Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
UNIVERSAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except share and per share data)
Three Months Ended June 30,
2025 2024
(Unaudited)
Sales and other operating revenues $ 593,762 $ 597,050
Costs and expenses
Cost of goods sold 479,635 501,129
Selling, general and administrative expenses 79,192 78,696
Restructuring and impairment costs 1,122 —
Operating income 33,813 17,225
Equity in pretax earnings (loss) of unconsolidated affiliates 2,435 140
Other non-operating income (expense) 586 464
Interest income 647 808
Interest expense 17,777 20,734
Income (loss) before income taxes and other items 19,704 ( 2,097 )
Income taxes 5,337 727
Net income (loss) 14,367 ( 2,824 )
Less: net loss (income) attributable to noncontrolling interests in subsidiaries ( 5,870 ) 2,954
Net income (loss) attributable to Universal Corporation $ 8,497 $ 130
Earnings per share:
Basic
$ 0.34 $ 0.01
Diluted
$ 0.34 $ 0.01
Weighted average common shares outstanding:
Basic
24,999,570 24,876,220
Diluted
25,131,857 25,066,106
Total comprehensive income (loss), net of income taxes $ 23,102 $ ( 8,350 )
Less: comprehensive (income) loss attributable to noncontrolling interests ( 5,893 ) 3,344
Comprehensive income (loss) attributable to Universal Corporation $ 17,209 $ ( 5,006 )
Dividends declared per common share $ 0.82 $ 0.81
See accompanying notes.
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UNIVERSAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
June 30, June 30, March 31,
2025 2024 2025
(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 178,435 $ 101,700 $ 260,115
Accounts receivable, net 424,157 435,941 625,876
Advances to suppliers, net 79,154 100,451 169,385
Accounts receivable—unconsolidated affiliates 127,701 60,991 7,143
Inventories—at lower of cost or net realizable value:
Tobacco 1,219,769 1,202,341 806,332
Other 205,036 187,743 189,610
Prepaid income taxes 22,715 23,576 19,595
Other current assets 89,360 85,712 78,041
Total current assets 2,346,327 2,198,455 2,156,097
Property, plant and equipment
Land 26,266 25,926 26,113
Buildings 337,290 326,988 333,398
Machinery and equipment 739,899 702,153 723,935
1,103,455 1,055,067 1,083,446
Less accumulated depreciation ( 728,180 ) ( 680,011 ) ( 710,472 )
375,275 375,056 372,974
Other assets
Operating lease right-of-use assets 38,428 30,582 34,260
Goodwill, net 213,864 213,810 213,840
Other intangibles, net 55,237 66,074 57,836
Investments in unconsolidated affiliates 87,988 75,531 79,317
Deferred income taxes 20,461 18,287 16,539
Pension asset 13,006 12,075 12,819
Other noncurrent assets 38,721 43,098 45,870
467,705 459,457 460,481
Total assets $ 3,189,307 $ 3,032,968 $ 2,989,552
See accompanying notes.
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UNIVERSAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
June 30, June 30, March 31,
2025 2024 2025
(Unaudited) (Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable and overdrafts $ 621,275 $ 581,087 $ 455,039
Accounts payable 119,803 79,747 98,036
Accounts payable—unconsolidated affiliates 76 — 1,999
Customer advances and deposits 4,557 15,660 3,763
Accrued compensation 22,577 20,903 44,646
Income taxes payable 15,528 10,766 12,586
Current portion of operating lease liabilities 11,233 9,588 10,742
Accrued expenses and other current liabilities 147,639 128,305 123,350
Current portion of long-term debt — — —
Total current liabilities 942,688 846,056 750,161
Long-term debt 618,057 617,502 617,918
Pensions and other postretirement benefits 36,307 43,386 35,336
Long-term operating lease liabilities 24,945 17,457 20,608
Other long-term liabilities 26,032 27,167 22,901
Deferred income taxes 41,689 37,901 42,090
Total liabilities 1,689,718 1,589,469 1,489,014
Shareholders’ equity
Universal Corporation:
Preferred stock:
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 24,807,613 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
Retained earnings 1,174,758 1,153,026 1,186,981
Accumulated other comprehensive loss ( 71,339 ) ( 86,721 ) ( 80,051 )
Total Universal Corporation shareholders' equity 1,458,917 1,413,457 1,458,556
Noncontrolling interests in subsidiaries 40,672 30,042 41,982
Total shareholders' equity 1,499,589 1,443,499 1,500,538
Total liabilities and shareholders' equity $ 3,189,307 $ 3,032,968 $ 2,989,552
See accompanying notes.
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UNIVERSAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
Three Months Ended June 30,
2025 2024
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 14,367 $ ( 2,824 )
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Depreciation and amortization 13,582 14,564
Net provision for losses (recoveries) on advances to suppliers 52 ( 751 )
Inventory writedowns 1,469 4,371
Stock-based compensation expense 7,575 4,641
Foreign currency remeasurement (gain) loss, net ( 2,362 ) 7,171
Foreign currency exchange contracts ( 6,162 ) ( 1,340 )
Deferred income taxes ( 3,259 ) ( 3,983 )
Equity in net loss (income) of unconsolidated affiliates, net of dividends ( 1,943 ) ( 154 )
Restructuring and impairment costs 1,122 —
Restructuring payments ( 2,669 ) ( 253 )
Other, net ( 43 ) 644
Changes in operating assets and liabilities, net:
Accounts and notes receivable 169,177 78,524
Inventories ( 419,123 ) ( 135,456 )
Other assets 627 8,510
Accounts payable 16,678 ( 28,706 )
Accrued expenses and other current liabilities 5,879 ( 5,423 )
Income taxes ( 548 ) ( 889 )
Customer advances and deposits 478 ( 1,090 )
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 property, plant and equipment 143 867
Net cash used by investing activities ( 11,910 ) ( 21,882 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of short-term debt, net 165,861 162,140
Dividends paid to noncontrolling interests ( 7,203 ) ( 8,330 )
Dividends paid on common stock ( 20,020 ) ( 19,659 )
Other ( 4,016 ) ( 3,397 )
Net cash provided by financing activities 134,622 130,754
Effect of exchange rate changes on cash, restricted cash and cash equivalents 711 ( 321 )
Net increase (decrease) in cash, restricted cash and cash equivalents ( 81,680 ) 46,107
Cash, restricted cash and cash equivalents at beginning of year 260,115 55,593
Cash, restricted cash and cash equivalents at end of period $ 178,435 $ 101,700
See accompanying notes.
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UNIVERSAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
Universal Corporation, which together with its subsidiaries is referred to herein as “Universal” or the “Company,” is a global business-to-business agri-products supplier to consumer product manufacturers. The Company is the leading global leaf tobacco supplier and provides high-quality plant-based ingredients to food and beverage end markets. Because of the seasonal nature of the Company’s business, the results of operations for any fiscal quarter will not necessarily be indicative of results to be expected for other quarters or a full fiscal year. 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, 2025.
Accounting Pronouncements to be Adopted in Future Years
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740) - Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires additional disclosures reconciling the rates of different categories of income tax (i.e. federal, state, foreign, etc.) and a disaggregation of taxes paid and refunded. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and for interim periods in fiscal years beginning after December 15, 2025, although early adoption is permitted. 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.
NOTE 2. 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 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
Restructuring costs:
Employee termination benefits $ 122 $ —
Other — —
Total restructuring costs 122 —
Impairment costs:
Property, plant and equipment 1,000 —
Total impairment costs 1,000 —
Total restructuring and impairment costs $ 1,122 $ —
NOTE 3. REVENUE FROM CONTRACTS WITH CUSTOMERS
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
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customers. Additionally, the Company has fruit and vegetable processing operations, as well as flavor and extract services that provide customers with a range of food ingredient products. Payment terms with customers vary depending on customer creditworthiness, product types, services provided, and other factors. Contract durations and payment terms for all revenue categories generally do not exceed one year. Therefore, the Company has applied a practical expedient to not adjust the transaction price for the effects of financing components, as the Company expects that the period from the time the revenue for a transaction is recognized to the time the customer pays for the related good or service transferred will be one year or less. Below is a description of the major revenue-generating categories from contracts with customers.
Tobacco Sales
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 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. The Company utilizes the most likely amount methodology under the accounting guidance to recognize revenue for cost-plus arrangements with customers. Shipping and handling costs under tobacco sales contracts with customers are treated as fulfillment costs and included in the transaction price. Taxes assessed by government authorities on the sale of leaf tobacco products are excluded from the transaction price. At the point in time that the customer obtains control over the tobacco, which is typically aligned with physical shipment under the contractual terms with the customer, the Company completes its performance obligation and recognizes the revenue for the sale.
Ingredient Sales
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. These operations procure raw materials from domestic and international growers and suppliers and through a variety of processing steps including sorting, cleaning, pressing, mixing, extracting, and blending to manufacture finished goods utilized in both human and pet food. The contracts for food ingredients with customers create a performance obligation to transfer the manufactured finished goods to the customer. Transaction prices for the sale of food ingredients are primarily based on negotiated fixed prices, 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.
Processing Revenue
Processing and packing of customer-owned tobacco and ingredients is a short-duration process. Processing charges are primarily based on negotiated fixed prices per unit of weight processed. Under normal operating conditions, customer-owned raw materials that are placed into the production line exits as processed and packed product and is then later transported to customer-designated transfer locations. The revenue for these services is recognized when the performance obligation is satisfied, which is generally when processing is completed. The Company’s operating history and contract analyses indicate that customer requirements for processed tobacco and food ingredients products are consistently met upon completion of processing.
Other Sales and Revenue from Contracts with Customers
From time to time, the Company enters into various arrangements with customers to provide other value-added services that may include blending, chemical and physical testing of products, storage, logistics, sorting, and tobacco cutting services for select manufacturers. These other arrangements and operations are a much smaller portion of the Company’s business, and are separate and distinct contractual agreements from the Company’s tobacco and food ingredients sales or third-party processing arrangements with customers. The transaction prices and timing of revenue recognition of these items are determined by the specifics of each contract.
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Disaggregation of Revenue from Contracts with Customers
The following table disaggregates the Company’s revenue by significant revenue-generating category:
Three Months Ended June 30,
(in thousands of dollars) 2025 2024
Tobacco sales $ 457,873 $ 488,231
Ingredient sales 84,943 80,694
Processing revenue 30,768 14,669
Other sales and revenue from contracts with customers 19,057 12,809
Total revenue from contracts with customers 592,641 596,403
Other operating sales and revenues 1,121 647
Consolidated sales and other operating revenues $ 593,762 $ 597,050
Other operating sales and revenue consists principally of interest on advances to tobacco suppliers and dividend income from unconsolidated affiliates.
NOTE 4. OTHER CONTINGENT LIABILITIES AND OTHER MATTERS
Other Contingent Liabilities
Other Contingent Liabilities (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
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 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
Various subsidiaries of the Company are involved in litigation and tax examinations incidental to their business activities. While the outcome of these matters cannot be predicted with certainty, management is vigorously defending the matters and does not currently expect that any of them will have a material adverse effect on the Company’s business or financial position. However, should one or more of these matters be resolved in a manner adverse to management’s current expectation, the effect on the Company’s results of operations for a particular fiscal reporting period could be material.
Advances to Suppliers
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 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. The long-term portion of advances is included in other noncurrent assets in the consolidated balance sheets. 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 $ 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
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$ 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. Interest on advances is recognized in earnings upon the farmers’ delivery of tobacco in payment of principal and interest.
Recoverable Value-Added Tax Credits
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. Items subject to VAT vary from jurisdiction to jurisdiction, as do the rates at which the tax is assessed. When tobacco is sold to customers in the country of origin, the operating subsidiaries generally collect VAT on those sales. The subsidiaries are normally permitted to offset their VAT payments against the collections and remit only the incremental VAT collections to the tax authorities. When tobacco is sold for export, VAT is normally not assessed. In countries where tobacco sales are predominately for export markets, VAT collections generated on downstream sales are often not sufficient to fully offset the subsidiaries’ VAT payments. In those situations, unused VAT credits can accumulate. Some jurisdictions have procedures that allow companies to apply for refunds of unused VAT credits from the tax authorities, but the refund process often takes an extended period of time and it is not uncommon for refund applications to be challenged or rejected in part on technical grounds. Other jurisdictions may permit companies to sell or transfer unused VAT credits to third parties in private transactions, although approval for such transactions must normally be obtained from the tax authorities, limits on the amounts that can be transferred may be imposed, and the proceeds realized may be heavily discounted from the face value of the credits. Due to these factors, local operating subsidiaries in some countries can accumulate significant balances of VAT credits over time. The Company reviews these balances on a regular basis and records valuation allowances on the credits to reflect amounts that are not expected to be recovered, as well as discounts anticipated on credits that are expected to be sold or transferred. At June 30, 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.
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 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.
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NOTE 5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended June 30,
(in thousands, except share and per share data) 2025 2024
Basic Earnings (Loss) Per Share
Numerator for basic earnings (loss) per share
Net income (loss) attributable to Universal Corporation $ 8,497 $ 130
Denominator for basic earnings (loss) per share
Weighted average shares outstanding 24,999,570 24,876,220
Basic earnings (loss) per share $ 0.34 $ 0.01
Diluted Earnings (Loss) Per Share
Numerator for diluted earnings (loss) per share
Net income (loss) attributable to Universal Corporation $ 8,497 $ 130
Denominator for diluted earnings (loss) per share:
Weighted average shares outstanding 24,999,570 24,876,220
Effect of dilutive securities
Employee and outside director share-based awards 132,287 189,886
Denominator for diluted earnings (loss) per share 25,131,857 25,066,106
Diluted earnings (loss) per share $ 0.34 $ 0.01
NOTE 6. INCOME TAXES
The Company operates in the United States and many foreign countries and is subject to the tax laws of many jurisdictions. Changes in tax laws or the interpretation of tax laws can affect the Company’s earnings, as can the resolution of pending and contested tax issues. The Company's consolidated effective income tax rate is affected by various factors, including the mix and timing of domestic and foreign earnings, discrete items, and the effect of exchange rate changes on taxes.
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. 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.
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NOTE 7. GOODWILL AND OTHER INTANGIBLES
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,
2025 2024
Balance at beginning of fiscal year $ 213,840 $ 213,869
Foreign currency translation adjustment
24 ( 59 )
Balance at end of period $ 213,864 $ 213,810
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, 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
Customer relationships 11 — 13 $ 86,500 $ ( 35,087 ) $ 51,413
Trade names 5 11,100 ( 10,710 ) 390
Developed technology 13 9,300 ( 6,098 ) 3,202
Noncompetition agreements 4 4,000 ( 3,813 ) 187
Other 5 866 ( 821 ) 45
Total intangible assets $ 111,766 $ ( 56,529 ) $ 55,237
June 30, 2024
Useful Life (years) Gross Carrying Value Accumulated Amortization Net Carrying Value
Customer relationships 11 — 13 $ 86,500 $ ( 27,357 ) $ 59,143
Trade names 5 11,100 ( 8,820 ) 2,280
Developed technology 13 9,300 ( 5,752 ) 3,548
Noncompetition agreements 4 — 5 4,000 ( 2,962 ) 1,038
Other 5 785 ( 720 ) 65
Total intangible assets $ 111,685 $ ( 45,611 ) $ 66,074
March 31, 2025
Useful Life (years) Gross Carrying Value Accumulated Amortization Net Carrying Value
Customer relationships 11 — 13 $ 86,500 $ ( 33,155 ) $ 53,345
Trade names 5 11,100 ( 10,320 ) 780
Developed technology 13 9,300 ( 6,012 ) 3,288
Noncompetition agreements 4 — 5 4,000 ( 3,625 ) 375
Other 5 802 ( 754 ) 48
Total intangible assets $ 111,702 $ ( 53,866 ) $ 57,836
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, 2025 and 2024 was:
(in thousands of dollars) Three Months Ended June 30,
2025 2024
Amortization Expense $ 2,663 $ 2,812
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Amortization expense for the developed technology intangible asset is recorded in cost of goods sold in the consolidated statements of income. 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, 2025, the expected future amortization expense for intangible assets was as follows:
Fiscal Year (in thousands of dollars)
2026 (excluding the three months ended June 30, 2025)
$ 6,652
2027 8,105
2028 8,077
2029 7,494
2030 and thereafter 24,909
Total expected future amortization expense $ 55,237
NOTE 8. DERIVATIVES AND HEDGING ACTIVITIES
Universal is exposed to various risks in its worldwide operations and uses derivative financial instruments to manage two specific types of risks – interest rate risk and foreign currency exchange rate risk. Interest rate risk has been managed by entering into interest rate swap agreements, and foreign currency exchange rate risk has been managed by entering into forward and option foreign currency exchange contracts. However, the Company’s policy also permits other types of derivative instruments. In addition, foreign currency exchange rate risk is also managed through strategies that do not involve derivative instruments, such as using local borrowings and other approaches to minimize net monetary positions in non-functional currencies. 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 (used) by operating activities.
Cash Flow Hedging Strategy for Interest Rate Risk
In December 2022, the Company entered into receive-floating/pay-fixed interest rate swap agreements that were designated and qualify as hedges of the exposure to changes in interest payment cash flows created by fluctuations in variable interest rates on two outstanding non-amortizing bank term loans that were funded as part of a new bank credit facility in December 2022. 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, 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 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
The majority of the tobacco production in most countries outside the United States where Universal operates is sold in export markets at prices denominated in U.S. dollars. However, sales of crop inputs (such as seeds and fertilizers) to farmers, purchases of tobacco from farmers, and most processing costs (such as labor and energy) in those countries are usually denominated in the local currency. Changes in exchange rates between the U.S. dollar and the local currencies where tobacco is grown and processed affect the ultimate U.S. dollar sales of crop inputs and cost of processed tobacco. From time to time, the Company enters into forward and option contracts to buy U.S. 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. dollars and buy the local currency at future dates that coincide with the expected timing of a portion of the tobacco purchases and processing costs. These strategies offset the variability of future U.S. 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.
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The aggregate U.S. 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
Tobacco purchases $ 42.2 $ 97.0
Processing costs 8.3 15.2
Total
$ 50.5 $ 112.2
Fluctuations in exchange rates and in the amount and timing of fixed-price orders from customers for their purchases from individual crop years routinely cause variations in the U.S. dollar notional amount of forward contracts entered into from one year to the next. 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 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
Tobacco purchases 2026 Brazil 2027
Tobacco purchases 2025 Brazil 2026
Crop input sales 2026 Brazil 2027
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.
Hedging Strategy for Foreign Currency Exchange Rate Risk Related to Net Local Currency Monetary Assets and Liabilities of Foreign Subsidiaries
Most of the Company’s foreign subsidiaries transact the majority of their sales in U.S. dollars and finance the majority of their operating requirements with U.S. dollar borrowings, and therefore use the U.S. dollar as their functional currency. These subsidiaries normally have certain monetary assets and liabilities on their balance sheets that are denominated in the local currency. Those assets and liabilities can include cash and cash equivalents, accounts receivable and accounts payable, advances to farmers and suppliers, deferred income tax assets and liabilities, recoverable value-added taxes, operating lease liabilities, and other items. Net monetary assets and liabilities denominated in the local currency are remeasured into U.S. dollars each reporting period, generating gains and losses that the Company records in earnings as a component of selling, general, and administrative expenses. The level of net monetary assets or liabilities denominated in the local currency normally fluctuates throughout the year based on the operating cycle, but it is most common for monetary assets to exceed monetary liabilities, sometimes by a significant amount. When this situation exists and the local currency weakens against the U.S. dollar, remeasurement losses are generated. Conversely, remeasurement gains are generated on a net monetary asset position when the local currency strengthens against the U.S. dollar. To manage a portion of its exposure to currency remeasurement gains and losses, the Company enters into forward contracts to buy or sell the local currency at future dates coinciding with expected changes in the overall net local currency monetary asset position of the subsidiary. Gains and losses on the forward contracts are recorded in earnings as a component of selling, general, and administrative expenses for each reporting period as they occur, and thus directly offset the related remeasurement losses or gains in the consolidated statements of income for the notional amount hedged. The Company does not designate these contracts as hedges for accounting purposes. 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, 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. This strategy, while not involving the use of derivative instruments, is intended to minimize the subsidiary’s net monetary position by financing a portion of the local currency monetary assets with local currency monetary liabilities, thus hedging a portion of the overall position.
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Several of the Company’s foreign subsidiaries transact the majority of their sales and finance the majority of their operating requirements in their local currency, and therefore use their respective local currencies as the functional currency for reporting purposes. From time to time, these subsidiaries sell tobacco to customers in transactions that are not denominated in the functional currency. In those situations, the subsidiaries routinely enter into forward exchange contracts to offset currency risk for the period of time that a fixed-price order and the related trade account receivable are outstanding with the customer. The contracts are not designated as hedges for accounting purposes.
Effect of Derivative Financial Instruments on the Consolidated Statements of Income
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,
(in thousands of dollars) 2025 2024
Cash Flow Hedges - Interest Rate Swap Agreements
Derivative
Effective Portion of Hedge
Gain (loss) recorded in accumulated other comprehensive loss $ ( 1,693 ) $ 2,623
Gain (loss) reclassified from accumulated other comprehensive loss into earnings
$ 692 $ 1,475
Gain on terminated interest rate swaps amortized from accumulated other comprehensive loss into earnings
$ 688 $ 689
Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings
Interest expense
Ineffective Portion of Hedge
Gain (loss) recognized in earnings $ — $ —
Location of gain (loss) recognized in earnings Selling, general and administrative expenses
Hedged Item
Description of hedged item Floating rate interest payments on term loans
Cash Flow Hedges - Foreign Currency Exchange Contracts
Derivative
Effective Portion of Hedge
Gain (loss) recorded in accumulated other comprehensive loss $ 952 $ ( 5,237 )
Gain (loss) reclassified from accumulated other comprehensive loss into earnings
$ ( 212 ) $ 592
Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings
Cost of goods sold
Ineffective Portion and Early De-designation of Hedges
Gain (loss) recognized in earnings $ — $ —
Location of gain (loss) recognized in earnings Selling, general and administrative expenses
Hedged Item
Description of hedged item
Forecast purchases of tobacco in Brazil
Derivatives Not Designated as Hedges - Foreign Currency Exchange Contracts
Gain (loss) recognized in earnings $ 830 $ 1,763
Location of gain (loss) recognized in earnings Selling, general and administrative expenses
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.
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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 June 30, 2025 and 2024, and March 31, 2025:
Derivatives in a Fair Value Asset Position Derivatives in a Fair Value Liability Position
Balance
Sheet
Location Fair Value as of Balance
Sheet
Location Fair Value as of
(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
Interest rate swap agreements Other
non-current
assets $ — $ 7,854 $ 1,783 Other
long-term
liabilities $ 602 $ — $ —
Foreign currency exchange contracts Other
current
assets 1,840 861 11 Accounts
payable and
accrued
expenses 1,297 6,341 5,228
Total $ 1,840 $ 8,715 $ 1,794 $ 1,899 $ 6,341 $ 5,228
Derivatives Not Designated as Hedging Instruments
Foreign currency exchange contracts Other
current
assets $ 947 $ 2,268 $ 291 Accounts
payable and
accrued
expenses $ 634 $ 1,027 $ 1,440
Total $ 947 $ 2,268 $ 291 $ 634 $ 1,027 $ 1,440
Substantially all of the Company's foreign exchange derivative instruments are subject to master netting arrangements whereby the right to offset occurs in the event of default by a participating party. The Company has elected to present these contracts on a gross basis in the consolidated balance sheets.
NOTE 9. FAIR VALUE MEASUREMENTS
Universal measures certain financial and nonfinancial assets and liabilities at fair value based on applicable accounting guidance. The financial assets and liabilities measured at fair value include money market funds, trading securities associated with deferred compensation plans, interest rate swap agreements, and forward foreign currency exchange contracts. The application of the fair value guidance to nonfinancial assets and liabilities primarily includes the determination of fair values for goodwill and long-lived assets when indicators of potential impairment are present.
Under the accounting guidance, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The framework for measuring fair value is based on a fair value hierarchy that distinguishes between observable inputs and unobservable inputs. Observable inputs are based on market data obtained from independent sources. Unobservable inputs require the Company to make its own assumptions about the value placed on an asset or liability by market participants because little or no market data exists.
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There are three levels within the fair value hierarchy:
Level Description
1 quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date;
2 quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability; and
3 unobservable inputs for the asset or liability.
As permitted under the accounting guidance, the Company uses net asset value per share ("NAV") as a practical expedient to measure the fair value of its money market funds. The fair values for those funds are presented under the heading "NAV" in the tables that follow in this disclosure. In measuring the fair value of liabilities, the Company considers the risk of non-performance in determining fair value. Universal has not elected to report at fair value any financial instruments or any other assets or liabilities that are not required to be reported at fair value under current accounting guidance.
Recurring Fair Value Measurements
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:
June 30, 2025
Fair Value Hierarchy
(in thousands of dollars) NAV Level 1 Level 2 Level 3 Total
Assets
Money market funds
$ 149 $ — $ — $ — $ 149
Trading securities associated with deferred compensation plans
— 12,078 — — 12,078
Foreign currency exchange contracts
— — 2,787 — 2,787
Total financial assets measured and reported at fair value
$ 149 $ 12,078 $ 2,787 $ — $ 15,014
Liabilities
Interest rate swap agreements
$ — $ — $ 602 $ — $ 602
Foreign currency exchange contracts
— — 1,931 — 1,931
Total financial liabilities measured and reported at fair value
$ — $ — $ 2,533 $ — $ 2,533
June 30, 2024
Fair Value Hierarchy
(in thousands of dollars) NAV Level 1 Level 2 Level 3 Total
Assets
Money market funds
$ 148 $ — $ — $ — $ 148
Trading securities associated with deferred compensation plans
— 12,111 — — 12,111
Interest rate swap agreements
— — 7,854 — 7,854
Foreign currency exchange contracts
— — 3,129 — 3,129
Total financial assets measured and reported at fair value
$ 148 $ 12,111 $ 10,983 $ — $ 23,242
Liabilities
Foreign currency exchange contracts
$ — $ — $ 7,368 $ — $ 7,368
Total financial liabilities measured and reported at fair value
$ — $ — $ 7,368 $ — $ 7,368
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March 31, 2025
Fair Value Hierarchy
(in thousands of dollars) NAV Level 1 Level 2 Level 3 Total
Assets
Money market funds
$ 149 $ — $ — $ — $ 149
Trading securities associated with deferred compensation plans
— 11,313 — — 11,313
Interest rate swap agreements
— — 1,783 — 1,783
Foreign currency exchange contracts
— — 302 — 302
Total financial assets measured and reported at fair value
$ 149 $ 11,313 $ 2,085 $ — $ 13,547
Liabilities
Foreign currency exchange contracts
$ — $ — $ 6,668 $ — $ 6,668
Total financial liabilities measured and reported at fair value
$ — $ — $ 6,668 $ — $ 6,668
Money market funds
The fair value of money market funds, which are reported in cash and cash equivalents in the consolidated balance sheets, is based on NAV, which is the amount at which the funds are redeemable and is used as a practical expedient for fair value. These funds are not classified in the fair value hierarchy, but are disclosed as part of the fair value table above.
Trading securities associated with deferred compensation plans
Trading securities represent mutual fund investments that are matched to employee deferred compensation obligations. These investments are bought and sold as employees defer compensation, receive distributions, or make changes in the funds underlying their accounts. Quoted market prices (Level 1) are used to determine the fair values of the mutual funds.
Interest rate swap agreements
The fair values of interest rate swap agreements are determined based on dealer quotes using a discounted cash flow model matched to the contractual terms of each instrument. Since inputs to the model are observable and significant judgment is not required in determining the fair values, interest rate swaps are classified within Level 2 of the fair value hierarchy.
Foreign currency exchange contracts
The fair values of forward and option foreign currency exchange contracts are also determined based on dealer quotes using a discounted cash flow model matched to the contractual terms of each instrument. Since inputs to the model are observable and significant judgment is not required in determining the fair values, forward and option foreign currency exchange contracts are classified within Level 2 of the fair value hierarchy.
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, 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
Carrying value of long term obligations $ 620 $ 620 $ 620
The Company estimates the fair value of its long-term debt using Level 2 inputs which are based upon quoted market prices for the same or similar obligations or on calculations that are based on the current interest rates available to the Company for debt of similar terms and maturities.
Nonrecurring Fair Value Measurements
Assets and liabilities that are measured at fair value on a nonrecurring basis primarily relate to long-lived assets, right-of-use operating lease assets and liabilities, goodwill and intangibles, and other current and noncurrent assets. These assets and liabilities fair values are also evaluated for impairment when potential indicators of impairment exist. Accordingly, the nonrecurring measurement of the fair value of these assets and liabilities are classified within Level 3 of the fair value hierarchy.
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Long-Lived Assets
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 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. 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
NOTE 10. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company sponsors several defined benefit pension plans covering eligible U.S. salaried employees and certain foreign and other employee groups. These plans provide retirement benefits based primarily on employee compensation and years of service. The Company also sponsors defined benefit plans that provide postretirement health and life insurance benefits for eligible U.S. employees attaining specific age and service levels, although postretirement life insurance is no longer provided for active employees.
The components of the Company’s net periodic benefit cost were as follows:
Pension Benefits Other Postretirement Benefits
Three Months Ended June 30, Three Months Ended June 30,
(in thousands of dollars) 2025 2024 2025 2024
Service cost $ 1,252 $ 1,322 $ 17 $ 24
Interest cost 2,267 2,872 262 271
Expected return on plan assets ( 3,027 ) ( 3,607 ) ( 11 ) ( 14 )
Net amortization and deferral 83 174 ( 160 ) ( 160 )
Net periodic benefit cost
$ 575 $ 761 $ 108 $ 121
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.
NOTE 11. 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. 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. In recent years, the Compensation Committee has awarded only grants of RSUs and PSUs. Awards of restricted stock, RSUs, and PSUs are currently outstanding.
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 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. The Company’s outside directors receive RSUs following the annual meeting of shareholders. RSUs awarded to outside directors vest 1 year after the grant date. Restricted shares vest upon the individual’s retirement from service as a director.
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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,
2025 2024
RSUs:
Number granted 83,795 74,950
Grant date fair value $ 65.39 $ 47.30
PSUs:
Number granted 50,295 62,085
Grant date fair value $ 56.05 $ 38.23
Fair value expense for stock-based compensation is recognized ratably over the period from grant date to the earlier of (1) the vesting date of the award or (2) the date the grantee is eligible to retire without forfeiting the award. For employees who are already eligible to retire at the date an award is granted, the total fair value of the award is recognized as expense at the date of grant. The Company accounts for forfeitures of stock-based awards as they occur. 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.
NOTE 12. OPERATING SEGMENTS
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 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.
The Ingredients Operations segment provides its customers with a broad variety of plant-based ingredients for both human and pet consumption. The Ingredients Operations segment utilizes a variety of value-added manufacturing processes converting raw materials into a wide spectrum of fruit and vegetable juices, concentrates, dehydrated products, botanical extracts, and flavorings. Customers for the Ingredients Operations segment include large multinational food and beverage companies, smaller independent manufacturers, and retail organizations. 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. 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.
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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
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
Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (1)
( 2,435 ) ( 140 )
Restructuring and impairment costs (2)
( 1,122 ) —
Consolidated operating income $ 33,813 $ 17,225
(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.
Segment Assets Accounts Receivable, net
June 30,
2025 June 30,
2024 March 31,
2025 June 30,
2025 June 30,
2024 March 31,
2025
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
June 30,
2025 June 30,
2024 March 31,
2025 June 30,
2025 June 30,
2024 March 31,
2025
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
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NOTE 13. 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, 2025 and 2024:
Three Months Ended June 30,
(in thousands of dollars) 2025 2024
Foreign currency translation:
Balance at beginning of year $ ( 42,639 ) $ ( 44,815 )
Other comprehensive income (loss) attributable to Universal Corporation:
Net gain (loss) on foreign currency translation 8,503 ( 782 )
Less: Net (gain) loss on foreign currency translation attributable to noncontrolling interests ( 23 ) 390
Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes 8,480 ( 392 )
Balance at end of period $ ( 34,159 ) $ ( 45,207 )
Foreign currency hedge:
Balance at beginning of year $ ( 4,914 ) $ ( 616 )
Other comprehensive income (loss) attributable to Universal Corporation:
Net gain (loss) on derivative instruments (net of tax (expense) benefit of $( 659 ) and $ 1,209 )
3,381 ( 4,518 )
Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $ 54 and $ 137 ) (1)
( 524 ) ( 339 )
Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes 2,857 ( 4,857 )
Balance at end of period $ ( 2,057 ) $ ( 5,473 )
Interest rate hedge:
Balance at beginning of year $ 2,834 $ 8,488
Other comprehensive income (loss) attributable to Universal Corporation:
Net gain (loss) on derivative instruments (net of tax (expense) benefit of $ 446 and $( 691 ))
( 1,247 ) 1,932
Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $ 363 and $ 570 ) (2)
( 1,017 ) ( 1,593 )
Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes ( 2,264 ) 339
Balance at end of period $ 570 $ 8,827
Pension and other postretirement benefit plans:
Balance at beginning of year $ ( 35,332 ) $ ( 44,642 )
Other comprehensive income (loss) attributable to Universal Corporation:
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 )
Balance at end of period $ ( 35,693 ) $ ( 44,868 )
Total accumulated other comprehensive loss at end of period $ ( 71,339 ) $ ( 86,721 )
(1) Gain (loss) on foreign currency cash flow hedges related to forecast purchases of tobacco and crop input sales is reclassified from accumulated other comprehensive income (loss) to cost of goods sold when the tobacco is sold to customers. See Note 8 for additional information.
(2) Gain (loss) on interest rate cash flow hedges is reclassified from accumulated other comprehensive income (loss) to interest expense when the related interest payments are made on the underlying debt, or as amortized to interest expense over the period to original maturity for terminated swap agreements. See Note 8 for additional information.
(3) This accumulated other comprehensive income (loss) component is included in the computation of net periodic benefit cost. See Note 10 for additional information.
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NOTE 14. 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, 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
Balance at beginning of three-month period $ 1,458,556 $ 41,982 $ 1,500,538 $ 1,437,207 $ 41,716 $ 1,478,923
Changes in common stock
Accrual of stock-based compensation 7,575 — 7,575 4,641 — 4,641
Withholding of shares from stock-based compensation for grantee income taxes
( 4,017 ) — ( 4,017 ) ( 3,397 ) — ( 3,397 )
Dividend equivalents on RSUs 314 — 314 312 — 312
Changes in retained earnings
Net income (loss) 8,497 5,870 14,367 130 ( 2,954 ) ( 2,824 )
Cash dividends declared
Common stock ( 20,406 ) — ( 20,406 ) ( 19,988 ) — ( 19,988 )
Dividend equivalents on RSUs ( 314 ) — ( 314 ) ( 312 ) — ( 312 )
Other comprehensive income (loss) 8,712 23 8,735 ( 5,136 ) ( 390 ) ( 5,526 )
Other changes in noncontrolling interests
Dividends paid to noncontrolling shareholders
— ( 7,203 ) ( 7,203 ) — ( 8,330 ) ( 8,330 )
Balance at end of period $ 1,458,917 $ 40,672 $ 1,499,589 $ 1,413,457 $ 30,042 $ 1,443,499
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.