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 ("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: product purchased not meeting quality and quantity requirements; reliance on a few large customers; anticipated levels of demand for and supply of our products and services; tobacco growing conditions and customer requirements; major shifts in customer requirements for leaf tobacco; higher inflation rates, tariffs and other pressures on costs; weather and other conditions; exposure to certain legal, regulatory and financial risks related to climate change; industry-specific risks related to our plant-based ingredients businesses; disruption of our supply chain for our plant-based ingredients; success in pursuing strategic investments or acquisitions and integration of new businesses and the impact of these new businesses on future results; our ability to maintain effective information technology systems and safeguard confidential information; our inability to attract, develop, retain, motivate, and maintain good relationships with our workforce; our dependence on a seasonal workforce; epidemics, pandemics or similar widespread public health concerns; government efforts to regulate the production and consumption of tobacco products; government actions on the sourcing of leaf tobacco; economic and political conditions in the countries in which we and our customers operate, including the ongoing impacts from international conflicts; sustainability considerations from governments and…

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: product purchased not meeting quality and quantity requirements; reliance on a few large customers; anticipated levels of demand for and supply of our products and services; tobacco growing conditions and customer requirements; major shifts in customer requirements for leaf tobacco; higher inflation rates, tariffs and other pressures on costs; weather and other conditions; exposure to certain legal, regulatory and financial risks related to climate change; industry-specific risks related to our plant-based ingredients businesses; disruption of our supply chain for our plant-based ingredients; success in pursuing strategic investments or acquisitions and integration of new businesses and the impact of these new businesses on future results; our ability to maintain effective information technology systems and safeguard confidential information; our inability to attract, develop, retain, motivate, and maintain good relationships with our workforce; our dependence on a seasonal workforce; epidemics, pandemics or similar widespread public health concerns; government efforts to regulate the production and consumption of tobacco products; government actions on the sourcing of leaf tobacco; economic and political conditions in the countries in which we and our customers operate, including the ongoing impacts from international conflicts; sustainability considerations from governments and…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Revenues for the Ingredients Operations segment increased by 5%, or $4.0 million, for the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024, on higher sales volumes. Operating income for the segment decreased by 42%, or $1.2 million, due to a less favorable product mix, some curtailed demand due to tariff uncertainty, and higher fixed costs, including depreciation, from our recently expanded Universal Ingredients production facility.

Current wording

Revenue for the Ingredients Operations segment increased by 18%, or $14.2 million, for the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024, on higher sales volumes. Operating income for the segment decreased by 112%, or $1.5 million, as higher sales volumes were offset by product mix, higher inventory write-downs of $3.5 million and higher fixed costs, including depreciation from our recently expanded Universal Ingredients production facility. Weakness in the consumer-packaged good industry and tariff uncertainty also impacted results for the segment in the quarter ended September 30, 2025.

Previous wording

Cost of goods sold decreased by 4%, or $21.5 million, in the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024, largely on lower sales volumes and product mix in the Tobacco Operations segment.

Current wording

Cost of goods sold increased by 8%, or $46.7 million, in the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024, largely on higher sales volumes and product mix.

Previous wording

Interest expense was down by 14%, or $3.0 million, in the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024, primarily on lower interest rates.

Current wording

Interest expense was down by 4%, or $0.8 million, in the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024, on lower interest rates and debt balances.

Previous wording

Restructuring and impairment costs of $1.1 million in the quarter ended June 30, 2025, were primarily related to the previously announced consolidation of the Company’s European tobacco sheet operations.

Current wording

Restructuring and impairment costs of $10.6 million in the quarter ended September 30, 2024, were primarily related to the consolidation of the Company’s European tobacco sheet operations.

Previous wording

Revenues decreased by 1%, or $3.3 million, and operating income increased by 96%, or $16.6 million, in the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024, primarily driven by performance in our Tobacco Operations segment.

Current wording

Operating income increased by 18%, or $15.5 million, in the six months ended September 30, 2025, compared to the six months ended September 30, 2024, primarily driven by a favorable product mix in our Tobacco Operations segment.

Previous wording

Selling, general, and administrative expenses were up by 1%, or $0.5 million, primarily due to higher compensation costs of $5.5 million and legal and professional fees of $3.7 million, which were largely offset by favorable foreign currency comparisons of $7.3 million and lower tobacco sales commissions of $2.8 million in the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024.

Current wording

Selling, general, and administrative expenses were up by 6%, or $8.8 million, primarily due to higher compensation costs of $6.1 million, legal and professional fees of $5.0 million, and provisions for farmer advances of $2.8 million, which were partially offset by lower tobacco sales commissions of $3.9 million and favorable foreign currency comparisons of $2.2 million in the six months ended September 30, 2025, compared to the six months ended September 30, 2024.

Previous wording

Adjusted operating income was up by $17.7 million, and adjusted net income attributable to Universal Corporation was up by $9.5 million, in the first quarter of fiscal year 2026, compared to the same period in the prior fiscal year, on a favorable product mix in the Tobacco Operations segment.

Current wording

Adjusted operating income was up by $6.1 million and adjusted net income attributable to Universal Corporation was up by $7.2 million, in the first half of fiscal year 2026, compared to the same period in the prior fiscal year, on a favorable product mix in the Tobacco Operations segment.

Previous wording

Revenues decreased by 1%, or $7.3 million, for the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024, primarily on an 8% decline in tobacco sales volumes, largely due to lower sales of carryover crop tobacco. Less carryover tobacco was available for sale in the first quarter of fiscal year 2026, due to significant shipment volumes earlier in fiscal year 2025. Operating income for the Tobacco Operations segment increased by 147%, or $21.2 million, for the first quarter of fiscal year 2026, compared to first quarter of fiscal year 2025, on a favorable product mix in Asia. Selling, general, and administrative expenses were lower by approximately $1.8 million for the segment mainly due to favorable foreign currency comparisons of $7.2 million, partially offset by higher compensation costs of $2.3 million and higher legal and professional fees of $2.5 million in the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024. Uncommitted tobacco inventory levels remained low at about 11% of total tobacco inventory as of June 30, 2025.

Current wording

Revenue increased by 2%, or $22.0 million, for the six months ended September 30, 2025, compared to the six months ended September 30, 2024, as increased third-party tobacco processing revenue offset a 1% decline in tobacco sales volumes. Higher sales and earlier shipments of current crop tobacco largely offset lower sales of carryover tobacco in the first half of fiscal year 2026, compared to the first half of fiscal year 2025. Operating income for the Tobacco Operations segment increased by 10%, or $9.1 million, for the first half of fiscal year 2026, compared to first half of fiscal year 2025, on a favorable product mix. Selling, general, and administrative expenses were higher by approximately $4.6 million for the segment mainly due to higher compensation costs of $4.3 million, legal and professional fees of $3.1 million, and provisions for farmer advances of $2.8 million, which were partially offset by lower tobacco sales commissions of $3.9 million and favorable foreign currency comparisons of $1.7 million in the six months ended September 30, 2025, compared to the six months ended September 30, 2024. Uncommitted tobacco inventory levels remained low at about 13% of total tobacco inventory as of September 30, 2025.

Previous wording

The consolidated effective tax rate for the three months ended June 30, 2025, was 27.1%. The consolidated tax rate for the three months ended June 30, 2024, was 34.7%. The consolidated effective tax rate for the three months ended June 30, 2024, was higher than the consolidated tax rate for the three months ended June 30, 2025, due to limitation of deductibility of certain compensation amounts.

Current wording

The consolidated effective tax rate for the six months ended September 30, 2025, was 25.2%. The consolidated tax rate for the six months ended September 30, 2024, was 31.5%. The consolidated effective tax rate for the six months ended September 30, 2024, was higher than the consolidated tax rate for the six months ended September 30, 2025, due to limitation of deductibility of certain compensation amounts.

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. Our working capital needs followed this pattern in the quarter ended June 30, 2025, and we funded these working capital needs using a combination of cash on hand, short-term borrowings, customer advances, and operating cash flows. In contrast, in the quarter ended June 30, 2024, certain tobacco purchases that would have typically been made in that fiscal quarter had been made earlier due to market conditions, which reduced required working capital investments in quarter ended June 30, 2024.

Current wording

The first half of our fiscal year is usually a period of significant working capital investment in Africa, South America, and the United States as tobacco crops are delivered by farmers. Our working capital needs followed this pattern in the six months ended September 30, 2025, and we funded these working capital needs using a combination of cash on hand, short-term borrowings, customer advances, account receivables factoring, and operating cash flows. In contrast, in the six months ended September 30, 2024, certain tobacco purchases that would have typically been made in the first half of fiscal year 2025 had been made earlier due to market conditions, which reduced required working capital investments in the six months ended September 30, 2024.

Previous wording

Net cash used by our operations was $205.1 million during the quarter ended June 30, 2025. That amount was $142.7 million higher than during the same period in fiscal year 2025, primarily on lower working capital requirements in the quarter ended June 30, 2024. Tobacco inventory levels increased by $413.4 million from March 31, 2025 levels to $1.2 billion at June 30, 2025, on seasonal leaf tobacco purchases. Tobacco inventory levels at June 30, 2025, were relatively flat, up $17.4 million, compared to June 30, 2024 levels. 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 June 30, 2025, our uncommitted tobacco inventories were $134.7 million, or about 11% of total tobacco inventory, compared to $164.0 million, or about 20% of our tobacco inventory as of March 31, 2025, and $154.8 million, or about 13% of our tobacco inventory as of June 30, 2024.

Current wording

Net cash used by our operations was $172.4 million during the six months ended September 30, 2025. That amount was $124.9 million higher than during the same period in fiscal year 2025, primarily on lower working capital requirements in the six months ended September 30, 2024. Tobacco inventory levels increased by $332.3 million from March 31, 2025 levels to $1.1 billion at September 30, 2025, on seasonal leaf tobacco purchases. Tobacco inventory levels at September 30, 2025, were up $68.0 million, compared to September 30, 2024 levels, on larger crop sizes partially offset by some earlier tobacco shipments in fiscal year 2026. 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 September 30, 2025, our uncommitted tobacco inventories were $144.2 million, or about 13% of total tobacco inventory, compared to $164.0 million, or about 20% of our tobacco inventory as of March 31, 2025, and $108.0 million, or about 10% of our tobacco inventory as of September 30, 2024.

Previous wording

Our balance sheet accounts reflected seasonal patterns in the quarter ended June 30, 2025, on deliveries of tobacco crops by farmers in both Africa and South America. Accounts receivable decreased by $201.7 million from March 31, 2025 levels, on tobacco crop shipments offset in part by collections on receivables. Advances to suppliers were $79.2 million at June 30, 2025, a reduction of $90.2 million from March 31, 2025, as tobacco crops were delivered in payment on some of those balances, net of new balances for upcoming tobacco crops. Accounts receivable--unconsolidated affiliates were $120.6 million higher as of June 30, 2025, compared to March 31, 2025, on tobacco crop purchases. Notes payable and overdrafts were up $166.2 million from March 31, 2025 levels, on seasonal working capital needs.

Current wording

Our balance sheet accounts reflected seasonal patterns in the six months ended September 30, 2025, on deliveries of tobacco crops by farmers in Africa, South America, and the United States. Accounts receivable decreased by $180.6 million from March 31, 2025 levels, on collections on receivables offset in part by tobacco crop shipments. Advances to suppliers were $121.6 million at September 30, 2025, a reduction of $47.8 million from March 31, 2025, as tobacco crops were delivered in payment on some of those balances, net of new balances for upcoming tobacco crops. Accounts receivable--unconsolidated affiliates were $106.9 million higher as of September 30, 2025, compared to March 31, 2025, on larger tobacco crops. Notes payable and overdrafts were up $84.5 million from March 31, 2025 levels, on seasonal working capital needs.

Previous wording

Accounts receivable--unconsolidated affiliates were $66.7 million higher as of June 30, 2025, compared to the same period in the prior fiscal year, on larger tobacco crop sizes. Accounts payable were $119.8 million at June 30, 2025, up $40.1 million, compared to June 30, 2024, largely on the timing of tobacco crop purchases. Notes payable and overdrafts and cash and cash equivalents were up $40.2 million and $76.7 million, respectively, as of June 30, 2025, compared to June 30, 2024, largely due to a lower use of cash and cash equivalents to fund working capital needs.

Current wording

Accounts receivable were $92.3 million lower as of September 30, 2025, compared to September 30, 2024, on customer mix. Accounts receivable--unconsolidated affiliates were $47.4 million higher as of September 30, 2025, compared to the same period in the prior fiscal year, on larger tobacco crop sizes. Notes payable and overdrafts were down $39.5 million as of September 30, 2025, compared to September 30, 2024, due to earlier crop shipments, collections on accounts receivable, and accounts receivable factoring.

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 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 quarters ended June 30, 2025 and 2024, we invested about $12.1 million and $22.7 million, respectively, in our property, plant and equipment. Depreciation expense was approximately $11.0 million and $11.7 million for the quarters ended June 30, 2025 and 2024, 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 $45 to $55 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 six ended September 30, 2025 and 2024, we invested approximately $21.1 million and $38.8 million, respectively, in our property, plant and equipment. Depreciation expense was approximately $22.0 million and $23.8 million for the six months ended September 30, 2025 and 2024, 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 $45 to $55 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

At June 30, 2025, we had $1.2 billion in total debt outstanding, an increase of $40.7 million compared to June 30, 2024. 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 decreased by $47.1 million to $1.1 billion at June 30, 2025, compared to June 30, 2024. Net debt as a percentage of net capitalization was 42% at June 30, 2025, down from 44% at June 30, 2024, and up from 36% at March 31, 2025.

Current wording

At September 30, 2025, we had $1.2 billion in total debt outstanding, a decrease of $39.0 million compared to September 30, 2024. 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 decreased by $51.6 million to $1.1 billion at September 30, 2025, compared to September 30, 2024. Net debt as a percentage of net capitalization was 42% at September 30, 2025, down from 44% at September 30, 2024, and up from 36% at March 31, 2025.

Previous wording

As of June 30, 2025, we had $178.4 million in cash and cash equivalents, $355 million available under our committed revolving credit facility that will mature in December 2027, and we, together with our consolidated affiliates, had approximately $86 million in available, uncommitted credit lines. The financial covenants under our committed revolving credit facility require us to maintain certain levels of tangible net worth and observe restrictions on debt levels. Based on our June 30, 2025 financial statement, we were in compliance with all financial covenants of our debt agreements as of June 30, 2025. We have no long-term debt maturing until fiscal year 2028.

Current wording

As of September 30, 2025, we had $88.7 million in cash and cash equivalents, $340 million available under our committed revolving credit facility that will mature in December 2027, and we, together with our consolidated affiliates, had approximately $166 million in available, uncommitted credit lines. The financial covenants under our committed revolving credit facility require us to maintain certain levels of tangible net worth and observe restrictions on debt levels. Based on our September 30, 2025 financial statements, we were in compliance with all financial covenants of our debt agreements as of September 30, 2025. We have no long-term debt maturing until fiscal year 2028.

Previous wording

From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates. At June 30, 2025, the fair value of our outstanding interest rate swap agreements was a liability of about $0.6 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 September 30, 2025, the fair value of our outstanding interest rate swap agreements was a liability of about $1.0 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, 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 June 30, 2025, the fair value of our open hedges for forecasted tobacco purchases was a net asset of approximately $0.5 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 $0.3 million as of June 30, 2025.

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 September 30, 2025, the fair value of our open hedges for forecasted tobacco purchases and crop inputs was a net asset of approximately $0.2 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 $0.4 million as of September 30, 2025.