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 an…

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 an…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Amounts described as net income (loss) and earnings (loss) per diluted share in the following discussion are attributable to Universal Corporation and exclude earnings related to non-controlling interests in subsidiaries. Any references to adjusted operating income (loss), adjusted net income (loss) attributable to Universal Corporation, adjusted diluted earnings (loss) per share, and the total for segment operating income (loss) are references to non-GAAP financial measures. These measures are not financial measures calculated in accordance with generally accepted accounting principles ("GAAP") and should not be considered as substitutes for operating income (loss), net income (loss) attributable to Universal Corporation, diluted earnings (loss) per share, cash from operating activities or any other operating or financial performance measure calculated in accordance with GAAP, and may not be comparable to similarly-titled measures reported by other companies. Reconciliations of adjusted operating income (loss) to consolidated operating (income), adjusted net income (loss) attributable to Universal Corporation to consolidated net income (loss) attributable to Universal Corporation and adjusted diluted earnings (loss) per share to diluted earnings (loss) per share are provided in Other Items below. In addition, we have provided a reconciliation of the total for segment operating income (loss) to consolidated operating income (loss) in Note 12. "Operating Segments" to the consolidated financial statements. Management evaluates the consolidated Company and segment performance excluding certain significant charges or credits. We believe these non-GAAP financial measures, which exclude items that we believe are not indicative of our core operating results, can provide investors with important information that is useful in understanding our business results and trends. References to net debt, net capitalization, and net debt to net capitalization ratio are also references to non-GAAP financial measures. These measures are not financial measures calculated in accordance with GAAP and should not be considered substitutes for total debt, total capitalization, total debt to total capitalization ratio, or any other operating or financial performance measures calculated in accordance with GAAP, and may not be comparable to similarly-titled measures reported by other companies. Reconciliations of net debt to total debt and net capitalization to total capitalization are provided in Other Items below. We believe these non-GAAP measures are meaningful indicators of liquidity and financial position.

Current wording

Amounts described as net income (loss) and earnings (loss) per diluted share in the following discussion are attributable to Universal Corporation and exclude earnings related to non-controlling interests in subsidiaries. References to adjusted operating income (loss), adjusted net income (loss) attributable to Universal Corporation, adjusted diluted earnings (loss) per share, and the total for segment operating income (loss) are references to non-GAAP financial measures. These measures are not financial measures calculated in accordance with generally accepted accounting principles ("GAAP") and should not be considered as substitutes for operating income (loss), net income (loss) attributable to Universal Corporation, diluted earnings (loss) per share, cash from operating activities or any other operating or financial performance measure calculated in accordance with GAAP, and may not be comparable to similarly-titled measures reported by other companies. Reconciliations of adjusted operating income (loss) to consolidated operating (income), adjusted net income (loss) attributable to Universal Corporation to consolidated net income (loss) attributable to Universal Corporation and adjusted diluted earnings (loss) per share to diluted earnings (loss) per share are provided in Other Items below. In addition, we have provided a reconciliation of the total for segment operating income (loss) to consolidated operating income (loss) in Note 12. "Operating Segments" to the consolidated financial statements. Management evaluates the consolidated Company and segment performance excluding certain significant charges or credits. We believe these non-GAAP financial measures, which exclude items that we believe are not indicative of our core operating results, can provide investors with important information that is useful in understanding our business results and trends. References to net debt, net capitalization, and net debt to net capitalization ratio are also references to non-GAAP financial measures. These measures are not financial measures calculated in accordance with GAAP and should not be considered substitutes for total debt, total capitalization, total debt to total capitalization ratio, or any other operating or financial performance measures calculated in accordance with GAAP, and may not be comparable to similarly-titled measures reported by other companies. Reconciliations of net debt to total debt and net capitalization to total capitalization are provided in Other Items below. We believe these non-GAAP measures are meaningful indicators of liquidity and financial position.

Previous wording

Revenue decreased by 8%, or $75.9 million, compared to the quarter ended December 31, 2024, primarily driven by lower tobacco sales volumes and prices as well as ingredients product mix.

Current wording

Revenue decreased by 12%, or $70.0 million, in the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025, primarily driven by lower tobacco sales volumes, down 9%, and tobacco sales prices, down 6%.

Previous wording

Operating income decreased by 3%, or $6.6 million, in the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024, on lower sales volumes in our Tobacco Operations segment and higher fixed costs and market headwinds, including broader softness in the consumer-packaged-goods sector, in our Ingredients Operations segment, partially offset by favorable foreign currency comparisons.

Current wording

Operating income decreased by 93%, or $31.5 million, in the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025, on a less favorable product mix and lower sales volumes in the Tobacco Operations segment and continued market headwinds and high fixed costs in the Ingredients Operations segment.

Previous wording

Adjusted operating income was down by $21.4 million and adjusted net income attributable to Universal Corporation was down by $25.7 million in the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024, largely on lower tobacco sales volumes and higher inventory write-downs, partially offset by favorable foreign currency comparisons.

Current wording

Adjusted operating income was down by $32.6 million and adjusted net income attributable to Universal Corporation was down by $14.6 million in the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025, largely on on a less favorable product mix and lower sales volumes in the Tobacco Operations segment and continued market headwinds and high fixed costs in the Ingredients Operations segment.

Previous wording

Revenue decreased by 9%, or $73.9 million, for the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024, primarily on an 8% decrease in tobacco sales volumes due to lower sales of certain types of tobacco as well as the timing of tobacco shipments. Operating income for the Tobacco Operations segment decreased by 18%, or $18.5 million, for the third quarter of fiscal year 2026, compared to third quarter of fiscal year 2025, on lower tobacco sales volumes and higher tobacco inventory write-downs, primarily dark air-cured tobacco, of $6.1 million. Selling, general, and administrative expenses were lower by $9.6 million for the segment mainly due to favorable foreign currency comparisons of $7.8 million and lower sales commissions of $2.6 million in the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024.

Current wording

Our first fiscal quarter is historically a slow quarter for our tobacco business. Revenue decreased by 13%, or $67.6 million, for the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025, primarily on a 9% decrease in tobacco sales volumes due to lower sales of carryover crop tobacco and a 6% decrease in tobacco sales prices due to product mix and lower green tobacco prices. Operating income for the Tobacco Operations segment decreased by 90%, or $32.2 million, for the first quarter of fiscal year 2027, compared to the first quarter of fiscal year 2026, on a less favorable product mix in Asia and lower sales of carryover crop tobacco. Selling, general, and administrative expenses were higher by $1.3 million for the segment mainly due to unfavorable foreign currency comparisons of $4.4 million and lower recoveries on advances to suppliers of $1.7 million, partially offset by lower legal and professional fees of $2.3 million in the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025. Corporate overhead costs allocated to the segment were $2.2 million higher in the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025, due to a higher percentage allocation of the actual corporate overhead costs to the segment. The allocation of corporate overhead costs is based on projected annual financial and operational performance.

Previous wording

Cost of goods sold decreased by 6%, or $41.9 million, in the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024, largely on lower tobacco sales volumes and ingredients product mix.

Current wording

Cost of goods sold decreased by 8%, or $38.9 million, in the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025, largely on lower tobacco sales volumes and green tobacco prices.

Previous wording

Interest expense was down by 11%, or $2.0 million, in the quarter ended December 31, 2025, compared to the quarter ended December 31, 2024, on lower interest rates and debt balances.

Current wording

Interest expense was down by 7%, or $1.3 million, in the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025, on lower debt balances.

Previous wording

The consolidated effective tax rate for the three months ended December 31, 2025, was 37.8%. The consolidated tax rate for the three months ended December 31, 2024, was 23.0%. The consolidated effective tax rate for the three months ended December 31, 2025, was higher than the consolidated tax rate for the three months ended December 31, 2024, due to the impact of certain withholding taxes on dividends from foreign subsidiaries and the mix of domestic and foreign earnings.

Current wording

The consolidated effective tax rate for the three months ended June 30, 2026, was 35%. The consolidated tax rate for the three months ended June 30, 2025, was 27%. The consolidated effective tax rate for the three months ended June 30, 2026, was higher than the consolidated tax rate for the three months ended June 30, 2025, due to various factors, including the mix and timing of domestic and foreign earnings, discrete items including increased withholding taxes on undistributed earnings in Brazil, and the tax deductibility of certain items.

Previous wording

The following tables set forth certain non-recurring items included in reported results to reconcile adjusted operating income to consolidated operating income and adjusted net income to net income attributable to Universal Corporation:

Current wording

The following tables set forth certain non-recurring items included in reported results to reconcile adjusted operating income to consolidated operating income and adjusted net income (loss) attributable to Universal Corporation to net income (loss) attributable to Universal Corporation:

Previous wording

(1) Restructuring and impairment costs are included in Consolidated operating income in the consolidated statements of income, but excluded for purposes of Adjusted operating income, Adjusted net income available to Universal Corporation, and Adjusted diluted earnings per share.

Current wording

(1) Restructuring and impairment costs are included in Consolidated operating income in the consolidated statements of income, but excluded for purposes of Adjusted operating income, Adjusted net income (loss) available to Universal Corporation, and Adjusted diluted earnings (loss) per share.

Previous wording

Net cash used by our operations was $58.0 million during the nine months ended December 31, 2025. That amount was $226.3 million higher than during the same period in fiscal year 2025, primarily on lower working capital requirements in the nine months ended December 31, 2024. Tobacco inventory levels at December 31, 2025, were up $66.0 million, compared to December 31, 2024 levels, on larger crop sizes. 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, 2025, our uncommitted tobacco inventories were $165.9 million, or about 17% of total tobacco inventory, compared to $164.0 million, or about 20% of our tobacco inventory as of March 31, 2025, and $94.3 million, or about 10% of our tobacco inventory as of December 31, 2024.

Current wording

Net cash used by our operations was $117.1 million during the quarter ended June 30, 2026. That amount was $88.0 million lower than during the same period in fiscal year 2026, primarily on lower working capital requirements. Tobacco inventory levels at June 30, 2026, were down $54.2 million, compared to June 30, 2025 levels, on slower green tobacco purchases and lower green tobacco prices. 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, 2026, our uncommitted tobacco inventories were $275.1 million, or about 24% of total tobacco inventory, compared to $222.3 million, or about 27% of our tobacco inventory as of March 31, 2026, and $134.7 million, or about 11% of our tobacco inventory as of June 30, 2025. Uncommitted tobacco levels as a percentage of total tobacco inventory came down from March 31, 2026 levels in the quarter ended June 30, 2026, but remained elevated due to delayed customer purchase commitments. We expect our uncommitted tobacco inventory levels to be within our range of 20% or less of total tobacco inventory during fiscal year 2027.

Previous wording

Our balance sheet accounts reflected seasonal patterns in the nine months ended December 31, 2025, on deliveries of tobacco crops by farmers in Africa, South America, and the United States. Cash and cash equivalents were down $174.9 million from March 31, 2025 levels, on seasonal working capital needs. Accounts receivable were down $54.4 million from March 31, 2025 levels largely on the timing of collections on receivables. Accounts receivable--unconsolidated affiliates increased by $55.2 million from March 31, 2025 levels, on larger tobacco crop sizes.

Current wording

Our balance sheet accounts reflected seasonal patterns in the quarter ended June 30, 2026, on deliveries of tobacco crops by farmers in Africa and South America. Accounts receivable decreased by $215.8 million from March 31, 2026 levels on collections on receivables, partially offset by tobacco crop shipments. Advances to suppliers were $102.9 million at June 30, 2026, a reduction of $74.3 million from March 31, 2026, as tobacco crops were delivered in payment on some of those balances, net of new balances for upcoming tobacco crops. Accounts receivable--unconsolidated affiliates increased by $92.2 million from March 31, 2026 levels, on tobacco crop purchases. Notes payable and overdrafts were up $279.4 million from March 31, 2026 levels on seasonal working capital needs.

Previous wording

Accounts receivable and notes payable and overdrafts were down $78.5 million and $76.3 million, respectively, as of December 31, 2025, compared to December 31, 2024, largely due to accounts receivable factoring. Accounts receivable--unconsolidated affiliates were $61.8 million higher as of December 31, 2025, compared to the same period in the prior fiscal year, on larger tobacco crop sizes. Cash and cash equivalents were down $129.9 million as of December 31, 2025, compared to December 31, 2024, due to a higher of use of cash and cash equivalents to fund working capital needs in fiscal year 2026.

Current wording

Accounts receivable were $76.1 million lower in the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025, on lower sales of carryover crop tobacco. Advances to suppliers were $23.7 million higher and accounts payable were $28.8 million lower at June 30, 2026, compared to June 30, 2025, largely on slower purchases of green tobacco. Accounts receivable--unconsolidated affiliates were $23.2 million lower as of June 30, 2026, compared to the same period in the prior fiscal year, on the timing of tobacco shipments. Notes payable and overdrafts were down $54.3 million as of June 30, 2026, compared to June 30, 2025, due to lower working capital requirements.

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 nine months ended December 31, 2025 and 2024, we invested approximately $40.3 million and $54.9 million, respectively, in our property, plant and equipment. Depreciation expense was approximately $33.0 million and $36.1 million for the nine months ended December 31, 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 quarters ended June 30, 2026 and 2025, we invested approximately $15.9 million and $12.1 million, respectively, in our property, plant and equipment. Depreciation expense was approximately $11.0 million for each of the quarters ended June 30, 2026 and 2025. 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 $55 to $65 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 2024. The program authorizes the purchase of up to $100 million of our common stock through November 15, 2026. Under the current authorization, 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 December 31, 2025, we did not purchase any shares of common stock. As of December 31, 2025, our available authorization under our current share repurchase program was $100 million.

Current wording

Our Board of Directors approved our current share repurchase program in November 2024. The program authorizes the purchase of up to $100 million of our common stock through November 15, 2026. Under the current authorization, 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, 2026, we purchased 51,741 shares of common stock at an aggregate cost of $2.7 million (average price per share $53.06). As of June 30, 2026, our available authorization under our current share repurchase program was $97.3 million.

Previous wording

At December 31, 2025, we had $1.1 billion in total debt outstanding, a decrease of $77.5 million compared to December 31, 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 increased by $50.7 million to $995.3 million at December 31, 2025, compared to December 31, 2024. Net debt as a percentage of net capitalization was 40% at December 31, 2025, up from 39% at December 31, 2024, and up from 36% at March 31, 2025.

Current wording

At June 30, 2026, we had $1.2 billion in total debt outstanding, a decrease of $55.5 million compared to June 30, 2025. 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 $1.0 billion at June 30, 2026, compared to June 30, 2025. Net debt as a percentage of net capitalization was 42% at June 30, 2026, flat with 42% at June 30, 2025, and up from 37% at March 31, 2026.

Previous wording

As of December 31, 2025, we had $85.2 million in cash and cash equivalents, $595 million available under our committed revolving credit facility that will mature in December 2030, and we, together with our consolidated affiliates, had approximately $237 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 December

Current wording

As of June 30, 2026, we had $174 million in cash and cash equivalents, $635 million available under our committed revolving credit facility that will mature in December 2030, and we, together with our consolidated affiliates, had approximately $279 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, 2026 financial statements, we were in compliance with all financial covenants of our debt agreements as of June 30, 2026. We have no long-term debt maturing until fiscal year 2031.

Previous wording

From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates. At December 31, 2025, the fair value of our outstanding interest rate swap agreements was a liability of about $1.3 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.

Current wording

From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates. At June 30, 2026, the fair value of our outstanding interest rate swap agreements was an asset of about $5.0 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 December 31, 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 asset of approximately $0.8 million as of December 31, 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 June 30, 2026, the fair value of our open hedges for forecasted tobacco purchases and crop inputs was a net liability of approximately $3.0 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 $1.1 million as of June 30, 2026.