What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-05 compared with 2025-08-06 · 94 added, 69 removed, 153 unchanged (52% of the section changed)

33 unchanged sentences

and low investment performance by our defined benefit pension plan assets and changes in pension plan valuation assumptions.

For a further description of factors that may cause actual results to differ materially from such forward-looking statements, see Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025.

We caution investors not to place undue reliance on any forward-looking statements as these statements speak only as of the date when made, and we undertake no obligation to update any forward-looking statements made in this report, except as required by law.

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Results of Operations

Universal Corporation is off to a good start for fiscal year 2026.

During our seasonally smaller first fiscal quarter ended June 30, 2025, consolidated revenues decreased slightly, by $3.3 million, and operating income increased by $16.6 million, compared to the same period in fiscal year 2025.

Improved operating income for our Tobacco Operations segment, up 147%, or $21.2 million, was driven by a favorable product mix, despite lower carryover crop sales.

The reduction in carryover crop sales in the quarter ended June 30, 2025, resulted from significant shipment volumes completed earlier in fiscal year 2025.

Current flue-cured and burley tobacco crop sizes have increased significantly, and we are seeing more typical buying patterns with green tobacco purchases largely completed in Brazil and Africa.

Customer demand remains firm, following several years of short tobacco supply, and our uncommitted tobacco inventory levels were low, at about 11%, as of June 30, 2025.

Revenues for our Ingredients Operations segment were up 5%, or $4.0 million, on increased sales volumes in the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024.

Segment results for the quarter ended June 30, 2025, were impacted by a less favorable product mix, some curtailed demand due to tariff uncertainty, and higher fixed costs as we work to fill our recently expanded production facility.

We are continuing to see interest in our new value-added products and capabilities.

Supported by a foundational customer for our expanded Universal Ingredients facility, we are diligently working on converting customer interest from existing and new customers into increased volumes for that facility.

Our focus for a successful fiscal year 2026 is growing Universal Ingredients organically, while also maximizing and optimizing our tobacco business and strengthening our organization.

Revenue was up 3% and 6% and operating income was up 18% and down 2%, respectively, in the six months and quarter ended September 30, 2025, compared to the same periods in fiscal year 2025.

Our Tobacco Operations segment achieved solid results in the six months and quarter.

Customer demand has remained firm following several years of undersupply, despite significantly larger tobacco crops.

Tobacco buying has been completed in most key growing regions, and green tobacco prices have softened in certain regions compared to fiscal year 2025.

Shipments are progressing smoothly, and current crop tobacco is being shipped earlier than in fiscal year 2025.

Overall, we believe the segment has once again demonstrated effective management in navigating market dynamics.

Our Ingredients Operations segment maintained positive momentum, achieving higher sales and volume in both the quarter and six months ended September 30, 2025, as compared to the respective prior fiscal year periods.

Continued interest in new value-added products has translated into an active pipeline, supported by Universal Ingredients' enhanced production and operational capabilities.

Demand for our new products remains solid, while fixed costs, product mix, and market challenges, including weakness in the consumer-packaged goods industry and tariff uncertainty, had a negative impact on earnings.

The segment’s proactive approach to meeting customers’ strategic needs, focusing on organic growth, and converting customer interest into sales is helping to build scale and generate returns on our investments.

We believe the segment continues to be well-positioned to capitalize on its investments and drive future growth.

FINANCIAL HIGHLIGHTS

Three Months Ended June 30,

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

(in millions of dollars, except per share data) 2025 2024 % 2025 2024 %

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Cost of goods sold $ 614.3 $ 567.6 8 % $ 1,094.0 $ 1,068.7 2 %

Gross profit margin percentage 19.2 % 16.1 %

Gross profit margin percentage 18.5 % 20.1 % -160 bps 18.8 % 18.3 % 50 bps

Selling, general and administrative expenses $ 72.2 $ 63.8 13 % $ 151.4 $ 142.5 6 %

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

Quarter Ended June 30, 2025, compared to Quarter Ended June 30, 2024

Quarter Ended September 30, 2025, compared to Quarter Ended September 30, 2024

Consolidated Results

Revenues decreased by 1%, or $3.3 million, and operating income increased by 96%, or $16.6 million, in the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024, primarily driven by performance in our Tobacco Operations segment.

Selling, general, and administrative expenses were up by 1%, or $0.5 million, primarily due to higher compensation costs of $5.5 million and legal and professional fees of $3.7 million, which were largely offset by favorable foreign currency

comparisons of $7.3 million and lower tobacco sales commissions of $2.8 million in the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024.

Adjusted operating income was up by $17.7 million, and adjusted net income attributable to Universal Corporation was up by $9.5 million, in the first quarter of fiscal year 2026, compared to the same period in the prior fiscal year, on a favorable product mix in the Tobacco Operations segment.

Revenue increased by 6%, or $43.4 million, compared to the quarter ended September 30, 2024, primarily driven by higher tobacco and ingredients sales volumes.

Operating income decreased by 2%, or $1.1 million, in the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024, due to higher inventory write-downs of $7.5 million, unfavorable foreign currency comparisons of

$5.1 million, and higher provisions for farmer advances of $2.0 million, but partially offset by a 3% increase in tobacco sales volumes coupled with lower sales commissions of $1.1 million.

Selling, general, and administrative expenses were up by 13%, or $8.3 million, primarily due to unfavorable foreign currency comparisons of $5.1 million and higher provisions for farmer advances of $2.0 million in the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024.

Adjusted operating income was down by $11.7 million and adjusted net income attributable to Universal Corporation was down by $2.2 million, in the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024, largely on unfavorable foreign currency comparisons, higher inventory write-downs, and higher provisions for farmer advances.

Tobacco Operations Segment

Revenues decreased by 1%, or $7.3 million, for the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024, primarily on an 8% decline in tobacco sales volumes, largely due to lower sales of carryover crop tobacco.

Less carryover tobacco was available for sale in the first quarter of fiscal year 2026, due to significant shipment volumes earlier in fiscal year 2025.

Operating income for the Tobacco Operations segment increased by 147%, or $21.2 million, for the first quarter of fiscal year 2026, compared to first quarter of fiscal year 2025, on a favorable product mix in Asia.

Selling, general, and administrative expenses were lower by approximately $1.8 million for the segment mainly due to favorable foreign currency comparisons of $7.2 million, partially offset by higher compensation costs of $2.3 million and higher legal and professional fees of $2.5 million in the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024.

Uncommitted tobacco inventory levels remained low at about 11% of total tobacco inventory as of June 30, 2025.

Revenue increased by 5%, or $29.2 million, for the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024, primarily on a 3% increase in tobacco sales volumes.

Operating income for the Tobacco Operations segment decreased by 16%, or $12.1 million, for the second quarter of fiscal year 2026, compared to second quarter of fiscal year 2025, on unfavorable foreign currency comparisons of $5.1 million, higher tobacco inventory write-downs of $4.0 million, and higher provisions for farmer advances of $2.0 million.

Selling, general, and administrative expenses were higher by $6.4 million for the segment mainly due to unfavorable foreign currency comparisons of $5.1 million and higher provisions for farmer advances of $2.0 million in the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024.

Ingredients Operations Segment

Revenues for the Ingredients Operations segment increased by 5%, or $4.0 million, for the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024, on higher sales volumes.

Operating income for the segment decreased by 42%, or $1.2 million, due to a less favorable product mix, some curtailed demand due to tariff uncertainty, and higher fixed costs, including depreciation, from our recently expanded Universal Ingredients production facility.

Revenue for the Ingredients Operations segment increased by 18%, or $14.2 million, for the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024, on higher sales volumes.

Operating income for the segment decreased by 112%, or $1.5 million, as higher sales volumes were offset by product mix, higher inventory write-downs of $3.5 million and higher fixed costs, including depreciation from our recently expanded Universal Ingredients production facility.

Weakness in the consumer-packaged good industry and tariff uncertainty also impacted results for the segment in the quarter ended September 30, 2025.

Additional Items

Cost of goods sold decreased by 4%, or $21.5 million, in the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024, largely on lower sales volumes and product mix in the Tobacco Operations segment.

Interest expense was down by 14%, or $3.0 million, in the quarter ended June 30, 2025, compared to the quarter ended June 30, 2024, primarily on lower interest rates.

Restructuring and impairment costs of $1.1 million in the quarter ended June 30, 2025, were primarily related to the previously announced consolidation of the Company’s European tobacco sheet operations.

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

The consolidated tax rate for the three months ended June 30, 2024, was 34.7%.

The consolidated effective tax rate for the three months ended June 30, 2024, was higher than the consolidated tax rate for the three months ended June 30, 2025, due to limitation of deductibility of certain compensation amounts.

Cost of goods sold increased by 8%, or $46.7 million, in the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024, largely on higher sales volumes and product mix.

Interest expense was down by 4%, or $0.8 million, in the quarter ended September 30, 2025, compared to the quarter ended September 30, 2024, on lower interest rates and debt balances.

Restructuring and impairment costs of $10.6 million in the quarter ended September 30, 2024, were primarily related to the consolidation of the Company’s European tobacco sheet operations.

The consolidated effective tax rate for the three months ended September 30, 2025, was 24.4%.

The consolidated tax rate for the three months ended September 30, 2024, was 28.6%.

Six Months Ended September 30, 2025, compared to Six Months Ended September 30, 2024

Consolidated Results

Revenue increased by 3%, or $40.1 million, in the six months ended September 30, 2025, compared to the six months ended September 30, 2024, on higher third-party tobacco processing volumes and accelerated shipments in our Tobacco Operations segment and higher sales volumes in Ingredients Operations segment.

Operating income increased by 18%, or $15.5 million, in the six months ended September 30, 2025, compared to the six months ended September 30, 2024, primarily driven by a favorable product mix in our Tobacco Operations segment.

Selling, general, and administrative expenses were up by 6%, or $8.8 million, primarily due to higher compensation costs of $6.1 million, legal and professional fees of $5.0 million, and provisions for farmer advances of $2.8 million, which were

partially offset by lower tobacco sales commissions of $3.9 million and favorable foreign currency comparisons of $2.2 million in the six months ended September 30, 2025, compared to the six months ended September 30, 2024.

Adjusted operating income was up by $6.1 million and adjusted net income attributable to Universal Corporation was up by $7.2 million, in the first half of fiscal year 2026, compared to the same period in the prior fiscal year, on a favorable product mix in the Tobacco Operations segment.

Tobacco Operations Segment

Revenue increased by 2%, or $22.0 million, for the six months ended September 30, 2025, compared to the six months ended September 30, 2024, as increased third-party tobacco processing revenue offset a 1% decline in tobacco sales volumes.

Higher sales and earlier shipments of current crop tobacco largely offset lower sales of carryover tobacco in the first half of fiscal year 2026, compared to the first half of fiscal year 2025.

Operating income for the Tobacco Operations segment increased by 10%, or $9.1 million, for the first half of fiscal year 2026, compared to first half of fiscal year 2025, on a favorable product mix.

Selling, general, and administrative expenses were higher by approximately $4.6 million for the segment mainly due to higher compensation costs of $4.3 million, legal and professional fees of $3.1 million, and provisions for farmer advances of $2.8 million, which were partially offset by lower tobacco sales commissions of $3.9 million and favorable foreign currency comparisons of $1.7 million in the six months ended September 30, 2025, compared to the six months ended September 30, 2024.

Uncommitted tobacco inventory levels remained low at about 13% of total tobacco inventory as of September 30, 2025.

Ingredients Operations Segment

Revenue for the Ingredients Operations segment increased by 11%, or $18.2 million, for the six months ended September 30, 2025, compared to the six months ended September 30, 2024, on higher sales volumes.

Operating income for the segment decreased by 64%, or $2.7 million, as higher sales volumes were offset by product mix, higher fixed costs, including depreciation from our recently expanded Universal Ingredients production facility, and higher inventory write-downs of $3.8 million.

Weakness in the consumer-packaged good industry and tariff uncertainty also impacted the segment in the six months ended September 30, 2025.

Additional Items

Cost of goods sold increased by 2%, or $25.2 million, in the six months ended September 30, 2025, compared to the six months ended September 30, 2024, largely due to product mix in our Tobacco Operations segment.

Interest expense was down by 9%, or $3.8 million, in the six months ended September 30, 2025, compared to the six months ended September 30, 2024, on lower interest rates and debt balances.

Restructuring and impairment costs of $1.1 million in the six months ended September 30, 2025, and $10.6 million in the six months ended September 30, 2024, were primarily related to the consolidation of the Company’s European tobacco sheet operations.

The consolidated effective tax rate for the six months ended September 30, 2025, was 25.2%.

The consolidated tax rate for the six months ended September 30, 2024, was 31.5%.

The consolidated effective tax rate for the six months ended September 30, 2024, was higher than the consolidated tax rate for the six months ended September 30, 2025, due to limitation of deductibility of certain compensation amounts.

Sustainability

As part of its broader renewable energy strategy, Universal recently completed its annual third-party assessment and verification of Scope 1, 2, and relevant Scope 3 emissions data.

This important assessment ensures alignment with established standards and provides transparency into Universal's emission reduction efforts.

A demonstration of how the Company is aligning operations with global sustainability standards is the recently commissioned biomass boiler in Zimbabwe.

The new boiler, once operational, will reduce coal use over time and contribute to long-term emissions reduction.

Universal Corporation continues to make meaningful progress in its transition to renewable and lower emission energy sources.

The Company has significantly expanded its use of clean electricity as an important element of its carbon transition plan.

Expanded solar capacity has played a central role in this progress.

On-site solar installations in Italy, the Dominican Republic, and the Philippines have further strengthened Universal’s clean energy footprint.

Reconciliation of Certain Non-GAAP Financial Measures:

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Adjusted Operating Income Reconciliation

Three Months Ended June 30,

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

(in thousands) 2025 2024 2025 2024

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Restructuring and impairment costs (1)

— 10,573 1,122 10,573

As Adjusted operating income (non-GAAP) $ 67,649 $ 79,309 $ 102,584 $ 96,534

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(in thousands except for per share amounts)

Three Months Ended June 30,

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

2025 2024 2025 2024

Net income attributable to Universal Corporation $ 34,169 $ 25,940 $ 42,666 $ 26,070

Restructuring and impairment costs (1)

— 10,573 1,122 10,573

Total of non-GAAP adjustments to income before income taxes — 10,573 1,122 10,573

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Income tax benefit from restructuring and impairment costs (2)

— (132) (35) (132)

Total of income tax impacts for non-GAAP adjustments to income before income taxes — (132) (35) (132)

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Net Debt and Net Capitalization Reconciliation

June 30, June 30, March 31,

September 30, September 30, March 31,

(in thousands) 2025 2024 2025

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

Our first fiscal quarter is usually a period of significant working capital investment in both Africa and South America as tobacco crops are delivered by farmers.

Our working capital needs followed this pattern in the quarter ended June 30, 2025, and we funded these working capital needs using a combination of cash on hand, short-term borrowings, customer advances, and operating cash flows.

In contrast, in the quarter ended June 30, 2024, certain tobacco purchases that would have typically been made in that fiscal quarter had been made earlier due to market conditions, which reduced required working capital investments in quarter ended June 30, 2024.

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

Our working capital needs followed this pattern in the six months ended September 30, 2025, and we funded these working capital needs using a combination of cash on hand, short-term borrowings, customer advances, account receivables factoring, and operating cash flows.

In contrast, in the six months ended September 30, 2024, certain tobacco purchases that would have typically been made in the first half of fiscal year 2025 had been made earlier due to market conditions, which reduced required working capital investments in the six months ended September 30, 2024.

Operating Activities

Net cash used by our operations was $205.1 million during the quarter ended June 30, 2025.

That amount was $142.7 million higher than during the same period in fiscal year 2025, primarily on lower working capital requirements in the quarter ended June 30, 2024.

Tobacco inventory levels increased by $413.4 million from March 31, 2025 levels to $1.2 billion at June 30, 2025, on seasonal leaf tobacco purchases.

Tobacco inventory levels at June 30, 2025, were relatively flat, up $17.4 million, compared to June 30, 2024 levels.

Net cash used by our operations was $172.4 million during the six months ended September 30, 2025.

That amount was $124.9 million higher than during the same period in fiscal year 2025, primarily on lower working capital requirements in the six months ended September 30, 2024.

Tobacco inventory levels increased by $332.3 million from March 31, 2025 levels to $1.1 billion at September 30, 2025, on seasonal leaf tobacco purchases.

Tobacco inventory levels at September 30, 2025, were up $68.0 million, compared to September 30, 2024 levels, on larger crop sizes partially offset by some earlier tobacco shipments in fiscal year 2026.

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

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

As of June 30, 2025, our uncommitted tobacco inventories were $134.7 million, or about 11% of total tobacco inventory, compared to $164.0 million, or about 20% of our tobacco inventory as of March 31, 2025, and $154.8 million, or about 13% of our tobacco inventory as of June 30, 2024.

Our balance sheet accounts reflected seasonal patterns in the quarter ended June 30, 2025, on deliveries of tobacco crops by farmers in both Africa and South America.

Accounts receivable decreased by $201.7 million from March 31, 2025 levels, on tobacco crop shipments offset in part by collections on receivables.

Advances to suppliers were $79.2 million at June 30, 2025, a reduction of $90.2 million from March 31, 2025, as tobacco crops were delivered in payment on some of those balances, net of

new balances for upcoming tobacco crops.

Accounts receivable--unconsolidated affiliates were $120.6 million higher as of June 30, 2025, compared to March 31, 2025, on tobacco crop purchases.

As of September 30, 2025, our uncommitted tobacco inventories were $144.2 million, or about 13% of total tobacco inventory, compared to $164.0 million, or about 20% of our tobacco inventory as of March 31, 2025, and $108.0 million, or about 10% of our tobacco inventory as of September 30, 2024.

Our balance sheet accounts reflected seasonal patterns in the six months ended September 30, 2025, on deliveries of tobacco crops by farmers in Africa, South America, and the United States.

Accounts receivable decreased by $180.6 million from March 31, 2025 levels, on collections on receivables offset in part by tobacco crop shipments.

Advances to suppliers were $121.6 million at September 30, 2025, a reduction of $47.8 million from March 31, 2025, as tobacco crops were delivered in payment on some of those balances, net of new balances for upcoming tobacco crops.

Accounts receivable--unconsolidated affiliates were $106.9 million higher as of September 30, 2025, compared to March 31, 2025, on larger tobacco crops.

Notes payable and overdrafts were up $84.5 million from March 31, 2025 levels, on seasonal working capital needs.

Accounts receivable--unconsolidated affiliates were $66.7 million higher as of June 30, 2025, compared to the same period in the prior fiscal year, on larger tobacco crop sizes.

Accounts payable were $119.8 million at June 30, 2025, up $40.1 million, compared to June 30, 2024, largely on the timing of tobacco crop purchases.

Notes payable and overdrafts and cash and cash equivalents were up $40.2 million and $76.7 million, respectively, as of June 30, 2025, compared to June 30, 2024, largely due to a lower use of cash and cash equivalents to fund working capital needs.

Accounts receivable were $92.3 million lower as of September 30, 2025, compared to September 30, 2024, on customer mix.

Accounts receivable--unconsolidated affiliates were $47.4 million higher as of September 30, 2025, compared to the same period in the prior fiscal year, on larger tobacco crop sizes.

Notes payable and overdrafts were down $39.5 million as of September 30, 2025, compared to September 30, 2024, due to earlier crop shipments, collections on accounts receivable, and accounts receivable factoring.

Investing Activities

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

During the quarters ended June 30, 2025 and 2024, we invested about $12.1 million and $22.7 million, respectively, in our property, plant and equipment.

Depreciation expense was approximately $11.0 million and $11.7 million for the quarters ended June 30, 2025 and 2024, respectively.

During the six ended September 30, 2025 and 2024, we invested approximately $21.1 million and $38.8 million, respectively, in our property, plant and equipment.

Depreciation expense was approximately $22.0 million and $23.8 million for the six months ended September 30, 2025 and 2024, respectively.

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

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

During the three months ended June 30, 2025, we did not purchase any shares of common stock.

As of June 30, 2025, our available authorization under our current share repurchase program was $100 million.

During the three months ended September 30, 2025, we did not purchase any shares of common stock.

As of September 30, 2025, our available authorization under our current share repurchase program was $100 million.

Financing Activities

At June 30, 2025, we had $1.2 billion in total debt outstanding, an increase of $40.7 million compared to June 30, 2024.

At September 30, 2025, we had $1.2 billion in total debt outstanding, a decrease of $39.0 million compared to September 30, 2024.

We consider the sum of notes payable and overdrafts, long-term debt (including any current portion), and customer advances and deposits, less cash, cash equivalents, and short-term investments on our balance sheet to be our net debt.

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

Net debt decreased by $47.1 million to $1.1 billion at June 30, 2025, compared to June 30, 2024.

Net debt as a percentage of net capitalization was 42% at June 30, 2025, down from 44% at June 30, 2024, and up from 36% at March 31, 2025.

As of June 30, 2025, we had $178.4 million in cash and cash equivalents, $355 million available under our committed revolving credit facility that will mature in December 2027, and we, together with our consolidated affiliates, had approximately $86 million in available, uncommitted credit lines.

Net debt decreased by $51.6 million to $1.1 billion at September 30, 2025, compared to September 30, 2024.

Net debt as a percentage of net capitalization was 42% at September 30, 2025, down from 44% at September 30, 2024, and up from 36% at March 31, 2025.

As of September 30, 2025, we had $88.7 million in cash and cash equivalents, $340 million available under our committed revolving credit facility that will mature in December 2027, and we, together with our consolidated affiliates, had approximately $166 million in available, uncommitted credit lines.

The financial covenants under our committed revolving credit facility require us to maintain certain levels of tangible net worth and observe restrictions on debt levels.

Based on our June 30, 2025 financial statement, we were in compliance with all financial covenants of our debt agreements as of June 30, 2025.

Based on our September 30, 2025 financial statements, we were in compliance with all financial covenants of our debt agreements as of September 30, 2025.

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

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

At June 30, 2025, the fair value of our outstanding interest rate swap agreements was a liability of about $0.6 million, and the notional amount swapped was $310 million.

We entered into these agreements to eliminate the variability of cash flows in the interest payments on

a portion of our variable-rate term loans.

At September 30, 2025, the fair value of our outstanding interest rate swap agreements was a liability of about $1.0 million, and the notional amount swapped was $310 million.

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

Under the swap agreements we receive variable rate interest and pay fixed rate interest.

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

As of June 30, 2025, the fair value of our open hedges for forecasted tobacco purchases was a net asset of approximately $0.5 million.

We had forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net liability of approximately $0.3 million as of June 30, 2025.

As of September 30, 2025, the fair value of our open hedges for forecasted tobacco purchases and crop inputs was a net asset of approximately $0.2 million.

We had forward contracts outstanding that were not designated as hedges, and the fair value of those contracts was a net liability of approximately $0.4 million as of September 30, 2025.

Critical Accounting Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis