UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
| x | Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 |
For the Quarterly Period Ended June 30, 2004
OR
| ¨ | Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 |
For the Transition Period From to
Commission file number 1-652
UNIVERSAL CORPORATION
(Exact name of registrant as specified in its charter)
| Virginia | 54-0414210 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
| 1501 North Hamilton Street, Richmond, Virginia 23230 |
804-359-9311 | |
| (Address of principal executive offices) | (Registrant’s telephone number) | |
Indicate by “X” mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by “X” mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No ¨
As of August 1, 2004, the total number of shares of common stock outstanding was 25,532,406.
FORM 10-Q
TABLE OF CONTENTS
2
UNIVERSAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Three Months Ended June 30, 2004, and September 30, 2003
(In thousands of dollars, except share and per share data)
| THREE MONTHS |
||||||||
| June 30, 2004 |
September 30, 2003 |
|||||||
| (Unaudited) | ||||||||
| Sales and other operating revenues |
$ | 737,141 | $ | 786,601 | ||||
| Costs and expenses |
||||||||
| Cost of goods sold |
601,067 | 647,008 | ||||||
| Selling, general and administrative expenses |
94,849 | 79,939 | ||||||
| Operating income |
41,225 | 59,654 | ||||||
| Equity in pretax earnings of unconsolidated affiliates |
2,909 | 3,776 | ||||||
| Interest expense |
12,608 | 11,076 | ||||||
| Income before income taxes and other items |
31,526 | 52,354 | ||||||
| Income taxes |
12,453 | 18,847 | ||||||
| Minority interests |
(1,406 | ) | (921 | ) | ||||
| Net income |
$ | 20,479 | $ | 34,428 | ||||
| Earnings per common share - basic |
$ | 0.80 | $ | 1.38 | ||||
| Earnings per common share - diluted |
$ | 0.80 | $ | 1.37 | ||||
| Retained earnings - beginning of period |
$ | 679,202 | $ | 592,673 | ||||
| Net income |
20,479 | 34,428 | ||||||
| Cash dividends declared ($.39 in 2004, $.36 in 2003) |
(9,951 | ) | (8,989 | ) | ||||
| Purchase of common stock |
— | (3,268 | ) | |||||
| Retained earnings - end of period |
$ | 689,730 | $ | 614,844 | ||||
See accompanying notes.
3
UNIVERSAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
| June 30, 2004 |
September 30, 2003 |
March 31, 2004 | |||||||
| (Unaudited) | (Unaudited) | ||||||||
| ASSETS | |||||||||
| Current |
|||||||||
| Cash and cash equivalents |
$ | 52,686 | $ | 57,183 | $ | 39,310 | |||
| Accounts receivable, net |
430,736 | 408,213 | 432,546 | ||||||
| Advances to suppliers, net |
113,913 | 122,991 | 140,758 | ||||||
| Accounts receivable - unconsolidated affiliates |
6,545 | 5,622 | 6,156 | ||||||
| Inventories - at lower of cost or market: |
|||||||||
| Tobacco |
790,089 | 609,431 | 562,927 | ||||||
| Lumber and building products |
150,045 | 140,299 | 138,423 | ||||||
| Agri-products |
127,573 | 76,748 | 106,214 | ||||||
| Other |
49,715 | 35,878 | 35,071 | ||||||
| Prepaid income taxes |
10,061 | 5,819 | 9,635 | ||||||
| Deferred income taxes |
15,146 | 5,995 | 16,908 | ||||||
| Other current assets |
49,216 | 34,893 | 38,721 | ||||||
| Total current assets |
1,795,725 | 1,503,072 | 1,526,669 | ||||||
| Property, plant and equipment - at cost |
|||||||||
| Land |
70,188 | 51,692 | 60,823 | ||||||
| Buildings |
376,952 | 306,092 | 364,948 | ||||||
| Machinery and equipment |
703,716 | 695,450 | 694,314 | ||||||
| 1,150,856 | 1,053,234 | 1,120,085 | |||||||
| Less accumulated depreciation |
574,783 | 524,234 | 559,217 | ||||||
| 576,073 | 529,000 | 560,868 | |||||||
| Other assets |
|||||||||
| Goodwill and other intangibles |
133,844 | 132,472 | 134,664 | ||||||
| Investments in unconsolidated affiliates |
89,043 | 93,559 | 94,460 | ||||||
| Deferred income taxes |
61,758 | 45,436 | 62,489 | ||||||
| Other noncurrent assets |
91,883 | 91,631 | 103,623 | ||||||
| 376,528 | 363,098 | 395,236 | |||||||
| Total assets |
$ | 2,748,326 | $ | 2,395,170 | $ | 2,482,773 | |||
See accompanying notes.
4
UNIVERSAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
| June 30, 2004 |
September 30, 2003 |
March 31, 2004 |
||||||||||
| (Unaudited) | (Unaudited) | |||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| Current |
||||||||||||
| Notes payable and overdrafts |
$ | 394,375 | $ | 253,423 | $ | 244,031 | ||||||
| Accounts payable |
320,514 | 352,201 | 331,963 | |||||||||
| Accounts payable - unconsolidated affiliates |
401 | 3,375 | 2,571 | |||||||||
| Customer advances and deposits |
183,554 | 193,202 | 59,894 | |||||||||
| Accrued compensation |
25,786 | 23,780 | 32,703 | |||||||||
| Income taxes payable |
30,559 | 23,958 | 22,007 | |||||||||
| Current portion of long-term obligations |
57,419 | 102,413 | 45,941 | |||||||||
| Total current liabilities |
1,012,608 | 952,352 | 739,110 | |||||||||
| Long-term obligations |
769,348 | 609,939 | 770,296 | |||||||||
| Postretirement benefits other than pensions |
42,283 | 40,491 | 41,721 | |||||||||
| Other long-term liabilities |
92,632 | 97,780 | 93,739 | |||||||||
| Deferred income taxes |
32,484 | 12,392 | 43,691 | |||||||||
| Total liabilities |
1,949,355 | 1,712,954 | 1,688,557 | |||||||||
| Minority interests |
32,272 | 33,416 | 34,383 | |||||||||
| Shareholders’ equity |
||||||||||||
| Preferred stock, no par value, authorized 5,000,000 shares, none issued or outstanding |
||||||||||||
| Common stock, no par value, authorized 100,000,000 shares, 25,532,406 issued and outstanding shares (24,983,745 at September 30, 2003, and 25,446,975 at March 31, 2004) |
111,896 | 95,169 | 112,505 | |||||||||
| Retained earnings |
689,730 | 614,844 | 679,202 | |||||||||
| Accumulated other comprehensive income (loss) |
(34,927 | ) | (61,213 | ) | (31,874 | ) | ||||||
| Total shareholders’ equity |
766,699 | 648,800 | 759,833 | |||||||||
| Total liabilities and shareholders’ equity |
$ | 2,748,326 | $ | 2,395,170 | $ | 2,482,773 | ||||||
See accompanying notes.
5
UNIVERSAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended June 30, 2004, and September 30, 2003
(In thousands of dollars)
| THREE MONTHS |
||||||||
| June 30, 2003 |
September 30, 2003 |
|||||||
| (Unaudited) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 20,479 | $ | 34,428 | ||||
| Depreciation |
15,585 | 11,892 | ||||||
| Amortization |
848 | 792 | ||||||
| Other adjustments to reconcile net income to net cash provided by operating activities |
5,819 | (4,354 | ) | |||||
| Changes in operating assets and liabilities |
(112,017 | ) | 9,866 | |||||
| Net cash provided (used) by operating activities |
(69,286 | ) | 52,624 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchase of property, plant and equipment |
(14,078 | ) | (19,500 | ) | ||||
| Purchase of business, net of cash acquired |
(12,477 | ) | — | |||||
| Sales of property, plant, and equipment and other |
2,261 | — | ||||||
| Net cash used in investing activities |
(24,294 | ) | (19,500 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Issuance (repayment) of short-term debt, net |
120,655 | (12,300 | ) | |||||
| Issuance of long-term debt |
— | 2,900 | ||||||
| Repayment of long-term debt |
(4,550 | ) | (3,400 | ) | ||||
| Issuance of common stock |
802 | 4,700 | ||||||
| Purchases of common stock |
— | (3,500 | ) | |||||
| Dividends paid |
(9,951 | ) | (9,000 | ) | ||||
| Net cash provided (used) in financing activities |
106,956 | (20,600 | ) | |||||
| Net increase in cash and cash equivalents |
13,376 | 12,524 | ||||||
| Cash and cash equivalents at beginning of year |
39,310 | 44,659 | ||||||
| Cash and cash equivalents at end of period |
$ | 52,686 | $ | 57,183 | ||||
See accompanying notes.
6
UNIVERSAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1. BASIS OF PRESENTATION
Universal Corporation, with its subsidiaries (the “Company” or “Universal”), has operations in tobacco, lumber and building products, and agri-products. Because of the seasonal nature of these businesses, 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. Certain amounts in prior year statements have been reclassified to conform to the current year presentation.
NOTE 2. CHANGE IN FISCAL YEAR END AND ELIMINATION OF REPORTING LAG FOR FOREIGN SUBSIDIARIES
The Company changed its fiscal year end from June 30 to March 31, effective March 31, 2004. In addition to better matching the fiscal reporting period with the crop and operating cycles of the Company’s largest operations, the change allowed the Company to eliminate the three-month reporting lag previously used by most of its foreign subsidiaries. All of the Company’s consolidated subsidiaries now have the same fiscal reporting period.
Throughout the fiscal year that will end on March 31, 2005, quarterly financial statements will include comparative information for the same sequential quarter of the prior year. Due to the year-end change, interim quarters in fiscal year 2005 will end three months earlier than the corresponding quarters in fiscal year 2004. Management believes this presentation provides the most appropriate comparison since foreign results, which represent the majority of the Company’s business, are generally compared for the same operating months in each year, due to the reporting lag in 2004. Comparisons of summarized historical financial information are provided in Note 11 that present 2004 data recast for the effect of eliminating the reporting lag; however, it is not practical to provide recast 2004 data for all information reported in the quarterly financial statements.
NOTE 3. ACCOUNTING PRONOUNCEMENTS
In December 2003, the Financial Accounting Standards Board (“FASB”) issued a revision of Statement of Financial Accounting Standards No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits” (“Statement No. 132”). The revised Statement No. 132 expanded the disclosure requirements for pension and postretirement benefits, and introduced new disclosures for interim financial periods. The Company adopted the provisions of the revised Statement No. 132 in fiscal year 2004 and has provided the required interim financial information for the first quarter of fiscal year 2005 in Note 10.
In May 2004, the FASB issued Staff Position No. 106-2 (“FSP No. 106-2”), “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement an