What changed in this filing

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Item 1. Financial Statements

2025-04-21 compared with 2024-08-07 · 168 added, 85 removed, 623 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 December 31, Nine Months Ended December 31,

2024 2023 2024 2023

(Unaudited) (Unaudited)

Sales and other operating revenues $ 937,193 $ 821,507 $ 2,245,005 $ 1,977,713

2 unchanged sentences

Selling, general and administrative expenses 89,512 78,563 232,044 227,846

Restructuring and impairment costs — 924 10,573 3,523

Operating income 104,076 87,464 190,037 153,811

22 unchanged sentences

(in thousands of dollars)

June 30, June 30, March 31,

December 31, December 31, March 31,

2024 2023 2024

31 unchanged sentences

(in thousands of dollars)

June 30, June 30, March 31,

December 31, December 31, March 31,

2024 2023 2024

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 24,675,988 shares issued and outstanding at June 30, 2024 ( 24,636,600 at June 30, 2023 and 24,573,408 at March 31, 2024)

Common stock, no par value, 100,000,000 shares authorized 24,715,625 shares issued and outstanding at December 31, 2024 ( 24,559,181 at December 31, 2023 and 24,573,408 at March 31, 2024)

350,243 344,467 345,596

9 unchanged sentences

(in thousands of dollars)

Three Months Ended June 30,

Nine Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

9 unchanged sentences

Equity in net loss (income) of unconsolidated affiliates, net of dividends 2,767 2,055

Restructuring and impairment costs 10,573 3,523

Restructuring payments ( 892 ) ( 999 )

11 unchanged sentences

Purchase of property, plant and equipment ( 54,885 ) ( 47,732 )

Proceeds from sale of business, net of cash held by the business — 3,757

Proceeds from sale of property, plant and equipment 2,035 1,932

3 unchanged sentences

Dividends paid to noncontrolling interests ( 12,880 ) ( 5,845 )

Repurchase of common stock — ( 4,744 )

Dividends paid on common stock ( 59,666 ) ( 58,755 )

13 unchanged sentences

All adjustments necessary to state fairly the results for the period have been included and were of a normal recurring nature.

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, 2024 (the “2024 Annual Report on Form 10-K”).

This Quarterly Report on 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, 2024, as amended by Amendment No.

1 thereto (the “2024 Annual Report on Form 10-K”).

Accounting Pronouncements to be Adopted in Future Years

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

In November 2023, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update No.

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

9 unchanged sentences

The Company is currently evaluating the impact of adopting this standard on its income tax disclosures.

In November 2024, the FASB issued Accounting Standards Update No.

2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses” (“ASU 2024-03”).

ASU 2024-03 requires additional disclosures about certain types of costs and expenses.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and for interim periods beginning after December 15, 2027, although early adoption is permitted.

The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.

RESTRUCTURING AND IMPAIRMENT COSTS

Universal regularly 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.

Tobacco Operations

During the nine months ended December 31, 2024, the Company began consolidating its European sheet tobacco operations into the Company's facility in the Netherlands, by initiating a wind-down of activities at its sheet facility in Germany, incurring $10.5 million of restructuring and impairment costs.

Additionally, during the nine months ended December 31, 2024, the Company also incurred $0.1 million of termination and impairment costs in other areas of the Tobacco Operations segment.

During the nine months ended December 31, 2023, the Company incurred $ 1.8 million of restructuring and impairment costs for its Global Labs Services ("GLS") facility in Wilson, NC.

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

The restructuring and impairment costs were net of approximately $0.2 million of income from the sale of GLS processes and procedures to a third-party buyer.

Additionally, 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.

A summary of the restructuring and impairment costs recorded for the three and nine months ended December 31, 2024 and 2023 were as follows:

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

(in thousands) 2024 2023 2024 2023

Restructuring costs:

Employee termination benefits $ — $ 212 $ 4,342 $ 1,615

Other — — 1,372 (182)

Total restructuring costs — 212 5,714 1,433

Impairment costs:

Property, plant and equipment — 712 4,859 2,090

Total impairment costs — 712 4,859 2,090

Total restructuring and impairment costs $ — $ 924 $ 10,573 $ 3,523

REVENUE FROM CONTRACTS WITH CUSTOMERS

20 unchanged sentences

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, but the Company does have a small number of cost-plus contracts with certain customers..

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

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.

11 unchanged sentences

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

Three Months Ended June 30,

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

(in thousands of dollars) 2024 2023 2024 2023

10 unchanged sentences

Other Contingent Liabilities (Letters of credit)

The Company had other contingent liabilities totaling approximately $ 1 million at June 30, 2024, primarily related to outstanding letters of credit.

The Company had other contingent liabilities totaling approximately $ 1 million at December 31, 2024, primarily related to outstanding letters of credit.

Value-Added Tax Assessments in Brazil

1 unchanged sentence

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

The Company’s operating subsidiary there pays VAT when tobaccos grown outside the state of Rio Grande do Sul are transferred to the factory for processing.

The Company’s Brazilian operating subsidiary pays VAT when tobaccos grown outside the state of Rio Grande do Sul are transferred to the factory for processing.

The subsidiary has received assessments for additional VAT plus interest and penalties from tax authorities for the state of Parana based on audits of the subsidiary’s VAT filings for specified periods.

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 $ 9 million.

Those amounts are based on the exchange rate for the Brazilian currency at June 30, 2024.

Those amounts are based on the exchange rate for the Brazilian currency at December 31, 2024.

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

Management of the subsidiary and outside counsel challenged the full amount of the Parana assessment claim.

A significant portion of the Parana assessment was based on positions taken by the tax authorities that management and outside counsel believe deviate significantly from the underlying statutes and relevant case law.

A significant portion of the Parana assessment was based on positions taken by the tax authorities that management and outside

counsel believe deviate significantly from the underlying statutes and relevant case law.

In addition, under the law, the subsidiary’s tax filings for certain periods covered in the assessment were no longer open to any challenge by the tax authorities.

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, 2024 exchange rate).

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 $ 2 million (at the December 31, 2024 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 $ 2 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, 2024.

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, 2024.

The process for reaching a final resolution to the assessment is expected to be lengthy, and management is not currently able to predict when the 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 $ 120 million at June 30, 2024, $ 138 million at June 30, 2023, and $ 162 million at March 31, 2024.

The related valuation allowances totaled $ 19 million at June 30, 2024, $ 26 million at June 30, 2023, and $ 20 million at March 31, 2024, and were estimated based on the Company’s historical loss information and crop projections.

The allowances were decreased by net recoveries of $ 0.8 million in the three-month period ended June 30, 2024 and increased by net provisions of approximately $ 1.4 million in the three-month period ended June 30, 2023.

Short-term and long-term advances to suppliers totaled $ 172 million at December 31, 2024, $ 186 million at December 31, 2023, and $ 162 million at March 31, 2024.

The related valuation allowances totaled $ 15 million at December 31, 2024, $ 25 million at December 31, 2023, and $ 20 million at March 31, 2024, and were estimated based on the Company’s historical loss information and crop projections.

The allowances were decreased by net recoveries of $ 0.4 million in the nine-month period ended December 31, 2024 and increased by net provisions of approximately $ 10.0 million in the nine-month period ended December 31, 2023.

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

2 unchanged sentences

In many foreign countries, the Company’s local operating subsidiaries pay significant amounts of VAT on purchases of unprocessed and processed tobacco, crop inputs, packing materials, and various other goods and services.

In some countries, VAT

is a national tax, and in other countries it is assessed at the state level.

In some countries, VAT is a national tax, and in other countries it is assessed at the state level.

Items subject to VAT vary from jurisdiction to jurisdiction, as do the rates at which the tax is assessed.

7 unchanged sentences

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, 2024, the aggregate balance of recoverable tax credits held by the Company’s subsidiaries totaled approximately $ 68 million ($ 76 million at June 30, 2023, and $ 72 million at March 31, 2024), and the related valuation allowances totaled approximately $ 21 million ($ 22 million at June 30, 2023, and $ 21 million at March 31, 2024).

be sold or transferred.

At December 31, 2024, the aggregate balance of recoverable tax credits held by the Company’s subsidiaries totaled approximately $ 62 million ($ 63 million at December 31, 2023 and $ 72 million at March 31, 2024).

The related valuation allowances totaled approximately $ 21 million at December 31, 2024 and 2023, and March 31, 2024.

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

Shelf Registration and Stock Repurchase Plan

In November 2023, the Company filed an undenominated automatic universal shelf registration statement with the U.S.

Securities and Exchange Commission to provide for the future issuance of an undefined amount of securities as determined by the Company and offered in one or more prospectus supplements prior to issuance.

A stock repurchase plan, which was authorized by the Company's Board of Directors, became effective and was publicly announced on November 2, 2022.

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 stock at June 30, 2024.

Stock Repurchase Program

A stock repurchase program, which was authorized by the Company's Board of Directors, became effective and was publicly announced on November 7, 2024.

This stock repurchase program authorized the purchase of up to $ 100 million in common stock in open market or privately negotiated transactions through November 15, 2026, subject to market conditions and other factors.

The program had $ 100 million of remaining capacity for repurchases of common stock at December 31, 2024.

EARNINGS PER SHARE

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

Three Months Ended June 30,

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

(in thousands, except share and per share data) 2024 2023 2024 2023

21 unchanged sentences

Based on the assessment, the Company does not anticipate a material impact to the consolidated financial statements from the Pillar Two legislation in fiscal year 2025.

Three months ended June 30, 2024

The Company's consolidated effective income tax rate for the three months ended June 30, 2024 was 34.7 %.

Three months ended June 30, 2023

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

Three and nine months ended December 31, 2024

The Company's consolidated effective income tax rate for the three and nine months ended December 31, 2024 was 23.0 % and 25.9 %, respectively.

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.

GOODWILL AND OTHER INTANGIBLES

The Company's changes in goodwill at June 30, 2024 and 2023 consisted of the following:

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

The Company's changes in goodwill at December 31, 2024 and 2023 consisted of the following:

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

Balance at beginning of fiscal year $ 213,869 $ 213,922

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, 2024 and 2023 and at March 31, 2024:

(in thousands, except useful life) June 30, 2024

The Company's intangible assets subject to amortization consisted of the following at December 31, 2024 and 2023 and at March 31, 2024:

(in thousands, except useful life) December 31, 2024

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

5 unchanged sentences

Total intangible assets $ 111,672 $ ( 51,228 ) $ 60,444

June 30, 2023

December 31, 2023

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, 2024 and 2023 was:

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

The Company's amortization expense for intangible assets for the three and nine months ended December 31, 2024 and 2023 was:

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

2023 2024 2023

Amortization Expense $ 2,765 $ 2,862 $ 8,429 $ 8,475

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, 2024, the expected future amortization expense for intangible assets is as follows:

As of December 31, 2024, the expected future amortization expense for intangible assets is as follows:

Fiscal Year (in thousands of dollars)

2025 (excluding the three months ended June 30, 2024)

2025 (excluding the nine months ended December 31, 2024)

2029 and thereafter 32,403

6 unchanged sentences

The disclosures below provide additional information about the Company’s hedging strategies, the derivative instruments used, and the effects of these activities on the consolidated statements of income and comprehensive income and the consolidated balance sheets.

In the consolidated statements of cash flows, the cash flows associated with all of these activities are reported in net cash provided by operating activities.

In the consolidated statements of cash flows, the cash flows associated with all of these activities are reported in net cash provided (used) by operating activities.

Cash Flow Hedging Strategy for Interest Rate Risk

1 unchanged sentence

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, 2024, 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, 2024, 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.

8 unchanged sentences

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.

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

In the case of forecast purchases of tobacco and the related processing costs, the Company enters into forward and option contracts to sell U.S.

2 unchanged sentences

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

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

These hedging strategies have been used mainly for tobacco purchases, processing costs, and sales of crop inputs in Brazil.

Additionally, the Company initiated a strategy in Brazil and Mexico to hedge a portion of the forecasted local currency-denominated operating costs in fiscal year 2025 by entering into derivative contracts to buy the local currencies and sell the U.S.

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 2025 and 2024 was as follows:

Three Months Ended June 30,

dollar notional amounts of forward and option contracts entered into for these purposes during the nine-month periods in fiscal years 2025 and 2024 was as follows:

Nine Months Ended December 31,

(in millions of dollars) 2024 2023

1 unchanged sentence

Processing costs 15.7 4.9

Operating costs 28.9 —

$ 146.0 $ 35.2

4 unchanged sentences

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 June 30, 2024 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, 2024 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

Tobacco purchases 2025 Brazil 2026

Crop input sales 2024 Brazil 2025

Crop input sales 2025 Brazil 2026

Forward contracts related to processing costs have not been designated as hedges, and gains and losses on those contracts have been recognized in earnings on a mark-to-market basis.

Forward contracts related to processing costs and operating costs have not been designated as hedges, and gains and losses on those contracts have been recognized in earnings on a mark-to-market basis.

Hedging Strategy for Foreign Currency Exchange Rate Risk Related to Net Local Currency Monetary Assets and Liabilities of Foreign Subsidiaries

14 unchanged sentences

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

The contracts are generally arranged to hedge the subsidiary's

projected exposure to currency remeasurement risk for specified periods of time, and new contracts are entered as necessary throughout the year to replace previous contracts as they mature.

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

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

The total notional amounts of contracts outstanding at June 30, 2024 and 2023, and March 31, 2024, were approximately $ 75.4 million, $ 83.0 million, and $ 20.9 million, respectively.

The total notional amounts of contracts outstanding at December 31, 2024 and 2023, and March 31, 2024, were approximately $ 66.7 million, $ 97.2 million, and $ 20.9 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 December 31, Nine Months Ended December 31,

(in thousands of dollars) 2024 2023 2024 2023

16 unchanged sentences

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

$ ( 142 ) $ 2,190 $ 462 $ 6,330

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 and the crop input sales in Brazil, a net hedge loss of approximately $ 5.9 million remained in accumulated other comprehensive loss at June 30, 2024.

That balance reflects gains and losses on contracts related to the 2025 and 2023 Brazil crops, and the 2025 and 2024 Brazil crop input sales, less the amounts reclassified to earnings related to tobacco sold through June 30, 2024.

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 loss of approximately $ 13.3 million remained in accumulated other comprehensive loss at December 31, 2024.

That balance reflects gains and losses on contracts related to the 2025 Brazil crop, and the 2025 and 2024 Brazil crop input sales, less the amounts reclassified to earnings related to tobacco sold through December 31, 2024.

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

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 June 30, 2024 and 2023, and March 31, 2024:

The table below outlines the effects of the Company’s derivative financial instruments on the consolidated balance sheets at December 31, 2024 and 2023, and March 31, 2024:

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, 2024 June 30, 2023 March 31, 2024 June 30, 2024 June 30, 2023 March 31, 2024

(in thousands of dollars) December 31, 2024 December 31, 2023 March 31, 2024 December 31, 2024 December 31, 2023 March 31, 2024

Derivatives Designated as Hedging Instruments

31 unchanged sentences

Recurring Fair Value Measurements

At June 30, 2024 and 2023, and at March 31, 2024, 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, 2024 and 2023, and at March 31, 2024, 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, 2024

December 31, 2024

Fair Value Hierarchy

14 unchanged sentences

$ — $ — $ 17,235 $ — $ 17,235

June 30, 2023

December 31, 2023

Fair Value Hierarchy

28 unchanged sentences

Foreign currency exchange contracts

$ — $ — $ 21 $ — $ 21

Total financial liabilities measured and reported at fair value

14 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, 2024, and 2023 and March 31, 2024:

(in millions of dollars) June 30, 2024 June 30, 2023 March 31, 2024

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, 2024, and 2023 and March 31, 2024:

(in millions of dollars) December 31, 2024 December 31, 2023 March 31, 2024

Fair market value of long term obligations $ 618 $ 617 $ 618

7 unchanged sentences

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

Consolidation of tobacco sheet operations

As discussed in Note 2, the Company initiated a plan to consolidate the European Sheet tobacco operations into the Company's facility in the Netherlands.

The Company is in the process of winding down its operations in Germany, resulting in an impairment charge of $ 4.9 million for the long-lived assets in the three-month period ended September 30, 2024, to reduce their carrying value to fair value.

The long-lived assets primarily consist of a processing facility, machinery and equipment, and administrative offices.

As part of the wind-down, the Company also recognized other impairment charges associated with inventory, certain accounts receivable and other assets during the three-month period ended September 30, 2024.

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

6 unchanged sentences

Pension Benefits Other Postretirement Benefits

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

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

(in thousands of dollars) 2024 2023 2024 2023

5 unchanged sentences

$ 758 $ 495 $ 111 $ 83

During the three months ended June 30, 2024, the Company made contributions of approximately $ 0.2 million to its pension plans.

Additional contributions of $ 2.5 million are expected during the remaining nine months of fiscal year 2025.

Pension Benefits Other Postretirement Benefits

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

(in thousands of dollars) 2024 2023 2024 2023

Service cost $ 3,956 $ 3,848 $ 69 $ 73

Interest cost 8,629 8,696 794 793

Expected return on plan assets ( 10,820 ) ( 11,663 ) ( 41 ) ( 47 )

Net amortization and deferral 522 611 ( 477 ) ( 569 )

Net periodic benefit cost

$ 2,287 $ 1,492 $ 345 $ 250

During the nine months ended December 31, 2024, the Company made contributions of approximately $ 1.6 million to its pension plans.

Additional contributions of $ 1.3 million are expected during the remaining three months of fiscal year 2025.

STOCK-BASED COMPENSATION

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.

The Compensation Committee administers the Company’s Plan consistently, following previously defined guidelines.

The Compensation Committee administers the Plan consistently, following previously defined guidelines.

In recent years, the Compensation Committee has awarded only grants of RSUs and PSUs.

8 unchanged sentences

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

During the three-month periods ended June 30, 2024 and 2023, 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 nine-month periods ended December 31, 2024 and 2023, 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 134,360 93,300

5 unchanged sentences

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

For the three-month periods ended June 30, 2024 and 2023, the Company recorded total stock-based compensation expense of approximately $ 4.6 million and $ 3.9 million, respectively.

The Company expects to recognize stock-based compensation expense of approximately $ 1.6 million during the remaining nine months of fiscal year 2025.

For the nine-month periods ended December 31, 2024 and 2023, the Company recorded total stock-based compensation expense of approximately $ 7.5 million and $ 10.6 million, respectively.

The Company expects to recognize stock-based compensation expense of approximately $ 0.7 million during the remaining three months of fiscal year 2025.

OPERATING SEGMENTS

1 unchanged sentence

The Tobacco Operations segment activities involve contracting, procuring, processing, packing, storing, and shipping leaf tobacco for sale to, or for the account of, manufacturers of consumer tobacco products throughout the world.

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.

Through various operating subsidiaries located in tobacco-growing countries around the world and significant ownership interests in unconsolidated affiliates, the Company processes 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.

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

The Tobacco Operations segment also provides physical and chemical product testing for tobacco customers.

Some of these tobacco types are also increasingly used in the manufacturing of next generation tobacco products that are intended to provide consumers with an alternative to traditional combustible products.

The Tobacco Operations segment also provides physical and chemical

product testing for tobacco customers.

A substantial portion of the Company’s Tobacco Operations' revenues are derived from sales to a limited number of large, multinational cigarette and cigar manufacturers.

9 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 December 31, Nine Months Ended December 31,

(in thousands of dollars) 2024 2023 2024 2023

9 unchanged sentences

( 2,149 ) ( 1,384 ) ( 1,647 ) 3,495

Restructuring and impairment costs (2)

— ( 924 ) ( 10,573 ) ( 3,523 )

Consolidated operating income $ 104,076 $ 87,464 $ 190,037 $ 153,811

(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, 2024 and 2023:

Three Months Ended June 30,

Nine Months Ended December 31,

(in thousands of dollars) 2024 2023

10 unchanged sentences

Net gain (loss) on derivative instruments (net of tax (expense) benefit of $ 3,000 and $( 153 ))

( 11,414 ) 703

Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $ 55 and $ 1,422 ) (1)

24 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, 2024 and 2023 is as follows:

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023

A reconciliation of the changes in Universal Corporation shareholders’ equity and noncontrolling interests in subsidiaries for the three and nine months ended December 31, 2024 and 2023 is as follows:

Three Months Ended December 31, 2024 Three Months Ended December 31, 2023

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

15 unchanged sentences

Balance at end of period $ 1,450,610 $ 41,302 $ 1,491,912 $ 1,417,076 $ 41,574 $ 1,458,650

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

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

Balance at beginning of year $ 1,437,207 $ 41,716 $ 1,478,923 $ 1,397,088 $ 39,864 $ 1,436,952

Changes in common stock

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

Accrual of stock-based compensation 7,457 — 7,457 10,625 — 10,625

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

( 3,715 ) — ( 3,715 ) ( 2,972 ) — ( 2,972 )

Dividend equivalents on RSUs 905 — 905 940 — 940

Changes in retained earnings

Net income 85,709 13,232 98,941 79,280 7,634 86,914

Cash dividends declared

( 60,028 ) — ( 60,028 ) ( 59,004 ) — ( 59,004 )

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

Dividend equivalents on RSUs ( 905 ) — ( 905 ) ( 940 ) — ( 940 )

Other comprehensive income (loss) ( 16,020 ) ( 766 ) ( 16,786 ) ( 3,197 ) ( 79 ) ( 3,276 )

Other changes in noncontrolling interests

Dividends paid to noncontrolling shareholders

— ( 12,880 ) ( 12,880 ) — ( 5,845 ) ( 5,845 )

Balance at end of period $ 1,450,610 $ 41,302 $ 1,491,912 $ 1,417,076 $ 41,574 $ 1,458,650

SUBSEQUENT EVENT

In July 2024, management initiated a restructuring plan to consolidate our European sheet tobacco operations into our facility in the Netherlands.

The plan involves the closure of the tobacco sheet operations in Germany in fiscal year 2025.

We expect to recognize between a total of $ 10 million to $ 15 million of restructuring and impairment costs during fiscal years 2025 and 2026 as a result of the consolidation of operations.

Pension De-Risking

In March 2025, the Company's management undertook a de-risking strategy for the Company-sponsored qualified defined benefit pension plan that covers certain domestic employees and retirees.

The Company purchased an annuity for a limited group of retirees currently receiving benefit payments.

The annuity purchase and transfer of risk to a third-party insurance company resulted in de-recognition of approximately $ 45 million of projected benefit obligation.

The transaction triggered settlement accounting that requires immediate recognition of a portion of the accumulated other comprehensive losses associated with the defined benefit plan.

The Company expects to recognize a non-cash settlement charge of approximately $ 15 million in the fourth quarter of fiscal year 2025.

Debt Covenant Consents

Due to the delays resulting from the previously disclosed investigation of the embezzlement at the Company's subsidiary in Mozambique, the Company was unable to timely file its quarterly reports on Form 10-Q for the second and third quarters of fiscal year 2025 with the Securities and Exchange Commission ("SEC").

The delayed filings resulted in the Company obtaining lender consents (the "Consents") under its Credit Agreement, dated December 15, 2022, among the Company, the lenders party thereto from time to time, and JP Morgan Chase Bank, N.A., as Administrative Agent (the "Credit Agreement").

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 and resulted in approximately $ 1.4 million of additional selling, general, and administrative costs.

Based on the Company's September 30, 2024 financial statements and its December 31, 2024 financial statements, it was in compliance with the financial covenants in the Credit Agreement, as of the end of each of the second and third quarters of fiscal year 2025.

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