Universal Corporation Reports Third Quarter Results
- Operating income and net income increased by 13% and 28% respectively compared to the third quarter of fiscal year 2023
- Tobacco business performed well due to a favorable product mix and strong demand from customers
- Global leaf supply for all types of leaf tobacco continues to be tight, with uncommitted tobacco inventory at a low level of 8%
- Progress made to expand the ingredients business, with investments in research and development and corporate sales teams gaining momentum
- Progress in advancing the global sustainability agenda, including the publication of the 2023 Sustainability Report and participation in a solar project to reduce operational greenhouse gas emissions by 30% by 2030
- Ingredients operations operating income decreased by 50% for the nine months ended December 31, 2023, compared to the same period in the prior fiscal year
- Lower operating income in the first quarter of the current fiscal year, negatively impacted by customer inventory recalibrations
- Higher selling, general, and administrative expenses for the nine months and quarter ended December 31, 2023, compared to the same periods in the prior fiscal year
Insights
The reported increase in Universal Corporation's operating and net income for both the quarter and nine-month periods is a strong indicator of the company's financial health and efficiency. The 13% and 28% growth in operating income and net income for the quarter, respectively, coupled with a 20% and 13% increase for the nine-month period, reflect robust operational performance. This performance is particularly noteworthy considering the tight global leaf supply and the low level of uncommitted inventory at 8%. Investors should consider the implications of these figures on the company's ability to sustain dividends and potentially invest in further growth opportunities.
The gross profit margin expansion by 160 basis points suggests improved cost management and pricing power. The company's ability to pass on higher costs to customers without significantly impacting volumes is a positive sign for its pricing strategy and market position. However, the increase in the cost of goods sold, albeit lower than the revenue increase, indicates rising input costs, which could be a concern if not managed effectively in the long term.
It is also important to note the impact of foreign currency fluctuations and higher interest expenses. These factors have affected equity earnings from the oriental tobacco joint venture and increased overall interest expenses, which could be a drag on profits if the trend continues. Investors should monitor these external factors as they could influence future profitability.
The performance of Universal Corporation's tobacco operations, with a 25% increase in operating income for the nine-month period, is a testament to the company's strong position in the market and its ability to navigate a tight global leaf supply. The favorable product mix and larger crops in Africa have contributed to this result, which is a positive sign for the company's sourcing and supply chain strategies. As the demand for leaf tobacco remains strong, the company's diverse global footprint is anticipated to be a critical factor in meeting customer needs despite the expected tight supply due to El Nino weather conditions.
On the other hand, the ingredients operations show a mixed performance with a 50% decrease in operating income for the nine-month period. This indicates challenges in this segment, which may include market saturation or operational inefficiencies. The company's investments in research and development and corporate sales teams, as well as the expansion of processing capabilities, are strategic moves to position for future growth, but the payoff of these investments will need to be closely watched.
The company's focus on sustainability, including the publication of the 2023 Sustainability Report and participation in a solar project, reflects a growing trend among corporations to address environmental concerns. Universal Corporation's target to reduce operational greenhouse gas emissions by 30% by 2030 aligns with broader global sustainability goals and can improve the company's reputation among environmentally conscious stakeholders. These initiatives may also lead to operational cost savings in the long term and could potentially open up new markets that prioritize sustainable suppliers. However, the upfront investment costs and the actual impact on the company's carbon footprint will need to be evaluated to determine the effectiveness of these sustainability measures.
"Our tobacco business continued to perform very well, driven by a favorable product mix and strong demand from our customers. Improved margins, larger crops in
"We continue to be encouraged by the solid progress the team is making to expand our ingredients business. The investments we have made to build out the research and development and corporate sales teams are starting to gain momentum and have positioned us for future growth. We are also pleased with the progress we are making on the expansion of our processing capabilities at our ingredients facility in
"Another important achievement in fiscal year 2024 has been the progress we made to advance Universal's global sustainability agenda. These include the December 2023 publication of our 2023 Sustainability Report, and our recently announced participation in a solar project that we believe will help us meet our target to reduce operational greenhouse gas emissions by 30 percent by 2030. We are proud of our sustainability advances, and we continue to seek opportunities to further promote sustainability in our business."
FINANCIAL HIGHLIGHTS | |||||||||||||||||||||||
Nine Months Ended December 31, | Change | ||||||||||||||||||||||
(in millions of dollars, except per share data) | 2023 | 2022 | $ | % | |||||||||||||||||||
Consolidated Results | |||||||||||||||||||||||
Sales and other operating revenue | $ | 1,977.7 | $ | 1,875.8 | $ | 101.9 | 5 | % | |||||||||||||||
Cost of goods sold | $ | 1,592.5 | $ | 1,540.4 | $ | 52.2 | 3 | % | |||||||||||||||
Gross Profit Margin | 19.5 | % | 17.9 | % | 160 bps | ||||||||||||||||||
Selling, general and administrative expenses | $ | 227.8 | $ | 206.8 | $ | 21.0 | 10 | % | |||||||||||||||
Operating income (loss) | $ | 153.8 | $ | 128.7 | $ | 25.1 | 20 | % | |||||||||||||||
Diluted earnings (loss) per share (as reported) | $ | 3.17 | $ | 2.82 | $ | 0.35 | 12 | % | |||||||||||||||
Adjusted diluted earnings (loss) per share (non-GAAP)* | $ | 3.29 | $ | 2.80 | $ | 0.49 | 18 | % | |||||||||||||||
Segment Results | |||||||||||||||||||||||
Tobacco operations sales and other operating revenues | $ | 1,742.5 | $ | 1,642.7 | $ | 99.8 | 6 | % | |||||||||||||||
Tobacco operations operating income | $ | 148.9 | $ | 119.0 | $ | 29.9 | 25 | % | |||||||||||||||
Ingredients operations sales and other operating revenues | $ | 235.2 | $ | 233.2 | $ | 2.1 | 1 | % | |||||||||||||||
Ingredients operations operating income (loss) | $ | 5.0 | $ | 9.9 | $ | (4.9) | (50) | % | |||||||||||||||
*See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below. |
Net income for the nine months ended December 31, 2023, was
Net income for the quarter ended December 31, 2023, was
Consolidated revenues increased by
TOBACCO OPERATIONS
Revenues for the Tobacco Operations segment were
Operating income for the Tobacco Operations segment increased by
INGREDIENTS OPERATIONS
Revenues for the Ingredients Operations segment of
Operating income for the Ingredients Operations segment was
In the quarter ended December 31, 2023, operating income for our Ingredients Operations segment was in line with results for the same quarter in the prior fiscal year, as incremental revenue and margin from sale of new products offset the effects of market challenges for our core products and higher expenses resulting from the investments that we are making to position the segment for future growth.
Operating income for the nine months ended December 31, 2023, was lower as compared to the same period in the prior year, mainly as the result of lower operating income in the first quarter of the current fiscal year, as compared to the same period in the prior fiscal year. Results for the first quarter of fiscal 2024 were negatively impacted by customer inventory recalibrations. Other factors that contributed to lower segment operating income for the nine months ended December 31, 2023, as compared to the same period in the prior fiscal year, include lower new crop raw material prices, inventory write-downs, and higher selling, general, and administrative expenses, partially offset by margins from the sale of new products. In the nine months and quarter ended December 31, 2023, selling, general, and administrative expenses were higher, compared to the same periods in the prior fiscal year, due to higher compensation and other costs related to investment in expanding sales and product development capabilities as well as higher corporate overhead allocations, partially offset by deferred compensation expense incurred during the third quarter of fiscal year 2023.
OTHER ITEMS
Cost of goods sold in the nine months and quarter ended December 31, 2023, increased by
For the nine months and quarter ended December 31, 2023, our effective tax rate on pre-tax income was
Reconciliation of Certain Non-GAAP Financial Measures
The following table sets forth certain non-recurring items included in reported results to reconcile adjusted net income to net income attributable to Universal Corporation:
Adjusted Operating Income Reconciliation | |||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
(in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
As Reported: Consolidated operating income | $ | 87,464 | $ | 77,526 | $ | 153,811 | $ | 128,678 | |||||||||||||||
Restructuring and impairment costs(1) | 924 | — | 3,523 | — | |||||||||||||||||||
As Adjusted operating income (Non-GAAP) | $ | 88,388 | $ | 77,526 | $ | 157,334 | $ | 128,678 | |||||||||||||||
Adjusted Net Income Attributable to Universal Corporation and Adjusted Diluted Earnings Per Share Reconciliation | |||||||||||||||||||||||
(in thousands except for per share amounts) | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
As Reported: Net income attributable to Universal Corporation | $ | 53,216 | $ | 41,660 | $ | 79,280 | $ | 70,345 | |||||||||||||||
Restructuring and impairment costs(1) | 924 | — | 3,523 | — | |||||||||||||||||||
Interest expense reversal on uncertain tax position from sale of operations in | — | — | — | (1,816) | |||||||||||||||||||
Total of Non-GAAP adjustments to income before income taxes | 924 | — | 3,523 | (1,816) | |||||||||||||||||||
Non-GAAP adjustments to income taxes | |||||||||||||||||||||||
Income tax benefit from restructuring and impairment costs | (47) | — | (512) | — | |||||||||||||||||||
Income tax expense from sale of operations in | — | — | — | 1,132 | |||||||||||||||||||
Total of income tax impacts for Non-GAAP adjustments to income before income taxes | (47) | — | (512) | 1,132 | |||||||||||||||||||
As adjusted: Net income attributable to Universal Corporation (Non-GAAP) | $ | 54,093 | $ | 41,660 | $ | 82,291 | $ | 69,661 | |||||||||||||||
As reported: Diluted earnings per share | $ | 2.12 | $ | 1.67 | $ | 3.17 | $ | 2.82 | |||||||||||||||
As adjusted: Diluted earnings per share (Non-GAAP) | $ | 2.16 | $ | 1.67 | $ | 3.29 | $ | 2.80 | |||||||||||||||
(1) 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. |
SUSTAINABILITY
Universal is taking important steps to advance its sustainability agenda as Universal continues to monitor and address the environmental and social impacts of its businesses. In December 2023, we published our 2023 Sustainability Report which details efforts we have taken to promote the sustainability of our operations and contribute to global sustainability goals. The report focuses on our primary sustainability topics as well as our environmental, social, and supply chain goals. We also announced in January 2024 an investment in a solar project that is intended to address emissions from 100 percent of Universal's annual purchased electricity demand in
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, 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 international conflicts, such as the conflict in
At 5:00 p.m. (Eastern Time) on February 7, 2024, 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 May 7, 2024. A taped replay of the call will be available through February 20, 2023, by dialing (877) 674-7070. The confirmation number to access the replay is 848937.
Universal Corporation (NYSE: UVV), headquartered in
UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME (in thousands of dollars, except per share data) | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||||
Sales and other operating revenues | $ | 821,507 | $ | 795,039 | $ | 1,977,713 | $ | 1,875,845 | ||||||||||||||||||
Costs and expenses | ||||||||||||||||||||||||||
Cost of goods sold | 654,556 | 649,539 | 1,592,533 | 1,540,368 | ||||||||||||||||||||||
Selling, general and administrative expenses | 78,563 | 67,974 | 227,846 | 206,799 | ||||||||||||||||||||||
Restructuring and impairment costs | 924 | — | 3,523 | — | ||||||||||||||||||||||
Operating income | 87,464 | 77,526 | 153,811 | 128,678 | ||||||||||||||||||||||
Equity in pretax earnings (loss) of unconsolidated affiliates | 1,384 | 345 | (3,495) | 208 | ||||||||||||||||||||||
Other non-operating income (expense) | 726 | (69) | 2,179 | (208) | ||||||||||||||||||||||
Interest income | 1,720 | 77 | 4,038 | 407 | ||||||||||||||||||||||
Interest expense | 15,525 | 14,265 | 48,121 | 33,259 | ||||||||||||||||||||||
Income before income taxes and other items | 75,769 | 63,614 | 108,412 | 95,826 | ||||||||||||||||||||||
Income taxes | 14,482 | 12,253 | 21,498 | 22,258 | ||||||||||||||||||||||
Net income | 61,287 | 51,361 | 86,914 | 73,568 | ||||||||||||||||||||||
Less: net loss (income) attributable to noncontrolling interests in subsidiaries | (8,071) | (9,701) | (7,634) | (3,223) | ||||||||||||||||||||||
Net income attributable to Universal Corporation | $ | 53,216 | $ | 41,660 | $ | 79,280 | $ | 70,345 | ||||||||||||||||||
Earnings per share: | ||||||||||||||||||||||||||
Basic | $ | 2.14 | $ | 1.68 | $ | 3.19 | $ | 2.84 | ||||||||||||||||||
Diluted | $ | 2.12 | $ | 1.67 | $ | 3.17 | $ | 2.82 | ||||||||||||||||||
See accompanying notes. |
UNIVERSAL CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of dollars) | ||||||||||||||||||||
December 31, | December 31, | March 31, | ||||||||||||||||||
2023 | 2022 | 2023 | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 74,102 | $ | 71,283 | $ | 64,690 | ||||||||||||||
Accounts receivable, net | 435,306 | 536,650 | 402,073 | |||||||||||||||||
Advances to suppliers, net | 159,481 | 163,237 | 170,801 | |||||||||||||||||
Accounts receivable—unconsolidated affiliates | 33,109 | 5,920 | 12,210 | |||||||||||||||||
Inventories—at lower of cost or net realizable value: | ||||||||||||||||||||
Tobacco | 1,009,030 | 866,380 | 833,876 | |||||||||||||||||
Other | 196,246 | 211,561 | 202,907 | |||||||||||||||||
Prepaid income taxes | 18,304 | 17,363 | 16,493 | |||||||||||||||||
Other current assets | 88,051 | 79,495 | 99,840 | |||||||||||||||||
Total current assets | 2,013,629 | 1,951,889 | 1,802,890 | |||||||||||||||||
Property, plant and equipment | ||||||||||||||||||||
Land | 26,516 | 24,142 | 24,926 | |||||||||||||||||
Buildings | 319,740 | 305,215 | 311,138 | |||||||||||||||||
Machinery and equipment | 720,816 | 679,970 | 689,220 | |||||||||||||||||
1,067,072 | 1,009,327 | 1,025,284 | ||||||||||||||||||
Less accumulated depreciation | (706,642) | (663,333) | (674,122) | |||||||||||||||||
360,430 | 345,994 | 351,162 | ||||||||||||||||||
Other assets | ||||||||||||||||||||
Operating lease right-of-use assets | 34,913 | 42,337 | 40,505 | |||||||||||||||||
Goodwill, net | 213,891 | 213,881 | 213,922 | |||||||||||||||||
Other intangibles, net | 71,697 | 82,917 | 80,101 | |||||||||||||||||
Investments in unconsolidated affiliates | 75,335 | 72,565 | 76,184 | |||||||||||||||||
Deferred income taxes | 14,855 | 10,005 | 13,091 | |||||||||||||||||
Pension asset | 11,586 | 12,740 | 9,984 | |||||||||||||||||
Other noncurrent assets | 37,538 | 32,575 | 51,343 | |||||||||||||||||
459,815 | 467,020 | 485,130 | ||||||||||||||||||
Total assets | $ | 2,833,874 | $ | 2,764,903 | $ | 2,639,182 | ||||||||||||||
See accompanying notes. |
UNIVERSAL CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of dollars) | ||||||||||||||||||||
December 31, | December 31, | March 31, | ||||||||||||||||||
2023 | 2022 | 2023 | ||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Notes payable and overdrafts | $ | 365,327 | $ | 348,073 | $ | 195,564 | ||||||||||||||
Accounts payable | 89,301 | 92,305 | 83,213 | |||||||||||||||||
Accounts payable—unconsolidated affiliates | 122 | 57 | 5,830 | |||||||||||||||||
Customer advances and deposits | 19,620 | 5,365 | 3,061 | |||||||||||||||||
Accrued compensation | 27,967 | 21,670 | 33,108 | |||||||||||||||||
Income taxes payable | 5,499 | 3,715 | 3,274 | |||||||||||||||||
Current portion of operating lease liabilities | 10,403 | 11,160 | 11,404 | |||||||||||||||||
Accrued expenses and other current liabilities | 106,635 | 115,882 | 106,533 | |||||||||||||||||
Current portion of long-term debt | — | — | — | |||||||||||||||||
Total current liabilities | 624,874 | 598,227 | 441,987 | |||||||||||||||||
Long-term debt | 617,225 | 616,750 | 616,809 | |||||||||||||||||
Pensions and other postretirement benefits | 43,301 | 50,773 | 42,769 | |||||||||||||||||
Long-term operating lease liabilities | 22,050 | 27,030 | 25,540 | |||||||||||||||||
Other long-term liabilities | 26,609 | 22,797 | 32,512 | |||||||||||||||||
Deferred income taxes | 41,165 | 48,584 | 42,613 | |||||||||||||||||
Total liabilities | 1,375,224 | 1,364,161 | 1,202,230 | |||||||||||||||||
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 24,559,181 shares issued and outstanding at December 31, 2023 (24,555,361 at December 31, 2022 and 24,555,361 at March 31, 2023) | 344,467 | 335,160 | 337,247 | |||||||||||||||||
Retained earnings | 1,152,863 | 1,102,887 | 1,136,898 | |||||||||||||||||
Accumulated other comprehensive loss | (80,254) | (77,255) | (77,057) | |||||||||||||||||
Total Universal Corporation shareholders' equity | 1,417,076 | 1,360,792 | 1,397,088 | |||||||||||||||||
Noncontrolling interests in subsidiaries | 41,574 | 39,950 | 39,864 | |||||||||||||||||
Total shareholders' equity | 1,458,650 | 1,400,742 | 1,436,952 | |||||||||||||||||
Total liabilities and shareholders' equity | $ | 2,833,874 | $ | 2,764,903 | $ | 2,639,182 | ||||||||||||||
See accompanying notes. |
UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars) | ||||||||||||||
Nine Months Ended December 31, | ||||||||||||||
2023 | 2022 | |||||||||||||
(Unaudited) | ||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||
Net income | $ | 86,914 | $ | 73,568 | ||||||||||
Adjustments to reconcile net income (loss) to net cash used by operating activities: | ||||||||||||||
Depreciation and amortization | 43,843 | 42,844 | ||||||||||||
Net provision for losses (recoveries) on advances to suppliers | 9,950 | 6,127 | ||||||||||||
Inventory writedowns | 4,813 | 10,782 | ||||||||||||
Stock-based compensation expense | 10,625 | 6,630 | ||||||||||||
Foreign currency remeasurement (gain) loss, net | 3,227 | (1,335) | ||||||||||||
Foreign currency exchange contracts | 2,655 | 14,600 | ||||||||||||
Deferred income taxes | (2,078) | 470 | ||||||||||||
Equity in net loss (income) of unconsolidated affiliates, net of dividends | 2,055 | 5,717 | ||||||||||||
Restructuring and impairment costs | 3,523 | — | ||||||||||||
Restructuring payments | (999) | — | ||||||||||||
Other, net | 734 | (4,967) | ||||||||||||
Changes in operating assets and liabilities, net: | (211,999) | (338,286) | ||||||||||||
Net cash provided (used) by operating activities | (46,737) | (183,850) | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||
Purchase of property, plant and equipment | (47,732) | (39,430) | ||||||||||||
Proceeds from sale of business, net of cash held by the business | 3,757 | 3,245 | ||||||||||||
Proceeds from sale of property, plant and equipment | 1,932 | 1,634 | ||||||||||||
Net cash used by investing activities | (42,043) | (34,551) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||
Issuance of short-term debt, net | 170,433 | 166,109 | ||||||||||||
Issuance of long-term debt | — | 123,481 | ||||||||||||
Repayment of long-term debt | — | (23,481) | ||||||||||||
Dividends paid to noncontrolling interests | (5,845) | (6,825) | ||||||||||||
Repurchase of common stock | (4,744) | (3,448) | ||||||||||||
Dividends paid on common stock | (58,755) | (57,993) | ||||||||||||
Proceeds from termination of interest rate swap agreements | — | 11,786 | ||||||||||||
Other | (2,973) | (6,337) | ||||||||||||
Net cash provided (used) by financing activities | 98,116 | 203,292 | ||||||||||||
Effect of exchange rate changes on cash, restricted cash and cash equivalents | 76 | (1,256) | ||||||||||||
Net increase (decrease) in cash, restricted cash and cash equivalents | 9,412 | (16,365) | ||||||||||||
Cash, restricted cash and cash equivalents at beginning of year | 64,690 | 87,648 | ||||||||||||
Cash, restricted cash and cash equivalents at end of period | $ | 74,102 | $ | 71,283 | ||||||||||
See accompanying notes. |
NOTE 1. BASIS OF PRESENTATION
Universal Corporation, which together with its subsidiaries is referred to herein as "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, 2023 (the "2023 Annual Report on Form 10-K").
NOTE 2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(in thousands, except share and per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
Basic Earnings Per Share | ||||||||||||||||||||||||||
Numerator for basic earnings per share | ||||||||||||||||||||||||||
Net income attributable to Universal Corporation | $ | 53,216 | $ | 41,660 | $ | 79,280 | $ | 70,345 | ||||||||||||||||||
Denominator for basic earnings per share | ||||||||||||||||||||||||||
Weighted average shares outstanding | 24,849,498 | 24,770,294 | 24,853,774 | 24,772,827 | ||||||||||||||||||||||
Basic earnings per share | $ | 2.14 | $ | 1.68 | $ | 3.19 | $ | 2.84 | ||||||||||||||||||
Diluted Earnings Per Share | ||||||||||||||||||||||||||
Numerator for diluted earnings per share | ||||||||||||||||||||||||||
Net income attributable to Universal Corporation | $ | 53,216 | $ | 41,660 | $ | 79,280 | $ | 70,345 | ||||||||||||||||||
Denominator for diluted earnings per share: | ||||||||||||||||||||||||||
Weighted average shares outstanding | 24,849,498 | 24,770,294 | 24,853,774 | 24,772,827 | ||||||||||||||||||||||
Effect of dilutive securities | ||||||||||||||||||||||||||
Employee and outside director share-based awards | 206,331 | 158,132 | 163,393 | 161,620 | ||||||||||||||||||||||
Denominator for diluted earnings per share | 25,055,829 | 24,928,426 | 25,017,167 | 24,934,447 | ||||||||||||||||||||||
Diluted earnings per share | $ | 2.12 | $ | 1.67 | $ | 3.17 | $ | 2.82 | ||||||||||||||||||
NOTE 3. SEGMENT INFORMATION
The Company conducts operations across two reportable operating segments, Tobacco Operations and Ingredients Operations.
The Tobacco Operations segment activities involve selecting, procuring, processing, packing, storing, shipping, and financing 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 non-combustible 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, flavors, and botanical extracts. 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 flavors and botanical extracts and also offers bottling and custom packaging for customers.
The Company currently evaluates the performance of its segments based on operating income after allocated overhead expenses, plus equity in the pretax earnings (loss) of unconsolidated affiliates. Operating results for the Company's reportable segments for each period presented in the consolidated statements of income and comprehensive income were as follows.
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(in thousands of dollars) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||
SALES AND OTHER OPERATING REVENUES | ||||||||||||||||||||||||||
Tobacco Operations | $ | 743,933 | $ | 724,589 | $ | 1,742,494 | $ | 1,642,682 | ||||||||||||||||||
Ingredients Operations | 77,574 | 70,450 | 235,219 | 233,163 | ||||||||||||||||||||||
Consolidated sales and other operating revenues | $ | 821,507 | $ | 795,039 | $ | 1,977,713 | $ | 1,875,845 | ||||||||||||||||||
OPERATING INCOME | ||||||||||||||||||||||||||
Tobacco Operations | $ | 87,605 | $ | 77,104 | $ | 148,875 | $ | 119,010 | ||||||||||||||||||
Ingredients Operations | 2,167 | 767 | 4,964 | 9,876 | ||||||||||||||||||||||
Segment operating income | 89,772 | 77,871 | 153,839 | 128,886 | ||||||||||||||||||||||
Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (1) | (1,384) | (345) | 3,495 | (208) | ||||||||||||||||||||||
Restructuring and impairment costs (2) | (924) | — | (3,523) | — | ||||||||||||||||||||||
Consolidated operating income | $ | 87,464 | $ | 77,526 | $ | 153,811 | $ | 128,678 | ||||||||||||||||||
(1) | Equity in pretax earnings (loss) of unconsolidated affiliates is included in segment operating income (Tobacco Operations), but is reported below consolidated operating income and excluded from that total in the consolidated statements of income and comprehensive income. |
(2) | Restructuring and impairment costs are excluded from segment operating income, but are included in consolidated operating income in the consolidated statements of income and comprehensive income. |
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SOURCE Universal Corporation
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