Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context otherwise requires, the terms “we,” “our,” “us” or “Universal” or the “Company” refer to Universal Corporation together with its subsidiaries. This Quarterly Report on Form 10-Q ("Form 10-Q") and the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Among other things, these statements relate to the Company’s financial condition, results of operation, and future business plans, operations, opportunities, and prospects. In addition, the Company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in other filings with the Securities and Exchange Commission (the "SEC") and in reports to shareholders. These forward-looking statements are generally identified by the use of words such as we “expect,” “believe,” “anticipate,” “could,” “should,” “may,” “plan,” “will,” “predict,” “estimate,” and similar expressions or words of similar import. These forward-looking statements are based upon management’s current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results, performance, or achievements to be materially different from any anticipated results, prospects, performance, or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: product purchased not meeting quality and quantity requirements; reliance on a few large customers; anticipated levels of demand for and supply of our products and services; tobacco growing conditions and customer requirements; major shifts in customer requirements for leaf tobacco; higher inflation rates, tariffs and other pressures on costs; weather and other conditions; exposure to certain legal, regulatory and financial risks related to climate change; industry-specific risks related to our plant-based ingredients businesses; disruption of our supply chain for our plant-based ingredients; success in pursuing strategic investments or acquisitions and integration of new businesses and the impact of these new businesses on future results; our ability to maintain effective information technology systems and safeguard confidential information; our inability to attract, develop, retain, motivate, and maintain good relationships with our workforce; our dependence on a seasonal workforce; epidemics, pandemics or similar widespread public health concerns; government efforts to regulate the production and consumption of tobacco products; government actions on the sourcing of leaf tobacco; economic and political conditions in the countries in which we and our customers operate, including the ongoing impacts from international conflicts; sustainability considerations from governments and other stakeholders; changes in tax laws in the countries where we do business; material weaknesses in our internal control over financial reporting; our inability to use a Form S-3 registration statement; failure of our customers or suppliers to repay extensions of credit; changes in exchange rates; changes in interest rates; 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 (the "2025 Form 10-K"). 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. This Form 10-Q should be read in conjunction with our 2025 Form 10-K.
Amounts described as net income (loss) and earnings (loss) per diluted share in the following discussion are attributable to Universal Corporation and exclude earnings related to non-controlling interests in subsidiaries. Any references to adjusted operating income (loss), adjusted net income (loss) attributable to Universal Corporation, adjusted diluted earnings (loss) per share, and the total for segment operating income (loss) are references to non-GAAP financial measures. These measures are not financial measures calculated in accordance with generally accepted accounting principles ("GAAP") and should not be considered as substitutes for operating income (loss), net income (loss) attributable to Universal Corporation, diluted earnings (loss) per share, cash from operating activities or any other operating or financial performance measure calculated in accordance with GAAP, and may not be comparable to similarly-titled measures reported by other companies. Reconciliations of adjusted operating income (loss) to consolidated operating (income), adjusted net income (loss) attributable to Universal Corporation to consolidated net income (loss) attributable to Universal Corporation and adjusted diluted earnings (loss) per share to diluted earnings (loss) per share are provided in Other Items below to the extent these non-GAAP financial measures are referenced. In addition, we have provided a reconciliation of the total for segment operating income (loss) to consolidated operating income (loss) in Note 12. "Operating Segments" to the consolidated financial statements. Management evaluates the consolidated Company and segment performance excluding certain significant charges or credits. We believe these non-GAAP financial measures, which exclude items that we believe are not indicative of our core operating results, can provide investors with important information that is useful in understanding our business results and trends. References to net debt, net capitalization, and net debt to net capitalization ratio are also references to non-GAAP financial measures. These measures are not financial measures calculated in accordance with GAAP and should not be considered substitutes for total debt, total capitalization, total debt to total capitalization ratio, or any other operating or financial performance measures calculated in accordance with GAAP, and may not be comparable to similarly-titled measures reported by other companies. Reconciliations of net debt to total debt and net capitalization to total capitalization are provided in Other Items below. We believe these non-GAAP measures are meaningful indicators of liquidity and financial position.
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Results of Operations
Overview
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 September 30, Change Six Months Ended September 30, Change
(in millions of dollars, except per share data) 2025 2024 % 2025 2024 %
Consolidated Results
Sales and other operating revenue $ 754.2 $ 710.8 6 % $ 1,347.9 $ 1,307.8 3 %
Cost of goods sold $ 614.3 $ 567.6 8 % $ 1,094.0 $ 1,068.7 2 %
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 %
Restructuring and impairment costs $ — $ 10.6 (100) % $ 1.1 $ 10.6 (89) %
Operating income $ 67.6 $ 68.7 (2) % $ 101.5 $ 86.0 18 %
Adjusted operating income (non-GAAP)* $ 67.6 $ 79.3 (15) % $ 102.6 $ 96.5 6 %
Net income attributable to Universal Corporation $ 34.2 $ 25.9 32 % $ 42.7 $ 26.1 64 %
Adjusted net income attributable to Universal Corporation (non-GAAP)* $ 34.2 $ 36.4 (6) % $ 43.8 $ 36.5 20 %
Diluted earnings (loss) per share $ 1.36 $ 1.03 32 % $ 1.70 $ 1.04 63 %
Adjusted diluted earnings (loss) per share (non-GAAP)* $ 1.36 $ 1.45 (6) % $ 1.74 $ 1.46 19 %
Segment Results
Tobacco operations sales and other operating revenues $ 659.4 $ 630.2 5 % $ 1,164.1 $ 1,142.2 2 %
Tobacco operations operating income $ 65.2 $ 77.3 (16) % $ 100.9 $ 91.8 10 %
Ingredients operations sales and other operating revenues $ 94.8 $ 80.6 18 % $ 183.8 $ 165.6 11 %
Ingredients operations operating income (loss) $ (0.2) $ 1.3 (112) % $ 1.5 $ 4.2 (64) %
*See Reconciliation of Certain non-GAAP Financial Measures in Other Items below.
Quarter Ended September 30, 2025, compared to Quarter Ended September 30, 2024
Consolidated Results
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
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$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
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
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 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
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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
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.
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Other Items
Reconciliation of Certain Non-GAAP Financial Measures:
The following tables set forth certain non-recurring items included in reported results to reconcile adjusted operating income to consolidated operating income and adjusted net income to net income attributable to Universal Corporation:
Adjusted Operating Income Reconciliation
Three Months Ended September 30, Six Months Ended September 30,
(in thousands) 2025 2024 2025 2024
As Reported: Consolidated operating income $ 67,649 $ 68,736 $ 101,462 $ 85,961
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
Adjusted Net Income Attributable to Universal Corporation and Adjusted Diluted Earnings Per Share Reconciliation
(in thousands except for per share amounts)
Three Months Ended September 30, Six Months Ended September 30,
2025 2024 2025 2024
As Reported: 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
Non-GAAP adjustments to income taxes
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)
As adjusted: Net income attributable to Universal Corporation (non-GAAP) $ 34,169 $ 36,381 $ 43,753 $ 36,511
As reported: Diluted earnings per share $ 1.36 $ 1.03 $ 1.70 $ 1.04
As adjusted: Diluted earnings per share (non-GAAP) $ 1.36 $ 1.45 $ 1.74 $ 1.46
(1) Restructuring and impairment costs are included in Consolidated operating income in the consolidated statements of income, but excluded for purposes of Adjusted operating income, Adjusted net income available to Universal Corporation, and Adjusted diluted earnings per share.
(2) The income tax effect of non-GAAP adjustments was determined based on the timing and nature of the specific non-GAAP adjustments and their relevant jurisdictional income tax rates (foreign, state, and local) and the applicable U.S. federal income tax rates. The Company considers current and deferred income tax rates to calculate the impact to income taxes for the non-GAAP adjustments.
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The following table reconciles total debt to net debt and net capitalization:
Net Debt and Net Capitalization Reconciliation
September 30, September 30, March 31,
(in thousands) 2025 2024 2025
Add: Notes payable and overdrafts $ 539,583 $ 579,132 $ 455,039
Add: Long-term obligations 618,196 617,641 617,918
Add: Current portion of long-term obligations — — —
Total Debt 1,157,779 1,196,773 1,072,957
Add: Customer advances and deposits 2,782 6,837 3,763
Less: Cash and cash equivalents 88,652 80,118 260,115
Net Debt (non-GAAP) $ 1,071,909 $ 1,123,492 $ 816,605
Add: Total Universal Corporation shareholders' equity 1,469,982 1,420,566 1,458,556
Net Capitalization (non-GAAP) $ 2,541,891 $ 2,544,058 $ 2,275,161
Net Debt/Net Capitalization (non-GAAP) 42 % 44 % 36 %
Liquidity and Capital Resources
Overview
Our liquidity and operating capital resource requirements are predominantly short term in nature and primarily relate to working capital for tobacco crop purchases. Working capital needs are seasonal within each geographic region. The geographic dispersion and the timing of working capital needs permit us to predict our general level of cash requirements, although tobacco crop sizes, prices paid to farmers, shipment and delivery timing, and currency fluctuations affect requirements each year. Peak working capital requirements are generally reached during the first and second fiscal quarters. Each geographic area follows a cycle of buying, processing, and shipping tobacco to customers, and in many regions, we also provide agricultural materials to farmers during the growing season. The timing of the elements of each cycle is influenced by such factors as local weather conditions and individual customer shipping requirements, which may change the level or the duration of crop financing. Despite a predominance of short-term needs, we maintain a portion of our total debt as long-term to reduce liquidity risk. We also periodically have large cash balances that we utilize to meet our working capital requirements.
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 $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. Our level of committed inventory percentages is influenced by timing of farmer deliveries of new crops, as well as the receipt of customer orders. 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 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.
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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 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
Our capital allocation strategy focuses on four strategic priorities: strengthening and investing for growth in our leaf tobacco business; increasing our strong dividend; exploring growth opportunities for our ingredients business; and returning excess capital to our shareholders. In deciding where to invest capital resources, we look for opportunities where we believe we can earn an adequate return as well as leverage our assets and expertise or enhance our farmer base. 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 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. In addition, from time to time, we undertake projects that require capital expenditures when we identify opportunities to improve efficiencies, invest in sustainability projects, add value for our customers, and position ourselves for future growth. We currently expect to spend approximately $45 to $55 million over the next twelve months on capital projects for maintenance of our facilities and other investments to grow and improve our businesses.
Our Board of Directors approved our current share repurchase program in November 2024. The program authorizes the purchase of up to $100 million of our common stock through November 15, 2026. Under the current authorization, we may purchase shares from time to time on the open market or in privately negotiated transactions at prices not exceeding prevailing market rates. 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 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 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 $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 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.
Our seasonal working capital requirements for our tobacco business typically increase significantly between March and September and decline after mid-fiscal year. Available capital resources from our cash balances, committed revolving credit facility, and uncommitted credit lines are expected to exceed our normal working capital needs and currently anticipated capital expenditure requirements over the next twelve months and beyond.
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Derivatives
From time to time, we use interest rate swap agreements to manage our exposure to changes in interest rates. 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. The swaps are accounted for as cash flow hedges.
We also use derivative instruments from time to time to hedge certain foreign currency exposures, primarily related to forecasted purchases of tobacco, related processing costs, and crop input sales, as well as our net monetary balance sheet exposures in local currency. We generally account for our hedges of forecasted tobacco purchases as cash flow hedges. 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
A summary of our critical accounting policies is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2025 Form 10-K. Our critical accounting policies have not changed from those reported in the 2025 Form 10-K.
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