UNIVERSAL CORP /VA/ 10-K

Item 8. Financial Statements and Supplementary Data UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME Fiscal Year Ended March 31, (in thousands of dollars, except share and per share data) 2026 2025 2024 Sales and other operating revenues $ 2,924,470 $ 2,947,284 $ 2,748,573 Costs and expenses Cost of goods sold 2,412,454 2,398,627 2,212,475 Selling, general and administrative expenses 300,671 305,287 310,566 Restructuring and impairment costs 1,833 10,573 3,523 Goodwill impairment 41,061 — — Operating income 168,451 232,797 222,009 Equity in pretax earnings of unconsolidated affiliates 3,430 9,103 756 Pension settlement charge — 14,101 — Other non-operating income 2,847 2,569 3,084 Interest income 1,964 3,483 4,504 Interest expense 74,040 79,636 66,273 Income before income taxes 102,652 154,215 164,080 Income taxes 46,657 40,946 31,109 Net income 55,995 113,269 132,971 Less: net income attributable to noncontrolling interests in subsidiaries ( 23,358 ) ( 18,222 ) ( 13,373 ) Net income attributable to Universal Corporation $ 32,637 $ 95,047 $ 119,598 Earnings per share: Basic $ 1.30 $ 3.81 $ 4.81 Diluted $ 1.30 $ 3.78 $ 4.78 Weighted average common shares outstanding: Basic 25,037,983 24,947,208 24,851,858 Diluted 25,171,162 25,127,356 25,040,914 See accompanying notes. 42 UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Year Ended March 31, (in thousands of dollars) 2026 2025 2024 Net income $ 55,995 $ 113,269 $ 132,971 Other comprehensive income (loss): Foreign currency translation, net of income taxes 4,955 1,750 ( 1,531 ) Foreign currency hedge, net of income taxes 3,836 ( 4,298 ) ( 5,515 ) Interest rate hedge, net of income taxes ( 2,790 ) ( 5,654 ) 3,235 Pension and other postretirement benefit plans, net of income taxes 368 9,310 ( 1,666 ) Total other comprehensive income (loss), net of income taxes 6,369 1,108 ( 5,477 ) Total comprehensive income 62,364 114,377 127,494 Less: comprehensive income attributable to noncontrolling interests ( 22,788 ) ( 17,796 ) ( 12,424 ) Comprehensive income attributable to Universal Corporation $ 39,576 $ 96,581 $ 115,070 See accompanying notes. 43 UNIVERSAL CORPORATION CONSOLIDATED BALANCE SHEETS March 31, (in thousands of dollars) 2026 2025 ASSETS Current assets Cash and cash equivalents $ 62,178 $ 260,115 Accounts receivable, net 563,864 625,876 Advances to suppliers, net 177,222 169,385 Accounts receivable—unconsolidated affiliates 12,300 7,143 Inventories—at lower of cost or net realizable value: Tobacco 832,360 806,332 Other 203,537 189,610 Prepaid income taxes 22,958 19,595 Other current assets 97,278 78,041 Total current assets 1,971,697 2,156,097 Property, plant and equipment Land 26,249 26,113 Buildings 333,416 333,398 Machinery and equipment 759,654 723,935 1,119,319 1,083,446 Less accumulated depreciation ( 746,365 ) ( 710,472 ) 372,954 372,974 Other assets Operating lease right-of-use assets 37,272 34,260 Goodwill, net 172,695 213,840 Other intangibles, net 48,604 57,836 Investments in unconsolidated affiliates 82,287 79,317 Deferred income taxes 15,636 16,539 Pension asset 16,542 12,819 Other noncurrent assets 49,080 45,870 422,116 460,481 Total assets $ 2,766,767 $ 2,989,552 44 UNIVERSAL CORPORATION CONSOLIDATED BALANCE SHEETS—(Continued) March 31, (in thousands of dollars) 2026 2025 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Notes payable and overdrafts $ 287,564 $ 455,039 Accounts payable 90,139 98,036 Accounts payable—unconsolidated affiliates 510 1,999 Customer advances and deposits 3,376 3,763 Accrued compensation 33,234 44,646 Income taxes payable 17,643 12,586 Current portion of operating lease liabilities 11,172 10,742 Accrued expenses and other current liabilities 120,603 123,350 Current portion of long-term debt — — Total current liabilities 564,241 750,161 Long-term debt 616,727 617,918 Pensions and other postretirement benefits 35,471 35,336 Long-term operating lease liabilities 24,359 20,608 Other long-term liabilities 24,925 22,901 Deferred income taxes 39,920 42,090 Total liabilities 1,305,643 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, 24,923,496 shares issued and outstanding ( 24,715,625 at March 31, 2025) 351,523 351,626 Retained earnings 1,136,989 1,186,981 Accumulated other comprehensive loss ( 73,112 ) ( 80,051 ) Total Universal Corporation shareholders' equity 1,415,400 1,458,556 Noncontrolling interests in subsidiaries 45,724 41,982 Total shareholders' equity 1,461,124 1,500,538 Total liabilities and shareholders' equity $ 2,766,767 $ 2,989,552 See accompanying notes. 45 UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended March 31, (in thousands of dollars) 2026 2025 2024 Cash Flows From Operating Activities: Net income $ 55,995 $ 113,269 $ 132,971 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 53,437 59,773 58,326 Provision for losses (recoveries) on advances 6,258 1,938 14,090 Inventory write-downs 51,988 19,769 9,234 Stock-based compensation expense 7,115 8,531 12,063 Foreign currency remeasurement loss (gain), net 6,708 6,096 5,114 Foreign currency exchange contracts ( 2,235 ) 916 ( 365 ) Deferred income taxes ( 961 ) 1,083 ( 5,404 ) Equity in net income of unconsolidated affiliates, net of dividends 245 ( 3,031 ) ( 1,239 ) Goodwill impairment 41,061 — — Restructuring and impairment costs 1,833 10,573 3,523 Restructuring payments ( 3,308 ) ( 1,568 ) ( 1,181 ) Pension settlement — 14,101 — Other, net 106 1,406 1,001 Changes in operating assets and liabilities, net: Accounts receivable 39,161 ( 129,988 ) ( 109,681 ) Inventories ( 89,521 ) 244,732 ( 236,243 ) Other assets ( 21,241 ) 9,187 ( 768 ) Accounts payable ( 12,618 ) ( 8,700 ) 20,806 Accrued expenses and other current liabilities ( 5,187 ) ( 10,269 ) 8,414 Income taxes 971 2,003 342 Customer advances and deposits ( 707 ) ( 12,847 ) 14,365 Net cash provided (used) by operating activities 129,100 326,974 ( 74,632 ) Cash Flows From Investing Activities: Purchase of property, plant and equipment ( 48,829 ) ( 62,601 ) ( 66,013 ) Proceeds from sale of business, less cash of businesses sold — — 3,757 Proceeds from sale of property, plant and equipment 5,873 3,783 2,257 Net cash used by investing activities ( 42,956 ) ( 58,818 ) ( 59,999 ) Cash Flows From Financing Activities: Issuance (repayment) of short-term debt, net ( 170,069 ) 37,696 223,000 Issuance of long-term debt 89,130 — — Repayment of long-term debt ( 89,130 ) — — Dividends paid to noncontrolling interests in subsidiaries ( 19,046 ) ( 17,530 ) ( 10,572 ) Repurchase of common stock — — ( 4,744 ) Dividends paid on common stock ( 81,299 ) ( 79,686 ) ( 78,402 ) Settlement costs from termination of interest rate swap agreements ( 988 ) — — Debt issuance costs and other ( 12,941 ) ( 3,715 ) ( 3,607 ) Net cash provided (used) by financing activities ( 284,343 ) ( 63,235 ) 125,675 Effect of exchange rate changes on cash 262 ( 399 ) ( 141 ) Net increase (decrease) in cash and cash equivalents ( 197,937 ) 204,522 ( 9,097 ) Cash, restricted cash and cash equivalents at beginning of year 260,115 55,593 64,690 Cash, Restricted Cash and Cash Equivalents at End of Year $ 62,178 $ 260,115 $ 55,593 Supplemental information—cash paid for: Interest $ 71,758 $ 75,285 $ 61,084 Income taxes, net of refunds $ 43,117 $ 38,358 $ 38,084 See accompanying notes. 46 UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Universal Corporation Shareholders (in thousands of dollars) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Non- controlling Interests Total Shareholders' Equity Fiscal Year Ended March 31, 2026 Balance at beginning of year $ 351,626 $ 1,186,981 $ ( 80,051 ) $ 41,982 $ 1,500,538 Changes in common stock Accrual of stock-based compensation 7,115 — — — 7,115 Withholding of shares from stock-based compensation for grantee income taxes ( 8,135 ) — — — ( 8,135 ) Dividend equivalents on restricted stock units (RSUs) 917 — — — 917 Changes in retained earnings Net income — 32,637 — 23,358 55,995 Cash dividends declared on common stock ($ 3.28 per share) — ( 81,712 ) — — ( 81,712 ) Dividend equivalents on restricted stock units (RSUs) — ( 917 ) — — ( 917 ) Other comprehensive income (loss) Foreign currency translation, net of income taxes — — 5,525 ( 570 ) 4,955 Foreign currency hedge, net of income taxes — — 3,836 — 3,836 Interest rate hedge, net of income taxes — — ( 2,790 ) — ( 2,790 ) Pension and other postretirement benefit plans, net of income taxes — — 368 — 368 Other changes in noncontrolling interests Dividends paid to noncontrolling shareholders — — — ( 19,046 ) ( 19,046 ) Balance at end of year $ 351,523 $ 1,136,989 $ ( 73,112 ) $ 45,724 $ 1,461,124 47 UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY—(Continued) Universal Corporation Shareholders (in thousands of dollars) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Non- controlling Interests Total Shareholders' Equity Fiscal Year Ended March 31, 2025 Balance at beginning of year $ 345,596 $ 1,173,196 $ ( 81,585 ) $ 41,716 $ 1,478,923 Changes in common stock Accrual of stock-based compensation 8,531 — — — 8,531 Withholding of shares from stock-based compensation for grantee income taxes ( 3,715 ) — — — ( 3,715 ) Dividend equivalents on restricted stock units (RSUs) 1,214 — — — 1,214 Changes in retained earnings Net income — 95,047 — 18,222 113,269 Cash dividends declared on common stock ($ 3.24 per share) — ( 80,048 ) — — ( 80,048 ) Dividend equivalents on restricted stock units (RSUs) — ( 1,214 ) — — ( 1,214 ) Other comprehensive income (loss) Foreign currency translation, net of income taxes — — 2,176 ( 426 ) 1,750 Foreign currency hedge, net of income taxes — — ( 4,298 ) — ( 4,298 ) Interest rate hedge, net of income taxes — — ( 5,654 ) — ( 5,654 ) Pension and other postretirement benefit plans, net of income taxes — — 9,310 — 9,310 Other changes in noncontrolling interests Dividends paid to noncontrolling shareholders — — — ( 17,530 ) ( 17,530 ) Balance at end of year $ 351,626 $ 1,186,981 $ ( 80,051 ) $ 41,982 $ 1,500,538 48 UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY—(Continued) Universal Corporation Shareholders (in thousands of dollars) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Non- controlling Interests Total Shareholders' Equity Fiscal Year Ended March 31, 2024 Balance at beginning of year $ 337,247 $ 1,136,898 $ ( 77,057 ) $ 39,864 $ 1,436,952 Changes in common stock Repurchase of common stock ( 1,373 ) — — — ( 1,373 ) Accrual of stock-based compensation 12,063 — — — 12,063 Withholding of shares from stock-based compensation for grantee income taxes ( 3,607 ) — — — ( 3,607 ) Dividend equivalents on restricted stock units (RSUs) 1,266 — — — 1,266 Changes in retained earnings Net income — 119,598 — 13,373 132,971 Cash dividends declared on common stock ($ 3.20 per share) ( 78,663 ) — — ( 78,663 ) Repurchase of common stock — ( 3,371 ) — — ( 3,371 ) Dividend equivalents on restricted stock units (RSUs) — ( 1,266 ) — — ( 1,266 ) Other comprehensive income (loss) Foreign currency translation, net of income taxes — — ( 582 ) ( 949 ) ( 1,531 ) Foreign currency hedge, net of income taxes — — ( 5,515 ) — ( 5,515 ) Interest rate hedge, net of income taxes — — 3,235 — 3,235 Pension and other postretirement benefit plans, net of income taxes — — ( 1,666 ) — ( 1,666 ) Other changes in noncontrolling interests Dividends paid to noncontrolling shareholders — — — ( 10,572 ) ( 10,572 ) Balance at end of year $ 345,596 $ 1,173,196 $ ( 81,585 ) $ 41,716 $ 1,478,923 49 UNIVERSAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY—(Continued) Fiscal Year Ended March 31, 2026 2025 2024 Common Shares Outstanding: Balance at beginning of year 24,715,625 24,573,408 24,555,361 Issuance of common stock 207,871 142,217 118,047 Repurchase of common stock — — ( 100,000 ) Balance at end of year 24,923,496 24,715,625 24,573,408 See accompanying notes. 50 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (All dollar amounts are in thousands, except per share amounts or as otherwise noted.) NOTE 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Universal Corporation, which together with its subsidiaries is referred to herein as “Universal” or the “Company,” is a global business-to-business agriproducts company. The Company is the leading global leaf tobacco supplier and provides high-quality plant-based ingredients to food and beverage end markets. The Company conducts its leaf tobacco business in over 30 countries, primarily in major tobacco-producing regions of the world. Consolidation The consolidated financial statements include the accounts of Universal Corporation and all domestic and foreign subsidiaries in which the Company maintains a controlling financial interest. Control is generally determined based on a voting interest of greater than 50%, such that Universal controls all significant corporate activities of the subsidiary. All significant intercompany accounts and transactions are eliminated in consolidation. The equity method of accounting is used for investments in companies where Universal Corporation has a voting interest of 20% to 50%. These investments are accounted for under the equity method because Universal exercises significant influence over those companies, but not control. The Company received $ 1.9 million dividends in fiscal year 2026, $ 4.2 million in fiscal year 2025, and no dividends in fiscal year 2024, from companies accounted for under the equity method. Investments where Universal has a voting interest of less than 20% are not significant and do not have readily determinable fair values. As such, the Company has elected the alternate method of measuring these investments at cost, less any impairment. The Company’s 49% ownership interest in Socotab L.L.C. (“Socotab”), a leading supplier of oriental tobaccos with operations located principally in Eastern Europe and Türkiye, is the primary investment accounted for under the equity method. The investment in Socotab is an important part of the Company’s overall product and service arrangements with its major customers. The Company reviews the carrying value of its investments in Socotab and its other unconsolidated affiliates on a regular basis and considers whether any factors exist that might indicate an impairment in value that is other than temporary. The Company’s operations in Zimbabwe are deconsolidated under accounting requirements that apply under certain conditions to foreign subsidiaries that are subject to foreign exchange controls and other government restrictions. The investment in the Zimbabwe operations is accounted for at cost and was zero at March 31, 2026 and 2025. The Company has a net foreign currency translation loss associated with the Zimbabwe operations of approximately $ 7.2 million, which remains a component of accumulated other comprehensive loss at March 31, 2026. As a regular part of its reporting, the Company reviews the conditions that resulted in the deconsolidation of the Zimbabwe operations to confirm that such accounting treatment is still appropriate. Dividends from the Zimbabwe operations are recorded in income in the period received. The Company holds less than a 100% financial interest in certain consolidated subsidiaries. The net income and shareholders’ equity attributable to the noncontrolling interests in these subsidiaries are reported in the consolidated financial statements. There were no material changes in the Company’s ownership percentage in any of these subsidiaries during fiscal years 2026, 2025, or 2024. Investments in Unconsolidated Affiliates The Company’s investments in its unconsolidated affiliates, which include its Zimbabwe operations, are non-marketable securities. Universal reviews such investments for impairment whenever events or changes in circumstances indicate that the carrying amount of an investment may not be recovered. For example, the Company would review such an investment for impairment if the investee were to lose a significant customer, suffer a large reduction in sales margins, experience a major change in its business environment, or undergo any other significant change in its normal business. In assessing the recoverability of these investments, the Company follows the applicable accounting guidance in determining the fair value of the investments. In most cases, this involves the use of undiscounted and discounted cash flow models (Level 3 of the fair value hierarchy under the accounting guidance). If the fair value of an unconsolidated investee is determined to be lower than its carrying value, an impairment loss is recognized. The determination of fair value using discounted cash flow models is normally not based on observable market data from independent sources and therefore requires significant management judgment with respect to estimates of future operating earnings and the selection of an appropriate discount rate. The use of different assumptions could increase or decrease estimated future operating cash flows, and the discounted value of those cash flows, and therefore could increase or decrease any impairment charge related to these investments. In its consolidated statements of income, the Company reports its proportional share of the earnings of unconsolidated affiliates accounted for on the equity method based on the pretax earnings of those affiliates, as permitted under the applicable accounting guidance. All applicable foreign and U.S. income taxes are provided on these earnings and reported as a component of 51 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) consolidated income tax expense. For unconsolidated affiliates located in foreign jurisdictions, repatriation of the Company’s share of the earnings through dividends is assumed in determining consolidated income tax expense. The following table provides a reconciliation of (1) equity in the pretax earnings of unconsolidated affiliates, as reported in the consolidated statements of income to (2) equity in the net income of unconsolidated affiliates, net of dividends, as reported in the consolidated statements of cash flows for the fiscal years ended March 31, 2026, 2025, and 2024: Fiscal Year Ended March 31, 2026 2025 2024 Equity in pretax earnings reported in the consolidated statements of income $ 3,430 $ 9,103 $ 756 Less: Equity in income taxes ( 1,818 ) ( 1,834 ) 483 Equity in net income 1,612 7,269 1,239 Less: Dividends received on investments (1) ( 1,857 ) ( 4,238 ) — Equity in net income, net of dividends, reported in the consolidated statements of cash flows $ ( 245 ) $ 3,031 $ 1,239 (1) In accordance with the applicable accounting guidance, dividends received from unconsolidated affiliates accounted for on the equity method that represent a return on capital (i.e., a return of earnings on a cumulative basis) are presented as operating cash flows in the consolidated statements of cash flows. Earnings Per Share The Company calculates basic earnings per share based on Net income attributable to Universal Corporation. The calculation uses the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed in a similar manner using the weighted average number of shares and dilutive potential shares outstanding. Dilutive potential shares include unvested restricted stock units and performance share units that are assumed to be fully vested and paid out in shares of common stock. Calculations of earnings per share for the fiscal years ended March 31, 2026, 2025, and 2024, are provided in Note 4. Cash, Restricted Cash, and Cash Equivalents All highly liquid investments with a maturity of three months or less at the time of purchase are classified as cash equivalents. Advances to Tobacco Suppliers In many sourcing regions where the Company operates, it provides agronomy services and seasonal advances of seed, fertilizer, and other supplies to tobacco farmers for crop production. These advances are typically 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 tobacco 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 tobacco suppliers totaled approximately $ 196 million at March 31, 2026 and $ 189 million at March 31, 2025. The related valuation allowances totaled $ 16 million at March 31, 2026 and $ 18 million at March 31, 2025, and were estimated based on the Company’s historical loss information and crop projections. The allowances were increased by net provisions for estimated uncollectible amounts of approximately $ 6.2 million in fiscal year 2026, $ 1.9 million in fiscal year 2025, and $ 14.1 million in fiscal year 2024. These net provisions are included in selling, general, and administrative expenses in the consolidated statements of income. Interest on advances is recognized in earnings as it is earned. Advances on which interest accruals had been discontinued totaled approximately $ 2 million at both March 31, 2026 and 2025. Inventories Inventories are valued at the lower of cost or net realizable value. Raw materials primarily consist of unprocessed leaf tobacco, which is clearly identified by type and grade at the time of purchase. The Company tracks the costs associated with this tobacco in the final product lots, and maintains this identification through the time of sale. This method of cost accounting is referred to as the specific cost or specific identification method. The predominant cost component of the Company’s inventories is the cost of the unprocessed tobacco. Direct and indirect processing costs related to these raw materials are capitalized and allocated to inventory in a systematic manner. The Company does not capitalize any interest or sales-related costs in inventory. 52 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In-bound freight costs are recorded in cost of goods sold. Other inventories consist primarily of unprocessed and processed food and beverage ingredients, botanical extracts, seed, fertilizer, packing materials, and other supplies, and are valued using the specific cost method. The Company records inventory write-downs to cost of goods sold for obsolete or unmarketable inventory in an amount equal to the difference between the carrying cost of inventory and the estimated net realizable value based upon assumptions about product demand and market conditions. If ultimate market conditions are less favorable than those projected by the Company, additional inventory write-downs may be required. The Company recognized inventory write-downs in fiscal years 2026, 2025, and 2024 of $52.0 million, $19.8 million, and $9.2 million, respectively. Recoverable Value-Added Tax Credits In many foreign countries, the Company’s local operating subsidiaries pay significant amounts of value-added tax (“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 predominantly 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 March 31, 2026 and 2025, the aggregate balances of recoverable tax credits held by the Company’s subsidiaries totaled approximately $ 66 million and $ 64 million, respectively, and the related valuation allowances totaled approximately $ 22 million and $ 21 million at March 31, 2026 and 2025. The net balances are reported in other current assets and other noncurrent assets in the consolidated balance sheets. Property, Plant and Equipment Depreciation of property, plant and equipment is based upon historical cost and the estimated useful lives of the assets. Depreciation is calculated primarily using the straight-line method. Buildings include processing and blending facilities, offices, and warehouses. Machinery and equipment consists of processing and packing machinery and transport, office, and computer equipment. Estimated useful lives range as follows: buildings - 15 to 40 years; processing and packing machinery - 3 to 11 years; transport equipment - 3 to 10 years; and office and computer equipment - 3 to 12 years. Depreciation expense for the fiscal years ended March 31, 2026, 2025, and 2024 was $ 44.2 million, $ 48.7 million, and $ 47.1 million, respectively. Where applicable and material in amount, the Company capitalizes related interest costs during periods that property, plant and equipment are being constructed or made ready for service. No interest was capitalized in fiscal years 2026, 2025, or 2024. Leases The Company determines if an arrangement meets the definition of a lease at inception. The Company, as a lessee, enters into operating leases for land, buildings, equipment, and vehicles. For all operating leases with terms greater than 12 months and with fixed payment arrangements, a lease liability and corresponding right-of-use asset are recognized in the balance sheet for the term of the lease by calculating the net present value of future lease payments. On the date of lease commencement, the present value of lease liabilities is determined by discounting the future lease payments by the Company’s collateralized incremental borrowing rate, adjusted for the lease term and currency of the lease payments. If a lease contains a renewal option that the Company is reasonably certain to exercise, the Company accounts for the original lease term and expected renewal term in the calculation of the lease liability and right-of-use asset. Certain of the Company’s leases include both lease and non-lease components (e.g., common-area or other maintenance costs) which are accounted for as a single lease component, as the Company has elected the practical expedient to group lease and non-lease components for real estate leases. Additional disclosures related to the Company’s leases are provided in Note 9. 53 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Goodwill and Other Intangibles Goodwill and other intangibles are disclosed in Note 6. Goodwill principally consists of the excess of the purchase price of acquired companies over the fair value of the net assets. Goodwill is carried at the lower of cost or fair value and is reviewed for potential impairment on an annual basis as of the end of the fiscal year. Reporting units are distinct operating subsidiaries or groups of subsidiaries that typically compose the Company’s business in a specific country or location. Goodwill is allocated to reporting units based on the country or location to which a specific acquisition relates, or by allocation based on expected future net cash flows if the acquisition relates to more than one country or location. The majority of the Company’s goodwill relates to its reporting unit in Brazil and reporting units in the Ingredients operating segment. See Note 6 for additional information. Significant adverse changes in the operations or estimated future net cash flows for a reporting unit with recorded goodwill could result in an impairment charge. Accounting Standards Codification Topic 350 (“ASC 350”) permits companies to base initial assessments of potential goodwill impairment on qualitative factors, and the Company elected to use that approach at March 31, 2026 for all entities with allocated goodwill with the exception of Universal Ingredients–Shank’s. For all entities, except Universal Ingredients–Shank’s, those factors did not indicate that it was more likely than not that the fair value of any of the reporting units was less than their respective carrying value, therefore no potential impairment of the Company’s recorded goodwill was noted at March 31, 2026. The Company elected to use the qualitative approach at March 31, 2025 for all entities. Those factors did not indicate that it was more likely than not that the fair value of any of the reporting units was less than their respective carrying value, therefore no potential impairment of the Company’s recorded goodwill was noted at March 31, 2025. The goodwill associated with Universal Ingredients–Shank’s was tested utilizing a quantitative approach at March 31, 2026. The quantitative approach was utilized because management determined it was more likely than not that the carrying value exceeded the fair value of the reporting unit based on management's lower internal profitability projections in future years due primarily to the impacts of persistent adverse market conditions for certain new and existing product offerings. ASC 350 allows companies to bypass the qualitative assessment and perform a quantitative assessment. The quantitative goodwill assessment consists of comparing the fair value of each reporting unit to the carrying value of that reporting unit. In the event that the carrying value of the reporting unit exceeds its fair value, an impairment of the reporting unit's goodwill is recognized, up to the amount of goodwill allocated to that reporting unit. The fair value of Universal Ingredients–Shank’s at March 31, 2026 was assessed using a combination of a discounted cash flow model, comprised of estimates of future net cash flows and discount rates, as well as a market-based approach that considered a subset of peer companies. Based on this quantitative assessment, the Company determined the carrying value of Universal Ingredients–Shank’s at March 31, 2026 exceeded the derived fair value and recognized a $ 41.1 million non-cash goodwill impairment charge for the fiscal year ended March 31, 2026. Other intangibles principally consists of finite lived intangible assets including customer-related intangibles, trade names, developed technology, and noncompetition agreements. Intangible assets acquired in a business combination are recorded at fair value using a discounted cash flow approach. A discounted cash flow approach to value intangible assets requires assumptions about the timing, amount, and probability of future net cash flows, as well as the discount rate and market participant considerations. Other intangibles are amortized on a straight-line basis over the intangible asset’s economic life. Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment, disclosed in Note 3 and Note 11, whenever events, changes in business conditions, or other circumstances provide an indication that such assets may be impaired. Potential impairment is initially assessed by comparing management’s undiscounted estimates of future cash flows from the use or disposition of the assets to their carrying value. If the carrying value exceeds the undiscounted cash flows, an impairment charge is recorded to reduce the carrying value of the asset to its fair value determined in accordance with the accounting guidance. In many cases, this involves the use of discounted cash flow models that are not based on observable market data from independent sources (Level 3 of the fair value hierarchy under the accounting guidance). Income Taxes The Company provides deferred income taxes on temporary differences between the book and tax basis of its assets and liabilities. Those differences arise principally from employee benefit accruals, depreciation, deferred compensation, undistributed earnings of unconsolidated affiliates, undistributed earnings of foreign subsidiaries, goodwill, intangibles, and valuation allowances on farmer advances and VAT credits. Income taxes provided on pretax amounts recorded in accumulated other comprehensive income (loss) are released when the related pretax amounts are reclassified to earnings. Additional disclosures related to the Company’s income taxes are disclosed in Note 5. 54 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Fair Values of Financial Instruments The fair value of the Company’s long-term debt, disclosed in Note 11, approximates the carrying amount since the variable interest rates in the underlying credit agreement reflect the market interest rates that were available to the Company at March 31, 2026. In periods when fixed-rate obligations are outstanding, fair values are estimated using market prices where they are available or discounted cash flow models based on current incremental borrowing rates for similar classes of borrowers and borrowing arrangements. The fair values of interest rate swap agreements designated as cash flow hedges and used to fix the variable benchmark rate on outstanding long-term debt are determined separately and recorded in other non-current assets. Except for interest rate swaps and forward foreign currency exchange contracts that are discussed below, the fair values of all other assets and liabilities that qualify as financial instruments approximate their carrying amounts. Derivative Financial Instruments The Company recognizes all derivatives on the balance sheet at fair value. Interest rate swaps and forward foreign currency exchange contracts are used from time to time to manage interest rate risk and foreign currency risk. The Company enters into such contracts only with counterparties of good standing. The credit exposure related to non-performance by the counterparties and the Company is considered in determining the fair values of the derivatives, and the effect has not been material to the financial statements or operations of the Company. Additional disclosures related to the Company’s derivatives and hedging activities are provided in Note 10. Translation and Remeasurement of Foreign Currencies The financial statements of foreign subsidiaries having the local currency as the functional currency are translated into U.S. dollars using exchange rates in effect at period end for assets and liabilities and average exchange rates applicable to each reporting period for results of operations. Adjustments resulting from translation of financial statements are reflected as a separate component of other comprehensive income or loss. The financial statements of foreign subsidiaries having the U.S. dollar as the functional currency, with certain transactions denominated in a local currency, are remeasured into U.S. dollars. The remeasurement of local currency amounts into U.S. dollars creates remeasurement gains and losses that are included in earnings as a component of selling, general, and administrative expenses. The Company recognized net remeasurement losses of $ 6.7 million, $ 6.1 million, and $ 5.1 million in fiscal years 2026, 2025, and 2024, respectively. Foreign currency transactions and forward foreign currency exchange contracts that are not designated as hedges generate gains and losses when they are settled or when they are marked-to-market under the prescribed accounting guidance. These transaction gains and losses are also included in earnings as a component of selling, general, and administrative expenses. The Company recognized net foreign currency transaction gains of $ 1.9 million in fiscal year 2026 and net foreign currency transaction losses of $ 2.2 million and $ 3.2 million in fiscal years 2025 and 2024, respectively. Customer Advances and Deposits From time to time, the Company receives advances and deposits from customers for future delivery of finished goods. The advance payments are applied against customer receivables after performance obligations are completed and recognition of revenue is appropriate. Revenue Recognition Revenue is recognized when the Company completes its performance obligation for the transfer of products and services under its contractual arrangements with customers. Transaction prices for the sale of tobacco are primarily based on negotiated fixed prices, but the Company does have a small number of cost-plus contracts with certain customers. For sales of tobacco, satisfaction of the performance obligation and recognition of the corresponding revenue is based on the transfer of the ownership and control of the product to the customer. A large percentage of the Company’s sales are to major multinational manufacturers of consumer tobacco products. The Company works closely with those customers to understand and plan for their requirements for volumes, styles, and grades of leaf tobacco from its various growing regions, and extensive coordination is maintained on an ongoing basis to determine and satisfy their requirements for transfer of ownership and physical shipment of processed tobacco. The customers typically specify, in sales contracts and in shipping documents, the precise terms for transfer of title and risk of loss for the tobacco. Customer returns and rejections are not historically significant, and the Company’s sales history indicates that customer-specific acceptance provisions are consistently met upon transfer of title and risk of loss. While most of the Company’s revenue is derived from tobacco that is purchased from farmers, processed and packed in its factories, and then sold to customers, some revenue is earned from processing tobacco owned by customers and from other value-added services. The arrangements for processing services usually exist in specific markets where the customers contract directly with farmers for leaf production, and they have accounted for less than 5 % of total revenue on an annual basis through the fiscal year ended March 31, 2026. Processing and packing of leaf tobacco is a short-duration process. Under normal operating conditions, raw tobacco that is placed into the production line exits as processed and packed tobacco within one hour, and is then 55 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) later transported to customer-designated storage facilities. The revenue for these services is recognized when the performance obligation is met upon the completion of processing, and the Company’s operating history indicates that customer requirements for processed tobacco are consistently met upon completion of processing. The Company has diversified its operations through acquisition of established companies that offer customers a wide range of both liquid and dehydrated fruit and vegetable ingredient products, as well as botanical extracts and flavors. 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), 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. 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. Additional disclosures related to the Company’s revenue from contracts with customers are provided in Note 2. Stock-Based Compensation Share-based payments, such as grants of restricted stock units, performance share units, restricted stock, stock appreciation rights, and stock options, are measured at fair value and reported as expense in the financial statements over the requisite service or performance periods. Additional disclosures related to stock-based compensation are included in Note 14. Estimates and Assumptions The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 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 fiscal year ended March 31, 2026, the Company sold $ 208.7 million of receivables and recorded discounts of $ 1.8 million. Accounting Pronouncements Accounting Pronouncements Adopted in Fiscal Year 2026 In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740) - Improvements to Income Tax Disclosure” (“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. The Company adopted ASU 2023-09 in fiscal year 2026, incorporating additional income tax disclosures on a prospective basis in Note 5. Accounting Pronouncements Adopted in Fiscal Year 2025 In November 2023, the FASB issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosure” (“ASU 2023-0”). ASU 2023-07 requires additional disclosures about profitability measures utilized by the chief operating decision maker and significant segment expenses. ASU 2023-07 also requires all annual disclosures regarding profit or loss and assets to be included in interim disclosures. The Company adopted ASU 2023-07 in fiscal year 2025, incorporating additional disclosures in Note 16 for significant segment expenses, including cost of goods sold, selling, general and administrative expenses, and allocated corporate overhead. Accounting Pronouncements to be Adopted in Future Years 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. 56 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Reclassifications Certain prior year amounts have been reclassified to conform to the current year’s presentation. NOTE 2. 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 57 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) arrangements with customers. The transaction prices and timing of revenue recognition of these items are determined by the specifics of each contract. Disaggregation of Revenue from Contracts with Customers The following table disaggregates the Company’s revenue by significant revenue-generating category: Fiscal Year Ended March 31, 2026 2025 2024 Tobacco sales $ 2,359,961 $ 2,460,496 $ 2,268,600 Ingredient sales 330,657 321,416 292,291 Processing revenue 119,076 73,597 82,976 Other sales and revenue from contracts with customers 75,384 67,415 77,777 Total revenue from contracts with customers 2,885,078 2,922,924 2,721,644 Other operating sales and revenues 39,392 24,360 26,929 Consolidated sales and other operating revenues $ 2,924,470 $ 2,947,284 $ 2,748,573 Other operating sales and revenues consists principally of interest on advances to tobacco suppliers and dividend income from unconsolidated affiliates. Major Customers A material part of the Company’s business is dependent upon a few customers. The Company’s six largest customers are Altria Group, Inc., British American Tobacco plc, China Tobacco International, Inc., Imperial Brands plc, Japan Tobacco, Inc., and Philip Morris International Inc. In the aggregate, these customers have accounted for approximately 60 % of consolidated revenue for each of the past three fiscal years. For the fiscal years ended March 31, 2026, 2025, and 2024, revenue from Philip Morris International Inc. accounted for revenue of approximately $ 620 million, $ 480 million, and $ 630 million, respectively, Imperial Brands plc accounted for revenue of approximately $ 400 million, $ 370 million, and $ 340 million, respectively, and Japan Tobacco, Inc. accounted for revenue of approximately $ 250 million, $ 240 million, and $ 260 million, respectively. These customers do business with various affiliates in the Company’s Tobacco Operations segment. The loss of, or substantial reduction in business from, any of these customers could have a material adverse effect on the Company. NOTE 3. RESTRUCTURING AND IMPAIRMENT COSTS During the fiscal years ended March 31, 2026, 2025 and 2024, Universal recorded restructuring and impairment costs related to business changes and various initiatives to adjust certain operations and reduce costs. See Note 1 for goodwill impairment for the fiscal year ended March 31, 2026. Fiscal Year Ended March 31, 2026 Tobacco Operations During the fiscal year ended March 31, 2026, the Company recognized an additional $ 0.7 million of restructuring costs and $ 1.0 million of impairment costs related to the consolidation of its European sheet tobacco operations that began during the fiscal year ended March 31, 2025. The Company also incurred $ 0.1 million of termination and impairment costs in other areas of the Tobacco Operations segment during the fiscal year ended March 31, 2026. Fiscal Year Ended March 31, 2025 Tobacco Operations During the fiscal year ended March 31, 2025, the Company began consolidating its European sheet tobacco operations into the Company’s facility in the Netherlands, by initiating a wind-down of activities at its sheet facility in Germany, incurring $ 10.5 million of restructuring and impairment costs. Additionally, during the fiscal year ended March 31, 2025, the Company also incurred $ 0.1 million of termination and impairment costs in other areas of the Tobacco Operations segment. Fiscal Year Ended March 31, 2024 Tobacco Operations During the fiscal year ended March 31, 2024, the Company incurred $ 1.8 million of restructuring and impairment costs for its Global Laboratory Services, Inc (“GLS”) facility in Wilson, NC. GLS provided testing for crop protection agents and tobacco constituents in seed, leaf, and finished products, including e-cigarette liquids and vapors, and had capabilities for testing 58 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) non-tobacco products. The restructuring and impairment costs were net of approximately $ 0.2 million of income from the sale of GLS processes and procedures to a third-party buyer. Additionally, during the fiscal year ended March 31, 2024, the Company also incurred $ 1.7 million of termination and impairment costs in other areas of the Tobacco Operations segment. A summary of the restructuring and impairment costs incurred during the fiscal years ended March 31, 2026, 2025, and 2024 is as follows: Fiscal Years Ended March 31, 2026 2025 2024 Restructuring Costs: Employee termination benefits $ 122 $ 4,342 $ 1,615 Other restructuring costs 711 1,372 ( 181 ) 833 5,714 1,434 Impairment Costs: Property, plant, and equipment and other noncurrent assets 1,000 4,859 2,089 Total restructuring and impairment costs $ 1,833 $ 10,573 $ 3,523 A reconciliation of the Company’s liability for employee termination benefits and other restructuring costs for fiscal years 2024 through 2026 is as follows: Employee Termination Benefits Other Costs Total Balance at April 1, 2023 $ — $ — $ — Fiscal Year 2024 Activity: Costs charged to expense 1,615 ( 181 ) 1,434 Payments and write-offs ( 1,362 ) 181 ( 1,181 ) Balance at March 31, 2024 253 — 253 Fiscal Year 2025 Activity: Costs charged to expense 4,342 1,372 5,714 Payments and write-offs ( 1,660 ) ( 1,101 ) ( 2,761 ) Balance at March 31, 2025 2,935 271 3,206 Fiscal Year 2026 Activity: Costs charged to expense 122 711 833 Payments and write-offs ( 2,852 ) ( 449 ) ( 3,301 ) Balance at March 31, 2026 $ 205 $ 533 $ 738 Universal regularly reviews its business for opportunities to realize efficiencies, reduce costs, and realign its operations in response to business changes. The Company may incur additional restructuring and impairment costs in future periods as business changes occur and additional cost savings initiatives are implemented. 59 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) NOTE 4. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: Fiscal Year Ended March 31, (in thousands, except share and per share data) 2026 2025 2024 Basic Earnings Per Share Numerator for basic earnings per share Net income attributable to Universal Corporation $ 32,637 $ 95,047 $ 119,598 Denominator for basic earnings per share Weighted average shares outstanding 25,037,983 24,947,208 24,851,858 Basic earnings per share $ 1.30 $ 3.81 $ 4.81 Diluted Earnings Per Share Numerator for diluted earnings per share Net income attributable to Universal Corporation $ 32,637 $ 95,047 $ 119,598 Denominator for diluted earnings per share: Weighted average shares outstanding 25,037,983 24,947,208 24,851,858 Effect of dilutive securities Employee and outside director share-based awards 133,179 180,148 189,056 Denominator for diluted earnings per share 25,171,162 25,127,356 25,040,914 Diluted earnings per share $ 1.30 $ 3.78 $ 4.78 NOTE 5. INCOME TAXES The Company operates in the United States and many foreign countries and is subject to the tax laws of multiple 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 a number of factors, including the mix of domestic and foreign earnings and the effect of exchange rate changes on local taxable income and deferred taxes in foreign countries. For fiscal years ended March 31, 2026, 2025, and 2024 the Company’s U.S. federal statutory tax rate was 21.0 %. The U.S. tax system is primarily territorial based after the enactment of the Tax Cuts and Jobs Act of 2017. The U.S. tax law imposes a tax on U.S. shareholders on certain low-taxed income earned by controlled foreign corporations, referred to as net controlled foreign corporation tested income (“NCTI”). The Company has made an accounting policy election to account for any additional tax resulting from the NCTI provisions in the year in which it is incurred and has not recorded any deferred taxes on temporary book-tax differences related to this income. The Company continues to assume repatriation of all undistributed earnings of its consolidated foreign subsidiaries and has therefore provided for expected foreign withholding taxes on the distribution of those earnings where applicable, net of any U.S. tax credit attributable to those withholding taxes. Brazil enacted new legislation applying a 10% withholding tax on dividends approved after December 31, 2025 to nonresident shareholders. The Company's tax holiday in Mozambique ended on December 31, 2025, increasing the local statutory rate to 32% and the withholding tax on dividends to 20%. The Company has asserted permanent reinvestment of the book basis of certain foreign subsidiaries, and accordingly, no deferred income tax liability has been recorded for any potential taxable gain that may be realized on a future disposition or liquidation of any of those subsidiaries. It is not practicable for the Company to quantify any deferred income tax liability that would be attributable to those events. In various countries in which the Company operates, legislation has been enacted incorporating the Organisation for Economic Co-operation and Development’s Global Anti-Base Erosion Pillar Two model rules establishing a 15% global minimum tax. The estimated tax impact of such legislation has been included in the provision for income taxes and is not material. Like NCTI, this is treated as a period cost and does not have any additional deferred taxes related to these new laws. 60 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Income Tax Expense Income taxes for the fiscal years ended March 31, 2026, 2025, and 2024 consisted of the following: Fiscal Year Ended March 31, 2026 2025 2024 Current United States $ ( 2,408 ) $ 7,038 $ 5,107 State and local 406 713 696 Foreign 49,619 32,112 30,711 47,617 39,863 36,514 Deferred United States ( 8,169 ) ( 2,631 ) ( 824 ) State and local ( 842 ) ( 22 ) ( 138 ) Foreign 8,051 3,736 ( 4,443 ) ( 960 ) 1,083 ( 5,405 ) Total $ 46,657 $ 40,946 $ 31,109 Foreign taxes include any applicable U.S. tax expense on the earnings of foreign subsidiaries for fiscal years 2025 and 2024. Consolidated Effective Income Tax Rate A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows: March 31, 2026 Amount Percentage Tax expense at U.S. federal statutory rate $ 21,557 21.0 % State and local income taxes ( 344 ) ( 0.3 ) % International Brazil Foreign rate differential 8,116 7.9 % ICMS not included in tax base ( 8,093 ) ( 7.9 ) % Local statutory differences 4,200 4.1 % Withholding taxes 5,410 5.3 % Dominican Republic Foreign rate differential 3,478 3.4 % Withholding taxes ( 1,656 ) ( 1.6 ) % Malawi Foreign rate differential 5,179 5.0 % Local statutory differences 480 0.5 % Withholding taxes 1,031 1.0 % Mexico Foreign rate differential ( 540 ) ( 0.5 ) % Local statutory differences 2,515 2.4 % Withholding taxes 216 0.2 % Mozambique Foreign rate differential ( 8,171 ) ( 8.0 ) % 61 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Local statutory differences ( 1,199 ) ( 1.2 ) % Withholding taxes ( 93 ) ( 0.1 ) % Philippines Foreign rate differential 621 0.6 % Local statutory differences 208 0.2 % Withholding taxes 1,367 1.3 % Switzerland Foreign rate differential ( 143 ) ( 0.1 ) % Local statutory differences 121 0.1 % Withholding taxes 2,194 2.1 % Zimbabwe Dividends paid from previously taxed earnings ( 3,533 ) ( 3.4 ) % Withholding taxes paid on dividends paid from previously tax earnings 2,523 2.5 % Other international jurisdictions local statutory differences 5,100 5.0 % Effect of cross border tax laws Net controlled foreign corporation tested income, net of foreign tax credits 6,241 6.1 % Branch income, taxed in U.S., net of foreign tax credits 1,557 1.5 % Other 1,833 1.8 % Tax Credits Foreign tax credits ( 4,455 ) ( 4.3 ) % Nontaxable or nondeductible items 817 0.8 % Changes in unrecognized tax benefits 31 — % Other All other 89 0.1 % Total $ 46,657 45.5 % For the fiscal year ending March 31, 2026, state taxes in Pennsylvania, New Jersey, and Illinois make up the majority (greater than 50%) of the state and local tax category. Fiscal Year Ended March 31, 2025 2024 U.S. federal statutory tax rate 21.0 % 21.0 % State income taxes, net of federal benefit 0.4 0.3 Foreign earnings taxed at rates other than the U.S. federal statutory tax rate ( 3.7 ) ( 5.2 ) Foreign dividend withholding taxes 6.7 2.9 Changes in uncertain tax positions — ( 0.2 ) Other 2.2 0.2 Effective income tax rate 26.6 % 19.0 % 62 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Components of Income Before Income Taxes The U.S. and foreign components of income before income taxes were as follows: Fiscal Year Ended March 31, 2026 2025 2024 United States $ ( 79,551 ) $ 5,529 $ 22,517 Foreign 182,203 148,686 141,563 Total $ 102,652 $ 154,215 $ 164,080 Deferred Income Tax Liabilities and Assets Significant components of deferred tax liabilities and assets were as follows: March 31, 2026 2025 Liabilities Foreign withholding taxes $ 26,928 $ 20,989 Property, plant and equipment 15,468 14,730 Undistributed earnings 3,296 3,362 Operating lease right-of-use assets 9,871 8,238 Goodwill and other intangible assets 20,494 30,834 Interest rate swap 16 1,013 All other 3,535 1,680 Total deferred tax liabilities $ 79,608 $ 80,846 Assets Employee benefit plans $ 10,590 $ 12,624 Reserves and accruals 6,472 6,325 Deferred income 4,167 3,989 Operating lease right-of-use liabilities 9,513 7,496 Currency translation losses of foreign subsidiaries 2,156 2,156 Local currency exchange losses of foreign subsidiaries 3,018 4,466 Interest expense limitation carryforward 9,008 6,369 Foreign tax credit carryforward 11,563 8,795 Capital loss carryforwards 4,055 4,097 All other 13,368 13,470 Total deferred tax assets 73,910 69,787 Valuation allowance ( 18,584 ) ( 14,492 ) Net deferred tax assets $ 55,326 $ 55,295 At March 31, 2026, the Company had no material net operating loss carryforwards in either its domestic or foreign operations. 63 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Combined Income Tax Expense (Benefit) The combined income tax expense (benefit) allocable to continuing operations and other comprehensive income was as follows: Fiscal Year Ended March 31, 2026 2025 2024 Continuing operations $ 46,657 $ 40,946 $ 31,109 Other comprehensive loss 165 ( 532 ) ( 1,056 ) Total $ 46,822 $ 40,414 $ 30,053 Uncertain Tax Positions A reconciliation of the beginning and ending balance of the gross liability for uncertain tax positions is as follows: Fiscal Year Ended March 31, 2026 2025 2024 Liability for uncertain tax positions, beginning of year $ 1,006 $ 1,070 $ 1,415 Additions: Related to tax positions for the current year 63 71 65 Reductions: Due to lapses of statutes of limitations ( 49 ) ( 56 ) ( 56 ) Due to tax settlements — — ( 311 ) Effect of currency rate changes 24 ( 79 ) ( 43 ) Liability for uncertain tax positions, end of year $ 1,044 $ 1,006 $ 1,070 The liability for uncertain tax positions at March 31, 2026 includes approximately $ 1.0 million that could have an effect on the consolidated effective tax rate if the tax benefits are recognized. Amounts accrued or reversed for interest and penalties were not material for fiscal years 2024 through 2026, and liabilities recorded for penalties at March 31, 2026 and 2025 were also not material. Universal and its subsidiaries file a U.S. federal consolidated income tax return, as well as returns in several U.S. states and a number of foreign jurisdictions. Open tax years in U.S. Federal, state, and foreign jurisdictions range from 3 to 6 years. There is an exception for the Company’s U.S. Federal fiscal year 2018 tax return due to the election on the amended return that extended the statute to 30 years. 64 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Cash Taxes T he following table provides the cash income taxes paid, net of refunds for the year ended March 31, 2026: March 31, 2026 Income tax payments (net of refunds): United States: U.S. Federal $ 7,602 U.S. State and Local 539 Total United States 8,141 Foreign: Brazil 4,841 Italy 4,715 Malawi 7,729 Philippines 4,712 Singapore 4,985 Zimbabwe 2,523 Other Foreign 5,471 Total Foreign 34,976 Total $ 43,117 NOTE 6. GOODWILL AND OTHER INTANGIBLES The Company’s changes in goodwill at March 31, 2026 and 2025 consisted of the following: Fiscal Year Ended March 31, 2026 2025 Balance at beginning of year $ 213,840 $ 213,869 Goodwill impairment (1) ( 41,061 ) — Foreign currency translation adjustment ( 84 ) ( 29 ) Balance at end of year $ 172,695 $ 213,840 (1) A $ 41.1 million non-cash goodwill impairment charge for Universal Ingredients–Shank’s was recognized for the fiscal year ended March 31, 2026. There is no remaining goodwill related to Universal Ingredients–Shank’s at March 31, 2026. See Note 1 for additional information. 65 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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 March 31, 2026 and 2025: March 31, 2026 (in thousands, except useful life) Useful Life (Years) Gross Carrying Value Accumulated Amortization Net Carrying Value Customer relationships 11 - 13 $ 86,500 $ ( 40,885 ) $ 45,615 Trade names 5 11,100 ( 11,100 ) — Developed technology 13 9,300 ( 6,358 ) 2,942 Noncompetition agreements 4 - 5 4,000 ( 4,000 ) — Other 5 694 ( 647 ) 47 Total intangible assets $ 111,594 $ ( 62,990 ) $ 48,604 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 fiscal years ended March 31, 2026, 2025, and 2024: Fiscal Year Ended March 31, 2026 2025 2024 Amortization Expense $ 9,124 $ 11,067 $ 11,279 Amortization expense for the developed technology intangible asset is recorded in cost of goods sold in the consolidated income statements of income. The amortization expense for the other intangible assets is recorded in selling, general, and administrative expenses in the consolidated income statements of income. As of March 31, 2026, the expected future amortization expense for intangible assets is as follows: Fiscal Year 2027 $ 8,101 2028 8,101 2029 8,077 2030 8,077 2031 and thereafter 16,248 Total expected future amortization expense $ 48,604 NOTE 7. CREDIT FACILITIES Bank Credit Agreement On December 9, 2025, the Company entered into a new senior unsecured bank credit agreement that replaced its then existing bank credit agreement. In addition to extending the maturity dates of the underlying components of the facility, the new 66 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) agreement includes a $ 780 million five-year revolving credit facility (expiring December 9, 2030), a $ 275 million five-year term loan (due December 9, 2030), and a $ 345 million seven-year term loan (due December 9, 2032). The new facility may be expanded to allow for additional borrowings of up to $ 300 million under certain conditions. Borrowings under the revolving credit facility bear interest at a variable rate benchmarked to the Secured Overnight Financing Rate (“SOFR”) plus a margin based on the Company’s credit measures. In addition to interest, the Company pays a facility fee on the revolving credit facility. $ 50 million was outstanding under the revolving credit facility at March 31, 2026. The Company may request that the lenders extend the applicable maturity date for the revolving credit facility, the five-year term loan and/or the seven-year term loan for up to two one-year extensions, subject to satisfaction of certain terms and conditions and consent of the requisite number of lenders. The Company’s obligations under the new bank credit agreement are guaranteed by its subsidiary, Universal Ingredients. The new credit agreement contains financial covenants that require the Company to maintain certain levels of tangible net worth and leverage. These covenants are substantially the same as the covenants in the prior bank credit agreement, and the Company was in compliance with the covenants at March 31, 2026. Short-Term Credit Facilities The Company maintains short-term uncommitted lines of credit in the United States and in a number of foreign countries. Foreign borrowings are generally in the form of overdraft facilities at rates competitive in the countries in which the Company operates. Generally, each foreign line is available only for borrowings related to operations of a specific country. As of March 31, 2026 and 2025, approximately $ 238 million and $ 195 million, respectively, were outstanding under these uncommitted lines of credit. The weighted-average interest rates on short-term borrowings outstanding as of March 31, 2026 and 2025 were approximately 5.2 % and 6.2 %, respectively. At March 31, 2026, the Company and its consolidated affiliates had unused uncommitted lines of credit totaling approximately $ 465 million. NOTE 8. LONG-TERM DEBT The Company’s long-term debt at March 31, 2026 and 2025 consisted of the following: March 31, 2026 2025 Senior bank term loans $ 620,000 $ 620,000 Less: current portion — — Less: unamortized debt issuance costs ( 3,273 ) ( 2,082 ) Long-term debt $ 616,727 $ 617,918 As discussed in Note 7, on December 9, 2025, the Company entered into a new bank credit agreement that replaced its then existing bank credit agreement. In addition to extending the maturity dates of the underlying components of the facility, the new agreement includes a $ 275 million five-year term loan and a $ 345 million seven-year term loan. Both term loans were fully funded at closing, require no amortization, and are repayable without penalty prior to maturity. Under the credit agreement, both term loans bear interest at a variable rate benchmarked to the SOFR plus a margin that is based on the Company’s credit measures. As discussed in Note 10, the Company had receive-floating/pay-fixed interest rate swap agreements in place with respect to the prior term loans through December 15, 2027 for the five-year term loan and through December 15, 2029 for the seven-year term loan. These agreements were terminated concurrently with the repayment of the prior term loans and replaced with new interest rate swap agreements that will continue to convert a portion of the variable benchmark rate to a fixed rate on each term loan through their respective maturity dates. With the swap agreements in place, the effective interest rates on the swapped portions of the five-year and seven-year term loans were 5.47 % and 6.13 % at March 31, 2026, respectively. The weighted average effective interest rates, when taking into consideration both the swapped and unswapped interest payments, were 5.57 % and 6.15 % at March 31, 2026 for the five-year and seven-year term loans, respectively. Changes in the effective interest rates could result from a change in interest rates on the unhedged interest payments or a change in the Company’s credit measures that impact the applicable credit spreads specified in the underlying loan agreement. Disclosures about the fair value of long-term debt are provided in Note 11. NOTE 9. LEASES The Company, as a lessee, enters into operating leases for land, buildings, equipment, and vehicles. For all operating leases with terms greater than 12 months and with fixed payment arrangements, a lease liability and corresponding right-of-use asset are recognized in the balance sheet for the term of the lease by calculating the net present value of future lease payments. On the date of lease commencement, the present value of lease liabilities is determined by discounting the future lease payments by 67 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) the Company’s collateralized incremental borrowing rate, adjusted for the lease term and currency of the lease payments. If a lease contains a renewal option that the Company is reasonably certain to exercise, the Company accounts for the original lease term and expected renewal term in the calculation of the lease liability and right-of-use asset. The following table sets forth the right-of-use assets and lease liabilities for operating leases included in the Company’s consolidated balance sheet: March 31, 2026 March 31, 2025 Assets Operating lease right-of-use assets $ 37,272 $ 34,260 Liabilities Current portion of operating lease liabilities $ 11,172 $ 10,742 Long-term operating lease liabilities 24,359 20,608 Total operating lease liabilities $ 35,531 $ 31,350 The following table sets forth the location and amount of operating lease costs included in the Company’s consolidated statement of income: Fiscal Year Ended March 31, 2026 2025 2024 Income Statement Location Cost of goods sold $ 16,220 $ 14,987 $ 11,806 Selling, general, and administrative expenses 9,461 9,572 10,691 Total operating lease costs (1) $ 25,681 $ 24,559 $ 22,497 (1) Includes variable operating lease costs. The following table reconciles the undiscounted cash flows to the operating lease liabilities in the Company’s consolidated balance sheet: March 31, 2026 Fiscal Year Maturity of Operating Lease Liabilities 2027 $ 13,232 2028 8,667 2029 6,660 2030 5,191 2031 2,654 2031 and thereafter 7,406 Total undiscounted cash flows for operating leases $ 43,810 Less: Imputed interest ( 8,279 ) Total operating lease liabilities $ 35,531 As of March 31, 2026, the Company had entered into no additional operating leases that have not yet commenced. The following table sets forth supplemental information related to operating leases: Fiscal Year Ended March 31, (in thousands, except lease term and incremental borrowing rate) 2026 2025 2024 Supplemental Cash Flow Information Cash paid for amounts included in the measurement of operating lease liabilities $ 16,061 $ 14,156 $ 13,898 Right-of-use assets obtained in exchange for new operating leases 16,901 15,406 8,507 Weighted Average Remaining Lease Term (years) 5.12 4.46 4.59 Weighted Average Collateralized Incremental Borrowing Rate 7.55 % 6.92 % 6.10 % 68 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) NOTE 10. 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 foreign currency exchange and option 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 by operating activities. Cash Flow Hedging Strategy for Interest Rate Risk In December 2025, 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 2025 (see Note 8 for additional information). Although no significant ineffectiveness is expected with this hedging strategy, the effectiveness of the interest rate swaps is evaluated on a quarterly basis. At March 31, 2026, the total notional amount of the interest rate swaps was $ 310 million, which corresponded to a portion of the aggregate balance of the term loans. Previously, the Company entered into receive-floating/pay-fixed interest rate swap agreements in December 2022 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 new bank credit facility in December 2025. Those swap agreements, which had an aggregate notional amount of $ 310 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 $ 1.0 million, was paid to the counterparties in December 2025 upon termination and is being amortized from accumulated other comprehensive loss into earnings as interest expense through the original maturity dates of those agreements. Cash Flow Hedging Strategy for Foreign Currency Exchange Rate Risk Related to Forecast Purchases of Tobacco, Tobacco Processing Costs, and Crop Input Sales 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, although the Company has also entered into hedges for a portion of the tobacco purchases in Africa. Additionally, the Company initiated a strategy in Brazil and Mexico to hedge a portion of the forecasted local currency-denominated operating costs in fiscal year 2026 by entering into derivative contracts to buy the local currencies and sell the U.S. dollar. The aggregate U.S. dollar notional amount of forward and option contracts entered for these purposes during fiscal years 2026, 2025, and 2024 was as follows: Fiscal Year Ended March 31, (in millions) 2026 2025 2024 Tobacco purchases $ 60.5 $ 108.8 $ 30.3 Processing costs 11.5 16.9 4.9 Operating costs 21.9 28.9 — Crop input sales 37.7 31.1 30.1 Total $ 131.6 $ 185.7 $ 65.3 69 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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 March 31, 2026 for cash flows hedges of tobacco purchases and crop input sales will be recognized in earnings. Hedging Program Crop Year Geographic Location(s) Fiscal Year Earnings Tobacco purchases 2026 Brazil 2027 Crop input sales 2027 Brazil 2028 Crop input sales 2026 Brazil 2027 Forward contracts related to processing and operating costs have not been designated as hedges, and gains and losses on those contracts have been recognized in earnings on a mark-to-market basis. 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 VAT, 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 March 31, 2026 and 2025, were approximately $ 24.2 million and $ 17.7 million, respectively. To further mitigate currency remeasurement exposure, the Company’s foreign subsidiaries may utilize short-term local currency financing during certain periods. This strategy, while not involving the use of derivative instruments, is intended to minimize the subsidiary’s net monetary position by financing a portion of the local currency monetary assets with local currency monetary liabilities, thus hedging a portion of the overall position. 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. 70 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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 for the fiscal years ended March 31, 2026, 2025, and 2024. Fiscal Year Ended March 31, 2026 2025 2024 Cash Flow Hedges - Interest Rate Swap Agreements Derivative Effective Portion of Hedge Gain (loss) recorded in accumulated other comprehensive loss $ 191 $ ( 247 ) $ 15,375 Gain (loss) reclassified from accumulated other comprehensive loss into earnings $ 2,009 $ 4,676 $ 5,592 Gain (loss) on terminated interest rate swaps amortized from accumulated other comprehensive loss into earnings $ 1,968 $ 2,754 $ 5,397 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 - Forward Foreign Currency Exchange Contracts Derivative Effective Portion of Hedge Gain (loss) recorded in accumulated other comprehensive loss $ 1,202 $ ( 5,708 ) $ 2,088 Gain (loss) reclassified from accumulated other comprehensive loss into earnings $ ( 3,519 ) $ 218 $ 7,996 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 $ — $ — $ 1,138 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 and Africa Derivatives Not Designated as Hedges - Forward Foreign Currency Exchange Contracts Gain (loss) recognized in earnings $ ( 1,006 ) $ ( 563 ) $ ( 3,484 ) Location of gain (loss) recognized in earnings Selling, general and administrative expenses For the outstanding 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 crop input sales in Brazil, a net hedge loss of approximately $ 1.3 million remained in accumulated other comprehensive loss at March 31, 2026. That balance reflects gains and losses on contracts related to the purchase of 2026 Brazil crops and the 2027 and 2026 Brazil crop input sales, less the amounts reclassified to earnings related to tobacco sold through March 31, 2026. Based on the hedging strategy, as the gain or loss is recognized in earnings, it is expected to be offset by a change in the direct cost for the tobacco or by a change in sales prices if the strategy has been mandated by the customer. Generally, margins on the sale of the tobacco will not be significantly affected. 71 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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 March 31, 2026 and 2025: Derivatives in a Fair Value Asset Position Derivatives in a Fair Value Liability Position Balance Sheet Location Fair Value as of March 31, Balance Sheet Location Fair Value as of March 31, 2026 2025 2026 2025 Derivatives Designated as Hedging Instruments Interest rate swap agreements Other non-current assets $ 953 $ 1,783 Other long-term liabilities $ — $ — Forward foreign currency exchange contracts Other current assets 307 11 Accounts payable and accrued expenses 321 5,228 Total $ 1,260 $ 1,794 $ 321 $ 5,228 Derivatives Not Designated as Hedging Instruments Forward foreign currency exchange contracts Other current assets $ 458 $ 291 Accounts payable and accrued expenses $ 273 $ 1,440 Total $ 458 $ 291 $ 273 $ 1,440 Substantially all of the Company’s forward foreign currency exchange contracts 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 11. 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, forward foreign currency exchange contracts, and guarantees of bank loans to tobacco growers. 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. 72 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) As permitted under the accounting guidance, the Company uses net asset value per share (“NAV”) as a practical expedient to measure the fair value of its money market funds. The fair values for those funds are presented under the heading NAV in the tables that follow in this disclosure. In measuring the fair value of liabilities, the Company considers the risk of non-performance in determining fair value. Universal has not elected to report at fair value any financial instruments or any other assets or liabilities that are not required to be reported at fair value under current accounting guidance. Recurring Fair Value Measurements At March 31, 2026 and 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: March 31, 2026 Fair Value Hierarchy NAV Level 1 Level 2 Level 3 Total Assets Money market funds $ 10 $ — $ — $ — $ 10 Trading securities associated with deferred compensation plans — 11,630 — — 11,630 Interest rate swap agreements — — 953 — 953 Forward foreign currency exchange contracts — — 765 — 765 Total financial assets measured and reported at fair value $ 10 $ 11,630 $ 1,718 $ — $ 13,358 Liabilities Forward foreign currency exchange contracts $ — $ — $ 594 $ — $ 594 Total financial liabilities measured and reported at fair value $ — $ — $ 594 $ — $ 594 March 31, 2025 Fair Value Hierarchy 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 Forward foreign currency exchange contracts — — 302 — 302 Total financial assets measured and reported at fair value $ 149 $ 11,313 $ 2,085 $ — $ 13,547 Liabilities Forward 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. 73 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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. Forward foreign currency exchange contracts The fair values of forward 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 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, including the current portion at each of the balance sheet dates March 31, 2026 and 2025: Fiscal Year Ended March 31, (in millions of dollars) 2026 2025 Fair market value of long-term obligations $ 615 $ 616 Carrying value of long-term obligations $ 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. See Note 8 for more information regarding long-term debt. 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 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. See Note 1 for discussion of the goodwill impairment at Universal Ingredients–Shank’s. Acquisition Accounting for Business Combinations The Company accounts for acquisitions qualifying under ASC 805, “Business Combinations,” which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The fair values of consideration transferred and net assets acquired are determined using a combination of Level 2 and Level 3 inputs as specified in the fair value hierarchy in ASC 820, “Fair Value Measurements and Disclosures.” The Company believes that the fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions. The significant assumptions used in determining the fair value include the discount rate and forecasted results (e.g., revenue growth rates and operating profit margins). 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 3, during fiscal year 2025, 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 for the fiscal year ended March 31, 2025, to reduce their carrying value to fair value. The long-lived assets primarily consist of a processing facility, machinery and equipment, and administrative offices. As part of the wind-down, the Company also recognized other impairment charges associated with inventory, certain accounts receivable and other assets in fiscal year 2025. After reassessing the fair value of the 74 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) long-lived assets associated with the operations in Germany, an additional $ 1.0 million impairment charge was recognized in fiscal year 2026. NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS Defined Benefit Plans Description of Plans The Company sponsors several defined benefit pension plans covering salaried and certain hourly employees in the U.S., as well as certain foreign and other employee groups. These plans provide retirement benefits based primarily on employee compensation and years of service. Plan assets consist primarily of equity and fixed income investments. The Company also sponsors defined benefit plans that provide postretirement health and life insurance benefits for eligible U.S. employees and retirees who have attained specific age and service levels, although postretirement life insurance benefits were discontinued in fiscal year 2015 for all employees who were not already retired. The health benefits are funded by the Company as the costs of those benefits are incurred. The plan design includes cost-sharing features such as deductibles and coinsurance. The life insurance benefits are funded with deposits to a reserve account held by an insurance company. The Company has the right to amend or discontinue its pension and other postretirement benefit plans at any time. In the following disclosures, the term “accumulated benefit obligation” (“ABO”) represents the actuarial present value of estimated future benefit payments earned by participants in the Company’s defined benefit pension plans as of the balance sheet date without regard to the estimated effect of future compensation increases on those benefits. The term does not apply to other postretirement benefits. “Projected benefit obligation” refers to the projected benefit obligation (“PBO”) for pension benefits and the accumulated postretirement benefit obligation (“APBO”) for other postretirement benefits. These amounts represent the actuarial present value of estimated future benefit payments earned by participants in the benefit plans as of the balance sheet date. For pension benefits, the PBO includes the estimated effect of future compensation increases on those benefits. Actuarial Assumptions Assumptions used for financial reporting purposes to compute net periodic benefit cost and benefit obligations for the Company’s primary defined benefit plans were as follows: Pension Benefits Other Postretirement Benefits 2026 2025 2024 2026 2025 2024 Discount rates: Benefit cost for plan year 5.58 % 5.27 % 5.00 % 5.35 % 5.17 % 4.90 % Benefit obligation at end of plan year 5.87 % 5.58 % 5.27 % 5.54 % 5.35 % 5.17 % Expected long-term return on plan assets: Benefit cost for plan year 6.75 % 6.30 % 6.50 % 3.00 % 3.00 % 3.00 % Salary scale: Benefit cost for plan year 5.00 % 4.00 % 4.00 % 5.00 % 4.00 % 4.00 % Benefit obligation at end of plan year 5.00 % 5.00 % 4.00 % 5.00 % 5.00 % 4.00 % Healthcare cost trend rate N/A N/A N/A 8.95 % 8.08 % 6.97 % Changes in the discount rates in the above table reflect prevailing market interest rates at the end of each fiscal year when the benefit obligations are actuarially measured. The expected long-term return on plan assets is developed from financial models used to project future returns on the underlying assets of the funded plans and is reviewed on an annual basis. The healthcare cost trend rate used by the Company is based on a study of medical cost inflation rates that is reviewed and updated annually for continued applicability. The trend assumption of 8.95 % in 2026 declines gradually to 4.45 % in 2035 . The Company has caps in place on postretirement medical benefits that limit its cost for a large segment of the retiree population. As a result, changes to the healthcare cost trend rate have a limited impact on the postretirement medical plan liability and expense. 75 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Benefit Obligations, Plan Assets, and Funded Status The following table reflects the changes in benefit obligations and plan assets in fiscal years 2026 and 2025, as well as the funded status of the plans at March 31, 2026 and 2025: Pension Benefits Other Postretirement Benefits March 31, March 31, 2026 2025 2026 2025 Actuarial present value of benefit obligation: Accumulated benefit obligation $ 173,312 $ 180,725 Projected benefit obligation 180,388 187,918 $ 17,285 $ 18,134 Change in projected benefit obligation: Projected benefit obligation, beginning of year $ 187,918 $ 237,626 $ 18,134 $ 20,077 Service cost 5,059 5,192 65 75 Interest cost 9,651 11,943 1,038 1,062 Effect of discount rate change ( 5,275 ) ( 4,710 ) ( 157 ) ( 469 ) Foreign currency exchange rate changes — ( 146 ) 217 ( 325 ) Settlements — ( 46,714 ) — — Other 3,481 232 573 247 Benefit payments ( 20,446 ) ( 15,505 ) ( 2,585 ) ( 2,533 ) Projected benefit obligation, end of year $ 180,388 $ 187,918 $ 17,285 $ 18,134 Change in plan assets: Plan assets at fair value, beginning of year $ 171,031 $ 220,336 $ 1,537 $ 1,934 Actual return on plan assets 13,135 9,766 44 53 Employer contributions 11,674 3,290 2,084 2,083 Settlements — ( 46,714 ) — — Foreign currency exchange rate changes ( 577 ) ( 142 ) — — Benefit payments ( 20,446 ) ( 15,505 ) ( 2,585 ) ( 2,533 ) Plan assets at fair value, end of year $ 174,817 $ 171,031 $ 1,080 $ 1,537 Funded status: Funded status of the plans, end of year $ ( 5,571 ) $ ( 16,887 ) $ ( 16,205 ) $ ( 16,597 ) The Company funds its non-regulated U.S. pension plan, one of its foreign pension plans, and its postretirement medical plans on a pay-as-you-go basis as the benefit payments are incurred. The unfunded PBO for those pension plans and postretirement benefit plans was $ 21.1 million and $ 14.2 million, respectively, at March 31, 2026. The funded status of the Company’s plans at the end of fiscal years 2026 and 2025 was reported in the consolidated balance sheets as follows: Pension Benefits Other Postretirement Benefits March 31, March 31, 2026 2025 2026 2025 Noncurrent assets (included in Pension asset) $ 16,541 $ 12,819 $ — $ — Current liability (included in Accrued expenses and other current liabilities) ( 1,508 ) ( 9,497 ) ( 1,337 ) ( 1,471 ) Noncurrent liability (reported as Pensions and other postretirement benefits) ( 20,604 ) ( 20,209 ) ( 14,868 ) ( 15,126 ) Amounts recognized in the consolidated balance sheets $ ( 5,571 ) $ ( 16,887 ) $ ( 16,205 ) $ ( 16,597 ) 76 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Additional information on the funded status of the Company’s plans as of the respective measurement dates for the fiscal years ended March 31, 2026 and 2025, is as follows: Pension Benefits Other Postretirement Benefits March 31, March 31, 2026 2025 2026 2025 For plans with a projected benefit obligation in excess of plan assets: Aggregate projected benefit obligation (PBO) $ 32,924 $ 39,116 $ 17,285 $ 18,134 Aggregate fair value of plan assets 10,812 — 1,080 1,537 For plans with an accumulated benefit obligation in excess of plan assets: Aggregate accumulated benefit obligation (ABO) 30,645 37,352 N/A N/A Aggregate fair value of plan assets 10,812 — N/A N/A Net Periodic Benefit Cost The components of the Company’s net periodic benefit cost were as follows: Pension Benefits Other Postretirement Benefits Fiscal Year Ended March 31, Fiscal Year Ended March 31, 2026 2025 2024 2026 2025 2024 Components of net periodic benefit cost: Service cost $ 5,059 $ 5,192 $ 5,214 $ 65 $ 75 $ 239 Interest cost 9,651 11,943 11,566 1,038 1,062 1,049 Expected return on plan assets ( 12,685 ) ( 14,874 ) ( 15,504 ) ( 42 ) ( 53 ) ( 63 ) Settlement cost — 14,101 — — — — Net amortization and deferral ( 79 ) 15 659 ( 730 ) ( 662 ) ( 791 ) Net periodic benefit cost $ 1,946 $ 16,377 $ 1,935 $ 331 $ 422 $ 434 A one-percentage-point increase or decrease in the assumed healthcare cost trend rate would not result in a significant change to the March 31, 2026 APBO or the aggregate service and interest cost components of the net periodic postretirement benefit expense for fiscal year 2027. In March 2025, the Company completed a pension de-risking transaction or “pension lift-out” to transfer approximately $ 47 million of its qualified domestic pension plan obligations and assets to a third-party insurer through the purchase of a non-participating annuity. The obligations transferred to the third-party insurer covered the respective benefit obligations for a subset of retirees currently receiving benefit payments. The transaction triggered settlement accounting that required the Company to immediately recognize a portion of the accumulated comprehensive losses associated with the defined benefit pension plan. The non-cash pension settlement charge of $ 14.1 million was recognized in the Company’s consolidated statements of income for the fiscal year ended March 31, 2025. 77 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Amounts Included in Accumulated Other Comprehensive Loss Amounts included in accumulated other comprehensive loss at the beginning of the year are amortized as a component of net periodic benefit cost during the year. The amounts recognized in other comprehensive income or loss for fiscal years 2026 and 2025 and the amounts included in accumulated other comprehensive loss at the end of those fiscal years are shown below. All amounts shown are before allocated income taxes. Pension Benefits Other Postretirement Benefits March 31, March 31, 2026 2025 2026 2025 Change in net actuarial loss (gain): Net actuarial loss (gain), beginning of year $ 50,050 $ 63,428 $ ( 6,732 ) $ ( 7,169 ) Losses (gains) arising during the year ( 2,460 ) 893 408 ( 221 ) Settlement — ( 14,101 ) — — Amortization included in net periodic benefit cost during the year 104 ( 170 ) 728 658 Net actuarial loss (gain), end of year 47,694 50,050 ( 5,596 ) ( 6,732 ) Change in prior service cost (benefit): Prior service cost (benefit), beginning of year 524 369 ( 27 ) ( 31 ) Prior service cost (benefit) arising during the year — — — — Amortization included in net periodic benefit cost during the year ( 25 ) 155 3 4 Prior service cost (benefit), end of year 499 524 ( 24 ) ( 27 ) Total amounts in accumulated other comprehensive loss at end of year, before income taxes $ 48,193 $ 50,574 $ ( 5,620 ) $ ( 6,759 ) Amounts in the above table reflect the Company and its consolidated subsidiaries. The accumulated other comprehensive loss reported in the consolidated balance sheets also includes pension and other postretirement benefit amounts related to ownership interests in unconsolidated affiliates. The Company expects to recognize approximately $ 0.7 million of the March 31, 2026 net actuarial loss and $ 0.1 million of the March 31, 2026 prior service benefit in net periodic benefit cost during fiscal year 2027. Allocation of Pension Plan Assets The Company has established, and periodically adjusts, target asset allocations for its investments in its U.S. ERISA-regulated defined benefit pension plan, which represents 94 % of consolidated plan assets and 82 % of consolidated PBO at March 31, 2026, to balance the needs of liquidity, total return, and risk control. The assets are required to be diversified across asset classes and investment styles to achieve that balance. During the year, the asset allocation is reviewed for adherence to the target policy and rebalanced to the targeted weights. The Company reviews the expected long-term returns of the asset allocation each year to help determine whether changes are needed. The return is evaluated on a weighted-average basis in relation to inflation. The assumed long-term rate of return used to calculate annual benefit expense is based on the asset allocation and expected market returns for the respective asset classes. The weighted–average target pension asset allocation and target ranges at the March 31, 2026 measurement date and the actual asset allocations at the March 31, 2026 and 2025 measurement dates by major asset category were as follows: Actual Allocation Target Allocation March 31, Major Asset Category Range 2026 2025 Equity securities 30.0 % 20 % - 40 % 29.5 % 28.4 % Fixed income securities (1) 65.0 % 55 % - 75 % 65.3 % 63.8 % Alternative investments 5.0 % 0 % - 10 % 5.2 % 7.8 % Total 100.0 % 100.0 % 100.0 % (1) Actual amounts include high yield securities and cash balances held for the payment of benefits. 78 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Universal makes regular contributions to its pension and other postretirement benefit plans. As previously noted, for postretirement health benefits, contributions reflect funding of those benefits as they are incurred. The Company expects to make no contributions to its ERISA regulated defined benefit pension plan and $ 3.4 million to its non-ERISA regulated pension plans in fiscal year 2027. Estimated future benefit payments to be made from the Company’s plans are as follows: Pension Benefits Other Postretirement Benefits Fiscal Year 2027 $ 13,154 $ 1,782 2028 16,553 1,708 2029 13,383 1,629 2030 12,724 1,580 2031 14,890 1,557 2032 - 2036 68,833 7,318 Fair Values of Pension Plan Assets Assets held by the Company’s defined benefit pension plans primarily consist of equity securities, fixed income securities, and alternative investments. Equity securities are primarily invested in actively-traded mutual funds with underlying common stock investments in U.S. and foreign companies ranging in size from small to large corporations. Fixed income securities are also held primarily through actively-traded mutual funds with the underlying investments in both U.S. and foreign securities. The methodologies for determining the fair values of the plan assets are outlined below. Where the values are based on quoted prices for the securities in an active market, they are classified as Level 1 of the fair value hierarchy. Where secondary pricing sources are used, they are classified as Level 2 of the hierarchy. Pricing models that use significant unobservable inputs are classified as Level 3. • Equity securities: Investments in equity securities through actively-traded mutual funds are valued based on the NAVs of the units held in the respective funds, which are determined by obtaining quoted prices on nationally recognized securities exchanges. These securities are classified as Level 1. • Fixed income securities: Fixed income investments that are held through mutual funds are valued based on the NAVs of the units held in the respective funds, which are determined by obtaining quoted prices on nationally recognized securities exchanges. These securities are classified as Level 1. Other fixed income investments are valued at an estimated price that a dealer would pay for a similar security on the valuation date using observable market inputs and are classified as Level 2. These market inputs may include yield curves for similarly rated securities. Small amounts of cash are held in common collective trusts. Fixed income securities also include insurance assets, which are valued based on an actuarial calculation. Those securities are classified as Level 3. • Alternative investments: Real estate assets are valued using valuation models that incorporate income and market approaches, including external appraisals, to derive fair values. The hedge fund allocation is a fund of hedge funds and is valued by the manager based on the NAV of each fund. These models use significant unobservable inputs and are classified as Level 3 within the fair value hierarchy. Fair values of the assets of the Company’s pension plans as of March 31, 2026 and 2025, classified based on how their values were determined under the fair value hierarchy are as follows: March 31, 2026 Level 1 Level 2 Level 3 Total Equity securities $ 48,050 $ — $ — $ 48,050 Fixed income securities (1) 93,119 14,331 10,812 118,262 Alternative investments — — 8,505 8,505 Total investments $ 141,169 $ 14,331 $ 19,317 $ 174,817 79 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) March 31, 2025 Level 1 Level 2 Level 3 Total Equity securities $ 45,008 $ — $ — $ 45,008 Fixed income securities (1) 104,071 — 9,409 113,480 Alternative investments — — 12,543 12,543 Total investments $ 149,079 $ — $ 21,952 $ 171,031 (1) Includes high yield securities and cash and cash equivalent balances. Other Benefit Plans Universal and several subsidiaries offer employer defined contribution savings plans. Amounts charged to expense for these plans were approximately $ 4.8 million for fiscal year 2026, $ 5.2 million for fiscal year 2025, and $ 4.3 million for fiscal year 2024. NOTE 13. CAPITAL STOCK Common Stock At March 31, 2026, the Company’s shareholders had authorized 100,000,000 shares of its common stock, and 24,923,496 shares were issued and outstanding. Holders of the common stock are entitled to one vote for each share held on all matters requiring a vote. Holders of the common stock are also entitled to receive dividends when, as, and if declared by the Company’s Board of Directors. The Board of Directors customarily declares and pays regular quarterly dividends on the outstanding common shares; however, such dividends are at the Board’s full discretion, and there is no obligation to continue them. Preferred Stock The Company is also authorized to issue up to 5,000,000 shares of preferred stock. No preferred stock was outstanding at March 31, 2026. Share Repurchase Programs Universal’s Board of Directors has authorized programs to repurchase outstanding shares of the Company’s common stock. Under these programs, the Company has made and may continue to make share repurchases from time to time in the open market or in privately negotiated transactions at prices not exceeding prevailing market rates. Programs have been in place continuously throughout fiscal years 2024 through 2026. The current program, which replaced an expiring program, was authorized and became effective on November 7, 2024. It authorizes the purchase of up to $ 100 million of the Company’s outstanding common stock and expires on November 15, 2026. At March 31, 2026, $ 100 million of the authorization remained available for share repurchases under the current program. Repurchases of common stock under the programs for fiscal years 2026, 2025, and 2024 were as follows: Fiscal Year Ended March 31, 2026 2025 2024 Number of shares repurchased — — 100,000 Cost of shares repurchased (in thousands of dollars) $ — $ — $ 4,744 Weighted-average cost per share $ — $ — $ 47.44 NOTE 14. EXECUTIVE STOCK PLANS AND STOCK-BASED COMPENSATION Executive Stock Plans The Company’s shareholders have approved executive stock plans under which directors, officers, 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. Currently, grants are outstanding under the 1997 Executive Stock Plan, the 2002 Executive Stock Plan, the 2007 Stock Incentive Plan, the 2017 Stock Incentive Plan, and the 2023 Stock Incentive Plan. Together, these plans are referred to in this disclosure as the “Plans.” Up to 1,250,000 shares may be issued under the 2023 Stock Incentive Plan, with no specific share limit for any of the award types. New awards may no longer be issued under the 1997, 2002, 2007, and 2017 Plans. 80 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company’s practice is to award grants of stock-based compensation to officers at the first regularly-scheduled meeting of the Compensation and Human Resources Committee of the Board of Directors (the “Compensation Committee”) in the fiscal year following the public release of the Company’s financial results for the prior fiscal year. The Compensation Committee administers the Plan consistently, following previously defined guidelines. In recent years, the Compensation Committee has awarded only grants of RSUs and PSUs. Outside directors automatically receive restricted stock units following each annual meeting of shareholders. RSUs awarded to officers 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 vesting date as the original RSU grant. The PSUs vest 3 years from the grant date, are paid out in shares of common stock at 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. RSUs awarded to outside directors vest 1 year after the grant date. Additionally, restricted stock vests upon the individual’s retirement from service as a director. RSUs, Restricted Stock, and PSUs The following table summarizes the Company’s RSU, restricted stock, and PSU activity for fiscal years 2024 through 2026: RSUs Restricted Stock PSUs Shares Weighted-Average Grant Date Fair Value Shares Weighted-Average Grant Date Fair Value Shares Weighted-Average Grant Date Fair Value Fiscal Year Ended March 31, 2024: Unvested at beginning of year 382,410 $ 56.03 11,600 $ 41.86 160,015 $ 44.55 Granted 117,103 51.90 — — 65,645 43.01 Vested ( 109,877 ) 61.75 — — ( 73,963 ) 34.45 Forfeited — — — — ( 467 ) 34.33 Unvested at end of year 389,636 53.18 11,600 41.86 151,230 48.22 Fiscal Year Ended March 31, 2025: Granted 157,861 49.36 — — 75,264 38.23 Vested ( 159,631 ) 56.42 — — ( 61,829 ) 47.95 Forfeited — — — — — — Unvested at end of year 387,866 50.29 11,600 41.86 164,665 44.54 Fiscal Year Ended March 31, 2026: Granted 133,142 61.53 — — 75,151 55.89 Vested ( 268,998 ) 50.46 — — ( 71,816 ) 54.46 Forfeited ( 2,667 ) 51.56 — — ( 2,425 ) 42.55 Unvested at end of year 249,343 $ 56.10 11,600 $ 41.86 165,575 $ 45.21 Shares granted and vested in the above table include dividend equivalents on RSUs and any shares awarded above the base grant under the performance provisions of PSUs. Shares forfeited or canceled include any reductions from the base PSU grant under those same performance provisions. The fair values of RSUs, restricted stock, and PSUs are based on the market price of the common stock on the grant date. Stock-Based Compensation Expense 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 81 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) grant. For the fiscal years ended March 31, 2026, 2025, and 2024, total stock-based compensation expense and the related income tax benefit recognized were as follows: Fiscal Year Ended March 31, 2026 2025 2024 Total stock-based compensation expense $ 7,116 $ 8,531 $ 12,063 Income tax benefit recorded on stock-based compensation expense $ 1,597 $ 1,914 $ 2,713 At March 31, 2026, the Company had $ 3.3 million of unrecognized compensation expense related to stock-based awards, which will be recognized over a weighted-average period of approximately 0.7 years. NOTE 15. COMMITMENTS, CONTINGENCIES, AND OTHER MATTERS Commitments The Company enters into contracts to purchase tobacco from farmers in a number of the countries where it operates. Contracts in most countries cover one annual growing season. Primarily with the farmer contracts in Brazil, Malawi, Mozambique, the Philippines, Guatemala, and Mexico, the Company provides seasonal financing to support the farmers’ production of their crops. At March 31, 2026, the Company had contracts to purchase approximately $ 699 million of tobacco to be delivered during fiscal year 2027 and $ 159 million of tobacco to be delivered in subsequent fiscal years. These amounts are estimates since actual quantities purchased will depend on crop yields, and prices will depend on the quality of the tobacco delivered and other market factors. Tobacco purchase obligations have been partially funded by short-term advances to farmers and other suppliers, which totaled approximately $ 180 million, net of allowances, at March 31, 2026. The Company withholds payments due to farmers on delivery of the tobacco to satisfy repayment of the financing it provided to the farmers. In addition to its contractual obligations to purchase tobacco, the Company had commitments related to agricultural materials, approved capital expenditures, and various other requirements that approximated $ 90 million at March 31, 2026. Other Contingent Liabilities Other Contingent Liabilities (Letters of credit) The Company had other contingent liabilities totaling approximately $ 1.0 million at March 31, 2026, primarily under 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 other litigation and tax examinations incidental to their business activities. While the outcome of these matters cannot be predicted with certainty, management is vigorously defending the matters and does not currently expect that any of them will have a material adverse effect on the Company’s business or financial position. However, should one or more of these matters be resolved in a manner adverse to management’s current expectation, the effect on the Company’s results of operations for a particular fiscal reporting period could be material. NOTE 16. 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. 82 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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, flavorings, and colorings. Customers for the Ingredients Operations segment include large multinational food and beverage companies, smaller independent manufacturers, and retail organizations. FruitSmart, Silva, and 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. 83 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Reportable segment data as of, or for, the fiscal years ended March 31, 2026, 2025, and 2024, is as follows: Fiscal Year Ended March 31, 2026 Fiscal Year Ended March 31, 2025 Fiscal Year Ended March 31, 2024 Tobacco Operations Ingredients Operations Consolidated Tobacco Operations Ingredients Operations Consolidated Tobacco Operations Ingredients Operations Consolidated Sales and other operating revenues $ 2,576,358 $ 348,112 $ 2,924,470 $ 2,608,675 $ 338,609 $ 2,947,284 $ 2,438,775 $ 309,798 $ 2,748,573 Cost of goods sold ( 2,124,845 ) ( 287,609 ) ( 2,412,454 ) ( 2,133,063 ) ( 265,564 ) ( 2,398,627 ) ( 1,975,955 ) ( 236,520 ) ( 2,212,475 ) Selling, general and administrative expenses ( 181,476 ) ( 45,559 ) ( 227,035 ) ( 179,340 ) ( 48,610 ) ( 227,950 ) ( 179,569 ) ( 56,624 ) ( 236,193 ) Corporate overhead allocated to the segments ( 61,928 ) ( 11,708 ) ( 73,636 ) ( 65,195 ) ( 12,142 ) ( 77,337 ) ( 61,655 ) ( 12,718 ) ( 74,373 ) Equity in pretax earnings (loss) of unconsolidated affiliates (1) 3,430 — 3,430 9,103 — 9,103 756 — 756 Segment operating income 211,539 3,236 214,775 240,180 12,293 252,473 222,352 3,936 226,288 Deduct: Equity in pretax (earnings) loss of unconsolidated affiliates (1) ( 3,430 ) ( 9,103 ) ( 756 ) Restructuring and impairment costs (2) ( 1,833 ) ( 10,573 ) ( 3,523 ) Goodwill impairment (3) ( 41,061 ) — — Consolidated operating income $ 168,451 $ 232,797 $ 222,009 (1) Equity in pretax earnings of unconsolidated affiliates is included in reportable segment operating income, but is reported below consolidated operating income and excluded from that total in the consolidated statements of income. (2) Restructuring and impairment costs are excluded from reportable segment operating income, but are included in consolidated operating income in the consolidated statements of income (see Note 3). (3) Goodwill impairment is excluded from reportable segment operating income, but is included in consolidated operating income in the consolidated statements of income (see Note 1). Segment Assets Accounts Receivable, net March 31, March 31, 2026 2025 2024 2026 2025 2024 Tobacco Operations $ 2,300,491 $ 2,436,416 $ 2,451,895 $ 508,247 $ 566,755 $ 472,357 Ingredients Operations 466,276 553,136 485,344 55,617 59,121 52,905 Consolidated total $ 2,766,767 $ 2,989,552 $ 2,937,239 $ 563,864 $ 625,876 $ 525,262 Goodwill, net Intangibles, net March 31, Fiscal Year Ended March 31, 2026 2025 2024 2026 2025 2024 Tobacco Operations $ 97,688 $ 97,772 $ 97,801 $ 47 $ 47 $ 62 Ingredients Operations 75,007 116,068 116,068 48,557 57,789 68,821 Consolidated total $ 172,695 $ 213,840 $ 213,869 $ 48,604 $ 57,836 $ 68,883 Capital Expenditures Depreciation and Amortization Fiscal Year Ended March 31, Fiscal Year Ended March 31, 2026 2025 2024 2026 2025 2024 Tobacco Operations $ 34,332 $ 35,387 $ 35,173 $ 32,822 $ 39,494 $ 40,267 Ingredients Operations 14,497 27,214 30,840 20,615 20,279 18,059 Consolidated total $ 48,829 $ 62,601 $ 66,013 $ 53,437 $ 59,773 $ 58,326 84 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Geographic data as of, or for, the fiscal years ended March 31, 2026, 2025, and 2024, is presented below. Sales and other operating revenues are attributed to individual countries based on the final destination of the shipment. Long-lived assets generally consist of net property, plant, and equipment, goodwill, and other intangibles. Geographic Data Sales and Other Operating Revenues Fiscal Year Ended March 31, 2026 2025 2024 United States $ 659,364 $ 622,325 $ 547,923 Belgium 559,625 532,479 552,208 Indonesia 193,543 105,934 117,019 Poland 170,885 99,845 97,723 China 169,291 293,619 219,979 Philippines 151,515 120,648 133,656 Germany 65,817 115,938 95,350 Italy 51,904 46,417 47,197 France 41,369 22,323 16,669 Netherlands 29,107 37,501 42,492 Mexico 22,830 29,073 26,438 All other countries 809,220 921,182 851,919 Consolidated total $ 2,924,470 $ 2,947,284 $ 2,748,573 Long-Lived Assets (net) March 31, (in thousands) 2026 2025 2024 United States $ 314,160 $ 362,701 $ 355,905 Brazil 139,285 139,497 139,642 Mozambique 40,748 39,415 35,845 All other countries 100,060 103,037 117,240 Consolidated total $ 594,253 $ 644,650 $ 648,632 85 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) NOTE 17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table summarizes the changes in the balances for each component of accumulated other comprehensive income (loss) attributable to the Company for the fiscal years ended March 31, 2026, 2025, and 2024: Fiscal Year Ended March 31, 2026 2025 2024 Foreign currency translation: Balance at beginning of year $ ( 42,639 ) $ ( 44,815 ) $ ( 44,233 ) Other comprehensive income (loss) attributable to Universal Corporation: Net gain (loss) on foreign currency translation 4,955 1,750 ( 1,531 ) Less: Net loss on foreign currency translation attributable to noncontrolling interests 570 426 949 Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes 5,525 2,176 ( 582 ) Balance at end of year $ ( 37,114 ) $ ( 42,639 ) $ ( 44,815 ) Foreign currency hedge: Balance at beginning of year $ ( 4,914 ) $ ( 616 ) $ 4,899 Other comprehensive income (loss) attributable to Universal Corporation: Net gain (loss) on derivative instruments (net of tax (expense) benefit of $( 561 ), $ 1,440 and $ 17 ) 2,779 ( 4,860 ) ( 187 ) Reclassification of net (gain) loss to earnings (net of tax expense (benefit) of $( 525 ), $( 75 ), and $ 1,718 ) (1) 1,057 562 ( 5,328 ) Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes 3,836 ( 4,298 ) ( 5,515 ) Balance at end of year $ ( 1,078 ) $ ( 4,914 ) $ ( 616 ) Interest rate hedge: Balance at beginning of year $ 2,834 $ 8,488 $ 5,253 Other comprehensive income (loss) attributable to Universal Corporation: Net gain (loss) on derivative instruments (net of tax (expense) benefit of $( 50 ), $ 65 , and $( 4,035 )) 140 ( 183 ) 11,340 Reclassification of net (gain) loss to earnings (net of tax expense (benefit) of $ 1,047 , $ 1,958 , and $ 2,884 ) (2) ( 2,930 ) ( 5,471 ) ( 8,105 ) Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes ( 2,790 ) ( 5,654 ) 3,235 Balance at end of year $ 44 $ 2,834 $ 8,488 Pension and other postretirement benefit plans: Balance at beginning of year $ ( 35,332 ) $ ( 44,642 ) $ ( 42,976 ) Other comprehensive income (loss) attributable to Universal Corporation: Net gain (loss) arising during the year (net of tax (expense) benefit of $( 42 ), $ 243 , and $ 149 ) (3) 200 ( 1,008 ) ( 430 ) Recognition of net actuarial loss for pension settlement, (net of tax benefit of $( 3,257 )) (4) — 10,844 — Amortization included in earnings (net of tax (expense) benefit of $( 34 ), $ 158 , and $ 339 ) (5) 168 ( 526 ) ( 1,236 ) Other comprehensive income (loss) attributable to Universal Corporation, net of income taxes 368 9,310 ( 1,666 ) Balance at end of year $ ( 34,964 ) $ ( 35,332 ) $ ( 44,642 ) Total accumulated other comprehensive income (loss) at end of year $ ( 73,112 ) $ ( 80,051 ) $ ( 81,585 ) (1) Gains (losses) on foreign currency cash flow hedges related to forecast purchases of tobacco and crop input sales are reclassified from accumulated other comprehensive income (loss) to cost of goods sold when the tobacco is sold to customers. See Note 10 for additional information. 86 UNIVERSAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) (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 debt for open interest rate swap agreements or as amortized to interest expense over the period to original maturity for terminated swap agreements. See Note 10 for additional information. (3) These items arise from the remeasurement of the assets and liabilities of the Company ’ s defined benefit pension and other postretirement benefit plans. Those remeasurements are made on an annual basis at the end of the fiscal year. See Note 12 for additional information. (4) The Company purchased a non-participating annuity for a limited group of retirees currently receiving benefit payments in the Company’s qualified domestic defined benefit plan. The transaction triggered settlement accounting that required immediate recognition of a portion of the accumulated other comprehensive losses associated with the qualified defined benefit plan. See Note 12 for additional information . (5) This accumulated other comprehensive income (loss) component is included in the computation of net periodic benefit cost. See Note 12 for additional information. 87 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Universal Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Universal Corporation (the Company) as of March 31, 2026 and 2025, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2026, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2026 and 2025, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2026, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated June 1, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Allowance for Advances to Tobacco Suppliers Description of the Matter The Company’s short-term and long-term advances to tobacco suppliers totaled approximately $196 million as of March 31, 2026, and the allowances totaled $16 million. As discussed in Note 1 of the financial statements, the Company provides agronomy services and seasonal advances of seed, fertilizer, and other supplies to tobacco farmers for crop production. These advances are repaid through the delivery of tobacco to the Company. Management determined the allowance based on assumptions including the assessment of historical loss information and crop projections. Auditing Management’s estimate for the allowance on advances to tobacco suppliers was complex and involved subjective auditor judgment as the estimate relies on a number of factors that are affected by economic and environmental conditions outside the Company’s control, including but not limited to inclement weather and low crop yields, which could have a significant effect on the allowance estimate. 88 How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s internal controls over the allowance for advances to tobacco suppliers. For example, we tested controls over Management’s review and approval of the models and assumptions used to estimate the allowance. We also tested controls used by Management to evaluate the data used in making the estimates for completeness and accuracy. To test the allowance for advances to tobacco suppliers, our audit procedures included, among others, evaluating the significant assumptions used in the allowance calculation. For example, we compared historical loss information to Management’s estimate of projected crop yield and analyzed the sensitivity of significant assumptions to evaluate the changes in the allowance that would result from changes in the assumptions. We also analyzed subsequent events to identify potential sources of contrary information to Management’s assumptions. Allowance for Recoverable Value-Added Tax (“VAT”) Credits Description of the Matter The Company’s gross balance of recoverable value-added tax (“VAT”) credits totaled approximately $66 million as of March 31, 2026, and the related allowance totaled approximately $22 million. As discussed in Note 1 of the consolidated financial statements, in many foreign countries, the Company pays and receives a significant amount of VAT on purchases and sales of tobacco and tobacco related material. Items subject to a VAT vary from jurisdiction to jurisdiction as do the rates at which the tax is assessed. Some jurisdictions allow companies to apply for refunds of unused VAT credits from the tax authorities, but the refund process may take an extended period of time and it is not uncommon for refund applications to be challenged or rejected. Some jurisdictions also permit companies to sell or transfer unused VAT credits to third parties in private transactions although the proceeds realized may be heavily discounted from the face value of the credits. Management applies judgment in calculating the valuation allowance to estimate the credits that are not expected to be recovered. Auditing Management’s estimate of the VAT allowance was complex and involved a high degree of subjectivity as the estimate relies on a number of factors including interpretations of applicable tax laws and regulations as well as economic and political conditions outside the Company’s control. There is uncertainty associated with the significant assumptions, including expected loss rates, which could have a significant effect on the estimate. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s internal controls over the allowance for recoverable VAT credits. For example, we tested controls over Management’s review and approval of the models used in the allowance and the completeness and accuracy of the data used in the calculation. To test the VAT allowance estimate, our audit procedures included, among others, evaluating the significant assumptions used to estimate the VAT allowance and assessing the historical accuracy of Management’s estimates. For example, we evaluated whether the historical loss rates of VAT credits used in Management’s calculation was representative of the current expected loss rates of the VAT credits. We analyzed the sensitivity of significant assumptions to evaluate the changes in the allowance that would result from changes in the assumptions and we considered subsequent events to identify potential sources of contrary information to Management’s assumptions. Excess and Obsolete Inventory – Tobacco Description of the Matter As discussed in Note 1 of the consolidated financial statements, net tobacco inventory totaled $832 million as of March 31, 2026 and is stated at the lower of its cost or net realizable value. The Company records adjustments when the cost of tobacco inventory is not expected to be fully recoverable. Auditing Management’s estimate of the net realizable value of its inventory, specifically its adjustments for excess and obsolete dark air-cured tobacco inventory, involved a higher degree of auditor judgment as the estimate is dependent on expectations about current and expected market trends and economic conditions. 89 How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s internal controls for estimating its excess and obsolete inventory for dark air-cured tobacco. To test excess and obsolete inventory for dark air-cured tobacco, our audit procedures included, among others, evaluating Management’s expectations about future sales, testing the accuracy and completeness of the underlying data used in management's calculation of the net realizable value of inventory, and recalculating the recorded reserve. To evaluate Management’s expectations of future sales, market trends, and economic conditions, we reviewed actual historical sales by crop year, performed inquiries of sales personnel, assessed the historical accuracy of Management’s estimates and performed a sensitivity analysis on significant assumptions. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1971. Richmond, Virginia June 1, 2026 90 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, To the Shareholders and the Board of Directors of Universal Corporation Opinion on Internal Control over Financial Reporting We have audited Universal Corporation’s internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Universal Corporation, (the Company) maintained, in all material respects, effective internal control over financial reporting as of March 31, 2026, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2026 and 2025, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2026, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 and our report dated June 1, 2026 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definitions and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Richmond, Virginia June 1, 2026 91 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure For the three years ended March 31, 2026, there were no changes in the Company’s independent registered public accounting firm, nor were there any disagreements between the Company and its independent registered public accounting firm on any matter of accounting principles, practices, or financial disclosures.