Universal Corporation Logo
P.O. Box 25099 Richmond, VA 23260 o phone: (804) 359-9311 o fax (804) 254-3594
PRESS RELEASE
CONTACT RELEASE
Karen M. L. Whelan 2:30 p.m. ET
Phone: (804) 359-9311
Fax: (804) 254-3594
Email: investor@universalleaf.com
Universal Corporation Reports Strong First Quarter Earnings
and Expanded Share Repurchase Program
Richmond, VA, October 23, 2001 / PRNEWSWIRE
Henry H. Harrell, Chairman and Chief Executive Officer of Universal
Corporation, announced today at the Company's annual shareholder meeting that
net income for the quarter ended September 30, 2001, was $28.3 million, or $1.04
per diluted share, compared to $25.0 million, or $.89 per diluted share, for the
first quarter of fiscal year 2001. Revenues were $616 million compared to $651
million a year ago.
Tobacco earnings were up overall in the quarter reflecting increased
shipments to customers of tobaccos from Brazil, Asia, and Africa. The African
shipments had been delayed from the prior year primarily due to late marketing
of crops, while Brazilian shipments were earlier than usual. The benefit of
these shipments was partially offset by higher costs in the United States, due
to the transition from an auction system to direct contracting, as well as the
reduction in income from green market services. Old crop shipments in the first
quarter of cigar leaf from Brazil and Indonesia also bolstered the Company's
earnings.
Non-tobacco results also improved in the quarter. Sales volumes were
maintained at good levels in our Dutch lumber and building products operations,
more than offsetting a 6% appreciation of the dollar against the euro.
Agri-products results were also higher as the Company's confectionery seeds and
nuts and dried fruits distribution operations performed well, compensating for
weaker results for rubber and tea.
Despite the strong first quarter, management announced on September 27,
2001, its expectation that the Company would report earnings of approximately
$100 million for fiscal year 2002. Higher costs continue in the United States
where the transition from an auction market to direct contracting with farmers
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has required sufficient staffing to participate in both systems. In addition,
the very high price of U.S. leaf has made it extremely difficult to recover all
of the increased costs, particularly startup costs, emanating from the new
system. Rising medical costs have also adversely affected U.S. operations.
Another major factor in the changed earnings outlook is the reduction in
crops being marketed this year from a number of important areas including
Brazil, Malawi and Zimbabwe. Because of the Company's traditionally large orders
in these origins, it is difficult to purchase all of its requirements when crops
are reduced significantly. This year, the Company faces the unusual circumstance
of smaller crops in a number of these areas at the same time. In addition, the
continuing political and economic instability in Zimbabwe together with the very
high prices being paid for this year's crops have reduced their attractiveness
in world markets and led to the shifting of some business to other origins such
as Brazil. Although the current fiscal year will be negatively impacted, the
Company's Brazilian operations could see a benefit from such shifts in fiscal
year 2003.
The present outlook is for continued good performance in non-tobacco
operations in fiscal year 2002. However, if the European economy weakens
significantly in the aftermath of the tragic events of September 11, the
Company's lumber and building products operations could be adversely affected.
Also, the volatility of the dollar/euro exchange rate makes accurate projection
of dollar results for these Dutch companies difficult.
Universal is moving aggressively to deal with the inefficiencies
associated with this period of far-reaching change in the U.S. tobacco market.
In addition to continuing efforts to manage U.S. costs, the Company's actions
include the significant investments announced this spring in new and upgraded
processing facilities in North Carolina and in Danville, Virginia. The upgrade
in Danville should begin to have a positive impact on U.S. operations in fiscal
year 2003, and the new plant will begin operations in the following year. While
smaller crops in key regions will reduce the Company's volumes in the near term,
they should also lead to improved market balance over the longer term. Based on
preliminary indications, management now expects larger crops to be marketed in
fiscal year 2003 in both Brazil and Malawi where the Company has a significant
presence.
In addition, in response to continued strong cash flow, the Board of
Directors today approved a $150 million expansion of Universal's ongoing share
repurchase program. This brings the total authorization to $450 million since
its inception in April 1998. Approximately 9.8 million shares have been
purchased so far under this program for about $270 million. The Company has
approximately 26.7 million common shares outstanding.
Mr. Allen B. King, President and Chief Operating Officer of the Company,
noted at the meeting, "The current environment continues to be extremely
challenging, but we remain confident of our ability to perform successfully and
to increase shareholder value in the years ahead."
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The Company cautions readers that any forward-looking statements contained
herein are based upon management's current knowledge and assumptions about
future events, including anticipated levels of demand for and supply of the
Company's 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 guilder (euro). Actual results, therefore, could vary from
those expected. For more details on factors that could affect expectations, see
the Management's Discussion and Analysis section of the Company's Annual Report
on Form 10-K for the year ended June 30, 2001, as filed with the Securities and
Exchange Commission. For more information, visit Universal's web site at
www.universalcorp.com.
At 4:30 p.m. (Eastern Time), 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 those web sites or by dialing 888-203-1112, pass code 653237.
Universal Corporation (UVV:NYSE) is a diversified company with operations
in tobacco, lumber, and agri-products. Its gross revenues for the fiscal year
that ended on June 30, 2001, were approximately $3 billion.
.
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UNIVERSAL CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per-share amounts)
Three Months ended September 30 2001 2000
---------------------------------------------------------------------------------------------
Sales and other operating revenues $616,377 $650,765
Costs and expenses
Cost of goods sold 499,911 537,355
Selling, general and administrative 61,644 61,474
-------- --------
Operating income 54,822 51,936
Equity in pretax earnings of unconsolidated affiliates 1,313 1,349
Interest expense 13,559 14,829
-------- --------
Income before income taxes and other items 42,576 38,456
Income taxes 14,902 14,998
Minority interests (655) (1,507)
-------- --------
Net income $28,329 $24,965
---------------------------------------------------------------------------------------------
Earnings per share $1.04 $ .89
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Diluted earnings per share $1.04 $ .89
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Denominator for earnings per share
(weighted average shares)
Basic 27,110,489 28,055,105
Diluted 27,295,943 28,060,565
See accompanying notes.
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NOTES
1. Results of operations for the period ended September 30, 2001, are not
necessarily indicative of results to be expected for the year ending
June 30, 2002. Certain amounts in prior year statements have been
reclassified to conform to the current year's presentation.
2. Contingencies: At September 30, 2001, total exposure under guarantees
issued for banking facilities of Brazilian farmers was approximately
$50 million. Other contingent liabilities approximate $30 million. 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 contingent liability, including penalties and
interest, approximates $18 million. 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. Although the Company does
not expect any significant impact on fiscal year 2002 earnings, if the
political situation in Zimbabwe were to deteriorate significantly, the
Company's ability to recover its assets there could be impaired. The
Company's equity in its net assets of subsidiaries was $37 million at
June 30, 2001.
3. Reportable Segment Data (in thousands)
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Sales and other operating revenues
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Three months ended September 30, 2001 2000
------------------------------------------------------------------------------------------------------------
Tobacco $375,258 $402,245
Lumber and building products 126,189 129,662
Agri-products 114,930 118,858
--------------- ---------------
Consolidated total $616,377 $650,765
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Operating income
------------------------------------------------------------------------------------------------------------
Three months ended September 30, 2001 2000
------------------------------------------------------------------------------------------------------------
Tobacco $49,123 $46,780
Lumber and building products 7,825 7,650
Agri-products 4,165 3,757
--------------- ----------------
Total 61,113 58,187
Less: Corporate expenses 4,978 4,902
Equity in pretax earnings of unconsolidated affiliates 1,313 1,349
--------------- ----------------
Consolidated total $54,822 $51,936
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4. Other data:
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Three months ended September 30, 2001 2000
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Depreciation $11,147 $10,744
Amortization 1,244 1,609
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