EXHIBIT 99.2
Contact: Release:
KAREN M.L. WHELAN Immediate
Phone: (804) 359-9311
Fax: (804) 254-3594
email: investor@universalleaf.com
UNIVERSAL CORPORATION ANNOUNCES INCREASED EARNINGS
RICHMOND, VA, February 4, 1999 / PRNEWSWIRE
Henry H. Harrell, Chairman and Chief Executive Officer of Universal
Corporation, announced today that net income rose in the second quarter ended
December 31, 1998, to $41.4 million or $1.23 per diluted share. On a per share
basis, this is a 14 percent increase over the $38.1 million or $1.08 per share
recorded in the second quarter last year. For the six months, net income totaled
$68.5 million or $2.01 per share compared with $70.9 million or $2.00 per share
earned in the six months ended December 31, 1997. Net income for the quarter and
the six months benefited from a lower tax rate of 37 percent. Last year the
effective tax rate was approximately 40 percent.
Gross revenues were $1.3 billion for the quarter and $2.2 billion for
the six months compared to $1.3 billion and $2.3 billion for the respective
periods a year ago. The share repurchase program is continuing and as of
December 31, 1998, approximately 2.2 million shares valued at $77.5 million had
been purchased out of the total $100 million authorized.
Several factors inhibited tobacco earnings growth in the second
quarter. Brazilian results were off slightly due to lower volumes handled out of
the much reduced 1998 crop, and a smaller U. S. flue-cured crop meant lower
volumes of tobacco processed during the period. There were also quality problems
with crops in Argentina and Kyrgyzstan, and some shipments of Oriental tobacco
have been delayed until the second half of the year. The negative impact of
these developments was partially offset by higher earnings in Africa and in the
Far East, and lower corporate and interest expenses. For the six months, these
factors, combined with shipment timing issues in the first quarter, held tobacco
earnings for the period below last year's record pace. It should be noted that
although recent news from Brazil has caused concern in world financial circles,
the currency devaluation may well be favorable for the future export of
Brazilian tobacco.
Dark tobacco earnings were higher in the second quarter, reflecting the
continued tight world market for wrapper leaf, and old crop shipments. For the
six months, however, dark tobacco earnings were flat compared with the year-ago
period.
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Universal Corporation
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Non-tobacco earnings were lower for the quarter and remain below those
of last year for the six-month period. Lumber and building products results were
negatively affected during the quarter by excessive rains in Holland that
seriously disrupted construction activity and impacted revenues in the regional
sales outlets. Wholesale results also declined due to margin pressures. However,
industrial timber earnings were up due primarily to improved margins.
Agri-products results were comparable to last year's good results for the
quarter and higher for the six months after excluding earnings from the spice
joint venture which was sold in fiscal year 1998. Tea continued to perform well
with good volumes and margins.
The leaf industry will continue to face uncertainties in the months
ahead resulting from the aftermath of the tobacco settlement in the United
States; from continued economic and financial turmoil in a number of areas of
Southeast Asia, Latin America and the former Soviet Union; and from uncommitted
inventories held in the trade.
These factors, which affect the overall industry environment, have thus
far not had a significant effect on Universal's operations and should not
materially affect earnings for the year. Management remains confident about the
company's strategic direction and continues to minimize unsold inventories.
Consequently, despite the effect of adverse weather in some areas on tobacco
production and on construction activity and lumber sales in Holland, the company
still expects to achieve earnings for the year from continuing operations in
line with its previous projections.
The company cautions readers that the statements contained herein
regarding expected earnings are forward-looking statements based upon
management's current knowledge and assumptions about future events, including
anticipated levels of demand for the company's products and services, costs
incurred in providing these products and services, and timing of shipments to
customers. Lumber earnings could also be affected by a number of factors,
including currency translations and unusual weather conditions in the
Netherlands. Actual results, therefore, could vary from those expected. For more
details on factors that could affect expectations, see the company's Annual
Report on Form 10-K for the year ended June 30, 1998, as filed with the
Securities and Exchange Commission.
Universal Corporation is a diversified company with operations in
tobacco, lumber, and agri-products. Its gross revenues for the fiscal year that
ended on June 30, 1998, were approximately $4.3 billion. For more information,
visit Universal's web site at www.universalcorp.com.
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Universal Corporation
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UNIVERSAL CORPORATION
UNAUDITED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED DECEMBER 31, 1998 AND 1997
(Dollars in thousands, except per-share amounts)
Three Months
1998 1997
----- ----
Sales and other operating revenues $1,297,719 $1,265,157
Costs and expenses
Cost of goods sold 1,129,187 1,093,490
Selling, general and administrative 85,670 87,142
---------- ----------
Operating income
Equity in pretax earnings of unconsolidated affiliates 1,212 1,512
Interest expense 13,146 15,879
---------- ----------
Income before income taxes and other items
Income taxes 26,243 28,691
Minority interests 3,261 3,382
---------- ----------
Net income $41,424 $38,085
========== ==========
Earnings per share $1.23 $1.08
Diluted earnings per share $1.23 $1.08
Denominator for earnings per share (weighted average shares)
Basic 33,571,791 35,172,358
Diluted 33,614,623 35,390,125
See accompanying notes.
-- M O R E --
Universal Corporation
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UNIVERSAL CORPORATION
UNAUDITED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
(Dollars in thousands, except per-share amounts)
Six Months
1998 1997
---- ----
Sales and other operating revenues $2,177,004 $2,288,313
Costs and expenses
Cost of goods sold 1,871,888 1,974,411
Selling, general and administrative 163,984 165,579
---------- ----------
Operating income
Equity in pretax earnings of unconsolidated affiliates 1,782 5,257
Interest expense 28,688 29,681
---------- ----------
Income before income taxes and other items
Income taxes 42,264 49,997
Minority interests 3,481 3,044
---------- ----------
Net income $68,481 $70,858
========== ==========
Earnings per share $2.02 $2.02
Diluted earnings per share $2.01 $2.00
Denominator for earnings per share (weighted average shares)
Basic 33,981,541 35,155,747
Diluted 34,049,234 35,359,860
See accompanying notes.
-- M O R E --
Universal Corporation
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NOTES
1. The company's operations are seasonal; therefore, the results of operations
for the three- and six-month periods ended December 31, 1998, are not
necessarily indicative of results to be expected for the year ending June
30, 1999. All adjustments necessary to state fairly the results for such
period have been included and were of a normal recurring nature. Certain
amounts in prior year's financial statements have been reclassified to
conform to current year's presentation.
2. Contingencies: At December 31, 1998, total exposure under guarantees issued
for banking facilities of unconsolidated affiliates was approximately $11
million. Other contingent liabilities approximate $40 million and relate
principally to performance bonds and Common Market guarantees. The
company's Brazilian subsidiaries have been notified by the tax authorities
of proposed adjustments to the income tax returns filed in prior years. The
total proposed adjustments, including penalties and interest, approximate
$40 million; however, recent currency fluctuations and possible interest
rate changes could affect that amount. The company believes the Brazilian
tax returns filed were in compliance with the applicable tax code. The
numerous proposed adjustments vary in complexity and amounts. While it is
not feasible to predict the precise amount or timing of each proposed
adjustment, the company believes that the ultimate disposition will not
have a material adverse effect on the company's consolidated financial
position or results of operations. At December 31, 1998, the company had
outstanding short-term loans of $29 million and long-term loans of $17.2
million to a farmer cooperative in Argentina. The loans are secured by
tobacco and liens on real property, processing machinery and equipment and
other assets of the cooperative. Upon export of the tobacco, which is
usually in less than twelve months, the short-term loans should be
recovered. The long-term loans are scheduled for repayment over the next
nine years. Ultimate collection of the loans is contingent upon the ability
of the farmers to produce competitively priced tobacco suitable for export,
the financial management of the cooperative and the value of the assets
pledged as security for the loans.
3. As of July 1, 1998, the company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." (SFAS 130) The
adoption of this statement had no impact on the company's net income or
shareholders' equity. Amounts in prior year financial statements have been
reclassified to conform to SFAS 130. The following table presents the
calculation of comprehensive income as it applies to Universal:
- --------------------------------------------------------------------------------
Periods ended December 31 Three months Six months
- --------------------------------------------------------------------------------
(in millions) 1998 1997 1998 1997
- --------------------------------------------------------------------------------
Net income $41 $38 $68 $71
Foreign currency translation adjustment 8 2 10 (5)
--- --- --- ---
Comprehensive income $49 $40 $78 $66
4. The lower estimated effective tax rate in fiscal year 1999 is due to the
anticipated mix of foreign and domestic earnings and management's current
assessment of pending and contested tax issues.
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