LOGO
Universal Corporation
P.O. Box 25099 Richmond, VA 23260 o phone: (804) 359-9311 o fax (804) 254-3594
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PRESS RELEASE
CONTACT RELEASE
Karen M. L. Whelan 4:00 p.m. Eastern Time
Phone: (804) 359-9311
Fax: (804) 254-3594
Email: investor@universalleaf.com
Universal Corporation Reports Fiscal Year Earnings
Richmond, VA, August 1, 2002 / PRNEWSWIRE
Henry H. Harrell, Chairman and Chief Executive Officer of Universal
Corporation (NYSE:UVV), announced today that net income for the fiscal year that
ended on June 30, 2002, was $106.6 million, or $4.00 per diluted share. Results
were in line with the Company's forecast of June 13, 2002, and above its earlier
projections. Net income for the prior fiscal year was $112.7 million, or $4.08
per share, and included a restructuring charge of approximately $5.6 million
after taxes or about $.21 per diluted share. Fourth quarter earnings were about
$16.1 million, or $.61 per share, compared to $24.0 million, or $.87 per share,
in fiscal year 2001.
Gross revenues were approximately $592 million and $2.5 billion for the
quarter and fiscal year, respectively, compared to about $616 million and $3.0
billion last year. Although smaller crops in a number of key exporting areas
reduced volumes, the primary factor in the revenue reduction for the fiscal year
was the change in manufacturers' purchasing methods in the United States. The
Company's revenues in fiscal year 2001 included the sale of a larger quantity of
tobacco purchased in the United States. This year a number of U.S. manufacturers
bought tobacco from farmers through direct contracts and paid leaf merchants to
process it. Universal's revenues have been reduced as a result of this change
because the Company received only processing revenues from this tobacco. For the
quarter, revenues reflected smaller crops and shipment timing.
For the fiscal year, as anticipated, tobacco results were lower as a
result of a number of factors. Crops were smaller in several origins, including
Zimbabwe, Malawi, and Poland. U.S. operations experienced higher costs from
staffing both contract receiving stations and the auction system, as well as a
decline in green market service income, compared to last year. In addition,
overall margins on sales of Brazilian tobacco were lower due to the mix of
business there. Increased earnings from higher volumes shipped from Argentina,
Asia, Western Europe, and the Company's oriental tobacco joint venture were not
sufficient to overcome these factors for the year. Finally, Universal recognized
$10.3 million in expenses related to the Argentine currency devaluation,
including $5.5 million in the fourth quarter, and $7.5 million in costs related
to the consolidation of U.S. operations, of which $5.6 million was recognized in
the fourth quarter.
In addition to the factors that affected the full fiscal year, shipment
timing was a major factor in the lower results for this fiscal year's fourth
quarter. Brazilian crops were shipped earlier than normal in fiscal year 2002,
while African crops were shipped later than normal in the prior year. Both of
these situations reduced earnings comparisons in the second half of fiscal year
2002. The Company's earnings benefited in the quarter from shipments from
Western Europe and from its oriental tobacco joint venture.
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Universal Corporation
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Results for the Company's lumber and building products operations were
down for the quarter and the fiscal year, reflecting, in part, the impact of the
strong U.S. dollar during the period. Although the recent weakening of the U.S.
dollar in relation to the euro should benefit earnings of this sector in fiscal
year 2003, there are now clear signs that activity in the Dutch construction
industry is slowing due to a stagnating economy, which is beginning to
negatively affect sales volumes and margins. Agri-products results were flat for
the quarter and declined for the year, as stronger results in the Company's
dried fruit and nut business were not sufficient to overcome the impact of
difficult market conditions in rubber, sunflower seeds, and tea.
During the fiscal year, the Company purchased 1.3 million common shares
under its share repurchase program for a total of $45.7 million. Approximately
$298 million of the $450 million approved by the Board has been spent under this
program. On June 30, 2002, there were 26.2 million shares outstanding.
The Company expects market conditions to remain challenging in the year
ahead. Management continues to closely monitor the situation in Zimbabwe where
the political and economic environment remains extremely difficult. The recent
increase in support payments to farmers should provide some help to them;
however, the size of flue-cured crop now being marketed is expected to be 18%
below that of last year. While this reduction will undoubtedly exacerbate the
economic difficulties in Zimbabwe, the volume declines are expected to be offset
by production increases in other African origins and in Brazil. Early
indications are that the Zimbabwe crop to be marketed in fiscal year 2004 could
be substantially smaller. That crop has not yet been planted. The situation in
Argentina remains unsettled. Although the devaluation of the peso has improved
the competitive market position of Argentine leaf, it is uncertain at this time
whether future currency movements will further impact the value of the Company's
Argentine assets.
Mr. Harrell stated, "We are very pleased that the Company was able to
achieve such a strong performance in fiscal year 2002 in the face of
extraordinarily difficult conditions. We are confident that Universal's talented
and dedicated employees will continue to deal effectively with the challenges of
the future."
Mr. Allen B. King, President and Chief Operating Officer, added, "We
are looking forward to the coming year. We have been working hard on
implementation of our business strategy and cost reductions and quality
enhancements over the last several years. The success of these efforts will
enable us to remain the leader in this competitive marketplace."
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 euro. Actual results, therefore, could vary from those
expected. For more details on factors that could affect expectations, see the
Management's Discussion 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.
At 9:00 a.m. (Eastern Time) on August 2, 2002, the Company will host a
conference call to discuss these results. Those wishing to listen to the call
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Universal Corporation
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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
888-203-1112. The conference replay access code is 446374.
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 June 30, 2002, were approximately $2.5 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
UNAUDITED STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 2002 AND 2001
(In thousands of dollars, except per-share amounts)
2002 2001
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Sales and other operating revenues $2,500,078 $3,017,579
Costs and expenses
Cost of goods sold 2,006,727 2,486,275
Selling, general and administrative expenses 292,844 283,777
Restructuring costs 0 8,745
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Operating income 200,507 238,782
Equity in pretax earnings of unconsolidated affiliates 18,311 10,189
Interest expense 47,831 61,576
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Income before income taxes and other items 170,987 187,395
Income taxes 59,821 66,336
Minority interests 4,504 8,390
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Net income $106,662 $112,669
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Earnings per common share $4.01 $4.09
Diluted earnings per common share $4.00 $4.08
Denominator for earnings per share (weighted average shares)
Basic 26,579,190 27,534,027
Diluted 26,679,860 27,644,525
See accompanying notes.
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Universal Corporation
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UNIVERSAL CORPORATION
UNAUDITED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED JUNE 30, 2002 AND 2001
(In thousands of dollars, except per-share amounts)
2002 2001
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Sales and other operating revenues $592,353 $615,584
Costs and expenses
Cost of goods sold 476,230 470,092
Selling, general and administrative expenses 88,977 87,146
Restructuring costs 0 8,745
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Operating income 27,146 49,601
Equity in pretax earnings of unconsolidated affiliates 8,600 4,597
Interest expense 10,336 14,486
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Income before income taxes and other items 25,410 39,712
Income taxes 8,869 13,170
Minority interests 413 2,567
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Net income $16,128 $23,975
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Earnings per common share $0.61 $0.88
Diluted earnings per common share $0.61 $0.87
Denominator for earnings per share (weighted average shares)
Basic 26,250,057 27,351,929
Diluted 26,334,869 27,525,358
See accompanying notes.
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Universal Corporation
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NOTES
1. Certain amounts in prior year's financial statements have been reclassified
to conform to the current year's presentation.
2. Contingent liabilities: The Company provides guarantees for seasonal
pre-export crop financing for some of its subsidiaries. The Company's
exposure around the world varies seasonally and is affected by the method
of funding working capital and the speed of shipment. In addition, certain
subsidiaries provide guarantees that ensure that value-added taxes will be
repaid if the crops are not exported. At June 30, 2002, total exposure
under guarantees issued for banking facilities of Brazilian farmers was
approximately $41.2 million. Other contingent liabilities approximate $21.2
million. The Company considers the possibility of loss on any of these
guarantees to be remote.
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 the net assets of its subsidiaries in Zimbabwe was
approximately $47 million at June 30, 2002.
The Company exports tobacco from Argentina through one or more subsidiaries
and the recent government actions there could affect its operations in the
future. The currency devaluation should provide benefits to exporters;
however it, along with evolving governmental policies, could further
jeopardize the value of assets in that country. Company subsidiaries had
approximately $12.5 million of such assets at June 30, 2002, after
considering the $10.3 million write-off that was recorded in fiscal year
2002. In addition, the Company has approximately $4 million in
peso-denominated liabilities.
The Directorate General Competition of the European Commission ("DG Comp")
is investigating the buying practices of Spanish tobacco processors with
the stated aim of determining to what extent the tobacco processing
companies have jointly agreed on raw tobacco qualities and prices offered
to Spanish tobacco growers. After conducting an investigation, the Company
believes that Spanish tobacco processors, including the Company's Spanish
subsidiary, Tabacos Espanoles, S.A. ("TAES"), have jointly agreed to the
terms of sale of green tobacco and quantities to be purchased from
associations of farmers and have jointly negotiated with those
associations. TAES is cooperating fully with the DG Comp in its
investigation and believes that there are unusual, mitigating circumstances
peculiar to the highly structured market for green tobacco in Spain.
Although the fine, if any, that the DG Comp may assess on TAES could be
material to the Company's earnings, the Company is not able to make an
accurate assessment of the amount of any such fine at this time.
The Company is also aware that the DG Comp is investigating certain
practices of the tobacco leaf dealers in Italy. The Company has a
subsidiary, Deltafina S.p.A., that buys and processes tobacco in Italy. At
this time, the Company does not believe that the DG Comp investigation in
Italy will result in penalties being assessed against it or its
subsidiaries that would be material to the Company's earnings.
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Universal Corporation
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3. Reportable segment data (in thousands)
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Sales and other operating revenues Three months Twelve months
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Periods ended June 30, 2002 2001 2002 2001
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Tobacco $362,031 $378,931 $1,559,811 $2,062,080
Lumber and building products 126,540 127,034 514,084 498,615
Agri-products 103,782 109,619 426,183 456,884
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Consolidated total $592,353 $615,584 $2,500,078 $3,017,579
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Operating income Three months Twelve months
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Periods ended June 30, 2002 2001 2002 2001
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Tobacco $33,213 $58,632 $203,010 $239,557
Lumber and building products 6,329 7,596 24,736 25,527
Agri-products 2,192 2,230 12,505 13,703
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Total 41,734 68,458 240,251 278,787
Less:
Corporate expenses 5,988 5,515 21,433 21,071
Restructuring costs 8,745 8,745
Equity in pretax earnings of unconsolidated
affiliates 8,600 4,597 18,311 10,189
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Consolidated total $27,146 $49,601 $200,507 $238,782
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4. Other Data (in thousands)
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Three months Twelve months
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Periods ended June 30, 2002 2001 2002 2001
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Depreciation $12,224 $13,490 $49,026 $46,024
Amortization $2,216 $4,655 $5,961 $10,375
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