Universal (UVV) 8-K Universal Corporation Announces Quarterly Dividend

EXHIBIT 99.2

P.O. Box 25099 • Richmond, VA 23260 • Phone: (804) 359-9311 • Fax: (804) 254-3594

PRESS RELEASE

CONTACT:	Karen M. L. Whelan		RELEASE: Hold for call
	Phone:	(804) 359-9311
	Fax:	(804) 254-3594
	Email:	investor@universalleaf.com

Universal Corporation Announces First Quarter Results

Richmond, VA, August 8, 2005 / PRNEWSWIRE

Allen B. King, Chairman, President, and Chief Executive Officer of Universal Corporation (NYSE:UVV), announced today that net income for the quarter ended June 30, 2005, was $11.8 million, or 46 cents per diluted share, compared to $20.5 million, or 80 cents per diluted share, last year. The current quarter’s earnings were below last year’s first quarter results due to a decline in tobacco operating earnings and higher interest expense. Revenues were $860 million in the quarter, compared to $737 million a year ago. Revenue increased for the quarter in all three operating segments.

Results from Universal’s joint venture in oriental tobaccos were lower due to shipment timing, which reduced carryover sales in the current quarter. Customers requested accelerated shipments at the end of fiscal year 2005 and, therefore, sales that would normally have occurred during the first quarter were recorded during the fourth quarter of fiscal year 2005. In addition, although tobacco shipments from Brazil were comparable to those of last year, margins on those sales were lower. Higher costs due to the relative strength of the Brazilian currency and lower average leaf quality caused by adverse weather conditions have combined to reduce operating margins. Carryover shipments from Africa were up significantly in the quarter, but they were at lower operating margins because the shipments were of lower value stock, including by-products, and because of higher selling and administrative costs in the region. Sales volumes of blended strips were lower in the quarter, and are forecast to be lower for the year, due to a decline in demand for this product.

Non-tobacco results were mixed for the quarter. Lumber and building products operations continued to perform well in a very difficult market but produced lower earnings in the quarter, while the results for agri-products were substantially higher. The continued weakness of the economy in the Netherlands along with heavy price competition has depressed quarterly results in the lumber and building products segment. Results in the construction supply market improved on higher volumes, but severe pricing pressures from DIY retailers negatively affected margins in retail supply. Agri-product results benefited from higher sales volumes and cost control efforts, primarily in rubber and seeds. In addition, results from nuts and dried fruits operations improved over last year. Revenues of the agri-products segment increased by more than 30%, principally because of higher commodity prices, higher volumes of rubber, and last year’s consolidation of a former joint venture after acquiring control.

Corporate expenses were lower in the quarter primarily due to lower costs related to pension settlement this year and a currency gain on a foreign withholding tax refund. Interest expense was substantially higher for the quarter due to increased borrowing levels and higher short-term interest rates. Although outstanding debt levels increased by approximately $270 million over those of last year’s first quarter, interest costs were primarily affected by the increase in short-term interest rates, which nearly tripled since last year. In addition, the tax rate remains high at 39.5% due to excess foreign taxes recorded in countries where the tax rate exceeds the U.S. rate and due to local tax expense recorded by a foreign subsidiary with a U.S. dollar loss for the quarter.

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Universal Corporation

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Tobacco crops in the United States are projected to be 9% smaller as farmers react to the end of the price support program. Italy has recently adopted the European Union’s 40% minimum decoupling provisions for the tobacco subsidy for most growths. That move is likely to reduce production, but is also likely to maintain a viable Italian tobacco sector for the interim period. The decline in Italian production will accelerate after the expiration of the interim period with the 2010 crop, unless action is taken to extend the system through year 2013 or alternative funds are made available at the national level. In contrast, the Greek government has adopted 100% decoupling so that farmers can receive the E.U. subsidy without growing tobacco. This move is likely to reduce production of certain classical oriental styles handled by the Company’s joint venture. The African expansion program is beginning to show results in the form of production of a larger quantity of good quality leaf, which should increase results. Flue-cured crops in Malawi, Tanzania, and Zambia are all of good quality and demand is strong. The quality of the Mozambique burley crop is good, demand is strong, and new customers have entered the market. Large crops in South America will cause excess supply in certain grades of tobacco, which is likely to increase uncommitted inventories and reduce supplier margins.

Mr. King stated, “The remainder of the fiscal year will be particularly challenging. Tobacco results will continue to be hampered by the below-average quality of the Brazilian crop and the strength of the Brazilian currency, along with lower shipments from our oriental tobacco joint venture. Lumber and building products will have to contend with a continued weak European economy and the prospect of a stronger U.S. dollar, which will reduce translated euro-based results. In addition, continuing costs of compliance with the Sarbanes-Oxley Act, higher interest costs, and a high corporate tax rate will weigh on the year. In addressing these challenges, we plan to focus on customer service, reduce overhead by $9 million by the end of the fiscal year, and strengthen our balance sheet.”

Additional information

The 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; and general economic, political, market, and weather conditions. Lumber and building products earnings are also affected by changes in exchange rates between the U.S. dollar and the euro. 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, 2005 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, 2005.

At 9:00 a.m. (Eastern Time) on August 9, 2005, 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 call will also be available for seven days at this web site or by dialing 888-707-8786.

Universal Corporation is a diversified company with operations in tobacco, lumber, and agri-products. Universal Corporation’s gross revenues for the fiscal year that ended on March 31, 2005, were approximately $3.3 billion. For more information on Universal Corporation, visit its web site at www.universalcorp.com.

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Universal Corporation

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UNIVERSAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

(In thousands of dollars, except per share data)

	Three Months Ended June 30,
	2005			2004
	(Unaudited)
Sales and other operating revenues	$	860,144		$	737,141
Costs and expenses
Cost of goods sold		720,576			601,067
Selling, general and administrative expenses		100,566			94,849
Operating income		39,002			41,225
Equity in pretax earnings (loss) of unconsolidated affiliates		(2,921	)		2,909
Interest expense		18,808			12,608
Income before income taxes and other items		17,273			31,526
Income taxes		6,823			12,453
Minority interests		(1,369	)		(1,406	)
Net income	$	11,819		$	20,479
Earnings per common share - basic	$	0.46		$	0.80
Earnings per common share - diluted	$	0.46		$	0.80
Retained earnings - beginning of period	$	733,763		$	679,202
Net income		11,819			20,479
Cash dividends declared ($.42 in 2005, $.39 in 2004)		(10,786	)		(9,951	)
Retained earnings - end of period	$	734,796		$	689,730

See accompanying notes.

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Universal Corporation

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UNIVERSAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

	June 30, 2005			June 30, 2004			March 31, 2005
	(Unaudited)			(Unaudited)
ASSETS
Current
Cash and cash equivalents	$	64,223		$	52,686		$	58,625
Accounts receivable, net		489,248			425,146			494,963
Advances to suppliers, net		151,492			124,356			171,906
Accounts receivable - unconsolidated affiliates		4,693			6,545			4,759
Inventories - at lower of cost or market:
Tobacco		838,089			790,089			609,114
Lumber and building products		148,157			150,045			167,333
Agri-products		166,587			127,573			172,448
Other		70,185			49,715			42,473
Prepaid income taxes		4,132			10,061			5,504
Deferred income taxes		7,151			15,146			6,875
Other current assets		64,869			65,889			54,808
Total current assets		2,008,826			1,817,251			1,788,808
Property, plant and equipment - at cost
Land		72,002			70,188			78,127
Buildings		378,851			376,952			395,077
Machinery and equipment		760,505			703,716			746,198
		1,211,358			1,150,856			1,219,402
Less accumulated depreciation		(588,650	)		(574,783	)		(595,732	)
		622,708			576,073			623,670
Other assets
Goodwill and other intangibles		135,420			133,844			138,053
Investments in unconsolidated affiliates		86,390			89,043			98,789
Deferred income taxes		90,967			61,758			85,014
Other noncurrent assets		172,923			91,883			150,990
		485,700			376,528			472,846
Total assets	$	3,117,234		$	2,769,852		$	2,885,324

See accompanying notes.

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Universal Corporation

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UNIVERSAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

	June 30, 2005			June 30, 2004			March 31, 2005
	(Unaudited)			(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Notes payable and overdrafts	$	538,460		$	394,375		$	429,470
Accounts payable		355,313			340,848			299,452
Accounts payable - unconsolidated affiliates		637			401			279
Customer advances and deposits		144,230			183,554			48,634
Accrued compensation		27,611			25,786			35,621
Income taxes payable		32,622			30,559			32,866
Current portion of long-term obligations		113,438			57,419			123,439
Total current liabilities		1,212,311			1,032,942			969,761
Long-term obligations		838,733			769,348			838,687
Postretirement benefits other than pensions		43,918			42,283			43,459
Other long-term liabilities		133,916			93,824			131,885
Deferred income taxes		41,421			32,484			43,899
Total liabilities		2,270,299			1,970,881			2,027,691
Minority interests		30,750			32,272			32,245
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, 25,682,609 issued and outstanding shares (25,532,406 at June 30, 2004, and 25,668,590 at March 31, 2005)		118,010			111,896			117,520
Retained earnings		734,796			689,730			733,763
Accumulated other comprehensive loss		(36,621	)		(34,927	)		(28,895	)
Total shareholders’ equity		816,185			766,699			822,388
Total liabilities and shareholders’ equity	$	3,117,234		$	2,769,852		$	2,882,324

See accompanying notes.

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Universal Corporation

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UNIVERSAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of dollars)

	Three Months Ended June 30,
	2005			2004
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	11,819		$	20,479
Depreciation		15,695			15,585
Amortization		1,127			848
Other adjustments to reconcile net income to net cash provided by operating activities		16,163			5,825
Changes in operating assets and liabilities		(113,622	)		(112,017	)
Net cash used by operating activities		(68,818	)		(69,280	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(27,076	)		(14,078	)
Purchase of business, net of cash acquired		—			(12,477	)
Sales of property, plant, and equipment and other		2,171			2,261
Net cash used in investing activities		(24,905	)		(24,294	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of short-term debt, net		125,436			120,655
Repayment of long-term debt		(11,439	)		(4,550	)
Issuance of common stock		490			802
Dividends paid		(10,786	)		(9,951	)
Other		(3,713	)		—
Net cash provided by in financing activities		99,988			106,956
Effect of exchange rate changes on cash		(667	)		(6	)
Net increase in cash and cash equivalents		5,598			13,376
Cash and cash equivalents at beginning of year		58,625			39,310
Cash and cash equivalents at end of period	$	64,223		$	52,686

See accompanying notes.

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Universal Corporation

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UNIVERSAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. GUARANTEES, OTHER CONTINGENT LIABILITIES, AND OTHER MATTERS

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 June 30, 2005, total exposure under subsidiaries’ guarantees issued for banking facilities of Brazilian farmers was approximately $171 million. About 61% of these guarantees expire within one year, and nearly all of the remainder expire within five years. The Company withholds payments due to the farmers on delivery of tobacco and forwards those payments to the third-party bank. Failure of farmers to deliver sufficient quantities of tobacco to the Company to cover their obligations to third-party banks could result in a liability for the Company; however, in that case, the Company would have recourse against the farmers. The maximum potential amount of future payments that the Company’s subsidiary could be required to make is the face amount, $171 million, and any unpaid accrued interest. The accrual recorded for the value of the guarantees was approximately $4 million and $3 million at June 30, 2005 and 2004, respectively, and approximately $4 million at March 31, 2005. In addition, the Company has contingent liabilities of approximately $4 million that consist primarily of bid and performance bonds. The Company considers the possibility of a material loss on any of the guarantees and other contingencies to be remote.

Assets Held in Zimbabwe

In recent years, economic and political changes in Zimbabwe have led to a significant decline in tobacco production in that country. Universal has been able to offset the effect of this decline on its business with increased production in other countries. If the political situation in Zimbabwe were to further deteriorate significantly, the Company’s ability to recover its assets there could be impaired. The Company’s equity in its net assets of subsidiaries in Zimbabwe was approximately $46 million at June 30, 2005.

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Universal Corporation

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NOTE 3. SEGMENT INFORMATION

Segments are based on product categories. The Company evaluates performance based on segment operating income and equity in pretax earnings of unconsolidated affiliates.

	Three Months Ended June 30,
(in thousands of dollars)	2005			2004
SALES AND OTHER OPERATING REVENUES
Tobacco	$	395,392		$	349,468
Lumber and building products distribution		243,196			222,772
Agri-products		221,556			164,901
Consolidated total	$	860,144		$	737,141
OPERATING INCOME
Tobacco	$	17,871		$	32,237
Lumber and building products distribution		14,879			15,752
Agri-products		7,521			3,705
Total segment operating income		40,271			51,694
Less:
Corporate expenses		4,190			7,560
Equity in pretax earnings (loss) of unconsolidated affiliates		(2,921	)		2,909
Consolidated total	$	39,002		$	41,225

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