Universal Corporation Reports Nine-Month Results

Feb 03, 2016, 16:15 ET from Universal Corporation

RICHMOND, Va., Feb. 3, 2016 /PRNewswire/ --

HIGHLIGHTS

Nine Months
Operating income down slightly to $101 million
Revenues of $1.3 billion declined on lower green prices and volumes
Improved gross margins
Strong shipments expected in fourth fiscal quarter

Third Quarter
Third quarter sales volumes at historic norms

George C. Freeman, III, Chairman, President, and Chief Executive Officer of Universal Corporation (NYSE: UVV) reported that net income for the nine months ended December 31, 2015, was $61.1 million, or $2.18 per diluted share, compared with $68.8 million, or $2.43 per diluted share for the same period last year, reflecting changes in shipping patterns discussed below. Those results included certain non-recurring items, detailed in Other Items below, which totaled $0.03 and $0.18 per diluted share for the nine-month periods ended December 31, 2015 and 2014, respectively. For the quarter ended December 31, 2015, net income was $44.5 million, or $1.60 per diluted share, compared with net income for the prior year's third fiscal quarter of $53.0 million, or $1.87 per diluted share. Those results also included certain non-recurring items, detailed in Other Items below, which totaled $0.08 and ($0.03) per diluted share for the quarters ended December 31, 2015 and 2014, respectively.

Segment operating income was $102.8 million for the nine months ended December 31, 2015, a decrease of $11.7 million from the prior year's comparable period, mainly due to lower results in the North America and Other Regions segments. Consolidated revenues decreased by 12% to $1.3 billion for the nine-month period, reflecting lower green prices, a modest decline in sales volumes, and lower processing revenues. Segment operating income was down by 27% to $68.2 million for the three months ended December 31, 2015, compared with the prior year's third fiscal quarter, which included strong volumes from shipments delayed from the first half of that fiscal year.

Mr. Freeman stated, "As we discussed last quarter, our shipping patterns continue to be more weighted toward the second half of the fiscal year. Our volumes increased during the first half of the current fiscal year compared to the prior year, but as anticipated, our third fiscal quarter volumes this year were weaker in comparison to last year's pattern. Last year's high third quarter volumes reflected shipments delayed from the first and second fiscal quarters due to a later start to the crop season and slower timing of shipping instructions that year. In the current fiscal year, the third quarter volumes returned to more historic norms. Furthermore, our second half sales volumes this year are heavily skewed to the fourth fiscal quarter, continuing a trend in customer shipping patterns that has become more pronounced in recent years.

"Despite the reduced volumes that impacted our comparable results for the third fiscal quarter, our fiscal year-to-date gross profit margin percentage was slightly higher than last year's comparable period, and our selling, general, and administrative costs were down about 6%. Our uncommitted inventories were well within our target range at about 14%, and our net debt at December 31, 2015 was more than $120 million lower than the prior year level. We are still expecting the current fiscal year's lamina sales volumes to slightly exceed last year's, however, we have a large amount of tobacco scheduled to ship in the fourth fiscal quarter. As a result, we may encounter logistical challenges that could push some of those volumes into the first fiscal quarter of 2017 as carryover crop sales. Our new food ingredient facility has begun commercial production, and we are working with customers on the extensive process of qualifying our processing plant and juice products.

"We have lowered our industry leaf production estimates for the 2016 crop year.  We are now forecasting an 11% decline in flue-cured crops produced outside of China and a 6% decline in burley crops, both in comparison to the 2015 crop year.  The El Nino weather pattern has negatively impacted crop production levels in Brazil, and this weather pattern also has the potential to affect African crops.  We believe that production declines resulting from this weather pattern, combined with reduced plantings in some origins, will bring markets largely into balance in fiscal year 2017. While we are pleased to see the movement away from the oversupplied conditions that have characterized the past two years, we remain cautious in our future crop planning and contracting commitments in order to remain in alignment with the global leaf requirements of our customers.

"We continue to work with our longstanding customers to find ways to improve supply chain efficiencies in origins where such opportunities are available. Our latest such move was the recent purchase of our former joint venture partner's share of Procesadora Unitab S.A., the sole leaf processing operation in Guatemala. We expect to continue to fulfill our former partner's leaf requirements in that origin. We are pleased to be able to support this market, which is part of our North America segment."

FLUE-CURED AND BURLEY LEAF TOBACCO OPERATIONS: OTHER REGIONS:

Operating income for the Other Regions segment decreased by $2.4 million to $87.7 million for the nine months ended December 31, 2015, compared to the same period of the prior fiscal year. Lower sales volumes, primarily in South America and lower green leaf prices reduced overall revenues for the segment, but segment gross margins improved on a percentage basis. While the segment benefited from higher carryover crop sales in some origins, the later timing of some current crop shipments, which have been delayed into the fourth fiscal quarter, reduced sales volumes in the nine months ended December 31, 2015.

The impact of lower volumes on the segment was partially mitigated by lower local currency costs in some origins and fewer inventory writedowns. Reduced selling, general, and administrative expenses buoyed results significantly for the segment, as benefits from lower incentive compensation costs, lower customer claims, and the absence of last year's large value-added tax valuation provision outweighed higher net currency remeasurement and exchange losses, primarily in Africa and Asia. Revenues for the Other Regions segment for the nine months ended December 31, 2015, were down about 14% to $1.0 billion, reflecting modestly lower volumes at lower average green leaf prices for the segment as a whole.

Operating income for the Other Regions segment declined $17.6 million to $61.3 million in the quarter ended December 31, 2015, compared with the previous year's third fiscal quarter. Sales volume decreases in nearly all of the segment's regions were the primary factor in the decline, in comparison with the unusually large volumes shipped in the third quarter of fiscal 2015. A combination of lower inventory writedowns, lower green leaf costs, and lower local-currency factory overheads contributed to an improved margin percentage for the segment. Selling, general, and administrative expenses increased modestly for this segment in the third fiscal quarter, mostly driven by unfavorable comparisons to last year's reversal of accruals for value-added tax reserves and a gain on a sale of property, largely offset by lower customer claims and incentive compensation costs. Revenues for the Other Regions segment declined by 24% to $460.7 million in the quarter ended December 31, 2015, compared with the prior fiscal year, on the lower total volumes and lower average green prices.

NORTH AMERICA: North America segment operating income of $12.9 million for the nine months and $5.8 million for the three months ended December 31, 2015, decreased by $8.9 million and $10.1 million, respectively, compared with the same periods in the previous fiscal year. Volumes were higher for the nine-month period in part due to old crop sales in the first fiscal quarter, but decreased in the three-month period. The product mix was less favorable in both periods compared with the prior fiscal year. Significantly lower processing volumes also impacted both periods in the current fiscal year, due largely to the previously announced changes in business with Philip Morris International in the United States from a toll processing model to sales of processed tobacco. These changes impact the timing of earnings recognition, as sales under the new model are recorded when the product ships. The majority of the 2015 current crop volumes sold under this new arrangement are expected to ship in the first quarter of fiscal 2017. Selling, general and administrative costs were flat for the nine-month period and declined modestly for the third fiscal quarter. Segment revenues were down by 12% to $179.5 million and by about 31% to $81.5 million for the nine and three-month periods ended December 31, 2015, respectively. In both periods, the decline was influenced by the lower toll processing revenues and a less favorable product mix from higher by-product sales.

OTHER TOBACCO OPERATIONS: For the nine months ended December 31, 2015, the Other Tobacco Operations segment's operating income decreased by $0.4 million to $2.1 million from results for the same period last fiscal year. Earnings improved for the dark tobacco operations on higher volumes, as well as better margins and lower overhead costs. That improvement was offset by reduced earnings, despite higher volumes, for the oriental joint venture mostly due to higher tax accruals and higher currency remeasurement losses. In addition, the special services group incurred losses primarily on startup and production testing costs for the new food ingredients business. Selling, general, and administrative costs for the segment were up slightly for the nine months ended December 31, 2015, compared with the previous fiscal year. Revenues for the Other Tobacco Operations segment increased by $11.3 million to $127.8 million for the period, as the stronger volumes for the dark tobacco operations were partly offset by lower overall green leaf prices.

The Other Tobacco Operations segment operating income improved by $2.4 million to $1.1 million for the quarter ended December 31, 2015, compared with the same period for the previous fiscal year. Results for the dark tobacco business improved for the third fiscal quarter, mainly on higher volumes from earlier timing of shipments in the current year, as well as lower overhead costs, despite inventory writedowns in Indonesia from tobacco damaged by volcanic ash. Results in the third fiscal quarter also improved for the oriental joint venture on higher volumes, mostly due to timing of shipments delayed into the third fiscal quarter this year compared with the prior year. Selling, general, and administrative costs in the third quarter for the segment were relatively flat. Revenues for the segment increased by $7.3 million to $42.4 million for the third fiscal quarter on the higher volumes for the dark tobacco business, as well as increased volumes due to the timing of shipments of oriental tobaccos into the United States compared to the same period in the prior year.

OTHER ITEMS: Cost of goods sold decreased by about 13% to $1.1 billion for the nine months, and by about 24% to $464.7 million for the third fiscal quarter ended December 31, 2015. For both periods, the reductions reflect the lower sales revenues in the respective periods, from reduced volumes and lower overall green leaf prices.

Selling, general, and administrative costs decreased by $10.9 million for the nine months ended December 31, 2015, and increased by $0.5 million for the third fiscal quarter of 2016 compared with the same periods in the prior fiscal year. In the nine-month period, benefits were achieved from a combination of items, including favorable comparisons to last year's accruals for value-added tax reserves, lower loss provisions on advances to suppliers, lower incentive compensation costs, and reductions in local currency-denominated expenses from devaluation of foreign currencies, mainly in South America and Africa. Those benefits were partially offset by higher currency remeasurement and exchange losses, mainly in Africa and Asia, and costs incurred to settle third party challenges to the property rights and valuation of a large tract of forestry land. The increase in expense in the third fiscal quarter of 2016 was mostly driven by unfavorable comparisons to last year's reversal of accruals for value-added tax reserves and a gain on a sale of property last year, offset in part by lower customer claims in the current year's third fiscal quarter.

Results for the nine months ended December 31, 2015, included restructuring and impairment costs of $2.4 million ($0.07 per diluted share) and a gain of $3.4 million ($0.10 per diluted share) on remeasuring the Company's interest in a tobacco processing joint venture to fair value upon acquiring our partner's 50% ownership in the third fiscal quarter. Last year's results for the nine months ended December 31, 2014, included an income tax benefit of $8.0 million ($0.28 per diluted share), arising from a subsidiary's payment of a portion of a fine, and restructuring costs of $4.5 million ($0.10 per diluted share). Results for the three months ended December 31, 2015, included the gain mentioned above, and for the three months ended December 31, 2014, results included restructuring costs of $1.1 million ($0.03 per diluted share).

The consolidated effective income tax rates were approximately 32% and 34% for the quarters ended December 31, 2015 and 2014, respectively. In both periods, rates were lower than the federal statutory rates due to the favorable impact of local currency devaluation on deferred income taxes in certain foreign operations, mainly in Brazil. The consolidated effective tax rate for the nine-month period ended December 31, 2015, was approximately 29% compared to about 23% for the prior year comparable period. Income taxes for the nine-month period of fiscal year 2015 were impacted by a non-recurring benefit of $8.0 million arising from the partial payment of the European Commission fine by our Italian subsidiary in June 2014. In both years, the nine-month period was also influenced by lower net effective tax rates on income from certain foreign subsidiaries, as well as effects of changes in local currency exchange rates on deferred income tax balances.

Additional information

Amounts included in the previous discussion are attributable to Universal Corporation and exclude earnings related to non-controlling interests in subsidiaries. In addition, the total for segment operating income referred to in this discussion is a non-GAAP measure. This measure is not a financial measure calculated in accordance with GAAP and should not be considered as a substitute for net income, operating income, cash from operating activities or any other operating performance measure calculated in accordance with GAAP, and it may not be comparable to similarly titled measures reported by other companies. A reconciliation of the total for segment operating income to consolidated operating income is in Note 3. Segment Information, included in this earnings release. The Company evaluates its segment performance excluding certain significant charges or credits. The Company believes this measure, which excludes these items that it believes are not indicative of its core operating results, provides investors with important information that is useful in understanding its business results and trends.

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 including the impact of regulations on tobacco products; product taxation; industry consolidation and evolution; changes in global supply and demand positions for tobacco products; 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, 2015, 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 fiscal year ended March 31, 2015.

At 5:00 p.m. (Eastern Time) on February 3, 2016, 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 3, 2016. A taped replay of the call will be available through February 17, 2016, by dialing (855) 859-2056. The confirmation number to access the replay is 39559930.

Headquartered in Richmond, Virginia, Universal Corporation is the leading global leaf tobacco supplier and conducts business in more than 30 countries. Its revenues for the fiscal year ended March 31, 2015, were $2.3 billion. For more information on Universal Corporation, visit its website at www.universalcorp.com.

 

UNIVERSAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(in thousands of dollars, except per share data)

Three Months Ended December 31,

Nine Months Ended December 31,

2015

2014

2015

2014

(Unaudited)

(Unaudited)

Sales and other operating revenues

$

584,592

$

758,054

$

1,316,393

$

1,493,642

Costs and expenses

Cost of goods sold

464,686

610,482

1,050,004

1,205,459

Selling, general and administrative expenses

54,081

53,539

166,187

177,125

Other income

(3,390)

(3,390)

Restructuring and impairment costs

1,143

2,389

4,493

Operating income

69,215

92,890

101,203

106,565

Equity in pretax earnings (loss) of unconsolidated affiliates

2,326

(527)

2,556

3,391

Interest income

452

148

896

358

Interest expense

3,937

4,637

11,733

13,509

Income before income taxes

68,056

87,874

92,922

96,805

Income tax expense

21,441

29,797

27,368

22,719

Net income

46,615

58,077

65,554

74,086

Less: net income attributable to noncontrolling interests in subsidiaries

(2,081)

(5,038)

(4,502)

(5,305)

Net income attributable to Universal Corporation

44,534

53,039

61,052

68,781

Dividends on Universal Corporation convertible perpetual preferred stock

(3,687)

(3,712)

(11,061)

(11,137)

Cost in excess of carrying value on repurchase of convertible perpetual stock

(18)

(18)

Earnings available to Universal Corporation common shareholders

$

40,847

$

49,309

$

49,991

$

57,626

Earnings per share attributable to Universal Corporation common shareholders:

  Basic

$

1.80

$

2.13

$

2.20

$

2.49

  Diluted

$

1.60

$

1.87

$

2.18

$

2.43

See accompanying notes.

 

UNIVERSAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands of dollars)

December 31,

December 31,

March 31,

2015

2014

2015

(Unaudited)

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

$

167,625

$

120,315

$

248,783

Accounts receivable, net

267,632

290,234

434,362

Advances to suppliers, net

84,905

106,563

114,883

Accounts receivable—unconsolidated affiliates

762

342

1,907

Inventories—at lower of cost or market:

Tobacco

965,917

1,011,234

636,488

Other

65,123

74,791

62,195

Prepaid income taxes

16,359

13,842

17,811

Deferred income taxes

25,303

40,588

36,611

Other current assets

67,456

80,683

81,570

Total current assets

1,661,082

1,738,592

1,634,610

Property, plant and equipment

Land

22,870

16,868

16,790

Buildings

256,970

239,177

238,372

Machinery and equipment

591,292

580,026

576,010

871,132

836,071

831,172

Less: accumulated depreciation

(545,518)

(530,731)

(525,783)

325,614

305,340

305,389

Other assets

Goodwill and other intangibles

99,035

99,220

99,146

Investments in unconsolidated affiliates

75,351

82,341

76,512

Deferred income taxes

21,999

12,358

6,301

Other noncurrent assets

53,953

60,975

76,515

250,338

254,894

258,474

Total assets

$

2,237,034

$

2,298,826

$

2,198,473

See accompanying notes.

 

UNIVERSAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands of dollars)

December 31,

December 31,

March 31,

2015

2014

2015

(Unaudited)

(Unaudited)

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Notes payable and overdrafts

$

65,894

$

116,771

$

59,862

Accounts payable and accrued expenses

132,572

146,516

140,112

Accounts payable—unconsolidated affiliates

21,768

12,500

3,281

Customer advances and deposits

41,209

65,450

30,183

Accrued compensation

20,681

20,469

28,232

Income taxes payable

8,568

12,596

9,243

Current portion of long-term obligations

Total current liabilities

290,692

374,302

270,913

Long-term obligations

370,000

370,000

370,000

Pensions and other postretirement benefits

90,643

73,052

97,048

Other long-term liabilities

33,179

34,077

36,790

Deferred income taxes

33,324

42,843

26,628

Total liabilities

817,838

894,274

801,379

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, 220,000    shares authorized, 218,490 shares issued and outstanding (219,999 at    December 31, 2014, and 218,490 at March 31, 2015)

211,562

212,633

211,562

Common stock, no par value, 100,000,000 shares authorized, 22,717,448    shares issued and outstanding (23,839,717 at December 31, 2014, and    22,593,266 at March 31, 2015)

206,941

205,699

206,002

Retained earnings

1,033,986

997,380

1,020,155

Accumulated other comprehensive loss

(70,439)

(47,168)

(74,994)

Total Universal Corporation shareholders' equity

1,382,050

1,368,544

1,362,725

Noncontrolling interests in subsidiaries

37,146

36,008

34,369

Total shareholders' equity

1,419,196

1,404,552

1,397,094

Total liabilities and shareholders' equity

$

2,237,034

$

2,298,826

$

2,198,473

See accompanying notes.

 

UNIVERSAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of dollars)

Nine Months Ended December 31,

2015

2014

(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income

$

65,554

$

74,086

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

   Depreciation

27,221

26,355

   Amortization

668

1,635

   Net provision for losses (recoveries) on advances and guaranteed loans to suppliers

(1,026)

668

   Foreign currency remeasurement loss (gain), net

21,492

14,231

   Fair value gain upon acquisition of partner's interest in joint venture

(3,390)

   Restructuring and impairment costs

2,389

4,493

 Other, net

17,336

(719)

 Changes in operating assets and liabilities, net

(123,781)

(122,372)

    Net cash used by operating activities

6,463

(1,623)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment

(38,504)

(43,207)

Purchase of partner's interest in joint venture, net of cash held by the business

(5,964)

Proceeds from sale of property, plant and equipment

1,380

3,791

Other

(398)

Net cash used by investing activities

(43,486)

(39,416)

CASH FLOWS FROM FINANCING ACTIVITIES:

Issuance (repayment) of short-term debt, net

4,168

57,075

Issuance of long-term obligations

370,000

Repayment of long-term obligations

(356,250)

Dividends paid to noncontrolling interests

(1,260)

(1,977)

Issuance of common stock

187

Repurchase of perpetual convertible preferred stock

(349)

Repurchase of common stock

(20,473)

Dividends paid on convertible perpetual preferred stock

(11,061)

(11,137)

Dividends paid on common stock

(35,349)

(35,485)

Debt issuance costs and other

(2,985)

Net cash provided by financing activities

(43,502)

(1,394)

Effect of exchange rate changes on cash

(633)

(784)

Net decrease in cash and cash equivalents

(81,158)

(43,217)

Cash and cash equivalents at beginning of year

248,783

163,532

Cash and cash equivalents at end of period

$

167,625

$

120,315

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 the leading global leaf tobacco supplier. 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. 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, 2015.

NOTE 2.   EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended December 31,

Nine Months Ended December 31,

(in thousands, except share and per share data)

2015

2014

2015

2014

Basic Earnings Per Share

Numerator for basic earnings per share

Net income attributable to Universal Corporation

$

44,534

$

53,039

$

61,052

$

68,781

Less: Dividends on convertible perpetual preferred stock

(3,687)

(3,712)

(11,061)

(11,137)

Less: Cost in excess of carrying value on repurchases of convertible   perpetual preferred stock

(18)

(18)

Earnings available to Universal Corporation common shareholders for   calculation of basic earnings per share

40,847

49,309

49,991

57,626

Denominator for basic earnings per share

Weighted average shares outstanding

22,717,043

23,095,861

22,671,943

23,165,553

Basic earnings per share

$

1.80

$

2.13

$

2.20

$

2.49

Diluted Earnings Per Share

Numerator for diluted earnings per share

Earnings available to Universal Corporation common shareholders

$

40,847

$

49,309

$

49,991

$

57,626

Add: Dividends on convertible perpetual preferred stock (if conversion   assumed)

3,687

3,712

11,137

Add: Cost in excess of carrying value on repurchases of convertible   perpetual preferred stock

18

18

Earnings available to Universal Corporation common shareholders for   calculation of diluted earnings per share

44,534

53,039

49,991

68,781

Denominator for diluted earnings per share

Weighted average shares outstanding

22,717,043

23,095,861

22,671,943

23,165,553

Effect of dilutive securities (if conversion or exercise assumed)

Convertible perpetual preferred stock

4,857,262

4,852,940

4,845,818

Employee share-based awards

280,603

342,216

285,107

328,060

Denominator for diluted earnings per share

27,854,908

28,291,017

22,957,050

28,339,431

Diluted earnings per share

$

1.60

$

1.87

$

2.18

$

2.43

NOTE 3. SEGMENT INFORMATION

The principal approach used by management to evaluate the Company's performance is by geographic region, although the dark air-cured and oriental tobacco businesses are each 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 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

December 31,

Nine Months Ended

December 31,

(in thousands of dollars)

2015

2014

2015

2014

SALES AND OTHER OPERATING REVENUES

     Flue-cured and burley leaf tobacco operations:

          North America

$

81,463

$

118,844

$

179,456

$

203,850

          Other regions (1)

460,729

604,100

1,009,162

1,173,341

               Subtotal

542,192

722,944

1,188,618

1,377,191

Other tobacco operations (2)

42,400

35,110

127,775

116,451

Consolidated sales and other operating revenues

$

584,592

$

758,054

$

1,316,393

$

1,493,642

OPERATING INCOME

Flue-cured and burley leaf tobacco operations:

     North America

$

5,750

$

15,864

$

12,949

$

21,821

     Other regions (1)

61,318

78,958

87,673

90,044

          Subtotal

67,068

94,822

100,622

111,865

Other tobacco operations (2)

1,083

(1,316)

2,136

2,584

Segment operating income

68,151

93,506

102,758

114,449

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

(2,326)

527

(2,556)

(3,391)

          Restructuring and impairment costs (4)

(1,143)

(2,389)

(4,493)

     Add: Other income (5)

3,390

3,390

Consolidated operating income

$

69,215

$

92,890

$

101,203

$

106,565

(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)

Equity in pretax earnings of unconsolidated affiliates is included in segment operating income (Other Tobacco Operations segment), but is reported below consolidated operating income and excluded from that total in the consolidated statements of income and comprehensive income.

(4)

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.

(5)

Other income represents a gain from remeasuring to fair value the Company's original 50% ownership interest in Procesadora Unitab, S.A., a tobacco processing joint venture in Guatemala, upon acquiring the 50% interest held by the Company's joint venture partner. This item is excluded from segment operating income, but is 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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