Universal (UVV) - 2026 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for Q1 FY2026, including income, balance sheets, cash flows, and detailed notes Consolidated Statements of Income and Comprehensive Income Net income attributable to Universal Corporation significantly increased to $8.5 million in Q1 FY2026, driven by higher operating income Consolidated Statements of Income (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Sales and other operating revenues | $593,762 | $597,050 | | Operating income | $33,813 | $17,225 | | Net income (loss) attributable to Universal Corporation | $8,497 | $130 | | Diluted Earnings per share | $0.34 | $0.01 | | Dividends declared per common share | $0.82 | $0.81 | Consolidated Balance Sheets Total assets increased to $3.19 billion as of June 30, 2025, primarily due to higher cash and accounts receivable Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | June 30, 2024 | March 31, 2025 | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $178,435 | $101,700 | $260,115 | | Total current assets | $2,346,327 | $2,198,455 | $2,156,097 | | Total assets | $3,189,307 | $3,032,968 | $2,989,552 | | Liabilities & Equity | | | | | Notes payable and overdrafts | $621,275 | $581,087 | $455,039 | | Total current liabilities | $942,688 | $846,056 | $750,161 | | Long-term debt | $618,057 | $617,502 | $617,918 | | Total liabilities | $1,689,718 | $1,589,469 | $1,489,014 | | Total shareholders' equity | $1,499,589 | $1,443,499 | $1,500,538 | Consolidated Statements of Cash Flows Net cash used by operating activities significantly increased to $205.1 million in Q1 FY2026, driven by higher inventory investment Cash Flow Summary (Three Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used by operating activities | $(205,103) | $(62,444) | | Net cash used by investing activities | $(11,910) | $(21,882) | | Net cash provided by financing activities | $134,622 | $130,754 | | Net (decrease) increase in cash | $(81,680) | $46,107 | Notes to Consolidated Financial Statements Detailed notes disclose $1.1 million in restructuring costs, segment revenue breakdown, and derivative hedging activities - The company incurred $1.122 million in restructuring and impairment costs during the three months ended June 30, 2025, primarily related to the consolidation of its European sheet tobacco operations[18][19] Disaggregation of Revenue (Three Months Ended June 30, in thousands) | Revenue Category | 2025 | 2024 | | :--- | :--- | :--- | | Tobacco sales | $457,873 | $488,231 | | Ingredient sales | $84,943 | $80,694 | | Processing revenue | $30,768 | $14,669 | | Other sales and revenue | $19,057 | $12,809 | | Total revenue from contracts | $592,641 | $596,403 | - The company's stock repurchase program, authorizing up to $100 million in purchases, had its full capacity remaining as of June 30, 2025[33] - The company's effective income tax rate for the quarter was 27.1%, compared to 34.7% on a pre-tax loss in the prior-year quarter[38][39] Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated operating income surged 96% to $33.8 million in Q1 FY2026, driven by Tobacco Operations, while liquidity remains strong Results of Operations Q1 FY2026 consolidated revenues slightly decreased, but operating income surged 96% to $33.8 million, primarily from Tobacco Operations Financial Highlights (Three Months Ended June 30, in millions) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Sales and other operating revenue | $593.8 | $597.1 | | Operating income | $33.8 | $17.2 | | Net income attributable to Universal Corp. | $8.5 | $0.1 | | Diluted earnings per share | $0.34 | $0.01 | | Tobacco operations operating income | $35.7 | $14.5 | | Ingredients operations operating income | $1.7 | $2.9 | - Tobacco Operations operating income increased by 147% ($21.2 million) due to a favorable product mix, despite an 8% decline in sales volumes from lower carryover crop sales[91] - Ingredients Operations operating income decreased by 42% ($1.2 million) due to a less favorable product mix, tariff uncertainty, and higher fixed costs from an expanded production facility[92] Liquidity and Capital Resources Liquidity is driven by seasonal working capital; net cash used in operations increased to $205.1 million due to inventory investment - Net cash used by operations was $205.1 million, $142.7 million higher than the prior year, mainly due to higher working capital requirements for seasonal leaf tobacco purchases[103] - Uncommitted tobacco inventories were low at about 11% of total tobacco inventory ($134.7 million) as of June 30, 2025[103] Net Debt and Capitalization (in thousands) | Metric | June 30, 2025 | June 30, 2024 | March 31, 2025 | | :--- | :--- | :--- | :--- | | Total Debt | $1,239,332 | $1,198,589 | $1,072,957 | | Net Debt (non-GAAP) | $1,065,454 | $1,112,549 | $816,605 | | Net Capitalization (non-GAAP) | $2,524,371 | $2,526,006 | $2,275,161 | | Net Debt/Net Capitalization | 42% | 44% | 36% | - The company expects to spend approximately $45 to $55 million on capital projects over the next twelve months[107] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk exposure were reported for Q1 FY2026, referring to the Annual Report for details - There have been no material changes to the Company's market risk during the first quarter of fiscal 2026[117] Controls and Procedures Disclosure controls and procedures were deemed ineffective due to a material weakness in tobacco inventory reconciliation, with remediation underway - Management concluded that the Company's disclosure controls and procedures were not effective as of the end of the period covered by this report[118] - A material weakness was identified in internal controls at a tobacco subsidiary related to the physical counting, compilation, and reconciliation of dark air-cured tobacco inventories[122] - A remediation plan is in process, which includes requiring enhanced documentation for management review controls and implementing additional reports for inventory reconciliation[125][126] PART II - OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings but does not anticipate any material adverse effects on its financial position - The company is involved in litigation incidental to its business activities but does not currently expect any material adverse effect on its business or financial position[129] Risk Factors No material changes to previously disclosed risk factors were reported for the quarter ended June 30, 2025 - There are no material changes to the risk factors previously disclosed in the Company's 2025 Form 10-K[130] Unregistered Sales of Equity Securities and Use of Proceeds No common stock was repurchased in Q1 FY2026; the $100 million stock repurchase program remains fully available - No shares of common stock were repurchased during the three-month period ended June 30, 2025[131] - The stock repurchase program authorized on November 7, 2024, for up to $100 million, had $100 million of remaining capacity for repurchases as of June 30, 2025[131] Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during Q1 FY2026 - During the three months ended June 30, 2025, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement[132] Exhibits This section lists exhibits filed, including management certifications and interactive data files (XBRL) - The report lists several exhibits filed concurrently, including CEO and CFO certifications pursuant to Sections 302 and 1350 of the Sarbanes-Oxley Act, and Interactive Data Files (XBRL)[135]