What changed in this filing

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Item 1. Financial Statements

2024-02-07 compared with 2023-11-02 · 100 added, 102 removed, 666 unchanged (23% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

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

Three Months Ended December 31, Nine Months Ended December 31,

2023 2022 2023 2022

29 unchanged sentences

(in thousands of dollars)

September 30, September 30, March 31,

December 31, December 31, March 31,

2023 2022 2023

31 unchanged sentences

(in thousands of dollars)

September 30, September 30, March 31,

December 31, December 31, 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 24,558,493 shares issued and outstanding at September 30, 2023 ( 24,555,361 at September 30, 2022 and 24,555,361 at March 31, 2023)

Common stock, no par value, 100,000,000 shares authorized 24,559,181 shares issued and outstanding at December 31, 2023 ( 24,555,361 at December 31, 2022 and 24,555,361 at March 31, 2023)

344,467 335,160 337,247

9 unchanged sentences

(in thousands of dollars)

Six Months Ended September 30,

Nine Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Issuance of short-term debt, net 170,433 166,109

Issuance of long-term debt — 123,481

Repayment of long-term debt — ( 23,481 )

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

1 unchanged sentence

Dividends paid on common stock ( 58,755 ) ( 57,993 )

Proceeds from termination of interest rate swap agreements — 11,786

Other ( 2,973 ) ( 6,337 )

4 unchanged sentences

Cash, restricted cash and cash equivalents at end of period $ 74,102 $ 71,283

Supplemental Information:

Cash and cash equivalents $ 99,683 $ 58,855

Restricted cash (Other noncurrent assets) — 6,000

Total cash, restricted cash and cash equivalents $ 99,683 $ 64,855

See accompanying notes.

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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”).

Accounting Pronouncements to be Adopted in Future Years

In November 2023, the FASB issued Accounting Standards Update No.

2023-07, "Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures" ("ASU 2023-07").

ASU 2023-07 requires additional disclosures about profitability measures utilized by the chief operating decision maker and significant segment expenses.

ASU 2023-07 also requires all annual disclosures regarding profit or loss and assets to be included in interim disclosures.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and for interim periods in fiscal years beginning after December 15, 2024, although early adoption is permitted.

The Company is currently evaluating the impact of adopting this standard on its operating segments disclosures.

RESTRUCTURING AND IMPAIRMENT COSTS

1 unchanged sentence

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.

There were no restructuring and impairment costs incurred for the three and nine months ended December 31, 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.

During the nine months ended December 31, 2023, the Company began restructuring operations at its 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.

As a result of the restructuring of the GLS operations, the Company incurred $ 1.8 million of restructuring and impairment costs for the nine months ended December 31, 2023.

During the nine months ended December 31, 2023, the Company also incurred $ 1.7 million of termination and impairment costs in other areas of the Tobacco Operations segment.

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.

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

Additionally, the Company has fruit and vegetable processing operations, as well as flavor and extract services that provide customers with a range of ingredient products.

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

6 unchanged sentences

On a much smaller basis, the Company also sources processed tobacco from third-party suppliers for resale to customers.

The contracts for tobacco sales with customers create a performance obligation to transfer tobacco to the customer.

The contracts

for tobacco sales with customers create a performance obligation to transfer tobacco to the customer.

Transaction prices for the sale of tobaccos are primarily based on negotiated fixed prices, but the Company does have a small number of cost-plus contracts with certain customers.

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At the point in time that the customer obtains control over the tobacco, which is typically aligned with physical shipment under the contractual terms with the customer, the Company completes its performance obligation and recognizes the revenue for the sale.

Ingredient Sales

Ingredients Sales

The Company has diversified operations through the acquisition of established companies that offer customers a wide range of both liquid and dehydrated fruit and vegetable ingredient products, flavors, and extracts.

These operations procure raw materials from domestic and international growers and suppliers and through a variety of processing steps including sorting, cleaning, pressing, mixing, extracting, and blending to manufacture finished goods utilized in both human and pet food.

The contracts for food ingredients with customers create a performance obligation to transfer the manufactured finished goods to the customer.

Transaction prices for the sale of food ingredients are primarily based on negotiated fixed prices.

The contracts for ingredients with customers create a performance obligation to transfer the manufactured finished goods to the customer.

Transaction prices for the sale of ingredients are primarily based on negotiated fixed prices.

At the point in time that the customer obtains control over the finished product, which is typically aligned with physical shipment under the contractual terms with the customer, the Company completes its performance obligation and recognizes the revenue for the sale.

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The revenue for these services is recognized when the performance obligation is satisfied, which is generally when processing is completed.

The Company’s operating history and contract analyses indicate that customer requirements for processed tobacco and food ingredients products are consistently met upon completion of processing.

The Company’s operating history and contract analyses indicate that customer requirements for processed tobacco and ingredients products are consistently met upon completion of processing.

Other Sales and Revenue from Contracts with Customers

From time to time, the Company enters into various arrangements with customers to provide other value-added services that may include blending, chemical and physical testing of products, storage, and tobacco cutting services for select manufacturers.

These other arrangements and operations are a much smaller portion of the Company’s business, and are separate and distinct contractual agreements from the Company’s tobacco and food ingredients sales or third-party processing arrangements with customers.

These other arrangements and operations are a much smaller portion of the Company’s business, and are separate and distinct contractual agreements from the Company’s tobacco and ingredients sales or third-party processing arrangements with customers.

The transaction prices and timing of revenue recognition of these items are determined by the specifics of each contract.

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

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

Three Months Ended December 31, Nine Months Ended December 31,

(in thousands of dollars) 2023 2022 2023 2022

Tobacco sales $ 694,215 $ 672,002 $ 1,635,105 $ 1,536,898

Ingredient sales 78,397 76,059 149,055 153,605

Ingredients sales 72,254 65,824 221,309 219,429

Processing revenue 20,448 21,266 58,342 54,796

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Other Contingent Liabilities (Letters of credit)

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

The Company had other contingent liabilities totaling approximately $ 1 million at December 31, 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.

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

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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 September 30, 2023.

Those amounts are based on the exchange rate for the Brazilian currency at December 31, 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 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).

As of December 31, 2023, a portion of the subsidiary’s arguments had been accepted, but there has not been any further resolution for the matter.

The assessment, together with the related accumulated interest through the end of the current reporting period, totaled approximately $ 11 million (at the December 31, 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 September 30, 2023.

While the range of reasonably possible loss is zero up to the full $ 11 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 December 31, 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 September 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 September 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 December 31, 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.

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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 $ 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.

Short-term and long-term advances to suppliers totaled $ 186 million at December 31, 2023 and 2022, and $ 199 million at March 31, 2023.

The related valuation allowances totaled $ 25 million at December 31, 2023, $ 21 million at December 31, 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 $ 10.0 million and $ 6.1 million in the nine-month periods ended December 31, 2023 and 2022, respectively.

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

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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 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).

At December 31, 2023, the aggregate balance of recoverable tax credits held by the Company’s subsidiaries totaled approximately $ 63 million ($ 66 million at December 31, 2022, and $ 64 million at March 31, 2023), and the related valuation allowances totaled approximately $ 21 million ($ 24 million at December 31, 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.

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

The program had $ 95 million of remaining capacity for repurchases of common stock at December 31, 2023.

Sale of Idled Tanzania Operations

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.

During the nine months ended December 31, 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.

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

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Therefore, under ASC Topic 805, "Business Combinations," the amounts held in escrow were treated as a contingent consideration arrangement and expensed as compensation expense in selling, general, and administrative expense on the consolidated statements of income.

As of December 31, 2022, all amounts have been released to the selling shareholder, who remains employed by the Company, and expensed in the Company's consolidated statements of income.

As of December 31, 2022, all amounts had been released to the selling shareholder, who remains employed by the Company, and expensed in the Company's consolidated statements of income.

EARNINGS PER SHARE

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

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

Three Months Ended December 31, Nine Months Ended December 31,

(in thousands, except share and per share data) 2023 2022 2023 2022

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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 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.

Three and nine months ended December 31, 2023

The Company's consolidated effective income tax rate for the three and nine months ended December 31, 2023 was 19.1 % and 19.8 %, respectively.

Three and nine months ended December 31, 2022

The Company's consolidated effective income tax rate for the three and nine months ended December 31, 2022 was 19.3 % and 23.2 %, respectively.

In the nine months ended December 31, 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 nine months ended December 31, 2022 would have been approximately 22.0 %.

GOODWILL AND OTHER INTANGIBLES

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,

The Company's changes in goodwill at December 31, 2023 and 2022 consisted of the following:

(in thousands of dollars) Nine Months Ended December 31,

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

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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 September 30, 2023 and 2022 and at March 31, 2023:

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

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

(in thousands, except useful life) December 31, 2023

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

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Total intangible assets $ 111,692 $ ( 39,995 ) $ 71,697

September 30, 2022

December 31, 2022

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

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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 six months ended September 30, 2023 and 2022 was:

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

The Company's amortization expense for intangible assets for the three and nine months ended December 31, 2023 and 2022 was:

(in thousands of dollars) Three Months Ended December 31, Nine Months Ended December 31,

2022 2023 2022

2 unchanged sentences

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, 2023, the expected future amortization expense for intangible assets is as follows:

As of December 31, 2023, the expected future amortization expense for intangible assets is as follows:

Fiscal Year (in thousands of dollars)

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

2024 (excluding the nine months ended December 31, 2023)

2028 and thereafter 40,480

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

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.

At December 31, 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.

7 unchanged sentences

dollar sales of crop inputs and cost of processed tobacco.

From time to time, the

Company enters into forward and option contracts to buy U.S.

From time to time, the Company enters into forward and option contracts to buy U.S.

dollars and sell the local currency at future dates that coincide with the sale of crop inputs to farmers.

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The aggregate U.S.

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,

dollar notional amount of forward and option contracts entered into for these purposes during the nine-month periods in fiscal years 2024 and 2023 was as follows:

Nine Months Ended December 31,

(in millions of dollars) 2023 2022

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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.

The table below presents the expected timing of when the remaining accumulated other comprehensive gains and losses as of December 31, 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

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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.

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.

1 unchanged sentence

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 September 30, 2023 and 2022, and March 31, 2023, were approximately $ 101.1 million, $ 112.3 million, and $ 42.8 million, respectively.

The total notional amounts of contracts outstanding at December 31, 2023 and 2022, and March 31, 2023, were approximately $ 97.2 million, $ 91.8 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.

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

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

Three Months Ended December 31, Nine Months Ended December 31,

(in thousands of dollars) 2023 2022 2023 2022

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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 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.

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 September 30, 2023.

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 $ 1.5 million remained in accumulated other comprehensive loss at December 31, 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

2 unchanged sentences

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 September 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 December 31, 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) September 30, 2023 September 30, 2022 March 31, 2023 September 30, 2023 September 30, 2022 March 31, 2023

(in thousands of dollars) December 31, 2023 December 31, 2022 March 31, 2023 December 31, 2023 December 31, 2022 March 31, 2023

Derivatives Designated as Hedging Instruments

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Universal measures certain financial and nonfinancial assets and liabilities at fair value based on applicable accounting guidance.

The financial assets and liabilities measured at fair value include money market funds, trading securities associated with deferred compensation plans, interest rate swap agreements, forward foreign currency exchange contracts and acquisition-related contingent consideration obligations.

The application of the fair value guidance to nonfinancial assets and liabilities primarily includes the determination of fair values for goodwill and long-lived assets when indicators of potential impairment are present.

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Recurring Fair Value Measurements

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.

At December 31, 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:

September 30, 2023

December 31, 2023

Fair Value Hierarchy

14 unchanged sentences

$ — $ — $ 1,377 $ — $ 1,377

September 30, 2022

December 31, 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 September 30, 2023, and 2022 and March 31, 2023:

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

(in millions of dollars) December 31, 2023 December 31, 2022 March 31, 2023

Fair market value of long term obligations $ 617 $ 615 $ 621

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Pension Benefits Other Postretirement Benefits

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

Three Months Ended December 31, Three Months Ended December 31,

(in thousands of dollars) 2023 2022 2023 2022

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Pension Benefits Other Postretirement Benefits

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

Nine Months Ended December 31, Nine Months Ended December 31,

(in thousands of dollars) 2023 2022 2023 2022

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$ 1,492 $ 4,656 $ 250 $ 246

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.

During the nine months ended December 31, 2023, the Company made contributions of approximately $ 0.9 million to its pension plans.

Additional contributions of $ 3.0 million are expected during the remaining three months of fiscal year 2024.

STOCK-BASED COMPENSATION

The Company's shareholders have approved the Universal Corporation 2023 Stock Incentive Plan (“Plan”) under which officers, directors, and employees of the Company may receive grants and awards of common stock, restricted stock, restricted stock units (“RSUs”), performance share units (“PSUs”), stock appreciation rights, incentive stock options, and non-qualified stock options.

The Company's shareholders approved the Universal Corporation 2023 Stock Incentive Plan (“Plan”) under which officers, directors, and employees of the Company may receive grants and awards of common stock, restricted stock, restricted stock units (“RSUs”), performance share units (“PSUs”), stock appreciation rights, incentive stock options, and non-qualified stock options.

The Company’s practice is to award grants of stock-based compensation to officers on an annual basis at the first regularly-scheduled meeting of the Compensation Committee of the Board of Directors (the “Compensation Committee”) in the fiscal year following the public release of the Company’s financial results for the prior year.

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

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,

During the nine-month periods ended December 31, 2023 and 2022, the Company issued the following stock-based awards, representing the regular annual grants to officers and outside directors of the Company:

Nine Months Ended December 31,

Number granted 93,300 79,405

2 unchanged sentences

Grant date fair value $ 43.01 $ 54.46

Fair value expense for restricted stock units is recognized ratably over the period from grant date to the earlier of:

Fair value expense for RSUs and PSUs is recognized ratably over the period from grant date to the earlier of:

(1) the vesting date of the award, or (2) the date the grantee is eligible to retire without forfeiting the award.

For employees who are already eligible to retire at the date an award is granted, the total fair value of all non-forfeitable awards is recognized as expense at the date of grant.

As a result, Universal typically incurs higher stock compensation expense in the first quarter of each fiscal year when grants are awarded to officers than in the other three quarters.

For PSUs, the Company generally recognizes fair value expense ratably over the performance and vesting period based on management’s judgment of the ultimate award that is likely to be paid out based on the achievement of the predetermined performance measures.

For PSUs, the Company recognizes expense based on management’s judgment of the ultimate award that is likely to be paid out based on the achievement of the predetermined performance measures.

Universal typically incurs higher stock compensation expense in the first quarter of each fiscal year when grants are awarded to officers who are retirement eligible.

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

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.

For the nine-month periods ended December 31, 2023 and 2022, the Company recorded total stock-based compensation expense of approximately $ 10.6 million and $ 6.6 million, respectively.

The Company expects to recognize stock-based compensation expense of approximately $ 1.0 million during the remaining three months of fiscal year 2024.

OPERATING SEGMENTS

16 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 September 30, Six Months Ended September 30,

Three Months Ended December 31, Nine Months Ended December 31,

(in thousands of dollars) 2023 2022 2023 2022

16 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 six months ended September 30, 2023 and 2022:

Six Months Ended September 30,

Nine Months Ended December 31,

(in thousands of dollars) 2023 2022

10 unchanged sentences

Net gain (loss) on derivative instruments (net of tax (expense) benefit of $( 153 ) and $( 530 ))

( 812 ) ( 4,146 )

Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $ 1,422 and $ 519 ) (1)

6 unchanged sentences

Net gain (loss) on derivative instruments (net of tax (expense) benefit of $( 2,063 ) and $( 3,224 ))

13,295 10,467

Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $ 2,327 and $( 220 )) (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 and six months ended September 30, 2023 and 2022 is as follows:

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

A reconciliation of the changes in Universal Corporation shareholders’ equity and noncontrolling interests in subsidiaries for the three and nine months ended December 31, 2023 and 2022 is as follows:

Three Months Ended December 31, 2023 Three Months Ended December 31, 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 4,914 — 4,914 1,326 — 1,326

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

( 9 ) — ( 9 ) — — —

Dividend equivalents on RSUs 321 — 321 294 — 294

3 unchanged sentences

Common stock ( 19,647 ) — ( 19,647 ) ( 19,399 ) — ( 19,399 )

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

Dividend equivalents on RSUs ( 321 ) — ( 321 ) ( 294 ) — ( 294 )

Other comprehensive income (loss) ( 5,587 ) 184 ( 5,403 ) 12,351 370 12,721

Other changes in noncontrolling interests

Dividends paid to noncontrolling shareholders

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

Balance at end of period $ 1,417,076 $ 41,574 $ 1,458,650 $ 1,360,792 $ 39,950 $ 1,400,742

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

Nine Months Ended December 31, 2023 Nine Months Ended December 31, 2022

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

19 unchanged sentences

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