Universal Corporation Reports Improved Third Quarter Results

07 Feb, 2012, 16:00 ET from Universal Corporation

RICHMOND, Va., Feb. 7, 2012 /PRNewswire/ --

HIGHLIGHTS

Third Quarter  

Diluted earnings per share of $2.06, up 13% from prior year

Segment operating income of $83 million, up $6 million from prior year

Nine Months  

Segment operating income of $175 million, down $22 million from prior year

Diluted earnings per share of $2.34, after $1.39 in net unusual charges

Unusual charges included a $49 million charge on loss of appeal of European Commission fine

George C. Freeman, III, Chairman, President, and Chief Executive Officer of Universal Corporation (NYSE: UVV), reported that net income for the third quarter of fiscal year 2012, which ended on December 31, 2011, was $58.5 million, or $2.06 per diluted share, about 12% above last year's net income of $52.3 million, or $1.82 per diluted share, for the same period.  These results included the effect of several unusual items, largely related to asset sales, which are described in the table below and amount to net pretax benefits of $10.7 million ($0.25 per diluted share) for the third quarter of fiscal year 2012 and $8.4 million ($0.18 per diluted share) for the same period last year. Segment operating income, which excludes those unusual items, increased by $5.6 million to $83.4 million as improved performance in the Company's Other Regions segment outweighed declines in the North America and the Other Tobacco Operations segments. Revenues for the quarter of $672 million were down about 2%, reflecting lower leaf prices on higher volumes.

For the nine months ended December 31, 2011, net income was $66.3 million, or $2.34 per diluted share, including the effect of the charge in the second fiscal quarter for the European Commission fine described below.  That charge and other unusual items amounted to a net pretax charge of $38.6 million ($1.39 per diluted share) for the nine-month period.  Those results compare to last year's net income of $129.4 million, or $4.46 per diluted share, which also includes unusual items amounting to a net benefit of $12.8 million ($0.28 per diluted share).  

Segment operating income declined by $21.8 million for the nine-month period ended December 31, 2011, compared with the prior year. Those results included the first quarter impact from last year's assignment of Brazilian farmer contracts to Philip Morris International ("PMI") and a portion of the decline in processing volumes in the Company's North America segment, as well as reduced volumes and margins in the Other Tobacco operations segment. Operating results in this period included $12 million in dividend income from unconsolidated subsidiaries.  Consolidated revenues fell by 5% to $1.8 billion for the nine months ended December 31, 2011, in part due to lower leaf prices on higher shipments, and in part because toll processing volumes replaced a portion of leaf sales to PMI as a result of the contract assignments last year.

The following table sets forth the unusual items included in reported results, none of which are included in segment results:

Three Months Ended December 31,

Nine Months Ended December 31,

(in millions of dollars, except per share amounts)

2011

2010

2011

2010

Charges and (gains) 

Charge for (reversal of) European Commission fines in Italy and Spain (1)

$     —

$     —

$   49.1

$   (7.4)

Restructuring and impairment costs, primarily in the United States, South America,

   and Europe (2)

0.4

11.0

10.2

14.0

Gain on fire loss insurance settlement in Europe (3)

(9.6)

Gain on sale of facility in Brazil (4)

(11.1)

(11.1)

Gain on assignment of farmer contracts and sale of related assets in Brazil (5)

(19.4)

(19.4)

   Total effect on operating income

$   (10.7)

$     (8.4)

$   38.6

$ (12.8)

   Total effect on net income

$     (7.0)

$     (5.1)

$   39.4

$   (8.0)

   Total effect on diluted earnings per share

$     0.25

$     0.18

$ (1.39)

$   0.28

(1)  Fiscal year 2012  -  fines and accumulated interest related to the September 9, 2011, decision by the General Court of the European Union rejecting an Italian subsidiary's application to reinstate immunity related to infringements of European Union antitrust law in the Italian raw tobacco market.    

 Fiscal year 2011  -  the reversal of a portion of a European Commission fine recorded by an Italian subsidiary in 2005 related to the Spanish tobacco processing market, following a decision of the General Court of the European Union that reduced the amount of the fine by half.  

(2)  Restructuring and impairment charges, primarily related to plant closures and workforce reductions in several areas.    

(3)  Fire loss insurance settlement in June 2011 related to a plant fire in Europe in 2010. The operating assets have been replaced.    

(4)  Sale of  land and storage buildings in Brazil in November 2011.  

(5)  Assignment of farmer production contracts and related assets in Brazil in October 2010.  

Mr. Freeman stated, "I am pleased with our strong third quarter performance, which is the result of our successful efforts in managing our business in this year's oversupply situation. We are working closely with customers, both old and new, to meet their requirements, and we are carefully monitoring our commitments for the upcoming crop cycle.

"Recent fiscal quarters reflected a slower start to the buying seasons in Brazil and Malawi, but we believe that we are back on track with shipment timing in most origins. Green prices have generally declined, as we expected.  Although we continue to deal with the previously anticipated effects of the decreased processing volumes in North America and the challenging markets in our oriental and dark tobacco operations, impacts from the global oversupply have been moderate. Our sales activity has been robust, and our hard-working teams around the globe are united.

"While our results included several unusual charges and benefits this year, our underlying business results have remained healthy, and we are performing at levels comparable to our historical norms.   During the third quarter, despite volatile financial markets, we successfully refinanced our primary $450 million global working capital facility, and our balance sheet remains strong.  In addition, we have maintained our focus on providing returns to our shareholders and increased our common stock dividend for the 41st consecutive year.

"Although it is too early to report specifically about the coming crop season, we continue to expect this year's oversupply situation to influence pricing and margins into the next fiscal year.  At the same time, we do anticipate that crop sizes will come down in many of our growing regions during the next year, which could mitigate those pressures, and markets for some grades may be tightening.  Our customers continue to signal their desire for high quality, compliant tobacco, which has always been our core strength.  I am excited about our prospects for the future as we continue to develop our plans and programs to support stable supplier markets, enhance production efficiencies, and improve sustainable tobacco production."

FLUE-CURED AND BURLEY LEAF TOBACCO OPERATIONS:

Third Quarter

Operating income for the third quarter of fiscal year 2012, for the flue-cured and burley tobacco operations, which comprise the North America and Other Regions segments, increased by 11% to $82.6 million, compared to the same period last year, on a combination of strong results for the Other Regions segment and declines in North America.  Revenues for the group were up about 1% at $639.2 million.

Income from operations for the Other Regions segment was up 46% from last year, to $69.4 million.  The Africa region showed improvement, as sales growth on larger crops in some origins and a favorable comparison to delayed shipments last year were offset somewhat by reductions in third party processing.  Earnings for the South America region were up, primarily due to higher shipments that reflected a catch-up of seasonal deliveries delayed from earlier quarters, along with savings from cost cutting efforts and lower costs related to a smaller farmer base, including those related to advances.  Earnings for the Asia region declined for the quarter, primarily due to lower trading levels. Results for the Other Regions segment results also included $6 million in dividend income from unconsolidated subsidiaries.  Revenues for that segment of $529 million were up nearly 5% on higher shipment volumes in Africa and South America, partly offset by lower trading volumes in Asia, as well as the pass-through to customers of lower green prices. Operating income for the North America segment decreased by 50% to $13.2 million on reduced third party processing volumes and the absence of last year's earnings from the Canadian facility, which was closed in March 2011. Revenues for this segment of $109.7 million were down 12%, as reduced green processing volumes were partially offset by an increase in current and old crop direct leaf sales.  

Nine Months

Operating income for the flue-cured and burley tobacco operations was $170.6 million for the nine months ended December 31, 2011, compared to $180.9 million for the same period in the prior year.  Revenues of $1.7 billion were relatively flat compared with last year. Earnings for the Other Regions segment for the nine months increased about 6% to $146.7 million, compared to the same period last year.  In the South America region, the effect of reduced leaf sales to PMI related to last year's assignment of farmer contracts was mitigated by increased processing volumes and cost savings efforts. Africa region operations reflected lower margins in most origins, in part related to business mix and lower prices, balanced by higher shipments in some origins and lower green leaf costs.  Results for the Asia region declined on a combination of lower margins on trading volumes and an unfavorable comparison on currency remeasurement in the Philippines.  In Europe, lower volumes and higher leaf costs were offset by insurance recoveries. Selling, general, and administrative expenses for the segment were down, due primarily to lower costs related to a smaller farmer base in South America.  In addition, results for the Other Regions segment included $12 million in dividend income from unconsolidated subsidiaries. Revenues for the Other Regions segment of $1.4 billion were down about 3%, reflecting lower leaf volumes in South America, higher volumes in Africa, and lower prices generally, as our customers received benefits of lower leaf prices at the farm level.  North America's results fell by 44% to $23.9 million on the change in processing volumes, although leaf sales were up for the period.  In addition, cost savings from restructuring efforts moderated the negative impact of the closure of the Company's Canadian operations.  These factors also caused revenue to fall by about 12%.

OTHER TOBACCO OPERATIONS:

The Other Tobacco Operations segment operating income declined by $2.6 million for the quarter and $11.4 million for the nine months, compared with the same periods in the previous fiscal year.  The declines in both periods were driven mainly by lower results in the dark tobacco operations on reduced volumes and margins, reflecting weaker domestic retail markets, as well as the effects of last year's severe weather-related crop damage in Indonesia.  Results from the oriental tobacco joint venture improved for the quarter on the absence of one-time charges for business realignment taken in the same period last year.  However, joint venture results were down for the nine months, partly due to reduced volumes from shipments delayed into the fourth quarter, as well as lower margins, which were also affected by inventory writedowns. Revenues for this segment decreased for the quarter by $24.4 million, or 42%, as a result of the transfer of some business from the just-in-time Special Services group to the Other Regions segment, the timing of shipments of oriental tobaccos to the United States, and lower dark tobacco volumes.  Similar factors influenced a $45.5 million drop in revenues for the nine-month period.

OTHER ITEMS:

In September 2011, the Company announced that the General Court of the European Union issued a decision rejecting the appeal of Deltafina, S.p.A, its Italian subsidiary. That appeal related to the European Commission's revocation of Deltafina's immunity from a fine of euro 30 million (about $41 million on September 9, 2011) assessed against Deltafina and Universal jointly for actions in connection with Deltafina's purchase and processing of tobacco in the Italian raw tobacco market between 1995 and 2002.  Deltafina has appealed the decision of the General Court to the European Court of Justice.  The appeal process could take up to two years.  Effective with the September 9, 2011 General Court decision, the Company recorded a charge for the full amount of the fine (euro 30 million) plus accumulated interest (euro 5.9 million). The charge totaled $49.1 million at the exchange rate in effect on the date of the General Court decision.

Cost of sales decreased by about 5% to $1.4 billion for the nine months ended December 31, 2011, and by about 2% for the quarter, primarily as a result of lower green leaf prices in some origins and on lower trading volumes in both periods.  Selling, general, and administrative costs fell by about $10 million in both the third quarter and in the first nine months of fiscal year 2012 compared to the previous year.  Both periods benefited from a favorable comparison on costs related to a smaller farmer base in South America. In addition, the nine-month period reflects a positive variance from the reversal of non-income tax provisions due to a favorable tax ruling in South America and reduced employment costs as a result of lower performance-based compensation expense in various operations, partially offset by unfavorable variances due to currency remeasurement primarily in South America and Asia.

Interest expense was almost flat for the third quarter and the nine months ended December 31, 2011, compared with the same periods in the previous year.  Interest income in the nine months of the current year was about $1 million lower, due to the previous year's recognition of interest income on the return of funds that had been escrowed to bond the appeal of the European Commission fine in Spain.  

The consolidated effective income tax rates on pretax earnings were approximately 30% and 41% for the quarter and nine months ended December 31, 2011. The rate for the nine-month period was significantly higher than normal because the Company did not record an income tax benefit on the non-deductible fine portion of the charge recorded in September 2011 for the European Commission fine and interest in Italy. Without that item, the effective income tax rate would have been approximately 29% for the nine months. That rate and the effective rate for the quarter were lower than the 35% federal statutory rate primarily due to the effect of exchange rate changes on deferred income taxes of certain foreign subsidiaries and to recoveries of prior year state income taxes.  The effective income tax rates for the quarter and nine months ended December 31, 2010, were approximately 29% and 30%, respectively. Those rates were lower than the 35% U.S. federal statutory rate primarily due to the recognition of foreign tax credits.

In November 2011, the Company sold land and storage buildings in Brazil in exchange for other property and $9.4 million in cash.  The transaction resulted in a gain of $11.1 million, which is reported in other income in the consolidated statements of income.

Additional information

Amounts described as "net income" and "earnings per diluted share" that are included in the previous discussion are attributable to Universal Corporation and exclude earnings related to non-controlling interests in subsidiaries.

This information 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 earnings and expectations for its performance are forward-looking statements based upon management's current knowledge and assumptions about future events, including 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; product taxation; industry consolidation and evolution; 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, 2011, 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 year ended March 31, 2011.

At 5:00 p.m. (Eastern Time) on February 7, 2012, 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, 2012.  A taped replay of the call will be available through February 28, 2012, by dialing (855) 859-2056.  The confirmation number to access the replay is 49266424.

Headquartered in Richmond, Virginia, Universal Corporation is the leading global leaf tobacco merchant and processor and conducts business in more than 30 countries.  Its revenues for the fiscal year ended March 31, 2011, were $2.6 billion. For more information on Universal Corporation, visit its web site at www.universalcorp.com.

UNIVERSAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands of dollars, except per share data)

Three Months Ended December 31,

Nine Months Ended December 31,

2011

2010

2011

2010

(Unaudited)

(Unaudited)

Sales and other operating revenues

$ 672,420

$ 688,208

$ 1,792,911

$ 1,891,312

Costs and expenses

   Cost of goods sold

525,315

534,164

1,432,022

1,501,757

   Selling, general and administrative expenses

64,747

74,826

183,985

194,103

   Other income

(11,111)

(19,368)

(20,703)

(19,368)

   Restructuring and impairment costs

399

10,995

10,220

13,964

   Charge for (reversal of) European Commission fines in Italy and Spain

49,091

(7,445)

Operating income

93,070

87,591

138,296

208,301

   Equity in pretax earnings (loss) of unconsolidated affiliates

1,072

(1,439)

(2,264)

953

   Interest income

519

754

1,240

2,614

   Interest expense

6,175

6,257

17,373

17,245

Income before income taxes and other items

88,486

80,649

119,899

194,623

   Income taxes

26,884

23,064

48,972

58,837

Net income

61,602

57,585

70,927

135,786

Less:  net (income) loss attributable to noncontrolling interests in subsidiaries

(3,149)

(5,287)

(4,625)

(6,337)

Net income attributable to Universal Corporation

58,453

52,298

66,302

129,449

Dividends on Universal Corporation convertible perpetual preferred stock

(3,712)

(3,712)

(11,137)

(11,137)

Earnings available to Universal Corporation common shareholders

$   54,741

$   48,586

$      55,165

$    118,312

Earnings per share attributable to Universal Corporation common shareholders:

   Basic

$       2.36

$       2.05

$          2.38

$          4.93

   Diluted

$       2.06

$       1.82

$          2.34

$          4.46

UNIVERSAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

December 31, 2011

December 31, 2010

March 31, 2011

(Unaudited)

(Unaudited)

ASSETS

Current

   Cash and cash equivalents

$        152,368

$          91,427

$    141,007

   Accounts receivable, net

406,541

292,490

335,575

   Advances to suppliers, net

94,732

132,815

160,616

   Accounts receivable - unconsolidated affiliates

912

35,978

10,433

   Inventories - at lower of cost or market:

      Tobacco

862,991

940,168

742,422

      Other

57,261

50,551

48,647

   Prepaid income taxes

13,661

8,633

18,661

   Deferred income taxes

52,766

43,669

47,009

   Other current assets

71,121

65,784

73,864

      Total current assets

1,712,353

1,661,515

1,578,234

Property, plant and equipment

   Land

16,976

15,490

14,851

   Buildings

225,010

265,390

257,380

   Machinery and equipment

531,183

552,575

555,316

773,169

833,455

827,547

      Less accumulated depreciation

(469,414)

(512,413)

(510,844)

303,755

321,042

316,703

Other assets

   Goodwill and other intangibles

99,293

99,602

99,546

   Investments in unconsolidated affiliates

84,306

103,821

115,478

   Deferred income taxes

13,683

36,373

18,177

   Other noncurrent assets

56,249

96,493

99,729

253,531

336,289

332,930

      Total assets

$     2,269,639

$     2,318,846

$ 2,227,867

See accompanying notes.

UNIVERSAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

December 31, 2011

December 31, 2010

March 31, 2011

(Unaudited)

(Unaudited)

LIABILITIES AND SHAREHOLDERS' EQUITY

Current

   Notes payable and overdrafts

$        130,165

$        204,769

$    149,291

   Accounts payable and accrued expenses

199,408

180,054

213,014

   Accounts payable - unconsolidated affiliates

7,207

15,355

4,154

   Customer advances and deposits

45,061

87,934

8,426

   Accrued compensation

20,638

19,029

30,201

   Income taxes payable

12,085

11,901

12,265

   Current portion of long-term obligations

15,000

95,000

95,000

          Total current liabilities

429,564

614,042

512,351

Long-term obligations

395,000

322,486

320,193

Pensions and other postretirement benefits

100,690

100,719

102,858

Other long-term liabilities

87,147

47,661

50,213

Deferred income taxes

49,179

44,963

42,847

          Total liabilities

1,061,580

1,129,871

1,028,462

Shareholders' equity

 Universal Corporation:

   Preferred stock:

      Series A Junior Participating Preferred Stock, no par value, 500,000 shares

       authorized, none issued or outstanding

      Series B 6.75% Convertible Perpetual Preferred Stock, no par value,

      5,000,000 shares authorized, 219,999 shares issued and outstanding

      (219,999 at December 31, 2010, and March 31, 2011)

213,023

213,023

213,023

   Common stock, no par value, 100,000,000 shares authorized, 23,245,254

      shares issued and outstanding  (23,569,443 at December 31, 2010, and

      23,240,503 at March 31, 2011)

194,806

193,263

191,608

   Retained earnings

844,150

824,244

825,751

   Accumulated other comprehensive loss

(62,152)

(53,670)

(44,776)

          Total Universal Corporation shareholders' equity

1,189,827

1,176,860

1,185,606

 Noncontrolling interests in subsidiaries

18,232

12,115

13,799

          Total shareholders' equity

1,208,059

1,188,975

1,199,405

          Total liabilities and shareholders' equity

$     2,269,639

$     2,318,846

$ 2,227,867

See accompanying notes.

UNIVERSAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of dollars)

Nine Months Ended December 31,

2011

2010

(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income

$   70,927

$ 135,786

  Adjustments to reconcile net income to net cash used by operating activities:

     Depreciation

31,496

32,474

     Amortization

1,277

1,220

     Provisions for losses on advances and guaranteed loans to suppliers

10,432

19,554

     Foreign currency remeasurement loss (gain), net

4,812

(1,368)

     Equity in net income of unconsolidated affiliates, net of dividends

18,769

1,921

     Gain on fire loss insurance settlement

(9,592)

     Gain on sale of property in Brazil

(11,111)

     Gain on assignment of farmer contracts and sale of related assets

(19,368)

     Restructuring and impairment costs

10,220

13,964

     Charge for (reversal of) European Commission fines in Italy and Spain

49,091

(7,445)

     Other, net

16,289

(3,842)

     Changes in operating assets and liabilities, net

(132,623)

(262,251)

       Net cash provided (used) by operating activities

59,987

(89,355)

CASH FLOWS FROM INVESTING ACTIVITIES:

   Purchase of property, plant and equipment

(30,251)

(31,801)

   Proceeds from assignment of farmer contracts and sale of related assets

   Proceeds from assignment of farmer contracts and sale of related assets

34,946

   Proceeds from sale of property, plant and equipment, and other

18,650

2,512

   Proceeds from fire loss insurance settlement

9,933

       Net cash provided (used) by investing activities

(1,668)

5,657

CASH FLOWS FROM FINANCING ACTIVITIES:

   Issuance (repayment) of short-term debt, net

(11,336)

22,510

   Issuance of long-term obligations

   Issuance of long-term obligations

100,000

   Repayment of long-term obligations

(95,000)

(15,000)

   Dividends paid to noncontrolling interests

(94)

(100)

   Issuance of common stock

134

   Repurchase of common stock

(4,004)

(33,450)

   Dividends paid on convertible perpetual preferred stock

(11,137)

(11,137)

   Dividends paid on common stock

(33,320)

(34,011)

   Proceeds from termination of interest rate swap agreements

13,388

   Other

(3,539)

       Net cash used by financing activities

(44,908)

(71,188)

Effect of exchange rate changes on cash

(2,050)

360

Net increase (decrease) in cash and cash equivalents

11,361

(154,526)

Cash and cash equivalents at beginning of year

141,007

245,953

Cash and cash equivalents at end of period

$ 152,368

$   91,427

See accompanying notes.

NOTE 1.   BASIS OF PRESENTATION

Universal Corporation, with its subsidiaries ("Universal" or the "Company"), is the leading global leaf tobacco merchant and processor.  Because of the seasonal nature of the Company's business, the results of operations for any fiscal quarter are not necessarily indicative of results that could 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. This Form 10-Q 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, 2011.

NOTE 2.   GUARANTEES AND OTHER CONTINGENT LIABILITIES

Guarantees of bank loans to growers for crop financing and construction of curing barns or other tobacco producing assets are industry practice in Brazil and support the farmers' production of tobacco there.  At December 31, 2011, the Company's total exposure under guarantees issued by its operating subsidiary in Brazil for banking facilities of farmers in that country was approximately $33 million ($38 million face amount including unpaid accrued interest, less $5 million recorded for the fair value of the guarantees).  About 95% of these guarantees expire within one year, and the remainder expire within two years.  The subsidiary withholds payments due to the farmers on delivery of tobacco and forwards those payments to the third-party banks.  Failure of farmers to deliver sufficient quantities of tobacco to the subsidiary to cover their obligations to the third-party banks could result in a liability for the subsidiary under the related guarantees; however, in that case, the subsidiary would have recourse against the farmers.  The maximum potential amount of future payments that the Company's subsidiary could be required to make at December 31, 2011, was the face amount, $38 million including unpaid accrued interest ($97 million as of December 31, 2010, and $73 million at March 31, 2011).  The fair value of the guarantees was a liability of approximately $5 million at December 31, 2011 ($20 million at December 31, 2010, and $21 million at March 31, 2011).  In addition to these guarantees, the Company has other contingent liabilities totaling approximately $4 million.  

Various subsidiaries of the Company are involved in other litigation and tax examinations incidental to their business activities.  While the outcome of these matters cannot be predicted with certainty, management is vigorously defending the claims and does not currently expect that any of them will have a material adverse effect on the Company's financial position.  However, should one or more of these matters be resolved in a manner adverse to management's current expectation, the effect on the Company's results of operations for a particular fiscal reporting period could be material.

NOTE 3.   EARNINGS PER SHARE

The following table sets forth the computation of earnings per share for the periods presented in the consolidated statements of income.

Three Months Ended December 31,

Nine Months Ended December 31,

(in thousands, except per share data)

2011

2010

2011

2010

Basic Earnings Per Share

Numerator for basic earnings per share

  Net income attributable to Universal Corporation

$ 58,453

$ 52,298

$ 66,302

$ 129,449

  Less:  Dividends on convertible perpetual preferred stock

(3,712)

(3,712)

(11,137)

(11,137)

  Earnings available to Universal Corporation common shareholders

     for calculation of basic earnings per share

54,741

48,586

55,165

118,312

Denominator for basic earnings per share

   Weighted average shares outstanding

23,238

23,738

23,220

24,010

Basic earnings per share

$     2.36

$     2.05

$     2.38

$       4.93

Diluted Earnings Per Share

Numerator for diluted earnings per share

  Earnings available to Universal Corporation common shareholders

$ 54,741

$ 48,586

$ 55,165

$ 118,312

  Add:  Dividends on convertible perpetual preferred stock (if

     conversion assumed)

3,712

3,712

11,137

11,137

  Earnings available to Universal Corporation common shareholders

     for calculation of diluted earnings per share

58,453

52,298

66,302

129,449

Denominator for diluted earnings per share:

   Weighted average shares outstanding

23,238

23,738

23,220

24,010

   Effect of dilutive securities (if conversion or exercise assumed)

      Convertible perpetual preferred stock

4,775

4,752

4,769

4,747

      Employee share-based awards

368

302

320

262

   Denominator for diluted earnings per share

28,381

28,792

28,309

29,019

Diluted earnings per share

$     2.06

$     1.82

$     2.34

$       4.46

For the nine months ended December 31, 2011 and 2010, certain employee share-based awards were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive.  These awards included stock appreciation rights and stock options totaling 435,801 shares at a weighted-average exercise price of $55.81 for the nine months ended December 31, 2011, and 669,401 shares at a weighted-average exercise price of $52.48 for the nine months ended December 31, 2010.

NOTE 4.   SEGMENT INFORMATION

The principal approach used by management to evaluate the Company's performance is by geographic region, although some components of the business are evaluated on the basis of their worldwide operations.  The Company evaluates the performance of its segments based on operating income after allocated overhead expenses (excluding significant non-recurring charges or credits), plus equity in 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 December 31,

Nine Months Ended December 31,

(in thousands of dollars)

2011

2010

2011

2010

SALES AND OTHER OPERATING REVENUES

  Flue-cured and burley leaf tobacco operations:

       North America

$ 109,743

$ 124,072

$    236,101

$    243,990

       Other regions (1)

529,476

506,568

1,423,275

1,468,326

            Subtotal

639,219

630,640

1,659,376

1,712,316

  Other tobacco operations (2)

33,201

57,568

133,535

178,996

  Consolidated sales and other operating revenues

$ 672,420

$ 688,208

$ 1,792,911

$ 1,891,312

OPERATING INCOME

  Flue-cured and burley leaf tobacco operations:

       North America

$   13,234

$   26,693

$      23,864

$      42,383

       Other regions (1)

69,382

47,620

146,732

138,530

            Subtotal

82,616

74,313

170,596

180,913

  Other tobacco operations (2)

814

3,466

4,044

15,492

  Segment operating income

83,430

77,779

174,640

196,405

  Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (3)

(1,072)

1,439

2,264

(953)

                Restructuring and impairment costs (4)

(399)

(10,995)

(10,220)

(13,964)

                Charge for (reversal of) European Commission fines

                   in Italy and Spain (4)

(49,091)

7,445

  Add: Other income (4)

11,111

19,368

20,703

19,368

  Consolidated operating income

$   93,070

$   87,591

$    138,296

$    208,301

(1)  Includes South America, Africa, Europe, and Asia regions, as well as inter-region eliminations.

(2)  Includes Dark Air-Cured, Special Services, and Oriental, as well as inter-company eliminations.  Sales and other operating revenues for this reportable segment include limited amounts for Oriental because its financial results consist principally of equity in the pretax earnings of an unconsolidated affiliate.

(3)  Item is included in segment operating income, but not included in consolidated operating income.

(4)  Item is not included in segment operating income, but is included in consolidated operating income.

SOURCE Universal Corporation



RELATED LINKS

http://www.universalcorp.com