including Africa where burley crop sizes were lower in
fiscal year 2023. For the quarter ended March 31, 2023, selling, general, and
administrative expenses for the Tobacco Operations segment were
higher compared to the quarter ended March
31, 2022, largely due to higher compensation costs and
higher legal and professional fees related to a tax ruling.
Revenues for the Tobacco Operations segment of $615.6 million for the quarter ended March 31, 2023, were up $48.4 million, compared to the quarter ended
March 31, 2022, on higher tobacco
sales prices.
INGREDIENTS OPERATIONS
Segment operating income for the Ingredients Operations segment
decreased by $6.0 million to
$10.6 million for the fiscal year
ended March 31, 2023, compared to
fiscal year 2022. Ingredients Operations segment results declined
despite relatively flat gross margins for fiscal year 2023,
compared to fiscal year 2022, largely due to higher costs related
to an increase in corporate overhead allocation and the expansion
of sales and product development capabilities, as well as market
and margin pressures from some of our customers during the second
half of fiscal year 2023. Results for the Ingredients Operations
segment for fiscal year 2023 included the October 2021 purchase of Shank's Extracts, LLC
("Shank's"). Operating income for the Ingredients Operations
segment was $0.7 million for the
quarter ended March 31, 2023,
compared to $6.0 million for the
quarter ended March 31, 2022, largely
on lower sales of botanical extracts and flavorings, reduced
margins, and higher costs. Selling, general, and administrative
expenses for the segment increased in the fiscal year and quarter
ended March 31, 2023, compared to the
same periods in fiscal year 2022, largely on costs related to the
expansion of sales and product development capabilities of our
plant-based ingredients platform as well as higher compensation
costs. Selling, general, and administrative expenses for the
segment also increased in the fiscal year 2023, compared to
the fiscal year 2022, on the addition of Shank's. Revenues for the
Ingredients Operations segment increased by $43.8 million to $311.6
million for fiscal year 2023, compared to fiscal year 2022,
largely on the addition of the revenues for the acquired business
as well as higher sales volumes and prices for the existing
businesses. For the quarter ended March 31,
2023, revenues for the Ingredients Operations segment
decreased by $1.4 million to
$78.4 million, compared to the
quarter ended March 31, 2022, on
lower sales of botanical extracts and flavorings.
OTHER ITEMS
Cost of goods sold in the fiscal year and quarter ended
March 31, 2023, increased by 25% and
9% to $2.1 billion and $571.1 million, respectively, compared to the
same periods in fiscal year 2022, as a result of higher raw
material costs. The percentage increases in cost of goods sold were
higher than comparable percentage increases in revenues in the same
periods primarily due to some lower margin sales in the Tobacco
Operations segment. Selling, general, and administrative costs for
fiscal year 2023 increased by $36.5
million to $277.2 million
compared to fiscal year 2022, on higher compensation costs,
additional costs from the acquisition of Shank's in the Ingredients
Operations segment as well as higher provisions on advances to
suppliers. Selling, general, and administrative costs for the
quarter ended March 31, 2022,
increased by $5.2 million to
$70.4 million compared to the same
period in the prior fiscal year, on higher compensation costs and
higher legal and professional fees related to a tax ruling.
Interest expense for the fiscal year and quarter ended March 31, 2023, compared to the same periods in
fiscal year 2022, increased by $21.6
million to $49.3 million and
by $9.1 million to $16.0 million, respectively, largely on higher
debt balances and interest rates.
For the fiscal year and quarter ended March 31, 2023, our effective tax rate on pre-tax
income was 8.3% and a benefit of 22.8%, respectively. In fiscal
year 2023, one of our subsidiaries in Brazil received a favorable final judgement
from the Brazilian Superior Court of Justice. The lawsuit asserted
certain tax credits on exported goods should be excluded from
taxable income. The Brazilian revenue authority asserted certain
tax credits generated on purchased goods and services that were
ultimately exported from Brazil
should be included in the calculation of taxable income. The
Brazilian Superior Court of Justice affirmed the tax credits are
non-taxable in accordance with the historical and existing tax
legislation in Brazil. The ruling
resulted in recognition of $26.6
million of Brazilian tax credits due to the recalculation of
federal income taxes in Brazil for
years 2015 through 2022. The affirmative ruling also resulted in
recognition of $5.0 million of
interest income for the fiscal year and quarter ended March 31, 2023. The ruling resulted in a net
income tax benefit of $24.2 million
for the fiscal year and quarter ended March
31, 2023. The net income tax benefit included a $2.4 million income tax provision for U.S.
federal income taxes. Without this interest income and income tax
benefit, the consolidated effective tax rate for the quarter ended
March 31, 2023, would have been
approximately 33.4%.
In the fiscal year ended March 31,
2023, we sold our idled Tanzania operations and recognized
$1.1 million of income taxes. Without
this item and the favorable judgement in Brazil discussed above, the consolidated
effective income tax rate for the fiscal year ended March 31, 2023, would have been approximately
25.5%. Additionally, the sale of our idled Tanzania operations resulted in a $1.8 million reduction to consolidated interest
expense related to an uncertain tax position.
For the fiscal year and quarter ended March 31, 2022, our effective tax rate on pre-tax
income was 27.2% and 37.2%, respectively. In the fiscal year ended
March 31, 2022, we recognized a
$1.7 million income tax benefit
related to a final tax ruling at a foreign subsidiary and a
$1.2 million benefit due to
finalizing the prior year U.S. tax return. Without these income tax
benefits, the adjusted effective tax rate for the fiscal year ended
March 31, 2022, would have been
29.2%.
Reconciliation of Certain Non-GAAP Financial Measures
The following tables set forth certain non-recurring items
included in reported results to reconcile adjusted operating income
to consolidated operating income and adjusted net income to net
income attributable to Universal Corporation:
Adjusted Operating
Income Reconciliation
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Fiscal Year Ended March
31,
|
(in
thousands)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
As Reported:
Consolidated operating income
|
|
$
|
52,394
|
|
|
$
|
57,124
|
|
|
$
|
181,072
|
|
|
$
|
160,315
|
|
Purchase accounting
adjustments(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,057
|
|
Transaction costs for
acquisitions(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,310
|
|
Fair value adjustment
to contingent consideration for FruitSmart
acquisition(3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,532)
|
|
Restructuring and
impairment costs(4)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,457
|
|
Adjusted operating
income (Non-GAAP)
|
|
$
|
52,394
|
|
|
$
|
57,124
|
|
|
$
|
181,072
|
|
|
$
|
173,607
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
and Adjusted Diluted Earnings Per Share
Reconciliation
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Fiscal Year Ended March
31,
|
(in thousands except
for per share amounts)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
As Reported: Net income
attributable to Universal Corporation
|
|
$
|
53,707
|
|
|
$
|
25,770
|
|
|
$
|
124,052
|
|
|
$
|
86,577
|
|
Purchase accounting
adjustments(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,057
|
|
Transaction costs for
acquisitions(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,310
|
|
Fair value adjustment
to contingent consideration for FruitSmart
acquisition(3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,532)
|
|
Restructuring and
impairment costs(4)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,457
|
|
Interest (income)
expense related to a final income tax rulings(5)
|
|
(4,980)
|
|
|
—
|
|
|
(4,980)
|
|
|
(470)
|
|
Interest expense
reversal on uncertain tax position from sale of operations in
Tanzania
|
|
—
|
|
|
—
|
|
|
(1,816)
|
|
|
—
|
|
Total of Non-GAAP
adjustments to income before income taxes
|
|
(4,980)
|
|
|
—
|
|
|
(6,796)
|
|
|
12,822
|
|
Income tax benefit on
final tax rulings(5)
|
|
(24,256)
|
|
|
—
|
|
|
(24,256)
|
|
|
(1,686)
|
|
Income tax expense from
sale of operations in Tanzania
|
|
—
|
|
|
—
|
|
|
1,132
|
|
|
—
|
|
Income tax benefit from
Non-GAAP adjustments to income before income
taxes(6)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,181)
|
|
Total of income tax
impacts for Non-GAAP adjustments to income before income taxes and
Non-GAAP
adjustment to income
taxes
|
|
(24,256)
|
|
|
—
|
|
|
(23,124)
|
|
|
(3,867)
|
|
Impact to net income
attributable to noncontrolling interests in subsidiaries from
Non-GAAP adjustments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,154)
|
|
As adjusted: Net income
attributable to Universal Corporation (Non-GAAP)
|
|
$
|
24,471
|
|
|
$
|
25,770
|
|
|
$
|
94,132
|
|
|
$
|
94,378
|
|
|
|
|
|
|
|
|
|
|
As reported: Diluted
earnings per share
|
|
$
|
2.15
|
|
|
$
|
1.03
|
|
|
$
|
4.97
|
|
|
$
|
3.47
|
|
Adjusted: Diluted
earnings per share
|
|
$
|
0.97
|
|
|
$
|
1.03
|
|
|
$
|
3.77
|
|
|
$
|
3.79
|
|
|
|
(1)
|
The Company recognized
an increase in cost of goods sold in the third quarter of fiscal
year 2022, relating to the expensing of fair value adjustments to
inventory associated with the acquisition accounting for Shank's
(effective October 4, 2021).
|
(2)
|
The Company incurred
selling, general, and administrative expenses for due diligence and
other transaction costs associated with the acquisition of Shank's.
A portion of these costs is not deductible for U.S. income tax
purposes.
|
(3)
|
The Company reversed
the contingent consideration liability for the FruitSmart
acquisition, as a result of certain performance metrics that did
not meet the required threshold stipulated in the purchase
agreement.
|
(4)
|
Restructuring and
impairment costs are included in Consolidated operating income in
the consolidated statements of income, but excluded for purposes of
Adjusted operating income, Adjusted net income available to
Universal Corporation, and Adjusted diluted earnings per
share.
|
(5)
|
The Company recognized
an income tax benefit ($24.2 million) and associated interest
income ($5.0 million) in the fourth quarter of fiscal year 2023
related to a favorable final judgement for one of the Company's
operating subsidiaries in Brazil. The lawsuit related to the
treatment of certain tax credits on exported goods in the
calculation of taxable income. The Company recognized income tax
benefits related to a favorable final income tax ruling at a
foreign subsidiary (fiscal year 2022).
|
(6)
|
The income tax effect
of Non-GAAP adjustments was determined based on the timing and
nature of the specific Non-GAAP adjustments and their relevant
jurisdictional income tax rates (foreign, state, and local) and the
applicable U.S. federal income tax rates. The Company considers
current and deferred income tax rates to calculate the impact to
income taxes for the Non-GAAP adjustments.
|
Additional information
Amounts described as net income (loss) and earnings (loss) per
diluted share in the previous discussion are attributable to
Universal Corporation and exclude earnings related to
non-controlling interests in subsidiaries. Adjusted operating
income (loss), adjusted net income (loss) attributable to Universal
Corporation, adjusted diluted earnings (loss) per share, and the
total for segment operating income (loss) referred to in this
discussion are non-GAAP financial measures. These measures are not
financial measures calculated in accordance with GAAP and should
not be considered as substitutes for operating income (loss), net
income (loss) attributable to Universal Corporation, diluted
earnings (loss) per share, cash from operating activities or any
other operating or financial performance measure calculated in
accordance with GAAP, and may not be comparable to similarly-titled
measures reported by other companies. A reconciliation of adjusted
operating income (loss) to consolidated operating (income),
adjusted net income (loss) attributable to Universal Corporation to
consolidated net income (loss) attributable to Universal
Corporation and adjusted diluted earnings (loss) per share to
diluted earnings (loss) per share are provided in Other Items
above. In addition, we have provided a reconciliation of the
total for segment operating income (loss) to consolidated operating
income (loss) in Note 3 "Segment Information" to the consolidated
financial statements. Management evaluates the consolidated Company
and segment performance excluding certain significant charges or
credits. We believe these non-GAAP financial measures, which
exclude items that we believe are not indicative of our core
operating results, provide investors with important information
that is useful in understanding our business results and
trends.
This release includes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
The Company cautions readers that any statements contained herein
regarding financial condition, results of operation, and future
business plans, operations, opportunities, and prospects for its
performance are forward-looking statements based upon management's
current knowledge and assumptions about future events, and involve
risks and uncertainties that could cause actual results,
performance, or achievements to be materially different from any
anticipated results, prospects, performance, or achievements
expressed or implied by such forward-looking statements. Such
risks and uncertainties include, but are not limited to, impacts of
the COVID-19 pandemic and subvariants; success in pursuing
strategic investments or acquisitions and integration of new
businesses and the impact of these new businesses on future
results; product purchased not meeting quality and quantity
requirements; our reliance on a few large customers; its ability to
maintain effective information technology systems and safeguard
confidential information; anticipated levels of demand for and
supply of its products and services; costs incurred in providing
these products and services including increased transportation
costs and delays attributed to global supply chain challenges;
timing of shipments to customers; higher inflation rates; changes
in market structure; government regulation and other stakeholder
expectations; economic and political conditions in the countries in
which we and our customers operate, including the ongoing impacts
from the conflict in Ukraine;
product taxation; industry consolidation and evolution; changes in
exchange rates and interest rates; impacts of regulation and
litigation on its customers; industry-specific risks related to its
plant-based ingredient businesses; exposure to certain regulatory
and financial risks related to climate change; changes in estimates
and assumptions underlying its critical accounting policies; the
promulgation and adoption of new accounting standards, new
government regulations and interpretation of existing standards and
regulations; and general economic, political, market, and weather
conditions. Actual results, therefore, could vary from those
expected. A further list and description of these risks,
uncertainties, and other factors can be found in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 2022, and in other documents the
Company files with the Securities and Exchange Commission. This
information should be read in conjunction with the Annual Report on
Form 10-K for the years ended March 31,
2022 and March 31, 2023, which
is expected to be filed later this week. The Company cautions
investors not to place undue reliance on any forward-looking
statements as these statements speak only as of the date when made,
and it undertakes no obligation to update any forward-looking
statements made.
At 5:00 p.m. (Eastern Time) on
May 24, 2023, the Company will host a
conference call to discuss these results. Those wishing to
listen to the call may do so by visiting www.universalcorp.com at
that time. A replay of the webcast will be available at that
site through August 24, 2023. A
taped replay of the call will be available through June 7, 2023, by dialing (866) 813-9403. The
confirmation number to access the replay is 361746.
Universal Corporation (NYSE: UVV), headquartered in Richmond, Virginia, is a global
business-to-business agri-products supplier to consumer product
manufacturers, operating in over 30 countries on five
continents. We strive to be the supplier of choice for our
customers by leveraging our farmer base, our commitment to a
sustainable supply chain, and our ability to provide high-quality,
customized, traceable, value-added agri-products essential for our
customers' requirements. We find innovative solutions to serve
our customers and have been meeting their agri-product needs for
more than 100 years. Our principal focus since our founding in
1918 has been tobacco, and we are the leading global leaf tobacco
supplier. Through our plant-based ingredients platform, we provide
a variety of value-added manufacturing processes to produce
high-quality, specialty vegetable- and fruit-based ingredients as
well as botanical extracts and flavorings for the food and beverage
end markets. For more information, visit www.universalcorp.com.
UNIVERSAL
CORPORATION
CONSOLIDATED
STATEMENTS OF INCOME
(in thousands of
dollars, except per share data)
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Fiscal Year Ended
March 31,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
(Unaudited)
|
|
(Unaudited)
|
Sales and other
operating revenues
|
|
$
|
693,979
|
|
|
$
|
646,973
|
|
|
$
|
2,569,824
|
|
|
$
|
2,103,601
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
Cost of goods
sold
|
|
571,171
|
|
|
524,676
|
|
|
2,111,539
|
|
|
1,694,675
|
|
Selling, general and
administrative expenses
|
|
70,414
|
|
|
65,173
|
|
|
277,213
|
|
|
240,686
|
|
Other income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,532)
|
|
Restructuring and
impairment costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,457
|
|
Operating
income
|
|
52,394
|
|
|
57,124
|
|
|
181,072
|
|
|
160,315
|
|
Equity in pretax
earnings of unconsolidated affiliates
|
|
2,175
|
|
|
1,039
|
|
|
2,383
|
|
|
6,095
|
|
Other non-operating
income (expense)
|
|
1,999
|
|
|
2,529
|
|
|
1,791
|
|
|
2,687
|
|
Interest
income
|
|
5,616
|
|
|
118
|
|
|
6,023
|
|
|
917
|
|
Interest
expense
|
|
16,041
|
|
|
6,947
|
|
|
49,300
|
|
|
27,747
|
|
Income before income
taxes
|
|
46,143
|
|
|
53,863
|
|
|
141,969
|
|
|
142,267
|
|
Income taxes
|
|
(10,525)
|
|
|
20,081
|
|
|
11,733
|
|
|
38,663
|
|
Net income
|
|
56,668
|
|
|
33,782
|
|
|
130,236
|
|
|
103,604
|
|
Less: net income
attributable to noncontrolling interests in subsidiaries
|
|
(2,961)
|
|
|
(8,012)
|
|
|
(6,184)
|
|
|
(17,027)
|
|
Net income
attributable to Universal Corporation
|
|
$
|
53,707
|
|
|
$
|
25,770
|
|
|
$
|
124,052
|
|
|
$
|
86,577
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.17
|
|
|
$
|
1.04
|
|
|
$
|
5.01
|
|
|
$
|
3.50
|
|
Diluted
|
|
$
|
2.15
|
|
|
$
|
1.03
|
|
|
$
|
4.97
|
|
|
$
|
3.47
|
|
UNIVERSAL
CORPORATION
CONSOLIDATED BALANCE
SHEETS
(in thousands of
dollars)
|
|
|
|
|
|
March
31,
|
|
|
2023
|
|
2022
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
64,690
|
|
|
$
|
81,648
|
|
Accounts receivable,
net
|
|
402,073
|
|
|
385,437
|
|
Advances to suppliers,
net
|
|
170,801
|
|
|
129,838
|
|
Accounts
receivable—unconsolidated affiliates
|
|
12,210
|
|
|
4,540
|
|
Inventories—at lower of
cost or net realizable value:
|
|
|
|
|
Tobacco
|
|
833,876
|
|
|
822,513
|
|
Other
|
|
202,907
|
|
|
194,161
|
|
Prepaid income
taxes
|
|
16,493
|
|
|
13,095
|
|
Other current
assets
|
|
99,840
|
|
|
116,779
|
|
Total current
assets
|
|
1,802,890
|
|
|
1,748,011
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
|
|
|
Land
|
|
24,926
|
|
|
23,959
|
|
Buildings
|
|
311,138
|
|
|
293,935
|
|
Machinery and
equipment
|
|
689,220
|
|
|
668,451
|
|
|
|
1,025,284
|
|
|
986,345
|
|
Less accumulated
depreciation
|
|
(674,122)
|
|
|
(641,227)
|
|
|
|
351,162
|
|
|
345,118
|
|
Other assets
|
|
|
|
|
Operating lease
right-of-use assets
|
|
40,505
|
|
|
40,243
|
|
Goodwill,
net
|
|
213,922
|
|
|
213,998
|
|
Other intangibles,
net
|
|
80,101
|
|
|
92,571
|
|
Investments in
unconsolidated affiliates
|
|
76,184
|
|
|
81,006
|
|
Deferred income
taxes
|
|
13,091
|
|
|
11,616
|
|
Pension
asset
|
|
9,984
|
|
|
12,667
|
|
Other noncurrent
assets
|
|
51,343
|
|
|
41,115
|
|
|
|
485,130
|
|
|
493,216
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,639,182
|
|
|
$
|
2,586,345
|
|
UNIVERSAL
CORPORATION
CONSOLIDATED BALANCE
SHEETS
(in thousands of
dollars)
|
|
|
|
|
|
March
31,
|
|
|
2023
|
|
2022
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Notes payable and
overdrafts
|
|
$
|
195,564
|
|
|
$
|
182,639
|
|
Accounts
payable
|
|
83,213
|
|
|
168,491
|
|
Accounts
payable—unconsolidated affiliates
|
|
5,830
|
|
|
5,308
|
|
Customer advances and
deposits
|
|
3,061
|
|
|
13,724
|
|
Accrued
compensation
|
|
33,108
|
|
|
27,281
|
|
Income taxes
payable
|
|
3,274
|
|
|
7,427
|
|
Current portion of
operating lease liabilities
|
|
11,404
|
|
|
10,303
|
|
Accrued expenses and
other current liabilities
|
|
106,533
|
|
|
103,551
|
|
Current portion of
long-term debt
|
|
—
|
|
|
—
|
|
Total current
liabilities
|
|
441,987
|
|
|
518,724
|
|
|
|
|
|
|
Long-term
debt
|
|
616,809
|
|
|
518,547
|
|
Pensions and other
postretirement benefits
|
|
42,769
|
|
|
52,890
|
|
Long-term operating
lease liabilities
|
|
25,540
|
|
|
29,617
|
|
Other long-term
liabilities
|
|
32,512
|
|
|
34,464
|
|
Deferred income
taxes
|
|
42,613
|
|
|
47,334
|
|
Total
liabilities
|
|
1,202,230
|
|
|
1,201,576
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
Universal
Corporation:
|
|
|
|
|
Preferred
stock:
|
|
|
|
|
Series A Junior
Participating Preferred Stock, no par value, 500,000 shares
authorized,
none issued or outstanding
|
|
—
|
|
|
—
|
|
Common stock, no par
value, 100,000,000 shares authorized, 24,555,361 shares issued
and outstanding (24,550,019 at March 31, 2022)
|
|
337,247
|
|
|
330,662
|
|
Retained
earnings
|
|
1,136,898
|
|
|
1,094,192
|
|
Accumulated other
comprehensive loss
|
|
(77,057)
|
|
|
(84,311)
|
|
Total Universal
Corporation shareholders' equity
|
|
1,397,088
|
|
|
1,340,543
|
|
Noncontrolling
interests in subsidiaries
|
|
39,864
|
|
|
44,226
|
|
Total shareholders'
equity
|
|
1,436,952
|
|
|
1,384,769
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity
|
|
$
|
2,639,182
|
|
|
$
|
2,586,345
|
|
UNIVERSAL
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands of
dollars)
|
|
|
|
|
|
Fiscal Year Ended
March 31,
|
|
|
2023
|
|
2022
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
Net income
|
|
$
|
130,236
|
|
|
$
|
103,604
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
57,300
|
|
|
52,521
|
|
Provision for losses
(recoveries) on advances
|
|
10,584
|
|
|
5,988
|
|
Inventory
write-downs
|
|
13,995
|
|
|
19,944
|
|
Stock-based
compensation expense
|
|
8,419
|
|
|
6,186
|
|
Foreign currency
remeasurement loss (gain), net
|
|
(3,892)
|
|
|
19,029
|
|
Foreign currency
exchange contracts
|
|
14,163
|
|
|
(13,210)
|
|
Deferred income
taxes
|
|
(7,657)
|
|
|
(2,473)
|
|
Equity in net income of
unconsolidated affiliates, net of dividends
|
|
4,010
|
|
|
(329)
|
|
Brazil tax
ruling
|
|
(29,236)
|
|
|
—
|
|
Restructuring and
impairment costs
|
|
—
|
|
|
10,457
|
|
Restructuring
payments
|
|
—
|
|
|
(4,134)
|
|
Change in estimated
fair value of contingent consideration for FruitSmart
acquisition
|
|
—
|
|
|
(2,532)
|
|
Other, net
|
|
(6,248)
|
|
|
513
|
|
Changes in operating
assets and liabilities, net:
|
|
(202,231)
|
|
|
(150,682)
|
|
Net cash
provided (used) by operating activities
|
|
(10,557)
|
|
|
44,882
|
|
|
|
|
|
|
Cash Flows From
Investing Activities:
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
(54,674)
|
|
|
(53,203)
|
|
Purchase of business,
net of cash held by the business
|
|
—
|
|
|
(102,462)
|
|
Proceeds from sale of
business, less cash of businesses sold
|
|
3,245
|
|
|
—
|
|
Proceeds from sale of
property, plant and equipment
|
|
1,079
|
|
|
13,004
|
|
Other
|
|
—
|
|
|
—
|
|
Net cash used
by investing activities
|
|
(50,350)
|
|
|
(142,661)
|
|
|
|
|
|
|
Cash Flows From
Financing Activities:
|
|
|
|
|
Issuance (repayment) of
short-term debt, net
|
|
24,712
|
|
|
79,286
|
|
Issuance of long-term
debt
|
|
123,481
|
|
|
—
|
|
Repayment of long-term
debt
|
|
(23,481)
|
|
|
—
|
|
Dividends paid to
noncontrolling interests in subsidiaries
|
|
(10,221)
|
|
|
(13,390)
|
|
Repurchase of common
stock
|
|
(3,448)
|
|
|
(3,053)
|
|
Dividends paid on
common stock
|
|
(77,391)
|
|
|
(76,436)
|
|
Proceeds from
termination of interest rate swap agreements
|
|
11,786
|
|
|
—
|
|
Debt issuance costs and
other
|
|
(6,489)
|
|
|
(3,167)
|
|
Net cash
provided/(used) by financing activities
|
|
38,949
|
|
|
(16,760)
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash
|
|
(1,000)
|
|
|
(1,034)
|
|
Net increase (decrease)
in cash and cash equivalents
|
|
(22,958)
|
|
|
(115,573)
|
|
Cash, restricted cash
and cash equivalents at beginning of year
|
|
87,648
|
|
|
203,221
|
|
Cash, Restricted
Cash and Cash Equivalents at End of Year
|
|
$
|
64,690
|
|
|
$
|
87,648
|
|
|
|
|
|
|
Supplemental
Information:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
64,690
|
|
|
$
|
81,648
|
|
Restricted cash
(Other noncurrent assets)
|
|
—
|
|
|
6,000
|
|
Total cash,
restricted cash and cash equivalents
|
|
$
|
64,690
|
|
|
$
|
87,648
|
|
NOTE 1. BASIS OF PRESENTATION
Universal Corporation, with its subsidiaries ("Universal" or the
"Company"), is a global business-to-business agri-products supplier
to consumer product manufacturers. The Company is the leading
global leaf tobacco supplier and provides high-quality plant-based
ingredients to food and beverage end markets. Because of the
seasonal nature of the Company's business, the results of
operations for any fiscal quarter will not necessarily be
indicative of results to be expected for other quarters or a full
fiscal year. All adjustments necessary to state fairly the results
for the period have been included and were of a normal recurring
nature. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2022.
NOTE 2. EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted earnings per share:
|
|
Three Months Ended
March 31,
|
|
Fiscal Year Ended
March 31,
|
(in thousands,
except per share data)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
|
|
|
|
|
|
|
|
Numerator for basic
earnings per share
|
|
|
|
|
|
|
|
|
Net income attributable
to Universal Corporation
|
|
$
|
53,707
|
|
|
$
|
25,770
|
|
|
$
|
124,052
|
|
|
$
|
86,577
|
|
|
|
|
|
|
|
|
|
|
Denominator for
basic earnings per share
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding
|
|
24,776,193
|
|
|
24,772,754
|
|
|
24,773,710
|
|
|
24,764,177
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
per share
|
|
$
|
2.17
|
|
|
$
|
1.04
|
|
|
$
|
5.01
|
|
|
$
|
3.50
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per
Share
|
|
|
|
|
|
|
|
|
Numerator for
diluted earnings per share
|
|
|
|
|
|
|
|
|
Net income attributable
to Universal Corporation
|
|
$
|
53,707
|
|
|
$
|
25,770
|
|
|
$
|
124,052
|
|
|
$
|
86,577
|
|
|
|
|
|
|
|
|
|
|
Denominator for
diluted earnings per share:
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding
|
|
24,776,193
|
|
|
24,772,754
|
|
|
24,773,710
|
|
|
24,764,177
|
|
Effect of dilutive
securities
|
|
|
|
|
|
|
|
|
Employee and
outside director share-based awards
|
|
195,661
|
|
|
180,816
|
|
|
170,131
|
|
|
158,719
|
|
Denominator for diluted
earnings per share
|
|
24,971,854
|
|
|
24,953,570
|
|
|
24,943,841
|
|
|
24,922,896
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
$
|
2.15
|
|
|
$
|
1.03
|
|
|
$
|
4.97
|
|
|
$
|
3.47
|
|
NOTE 3. SEGMENT INFORMATION
Management regularly evaluates the Company's global business
activities, including product and service offerings to its
customers, as well as senior management's operational and financial
responsibilities. Assessments include an analysis of how its chief
operating decision maker measures business performance and
allocates resources. As a result of this analysis, senior
management has determined the Company conducts operations across
two reportable operating segments, Tobacco Operations and
Ingredients Operations.
The Tobacco Operations segment activities involve contracting,
procuring, processing, packing, storing, and shipping leaf tobacco
for sale to, or for the account of, manufacturers of consumer
tobacco products throughout the world. Through various operating
subsidiaries located in tobacco-growing countries around the world
and significant ownership interests in unconsolidated affiliates,
the Company processes and/or sells flue-cured and burley tobaccos,
dark air-cured tobaccos, and oriental tobaccos. Flue-cured, burley,
and oriental tobaccos are used principally in the manufacture of
cigarettes, and dark air-cured tobaccos are used mainly in the
manufacture of cigars, pipe tobacco, and smokeless tobacco
products. Some of these tobacco types are also increasingly used in
the manufacture of next generation tobacco products that are
intended to provide consumers with an alternative to traditional
combustible products. The Tobacco Operations segment also provides
physical and chemical product testing and smoke testing for
tobacco customers. A substantial portion of the Company's Tobacco
Operations' revenues are derived from sales to a limited number of
large, multinational cigarette and cigar manufacturers.
The Ingredients Operations segment provides its customers with a
broad variety of plant-based ingredients for both human and pet
consumption. The Ingredients Operations segment utilizes a variety
of value-added manufacturing processes converting raw materials
into a wide spectrum of fruit and vegetable juices, concentrates,
dehydrated products, botanical extracts, and flavorings. Customers
for the Ingredients Operations segment include large multinational
food and beverage companies, smaller independent manufacturers, and
retail organizations. FruitSmart, Silva, and Shank's are the
primary operations for the Ingredients Operations segment.
FruitSmart manufactures fruit and vegetable juices, purees,
concentrates, essences, fibers, seeds, seed oils, and seed powders.
Silva is primarily a dehydrated product manufacturer of fruit and
vegetable based flakes, dices, granules, powders, and blends.
Shank's manufactures botanical extracts and flavorings and also
offers bottling and custom packaging for customers. In fiscal year
2021, the Company announced the wind-down of CIFI, a greenfield
operation that primarily manufactured both dehydrated and liquid
sweet potato products.
Universal incurs overhead expenses related to senior management,
sales, finance, legal, and other functions that are centralized at
its corporate headquarters, as well as functions performed at
several sales and administrative offices around the world. These
overhead expenses are currently allocated to the reportable
operating segments, generally on the basis of projected annual
financial and operational performance, including volumes planned to
be purchased and/or processed. Management believes this method of
allocation is currently representative of the value of the related
services provided to the operating segments. The Company currently
evaluates the performance of its segments based on operating income
after allocated overhead expenses, plus equity in the pretax
earnings of unconsolidated affiliates.
Operating results for the Company's reportable segments for each
period presented in the consolidated statements of income were as
follows:
|
|
Three Months Ended
March 31,
|
|
Fiscal Year Ended
March 31,
|
(in thousands of
dollars)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
|
SALES AND OTHER
OPERATING REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tobacco
Operations
|
|
$
|
615,578
|
|
|
$
|
567,180
|
|
|
$
|
2,258,260
|
|
|
$
|
1,835,790
|
|
Ingredients
Operations
|
|
78,401
|
|
|
79,793
|
|
|
311,564
|
|
|
267,811
|
|
Consolidated sales and
other operating revenues
|
|
$
|
693,979
|
|
|
$
|
646,973
|
|
|
$
|
2,569,824
|
|
|
$
|
2,103,601
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tobacco
Operations
|
|
$
|
53,879
|
|
|
$
|
52,155
|
|
|
$
|
172,889
|
|
|
$
|
157,754
|
|
Ingredients
Operations
|
|
690
|
|
|
6,008
|
|
|
10,566
|
|
|
16,581
|
|
Subtotal
|
|
54,569
|
|
|
58,163
|
|
|
183,455
|
|
|
174,335
|
|
Deduct: Equity in
pretax earnings of unconsolidated affiliates (1)
|
|
(2,175)
|
|
|
(1,039)
|
|
|
(2,383)
|
|
|
(6,095)
|
|
Restructuring and impairment costs (2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,457)
|
|
Add: Other
income (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,532
|
|
Consolidated operating
income
|
|
$
|
52,394
|
|
|
$
|
57,124
|
|
|
$
|
181,072
|
|
|
$
|
160,315
|
|
|
|
(1)
|
Equity in pretax
earnings of unconsolidated affiliates is included in reportable
segment operating income, but is reported below consolidated
operating income and excluded from that total in the consolidated
statements of income.
|
(2)
|
Restructuring and
impairment costs are excluded from reportable segment operating
income, but are included in consolidated operating income in the
consolidated statements of income.
|
(3)
|
Other income represents
the reversal of the contingent consideration liability associated
with the acquisition of FruitSmart.
|
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SOURCE Universal Corporation