What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-08-04 · 162 added, 107 removed, 736 unchanged (27% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

2021 2020 2021 2020

(Unaudited) (Unaudited)

Sales and other operating revenues $ 453,955 $ 377,025 $ 803,984 $ 692,836

28 unchanged sentences

(in thousands of dollars)

June 30, June 30, March 31,

September 30, September 30, March 31,

2021 2020 2021

31 unchanged sentences

(in thousands of dollars)

June 30, June 30, March 31,

September 30, September 30, March 31,

2021 2020 2021

21 unchanged sentences

Series A Junior Participating Preferred Stock, no par value, 500,000 shares authorized, none issued or outstanding

Common stock, no par value, 100,000,000 shares authorized 24,577,254 shares issued and outstanding at June 30, 2021 ( 24,488,964 at June 30, 2020 and 24,514,867 at March 31, 2021)

Common stock, no par value, 100,000,000 shares authorized 24,607,384 shares issued and outstanding at September 30, 2021 ( 24,514,867 at September 30, 2020 and 24,514,867 at March 31, 2021)

328,836 323,761 326,673

9 unchanged sentences

(in thousands of dollars)

Three Months Ended June 30,

Six Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

41 unchanged sentences

and the global economies, markets and supply chains.

At June 30, 2021, it is not possible to predict the overall impact of the ongoing COVID-19 pandemic on the Company's business, financial condition, results of operations and demand for its products and services.

At September 30, 2021, it is not possible to predict the overall impact of the ongoing COVID-19 pandemic on the Company's business, financial condition, results of operations and demand for its products and services.

ACCOUNTING PRONOUNCEMENTS

23 unchanged sentences

purchase price to be allocated.

The $ 6 million in escrow is recognized as restricted cash in other noncurrent assets on the consolidated balance sheet at June 30, 2021.

The $ 6 million in escrow is recognized as restricted cash in other noncurrent assets on the consolidated balance sheet at September 30, 2021.

The contingent consideration arrangement for the selling shareholder includes a post-combination service requirement and forfeitable payment provisions, therefore under ASC Topic 805, "Business Combinations," must be treated as compensation expense.

This expense is being recognized ratably over the requisite service period in selling, general, and administrative expense on the consolidated statements of income.

The following preliminary allocation of the purchase price was based on third-party valuations and assumptions.

At June 30, 2021 , the Company is finalizing the fair value assigned to income tax related assets and liabilities.

The final purchase price allocation is expected to be completed in the second quarter of fiscal year 2022.

The following table summarizes the preliminary purchase price allocation of the assets acquired and liabilities assumed on October 1, 2020.

The following table summarizes the final purchase price allocation of the assets acquired and liabilities assumed on October 1, 2020.

(in thousands of dollars)

25 unchanged sentences

Tobacco Operations

In the three months ended June 30, 2021, the Company incurred and paid $ 1.5 million of termination costs associated with restructuring of tobacco processing and administrative operations in Africa.

In the six months ended September 30, 2021, the Company incurred and paid $ 1.5 million of termination costs associated with restructuring of tobacco processing and administrative operations in Africa.

Ingredients Operations

In the three months ended June 30, 2021, the Company incurred $ 0.5 million of impairment costs on property, plant, and equipment associated with the wind-down of the Carolina Innovative Food Ingredients, Inc.

In the six months ended September 30, 2021, the Company incurred $ 0.5 million of impairment costs on property, plant, and equipment associated with the wind-down of the Carolina Innovative Food Ingredients, Inc.

("CIFI") operations that was announced in fiscal year 2021.

There were no restructuring and impairment costs incurred for the three months ended June 30, 2020.

There were zero restructuring and impairment costs incurred for the three and six months ended September 30, 2020.

REVENUE FROM CONTRACTS WITH CUSTOMERS

1 unchanged sentence

The Company also earns revenue from processing leaf tobacco owned by customers and from various other services provided to customers.

The Company also has fruit and vegetable processing operations that provide customers with a range of food ingredient products.

Additionally, the Company has fruit and vegetable processing operations that provide customers with a range of food ingredient products.

Payment terms with customers vary depending on customer creditworthiness, product types, services provided, and other factors.

30 unchanged sentences

The following table disaggregates the Company’s revenue by significant revenue-generating category:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

(in thousands of dollars) 2021 2020 2021 2020

10 unchanged sentences

Other Contingent Liabilities (Letters of credit)

The Company had other contingent liabilities totaling approximately $ 1 million at June 30, 2021, primarily related to outstanding letters of credit.

The Company had other contingent liabilities totaling approximately $ 1 million at September 30, 2021, primarily related to outstanding letters of credit.

Value-Added Tax Assessments in Brazil

5 unchanged sentences

In September 2014, tax authorities for the state of Parana issued an assessment for tax, interest, and penalties for periods from 2009 through 2014 totaling approximately $ 10 million.

Those amounts are based on the exchange rate for the Brazilian currency at June 30, 2021.

Those amounts are based on the exchange rate for the Brazilian currency at September 30, 2021.

Management of the operating subsidiary and outside counsel believe that errors were made by the tax authorities for both states in determining all or significant portions of these assessments and that various defenses support the subsidiary’s positions.

With respect to the Santa Catarina assessments, the subsidiary took appropriate steps to contest the full amount of the claims.

As of June 30, 2021, a portion of the subsidiary’s arguments had been accepted, and the outstanding assessment had been reduced.

The reduced assessment, together with the related accumulated interest through the end of the current reporting period, totaled approximately $ 9 million (at the June 30, 2021 exchange rate).

As of September 30, 2021, a portion of the subsidiary’s arguments had been accepted, and the outstanding assessment had been reduced.

The reduced assessment, together with the related accumulated interest through the end of the current reporting period, totaled approximately $ 9 million (at the September 30, 2021 exchange rate).

The subsidiary is continuing to contest the full remaining amount of the assessment.

While the range of reasonably possible loss is zero up to the full $ 9 million remaining assessment with interest, based on the strength of the subsidiary’s defenses, no loss within that range is considered probable at this time and no liability has been recorded at June 30, 2021.

With respect to the Parana assessment, management of the subsidiary and outside counsel challenged the full amount of the claim.

2 unchanged sentences

In December 2015, the Parana tax authorities withdrew the initial claim and subsequently issued a new assessment covering the same tax periods, reflecting a substantial reduction from the original assessment.

In fiscal year 2020, the Parana tax authorities acknowledged the statute of limitations related to claims prior to December 2010 had expired and reduced the assessment to $ 3 million (at the June 30, 2021 exchange rate).

Notwithstanding the reduced assessment, management and outside counsel continue to believe that the new assessment is not supported by the underlying statutes and relevant case law and have challenged the full amount of the claim.

The range of reasonably possible loss is considered to be zero up to the full $ 3 million

However, based on the strength of the subsidiary's defenses, no loss within that range is considered probable at this time and no liability has been recorded at June 30, 2021.

The range of reasonably possible loss is considered to be zero up to the full $ 3

million assessment.

However, based on the strength of the subsidiary's defenses, no loss within that range is considered probable at this time and no liability has been recorded at September 30, 2021.

In both states, the process for reaching a final resolution to the assessments is expected to be lengthy, and management is not currently able to predict when either case will be concluded.

11 unchanged sentences

Both the current and the long-term portions of advances to suppliers are reported net of allowances recorded when the Company determines that amounts outstanding are not likely to be collected.

Short-term and long-term advances to suppliers totaled $ 92 million at June 30, 2021, $ 83 million at June 30, 2020, and $ 144 million at March 31, 2021.

The related valuation allowances totaled $ 18 million at June 30, 2021, $ 16 million at June 30, 2020, and $ 18 million at March 31, 2021, and were estimated based on the Company’s historical loss information and crop projections.

The allowances were reduced by net recoveries of approximately $ 0.3 million and increased by net provisions of approximately $ 0.1 million in the three-month periods ended June 30, 2021 and 2020, respectively.

Short-term and long-term advances to suppliers totaled $ 98 million at September 30, 2021, $ 81 million at September 30, 2020, and $ 144 million at March 31, 2021.

The related valuation allowances totaled $ 14 million at September 30, 2021, $ 14 million at September 30, 2020, and $ 18 million at March 31, 2021, and were estimated based on the Company’s historical loss information and crop projections.

The allowances were reduced by net recoveries of approximately $ 44 thousand and increased by net provisions of approximately $ 0.3 million in the six-month periods ended September 30, 2021 and 2020, respectively.

These net recoveries and provisions are included in selling, general, and administrative expenses in the consolidated statements of income.

13 unchanged sentences

The Company reviews these balances on a regular basis and records valuation allowances on the credits to reflect amounts that are not expected to be recovered, as well as discounts anticipated on credits that are expected to be sold or transferred.

At June 30, 2021, the aggregate balance of recoverable tax credits held by the Company’s subsidiaries totaled approximately $ 61 million ($ 54 million at June 30, 2020, and $ 49 million at March 31, 2021), and the related valuation allowances totaled approximately $ 19 million ($ 17 million at June 30, 2020, and $ 19 million at March 31, 2021).

At September 30, 2021, the aggregate balance of recoverable tax credits held by the Company’s subsidiaries totaled approximately $ 55 million ($ 51 million at September 30, 2020, and $ 49 million at March 31, 2021), and the related valuation allowances totaled approximately $ 20 million ($ 18 million at September 30, 2020, and $ 19 million at March 31, 2021).

The net balances are reported in other current assets and other noncurrent assets in the consolidated balance sheets.

2 unchanged sentences

The Company increased the borrowings of the senior unsecured five-year and seven-year term loans by $ 75 million each.

At June 30, 2021, the five-year term loan maturing December 2023 and the seven-year term loan maturing December 2025 had outstanding borrowings of $ 225 million and $ 295 million, respectively.

Under the senior unsecured bank credit facility, the additional $ 150 million of terms loans bear interest at variable rates plus a margin based on the Company's credit metrics and interest payments remained unhedged at June 30, 2021.

At September 30, 2021, the five-year term loan maturing December 2023 and the seven-year term loan maturing December 2025 had outstanding borrowings of $ 225 million and $ 295 million, respectively.

The Company maintains receive-floating/pay-fixed interest rates swap agreements for a portion of the outstanding five and seven-year term loans.

5 unchanged sentences

This stock repurchase plan authorizes the purchase of up to $ 100 million in common and/or preferred stock in open market or privately negotiated transactions through November 15, 2022 or when funds for the program have been exhausted, subject to market conditions and other factors.

The program had $ 100 million of remaining capacity for repurchases of common and/or preferred stock at June 30, 2021.

The program had $ 100 million of remaining capacity for repurchases of common and/or preferred stock at September 30, 2021.

EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

(in thousands, except share and per share data) 2021 2020 2021 2020

18 unchanged sentences

The Company's consolidated effective income tax rate is affected by a number of factors, including the mix and timing of domestic and foreign earnings, discrete items, and the effect of exchange rate changes on taxes.

The consolidated effective income tax rate for the three months ended June 30, 2021 was 24 % .

There were no discrete items that impacted the income tax provision for the three months ended June 30, 2021.

The consolidated effective income tax rate for the three months ended June 30, 2020 was a benefit of $ 5.0 million.

The Company's consolidated effective income tax rate for the three months ended June 30, 2020 was affected by a $ 4.4 net tax benefit for final U.S.

The consolidated effective income tax rate for the three months and six months ended September 30, 2021 was 15.1 % and 16.5 %, respectively.

The consolidated effective income tax rate for the three and six months ended September 30, 2021 was affected by a $ 1.7 million benefit related to a final tax law ruling at a foreign subsidiary.

Without this item, the consolidated effective income tax rate for the three and six months ended September 30, 2021 would have been approximately 21.7 % and 22.0 %, respectively.

The Company's consolidated effective income tax rate for the three and six months ended September 30, 2020 was 27.8 % and a benefit of 14.1 %, respectively.

The consolidated income tax rate for the six months ended September 30, 2020 was affected by a $ 4.4 million net tax benefit for final U.S.

tax regulations issued for hybrid dividends paid by foreign subsidiaries.

Without this discrete item for the final U.S.

tax regulations, the consolidated effective income tax rate for the three months ended June 30, 2020 would have been a benefit of approximately 24 %.

Additionally, for the three months ended June 30, 2020 the Company recognized $ 1.8 million as a component of interest expense related to a settlement of an uncertain tax position at foreign subsidiary.

tax regulations, the consolidated effective income tax rate for the six months ended September 30, 2020 would have been approximately 19.2 %.

Additionally, for the six months ended September 30, 2020 the Company recognized $ 1.8 million of interest expense related to a settlement of an uncertain tax position at foreign subsidiary.

GOODWILL AND OTHER INTANGIBLES

The Company's changes in goodwill at June 30, 2021 and 2020 consisted of the following:

(in thousands of dollars) Three Months Ended June 30,

The Company's changes in goodwill at September 30, 2021 and 2020 consisted of the following:

(in thousands of dollars) Six Months Ended September 30,

Balance at beginning of fiscal year $ 173,051 $ 126,826

2 unchanged sentences

The Company's intangible assets primarily consist of capitalized customer-related intangibles, trade names, proprietary developed technology and noncompetition agreements.

The Company's intangible assets subject to amortization consisted of the following at June 30, 2021 and 2020:

(in thousands, except useful life) June 30,

Useful Life (years) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value

The Company's intangible assets subject to amortization consisted of the following at September 30, 2021 and 2020 and at March 31, 2021:

(in thousands, except useful life) September 30, 2021

Useful Life (years) Gross Carrying Value Accumulated Amortization Net Carrying Value

Customer relationships (1)

8 unchanged sentences

Total intangible assets $ 80,164 $ ( 12,654 ) $ 67,510

September 30, 2020

Useful Life (years) Gross Carrying Value Accumulated Amortization Net Carrying Value

Customer relationships 13 $ 9,500 $ ( 548 ) $ 8,952

Trade names 5 3,300 $ ( 495 ) 2,805

Developed technology 3 4,800 $ ( 1,200 ) 3,600

Noncompetition agreements 5 1,000 $ ( 150 ) 850

Other 5 762 $ ( 660 ) 102

Total intangible assets $ 19,362 $ ( 3,053 ) $ 16,309

March 31, 2021

Useful Life (years) Gross Carrying Value Accumulated Amortization Net Carrying Value

Customer relationships(1) 11 — 13 $ 62,500 $ ( 3,323 ) $ 59,177

Trade names(1) 5 11,100 ( 1,605 ) 9,495

Developed technology(1) 3 4,800 ( 2,000 ) 2,800

Noncompetition agreements(1) 5 1,000 ( 250 ) 750

Other 5 760 ( 678 ) 82

Total intangible assets $ 80,160 $ ( 7,856 ) $ 72,304

(1) On October 1, 2020 the Company acquired 100 % of the capital stock of Silva for approximately $ 164.0 million in cash and $ 5.9 million of working capital on-hand at the date of acquisition.

2 unchanged sentences

Intangible assets are amortized on a straight-line basis over the asset's estimated useful economic life as noted above.

The Company's amortization expense for intangible assets for the three months ended June 30, 2021 and 2020 was:

(in thousands of dollars) Three Months Ended June 30,

The Company's amortization expense for intangible assets for the three and six months ended September 30, 2021 and 2020 was:

(in thousands of dollars) Three Months Ended September 30, Six Months Ended September 30,

2020 2021 2020

Amortization Expense $ 2,853 $ 809 $ 5,256 $ 1,617

Amortization expense for the developed technology intangible asset is recorded in cost of goods sold in the consolidated income statements of income.

The amortization expense for the other intangible assets is recorded in selling, general, and administrative expenses in the consolidated statements of income.

As of June 30, 2021, the expected future amortization expense for intangible assets is as follows:

The amortization expense for other intangible assets is recorded in selling, general, and administrative expenses in the consolidated statements of income.

As of September 30, 2021, the expected future amortization expense for intangible assets is as follows:

Fiscal Year (in thousands of dollars)

2022 (excluding the three months ended June 30, 2021)

2022 (excluding the six months ended September 30, 2021)

2026 and thereafter 36,981

5 unchanged sentences

The following table sets forth the right-of-use assets and lease liabilities for operating leases included in the Company’s consolidated balance sheet:

(in thousands of dollars) June 30, 2021 June 30, 2020 March 31, 2021

(in thousands of dollars) September 30, 2021 September 30, 2020 March 31, 2021

Operating lease right-of-use assets $ 33,790 $ 35,665 $ 31,230

3 unchanged sentences

The following table sets forth the location and amount of operating lease costs included in the Company's consolidated statement of income:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

(in thousands of dollars) 2021 2020 2021 2020

6 unchanged sentences

The following table reconciles the undiscounted cash flows to the operating lease liabilities in the Company’s consolidated balance sheet:

(in thousands of dollars) June 30, 2021

(in thousands of dollars) September 30, 2021

Maturity of Operating Lease Liabilities

2022 (excluding the three months ended June 30, 2021)

2022 (excluding the six months ended September 30, 2021)

2027 and thereafter 7,592

2 unchanged sentences

Total operating lease liabilities $ 31,515

As of June 30, 2021, the Company had no leases that did not yet commence.

As of September 30, 2021, the Company had no leases that did not yet commence.

The following table sets forth supplemental information related to operating leases:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

(in thousands, except lease term and incremental borrowing rate) 2021 2020 2021 2020

14 unchanged sentences

Although no significant ineffectiveness is expected with this hedging strategy, the effectiveness of the interest rate swaps is evaluated on a quarterly basis.

At June 30, 2021, the total notional amount of the interest rate swaps was $ 370 million, which corresponded with the former original outstanding balance of the term loans.

At September 30, 2021, the total notional amount of the interest rate swaps was $ 370 million, which corresponded with the former original outstanding balance of the term loans.

During the third quarter of fiscal year 2021, the Company converted $ 150 million from the balance in its revolving credit line into the existing term loans, splitting the balance equally between them.

At June 30, 2021, the Company is not hedging the interest payments on the additional $ 150 million of term loans.

At September 30, 2021, the Company is not hedging the interest payments on the additional $ 150 million of term loans.

The increase to the principal balance of the term loans does not have an impact to the effectiveness analysis of the interest rate swap agreements.

2 unchanged sentences

The fair value of the previous swap agreements, approximately $ 5.4 million, was received from the counterparties upon termination and is being amortized from accumulated other comprehensive loss into earnings as a reduction of interest expense through the original maturity dates of those agreements.

As of June 30, 2021, $ 0.7 million remained in accumulated other comprehensive loss to be amortized through December 31, 2021.

As of September 30, 2021, $ 0.4 million remained in accumulated other comprehensive loss to be amortized through December 31, 2021.

Cash Flow Hedging Strategy for Foreign Currency Exchange Rate Risk Related to Sales of Crop Inputs, Forecast Purchases of Tobacco, and Related Processing Costs

9 unchanged sentences

These strategies offset the variability of future U.S.

dollar cash flows for sales of crop inputs, tobacco purchases, and processing costs for the foreign currency notional amount hedged.

dollar cash flows for sales of crop inputs, tobacco purchases, and processing costs for the foreign currency notional amount

These hedging strategies have been used mainly for tobacco purchases, processing costs, and sales of crop inputs in Brazil, although the Company has also entered into hedges for a portion of the tobacco purchases in Africa.

The aggregate U.S.

dollar notional amount of forward and option contracts entered into for these purposes during the three-month periods in fiscal years 2022 and 2021 was as follows:

Three Months Ended June 30,

dollar notional amount of forward and option contracts entered into for these purposes during the six-month periods in fiscal years 2022 and 2021 was as follows:

Six Months Ended September 30,

(in millions of dollars) 2021 2020

3 unchanged sentences

$ 139.2 $ 73.5

Variations in exchange rates and in the amount and timing of fixed-price orders from customers for their purchases from individual crop years routinely cause variations in the U.S.

Fluctuations in exchange rates and in the amount and timing of fixed-price orders from customers for their purchases from individual crop years routinely cause variations in the U.S.

dollar notional amount of forward contracts entered into from one year to the next.

3 unchanged sentences

Premium payments for option contracts entered into for the sale of crop inputs in fiscal year 2021 were expensed into earnings as incurred.

The table below presents the expected timing of when the remaining accumulated other comprehensive gains and losses as of June 30, 2021 for cash flows hedges of tobacco purchases and crop input sales will be recognized in earnings.

The table below presents the expected timing of when the remaining accumulated other comprehensive gains and losses as of September 30, 2021 for cash flows hedges of tobacco purchases and crop input sales will be recognized in earnings.

Hedging Program Crop Year Geographic Location(s) Fiscal Year Earnings

Tobacco purchases 2023 Brazil 2024

Tobacco purchases 2022 Brazil 2023

Tobacco purchases 2021 Brazil, Africa 2022

19 unchanged sentences

The Company does not designate these contracts as hedges for accounting purposes.

The contracts are generally arranged to hedge the subsidiary's projected exposure to currency remeasurement risk for specified periods of time, and new contracts are entered as necessary throughout the year to replace previous contracts as they mature.

The contracts are generally arranged to hedge the subsidiary's projected exposure to currency remeasurement risk for specified periods of time, and new contracts are entered as necessary

throughout the year to replace previous contracts as they mature.

The Company is currently using forward currency contracts to manage its exposure to currency remeasurement risk in Brazil.

The total notional amounts of contracts outstanding at June 30, 2021 and 2020, and March 31, 2021, were approximately $ 16.7 million, $ 11.8 million, and $ 16.6 million, respectively.

The total notional amounts of contracts outstanding at September 30, 2021 and 2020, and March 31, 2021, were approximately $ 22.3 million, $ 19.8 million, and $ 16.6 million, respectively.

To further mitigate currency remeasurement exposure, the Company’s foreign subsidiaries may utilize short-term local currency financing during certain periods.

6 unchanged sentences

The table below outlines the effects of the Company’s use of derivative financial instruments on the consolidated statements of income:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

(in thousands of dollars) 2021 2020 2021 2020

5 unchanged sentences

Gain on terminated interest rate swaps amortized from accumulated other comprehensive loss into earnings

$ 355 $ 354 $ 708 $ 708

Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings

20 unchanged sentences

For the interest rate swap agreements, the effective portion of the gain or loss on the derivative is recorded in accumulated other comprehensive loss and any ineffective portion is recorded in selling, general and administrative expenses.

For the forward foreign currency exchange contracts designated as cash flow hedges of tobacco purchases in Brazil and Africa and the crop input sales in Brazil, a net hedge gain of approximately $ 7.3 million remained in accumulated other comprehensive loss at June 30, 2021.

That balance reflects gains and losses on contracts related to the 2022, 2021, and 2020 Brazil crops, the 2021 Africa crop, and the 2022 and 2021 Brazil crop input sales, less the amounts reclassified to earnings related to tobacco sold through June 30, 2021.

Based on the hedging strategy, as the gain or loss is recognized in earnings, it is expected

to be offset by a change in the direct cost for the tobacco or by a change in sales prices if the strategy has been mandated by the customer.

For the forward foreign currency exchange contracts designated as cash flow hedges of tobacco purchases in Brazil and Africa and the crop input sales in Brazil, a net hedge gain of approximately $ 0.5 million remained in accumulated other comprehensive loss at September 30, 2021.

That balance reflects gains and losses on contracts related to the 2023, 2022, 2021, and 2020 Brazil crops, the 2021 Africa crop, and the 2022 and 2021 Brazil crop input sales, less the amounts reclassified to earnings related to tobacco sold through September 30, 2021.

Based on the hedging strategy, as the gain or loss is recognized in

earnings, it is expected to be offset by a change in the direct cost for the tobacco or by a change in sales prices if the strategy has been mandated by the customer.

Generally, margins on the sale of the tobacco will not be significantly affected.

Effect of Derivative Financial Instruments on the Consolidated Balance Sheets

The table below outlines the effects of the Company’s derivative financial instruments on the consolidated balance sheets at June 30, 2021 and 2020, and March 31, 2021:

The table below outlines the effects of the Company’s derivative financial instruments on the consolidated balance sheets at September 30, 2021 and 2020, and March 31, 2021:

Derivatives in a Fair Value Asset Position Derivatives in a Fair Value Liability Position

1 unchanged sentence

Location Fair Value as of

(in thousands of dollars) June 30, 2021 June 30, 2020 March 31, 2021 June 30, 2021 June 30, 2020 March 31, 2021

(in thousands of dollars) September 30, 2021 September 30, 2020 March 31, 2021 September 30, 2021 September 30, 2020 March 31, 2021

Derivatives Designated as Hedging Instruments

31 unchanged sentences

Recurring Fair Value Measurements

At June 30, 2021 and 2020, and at March 31, 2021, the Company had certain financial assets and financial liabilities that were required to be measured and reported at fair value on a recurring basis.

At September 30, 2021 and 2020, and at March 31, 2021, the Company had certain financial assets and financial liabilities that were required to be measured and reported at fair value on a recurring basis.

These assets and liabilities are listed in the tables below and are classified based on how their values were determined under the fair value hierarchy or the NAV practical expedient:

June 30, 2021

September 30, 2021

Fair Value Hierarchy

9 unchanged sentences

$ 335 $ 14,557 $ 1,917 $ — $ 16,809

Acquisition-related contingent consideration obligations - short term

$ — $ — $ — $ 2,532 $ 2,532

Interest rate swap agreements

4 unchanged sentences

$ — $ — $ 26,679 $ — $ 26,679

June 30, 2020

September 30, 2020

Fair Value Hierarchy

54 unchanged sentences

During the year ended March 31, 2021, the evaluation resulted in a reduction of $ 4.2 million of contingent consideration of the original $ 6.7 million liability recorded.

During the quarter ended September 30, 2021, an evaluation of the contingent liability resulted in a reduction of the remaining $ 2.5 million contingent consideration recorded.

Significant judgment is applied to this model and therefore the acquisition-related contingent consideration obligation is classified within Level 3 of the fair value hierarchy.

A reconciliation of the change in the balance of the acquisition-related contingent consideration obligation (Level 3) for the three months ended June 30, 2021 and 2020 is provided below.

(in thousands of dollars) Three Months Ended June 30,

A reconciliation of the change in the balance of the acquisition-related contingent consideration obligation (Level 3) for the six months ended September 30, 2021 and 2020 is provided below.

(in thousands of dollars) Six Months Ended September 30,

Balance beginning of year $ 2,532 $ 6,705

2 unchanged sentences

Long-term Debt

The following table summarizes the fair and carrying value of the Company’s long-term debt, including the current portion at each of the balance sheet dates June 30, 2021, and 2020 and March 31, 2021:

(in millions of dollars) June 30, 2021 June 30, 2020 March 31, 2021

The following table summarizes the fair and carrying value of the Company’s long-term debt, including the current portion at each of the balance sheet dates September 30, 2021, and 2020 and March 31, 2021:

(in millions of dollars) September 30, 2021 September 30, 2020 March 31, 2021

Fair market value of long term obligations $ 518 $ 370 $ 517

10 unchanged sentences

The Company reviews long-lived assets for impairment whenever events, changes in business conditions, or other circumstances provide an indication that such assets may be impaired.

As a result of the wind-down of the CIFI operation, impairments of $ 0.5 million and $ 16.1 million of the related long-lived assets were recorded in the three months ended June 30, 2021 and in fiscal year 2021, respectively.

The long-lived assets primarily consist of buildings, processing equipment, and other manufacturing related assets.

The aggregate fair value and carrying value of those assets following the impairment adjustments was approximately $ 5 million at June 30, 2021.

The fair values of the property, plant and equipment were principally determined using a market-based approach with consideration of the assets fair values to potential third-parties.

Significant judgment was required in estimating the amount and timing of the future cash flows associated with the disposition of the assets.

As a result of the wind-down of the CIFI operation, the Company recognized restructuring and impairment charges in the first quarter of fiscal year 2022 and during fiscal year 2021.

At September 30, 2021 assets for the idled CIFI operation consisted of land and buildings.

The aggregate fair value and carrying value of those assets was approximately $ 4 million at September 30, 2021.

Due to business changes that affected the leaf tobacco market in Tanzania and the Company's operations there, an impairment charge of the long-lived assets in Tanzania was recorded in fiscal year 2019 to reduce their carrying value to fair value at March 31, 2019.

The long-lived assets consist principally of the Company's processing facility and equipment, storage

facilities, tobacco buying and receiving stations, employee housing, and vehicles and transportation equipment.

The long-lived assets consist principally of the Company's processing facility and equipment, storage facilities, tobacco buying and receiving stations, employee housing, and vehicles and transportation equipment.

The aggregate fair value and carrying value of those assets following the impairment adjustments was approximately $ 17 million.

The fair values of the property, plant and equipment were determined based principally on a probability-weighting of the discounted cash flows expected under multiple operating and disposition scenarios.

The fair values of the property, plant and equipment were determined based principally on a probability-weighting of the discounted cash

flows expected under multiple operating and disposition scenarios.

Significant judgment was required in estimating the amount and timing of the future cash flows associated with the use and disposition of the assets, as well as the probabilities associated with the respective operating and disposition scenarios.

7 unchanged sentences

Pension Benefits Other Postretirement Benefits

Three Months Ended June 30, Three Months Ended June 30,

Three Months Ended September 30, Three Months Ended September 30,

(in thousands of dollars) 2021 2020 2021 2020

5 unchanged sentences

$ 1,496 $ 1,447 $ 150 $ 169

During the three months ended June 30, 2021, the Company made contributions of approximately $ 2.5 million to its pension plans.

Additional contributions of $ 3.7 million are expected during the remaining nine months of fiscal year 2022.

Pension Benefits Other Postretirement Benefits

Six Months Ended September 30, Six Months Ended September 30,

(in thousands of dollars) 2021 2020 2021 2020

Service cost $ 3,303 $ 3,088 $ 94 $ 97

Interest cost 4,513 4,913 480 573

Expected return on plan assets ( 6,772 ) ( 7,356 ) ( 44 ) ( 48 )

Net amortization and deferral 1,952 2,241 ( 231 ) ( 285 )

Net periodic benefit cost

$ 2,996 $ 2,886 $ 299 $ 337

During the six months ended September 30, 2021, the Company made contributions of approximately $ 4.3 million to its pension plans.

Additional contributions of $ 1.9 million are expected during the remaining six months of fiscal year 2022.

STOCK-BASED COMPENSATION

4 unchanged sentences

Awards of restricted stock, RSUs, and PSUs are currently outstanding under the Plan.

The RSUs granted to employees vest either three or five years from the grant date and are then paid out in shares of common stock.

The RSUs granted to employees vest in either three or five years from the grant date and are then paid out in shares of common stock.

Under the terms of the RSU awards, grantees receive dividend equivalents in the form of additional RSUs that vest and are paid out on the same date as the original RSU grant.

The PSUs vest at the end of a performance period of three years that begins with the year of the grant, are paid out in shares of common stock shortly after the vesting date, and do not carry rights to dividends or dividend equivalents prior to vesting.

Shares ultimately paid out under PSU grants are dependent on the achievement of predetermined performance measures established by the Compensation Committee and can range from zero to 150 % of the stated award.

Shares ultimately paid out under PSU grants are dependent on the

achievement of predetermined performance measures established by the Compensation Committee and can range from zero to 150 % of the stated award.

The Company’s outside directors receive RSUs following the annual meeting of shareholders.

1 unchanged sentence

Restricted shares vest upon the individual’s retirement from service as a director.

During the three-month periods ended June 30, 2021 and 2020, Universal issued the following stock-based awards, representing the regular annual grants to officers and outside directors of the Company:

Three Months Ended June 30,

During the six-month periods ended September 30, 2021 and 2020, Universal issued the following stock-based awards, representing the regular annual grants to officers and outside directors of the Company:

Six Months Ended September 30,

(in thousands, except share fair value) 2021 2020

9 unchanged sentences

The Company accounts for forfeitures of stock-based awards as they occur.

For the three-month periods ended June 30, 2021 and 2020, the Company recorded total stock-based compensation expense of approximately $ 3.0 million and $ 2.6 million, respectively.

The Company expects to recognize stock-based compensation expense of approximately $ 3.1 million during the remaining nine months of fiscal year 2022.

For the six-month periods ended September 30, 2021 and 2020, the Company recorded total stock-based compensation expense of approximately $ 4.1 million and $ 3.7 million, respectively.

The Company expects to recognize stock-based compensation expense of approximately $ 2.0 million during the remaining six months of fiscal year 2022.

OPERATING SEGMENTS

11 unchanged sentences

Customers for the Ingredients Operations segment include large multinational food and beverage companies, as well as smaller independent entities.

FruitSmart, Silva, and CIFI are the primary operations for the Ingredients Operations segment.

FruitSmart and Silva are the primary operations for the Ingredients Operations segment.

FruitSmart manufactures fruit and vegetable juices, purees, concentrates, essences, fibers, seeds, seed oils, and seed powders.

Silva is primarily a dehydrated product manufacturer of fruit and vegetable based flakes, dices, granules, powders, and blends.

In fiscal year 2021, the Company announced the wind-down of CIFI, a greenfield operation that primarily manufactured both dehydrated and liquid sweet potato products.

In fiscal year 2021, the Company

announced the wind-down of CIFI, a greenfield operation that primarily manufactured both dehydrated and liquid sweet potato products.

The Company currently evaluates the performance of its segments based on operating income after allocated overhead expenses, plus equity in the pretax earnings of unconsolidated affiliates.

Operating results for the Company’s reportable segments

for each period presented in the consolidated statements of income and comprehensive income were as follows, including a recast of the new reportable operating segments presentation for all periods presented below:

Three Months Ended June 30,

Operating results for the Company’s reportable segments for each period presented in the consolidated statements of income and comprehensive income were as follows, including a recast of the new reportable operating segments presentation for all periods presented below:

Three Months Ended September 30, Six Months Ended September 30,

(in thousands of dollars) 2021 2020 2021 2020

8 unchanged sentences

Equity in pretax (earnings) loss of unconsolidated affiliates (1)

( 2,363 ) ( 590 ) ( 2,972 ) ( 583 )

Restructuring and impairment costs (2)

— — ( 2,024 ) —

Other income (loss) (3)

2,532 — 2,532 4,173

Consolidated operating income $ 29,813 $ 16,351 $ 40,418 $ 24,879

5 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) attributable to the Company for the three months ended June 30, 2021 and 2020:

Three Months Ended June 30,

Six Months Ended September 30,

(in thousands of dollars) 2021 2020

10 unchanged sentences

Net gain (loss) on derivative instruments (net of tax (expense) benefit of $( 512 ) and $ 275 )

5,698 ( 601 )

Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $ 271 and $( 1,501 )) (1)

( 718 ) 5,399

Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes ( 180 ) 5,970

22 unchanged sentences

CHANGES IN SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS IN SUBSIDIARIES

A reconciliation of the changes in Universal Corporation shareholders’ equity and noncontrolling interests in subsidiaries for the three months ended June 30, 2021 and 2020 is as follows:

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

A reconciliation of the changes in Universal Corporation shareholders’ equity and noncontrolling interests in subsidiaries for the three and six months ended September 30, 2021 and 2020 is as follows:

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020

(in thousands of dollars) Universal Corporation Non-controlling Interests Total Universal Corporation Non-controlling Interests Total

Balance at beginning of three-month period $ 1,303,825 $ 37,730 $ 1,341,555 $ 1,236,244 $ 42,089 $ 1,278,333

Changes in common stock

Accrual of stock-based compensation 1,119 — 1,119 1,075 — 1,075

Withholding of shares from stock-based compensation for grantee income taxes

( 26 ) — ( 26 ) ( 19 ) — ( 19 )

Dividend equivalents on RSUs 272 — 272 256 — 256

Changes in retained earnings

Net income 19,510 2,245 21,755 7,502 747 8,249

Cash dividends declared

( 19,195 ) — ( 19,195 ) ( 18,877 ) — ( 18,877 )

Dividend equivalents on RSUs ( 272 ) — ( 272 ) ( 257 ) — ( 257 )

Other comprehensive income (loss) ( 7,901 ) ( 185 ) ( 8,086 ) 13,576 235 13,811

Other changes in noncontrolling interests

Dividends paid to noncontrolling shareholders

— ( 3,696 ) ( 3,696 ) — ( 3,695 ) ( 3,695 )

Balance at end of period $ 1,297,332 $ 36,094 $ 1,333,426 $ 1,239,500 $ 39,376 $ 1,278,876

Six Months Ended September 30, 2021 Six Months Ended September 30, 2020

(in thousands of dollars) Universal Corporation Non-controlling Interests Total Universal Corporation Non-controlling Interests Total

Balance at beginning of year $ 1,307,299 $ 41,126 $ 1,348,425 $ 1,246,665 $ 42,619 $ 1,289,284

14 unchanged sentences

Balance at end of period $ 1,297,332 $ 36,094 $ 1,333,426 $ 1,239,500 $ 39,376 $ 1,278,876

SUBSEQUENT EVENTS

On October 4, 2021 the Company acquired 100 % of the capital stock of Shank's Extracts, Inc.

("Shank's"), a privately-held, specialty ingredient, flavoring, and food company with bottling and packaging capabilities, for approximately $ 100 million in cash.

The Company utilized cash-on-hand and revolving credit facility borrowings to fund the acquisition.

Subsequent to the acquisition of Shank's operations, the Company agreed to acquire the real property assets related to the Shank's business for approximately $ 13 million in cash, which is expected to close in the third quarter of fiscal year 2022.

Following the acquisition, Shank's became a wholly-owned direct subsidiary of the Company.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements