What changed in this filing

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Item 1. Financial Statements

2025-08-06 compared with 2025-04-21 · 148 added, 190 removed, 605 unchanged (36% 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,

2024 2023 2024 2023

(Unaudited) (Unaudited)

Three Months Ended June 30,

Sales and other operating revenues $ 593,762 $ 597,050

27 unchanged sentences

(in thousands of dollars)

September 30, September 30, March 31,

June 30, June 30, March 31,

2025 2024 2025

31 unchanged sentences

(in thousands of dollars)

September 30, September 30, March 31,

June 30, June 30, March 31,

2025 2024 2025

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 24,715,625 shares issued and outstanding at September 30, 2024 ( 24,558,493 at September 30, 2023 and 24,573,408 at March 31, 2024)

Common stock, no par value, 100,000,000 shares authorized 24,807,613 shares issued and outstanding at June 30, 2025 ( 24,675,988 at June 30, 2024 and 24,715,625 at March 31, 2025)

355,498 347,152 351,626

9 unchanged sentences

(in thousands of dollars)

Six Months Ended September 30,

Three Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

20 unchanged sentences

Customer advances and deposits 478 ( 1,090 )

Net cash provided (used) by operating activities ( 47,413 ) 10,534

Net cash used by operating activities ( 205,103 ) ( 62,444 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment ( 12,053 ) ( 22,749 )

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

Proceeds from sale of property, plant and equipment 143 867

3 unchanged sentences

Dividends paid to noncontrolling interests ( 7,203 ) ( 8,330 )

Repurchase of common stock — ( 4,744 )

Dividends paid on common stock ( 20,020 ) ( 19,659 )

Other ( 4,016 ) ( 3,397 )

Net cash provided (used) by financing activities 109,289 52,989

Net cash provided by financing activities 134,622 130,754

Effect of exchange rate changes on cash, restricted cash and cash equivalents 711 ( 321 )

10 unchanged sentences

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

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 Financial Accounting Standard Board ("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 segment disclosures.

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

13 unchanged sentences

Tobacco Operations

During the six months ended September 30, 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 six months ended September 30, 2024, the Company also incurred $ 0.1 million of termination and impairment costs in other areas of the Tobacco Operations segment.

During the six months ended September 30, 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 six months ended September 30, 2023, the Company also incurred $ 0.8 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 six months ended September 30, 2024 and 2023 were as follows:

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

During the second quarter of fiscal year 2025, 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.

During the three months ended June 30, 2025, the Company recognized an additional $ 1.0 million of impairment costs.

Additionally, during the three months ended June 30, 2025, the Company also incurred $ 0.1 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 months ended June 30, 2025 and 2024 were as follows:

Three Months Ended June 30,

(in thousands) 2025 2024

1 unchanged sentence

Employee termination benefits $ 122 $ —

Other 1,372 (182) 1,372 (182)

Total restructuring costs 122 —

5 unchanged sentences

The majority of the Company’s consolidated revenue consists of sales of processed leaf tobacco to customers.

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 ingredient products.

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

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.

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

3 unchanged sentences

Tobacco Sales

The majority of the Company’s business involves purchasing leaf tobacco from farmers in the origins where it is grown, processing and packing the tobacco in its factories, and then transferring ownership and control of the tobacco to customers.

The majority of the Company’s business involves purchasing leaf tobacco from farmers in the regions where it is grown, processing and packing the tobacco in its factories, and then transferring ownership and control of the tobacco to customers.

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.

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.

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

Cost-plus arrangements provide the Company reimbursement of the cost to purchase and process the tobacco, plus a contractually agreed-upon profit margin.

3 unchanged sentences

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.

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 beverages and both human and pet food.

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 cost-plus contracts with certain customers.

Ingredient Sales

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

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, but the Company does have cost-plus contracts with certain customers.

The Company utilizes the most likely amount methodology under the accounting guidance to recognize revenue for cost-plus arrangements with 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 September 30, Six Months Ended September 30,

Three Months Ended June 30,

(in thousands of dollars) 2025 2024

Tobacco sales $ 457,873 $ 488,231

Ingredients sales 76,543 78,397 157,237 149,055

Ingredient sales 84,943 80,694

Processing revenue 30,768 14,669

3 unchanged sentences

Consolidated sales and other operating revenues $ 593,762 $ 597,050

Other operating sales and revenues consists principally of interest on advances to suppliers and dividend payments from deconsolidated affiliates.

Other operating sales and revenue consists principally of interest on advances to tobacco suppliers and dividend income from unconsolidated affiliates.

OTHER CONTINGENT LIABILITIES AND OTHER MATTERS

1 unchanged sentence

Other Contingent Liabilities (Letters of credit)

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

The Company had other contingent liabilities totaling approximately $ 1 million at June 30, 2025, 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.

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.

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 $ 10 million.

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

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 September 30, 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 $ 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, 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.

Should the subsidiary ultimately be required to pay any tax, interest, or penalties in the case, the portion paid for tax would generate VAT credits that the subsidiary may be able to recover.

The subsidiary 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.

Management of the subsidiary and outside counsel challenged the Parana assessment claims.

In July 2025, a final and indisputable favorable ruling was issued by the Brazilian National Treasury Attorney's office declaring the Parana assessment without merit, requiring the state to withdraw and cancel all claims made against the Company's Brazilian operating subsidiary.

Other Legal and Tax Matters

3 unchanged sentences

Advances to Suppliers

In many sourcing origins where the Company operates, it provides agronomy services and seasonal advances of seed, seedlings, fertilizer, and other supplies to tobacco farmers for crop production, or makes seasonal cash advances to farmers for the procurement of those inputs.

In many sourcing regions where the Company operates, it provides agronomy services and seasonal advances of seed, seedlings, fertilizer, and other supplies to tobacco farmers for crop production, or makes seasonal cash advances to farmers for the procurement of those inputs.

These advances are short term, are repaid upon delivery of tobacco to the Company, and are reported in advances to suppliers in the consolidated balance sheets.

In several origins, the Company has made long-term advances to tobacco farmers to finance curing barns and other farm infrastructure.

In several regions, the Company has made long-term advances to tobacco farmers to finance curing barns and other farm infrastructure.

In some years, due to low crop yields and other factors, individual farmers may not deliver sufficient volumes of tobacco to fully repay their seasonal advances, and the Company may extend repayment of those advances into future crop years.

1 unchanged sentence

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 $ 151 million at September 30, 2024, $ 127 million at September 30, 2023, and $ 162 million at March 31, 2024.

The related valuation allowances totaled $ 11 million at September 30, 2024, $ 20 million at September 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 $ 5.6 million in the six-month period ended September 30, 2024 and increased by net provisions of approximately $ 3.8 million in the six-month period ended September 30, 2023.

Short-term and long-term advances to suppliers totaled $ 98 million at June 30, 2025, $ 120 million at June 30, 2024, and $ 189 million at March 31, 2025.

The related valuation allowances totaled $ 18 million at June 30, 2025 and March 31, 2025 and $ 19 million at June 30, 2024, and were estimated based on the Company’s historical loss information and crop projections.

The allowances were increased by net provisions of $ 0.1 million in the three-month period ended June 30, 2025 and decreased by net recoveries of

$ 0.8 million in the three-month period ended June 30, 2024.

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

12 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 September 30, 2024, the aggregate balance of recoverable tax credits held by the Company’s subsidiaries totaled approximately $ 63 million ($ 61 million at September 30, 2023 and $ 72 million at March 31, 2024).

The related valuation allowances totaled approximately $ 21 million at September 30, 2024 and 2023, and March 31, 2024.

At June 30, 2025, the aggregate balance of recoverable tax credits held by the Company’s subsidiaries totaled approximately $ 78 million ($ 68 million at June 30, 2024 and $ 64 million at March 31, 2025).

The related valuation allowances totaled approximately $ 21 million at June 30, 2025 and 2024, and March 31, 2025.

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

1 unchanged sentence

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, 2024, subject to market conditions and other factors.

The program had $ 95 million of remaining capacity for repurchases of common stock at September 30, 2024.

This stock repurchase program was replaced on November 6, 2024 when the Company's Board of Directors authorized a new stock repurchase program up to $ 100 million in common stock through November 15, 2026, subject to market conditions and other factors.

This stock repurchase program authorized the purchase of up to $ 100 million in common stock in open market or privately negotiated transactions at prices not exceeding prevailing market rates 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 June 30, 2025.

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 June 30,

(in thousands, except share and per share data) 2025 2024

18 unchanged sentences

Numerous countries in which Company operates have enacted or are in the process of enacting legislation to adopt a global minimum effective tax rate described in the Global Anti-Base Erosion framework rules, or Pillar Two, issued by the Organization for Economic Co-operation and Development (“OECD”).

The Pillar Two legislation includes establishing a 15 % global minimum tax rate on a country-by-country basis and is effective for the Company's fiscal year 2025.

performed an assessment of the potential impact on income taxes from enactment of the Pillar Two legislation.

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 and six months ended September 30, 2024

The Company's consolidated effective income tax rate for the three and six months ended September 30, 2024 was 28.6 % and 31.5 %, respectively.

Three and six months ended September 30, 2023

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

The Pillar Two legislation includes establishing a 15 % global minimum tax rate on a country-by-country.

The Company performed an assessment of the potential impact on income taxes from enactment of the Pillar Two legislation.

On July 4, 2025, the One, Big, Beautiful Bill Act (“OBBBA”), (Public Law 119-21), was signed into law.

The Company is still evaluating the potential impacts of the OBBBA;

however, the Company does not anticipate it will have a material impact on the Company’s financial statements.

Three months ended June 30, 2025

The Company's consolidated effective income tax rate for the three months ended June 30, 2025 was 27.1 %.

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 % on a loss before income taxes and other items.

GOODWILL AND OTHER INTANGIBLES

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

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

The Company's changes in goodwill at June 30, 2025 and 2024 consisted of the following:

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

Balance at beginning of fiscal year $ 213,840 $ 213,869

2 unchanged sentences

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

The Company's intangible assets subject to amortization consisted of the following at September 30, 2024 and 2023 and at March 31, 2024:

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

The Company's intangible assets subject to amortization consisted of the following at June 30, 2025 and 2024 and at March 31, 2025:

(in thousands, except useful life) June 30, 2025

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

5 unchanged sentences

Total intangible assets $ 111,766 $ ( 56,529 ) $ 55,237

September 30, 2023

June 30, 2024

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 and six months ended September 30, 2024 and 2023 was:

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

2023 2024 2023

The Company's amortization expense for intangible assets for the three months ended June 30, 2025 and 2024 was:

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

Amortization Expense $ 2,663 $ 2,812

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 September 30, 2024, the expected future amortization expense for intangible assets is as follows:

As of June 30, 2025, the expected future amortization expense for intangible assets was as follows:

Fiscal Year (in thousands of dollars)

2025 (excluding the six months ended September 30, 2024)

2026 (excluding the three months ended June 30, 2025)

2030 and thereafter 24,909

10 unchanged sentences

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

At September 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.

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.

At June 30, 2025, 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 the entry into the Company's bank credit facility in December 2022.

Those swap agreements, which had an aggregate notional amount of $ 370 million corresponding to a portion of the principal balance on the repaid loans, were terminated concurrent with the inception of the new swap agreements.

The fair value of the previous swap agreements, approximately $ 11.8 million, was received from the counterparties in December 2022 upon termination and is being amortized from accumulated other comprehensive loss into earnings as a reduction of interest expense through the original maturity dates of those agreements.

The fair value of the previous swap agreements, approximately $ 11.8 million, was received from the counterparties upon termination and is being amortized from accumulated other comprehensive loss into earnings as a reduction of interest expense through the original maturity dates of those agreements.

As of June 30, 2025, $ 1.4 million remained in accumulated other comprehensive loss to be amortized through December 31, 2025.

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

11 unchanged sentences

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

Six Months Ended September 30,

dollar notional amounts of forward and option contracts entered into for these purposes during the three-month periods in fiscal years 2026 and 2025 was as follows:

Three Months Ended June 30,

(in millions of dollars) 2025 2024

1 unchanged sentence

Processing costs 8.3 15.2

Operating costs 28.9 —

$ 50.5 $ 112.2

1 unchanged sentence

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

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

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

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

The 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, 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 June 30, 2025 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

3 unchanged sentences

Crop input sales 2025 Brazil 2026

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.

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.

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

16 unchanged sentences

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, 2024 and 2023, and March 31, 2024, were approximately $ 88.5 million, $ 101.1 million, and $ 20.9 million, respectively.

The total notional amounts of contracts outstanding at June 30, 2025 and 2024, and March 31, 2025, were approximately $ 29.1 million, $ 75.4 million, and $ 17.7 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 September 30, Six Months Ended September 30,

Three Months Ended June 30,

(in thousands of dollars) 2025 2024

5 unchanged sentences

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

$ 688 $ 1,569 $ 1,377 $ 3,139

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

20 unchanged sentences

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

For the forward foreign currency exchange contracts designated as cash flow hedges of tobacco purchases and the crop input sales in Brazil, a net hedge loss of approximately $ 3.3 million remained in accumulated other comprehensive loss at September 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 September 30, 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 tobacco or by a change in sales prices if the strategy has been mandated by the customer.

For the forward foreign currency exchange contracts designated as cash flow hedges of tobacco purchases and the crop input sales in Brazil, a net hedge loss of approximately $ 4.9 million remained in accumulated other comprehensive loss at June 30, 2025.

That balance reflects gains and losses on contracts related to the 2026 and 2025 Brazil crop, and the 2026 and 2025 Brazil crop input sales, less the amounts reclassified to earnings related to tobacco sold through June 30, 2025.

Based on the hedging strategy, as the gain or loss is recognized in earnings, it is expected to be offset by a change in the direct cost for the tobacco or by a change in sales prices if the strategy has been mandated by the customer.

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

Effect of Derivative Financial Instruments on the Consolidated Balance Sheets

The table below outlines the effects of the Company’s derivative financial instruments on the consolidated balance sheets at September 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 June 30, 2025 and 2024, and March 31, 2025:

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, 2024 September 30, 2023 March 31, 2024 September 30, 2024 September 30, 2023 March 31, 2024

(in thousands of dollars) June 30, 2025 June 30, 2024 March 31, 2025 June 30, 2025 June 30, 2024 March 31, 2025

Derivatives Designated as Hedging Instruments

31 unchanged sentences

Recurring Fair Value Measurements

At September 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 June 30, 2025 and 2024, and at March 31, 2025, 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, 2024

June 30, 2025

Fair Value Hierarchy

14 unchanged sentences

$ — $ — $ 2,533 $ — $ 2,533

September 30, 2023

June 30, 2024

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, 2024, and 2023 and March 31, 2024:

(in millions of dollars) September 30, 2024 September 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 June 30, 2025, and 2024 and March 31, 2025:

(in millions of dollars) June 30, 2025 June 30, 2024 March 31, 2025

Fair market value of long term obligations $ 618 $ 619 $ 616

9 unchanged sentences

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 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 fiscal year 2025, 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.

After reassessing the fair value of the long-lived assets associated with the operations in Germany, an additional $ 1.0 million impairment charge was recognized during three-month period ended June 30, 2025

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

6 unchanged sentences

Pension Benefits Other Postretirement Benefits

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

(in thousands of dollars) 2024 2023 2024 2023

Service cost $ 1,319 $ 1,286 $ 23 $ 24

Interest cost 2,882 2,898 264 266

Expected return on plan assets ( 3,607 ) ( 3,888 ) ( 14 ) ( 16 )

Net amortization and deferral 174 203 ( 160 ) ( 191 )

Net periodic benefit cost

$ 768 $ 499 $ 113 $ 83

Pension Benefits Other Postretirement Benefits

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

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

(in thousands of dollars) 2025 2024 2025 2024

5 unchanged sentences

$ 575 $ 761 $ 108 $ 121

During the six months ended September 30, 2024, the Company made contributions of approximately $ 1.4 million to its pension plans.

Additional contributions of $ 1.5 million are expected during the remaining six months of fiscal year 2025.

During the three months ended June 30, 2025, the Company made contributions of approximately $ 0.6 million to its pension plans.

Additional contributions of $ 10.7 million are expected during the remaining nine months of fiscal year 2026.

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 fiscal year.

With the exception of new hires and promotions, 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 fiscal year.

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

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

RSUs awarded prior to fiscal year 2022 vest 5 years after the grant date and those awarded beginning with fiscal year 2022 vest 3 years after the grant date.

RSUs awarded to officers and employees generally vest 3 years after the grant date.

After vesting RSUs are paid out in shares of common stock.

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

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

The PSUs vest at the end of a performance period of 3 years that begins with the year of the grant, are paid out in shares of common stock shortly after the vesting date, and do not carry rights to dividends or dividend equivalents prior to vesting.

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

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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, 2024 and 2023, 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 three-month periods ended June 30, 2025 and 2024, 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,

Number granted 83,795 74,950

5 unchanged sentences

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

For the six-month periods ended September 30, 2024 and 2023, the Company recorded total stock-based compensation expense of approximately $ 6.6 million and $ 5.7 million, respectively.

The Company expects to recognize stock-based compensation expense of approximately $ 0.9 million during the remaining six months of fiscal year 2025.

For the three-month periods ended June 30, 2025 and 2024, the Company recorded total stock-based compensation expense of approximately $ 7.6 million and $ 4.6 million, respectively.

The Company expects to recognize stock-based compensation expense of approximately $ 2.2 million during the remaining nine months of fiscal year 2026.

OPERATING SEGMENTS

The Company conducts operations across two reportable operating segments, Tobacco Operations and Ingredients Operations.

Management regularly evaluates the Company’s global business activities, including product and service offerings to its customers, as well as senior management’s operational and financial responsibilities.

Assessments include an analysis of how its Chief Operating Decision Maker (“CODM”) measures business performance and allocates resources.

As a result of this analysis, senior management has determined the Company conducts operations across two reportable operating segments, Tobacco Operations and Ingredients Operations.

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 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 manufacturing 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.

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

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

Some of these tobacco types are also 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.

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.

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Customers for the Ingredients Operations segment include large multinational food and beverage companies, smaller independent manufacturers, and retail organizations.

FruitSmart, Silva, and Shank's are the primary operations for the Ingredients Operations segment.

FruitSmart, Inc.

(“FruitSmart”), Silva International, Inc.

(“Silva”), and Shank’s Extracts, LLC d/b/a Universal Ingredients–Shank’s (“Universal Ingredients–Shank’s”) are the primary operations for the Ingredients Operations segment.

FruitSmart supplies a broad set of juices, concentrates, pomaces, purees, fruit fibers, seeds, seed powders, and other value-added products to food, beverage, and flavor companies throughout the United States and internationally.

Silva procures dehydrated vegetables, fruits, and herbs from around the world and specializes in processing natural materials into custom designed dehydrated vegetable and fruit-based ingredients for a variety of end products.

Shank's offers a diversified portfolio of botanical extracts, distillates, natural flavors, and color for industrial and private label customers worldwide, and is known for their significant vanilla expertise.

Shank's is also equipped to offer customers custom bottling and packaging for their products.

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

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

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

(in thousands of dollars) 2024 2023 2024 2023

Universal Ingredients–Shank’s offers a diversified portfolio of botanical extracts, distillates, natural flavors, and color for industrial and private label customers worldwide, and is known for their significant vanilla expertise.

Universal Ingredients–Shank’s is also equipped to offer customers custom bottling and packaging for their products.

Universal incurs corporate overhead expenses related to senior management, sales, finance, legal, and other functions that are centralized at its corporate headquarters, as well as functions performed at several sales and administrative offices around the world.

These overhead expenses are currently allocated to the reportable operating segments, generally on the basis of projected annual financial and operational performance, including volumes planned to be purchased and/or processed.

Management believes this method of allocation is currently representative of the value of the related services provided to the operating segments.

The CODM, which has been identified as a group comprised of the Company’s Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer, currently evaluates the performance of the operating segments based on operating income after allocated overhead expenses, plus equity in the pretax earnings of unconsolidated affiliates (“Segment Operating Income”).

The CODM also uses Segment Operating Income for planning, forecasting, and allocating capital and other resources to the operating segments.

Reportable segment data as of, or for, each period presented in the consolidated statements of income and comprehensive income, the consolidated balance sheets, and the consolidated statements of cash flows is as follows:

Three Months Ended June 30, 2025 Three Months Ended June 30, 2024

Tobacco Operations Ingredients Operations Consolidated Tobacco Operations Ingredients Operations Consolidated

Sales and other operating revenues $ 504,696 $ 89,066 $ 593,762 $ 511,955 $ 85,095 $ 597,050

Tobacco Operations $ 630,212 $ 554,653 $ 1,142,167 $ 998,561

Ingredients Operations 80,550 83,831 165,645 157,645

Consolidated sales and other operating revenues $ 710,762 $ 638,484 $ 1,307,812 $ 1,156,206

OPERATING INCOME (LOSS)

Tobacco Operations $ 77,334 $ 52,387 $ 91,788 $ 61,270

Ingredients Operations 1,333 4,811 4,244 2,797

Cost of goods sold ( 407,867 ) ( 71,768 ) ( 479,635 ) ( 434,765 ) ( 66,364 ) ( 501,129 )

Selling, general and administrative expenses ( 44,754 ) ( 12,037 ) ( 56,791 ) ( 46,548 ) ( 12,779 ) ( 59,327 )

Corporate overhead allocated to the segments ( 18,840 ) ( 3,561 ) ( 22,401 ) ( 16,328 ) ( 3,041 ) ( 19,369 )

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

2,435 — 2,435 140 — 140

Segment operating income 35,670 1,700 37,370 14,454 2,911 17,365

2 unchanged sentences

Restructuring and impairment costs (2)

( 10,573 ) ( 2,599 ) ( 10,573 ) ( 2,599 )

Consolidated operating income $ 33,813 $ 17,225

2 unchanged sentences

See Note 2 for additional information.

Segment Assets Accounts Receivable, net

2025 June 30,

2024 March 31,

2025 June 30,

2024 March 31,

Tobacco Operations $ 2,652,407 $ 2,523,296 $ 2,436,416 $ 366,317 $ 376,578 $ 566,755

Ingredients Operations 536,900 509,672 553,136 57,840 59,363 59,121

Consolidated total $ 3,189,307 $ 3,032,968 $ 2,989,552 $ 424,157 $ 435,941 $ 625,876

Goodwill, net Intangibles, net

2025 June 30,

2024 March 31,

2025 June 30,

2024 March 31,

Tobacco Operations $ 97,796 $ 97,742 $ 97,772 $ 45 $ 65 $ 47

Ingredients Operations 116,068 116,068 116,068 55,192 66,009 57,789

Consolidated total $ 213,864 $ 213,810 $ 213,840 $ 55,237 $ 66,074 $ 57,836

Capital Expenditures Depreciation and Amortization

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

2025 2024 2025 2024

Tobacco Operations $ 7,402 $ 9,135 $ 8,216 $ 9,881

Ingredients Operations 4,651 13,614 5,366 4,683

Consolidated total $ 12,053 $ 22,749 $ 13,582 $ 14,564

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, 2024 and 2023:

Six Months Ended September 30,

Three Months Ended June 30,

(in thousands of dollars) 2025 2024

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Amortization included in earnings (net of tax expense (benefit) of $ 38 and $( 12 )) (3)

( 361 ) ( 226 )

Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes ( 361 ) ( 226 )

8 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, 2024 and 2023 is as follows:

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023

A reconciliation of the changes in Universal Corporation shareholders’ equity and noncontrolling interests in subsidiaries for the three months ended June 30, 2025 and 2024 is as follows:

Three Months Ended June 30, 2025 Three Months Ended June 30, 2024

(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 )

Accrual of stock-based compensation 7,575 — 7,575 4,641 — 4,641

6 unchanged sentences

Common stock ( 20,406 ) — ( 20,406 ) ( 19,988 ) — ( 19,988 )

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

Dividend equivalents on RSUs ( 314 ) — ( 314 ) ( 312 ) — ( 312 )

4 unchanged sentences

Balance at end of period $ 1,458,917 $ 40,672 $ 1,499,589 $ 1,413,457 $ 30,042 $ 1,443,499

Six Months Ended September 30, 2024 Six Months Ended September 30, 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 6,583 — 6,583 5,711 — 5,711

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

( 3,715 ) — ( 3,715 ) ( 2,963 ) — ( 2,963 )

Dividend equivalents on RSUs 600 — 600 619 — 619

Changes in retained earnings

Net income 26,070 5,075 31,145 26,064 ( 437 ) 25,627

Cash dividends declared

( 40,008 ) — ( 40,008 ) ( 39,357 ) — ( 39,357 )

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

Dividend equivalents on RSUs ( 600 ) — ( 600 ) ( 619 ) — ( 619 )

Other comprehensive income (loss) ( 5,571 ) ( 393 ) ( 5,964 ) 2,390 ( 263 ) 2,127

Other changes in noncontrolling interests

Dividends paid to noncontrolling shareholders

— ( 8,960 ) ( 8,960 ) — ( 5,845 ) ( 5,845 )

Balance at end of period $ 1,420,566 $ 37,438 $ 1,458,004 $ 1,384,189 $ 33,319 $ 1,417,508

SUBSEQUENT EVENTS

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