UNIVERSAL CORP /VA/

Previous wording

Unless the context otherwise requires, the terms “we,” “our,” “us” or “Universal” or the “Company” refer to Universal Corporation together with its subsidiaries. This Quarterly Report on Form 10-Q and the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Among other things, these statements relate to the Company’s financial condition, results of operation, and future business plans, operations, opportunities, and prospects. In addition, the Company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in other filings with the Securities and Exchange Commission and in reports to shareholders. These forward-looking statements are generally identified by the use of words such as we “expect,” “believe,” “anticipate,” “could,” “should,” “may,” “plan,” “will,” “predict,” “estimate,” and similar expressions or words of similar import. These forward-looking statements are based upon management’s current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results, performance, or achievements to be materially different from any anticipated results, prospects, performance, or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: success in pursuing strategic investments or acquisitions and integration of new businesses and the impact of these new businesses on future results; product purchased not meeting quality and quantity requirements; our reliance on a few large customers; our ability to maintain effective information systems and safeguard confidential information; anticipated levels of demand for and supply of our products and services; costs incurred in providing these products and services including increased transportation costs and delays attributed to global supply chain challenges; timing of shipments to customers; higher inflation rates; changes in market structure; government regulation and other stakeholder expectations; economic and political conditions in the countries in which we and our customers operate, including the ongoing impacts from international conflicts; product taxation; industry consolidation and evolution; changes in exchange rates and interest rates; impacts of regulation and litigation on our customers; industry-specific risks related to our plant-based ingredients businesses; exposure to certain regulatory and financial risks related to climate change; changes in estimates and assumptions underlying our critical accounting policies; the promulgation and adoption of new accounting standards; new government regulations and interpretation of existing standards and regulations; and general economic,…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Unless the context otherwise requires, the terms “we,” “our,” “us” or “Universal” or the “Company” refer to Universal Corporation together with its subsidiaries. This Quarterly Report on Form 10-Q ("Form 10-Q") and the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Among other things, these statements relate to the Company’s financial condition, results of operation, and future business plans, operations, opportunities, and prospects. In addition, the Company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in other filings with the Securities and Exchange Commission (the "SEC") and in reports to shareholders. These forward-looking statements are generally identified by the use of words such as we “expect,” “believe,” “anticipate,” “could,” “should,” “may,” “plan,” “will,” “predict,” “estimate,” and similar expressions or words of similar import. These forward-looking statements are based upon management’s current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results, performance, or achievements to be materially different from any anticipated results, prospects, performance, or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: success in pursuing strategic investments or acquisitions and integration of new businesses and the impact of these new businesses on future results; product purchased not meeting quality and quantity requirements; our reliance on a few large customers; our ability to maintain effective information systems and safeguard confidential information; anticipated levels of demand for and supply of our products and services; costs incurred in providing these products and services, including increased transportation costs and delays attributed to global supply chain challenges; timing of shipments to customers; higher inflation rates; changes in market structure; government regulation and other stakeholder expectations; economic and political conditions in the countries in which we and our customers operate, including the ongoing impacts from international conflicts; product taxation; industry consolidation and evolution; changes in exchange rates and interest rates; impacts of regulation and litigation on our customers; industry-specific risks related to our plant-based ingredients businesses; exposure to certain regulatory and financial risks related to climate change; changes in estimates and assumptions underlying our critical accounting policies; the promulgation and adoption of new accounting standards; new government regulations and interpretation of existing standards and regulat…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Our first fiscal quarter is usually a period of significant working capital investment in both Africa and South America as tobacco crops are delivered by farmers. Due to market conditions in Brazil, we made the strategic decision in the quarter ended March 31, 2024, to accelerate tobacco purchases there. Therefore, some of our working capital investments for the Brazil crop that typically would have been made in the quarter ended June 30, 2024, were made in the quarter ended March 31, 2024. We also accelerated some African tobacco crop purchases in the quarter ended June 30, 2024. We funded our working capital needs in the quarter ended June 30, 2024, using a combination of cash on hand, short-term borrowings, customer advances, and operating cash flows. Tobacco sales are expected to be more heavily weighted to the second half of fiscal year 2025.

Current wording

After significant seasonal working capital investment in our tobacco operations in the first half of the fiscal year, we generally see tobacco inventory levels and other working capital items decrease in the second half of our fiscal year as tobacco crops in Africa, South America, and the United States are being shipped. Due to market conditions in Brazil, we made the strategic decision in the quarter ended March 31, 2024, to accelerate tobacco purchases there. Therefore, some of our working capital investments for the Brazil crop that typically would have been made in our fiscal year 2025, were made in our fiscal year 2024, reducing required working capital investments in the nine months ended December 31, 2024. We funded our working capital needs in the nine months ended December 31, 2024, using a combination of cash on hand, short-term borrowings, customer advances, and operating cash flows.

Previous wording

Net cash used by our operations was $62.4 million during the quarter ended June 30, 2024. The net use of cash was $41.4 million less than during the same period in fiscal year 2024, primarily on accelerated tobacco purchases in Brazil in our Tobacco Operations segment in the fourth quarter of fiscal year 2024. Tobacco inventory levels increased by $131.8 million from March 31, 2024 levels to $1.2 billion at June 30, 2024, on seasonal leaf purchases. Tobacco inventory levels were $101.6 million above June 30, 2023 levels, primarily on higher green leaf tobacco prices and some accelerated tobacco purchases in Africa. We generally do not purchase material quantities of tobacco on a speculative basis. However, when we contract directly with tobacco farmers, we are often obligated to buy all stalk positions, which may contain less marketable leaf styles. As of June 30, 2024, our uncommitted tobacco inventories were $154.8 million, or about 13% of total tobacco inventory, compared to $181.1 million, or about 17% of our tobacco inventory as of March 31, 2024, and $175.2 million, or about 16% of our tobacco inventory as of June 30, 2023. While we target committed inventory levels of 80% or more of total tobacco inventory, the level of these uncommitted inventory percentages is influenced by timing of farmer deliveries of new crops, as well as the receipt of customer orders.

Current wording

Net cash provided by our operations was $168.2 million during the nine months ended December 31, 2024. That amount was $215.0 million higher than during the same period in fiscal year 2024, primarily on lower working capital requirements in the nine months ended December 31, 2024, due to accelerated tobacco purchases in Brazil in our fiscal year 2024. Tobacco inventory levels were $924.7 million as of December 31, 2024, which was $84.3 million below the levels on December 31, 2023, largely due to the timing of tobacco shipments. We generally do not purchase material quantities of tobacco on a speculative basis, and we target committed inventory levels of 80% or more of total tobacco inventory. Our level of committed inventory percentages is influenced by timing of farmer deliveries of new crops, as well as the receipt of customer orders. In addition, when we contract directly with tobacco farmers, we are often obligated to buy all stalk positions, which may contain less marketable leaf styles. As of December 31, 2024, our uncommitted tobacco inventories were $94.3 million, or about 10% of total tobacco inventory, compared to $181.1 million, or about 17% of our tobacco inventory as of March 31, 2024, and $75.8 million, or about 8% of our tobacco inventory as of December 31, 2023.

Previous wording

Our balance sheet accounts reflected seasonal patterns in the quarter ended June 30, 2024, on deliveries of tobacco crops by farmers in both South America and Africa. Accounts receivable decreased by $89.3 million from March 31, 2024 levels, as we used collections on receivables to fund seasonal working capital needs. Advances to suppliers were $100.5 million at June 30, 2024, a reduction of $38.6 million from March 31, 2024, as tobacco crops were delivered in payment on some of those balances, net of new advances on upcoming tobacco crops. Accounts receivable—unconsolidated affiliates were up $55.6 million at June 30, 2024, on the timing of tobacco crop purchases and shipments. Notes payable and overdrafts were up $163.9 million from March 31, 2024 levels, on seasonal working capital needs.

Current wording

Our balance sheet accounts reflected seasonal patterns in the nine months ended December 31, 2024, on deliveries of tobacco crops by farmers in Africa, South America, and the United States. Accounts receivable increased by $125.7 million from March 31, 2024 levels, on tobacco crop shipments offset in part by collections on receivables. Notes payable and overdrafts were up $121.3 million from March 31, 2024 levels, on seasonal working capital needs.

Previous wording

Accounts receivable were up $60.4 million for the quarter ended June 30, 2024, compared to the same quarter in the prior fiscal year, on higher sales of carryover crop tobacco as well as the timing of tobacco crop shipments. Notes payable and overdrafts were up $221.3 million compared to June 30, 2023 levels, in part due to lower customer advances available to fund working capital needs and timing of tobacco crop purchases. Customer advances and deposits were $87.8 million lower at June 30, 2024, compared to June 30, 2023, primarily due to a customer arrangement providing for a higher amount of advances on tobacco crop purchases in fiscal year 2024 that was not repeated in the first quarter of fiscal year 2025.

Current wording

Accounts receivable were up $214.7 million at December 31, 2024, compared to the same period in the prior fiscal year, on higher tobacco sales volumes as well as the timing of tobacco crop shipments. Accounts receivable--unconsolidated affiliates were $32.5 million lower as of December 31, 2024, compared to the same period in the prior fiscal year, on the timing of crop shipments. Notes payable and overdrafts and cash and cash equivalents were up $173.2 million and $141.0 million, respectively, compared to December 31, 2023 levels, largely due to a lower use of cash and cash equivalents to fund working capital needs.

Previous wording

Our capital allocation strategy focuses on four strategic priorities: strengthening and investing for growth in our leaf tobacco business; increasing our strong dividend; exploring growth opportunities for our plant-based ingredients platform; and returning excess capital to our shareholders. In deciding where to invest capital resources, we look for opportunities where we believe we can earn an adequate return as well as leverage our assets and expertise or enhance our farmer base. Our capital expenditures are generally limited to those that add value, replace or maintain equipment, increase efficiency, or position us for future growth. During the quarters ended June 30, 2024 and 2023, we invested about $22.7 million and $18.0 million, respectively, in our property, plant and equipment. Depreciation expense was approximately $11.7 million and $11.9 million for the quarters ended June 30, 2024 and 2023, respectively. Typically, our capital expenditures for maintenance projects are less than $30 million per fiscal year. In addition, from time to time, we undertake projects that require capital expenditures when we identify opportunities to improve efficiencies, invest in sustainability projects, add value for our customers, and position ourselves for future growth. We currently expect to spend approximately $50 to $60 million over the next twelve months on capital projects for maintenance of our facilities and other investments to grow and improve our businesses.

Current wording

Our capital allocation strategy focuses on four strategic priorities: strengthening and investing for growth in our leaf tobacco business; increasing our strong dividend; exploring growth opportunities for our ingredients business; and returning excess capital to our shareholders. In deciding where to invest capital resources, we look for opportunities where we believe we can earn an adequate return as well as leverage our assets and expertise or enhance our farmer base. Our capital expenditures are generally limited to those that add value, replace or maintain equipment, increase efficiency, or position us for future growth. During the nine months ended December 31, 2024 and 2023, we invested about $54.9 million and $47.7 million, respectively, in our property, plant and equipment. Depreciation expense was approximately $36.1 million and $35.4 million for the nine months ended December 31, 2024 and 2023, respectively. Typically, our capital expenditures for maintenance projects are less than $30 million per fiscal year. In addition, from time to time, we undertake projects that require capital expenditures when we identify opportunities to improve efficiencies, invest in sustainability projects, add value for our customers, and position ourselves for future growth. We currently expect to spend approximately $50 to $60 million over the next twelve months on capital projects for maintenance of our facilities and other investments to grow and improve our businesses.

Previous wording

Our Board of Directors approved our current share repurchase program in November 2022. The program authorizes the purchase of up to $100 million of our common stock through November 15, 2024. Under the program, we may purchase shares from time to time on the open market or in privately negotiated transactions at prices not exceeding prevailing market rates. Repurchases of shares under the repurchase program may vary based on management discretion, as well as changes in cash flow generation and availability. During the three months ended June 30, 2024, we did not purchase any shares of common stock. As of June 30, 2024, approximately 24.7 million shares of our common stock were outstanding, and our available authorization under our current share repurchase program was $95.3 million.

Current wording

On November 7, 2024, we announced that our Board of Directors had approved a new share repurchase program, which replaced the share repurchase program expiring November 15, 2024, for the purchase of up to $100 million of our common stock through November 15, 2026. Under the new program, we may purchase shares from time to time on the open market or in privately negotiated transactions at prices not exceeding prevailing market prices. Repurchases of shares under the repurchase program may vary based on management discretion, as well as changes in cash flow generation and availability. During the three months ended December 31, 2024, we did not purchase any shares of common stock. As of December 31, 2024, approximately 24.7 million shares of our common stock were outstanding.

Previous wording

We consider the sum of notes payable and overdrafts, long-term debt (including any current portion), and customer advances and deposits, less cash, cash equivalents, and short-term investments on our balance sheet to be our net debt. We also consider our net debt plus shareholders' equity to be our net capitalization. Net debt as a percentage of net capitalization was approximately 44% at June 30, 2024, up from the June 30, 2023 level of approximately 42%, and up from the March 31, 2024 level of approximately 41%. As of June 30, 2024, we had $101.7 million in cash and cash equivalents, our short-term debt totaled $581.1 million, and we were in compliance with all covenants of our debt agreements, which require us to maintain certain levels of tangible net worth and observe restrictions on debt levels.

Current wording

We consider the sum of notes payable and overdrafts, long-term debt (including any current portion), and customer advances and deposits, less cash, cash equivalents, and short-term investments on our balance sheet to be our net debt. We also consider our net debt plus shareholders' equity to be our net capitalization. Net debt as a percentage of net capitalization was approximately 39% at December 31, 2024, down from the December 31, 2023 level of approximately 40%, and down from the March 31, 2024 level of approximately 41%. As of December 31, 2024, we had $215.1 million in cash and cash equivalents, and our short-term debt totaled $538.5 million. As discussed in Note 15. "Subsequent Event" to the consolidated financial statements, we obtained lender consents for our committed revolving credit facility (the "Consents"). The Consents provided for, among other things, an extension until June 16, 2025, to file the second and third quarter financial statements with the SEC. Based on our September 30, 2024 financial statements and December 31, 2024 financial statements, we were in compliance with the financial covenants in the committed revolving credit facility as of the end of each of the second and third fiscal quarters.

Previous wording

As of June 30, 2024, we had $330 million available under the committed revolving credit facility that will mature in December 2027, and we had about $41 million in available, uncommitted credit lines. We also maintain an effective, undenominated universal shelf registration statement that provides for future issuance of additional debt or equity securities. We have no long-term debt maturing until fiscal year 2028.

Current wording

As of December 31, 2024, we had $270 million available under the committed revolving credit facility that will mature in December 2027, and we had approximately $152 million in available, uncommitted credit lines. We have no long-term debt maturing until fiscal year 2028.

Previous wording

Our seasonal working capital requirements for our tobacco business typically increase significantly between March and September and decline after mid-year. Available capital resources from our cash balances, committed credit facility, and uncommitted credit lines exceed our normal working capital needs and currently anticipated capital expenditure requirements over the next twelve months.

Current wording

Our seasonal working capital requirements for our tobacco business typically increase significantly between March and September and decline after mid-fiscal year. Available capital resources from our cash balances, committed revolving credit facility, and uncommitted credit lines are expected to exceed our normal working capital needs and currently anticipated capital expenditure requirements over the next twelve months.

Previous wording

From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates. At June 30, 2024, the fair value of our outstanding interest rate swap agreements was an asset of about $7.9 million, and the notional amount swapped was $310 million. We entered into these agreements to eliminate the variability of cash flows in the interest payments on a portion of our variable-rate term loans. Under the swap agreements we receive variable rate interest and pay fixed rate interest. The swaps are accounted for as cash flow hedges.

Current wording

From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates. At December 31, 2024, the fair value of our outstanding interest rate swap agreements was an asset of about $6.3 million, and the notional amount swapped was $310 million. We entered into these agreements to eliminate the variability of cash flows in the interest payments on a portion of our variable-rate term loans. Under the swap agreements we receive variable rate interest and pay fixed rate interest. The swaps are accounted for as cash flow hedges.

Previous wording

We also use derivative instruments from time to time to hedge certain foreign currency exposures, primarily related to forecasted purchases of tobacco, related processing costs, and crop input sales in Brazil, as well as our net monetary balance sheet exposures in local currency there. We generally account for our hedges of forecasted tobacco purchases as cash flow hedges. At June 30, 2024, the fair value of our open hedges for forecasted tobacco purchases was a net liability of approximately $5.5 million. We had forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net asset of approximately $1.2 million at June 30, 2024.

Current wording

We also use derivative instruments from time to time to hedge certain foreign currency exposures, primarily related to forecasted purchases of tobacco, related processing costs, and crop input sales, as well as our net monetary balance sheet exposures in local currency. We generally account for our hedges of forecasted tobacco purchases as cash flow hedges. As of December 31, 2024, the fair value of our open hedges for forecasted tobacco purchases was a net liability of approximately $13.8 million. We had forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net liability of approximately $2.8 million as of December 31, 2024.

Previous wording

A summary of our critical accounting policies is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the period ended March 31, 2024. Our critical accounting policies have not changed from those reported in the 2024 Annual Report on Form 10-K.

Current wording

A summary of our critical accounting policies is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2024 Form 10-K. Our critical accounting policies have not changed from those reported in the 2024 Annual Report on Form 10-K.