Universal Corporation (UVV)

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Universal Corporation (UVV)

F4Q2013 Earnings Call

May 21, 2013 05:30 pm ET


George Freeman – Chairman, President & Chief Executive Officer

David Moore – Senior Vice President & Chief Financial Officer

Candace Formacek – Vice President & Treasurer


Ann Gurkin – Davenport & Company LLC



Good evening. My name is Jessica and I will be your Conference Operator for today. At this time I’d like to welcome everyone to the Universal Corporation’s Fiscal 2013 Results Conference Call. (Operator instructions.) Thank you. I would now like to turn the call over to your host Candace Formacek, Vice President and Treasurer. Ma’am, you may begin your conference.

Candace Formacek

Thank you, Jessica, and thank you for joining us today. George Freeman, our Chairman, President, and CEO, and David Moore, our Chief Financial Officer, are here with me today. They will join me in answering questions after these brief remarks.

This call is being webcast live and will be available on our website and on telephone taped replay. It will remain on our website through August 5, 2013. If you are listening to this call after that date or if you are reading a transcription we have not authorized such recording or transcription. It has been made available to you without our permission, review or approval. We take no responsibility for such presentation. Any transcription inaccuracies or omissions or failures to present available updates are the responsibility of the party who is providing it to you.

Before I begin to discuss our results I caution you that we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future. For information on some of the factors that can affect our estimates I urge you to read our 10-K for the year ended March 31, 2012, as well as the 10-K for the year ended March 31, 2013, which will be filed later this week.

The factors that can affect our estimates include such things as customer-mandated timing of shipments, weather conditions, political and economic environment, changes in currency, industry consolidation and evolution, and changes in market structure or sources. Finally some of the information I have for you today is based on unaudited allocations and is subject to reclassification.

Net income for the fiscal year ended March 31, 2013, was $132.8 million or $4.66 per diluted share and includes restructuring charges of $0.06 per share. Last year’s net income for the same period was $92.1 million or $3.25 per diluted share, and included the net effect of several unusual items which amounted to a net charge of $1.42 per share.

Net income of $26.1 million or $0.92 per diluted share for F4Q was relatively flat compared with net income for the prior year’s F4Q of $25.8 million or $0.91 per diluted share. Our total segment operating income for the fiscal year ended March 31, 2013, of $232.8 million increased $9.2 million over the prior year as improved results for the other regions and Other Tobacco operations segments outweighed lower results for the North America segment.

Segment operating income for F4Q of $46.8 million declined $2.1 million compared with the prior year. We delivered better performance than we had anticipated at the beginning of the fiscal year despite smaller crops, rising leaf production costs, and margin pressures in most regions. Some of this success was attributable to the sale of previously uncommitted inventories and carryover shipments of the prior year’s large African and South American crop.

In addition, we benefited from lower selling, general and administrative costs. Certain of these cost reductions were unpredictable such as currency re-measurements and exchange gains, and may not be recurring while others were a result of our targeted cost reduction and efficiency improvement efforts.

Several factors are key to understanding our segment results for the year and F4Q. First, the operating income for our other regions segment improved 7% for the year, largely due to lower selling, general, and administrative costs. Overall volumes for the year were lower for this segment compared with the previous year, reflecting the smaller current crops and additional volumes from carryover shipments of prior year’s crops.

The North America segment achieved higher overall volumes and increased processing business for the year, but experienced lower operating results due to higher green leaf and overhead costs.

For F4Q, total segment operating income declined by about $2 million. Earnings for the quarter in the other regions segment were down significantly influenced by lower African volumes in comparison with last year’s large crops and shipments there. But this decline was nearly offset by earnings improvements in the North America and the Other Tobacco operations segments.

The North America segment outperformed against the prior year’s F4Q on higher volumes from the larger US crop and increased processing business. Our Other Tobacco operations segment contributed earnings improvements for both the full year and F4Q due mainly to stronger wrapper sales in the dark tobacco operations.

In F2013 we generated over $230 million in cash flow from our operations and returned nearly $70 million to our shareholders through a combination of dividends and share repurchases. In addition to our financial achievements, our strong local management teams around the globe continued to advance our goal of providing compliant leaf produced in a sustainable and competitive manner to our customers.

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