Universal Corporation Reports Annual Results
Universal Corporation (NYSE:UVV) reported fiscal year 2022 results showing a 6% revenue increase to $2.1 billion, driven by strong performance in its Ingredients Operations segment. The Ingredients segment rose 89% to $267.8 million, aided by the acquisition of Shank's Extracts. Conversely, Tobacco Operations faced challenges, with revenues declining slightly to $1.8 billion due to shipping constraints and lower African burley tobacco crops. Despite these hurdles, the company announced its 52nd annual dividend increase, emphasizing its commitment to shareholder value.
- Revenue rose 6% to $2.1 billion, with Ingredients Operations segment up 89% to $267.8 million.
- Successful acquisition of Shank's Extracts, supporting diverse product offerings.
- 52nd consecutive annual dividend increase announced, reflecting commitment to shareholders.
- Tobacco Operations segment revenue decreased slightly to $1.8 billion, impacted by shipping constraints.
- Lower tobacco shipment volumes due to logistical challenges and smaller African burley crops.
- Increased costs in freight, raw materials, and labor pressures anticipated as fiscal year 2023 proceeds.
RICHMOND, Va., May 25, 2022 /PRNewswire/ -- George C. Freeman, III, Chairman, President, and Chief Executive Officer of Universal Corporation (NYSE:UVV), stated, "I am proud of our fiscal year 2022 results which were generally comparable to those in fiscal year 2021. During fiscal year 2022, we continued to face a very challenging logistical environment in many of our key tobacco regions. Strong performance from our Ingredients Operations segment offset some challenges that reduced results in our Tobacco Operations segment.
"Our plant–based ingredients platform is coming together nicely and is exceeding our expectations. With the acquisition of Shank's Extracts, LLC ("Shank's"), we are now positioned to offer our customers a broad range of products, from fruit and vegetable juices, concentrates, and dehydrated ingredients to botanical extracts and flavorings. In fiscal year 2022, the Ingredients Operations segment saw increased demand for organic-based products and continued strong volumes for human and pet food categories as well as for vanilla extracts.
"Ongoing shipping constraints reduced our Tobacco Operations segment results for the year and quarter ended March 31, 2022, as a result of continued limitations in worldwide shipping availability stemming from the COVID-19 pandemic. Due to the logistical constraints in fiscal year 2021, we had carryover tobacco volumes which shipped in fiscal year 2022. Similar logistical constraints impacted fiscal year 2022 which led to an even larger amount of tobacco volumes, reflecting a difference of about
"We experienced volatile tobacco and currency markets in Brazil during the fourth quarter of fiscal year 2022. Appreciation of the Brazilian currency coupled with strong demand for leaf tobacco led to unprecedented increases in green prices for leaf tobacco and earlier purchasing of the 2022 Brazilian crop, resulting in disruptions to market dynamics. To fulfill our customers' orders, leaf tobacco purchases from our contracted farmers this season have been at the prevailing inflated market price for all leaf tobacco regardless of the quality of leaf tobacco. This resulted in larger inventory write downs in the quarter ended March 31, 2022, compared to the prior year's fourth quarter.
"As we move into fiscal year 2023, we are seeing strong demand for our plant-based ingredients and tobacco products. We believe leaf tobacco supply for flue-cured, burley, dark air-cured, and oriental tobaccos to be in an undersupply position. At the same time, we continue to see opportunities to increase market share and expand the supply chain services we provide our customers. We expect continued logistical constraints as well as higher costs, particularly freight, raw materials, labor, fertilizer, and energy, in both our tobacco and ingredients businesses. We are actively working to mitigate these challenges, and I am confident that we can deliver another good year.
"We remain focused on returning value to our shareholders and promoting sustainability in our operations. We are extremely proud to deliver value to our shareholders though dividend increases such as our 52nd annual dividend increase announced today. Increasing our strong dividend remains one of the strategic priorities of our capital allocation strategy. We have also achieved some important milestones in our sustainability efforts in fiscal year 2022, notably releasing goals and targets around agricultural labor practices and environmental performance and publishing our 2021 Sustainability Report in December. We were also named a 2021 Supplier Engagement Leader by CDP, earning recognition for our work in engaging our suppliers on climate change. We look forward to attaining new achievements with our sustainability programs in fiscal year 2023."
FINANCIAL HIGHLIGHTS | |||||||||||||||||||||||
Fiscal Year Ended March 31, | Change | ||||||||||||||||||||||
(in millions of dollars, except per share data) | 2022 | 2021 | $ | % | |||||||||||||||||||
Consolidated Results | |||||||||||||||||||||||
Sales and other operating revenue | $ | 2,103.6 | $ | 1,983.4 | $ | 120.2 | 6 | % | |||||||||||||||
Cost of goods sold | 1,694.7 | 1,597.4 | 97.3 | 6 | % | ||||||||||||||||||
Gross Profit Margin | 19.44 | % | 19.46 | % | --- | -2 bps | |||||||||||||||||
Selling, general and administrative expenses | 240.7 | 219.8 | 20.9 | 10 | % | ||||||||||||||||||
Restructuring and impairment costs | 10.5 | 22.6 | (12.1) | (54) | % | ||||||||||||||||||
Operating income (as reported) | 160.3 | 147.8 | 12.5 | 8 | % | ||||||||||||||||||
Adjusted operating income (non-GAAP)* | 173.6 | 172.9 | 0.7 | 0 | % | ||||||||||||||||||
Diluted earnings per share (as reported) | 3.47 | 3.53 | (0.06) | (2) | % | ||||||||||||||||||
Adjusted diluted earnings per share (non-GAAP)* | 3.79 | 4.25 | (0.46) | (11) | % | ||||||||||||||||||
Segment Results | |||||||||||||||||||||||
Tobacco operations sales and other operating revenues | $ | 1,835.8 | $ | 1,841.8 | $ | (6.0) | 0 | % | |||||||||||||||
Tobacco operations operating income | 157.8 | 168.8 | (11.1) | (7) | % | ||||||||||||||||||
Ingredients operations sales and other operating revenues | 267.8 | 141.5 | 126.3 | 89 | % | ||||||||||||||||||
Ingredients operations operating income | 16.6 | 0.4 | 16.2 | 4,418 | % | ||||||||||||||||||
*See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below |
Net income for the year ended March 31, 2022, was
Net income for the quarter ended March 31, 2022, was
Consolidated revenues increased by
TOBACCO OPERATIONS
Segment operating income for the Tobacco Operations segment decreased by
INGREDIENTS OPERATIONS
Segment operating income for the Ingredients Operations segment was
COVID-19 PANDEMIC IMPACT
On March 11, 2020, the World Health Organization declared the coronavirus ("COVID-19") a pandemic. Foreign governmental organizations and governmental organizations in the United States have taken various actions to combat the spread of COVID-19 and its subsequent variants, including imposing stay-at-home orders, closing "non-essential" businesses and their operations, and restricting international travel. We continue to closely monitor developments related to the COVID-19 pandemic and have taken and continue to take steps intended to mitigate the potential risks and impacts to us. It is paramount that our employees who operate our businesses are safe and informed. We have assessed and regularly update our existing business continuity plans for our business in the context of this pandemic. For example, we have taken precautions during the pandemic with regard to employee and facility hygiene, imposed travel limitations on our employees, implemented work-from-home procedures, and we continue to assess and reevaluate protocols designed to protect our employees, customers and the public.
We continue to work with our suppliers to mitigate the impacts to our supply chain due to the pandemic. To date, we have not experienced a material impact to our supply chain, although the COVID-19 pandemic resulted in delays in certain operations during fiscal year 2021. Since March 2020, we have at times also experienced increased volatility in foreign currency exchange rates, which we believe is in part related to the continued uncertainties from COVID-19, as well as actions taken by governments and central banks in response to COVID-19. We are currently seeing and monitoring some logistical constraints around worldwide vessel and container availability and increased costs stemming from the COVID-19 pandemic.
We believe we currently have sufficient liquidity to meet our current obligations and our business operations remain fundamentally unchanged other than shipping delays, which could continue to impact quarterly comparisons. This is, however, a rapidly evolving situation, and we cannot predict the extent, resurgence, or duration of the COVID-19 pandemic, the effects of it on the global, national or local economy, including the impacts on our ability to access capital, or its effects on our business, financial position, results of operations, and cash flows. We continue to monitor developments affecting our employees, customers and operations. We will take additional steps and reevaluate current protocols to address the spread of COVID-19 and its impacts, as necessary, and remain thankful for the hard work of our employees and the continued support of our customers, growers, and other partners during these challenging times.
THE CONFLICT IN UKRAINE
We are closely monitoring the tragic situation in Ukraine. Since Russia initiated its current military operations in Ukraine in 2022, business globally has been directly or indirectly impacted. The region is an important supplier of fertilizer, oil, gas, and agricultural products for export to countries around the world, and disruptions in those exports have created or contributed to various economic and commercial challenges including increased energy costs, increased fertilizer costs, and other inflationary impacts. In addition, business in Ukraine, Russia and the surrounding region has been impacted by the temporary suspension of business operations by companies due to safety and security concerns, the divestiture of assets and businesses in the region by their international owners, and government imposition of sanctions targeting Russia and others, including "luxury goods" sanctions that prohibit the supply of tobacco and tobacco products to Russia.
We do not have manufacturing facilities or material subsidiaries in Ukraine or Russia. We do, however, have a number of customers that have historically conducted business there, and some of those customers have previously disclosed the temporary suspension of operations in Ukraine or the divestiture of assets in Russia. We have worked closely with those customers to monitor and understand the impacts the conflict in Ukraine has had on their operations. In some cases we have worked with customers to suspend tobacco orders until such time that customers believe it is safe to reopen their facilities in Ukraine, and in other cases we have coordinated with customers to cancel orders for tobacco destined to Russia and ship some or all of that tobacco to other countries in which those customers have operations that need those quantities and qualities of tobacco.
At this time, we have not experienced any material direct impact on our business from the ongoing Ukraine conflict. We are unable, however, to estimate the duration or extent of any potential impact on our business from the continuation or potential escalation of the conflict. Such future impacts could be direct, such as the impact of continued or increased governmental prohibitions against shipping tobacco and tobacco products to Russia, or they could be indirect, such as contributing to or increasing costs and other inflationary pressures impacting our global operations and those of our supply chain around the world. We will continue to monitor and evaluate this complex and evolving situation.
OTHER ITEMS
Cost of goods sold in the year ended March 31, 2022, increased by
For the fiscal year and quarter ended March 31, 2022, the Company's effective tax rate on pre-tax income was
For the fiscal year and quarter ended March 31, 2021, the Company's consolidated effective tax rate was
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) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
As Reported: Consolidated operating income | $ | 57,124 | $ | 62,745 | $ | 160,315 | $ | 147,810 | ||||||||||||||||||
Purchase accounting adjustments(1) | — | — | 3,057 | 2,800 | ||||||||||||||||||||||
Transaction costs for acquisitions(2) | — | — | 2,310 | 3,915 | ||||||||||||||||||||||
Fair value adjustment to contingent consideration for FruitSmart acquisition(3) | — | — | (2,532) | (4,173) | ||||||||||||||||||||||
Restructuring and impairment costs(4) | — | 2,598 | 10,457 | 22,577 | ||||||||||||||||||||||
Adjusted operating income | 57,124 | 65,343 | $ | 173,607 | $ | 172,929 | ||||||||||||||||||||
Adjusted Net Income and Diluted Earnings Per Share Reconciliation | ||||||||||||||||||||||||||
(in thousands except for per share amounts) | Three Months Ended March 31, | Fiscal Year Ended March 31, | ||||||||||||||||||||||||
(all amounts reported net of income taxes) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
As Reported: Net income attributable to Universal Corporation | $ | 25,770 | $ | 39,361 | $ | 86,577 | $ | 87,410 | ||||||||||||||||||
Purchase accounting adjustments(1) | — | — | 2,415 | 2,800 | ||||||||||||||||||||||
Transaction costs for acquisitions(2) | — | — | 2,195 | 3,915 | ||||||||||||||||||||||
Fair value adjustment to contingent consideration for FruitSmart acquisition(3) | — | — | (2,532) | (4,173) | ||||||||||||||||||||||
Restructuring and impairment costs(4) | — | 1,700 | 7,879 | 17,800 | ||||||||||||||||||||||
Interest expense related to an uncertain tax matter at a foreign subsidiary | — | — | (470) | 1,849 | ||||||||||||||||||||||
Income tax benefit from dividend withholding tax liability reversal(5) | — | — | (1,686) | (4,421) | ||||||||||||||||||||||
Adjusted Net income attributable to Universal Corporation | $ | 25,770 | $ | 41,061 | $ | 94,378 | $ | 105,180 | ||||||||||||||||||
As reported: Diluted earnings per share | $ | 1.03 | $ | 1.58 | $ | 3.47 | $ | 3.53 | ||||||||||||||||||
Adjusted: Diluted earnings per share | $ | 1.03 | $ | 1.65 | $ | 3.79 | $ | 4.25 | ||||||||||||||||||
(1) | The Company recognized an increase in cost of goods sold in the third quarters of fiscal year 2022 and 2021, relating to the expensing of fair value adjustments to inventory associated with the acquisition accounting for Shank's (effective October 4, 2021) and Silva (effective October 1, 2020). The adjustment related to the Silva acquisition is not deductible for U.S. income tax purposes. |
(2) | The Company incurred selling, general, and administrative expenses for due diligence and other transaction costs associated with the acquisitions of Shank's and Silva. 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. See Note 4 for additional information. |
(5) | The Company recognized income tax benefits related to a favorable final income tax ruling at a foreign subsidiary (fiscal year 2022) and final U.S. tax regulations on certain dividends paid by foreign subsidiaries (fiscal year 2021). |
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; 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; 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; timing of shipments to customers; 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, 2021, 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, 2021 and March 31, 2022, 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 25, 2022, 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 25, 2022. A taped replay of the call will be available through June 7, 2022, by dialing (866) 813-9403. The confirmation number to access the replay is 134295.
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 | ||||||||||||||||||||||||||
Three Months Ended March 31, | Fiscal Year Ended March 31, | |||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||||
Sales and other operating revenues | $ | 646,973 | $ | 617,590 | $ | 2,103,601 | $ | 1,983,357 | ||||||||||||||||||
Costs and expenses | ||||||||||||||||||||||||||
Cost of goods sold | 524,676 | 493,610 | 1,694,675 | 1,597,354 | ||||||||||||||||||||||
Selling, general and administrative expenses | 65,173 | 58,637 | 240,686 | 219,789 | ||||||||||||||||||||||
Other income | — | — | (2,532) | (4,173) | ||||||||||||||||||||||
Restructuring and impairment costs | — | 2,598 | 10,457 | 22,577 | ||||||||||||||||||||||
Operating income | 57,124 | 62,745 | 160,315 | 147,810 | ||||||||||||||||||||||
Equity in pretax earnings of unconsolidated affiliates | 1,039 | 896 | 6,095 | 2,985 | ||||||||||||||||||||||
Other non-operating income (expense) | 2,529 | (432) | 2,687 | (440) | ||||||||||||||||||||||
Interest income | 118 | 63 | 917 | 325 | ||||||||||||||||||||||
Interest expense | 6,947 | 5,814 | 27,747 | 24,954 | ||||||||||||||||||||||
Income before income taxes | 53,863 | 57,458 | 142,267 | 125,726 | ||||||||||||||||||||||
Income taxes | 20,081 | 16,734 | 38,663 | 29,412 | ||||||||||||||||||||||
Net income | 33,782 | 40,724 | 103,604 | 96,314 | ||||||||||||||||||||||
Less: net income attributable to noncontrolling interests in subsidiaries | (8,012) | (1,363) | (17,027) | (8,904) | ||||||||||||||||||||||
Net income attributable to Universal Corporation | $ | 25,770 | $ | 39,361 | $ | 86,577 | $ | 87,410 | ||||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||||
Basic | $ | 1.04 | $ | 1.59 | $ | 3.50 | $ | 3.55 | ||||||||||||||||||
Diluted | $ | 1.03 | $ | 1.58 | $ | 3.47 | $ | 3.53 | ||||||||||||||||||
See accompanying notes. |
UNIVERSAL CORPORATION | ||||||||||||||
March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
ASSETS | ||||||||||||||
Current assets | ||||||||||||||
Cash and cash equivalents | $ | 81,648 | $ | 197,221 | ||||||||||
Accounts receivable, net | 385,437 | 367,482 | ||||||||||||
Advances to suppliers, net | 129,838 | 121,618 | ||||||||||||
Accounts receivable—unconsolidated affiliates | 4,540 | 584 | ||||||||||||
Inventories—at lower of cost or net realizable value: | ||||||||||||||
Tobacco | 822,513 | 640,653 | ||||||||||||
Other | 194,161 | 145,965 | ||||||||||||
Prepaid income taxes | 13,095 | 15,029 | ||||||||||||
Other current assets | 116,779 | 66,806 | ||||||||||||
Total current assets | 1,748,011 | 1,555,358 | ||||||||||||
Property, plant and equipment | ||||||||||||||
Land | 23,959 | 22,400 | ||||||||||||
Buildings | 293,935 | 284,430 | ||||||||||||
Machinery and equipment | 668,451 | 658,826 | ||||||||||||
986,345 | 965,656 | |||||||||||||
Less accumulated depreciation | (641,227) | (616,146) | ||||||||||||
345,118 | 349,510 | |||||||||||||
Other assets | ||||||||||||||
Operating lease right-of-use assets | 40,243 | 31,230 | ||||||||||||
Goodwill, net | 213,998 | 173,051 | ||||||||||||
Other intangibles, net | 92,571 | 72,304 | ||||||||||||
Investments in unconsolidated affiliates | 81,006 | 84,218 | ||||||||||||
Deferred income taxes | 11,616 | 12,149 | ||||||||||||
Pension asset | 12,667 | 11,950 | ||||||||||||
Other noncurrent assets | 41,115 | 52,154 | ||||||||||||
493,216 | 437,056 | |||||||||||||
Total assets | $ | 2,586,345 | $ | 2,341,924 | ||||||||||
See accompanying notes. |
UNIVERSAL CORPORATION | ||||||||||||||
March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
Current liabilities | ||||||||||||||
Notes payable and overdrafts | $ | 182,639 | $ | 101,294 | ||||||||||
Accounts payable and accrued expenses | 272,042 | 139,484 | ||||||||||||
Accounts payable—unconsolidated affiliates | 5,308 | 1,282 | ||||||||||||
Customer advances and deposits | 13,724 | 8,765 | ||||||||||||
Accrued compensation | 27,281 | 29,918 | ||||||||||||
Income taxes payable | 7,427 | 4,516 | ||||||||||||
Current portion of operating lease liabilities | 10,303 | 7,898 | ||||||||||||
Current portion of long-term debt | — | — | ||||||||||||
Total current liabilities | 518,724 | 293,157 | ||||||||||||
Long-term debt | 518,547 | 518,172 | ||||||||||||
Pensions and other postretirement benefits | 52,890 | 57,637 | ||||||||||||
Long-term operating lease liabilities | 29,617 | 19,725 | ||||||||||||
Other long-term liabilities | 34,464 | 59,814 | ||||||||||||
Deferred income taxes | 47,334 | 44,994 | ||||||||||||
Total liabilities | 1,201,576 | 993,499 | ||||||||||||
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, 24,550,019 shares issued and outstanding (24,514,867 at March 31, 2021) | 330,662 | 326,673 | ||||||||||||
Retained earnings | 1,094,192 | 1,087,663 | ||||||||||||
Accumulated other comprehensive loss | (84,311) | (107,037) | ||||||||||||
Total Universal Corporation shareholders' equity | 1,340,543 | 1,307,299 | ||||||||||||
Noncontrolling interests in subsidiaries | 44,226 | 41,126 | ||||||||||||
Total shareholders' equity | 1,384,769 | 1,348,425 | ||||||||||||
Total liabilities and shareholders' equity | $ | 2,586,345 | $ | 2,341,924 | ||||||||||
See accompanying notes. |
UNIVERSAL CORPORATION | ||||||||||||||
Fiscal Year Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||
Net income | $ | 103,604 | $ | 96,314 | ||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
Depreciation and amortization | 52,521 | 44,733 | ||||||||||||
Provision for losses (recoveries) on advances and guaranteed loans to suppliers | 5,988 | 5,534 | ||||||||||||
Inventory write-downs | 19,944 | 13,463 | ||||||||||||
Stock-based compensation expense | 6,186 | 6,106 | ||||||||||||
Foreign currency remeasurement loss (gain), net | 19,029 | (8,475) | ||||||||||||
Foreign currency exchange contracts | (13,210) | (1,567) | ||||||||||||
Deferred income taxes | (2,473) | (2,335) | ||||||||||||
Equity in net income of unconsolidated affiliates, net of dividends | (329) | (296) | ||||||||||||
Restructuring and impairment costs | 10,457 | 22,577 | ||||||||||||
Restructuring payments | (4,134) | (8,283) | ||||||||||||
Change in estimated fair value of contingent consideration for FruitSmart acquisition | (2,532) | (4,173) | ||||||||||||
Other, net | 513 | (1,373) | ||||||||||||
Changes in operating assets and liabilities, net: | (150,682) | 58,189 | ||||||||||||
Net cash provided by operating activities | 44,882 | 220,414 | ||||||||||||
Cash Flows From Investing Activities: | ||||||||||||||
Purchase of property, plant and equipment | (53,203) | (66,154) | ||||||||||||
Purchase of business, net of cash held by the business | (102,462) | (161,751) | ||||||||||||
Proceeds from sale of property, plant and equipment | 13,004 | 11,436 | ||||||||||||
Other | — | (800) | ||||||||||||
Net cash used by investing activities | (142,661) | (217,269) | ||||||||||||
Cash Flows From Financing Activities: | ||||||||||||||
Issuance (repayment) of short-term debt, net | 79,286 | 29,396 | ||||||||||||
Issuance of long-term debt | — | 150,000 | ||||||||||||
Dividends paid to noncontrolling interests in subsidiaries | (13,390) | (10,881) | ||||||||||||
Repurchase of common stock | (3,053) | — | ||||||||||||
Dividends paid on common stock | (76,436) | (75,177) | ||||||||||||
Debt issuance costs and other | (3,167) | (1,949) | ||||||||||||
Net cash provided/(used) by financing activities | (16,760) | 91,389 | ||||||||||||
Effect of exchange rate changes on cash | (1,034) | 1,257 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | (115,573) | 95,791 | ||||||||||||
Cash, restricted cash and cash equivalents at beginning of year | 203,221 | 107,430 | ||||||||||||
Cash, Restricted Cash and Cash Equivalents at End of Year | $ | 87,648 | $ | 203,221 | ||||||||||
Supplemental Information: | ||||||||||||||
Cash and cash equivalents | $ | 81,648 | $ | 197,221 | ||||||||||
Restricted cash (Other noncurrent assets) | 6,000 | 6,000 | ||||||||||||
Total cash, restricted cash and cash equivalents | $ | 87,648 | $ | 203,221 | ||||||||||
See accompanying notes. |
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, 2021.
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) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
Basic Earnings Per Share | ||||||||||||||||||||||||||
Numerator for basic earnings per share | ||||||||||||||||||||||||||
Net income attributable to Universal Corporation | $ | 25,770 | $ | 39,361 | $ | 86,577 | $ | 87,410 | ||||||||||||||||||
Denominator for basic earnings per share | ||||||||||||||||||||||||||
Weighted average shares outstanding | 24,772,754 | 24,685,343 | 24,764,177 | 24,656,009 | ||||||||||||||||||||||
Basic earnings per share | $ | 1.04 | $ | 1.59 | $ | 3.50 | $ | 3.55 | ||||||||||||||||||
Diluted Earnings Per Share | ||||||||||||||||||||||||||
Numerator for diluted earnings per share | ||||||||||||||||||||||||||
Net income attributable to Universal Corporation | $ | 25,770 | $ | 39,361 | $ | 86,577 | $ | 87,410 | ||||||||||||||||||
Denominator for diluted earnings per share: | ||||||||||||||||||||||||||
Weighted average shares outstanding | 24,772,754 | 24,685,343 | 24,764,177 | 24,656,009 | ||||||||||||||||||||||
Effect of dilutive securities | ||||||||||||||||||||||||||
Employee and outside director share-based awards | 180,816 | 175,935 | 158,719 | 132,557 | ||||||||||||||||||||||
Denominator for diluted earnings per share | 24,953,570 | 24,861,278 | 24,922,896 | 24,788,566 | ||||||||||||||||||||||
Diluted earnings per share | $ | 1.03 | $ | 1.58 | $ | 3.47 | $ | 3.53 | ||||||||||||||||||
NOTE 3. SEGMENT INFORMATION
As a result of acquisitions of plant-based ingredients companies in fiscal year 2020 and 2021, during the fiscal year ended March 31, 2021 management evaluated the Company's global business activities, including product and service offerings to its customers, as well as senior management's operational and financial responsibilities. This assessment included an analysis of how its chief operating decision maker measures business performance and allocates resources. As a result of this analysis, senior management 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. See Note 4 for additional information about the wind-down of CIFI.
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) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
SALES AND OTHER OPERATING REVENUES | ||||||||||||||||||||||||||
Tobacco Operations | $ | 567,180 | $ | 562,993 | $ | 1,835,790 | $ | 1,841,837 | ||||||||||||||||||
Ingredients Operations | 79,793 | 54,597 | 267,811 | 141,520 | ||||||||||||||||||||||
Consolidated sales and other operating revenues | $ | 646,973 | $ | 617,590 | $ | 2,103,601 | $ | 1,983,357 | ||||||||||||||||||
OPERATING INCOME | ||||||||||||||||||||||||||
Tobacco Operations | $ | 52,155 | $ | 61,174 | $ | 157,754 | $ | 168,832 | ||||||||||||||||||
Ingredients Operations | 6,008 | 5,065 | 16,581 | 367 | ||||||||||||||||||||||
Subtotal | 58,163 | 66,239 | 174,335 | 169,199 | ||||||||||||||||||||||
Deduct: Equity in pretax earnings of unconsolidated affiliates (1) | (1,039) | (896) | (6,095) | (2,985) | ||||||||||||||||||||||
Restructuring and impairment costs (2) | — | (2,598) | (10,457) | (22,577) | ||||||||||||||||||||||
Add: Other income (3) | — | — | 2,532 | 4,173 | ||||||||||||||||||||||
Consolidated operating income | $ | 57,124 | $ | 62,745 | $ | 160,315 | $ | 147,810 | ||||||||||||||||||
(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. |
NOTE 4. RESTRUCTURING AND IMPAIRMENT COSTS
During the fiscal years ended March 31, 2022, 2021, and 2020 Universal recorded restructuring and impairment costs related to business changes and various initiatives to adjust certain operations and reduce costs.
Fiscal Year Ended March 31, 2022
Tobacco Operations
As a result of efforts to exit the idled tobacco operations in Tanzania, the Company reevaluated the carrying values of property, plant, and equipment associated with the Tanzania operations. During the fiscal year ended March 31, 2022, the Company determined the carrying value exceeded the estimated fair value of those assets and recognized a
During the fiscal year ended March 31, 2022, the Company also incurred
Ingredients Operations
During the fiscal year ended March 31, 2022, the Company recognized
Fiscal Year Ended March 31, 2021
Tobacco Operations
During the fiscal year ended March 31, 2021, the Company incurred
Ingredients Operations
In fiscal year 2021, the Company committed to a plan to wind-down its subsidiary, Carolina Innovative Food Ingredients, Inc. ("CIFI"), a sweet potato processing operation located in Nashville, North Carolina. The CIFI operation was a start-up project initially undertaken by the Company in fiscal year 2015. The decision to wind down CIFI was consistent with the Company's capital allocation strategy to focus on delivering shareholder value through building and enhancing a plant-based ingredients platform, which includes integrating and exploring the synergies of recently acquired businesses, FruitSmart and Silva. The Company determined that CIFI was not a strategic fit for the platform's long-term objectives. CIFI's single-product focused processing facility and ongoing international pricing pressures, among other factors, created challenges that proved insurmountable. As a result of the decision to wind down the CIFI operations, the Company paid termination benefits totaling approximately
Fiscal Year Ended March 31, 2020
Tobacco Operations
In fiscal year 2020, the Company recorded restructuring and impairment costs totaling
A summary of the restructuring and impairment costs incurred during the fiscal years ended March 31, 2022, 2021, and 2020 is as follows:
Fiscal Years Ended | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
Restructuring Costs: | ||||||||||||||||||||
Employee termination benefits | $ | 2,174 | $ | 5,237 | $ | 5,356 | ||||||||||||||
Other restructuring costs | (24) | 3,468 | — | |||||||||||||||||
2,150 | 8,705 | 5,356 | ||||||||||||||||||
Impairment Costs: | ||||||||||||||||||||
Property, plant, and equipment and other noncurrent assets | 8,307 | 13,872 | 2,187 | |||||||||||||||||
$ | 8,307 | $ | 13,872 | $ | 2,187 | |||||||||||||||
Total restructuring and impairment costs | $ | 10,457 | $ | 22,577 | $ | 7,543 | ||||||||||||||
A reconciliation of the Company's liability for employee termination benefits and other restructuring costs for fiscal years 2020 through 2022 is as follows:
Employee | Other Costs | Total | ||||||||||||||||||
Balance at April 1, 2019 | $ | 623 | $ | 223 | $ | 846 | ||||||||||||||
Fiscal Year 2020 Activity: | ||||||||||||||||||||
Costs charged to expense | 5,356 | — | 5,356 | |||||||||||||||||
Payments and write-offs | (2,564) | (223) | (2,787) | |||||||||||||||||
Balance at March 31, 2020 | 3,415 | — | 3,415 | |||||||||||||||||
Fiscal Year 2021 Activity: | ||||||||||||||||||||
Costs charged to expense | 5,237 | 3,468 | 8,705 | |||||||||||||||||
Payments and write-offs | (7,282) | (2,855) | (10,137) | |||||||||||||||||
Balance at March 31, 2021 | 1,370 | 613 | 1,983 | |||||||||||||||||
Fiscal Year 2022 Activity: | ||||||||||||||||||||
Costs charged to expense | 2,174 | (24) | 2,150 | |||||||||||||||||
Payments and write-offs | (3,544) | (589) | (4,133) | |||||||||||||||||
Balance at March 31, 2022 | $ | — | $ | — | $ | — | ||||||||||||||
Universal continually reviews its business for opportunities to realize efficiencies, reduce costs, and realign its operations in response to business changes. The Company may incur additional restructuring and impairment costs in future periods as business changes occur and additional cost savings initiatives are implemented.
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SOURCE Universal Corporation
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