What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-02 · 151 added, 97 removed, 617 unchanged (29% 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,

2023 2022 2023 2022

(Unaudited) (Unaudited)

Sales and other operating revenues $ 638,484 $ 650,984 $ 1,156,206 $ 1,080,806

2 unchanged sentences

Selling, general and administrative expenses 73,806 72,373 149,283 138,825

Restructuring and impairment costs 2,599 — 2,599 —

Operating income 55,312 37,886 66,347 51,152

3 unchanged sentences

Interest expense 17,053 12,270 32,596 18,994

Income (loss) before income taxes and other items ( 6,584 ) 6,164

Income before income taxes and other items 39,227 26,048 32,643 32,212

Income taxes 8,439 6,642 7,016 10,005

Net income (loss) ( 5,161 ) 2,801

Net income 30,788 19,406 25,627 22,207

net loss (income) attributable to noncontrolling interests in subsidiaries ( 2,660 ) 2,449 437 6,478

Net income (loss) attributable to Universal Corporation $ ( 2,064 ) $ 6,830

Earnings (loss) per share:

Net income attributable to Universal Corporation $ 28,128 $ 21,855 $ 26,064 $ 28,685

Earnings per share:

$ 1.13 $ 0.88 $ 1.05 $ 1.16

11 unchanged sentences

(in thousands of dollars)

June 30, June 30, March 31,

September 30, September 30, March 31,

2023 2022 2023

31 unchanged sentences

(in thousands of dollars)

June 30, June 30, March 31,

September 30, September 30, March 31,

2023 2022 2023

22 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 24,636,600 shares issued and outstanding at June 30, 2023 ( 24,605,889 at June 30, 2022 and 24,555,361 at March 31, 2023)

Common stock, no par value, 100,000,000 shares authorized 24,558,493 shares issued and outstanding at September 30, 2023 ( 24,555,361 at September 30, 2022 and 24,555,361 at March 31, 2023)

339,241 333,540 337,247

9 unchanged sentences

(in thousands of dollars)

Three Months Ended June 30,

Six Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $ ( 5,161 ) $ 2,801

Net income $ 25,627 $ 22,207

Adjustments to reconcile net income (loss) to net cash used by operating activities:

7 unchanged sentences

Equity in net loss (income) of unconsolidated affiliates, net of dividends 3,135 ( 18 )

Restructuring and impairment costs 2,599 —

Restructuring payments ( 806 ) —

Other, net 1,012 1,913

7 unchanged sentences

Customer advances and deposits 163,663 1,329

Net cash used by operating activities ( 103,891 ) ( 225,771 )

Net cash provided (used) by operating activities 10,534 ( 346,248 )

CASH FLOWS FROM INVESTING ACTIVITIES:

6 unchanged sentences

Dividends paid to noncontrolling interests ( 5,845 ) ( 6,825 )

Repurchase of common stock ( 4,744 ) ( 3,448 )

Dividends paid on common stock ( 39,108 ) ( 38,594 )

18 unchanged sentences

This Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023 (the “2023 Annual Report on Form 10-K”) .

RESTRUCTURING AND IMPAIRMENT COSTS

Universal continually reviews its business for opportunities to realize efficiencies, reduce costs, and realign its operations in response to business changes.

Restructuring and impairment costs are periodically incurred in connection with those activities.

There were no restructuring and impairment costs incurred for the three and six months ended September 30, 2022.

Tobacco Operations

During the three months ended September 30, 2023, the Company began restructuring operations at our Global Labs Services ("GLS") facility in Wilson, NC.

GLS provides testing for crop protection agents and tobacco constituents in seed, leaf, and finished products, including e-cigarette liquids and vapors, and has capabilities for testing non-tobacco products.

As a result of the restructuring of the GLS operations, the Company incurred $ 1.8 million of restructuring and impairment costs for the three and six months ended September 30, 2023.

During the three months ended September 30, 2023, the Company also incurred $ 0.8 million of termination costs in other areas of the Tobacco Operations segment.

REVENUE FROM CONTRACTS WITH CUSTOMERS

34 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) 2023 2022 2023 2022

10 unchanged sentences

Other Contingent Liabilities (Letters of credit)

The Company had other contingent liabilities totaling approximately $ 1 million at June 30, 2023, primarily related to outstanding letters of credit.

The Company had other contingent liabilities totaling approximately $ 1 million at September 30, 2023, primarily related to outstanding letters of credit.

Value-Added Tax Assessments in Brazil

As further discussed below, the Company’s local operating subsidiaries pay significant amounts of value-added tax (“VAT”) in connection with their operations, which generate tax credits that they normally are entitled to recover through offset, refund, or sale to third parties.

refund, or sale to third parties.

In Brazil, VAT is assessed at the state level when green tobacco is transferred between states.

3 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 $ 11 million.

Those amounts are based on the exchange rate for the Brazilian currency at June 30, 2023.

Those amounts are based on the exchange rate for the Brazilian currency at September 30, 2023.

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, 2023, 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 $ 10 million (at the June 30, 2023 exchange rate).

As of September 30, 2023, 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 $ 10 million (at the September 30, 2023 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 $ 10 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, 2023.

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, 2023 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 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 June 30, 2023.

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, 2023.

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 $ 138 million at June 30, 2023, $ 120 million at June 30, 2022, and $ 199 million at March 31, 2023.

The related valuation allowances totaled $ 26 million at June 30, 2023, $ 17 million at June 30, 2022, and $ 24 million at March 31, 2023, and were estimated based on the Company’s historical loss information and crop projections.

The allowances were increased by net provisions of approximately $ 1.4 million in the three-month periods ended June 30, 2023 and decreased by net recoveries of $ 42 thousand in the three-month periods ended June 30, 2022.

Short-term and long-term advances to suppliers totaled $ 127 million at September 30, 2023, $ 122 million at September 30, 2022, and $ 199 million at March 31, 2023.

The related valuation allowances totaled $ 20 million at September 30, 2023, $ 14 million at September 30, 2022, and $ 24 million at March 31, 2023, and were estimated based on the Company’s historical loss information and crop projections.

The allowances were increased by net provisions of approximately $ 3.8 million in the six-month period ended September 30,

2023 and decreased by net recoveries of $ 1.0 million in the six-month period ended September 30, 2022.

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

10 unchanged sentences

Some jurisdictions have procedures that allow companies to apply for refunds of unused VAT credits from the tax authorities, but the refund process often takes an extended period of time and it is not uncommon for refund applications to be challenged or rejected in part on technical grounds.

authorities, limits on the amounts that can be transferred may be imposed, and the proceeds realized may be heavily discounted from the face value of the credits.

Other jurisdictions may permit companies to sell or transfer unused VAT credits to third parties in private transactions, although approval for such transactions must normally be obtained from the tax authorities, limits on the amounts that can be transferred may be imposed, and the proceeds realized may be heavily discounted from the face value of the credits.

Due to these factors, local operating subsidiaries in some countries can accumulate significant balances of VAT credits over time.

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, 2023, the aggregate balance of recoverable tax credits held by the Company’s subsidiaries totaled approximately $ 76 million ($ 77 million at June 30, 2022, and $ 64 million at March 31, 2023), and the related valuation allowances totaled approximately $ 22 million ($ 22 million at June 30, 2022, and $ 22 million at March 31, 2023).

At September 30, 2023, the aggregate balance of recoverable tax credits held by the Company’s subsidiaries totaled approximately $ 61 million ($ 70 million at September 30, 2022, and $ 64 million at March 31, 2023), and the related valuation allowances totaled approximately $ 21 million ($ 24 million at September 30, 2022, and $ 22 million at March 31, 2023).

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

4 unchanged sentences

This stock repurchase plan authorized the purchase of up to $ 100 million in common and/or preferred stock in open market or privately negotiated transactions through November 15, 2024 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, 2023.

The program had $ 95 million of remaining capacity for repurchases of common and/or preferred stock at September 30, 2023.

Sale of Idled Tanzania Operations

During the three months ended June 30, 2022, the Company entered into a sales agreement to sell all outstanding shares of common stock, which included all properties, of the idled companies in Tanzania for $ 8.5 million.

The Company had received $ 5.7 million of the $ 8.5 million sales agreement as of June 30, 2023.

The remaining $ 2.8 million outstanding proceeds were received in July 2023.

During the six months ended June 30, 2022, the Company entered into a sales agreement to sell all outstanding shares of common stock, which included all properties, of the idled companies in Tanzania for $ 8.5 million, which had been paid in full as of September 30, 2023.

Restricted Cash Release of Deferred Proceeds from Acquisition of Silva International, Inc.

5 unchanged sentences

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) 2023 2022 2023 2022

Basic Earnings (Loss) Per Share

Numerator for basic earnings (loss) per share

Net income (loss) attributable to Universal Corporation $ ( 2,064 ) $ 6,830

Denominator for basic earnings (loss) per share

Basic Earnings Per Share

Numerator for basic earnings per share

Net income attributable to Universal Corporation $ 28,128 $ 21,855 $ 26,064 $ 28,685

Denominator for basic earnings per share

Weighted average shares outstanding 24,869,697 24,779,237 24,855,974 24,774,126

Basic earnings (loss) per share $ ( 0.08 ) $ 0.28

Diluted Earnings (Loss) Per Share

Numerator for diluted earnings (loss) per share

Net income (loss) attributable to Universal Corporation $ ( 2,064 ) $ 6,830

Denominator for diluted earnings (loss) per share:

Basic earnings per share $ 1.13 $ 0.88 $ 1.05 $ 1.16

Diluted Earnings Per Share

Numerator for diluted earnings per share

Net income attributable to Universal Corporation $ 28,128 $ 21,855 $ 26,064 $ 28,685

Denominator for diluted earnings per share:

Weighted average shares outstanding 24,869,697 24,779,237 24,855,974 24,774,126

2 unchanged sentences

Denominator for diluted earnings per share 25,015,369 24,939,427 24,997,899 24,937,491

Diluted earnings (loss) per share $ ( 0.08 ) $ 0.27

Diluted earnings per share $ 1.12 $ 0.88 $ 1.04 $ 1.15

The Company operates in the United States and many foreign countries and is subject to the tax laws of many jurisdictions.

1 unchanged sentence

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

Three months ended June 30, 2023

The Company's consolidated effective income tax rate for the three months ended June 30, 2023 was a benefit of 21.6 %.

Three months ended June 30, 2022

The Company's consolidated effective income tax rate for the three months ended June 30, 2022 was 54.6 %.

In the three months ended June 30, 2022, the Company sold its idled Tanzania operations and recognized $1.1 million of income taxes.

Without this item, the consolidated effective income tax rate for the three months ended June 30, 2022 would have been approximately 36.2%.

Additionally, the sale of the Company's idled Tanzania operations resulted in a $ 1.8 million reduction to consolidated interest expense related to the removal of an uncertain tax position.

Three and six months ended September 30, 2023

The Company's consolidated effective income tax rate for both the three and six months ended September 30, 2023 was 21.5 %.

Three and six months ended September 30, 2022

The Company's consolidated effective income tax rate for the three and six months ended September 30, 2022 was 25.5 % and 31.1 %, respectively.

In the six months ended September 30, 2022, the Company sold its idled Tanzania operations and recognized $ 1.1 million of income taxes.

Without this item, the consolidated effective income tax rate for the six months ended September 30, 2022 would have been approximately 27.5 %.

Additionally, the sale of the Company's idled Tanzania operations resulted in a $ 1.8 million reduction to consolidated interest expense related to the removal of an uncertain tax position for the six months ended September 30, 2022.

GOODWILL AND OTHER INTANGIBLES

The Company's changes in goodwill at June 30, 2023 and 2022 consisted of the following:

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

The Company's changes in goodwill at September 30, 2023 and 2022 consisted of the following:

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

Balance at beginning of fiscal year $ 213,922 $ 213,998

3 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, 2023 and 2022 and at March 31, 2023:

(in thousands, except useful life) June 30, 2023

The Company's intangible assets subject to amortization consisted of the following at September 30, 2023 and 2022 and at March 31, 2023:

(in thousands, except useful life) September 30, 2023

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

5 unchanged sentences

Total intangible assets $ 111,608 $ ( 37,133 ) $ 74,475

June 30, 2022

September 30, 2022

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

14 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, 2023 and 2022 was:

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

The Company's amortization expense for intangible assets for the six months ended September 30, 2023 and 2022 was:

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

2022 2023 2022

Amortization Expense $ 2,786 $ 3,172 $ 5,613 $ 6,345

1 unchanged sentence

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

As of June 30, 2023, the expected future amortization expense for intangible assets is as follows:

As of September 30, 2023, the expected future amortization expense for intangible assets is as follows:

Fiscal Year (in thousands of dollars)

2024 (excluding the three months ended June 30, 2023)

2024 (excluding the six months ended September 30, 2023)

2028 and thereafter 40,480

10 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, 2023, the total notional amount of the interest rate swaps was $ 310 million, which corresponded to a portion of the aggregate outstanding balance of the term loans.

At September 30, 2023, the total notional amount of the interest rate swaps was $ 310 million, which corresponded to a portion of the aggregate outstanding balance of the term loans.

Previously, the Company had receive-floating/pay-fixed interest rate swap agreements that were designated and qualified as cash flow hedges for two non-amortizing bank loans that were repaid concurrent with closing on the new bank credit facility in December 2022.

16 unchanged sentences

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 2024 and 2023 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 2024 and 2023 was as follows:

Six Months Ended September 30,

(in millions of dollars) 2023 2022

1 unchanged sentence

Processing costs 4.9 5.4

Crop input sales — —

$ 35.2 $ 35.8

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.

All contracts related to tobacco purchases and crop input sales were designated and qualified as hedges of the future cash flows associated with the forecast purchases of tobacco.

All contracts related to tobacco purchases and crop input sales were initially designated and qualified as hedges of the future cash flows associated with the forecast purchases of tobacco.

As a result, changes in fair values of the forward contracts have been recognized in comprehensive income as they occurred, but only recognized in earnings as a component of cost of goods sold upon sale of the related tobacco to third-party customers.

The table below presents the expected timing of when the remaining accumulated other comprehensive gains and losses as of June 30, 2023 for cash flows hedges of tobacco purchases and crop input sales are expected to be recognized in earnings.

The Company de-designates ineffective tobacco purchases and crop input sales hedges to selling, general, and administrative expense when the forecasted tobacco purchases or crop input sales are no longer expected to occur.

The table below presents the expected timing of when the remaining accumulated other comprehensive gains and losses as of September 30, 2023 for cash flows hedges of tobacco purchases and crop input sales are expected to be recognized in earnings.

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

18 unchanged sentences

To manage a portion of its exposure to currency remeasurement gains and losses, the Company enters into forward contracts to buy or sell the local currency at future dates coinciding with expected changes in the overall net local currency monetary asset position of the subsidiary.

Gains and losses on the forward contracts are recorded in earnings as a component of selling, general, and administrative expenses for each reporting period as they occur, and thus directly offset the related remeasurement losses or gains in the consolidated statements of income for the notional amount hedged.

The Company does not

designate these contracts as hedges for accounting purposes.

Gains and losses on the forward contracts are recorded in earnings as a component of

selling, general, and administrative expenses for each reporting period as they occur, and thus directly offset the related remeasurement losses or gains in the consolidated statements of income for the notional amount hedged.

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 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, 2023 and 2022, and March 31, 2023, were approximately $ 83.0 million, $ 110.1 million, and $ 42.8 million, respectively.

The total notional amounts of contracts outstanding at September 30, 2023 and 2022, and March 31, 2023, were approximately $ 101.1 million, $ 112.3 million, and $ 42.8 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) 2023 2022 2023 2022

5 unchanged sentences

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

$ 1,569 $ — $ 3,139 $ —

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

8 unchanged sentences

Gain (loss) reclassified from accumulated other comprehensive loss into earnings

$ 3,334 $ 2,084 $ 4,140 $ 3,041

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

9 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, as well as the crop input sales in Brazil, a net hedge gain of approximately $ 6.3 million remained in accumulated other comprehensive loss at June 30, 2023.

That balance reflects gains and losses on contracts related to the 2023 and 2022 Brazil crops, and the 2024 and 2023 Brazil crop input sales, less the amounts reclassified to earnings related to tobacco sold through June 30, 2023.

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 and the crop input sales in Brazil, a net hedge gain of approximately $ 3.7 million remained in accumulated other comprehensive loss at September 30, 2023.

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, 2023 and 2022, and March 31, 2023:

The table below outlines the effects of the Company’s derivative financial instruments on the consolidated balance sheets at September 30, 2023 and 2022, and March 31, 2023:

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, 2023 June 30, 2022 March 31, 2023 June 30, 2023 June 30, 2022 March 31, 2023

(in thousands of dollars) September 30, 2023 September 30, 2022 March 31, 2023 September 30, 2023 September 30, 2022 March 31, 2023

Derivatives Designated as Hedging Instruments

31 unchanged sentences

Recurring Fair Value Measurements

At June 30, 2023 and 2022, and at March 31, 2023, 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, 2023 and 2022, and at March 31, 2023, 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, 2023

September 30, 2023

Fair Value Hierarchy

14 unchanged sentences

$ — $ — $ 14 $ — $ 14

June 30, 2022

September 30, 2022

Fair Value Hierarchy

45 unchanged sentences

Long-term Debt

The following table summarizes the fair and carrying value of the Company’s long-term debt, and if applicable any current portion, at each of the balance sheet dates June 30, 2023, and 2022 and March 31, 2023:

(in millions of dollars) June 30, 2023 June 30, 2022 March 31, 2023

The following table summarizes the fair and carrying value of the Company’s long-term debt, and if applicable any current portion, at each of the balance sheet dates September 30, 2023, and 2022 and March 31, 2023:

(in millions of dollars) September 30, 2023 September 30, 2022 March 31, 2023

Fair market value of long term obligations $ 615 $ 517 $ 621

18 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) 2023 2022 2023 2022

5 unchanged sentences

$ 499 $ 1,531 $ 83 $ 81

During the three months ended June 30, 2023, the Company made contributions of approximately $ 0.3 million to its pension plans.

Additional contributions of $ 3.6 million are expected during the remaining nine months of fiscal year 2024.

Pension Benefits Other Postretirement Benefits

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

(in thousands of dollars) 2023 2022 2023 2022

Service cost $ 2,568 $ 3,048 $ 49 $ 64

Interest cost 5,799 4,686 530 476

Expected return on plan assets ( 7,776 ) ( 6,648 ) ( 32 ) ( 38 )

Net amortization and deferral 406 2,002 ( 380 ) ( 339 )

Net periodic benefit cost

$ 997 $ 3,088 $ 167 $ 163

During the six months ended September 30, 2023, the Company made contributions of approximately $ 0.7 million to its pension plans.

Additional contributions of $ 3.2 million are expected during the remaining six months of fiscal year 2024.

STOCK-BASED COMPENSATION

12 unchanged sentences

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

During the three-month periods ended June 30, 2023 and 2022, the Company 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, 2023 and 2022, the Company issued the following stock-based awards, representing the regular annual grants to officers and outside directors of the Company:

Six Months Ended September 30,

Number granted 93,300 79,405

8 unchanged sentences

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

For the three-month periods ended June 30, 2023 and 2022, the Company recorded total stock-based compensation expense of approximately $ 3.9 million and $ 3.7 million, respectively.

The Company expects to recognize stock-based compensation expense of approximately $ 3.7 million during the remaining nine months of fiscal year 2024.

For the six-month periods ended September 30, 2023 and 2022, the Company recorded total stock-based compensation expense of approximately $ 5.7 million and $ 5.3 million, respectively.

The Company expects to recognize stock-based compensation expense of approximately $ 2.9 million during the remaining six months of fiscal year 2024.

OPERATING SEGMENTS

2 unchanged sentences

Through various operating subsidiaries located in tobacco-growing countries around the world and significant ownership interests in unconsolidated affiliates, the Company processes and/or sells flue-cured and burley tobaccos, dark air-cured tobaccos, and oriental tobaccos.

Flue-cured, burley, and oriental tobaccos are used principally in the manufacture of cigarettes, and dark air-cured tobaccos are used mainly in the manufacture of cigars, pipe tobacco, and smokeless tobacco products.

Flue-cured, burley, and oriental tobaccos are used principally in the manufacture of cigarettes, and dark air-

cured tobaccos are used mainly in the manufacture of cigars, pipe tobacco, and smokeless tobacco products.

Some of these tobacco types are also increasingly used in the manufacture of non-combustible tobacco products that are intended to provide consumers with an alternative to traditional combustible products.

5 unchanged sentences

FruitSmart, Silva, and Shank's 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.

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.

2 unchanged sentences

Operating results for the Company’s reportable segments for each period presented in the consolidated statements of income and comprehensive income were as follows.

Three Months Ended June 30,

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

(in thousands of dollars) 2023 2022 2023 2022

3 unchanged sentences

Consolidated sales and other operating revenues $ 638,484 $ 650,984 $ 1,156,206 $ 1,080,806

OPERATING INCOME (LOSS)

OPERATING INCOME

Tobacco Operations $ 52,387 $ 33,790 $ 61,270 $ 41,906

2 unchanged sentences

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

713 ( 416 ) 4,879 137

Restructuring and impairment costs (2)

( 2,599 ) — ( 2,599 ) —

Consolidated operating income $ 55,312 $ 37,886 $ 66,347 $ 51,152

(1) Equity in pretax earnings (loss) of unconsolidated affiliates is included in segment operating income (Tobacco Operations), but is reported below consolidated operating income and excluded from that total in the consolidated statements of income and comprehensive income.

(2) Restructuring and impairment costs are excluded from segment operating income, but are included in consolidated operating income in the consolidated statements of income and comprehensive income.

See Note 2 for additional information .

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, 2023 and 2022:

Three Months Ended June 30,

Six Months Ended September 30,

(in thousands of dollars) 2023 2022

10 unchanged sentences

Net gain (loss) on derivative instruments (net of tax (expense) benefit of $( 53 ) and $( 158 ))

( 812 ) ( 4,146 )

Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $ 908 and $ 600 ) (1)

6 unchanged sentences

Net gain (loss) on derivative instruments (net of tax (expense) benefit of $( 4,769 ) and $( 2,782 ))

13,295 10,467

Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $ 1,522 and $( 393 )) (2)

16 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, 2023 and 2022 is as follows:

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

A reconciliation of the changes in Universal Corporation shareholders’ equity and noncontrolling interests in subsidiaries for the three and six months ended September 30, 2023 and 2022 is as follows:

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022

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

1 unchanged sentence

Changes in common stock

Repurchase of common stock ( 1,373 ) — ( 1,373 ) ( 893 ) — ( 893 )

Accrual of stock-based compensation 1,852 — 1,852 1,622 — 1,622

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

( 2,963 ) — ( 2,963 ) ( 2,090 ) — ( 2,090 )

Dividend equivalents on RSUs 317 — 317 291 — 291

3 unchanged sentences

Common stock ( 19,647 ) — ( 19,647 ) ( 19,398 ) — ( 19,398 )

Repurchase of common stock ( 3,371 ) — ( 3,371 ) ( 2,555 ) — ( 2,555 )

Dividend equivalents on RSUs ( 317 ) — ( 317 ) ( 291 ) — ( 291 )

3 unchanged sentences

— ( 1,681 ) ( 1,681 ) — ( 1,680 ) ( 1,680 )

Balance at end of period $ 1,384,189 $ 33,319 $ 1,417,508 $ 1,324,854 $ 29,879 $ 1,354,733

Six Months Ended September 30, 2023 Six Months Ended September 30, 2022

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

Balance at beginning of year $ 1,397,088 $ 39,864 $ 1,436,952 $ 1,340,543 $ 44,226 $ 1,384,769

Changes in common stock

Repurchase of common stock ( 1,373 ) — ( 1,373 ) ( 893 ) — ( 893 )

Accrual of stock-based compensation 5,711 — 5,711 5,304 — 5,304

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

( 2,963 ) — ( 2,963 ) ( 2,090 ) — ( 2,090 )

Dividend equivalents on RSUs 619 — 619 557 — 557

Changes in retained earnings

Net income 26,064 ( 437 ) 25,627 28,685 ( 6,478 ) 22,207

Cash dividends declared

( 39,357 ) — ( 39,357 ) ( 38,845 ) — ( 38,845 )

Repurchase of common stock ( 3,371 ) — ( 3,371 ) ( 2,555 ) — ( 2,555 )

Dividend equivalents on RSUs ( 619 ) — ( 619 ) ( 557 ) — ( 557 )

Other comprehensive income (loss) 2,390 ( 263 ) 2,127 ( 5,295 ) ( 617 ) ( 5,912 )

Other changes in noncontrolling interests

Dividends paid to noncontrolling shareholders

— ( 5,845 ) ( 5,845 ) — ( 6,825 ) ( 6,825 )

Other — — — — ( 427 ) ( 427 )

1 unchanged sentence

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