UNIVERSAL CORP /VA/ 10-Q

ITEM 1. FINANCIAL STATEMENTS UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (in thousands, except share and per share data) Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 (Unaudited) (Unaudited) Sales and other operating revenues $ 754,177 $ 710,762 $ 1,347,939 $ 1,307,812 Costs and expenses Cost of goods sold 614,347 567,617 1,093,982 1,068,746 Selling, general and administrative expenses 72,181 63,836 151,373 142,532 Restructuring and impairment costs — 10,573 1,122 10,573 Operating income 67,649 68,736 101,462 85,961 Equity in pretax earnings (loss) of unconsolidated affiliates ( 2,561 ) ( 642 ) ( 126 ) ( 502 ) Other non-operating income (expense) 582 461 1,168 925 Interest income 778 295 1,425 1,103 Interest expense 20,438 21,273 38,215 42,007 Income (loss) before income taxes and other items 46,010 47,577 65,714 45,480 Income taxes 11,207 13,608 16,544 14,335 Net income (loss) 34,803 33,969 49,170 31,145 Less: net loss (income) attributable to noncontrolling interests in subsidiaries ( 634 ) ( 8,029 ) ( 6,504 ) ( 5,075 ) Net income (loss) attributable to Universal Corporation $ 34,169 $ 25,940 $ 42,666 $ 26,070 Earnings per share: Basic $ 1.36 $ 1.04 $ 1.71 $ 1.05 Diluted $ 1.36 $ 1.03 $ 1.70 $ 1.04 Weighted average common shares outstanding: Basic 25,035,110 24,946,632 25,017,765 24,911,681 Diluted 25,178,546 25,135,973 25,155,627 25,101,295 Total comprehensive income (loss), net of income taxes $ 34,654 $ 33,531 $ 57,756 $ 25,181 Less: comprehensive (income) loss attributable to noncontrolling interests ( 356 ) ( 8,026 ) ( 6,249 ) ( 4,682 ) Comprehensive income (loss) attributable to Universal Corporation $ 34,298 $ 25,505 $ 51,507 $ 20,499 Dividends declared per common share $ 0.82 $ 0.81 $ 1.64 $ 1.62 See accompanying notes. 3 UNIVERSAL CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of dollars, except share data) September 30, September 30, March 31, 2025 2024 2025 (Unaudited) (Unaudited) ASSETS Current assets Cash and cash equivalents $ 88,652 $ 80,118 $ 260,115 Accounts receivable, net 445,257 537,602 625,876 Advances to suppliers, net 121,569 139,766 169,385 Accounts receivable—unconsolidated affiliates 114,071 66,646 7,143 Inventories—at lower of cost or net realizable value: Tobacco 1,138,630 1,070,655 806,332 Other 222,505 211,476 189,610 Prepaid income taxes 23,066 20,771 19,595 Other current assets 85,928 84,884 78,041 Total current assets 2,239,678 2,211,918 2,156,097 Property, plant and equipment Land 26,285 25,972 26,113 Buildings 335,300 330,407 333,398 Machinery and equipment 746,284 705,246 723,935 1,107,869 1,061,625 1,083,446 Less accumulated depreciation ( 735,473 ) ( 685,883 ) ( 710,472 ) 372,396 375,742 372,974 Other assets Operating lease right-of-use assets 37,319 32,487 34,260 Goodwill, net 213,815 213,872 213,840 Other intangibles, net 52,650 63,263 57,836 Investments in unconsolidated affiliates 84,526 78,774 79,317 Deferred income taxes 18,238 15,526 16,539 Pension asset 13,393 12,293 12,819 Other noncurrent assets 38,424 41,711 45,870 458,365 457,926 460,481 Total assets $ 3,070,439 $ 3,045,586 $ 2,989,552 See accompanying notes. 4 UNIVERSAL CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of dollars, except share data) September 30, September 30, March 31, 2025 2024 2025 (Unaudited) (Unaudited) LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Notes payable and overdrafts $ 539,583 $ 579,132 $ 455,039 Accounts payable 99,599 87,106 98,036 Accounts payable—unconsolidated affiliates 299 174 1,999 Customer advances and deposits 2,782 6,837 3,763 Accrued compensation 30,776 29,266 44,646 Income taxes payable 14,573 7,948 12,586 Current portion of operating lease liabilities 11,809 10,325 10,742 Accrued expenses and other current liabilities 129,210 128,634 123,350 Current portion of long-term debt — — — Total current liabilities 828,631 849,422 750,161 Long-term debt 618,196 617,641 617,918 Pensions and other postretirement benefits 36,490 36,734 35,336 Long-term operating lease liabilities 23,584 19,038 20,608 Other long-term liabilities 26,228 28,425 22,901 Deferred income taxes 33,160 36,322 42,090 Total liabilities 1,566,289 1,587,582 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 24,913,747 shares issued and outstanding at September 30, 2025 ( 24,715,625 at September 30, 2024 and 24,715,625 at March 31, 2025) 352,909 349,064 351,626 Retained earnings 1,188,283 1,158,658 1,186,981 Accumulated other comprehensive loss ( 71,210 ) ( 87,156 ) ( 80,051 ) Total Universal Corporation shareholders' equity 1,469,982 1,420,566 1,458,556 Noncontrolling interests in subsidiaries 34,168 37,438 41,982 Total shareholders' equity 1,504,150 1,458,004 1,500,538 Total liabilities and shareholders' equity $ 3,070,439 $ 3,045,586 $ 2,989,552 See accompanying notes. 5 UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars) Six Months Ended September 30, 2025 2024 (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 49,170 $ 31,145 Adjustments to reconcile net income (loss) to net cash used by operating activities: Depreciation and amortization 27,198 29,420 Net provision for losses (recoveries) on advances to suppliers ( 2,810 ) ( 5,562 ) Inventory writedowns 9,780 5,231 Stock-based compensation expense 8,481 6,583 Foreign currency remeasurement (gain) loss, net 1,195 1,334 Foreign currency exchange contracts ( 2,531 ) 3,225 Deferred income taxes ( 9,726 ) 153 Equity in net loss (income) of unconsolidated affiliates, net of dividends 991 404 Restructuring and impairment costs 1,122 10,573 Restructuring payments ( 2,774 ) ( 350 ) Other, net 37 ( 217 ) Changes in operating assets and liabilities, net: Accounts and notes receivable 123,321 ( 63,420 ) Inventories ( 367,010 ) ( 21,682 ) Other assets 2,199 9,029 Accounts payable ( 3,262 ) ( 22,066 ) Accrued expenses and other current liabilities ( 4,426 ) ( 19,970 ) Income taxes ( 1,989 ) ( 1,238 ) Customer advances and deposits ( 1,324 ) ( 10,005 ) Net cash used by operating activities ( 172,358 ) ( 47,413 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment ( 21,099 ) ( 38,796 ) Proceeds from sale of property, plant and equipment 881 1,412 Net cash used by investing activities ( 20,218 ) ( 37,384 ) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of short-term debt, net 82,781 161,611 Dividends paid to noncontrolling interests ( 14,063 ) ( 8,960 ) Dividends paid on common stock ( 40,426 ) ( 39,646 ) Other ( 7,727 ) ( 3,716 ) Net cash provided by financing activities 20,565 109,289 Effect of exchange rate changes on cash, restricted cash and cash equivalents 548 33 Net increase (decrease) in cash, restricted cash and cash equivalents ( 171,463 ) 24,525 Cash, restricted cash and cash equivalents at beginning of year 260,115 55,593 Cash, restricted cash and cash equivalents at end of period $ 88,652 $ 80,118 See accompanying notes. 6 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 Financial Accounting Standards Board (“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 six months ended September 30, 2024, the Company began consolidating its European sheet tobacco operations into the Company's facility in the Netherlands, by initiating a wind-down of activities at its sheet facility in Germany, incurring $ 10.5 million of restructuring and impairment costs. During the six months ended September 30, 2025, the Company recognized an additional $ 1.0 million of impairment costs related to the consolidation of the sheet tobacco operations. The Company also incurred $ 0.1 million of termination and impairment costs in other areas of the Tobacco Operations segment in both the six months ended September 30, 2025 and 2024. A summary of the restructuring and impairment costs recorded for the three and six months ended September 30, 2025 and 2024 was as follows: Three Months Ended September 30, Six Months Ended September 30, (in thousands) 2025 2024 2025 2024 Restructuring costs: Employee termination benefits $ — $ 4,342 $ 122 $ 4,342 Other — 1,372 — 1,372 Total restructuring costs — 5,714 122 5,714 Impairment costs: Property, plant and equipment — 4,859 1,000 4,859 Total impairment costs — 4,859 1,000 4,859 Total restructuring and impairment costs $ — $ 10,573 $ 1,122 $ 10,573 7 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 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. Under agreements with certain customers, the Company will act as the importer of record, incurring various additional costs associated with the import activity, including tariffs, and applying for drawback of those costs when possible. When the agreement with the customer provides for the reimbursement of those fees, the reimbursement is 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. 8 Disaggregation of Revenue from Contracts with Customers The following table disaggregates the Company’s revenue by significant revenue-generating category: Three Months Ended September 30, Six Months Ended September 30, (in thousands of dollars) 2025 2024 2025 2024 Tobacco sales $ 622,613 $ 601,590 $ 1,080,486 $ 1,089,821 Ingredient sales 88,837 76,543 173,780 157,237 Processing revenue 23,964 14,080 54,732 28,749 Other sales and revenue from contracts with customers 14,014 16,155 33,071 28,964 Total revenue from contracts with customers 749,428 708,368 1,342,069 1,304,771 Other operating sales and revenues 4,749 2,394 5,870 3,041 Consolidated sales and other operating revenues $ 754,177 $ 710,762 $ 1,347,939 $ 1,307,812 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 September 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, results of operations, 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 $ 135 million at September 30, 2025, $ 151 million at September 30, 2024, and $ 189 million at March 31, 2025. The related valuation allowances totaled $ 13 million at September 30, 2025, $ 11 million at September 30, 2024, and $ 18 million at March 31, 2025, and were estimated based on the Company’s historical loss information and crop projections. The allowances were decreased by net recoveries of $ 2.8 million and $ 5.6 million in the six-month periods ended September 30, 9 2025 and 2024, respectively. 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 September 30, 2025, the aggregate balance of recoverable tax credits held by the Company’s subsidiaries totaled approximately $ 65 million ($ 63 million at September 30, 2024 and $ 64 million at March 31, 2025). The related valuation allowances totaled approximately $ 22 million at September 30, 2025 and $21 million at September 30, 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 On November 7, 2024, the Company's Board of Directors approved a stock repurchase program for 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 September 30, 2025. Trade Receivable Sales During fiscal year 2026, the Company entered into an agreement to sell certain trade receivables, at its discretion, to a third-party financial institution at a discount. The transactions have no recourse and qualify as a true sale, meaning upon receipt of the settlement amount, the associated receivable is removed from the balance sheet and the discount is recognized as an expense in selling, general, and administrative expense on the consolidated statements of income. During the three months ended September 30, 2025, the Company sold $ 42.0 million of receivables and recorded a loss of $ 0.4 million. 10 NOTE 5. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended September 30, Six Months Ended September 30, (in thousands, except share and per share data) 2025 2024 2025 2024 Basic Earnings (Loss) Per Share Numerator for basic earnings (loss) per share Net income (loss) attributable to Universal Corporation $ 34,169 $ 25,940 $ 42,666 $ 26,070 Denominator for basic earnings (loss) per share Weighted average shares outstanding 25,035,110 24,946,632 25,017,765 24,911,681 Basic earnings (loss) per share $ 1.36 $ 1.04 $ 1.71 $ 1.05 Diluted Earnings (Loss) Per Share Numerator for diluted earnings (loss) per share Net income (loss) attributable to Universal Corporation $ 34,169 $ 25,940 $ 42,666 $ 26,070 Denominator for diluted earnings (loss) per share: Weighted average shares outstanding 25,035,110 24,946,632 25,017,765 24,911,681 Effect of dilutive securities Employee and outside director share-based awards 143,436 189,341 137,862 189,614 Denominator for diluted earnings (loss) per share 25,178,546 25,135,973 25,155,627 25,101,295 Diluted earnings (loss) per share $ 1.36 $ 1.03 $ 1.70 $ 1.04 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 basis and was effective for the Company's fiscal year 2025. The Company performed an assessment of the potential impact on income taxes from enactment of the Pillar Two legislation. Based on the assessment, the Company does not anticipate a material impact to the consolidated financial statements from the Pillar Two legislation in fiscal year 2026. 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 and six months ended September 30, 2025 The Company's consolidated effective income tax rates for the three and six months ended September 30, 2025 was 24.4 % and 25.2 %, respectively. Three and six months ended September 30, 2024 The Company's consolidated effective income tax rates for the three and six months ended September 30, 2024 was 28.6 % and 31.5 %, respectively. 11 NOTE 7. GOODWILL AND OTHER INTANGIBLES The Company's changes in goodwill at September 30, 2025 and 2024 consisted of the following: (in thousands of dollars) Six Months Ended September 30, 2025 2024 Balance at beginning of fiscal year $ 213,840 $ 213,869 Foreign currency translation adjustment ( 25 ) 3 Balance at end of period $ 213,815 $ 213,872 The Company's intangible assets primarily consist of capitalized customer-related intangibles, trade names, proprietary developed technology and noncompetition agreements. The Company's intangible assets subject to amortization consisted of the following at September 30, 2025 and 2024 and at March 31, 2025: (in thousands, except useful life) September 30, 2025 Useful Life (years) Gross Carrying Value Accumulated Amortization Net Carrying Value Customer relationships 11 — 13 $ 86,500 $ ( 37,020 ) $ 49,480 Trade names 5 11,100 ( 11,100 ) — Developed technology 13 9,300 ( 6,185 ) 3,115 Noncompetition agreements 4 4,000 ( 4,000 ) — Other 5 880 ( 825 ) 55 Total intangible assets $ 111,780 $ ( 59,130 ) $ 52,650 September 30, 2024 Useful Life (years) Gross Carrying Value Accumulated Amortization Net Carrying Value Customer relationships 11 — 13 $ 86,500 $ ( 29,289 ) $ 57,211 Trade names 5 11,100 ( 9,375 ) 1,725 Developed technology 13 9,300 ( 5,838 ) 3,462 Noncompetition agreements 4 — 5 4,000 ( 3,200 ) 800 Other 5 826 ( 761 ) 65 Total intangible assets $ 111,726 $ ( 48,463 ) $ 63,263 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 six months ended September 30, 2025 and 2024 was: (in thousands of dollars) Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 Amortization Expense $ 2,601 $ 2,852 $ 5,264 $ 5,664 12 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 September 30, 2025, the expected future amortization expense for intangible assets was as follows: Fiscal Year (in thousands of dollars) 2026 (excluding the six months ended September 30, 2025) $ 4,057 2027 8,113 2028 8,077 2029 7,494 2030 and thereafter 24,909 Total expected future amortization expense $ 52,650 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 September 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 September 30, 2025, $ 0.7 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. Additionally, the Company from time to time hedges a portion of the forecasted local currency-denominated operating costs in Brazil and Mexico by entering into derivative contracts to buy the local currencies and sell the U.S. dollar. 13 The aggregate U.S. dollar notional amounts of forward and option contracts entered into for these purposes during the six-month periods in fiscal years 2026 and 2025 was as follows: Six Months Ended September 30, (in millions of dollars) 2025 2024 Tobacco purchases $ 42.2 $ 97.0 Processing costs 8.3 15.2 Operating costs 16.1 28.9 Total $ 66.6 $ 141.1 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 September 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 September 30, 2025 and 2024, and March 31, 2025, were approximately $ 58.4 million, $ 88.5 million, and $ 17.7 million, respectively. To further mitigate currency remeasurement exposure, the Company’s foreign subsidiaries may utilize short-term 14 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. 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. 15 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 September 30, Six Months Ended September 30, (in thousands of dollars) 2025 2024 2025 2024 Cash Flow Hedges - Interest Rate Swap Agreements Derivative Effective Portion of Hedge Gain (loss) recorded in accumulated other comprehensive loss $ 273 $ ( 8,969 ) $ ( 1,420 ) $ ( 6,346 ) Gain (loss) reclassified from accumulated other comprehensive loss into earnings $ 706 $ 1,514 $ 1,398 $ 2,989 Gain on terminated interest rate swaps amortized from accumulated other comprehensive loss into earnings $ 689 $ 688 $ 1,377 $ 1,377 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 $ 151 $ 2,685 $ 1,103 $ ( 2,552 ) Gain (loss) reclassified from accumulated other comprehensive loss into earnings $ ( 2,365 ) $ 12 $ ( 2,577 ) $ 604 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 and sales of crop inputs in Brazil Derivatives Not Designated as Hedges - Foreign Currency Exchange Contracts Gain (loss) recognized in earnings $ ( 1,156 ) $ ( 2,352 ) $ ( 326 ) $ ( 589 ) 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. 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 $ 2.3 million remained in accumulated other comprehensive loss at September 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 September 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 16 cost for the tobacco or by a change in sales prices if the strategy has been mandated by the customer. Generally, margins on the sale of the tobacco will not be significantly affected. Effect of Derivative Financial Instruments on the Consolidated Balance Sheets The table below outlines the effects of the Company’s derivative financial instruments on the consolidated balance sheets at September 30, 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) September 30, 2025 September 30, 2024 March 31, 2025 September 30, 2025 September 30, 2024 March 31, 2025 Derivatives Designated as Hedging Instruments Interest rate swap agreements Other non-current assets $ — $ — $ 1,783 Other long-term liabilities $ 1,035 $ 2,629 $ — Foreign currency exchange contracts Other current assets 224 — 11 Accounts payable and accrued expenses — 3,626 5,228 Total $ 224 $ — $ 1,794 $ 1,035 $ 6,255 $ 5,228 Derivatives Not Designated as Hedging Instruments Foreign currency exchange contracts Other current assets $ 436 $ 144 $ 291 Accounts payable and accrued expenses $ 819 $ 3,344 $ 1,440 Total $ 436 $ 144 $ 291 $ 819 $ 3,344 $ 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. 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 17 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 September 30, 2025 and 2024, and at March 31, 2025, the Company had certain financial assets and financial liabilities that were required to be measured and reported at fair value on a recurring basis. These assets and liabilities are listed in the tables below and are classified based on how their values were determined under the fair value hierarchy or the NAV practical expedient: September 30, 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 — 12,303 — — 12,303 Foreign currency exchange contracts — — 660 — 660 Total financial assets measured and reported at fair value $ 149 $ 12,303 $ 660 $ — $ 13,112 Liabilities Interest rate swap agreements $ — $ — $ 1,035 $ — $ 1,035 Foreign currency exchange contracts — — 819 — 819 Total financial liabilities measured and reported at fair value $ — $ — $ 1,854 $ — $ 1,854 September 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 — 12,376 — — 12,376 Foreign currency exchange contracts — — 144 — 144 Total financial assets measured and reported at fair value $ 148 $ 12,376 $ 144 $ — $ 12,668 Liabilities Interest rate swap agreements $ — $ — $ 2,629 $ — $ 2,629 Foreign currency exchange contracts — — 6,970 — 6,970 Total financial liabilities measured and reported at fair value $ — $ — $ 9,599 $ — $ 9,599 18 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 September 30, 2025, and 2024 and March 31, 2025: (in millions of dollars) September 30, 2025 September 30, 2024 March 31, 2025 Fair market value of long term obligations $ 619 $ 615 $ 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. 19 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 September 30, Three Months Ended September 30, (in thousands of dollars) 2025 2024 2025 2024 Service cost $ 1,259 $ 1,319 $ 17 $ 23 Interest cost 2,268 2,882 266 264 Expected return on plan assets ( 3,027 ) ( 3,607 ) ( 11 ) ( 14 ) Net amortization and deferral 83 174 ( 161 ) ( 160 ) Net periodic benefit cost $ 583 $ 768 $ 111 $ 113 Pension Benefits Other Postretirement Benefits Six Months Ended September 30, Six Months Ended September 30, (in thousands of dollars) 2025 2024 2025 2024 Service cost $ 2,511 $ 2,641 $ 34 $ 47 Interest cost 4,535 5,754 528 535 Expected return on plan assets ( 6,054 ) ( 7,214 ) ( 22 ) ( 28 ) Net amortization and deferral 166 348 ( 321 ) ( 320 ) Net periodic benefit cost $ 1,158 $ 1,529 $ 219 $ 234 During the six months ended September 30, 2025, the Company made contributions of approximately $ 10.0 million to its pension plans. Additional contributions of $ 1.6 million are expected during the remaining six 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. 20 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. During the six-month periods ended September 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: Six Months Ended September 30, 2025 2024 RSUs: Number granted 114,440 96,230 Grant date fair value $ 62.77 $ 47.81 PSUs: Number granted 51,215 62,085 Grant date fair value $ 55.89 $ 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 six-month periods ended September 30, 2025 and 2024, the Company recorded total stock-based compensation expense of approximately $ 8.5 million and $ 6.6 million, respectively. The Company expects to recognize stock-based compensation expense of approximately $ 1.6 million during the remaining six 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”), 21 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. 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 September 30, 2025 Three Months Ended September 30, 2024 Tobacco Operations Ingredients Operations Consolidated Tobacco Operations Ingredients Operations Consolidated Sales and other operating revenues $ 659,423 $ 94,754 $ 754,177 $ 630,212 $ 80,550 $ 710,762 Cost of goods sold ( 534,668 ) ( 79,679 ) ( 614,347 ) ( 503,147 ) ( 64,470 ) ( 567,617 ) Selling, general and administrative expenses ( 40,057 ) ( 12,041 ) ( 52,098 ) ( 33,657 ) ( 11,873 ) ( 45,530 ) Corporate overhead allocated to the segments ( 16,889 ) ( 3,194 ) ( 20,083 ) ( 15,432 ) ( 2,874 ) ( 18,306 ) Equity in pretax earnings (loss) of unconsolidated affiliates (1) ( 2,561 ) — ( 2,561 ) ( 642 ) — ( 642 ) Segment operating income 65,248 ( 160 ) 65,088 77,334 1,333 78,667 Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (1) 2,561 642 Restructuring and impairment costs (2) — ( 10,573 ) Consolidated total $ 67,649 $ 68,736 Six Months Ended September 30, 2025 Six Months Ended September 30, 2024 Tobacco Operations Ingredients Operations Consolidated Tobacco Operations Ingredients Operations Consolidated Sales and other operating revenues $ 1,164,119 $ 183,820 $ 1,347,939 $ 1,142,167 $ 165,645 $ 1,307,812 Cost of goods sold ( 942,535 ) ( 151,447 ) ( 1,093,982 ) ( 937,912 ) ( 130,834 ) ( 1,068,746 ) Selling, general and administrative expenses ( 84,811 ) ( 24,078 ) ( 108,889 ) ( 80,205 ) ( 24,652 ) ( 104,857 ) Corporate overhead allocated to the segments ( 35,729 ) ( 6,755 ) ( 42,484 ) ( 31,760 ) ( 5,915 ) ( 37,675 ) Equity in pretax earnings (loss) of unconsolidated affiliates (1) ( 126 ) — ( 126 ) ( 502 ) — ( 502 ) Segment operating income 100,918 1,540 102,458 91,788 4,244 96,032 Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (1) 126 502 Restructuring and impairment costs (2) ( 1,122 ) ( 10,573 ) Consolidated operating income $ 101,462 $ 85,961 (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. 22 Segment Assets Accounts Receivable, net September 30, 2025 September 30, 2024 March 31, 2025 September 30, 2025 September 30, 2024 March 31, 2025 Tobacco Operations $ 2,555,801 $ 2,533,062 $ 2,436,416 $ 383,623 $ 477,855 $ 566,755 Ingredients Operations 514,638 512,524 553,136 61,634 59,747 59,121 Consolidated total $ 3,070,439 $ 3,045,586 $ 2,989,552 $ 445,257 $ 537,602 $ 625,876 Goodwill, net Intangibles, net September 30, 2025 September 30, 2024 March 31, 2025 September 30, 2025 September 30, 2024 March 31, 2025 Tobacco Operations $ 97,747 $ 97,804 $ 97,772 $ 55 $ 66 $ 47 Ingredients Operations 116,068 116,068 116,068 52,595 63,197 57,789 Consolidated total $ 213,815 $ 213,872 $ 213,840 $ 52,650 $ 63,263 $ 57,836 Capital Expenditures Depreciation and Amortization Six Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 Tobacco Operations $ 13,711 $ 18,781 $ 16,378 $ 19,835 Ingredients Operations 7,388 20,015 10,820 9,585 Consolidated total $ 21,099 $ 38,796 $ 27,198 $ 29,420 23 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 six months ended September 30, 2025 and 2024: Six Months Ended September 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 7,954 3,933 Less: Net (gain) loss on foreign currency translation attributable to noncontrolling interests 255 393 Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes 8,209 4,326 Balance at end of period $ ( 34,430 ) $ ( 40,489 ) 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 $( 479 ) and $ 515 ) 3,254 ( 911 ) Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $( 442 ) and $ 145 ) (1) 971 ( 507 ) Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes 4,225 ( 1,418 ) Balance at end of period $ ( 689 ) $ ( 2,034 ) 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 $ 374 and $ 1,779 ) ( 1,047 ) ( 4,567 ) Reclassification of (gain) loss to earnings (net of tax expense (benefit) of $ 730 and $ 1,224 ) (2) ( 2,044 ) ( 3,142 ) Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes ( 3,091 ) ( 7,709 ) Balance at end of period $ ( 257 ) $ 779 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 $ 67 and $ 0 ) (3) ( 502 ) ( 770 ) Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes ( 502 ) ( 770 ) Balance at end of period $ ( 35,834 ) $ ( 45,412 ) Total accumulated other comprehensive loss at end of period $ ( 71,210 ) $ ( 87,156 ) (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. 24 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 and six months ended September 30, 2025 and 2024 is as follows: Three Months Ended September 30, 2025 Three Months Ended September 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 $ 1,458,917 $ 40,672 $ 1,499,589 $ 1,413,457 $ 30,042 $ 1,443,499 Changes in common stock Accrual of stock-based compensation 906 — 906 1,942 — 1,942 Withholding of shares from stock-based compensation for grantee income taxes ( 3,710 ) — ( 3,710 ) ( 318 ) — ( 318 ) Dividend equivalents on RSUs 215 — 215 288 — 288 Changes in retained earnings Net income (loss) 34,169 634 34,803 25,940 8,029 33,969 Cash dividends declared Common stock ( 20,429 ) — ( 20,429 ) ( 20,020 ) — ( 20,020 ) Dividend equivalents on RSUs ( 215 ) — ( 215 ) ( 288 ) — ( 288 ) Other comprehensive income (loss) 129 ( 278 ) ( 149 ) ( 435 ) ( 3 ) ( 438 ) Other changes in noncontrolling interests Dividends paid to noncontrolling shareholders — ( 6,860 ) ( 6,860 ) — ( 630 ) ( 630 ) Balance at end of period $ 1,469,982 $ 34,168 $ 1,504,150 $ 1,420,566 $ 37,438 $ 1,458,004 Six Months Ended September 30, 2025 Six Months Ended September 30, 2024 (in thousands of dollars) Universal Corporation Non-controlling Interests Total Universal Corporation Non-controlling Interests Total Balance at beginning of year $ 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 8,481 — 8,481 6,583 — 6,583 Withholding of shares from stock-based compensation for grantee income taxes ( 7,727 ) — ( 7,727 ) ( 3,715 ) — ( 3,715 ) Dividend equivalents on RSUs 529 — 529 600 — 600 Changes in retained earnings Net income 42,666 6,504 49,170 26,070 5,075 31,145 Cash dividends declared Common stock ( 40,835 ) — ( 40,835 ) ( 40,008 ) — ( 40,008 ) Dividend equivalents on RSUs ( 529 ) — ( 529 ) ( 600 ) — ( 600 ) Other comprehensive income (loss) 8,841 ( 255 ) 8,586 ( 5,571 ) ( 393 ) ( 5,964 ) Other changes in noncontrolling interests Dividends paid to noncontrolling shareholders — ( 14,063 ) ( 14,063 ) — ( 8,960 ) ( 8,960 ) Balance at end of period $ 1,469,982 $ 34,168 $ 1,504,150 $ 1,420,566 $ 37,438 $ 1,458,004 25