What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-21 compared with 2025-04-21 · 92 added, 87 removed, 154 unchanged (54% of the section changed)

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new government regulations and interpretation of existing standards and regulations;

general economic, political, market, and weather conditions;and our failure to maintain effective internal control over financial reporting.

general economic, political, market, and weather conditions;

and our failure to maintain effective internal control over financial reporting.

For a further description of factors that may cause actual results to differ materially from such forward-looking statements, see Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, as amended by Amendment No.1 thereto ("2024 Form 10-K"), and Item 1A, "Risk Factors" of this Form 10-Q.

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Results of Operations

Universal Corporation had a strong quarter and nine months ended December 31, 2024.

Revenues and operating income increased by 14% and 19%, respectively, for the quarter, and by 14% and 24%, respectively, for the nine months ended December 31, 2024, compared to the same periods in fiscal year 2024.

These increases were primarily driven by strong tobacco sales volumes and prices.

Improved results for our Tobacco Operations segment in both the quarter and nine months ended December 31, 2024, compared to the same periods in fiscal year 2024, were largely driven by strong customer demand, successful tobacco procurement and marketing efforts, and larger, higher quality, and better yielding crops in Africa.

Strong trading volumes combined with higher shipment volumes and better-quality crops in Asia and accelerated shipment timing in the United States requested by certain customers also contributed to the improved results.

The Ingredients Operations segment also continued to perform in line with strategic plans, with sales of newly produced and developed value-added products largely offsetting market-driven pricing pressures experienced by certain of the Company’s traditional product lines.

The progress Universal is making in its ingredients business is a direct result of the investments made in fiscal years 2024 and 2025, including in its enhanced ingredients facility.

Universal Corporation had a strong second quarter and first half of fiscal year 2025.

Revenues and operating income increased by 11% and 24%, respectively, for the quarter, and by 13% and 30%, respectively, for the six months ended September 30, 2024, compared to the same periods in the prior fiscal year.

These increases were driven by strong tobacco sales volumes and prices.

Higher results for our Tobacco Operations segment in both the quarter and six months ended September 30, 2024, compared to the same periods in fiscal year 2024, were primarily driven by strong customer demand and larger, higher quality, and better yielding crops in Africa.

Accelerated shipment timing requested by certain customers and sales of carryover crop tobacco also contributed to the improved results for the Tobacco Operations segment in the quarter and six months ended September 30, 2024.

We also continued to grow our Universal Ingredients’ market presence in the quarter and six months ended September 30, 2024, and saw increased interest from new and existing customers, despite higher food costs creating pricing pressures.

We expect our newly expanded ingredients facility to support increases in production and meaningfully contribute to our fiscal year 2026 results.

FINANCIAL HIGHLIGHTS

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

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

(in millions of dollars, except per share data) 2024 2023 % 2024 2023 %

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*See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below.

Quarter Ended December 31, 2024, compared to Quarter Ended December 31, 2023

Quarter Ended September 30, 2024, compared to Quarter Ended September 30, 2023

Consolidated Results

Revenues and operating income increased by 14%, or $115.7 million, and by 19%, or $16.6 million, respectively, in the quarter ended December 31, 2024, compared to the quarter ended December 31, 2023, primarily driven by improved performance in the Tobacco Operations segment.

Selling, general, and administrative expenses were up by 14%, or $10.9 million, primarily on an unfavorable foreign currency comparison of approximately $11 million in the quarter ended December 31, 2024, compared to the quarter ended December 31, 2023.

Adjusted operating income was up by 18%, or $15.7 million, and adjusted net income attributable to Universal Corporation was up by 10%, or $5.6 million, in the third quarter of fiscal year 2025, compared to the same period in the prior fiscal year, on strong performance in the Tobacco Operations segment.

Revenues and operating income increased by 11%, or $72.3 million, and 24%, or $13.4 million, respectively, in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, driven by improved performance in the Tobacco Operations segment.

Selling, general, and administrative expenses decreased by 14%, or $10.0 million, largely on approximately $7.3 million of lower net provisions for farmer advances in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023.

Adjusted operating income was up 37%, or $21.4 million, and adjusted net income attributable to Universal Corporation was up 20%, or $6.1 million, in the second quarter of fiscal year 2025, compared to the same period in the prior fiscal year, on strong performance in the Tobacco Operations segment.

Tobacco Operations Segment

Revenues and operating income for the Tobacco Operations segment increased by 15%, or $110.0 million, and by 17%, or $15.0 million, respectively, for the quarter ended December 31, 2024, compared to the quarter ended December 31, 2023.

Tobacco Operations segment results reflected continued strong customer demand and successful tobacco procurement and marketing efforts.

Tobacco average sales price and tobacco sales volumes increased 5% and 11%, respectively, in the quarter ended December 31, 2024, compared to the quarter ended December 31, 2023.

In addition, results for the quarter ended December 31, 2024, benefited from higher sales volumes in Asia, in part on better-quality crops, and in North America on accelerated shipment timing in the United States per certain customers’ requests, compared to the same quarter in fiscal year 2024.

Selling, general, and administrative expenses were higher by approximately $14.9 million for the segment mainly due to unfavorable foreign currency comparisons of $10.4 million in the quarter ended December 31, 2024, compared to the quarter ended December 31, 2023.

Uncommitted tobacco inventory levels remained low at about 10% at December 30, 2024.

Revenues and operating income for the Tobacco Operations segment increased by 14%, or $75.6 million, and 48%, or $24.9 million, respectively, for the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023.

Tobacco Operations segment results reflect continued strong customer demand;

an approximately 17% increase in the tobacco average sales price;

larger, higher quality, better yielding crops from Africa;

and accelerated shipment timing per certain customers’ requests.

Uncommitted tobacco inventory levels remained low at about 10% at September 30, 2024.

Ingredients Operations Segment

Revenues and operating income for the Ingredients Operations segment increased by 7%, or $5.7 million, and by 69%, or $1.5 million, respectively, for the quarter ended December 31, 2024, compared to the quarter ended December 31, 2023.

Revenues for value-added products in the Ingredients Operations segment were higher in the quarter ended December 31, 2024, compared to the quarter ended December 31, 2023.

However, the segment did experience some margin pressure in the quarter ended December 31, 2024, due to high raw material costs and inflation-driven increases in consumer food prices.

Also, in the quarter, we continued to see a high level of interest in our value-added products, reflecting the effectiveness of the investments made in Universal Ingredients in fiscal year 2024 and 2025.

Revenues and operating income for the Ingredients Operations segment decreased by 4%, or $3.3 million, and 72%, or $3.5 million, respectively, for the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, on unfavorable comparisons to last fiscal year's strong second fiscal quarter results.

Sales volumes for some of the products in the Ingredients Operations segment were higher in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023.

However, customer pressure due to the inflationary environment impacted demand and pricing for certain products in the Ingredients Operations segment in the quarter ended September 30, 2024.

Additional Items

Cost of goods sold increased by 14%, or $89.0 million, in the quarter ended December 31, 2024, compared to the quarter ended December 31, 2023, largely on higher tobacco sales volumes and tobacco prices.

Interest expense was up by 24%, or $4 million, in the quarter ended December 31, 2024, compared to the quarter ended December 31, 2023, primarily on on higher notes payable and overdrafts of approximately $173 million.

The consolidated effective tax rate for the three months ended December 31, 2024, was 23%.

The consolidated tax for the three months ended December 31, 2023, was 19%.

The consolidated effective tax rate for the three months ended December 31, 2024, was higher than the consolidated tax rate for the three months ended December 31, 2023, due to various factors, including the mix and timing of domestic and foreign earnings, discrete items, and the effect of exchange rate changes on taxes.

Nine Months Ended December 31, 2024, compared to Nine Months Ended December 31, 2023

Cost of goods sold increased 12%, or $60.9 million, in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, largely on higher tobacco sales prices, reflecting strong customer demand, and larger, higher quality, and better yielding African crops.

Interest expense was up $4 million in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, on higher notes payable and overdrafts of approximately $278 million.

Restructuring and impairment costs of $10.6 million in the quarter ended September 30, 2024, related to the previously announced consolidation of our European sheet operations.

The consolidated effective tax rate for the three months ended September 30, 2024, was 29%.

The consolidated tax for the three months ended September 30, 2023 was 22%.

The consolidated effective tax rate for the quarter ended September 30, 2024, was higher than the consolidated tax rate for the quarter ended September 30, 2023, due to various factors, including the mix and timing of domestic and foreign earnings, discrete items, and the effect of exchange rate changes on taxes coupled with a minimal income tax benefit of $0.1 million associated with the $10.6 million of restructuring and impairment costs recognized for the consolidation of the sheet operations in fiscal year 2025.

Six Months Ended September 30, 2024, compared to Six Months Ended September 30, 2023

Consolidated Results

Revenues and operating income for the nine months ended December 31, 2024, increased by 14%, or $267.3 million, and by 24%, or $36.2 million, respectively, compared to the nine months ended December 31, 2023, primarily driven by improved performance in the Tobacco Operations segment.

Selling, general, and administrative expenses were up by 2%, or $4.2 million, on $5.6 million of unfavorable foreign currency comparisons, $5.0 million of higher sales commissions, and $3.0 million of higher legal and professional fees largely offset by $10.4 million of higher recoveries of farmer advances in the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023.

Adjusted operating income was up by 28%, or $43.3 million, and adjusted net income attributable to Universal Corporation was up by 17%, or $13.9 million, for the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023, largely on strong performance in the Tobacco Operations segment.

Revenues and operating income for the first half of fiscal year 2025 increased 13%, or $151.6 million, and 30%, or $19.6 million, respectively, compared to the first half of fiscal year 2024, driven primarily by improved performance in the Tobacco Operations segment.

Selling, general, and administrative expenses decreased by 5%, or $6.8 million, largely on $9.4 million of lower net provisions for farmer advances, but partially offset by higher sales commissions of $3.3 million in the six months ended September 30, 2024, compared to the six months ended September 30, 2023.

Adjusted operating income increased by 40%, or $27.6 million, and adjusted net income attributable to Universal Corporation increased by 29%, or $8.3 million, for the six months ended September 30, 2024, compared to the six months ended September 30, 2023, largely on strong performance in the Tobacco Operations segment.

Tobacco Operations Segment

Revenues for the Tobacco Operations segment increased by 15%, or $253.6 million, and operating income for the segment increased by 31%, or $45.5 million, in the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023.

Tobacco Operations segment results reflected continued strong customer demand as well as successful tobacco procurement and marketing.

In addition, an approximately 7% increase in the tobacco average sales price;

an 8% increase in total sales volumes;

Revenues for the Tobacco Operations segment increased by 14%, or $143.6 million, and operating income for the segment increased by 50%, or $30.5 million, in the six months ended September 30, 2024, compared to the six months ended September 30, 2023.

Tobacco Operations segment results reflected continued strong customer demand;

an approximately 13% increase in the tobacco average sales price;

an approximately 2% increase in total tobacco sales volumes;

larger, higher quality, better yielding crops from Africa;

better-quality crops from Asia;

and accelerated shipment timing in the United States per certain customers’ requests, contributed to higher results for the segment in the nine months ended December 31, 2024, compared to the same period in fiscal year 2024.

and accelerated shipment timing per certain customers’ requests.

In addition, our tobacco procurement and marketing efforts have been successful in the six months ended September 30, 2024, despite negative impacts from adverse weather on certain tobacco crops, mainly in South America and North America this fiscal year.

Ingredients Operations Segment

Revenues and operating income for the Ingredients Operations segment increased by 6%, or $13.7 million, and 59%, or $2.9 million, respectively, in the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023.

Results for the Ingredients Operations segment reflected some increased sales of new products, as well as lower inventory write-downs of $2.1 million compared to the nine months ended December 31, 2023.

However, the segment did experience some margin pressure in the nine months ended December 31, 2024, due to high raw material costs and inflation-driven increases in consumer food prices.

We also continued to see a high level of interest in our value-added products in the nine months ended December 31, 2024, reflecting the effectiveness of the investments made in Universal Ingredients in fiscal year 2024 and 2025.

Revenues and operating income for the Ingredients Operations segment increased by 5%, or $8.0 million, and 52%, or $1.4 million, respectively, in the six months ended September 30, 2024, compared to the six months ended September 30, 2023.

Results for the Ingredients Operations segment reflected increased sales volumes for some products, including some sales of new products, as well as lower inventory write-downs of approximately $1.8 million compared to the six months ended September 30, 2023.

However, customer pressure due to the inflationary environment impacted demand and pricing for certain products in the Ingredients Operations segment in the six months ended September 30, 2024.

Additional Items

Cost of goods sold increased by 14%, or $219.8 million, in the nine months ended December 31, 2024, compared to the nine months ended December 31, 2023, largely on higher tobacco sales volumes and tobacco prices that reflected continued strong customer demand as well as successful tobacco procurement and marketing.

Restructuring and impairment costs of $10.6 million in the nine months ended December 31, 2024, were related to the previously announced consolidation of the Company’s European tobacco sheet operations.

The consolidated effective tax rate for the nine months ended December 31, 2024, was 26%.

The consolidated effective tax rate for the nine months ended December 31, 2023, was 20%.

The consolidated effective tax rate for the nine months ended December 31, 2024, was higher than the consolidated tax rate for the nine months ended December 31, 2023, due to various factors, including the mix and timing of domestic and foreign earnings, discrete items, and the effect of exchange rate changes on taxes coupled with a minimal income tax benefit associated with the restructuring and impairment costs recognized for the consolidation of the sheet operations in fiscal year 2025.

Cost of goods sold increased 14%, or $130.8 million, in the six months ended September 30, 2024, compared to the six months ended September 30, 2023, largely on higher tobacco sales volumes and prices, reflecting strong customer demand and larger, higher quality, and better quality crops in Africa.

Restructuring and impairment costs of $10.6 million in the six months ended September 30, 2024, related to the previously announced consolidation of the Company’s European tobacco sheet operations.

The consolidated effective tax rate for the six months ended September 30, 2024, was 32%.

The consolidated effective tax rate for the six months ended September 30, 2023, was 22%.

The consolidated effective tax rate for the six months ended September 30, 2024, was higher than the consolidated tax rate for the six months ended September 30, 2023, due to various factors, including the mix and timing of domestic and foreign earnings, discrete items, and the effect of exchange rate changes on taxes coupled with a minimal income tax benefit of $0.1 million associated with the $10.6 million of restructuring and impairment costs recognized for the consolidation of the sheet operations in fiscal year 2025.

Sustainability

On December 19, 2024, Universal released its 2024 Sustainability Report (the “Report”), highlighting its efforts in advancing energy efficiency, strengthening supply chain resiliency and continuing to be a strong partner for its farming communities.

Responsible business practices are integrated into Universal’s business strategy, allowing the Company to cultivate sustainable growth as good stewards of the environment.

As a result of the Company’s transition to cleaner fuels for its operations, 93.5% of the tobacco Universal processes is coal-free as of fiscal year 2024.

This positive change supports the Company’s goal of reducing its greenhouse gas (GHG) emissions by 30% by 2030 from its 2020 baseline year.

In 2024, the Company also trained over 175,000 farmers on Good Agricultural Practices and Agricultural Labor Practices to advance human rights standards throughout its supply chain.

Universal also adopted a Behavior-Based Safety program to cultivate a proactive safety culture in its operations.

Universal continually looks to set new standards for social and environmental performance.

The Company completed a thorough assessment of its sustainability practices and performance through EcoVadis, a leading global third-party platform for business sustainability ratings.

As a result of the assessment, EcoVadis ranked Universal in the 91st percentile of the companies rated globally in the prior 12 months.

The assessment included 21 sustainability criteria across four core themes:

Environment, Labor & Human Rights, Ethics, and Sustainable Procurement.

Reconciliation of Certain Non-GAAP Financial Measures

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

The following table sets forth certain non-recurring items included in reported results to reconcile adjusted net income to net income attributable to Universal Corporation:

Adjusted Operating Income Reconciliation

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

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

(in thousands) 2024 2023 2024 2023

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(in thousands except for per share amounts)

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

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

2024 2023 2024 2023

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Net Debt and Net Capitalization Reconciliation

December 31, December 31, March 31,

September 30, September 30, March 31,

(in thousands) 2024 2023 2024

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Liquidity and Capital Resources

The first half of our fiscal year is usually a period of significant working capital investment in Africa, South America, and the United States as tobacco crops are delivered by farmers.

Due to market conditions in Brazil, we made the strategic decision in the quarter ended March 31, 2024, to accelerate tobacco purchases there.

Therefore, some of our working capital investments for the Brazil crop that typically would have been made in our fiscal year 2025, were made in our fiscal year 2024, reducing required working capital investments in the six months ended September 30, 2024.

We funded our working capital needs in the six months ended September 30, 2024, using a combination of cash on hand, short-term borrowings, customer advances, and operating cash flows.

Tobacco sales are expected to be more heavily weighted to the second half of fiscal year 2025.

Our liquidity and operating capital resource requirements are predominantly short term in nature and primarily relate to working capital for tobacco crop purchases.

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We also periodically have large cash balances that we utilize to meet our working capital requirements.

After significant seasonal working capital investment in our tobacco operations in the first half of the fiscal year, we generally see tobacco inventory levels and other working capital items decrease in the second half of our fiscal year as tobacco crops in Africa, South America, and the United States are being shipped.

Due to market conditions in Brazil, we made the strategic decision in the quarter ended March 31, 2024, to accelerate tobacco purchases there.

We funded our working capital needs in the nine months ended December 31, 2024, using a combination of cash on hand, short-term borrowings, customer advances, and operating cash flows.

Operating Activities

Net cash provided by our operations was $168.2 million during the nine months ended December 31, 2024.

That amount was $215.0 million higher than during the same period in fiscal year 2024, primarily on lower working capital requirements in the nine months ended December 31, 2024, due to accelerated tobacco purchases in Brazil in our fiscal year 2024.

Tobacco inventory levels were $924.7 million as of December 31, 2024, which was $84.3 million below the levels on December 31, 2023, largely due to the timing of tobacco shipments.

We generally do not purchase material quantities of tobacco on a speculative basis, and we target committed inventory levels of 80% or more of total tobacco inventory.

Our level of committed inventory percentages is influenced by timing of farmer deliveries of new crops, as well as the receipt of customer orders.

In addition, when we contract directly with tobacco farmers, we are often obligated to buy all stalk positions, which may contain less marketable leaf styles.

As of December 31, 2024, our uncommitted tobacco inventories were $94.3 million, or about 10% of total tobacco inventory, compared to $181.1 million, or about 17% of our tobacco inventory as of March 31, 2024, and $75.8 million, or about 8% of our tobacco inventory as of December 31, 2023.

Our balance sheet accounts reflected seasonal patterns in the nine months ended December 31, 2024, on deliveries of tobacco crops by farmers in Africa, South America, and the United States.

Net cash used by our operations was $47.4 million during the six months ended September 30, 2024.

The net use of cash was $57.9 million more than during the same period in fiscal year 2024, primarily on lower customer advances and deposits largely offset by lower working capital requirements in the six months ended September 30, 2024, due to accelerated tobacco purchases in Brazil in our fiscal year 2024.

Customer advances and deposits were lower in the six months ended September 30, 2024, compared to the same period in the prior fiscal year, primarily due to a customer arrangement providing for a higher amount of advances on tobacco crop purchases in fiscal year 2024 that was not repeated in fiscal year 2025.

Tobacco inventory levels were $1.1 billion at September 30, 2024.

Tobacco inventory levels were $15.6 million below September 30, 2023 levels, primarily on the timing of tobacco crop purchases and shipments.

We generally do not purchase material quantities of tobacco on a speculative basis.

However, when we contract directly with tobacco farmers, we are often obligated to buy all stalk positions, which may contain less marketable leaf styles.

As of September 30, 2024, our uncommitted tobacco inventories were $108.0 million, or about 10% of total tobacco inventory, compared to $181.1 million, or about 17% of our tobacco inventory as of March 31, 2024, and $130.2 million, or about 12% of our tobacco inventory as of September 30, 2023.

While we target committed

inventory levels of 80% or more of total tobacco inventory, the level of these uncommitted inventory percentages is influenced by timing of farmer deliveries of new crops, as well as the receipt of customer orders.

Our balance sheet accounts reflected seasonal patterns in the six months ended September 30, 2024, on deliveries of tobacco crops by farmers in Africa, South America, and the United States.

Accounts receivable increased by $12.3 million from March 31, 2024 levels, on tobacco crop shipments offset in part by collections on receivables.

Accounts receivable—unconsolidated affiliates were up $61.3 million from March 31, 2024 levels, on the timing of tobacco crop purchases and shipments.

Notes payable and overdrafts were up $161.9 million from March 31, 2024 levels, on seasonal working capital needs.

Accounts receivable were up $214.7 million at December 31, 2024, compared to the same period in the prior fiscal year, on higher tobacco sales volumes as well as the timing of tobacco crop shipments.

Accounts receivable--unconsolidated affiliates were $32.5 million lower as of December 31, 2024, compared to the same period in the prior fiscal year, on the timing of crop shipments.

Notes payable and overdrafts and cash and cash equivalents were up $173.2 million and $141.0 million, respectively, compared to December 31, 2023 levels, largely due to a lower use of cash and cash equivalents to fund working capital needs.

Accounts receivable were up $168.7 million at September 30, 2024, compared to the same period in the prior fiscal year, on higher sales of carryover crop tobacco as well as the timing of tobacco crop shipments.

Advances to suppliers at September 30, 2024 were $34.1 million higher, compared to the same period in the prior fiscal year, on larger tobacco volumes in certain regions.

Notes payable and overdrafts were up $277.8 million compared to September 30, 2023 levels, in part due to lower customer advances available to fund working capital needs.

Customer advances and deposits were $159.7 million lower at September 30, 2024, compared to September 30, 2023, primarily due to a customer arrangement providing for a higher amount of advances on tobacco crop purchases in fiscal year 2024 that was not repeated in the first quarter of fiscal year 2025.

Investing Activities

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Our capital expenditures are generally limited to those that add value, replace or maintain equipment, increase efficiency, or position us for future growth.

During the nine months ended December 31, 2024 and 2023, we invested about $54.9 million and $47.7 million, respectively, in our property, plant and equipment.

Depreciation expense was approximately $36.1 million and $35.4 million for the nine months ended December 31, 2024 and 2023, respectively.

During the six months ended September 30, 2024 and 2023, we invested about $38.8 million and $32.6 million, respectively, in our property, plant and equipment.

Depreciation expense was approximately $23.8 million and $23.4 million for the six months ended September 30, 2024 and 2023, respectively.

Typically, our capital expenditures for maintenance projects are less than $30 million per fiscal year.

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On November 7, 2024, we announced that our Board of Directors had approved a new share repurchase program, which replaced the share repurchase program expiring November 15, 2024, for the purchase of up to $100 million of our common stock through November 15, 2026.

Under the new program, we may purchase shares from time to time on the open market or in privately negotiated transactions at prices not exceeding prevailing market prices.

Under the new program, we may purchase shares from time to time on the open market or in privately negotiated transactions at prices not exceeding prevailing market rates.

Repurchases of shares under the repurchase program may vary based on management discretion, as well as changes in cash flow generation and availability.

During the three months ended December 31, 2024, we did not purchase any shares of common stock.

As of December 31, 2024, approximately 24.7 million shares of our common stock were outstanding.

During the three months ended September 30, 2024, we did not purchase any shares of common stock.

As of September 30, 2024, approximately 24.7 million shares of our common stock were outstanding.

Financing Activities

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We also consider our net debt plus shareholders' equity to be our net capitalization.

Net debt as a percentage of net capitalization was approximately 39% at December 31, 2024, down from the December 31, 2023 level of approximately 40%, and down from the March 31, 2024 level of approximately 41%.

As of December 31, 2024, we had $215.1 million in cash and cash equivalents, and our short-term debt totaled $538.5 million.

Net debt as a percentage of net capitalization was approximately 44% at September 30, 2024, up from the September 30, 2023 level of approximately 42%, and up from the March 31, 2024 level of approximately 41%.

As of September 30, 2024, we had $80.1 million in cash and cash equivalents, and our short-term debt totaled $579.1 million.

As discussed in Note 15.

"Subsequent Event" to the consolidated financial statements, we obtained lender consents for our committed revolving credit facility (the "Consents").

The Consents provided for, among other things, an extension until June 16, 2025, to file the second and third quarter financial statements with the SEC.

Based on our September 30, 2024 financial statements and December 31, 2024 financial statements, we were in compliance with the financial covenants in the committed revolving credit facility as of the end of each of the second and third fiscal quarters.

As of December 31, 2024, we had $270 million available under the committed revolving credit facility that will mature in December 2027, and we had approximately $152 million in available, uncommitted credit lines.

The Consents provided for, among other things, an extension to file until June 16, 2025, the second and third quarter financial statements with the SEC.

Based on our September 30, 2024 financial statements and our December 31, 2024 financial statements, we were in compliance with the financial covenants in the committed revolving credit facility as of the end of each of the second and third fiscal quarters.

As of September 30, 2024, we had $330 million available under the committed revolving credit facility that will mature in December 2027, and we had approximately $57 million in available, uncommitted credit lines.

We have no long-term debt maturing until fiscal year 2028.

Our seasonal working capital requirements for our tobacco business typically increase significantly between March and September and decline after mid-fiscal year.

Available capital resources from our cash balances, committed revolving credit facility, and uncommitted credit lines are expected to exceed our normal working capital needs and currently anticipated capital expenditure requirements over the next twelve months.

Available capital resources from our cash balances, committed revolving credit facility, and uncommitted credit lines exceed our normal working capital needs and currently anticipated capital expenditure requirements over the next twelve months.

From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates.

At December 31, 2024, the fair value of our outstanding interest rate swap agreements was an asset of about $6.3 million, and the notional amount swapped was $310 million.

At September 30, 2024, the fair value of our outstanding interest rate swap agreements was a liability of about $2.6 million, and the notional amount swapped was $310 million.

We entered into these agreements to eliminate the variability of cash flows in the interest payments on a portion of our variable-rate term loans.

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We generally account for our hedges of forecasted tobacco purchases as cash flow hedges.

As of December 31, 2024, the fair value of our open hedges for forecasted tobacco purchases was a net liability of approximately $13.8 million.

We had forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net liability of approximately $2.8 million as of December 31, 2024.

At September 30, 2024, the fair value of our open hedges for forecasted tobacco purchases was a net liability of approximately $3.6 million.

We had forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net liability of approximately $3.2 million at September 30, 2024.

Critical Accounting Estimates

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Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2024 Form 10-K.

Our critical accounting policies have not changed from those reported in the 2024 Annual Report on Form 10-K.

Our critical accounting policies have not changed from those reported in the 2024 Form 10-K.

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 2. Management’s Discussion and Analysis