DRAFT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [ x ] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Period Ended December 31, 2001 OR [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Transition Period From to ------------------- ---------------- Commission file number 1-652 UNIVERSAL CORPORATION ------------------------------------------------------ (Exact name of Registrant as specified in its charter) VIRGINIA 54-0414210 - ------------------------------- ---------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 1501 North Hamilton Street, Richmond, Virginia 23230 - ---------------------------------------------- ------------------------------ (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code - (804) 359-9311 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock as of the latest practicable date: Common Stock, No par value - 26,366,699 shares outstanding as of February 8, 2002
DRAFT PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Universal Corporation and Subsidiaries UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Three and Six Months Ended December 31, 2001 and 2000 (In thousands of dollars, except per share data) <TABLE> <CAPTION> THREE MONTHS SIX MONTHS 2001 2000 2001 2000 ------------------------------------------------------- <S> <C> Sales and other operating revenues $ 744,275 $ 995,062 $1,360,652 $1,645,827 Costs and expenses Cost of goods sold 610,590 863,292 1,110,501 1,400,647 Selling, general and administrative expenses 73,362 68,615 135,006 130,089 ------------------------------------------------------- Operating Income 60,323 63,155 115,145 115,091 Equity in pretax earnings of unconsolidated affiliates 230 523 1,543 1,872 Interest expense 12,359 17,279 25,918 32,108 ------------------------------------------------------- Income before income taxes and other items 48,194 46,399 90,770 84,855 Income taxes 16,868 15,550 31,770 30,548 Minority interests 2,235 2,987 1,580 1,480 --------------------------------------------------------- Net Income $ 29,091 $ 27,862 $ 57,420 $ 52,827 =============================================================================================================== Earnings per common share $ 1.09 $ 1.02 $ 2.14 $ 1.90 =============================================================================================================== Diluted earnings per share $ 1.09 $ 1.01 $ 2.13 $ 1.90 =============================================================================================================== Retained earnings - beginning of period $ 540,546 $ 499,490 Net income 57,420 52,827 Cash dividends declared ($.66 - 2001, $.63 - 2000) (17,597) (16,960) Purchase of common stock (28,543) (25,085) ---------------------------- Retained earnings - end of period $ 551,826 $ 510,272 =============================================================================================================== </TABLE> See accompanying notes.
2 Universal Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands of dollars) Dec. 31, June 30, 2001 2001 ------------- ------------ ASSETS Current Cash and cash equivalents $ 71,739 $ 109,54 Accounts receivable 280,239 330,146 Advances to suppliers 66,479 66,683 Accounts receivable - unconsolidated affiliates 3,987 3,531 Inventories - at lower of cost or market: Tobacco 577,881 389,520 Lumber and building products 79,230 78,945 Agri-products 76,409 80,168 Other 27,807 26,176 Prepaid income taxes 19,124 17,683 Deferred income taxes 8,156 8,256 Other current assets 19,504 21,998 ------------------------- Total current assets 1,230,555 1,132,646 Property, plant and equipment - at cost Land 26,970 26,523 Buildings 249,205 236,875 Machinery and equipment 523,595 500,505 ------------------------- 799,770 763,903 Less accumulated depreciation 435,678 425,808 ------------------------- 364,092 338,095 Other Goodwill 117,863 111,341 Other intangibles 10,694 12,191 Investments in unconsolidated affiliates 80,127 78,860 Deferred income taxes 37,124 37,620 Other noncurrent assets 87,821 71,620 ------------------------- 333,629 311,632 ------------------------- $ 1,928,276 $ 1,782,373 ============================================================================= See accompanying notes.
3 Universal Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands of dollars) Dec. 31, June 30, 2001 2001 ------------ ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Notes payable and overdrafts $ 167,073 $ 190,776 Accounts payable 276,497 241,607 Accounts payable - unconsolidated affiliates 2,616 4,967 Customer advances and deposits 173,135 96,166 Accrued compensation 17,456 22,020 Income taxes payable 33,958 23,789 Current portion of long-term obligations 2,392 2,440 --------------------------- Total current liabilities 673,127 581,765 Long-term obligations 553,537 515,349 Postretirement benefits other than pensions 39,077 39,088 Other long-term liabilities 66,678 59,351 Deferred income taxes 6,158 6,380 Minority interests 25,384 28,311 Shareholders' equity Preferred stock, no par value, authorized 5,000,000 shares none issued or outstanding Common stock, no par value, authorized 100,000,000 shares, issued and outstanding 26,445,599 shares (27,184,663 at June 30, 2001) 84,303 85,582 Retained earnings 551,826 540,546 Accumulated other comprehensive income (71,814) (73,999) --------------------------- Total shareholders' equity 564,315 552,129 --------------------------- $ 1,928,276 $ 1,782,373 ================================================================================ See accompanying notes.
4 Universal Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended December 31, 2001 and 2000 (In thousands of dollars) 2001 2000 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 57,420 $ 52,827 Adjustments to reconcile net income to net cash provided by operating activities 23,000 17,000 Changes in operating assets and liabilities (16,221) (91,935) ------------------------- Net cash provided (used) by operating activities 64,199 (22,108) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (45,000) (37,000) Purchase of business, net of cash acquired (14,000) ------------------------- Net cash used in investing activities (59,000) (37,000) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance (repayment) of short-term debt, net (24,000) 9,000 Repayment of long-term debt - (20,000) Issuance of long-term debt 30,000 122,000 Purchases of common stock (31,000) (28,000) Dividends paid (18,000) (17,000) ------------------------- Net cash provided (used) in financing activities (43,000) 66,000 Net increase (decrease) in cash and cash equivalents (37,801) 6,892 Cash and cash equivalents at beginning of year 109,540 61,395 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 71,739 $ 68,287 ================================================================================ See accompanying notes.
5 Universal Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 All figures contained herein are unaudited. 1). Universal Corporation, with its subsidiaries (the "Company"), has seasonal operations in tobacco, lumber and building products, and agri-products. Therefore, the results of operations for the quarter and six-months ended December 31, 2001, are not necessarily indicative of results to be expected for the year ending June 30, 2002. All adjustments necessary to state fairly the results for such periods have been included and were of a normal recurring nature. Certain amounts in prior year statements have been reclassified to conform to the current year's presentation. 2). Contingent liabilities: The Company provides guarantees for seasonal pre-export crop financing for some of its subsidiaries. In addition, certain subsidiaries provide guarantees that ensure that value-added taxes will be repaid if the crops are not exported. At December 31, 2001, total exposure under guarantees issued for banking facilities of Brazilian farmers was approximately $57 million. Other contingent liabilities approximate $14 million. The Company considers the possibility of significant loss on any of these guarantees to be remote. The Company's Brazilian subsidiaries have been notified by the tax authorities of proposed adjustments to income tax returns filed in prior years. The total proposed adjustments, including penalties and interest, approximate $18 million. The Company believes the Brazilian tax returns filed were in compliance with the applicable tax code. The numerous proposed adjustments vary in complexity and amount. While it is not feasible to predict the precise amount or timing of each proposed adjustment, the Company believes that the ultimate disposition will not have a material adverse effect on the Company's consolidated financial position or results of operations. Although the Company does not expect any significant impact on fiscal year 2002 earnings, if the political situation in Zimbabwe were to deteriorate significantly, the Company's ability to recover its assets there could be impaired. The Company's equity in the net assets of its subsidiaries in Zimbabwe was approximately $40 million at December 31, 2001. The Company exports tobacco from Argentina through one or more subsidiaries and the recent government actions there could affect its operations in the future. The currency devaluation should provide benefits to exporters; however it, along with evolving governmental policies, could further jeopardize collection of value added tax receivables from the Argentine government. A Company subsidiary has an 11.5 million peso value added tax receivable that has been adjusted to a market value of $6.8 million after being re-denominated from U.S. dollars to pesos by the Argentine government. In addition, as of December 31, 2001, the Company's subsidiaries have provided long-term loans to a supplier. The loans are secured by liens on real property, processing machinery and equipment and other assets of the supplier. Short-term export financing, which is secured by tobacco, is provided annually to suppliers. This financing is repaid through the export of tobacco. If U.S. dollar loans, which approximated $25 million at December 31, 2001, were to be re-denominated into Argentina pesos, they
6 would be revalued quarterly at market exchange rates. For current year advances, such a change could affect the timing of the Company's results from quarter to quarter and between its fiscal years. The Directorate General Competition of the European Commission ("DG IV") is investigating the buying practices of Spanish tobacco processors with the stated aim of determining to what extent the tobacco processing companies have jointly agreed on raw tobacco qualities and prices offered to Spanish tobacco growers. After conducting an investigation, the Company believes that Spanish tobacco processors, including the Company's Spanish subsidiary, Tabacos Espanoles, S.A. ("TAES"), have jointly agreed to the terms of sale of green tobacco and quantities to be purchased from associations of farmers and have held joint negotiations with those associations. TAES is cooperating fully with the DG IV in its investigation and believes that there are unusual, mitigating circumstances peculiar to the highly-structured market for green tobacco in Spain. Although the fine, if any, that the DG IV may assess on TAES could be material to the Company's earnings, the Company is not able to make an accurate assessment of the amount of any such fine at this time. The investigation is ongoing. 3). On July 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 141 "Business Combinations" and No. 142 "Goodwill and Other Intangible Assets." The adoption of these standards did not have a material impact on the quarterly consolidated financial position or results of operations for the Company. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement establishes a single accounting model for the impairment or disposal of long-lived assets. As required by SFAS No. 144, the Company will adopt this new accounting standard on July 1, 2002. The Company believes the adoption of SFAS No. 144 will not have a material impact on its financial statements. 4). During fiscal years 2000 and 2001, the Company adopted restructuring plans with a total cost of $19.7 million. During the three- and six-month periods ended December 31, 2001, the Company made $1.2 million and $3.8 million in cash payments to 205 and 243 employees, respectively. No additional restructuring costs were recorded during the quarter. The remaining liability for severance payments as of December 31, 2001, was $2.5 million and will be paid during fiscal years 2002 and 2003. 5). On December 31, 2001, one of the Company's subsidiaries entered into a secured, multi-draw, $75 million term loan facility. This financing was put in place to fund the previously announced construction of a new processing factory in Nash County, North Carolina and the upgrade of an existing factory in Danville, Virginia. The facility is guaranteed by the Company and is secured by the assets of the project. It matures on December 31, 2007, and under some conditions, the subsidiary can exercise an extension option for an additional four years. The Company borrowed $30 million under the loan facility on December 31, 2001.
7 6). The following table sets forth the computation of earnings per share and diluted earnings per share. <TABLE> <CAPTION> THREE MONTHS SIX MONTHS Periods ended December 31, 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------ <S> <C> Net income (in thousands of dollars) $ 29,091 $ 27,862 $ 57,420 $ 52,827 ---------------------------------------------------------------- Denominator for earnings per share: Weighted average shares 26,628,969 27,428,352 26,869,729 27,741,728 Effect of dilutive securities: Employee stock options 62,445 99,754 123,950 52,607 ---------------------------------------------------------------- Denominator for diluted earnings per share 26,691,414 27,528,106 26,993,679 27,794,335 ---------------------------------------------------------------- Earnings per share $ 1.09 $ 1.02 $ 2.14 $ 1.90 - ------------------------------------------------------------------------------------------------------------ Diluted earnings per share $ 1.09 $ 1.01 $ 2.13 $ 1.90 - ------------------------------------------------------------------------------------------------------------ </TABLE> 7). Comprehensive Income: <TABLE> <CAPTION> THREE MONTHS SIX MONTHS Periods ended December 31, 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------- (in thousands of dollars) <S> <C> Net income $ 29,091 $ 27,862 $ 57,420 $ 52,827 Foreign currency translation adjustment 3,653 (10,151) 2,185 (9,926) -------------------------------------------------------- Comprehensive income $ 32,744 $ 17,711 $ 59,605 $ 42,901 - ---------------------------------------------------------------------------------------------------- </TABLE> 8). Segments are based on product categories. The Company evaluates performance based on segment operating income including equity in pretax earnings of unconsolidated affiliates. <TABLE> <CAPTION> THREE MONTHS SIX MONTHS Periods ended December 31, 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------ (in thousands of dollars) <S> <C> SALES AND OTHER OPERATING REVENUES Tobacco $ 491,379 $ 758,076 $ 826,637 $ 1,160,321 Lumber/building products 140,628 123,038 266,817 252,700 Agri-products 112,268 113,948 267,198 232,806 ----------------------------------------------------- Consolidated total $ 744,275 $ 995,062 $ 1,360,652 $ 1,645,827 - ------------------------------------------------------------------------------------------ </TABLE>
8 <TABLE> <CAPTION> <S> <C> OPERATING INCOME Tobacco $ 57,024 $ 58,411 $ 106,005 $ 105,191 Lumber/building products 5,757 6,100 13,693 13,750 Agri-products 3,131 4,053 7,328 7,810 - ---------------------------------------------------------------------------------------------------- Total 65,912 68,564 127,026 126,751 Less: Corporate expenses 5,359 4,886 10,338 9,788 Equity in pretax earnings of unconsolidated affiliates 230 523 1,543 1,872 --------------------------------------------------------------- Consolidated total $ 60,323 $ 63,155 $ 115,145 $ 115,091 - ---------------------------------------------------------------------------------------------------- </TABLE> 9). Depreciation and amortization for the three- and six-month periods are as follows: THREE MONTHS SIX MONTHS Periods ended December 31, 2001 2000 2001 2000 - -------------------------------------------------------------------------------- (in thousands of dollars) Depreciation $ 12,330 $ 10,345 $ 23,477 $ 21,118 ---------------------------------------------------- Amortization $ 1,309 $ 2,230 $ 2,553 $ 3,840 - --------------------------------------------------------------------------------
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Working capital at December 31, 2001, was $557 million compared to $551 million at June 30, 2001. The increase in working capital was the result of an increase in current assets of $97 million, primarily from a seasonal increase in tobacco inventories, net of a $91 million increase in current liabilities. In the United States, tobacco working capital needs are normally at their lowest point at June 30. Tobacco inventories increased during the six-month period and quarter in Malawi, Zimbabwe and the United States as tobacco was purchased from farmers and at auction. The purchased tobacco is financed with cash, notes payable and customer deposits. The mix of notes payable and customer advances is dependent on both the Company's and its customers' borrowing capabilities, interest rates, and exchange rates. The Company does not purchase material quantities of tobacco on a speculative basis; thus the increase in inventory represents primarily tobacco that has been committed to customers. Generally, the Company's international tobacco operations conduct business in U. S. dollars, thereby limiting foreign exchange risk to local production and overhead costs. Agri-product and lumber operations enter into foreign exchange contracts to hedge firm purchase and sales commitments for terms of less than six months. Interest rate risk is limited because customers in the tobacco business usually pre-finance purchases or pay market rates of interest for inventory purchased for their accounts. On October 23, 2001, the Board of Directors increased the Company's authority to repurchase its common shares by $150 million. The purchase programs, which began in 1998, provide for purchases of up to $450 million worth of the Company's common stock. As of
10 December 31, 2001, the Company had purchased, pursuant to these programs, an aggregate of 10.2 million shares of Universal common stock for approximately $283 million. On December 31, 2001, one of the Company's subsidiaries entered into a secured, multi-draw, $75 million term loan facility. This financing was put in place to fund the previously announced construction of a new processing factory in Nash County, North Carolina and the upgrade of an existing plant in Danville, Virginia. The facility is guaranteed by the Company and is secured by the assets of the project. It matures on December 31, 2007, and under some conditions, the subsidiary can exercise an extension option for an additional four years. The Company borrowed $30 million under the loan facility on December 31, 2001. Management believes that the liquidity and capital resources of the Company at December 31, 2001, remain adequate to support the Company's foreseeable operating needs. Results of Operations `Sales and Other Operating Revenues' decreased $251 million or 25% in the second quarter of fiscal year 2002 and $285 million for the six-month period ending December 31, 2001. In the quarter, tobacco revenues were down by $267 million; lumber and building products revenues increased by $18 million; and agri-products revenues decreased by $2 million. The most important factor in the revenue decline has been the reduction in revenue caused by the shift in the United States to direct purchasing of tobacco leaf by manufacturers. The majority of the increase in revenue from the Company's lumber and building operations was due to the inclusion of sales from a newly acquired lumber subsidiary. Agri-product revenues have declined due to weaknesses in the tea and rubber businesses.
11 Fiscal year 2002 segment operating income in the second quarter decreased by $3 million, or 4%, compared to the same period last year. The results for the six-month period were flat, compared to the comparable period last year. Tobacco earnings for the quarter were $1 million lower than the prior year's second quarter and $1 million higher than the prior year's six-month period. Tobacco earnings were higher for the quarter and for the six-month period before recognizing a $4.7 million charge related to the re-denomination of value added tax receivables in Argentina. Increased leaf shipments from South America, Africa, and Europe more than compensated for continued weakness in the United States. Acceleration of South American shipments in the second quarter and carryover shipments from Africa in the first quarter also benefited earnings during the period. Shipment volumes from those origins are expected to be lower during the remainder of fiscal year 2002. U. S. operations continued to experience higher costs incurred in staffing both contract receiving stations and the auction system, as well as a decline in green market service income, compared to the same period last year. Dark tobacco results were lower in the quarter and for the six months, reflecting reduced leaf volumes handled in the United States due to consolidation of manufacturers in the United States and a poor Connecticut wrapper crop. This was partially offset by higher volumes from Indonesia and Brazil due to favorable timing of shipments. Results of the Company's lumber and building products distribution operations in the quarter and for the six-month period were comparable to those of the prior year. Construction activity in the Netherlands appears to be slowing in concert with a deteriorating economic environment there. However, the Company is unable to determine at this time the effect, if any, on future earnings, nor can it predict the euro/dollar exchange rate, which may affect translation of euro earnings into dollars. Agri-products results were lower in both periods, as the improved
12 performance of the confectionery seeds and nut import businesses did not completely offset weaknesses in tea, rubber, and canned meat markets. Management continues to believe that the Company's non-tobacco operations will perform well for the fiscal year. Interest expense decreased for the quarter and six-month period due to lower interest rates and lower borrowing levels. The Company's estimated effective tax rate in fiscal year 2002 declined slightly from the prior year's annual rate to 35%. Management continues to expect earnings of approximately $100 million for the full year. Other Information regarding Trends and Management's Actions The Company's operating environment continues to be extremely challenging. Smaller Brazilian and Zimbabwean crops have impacted the quantities of tobacco handled in those origins, which will lower the volumes of leaf shipped during the remainder of the fiscal year. The outlook appears brighter in Brazil for the coming year, with the prospect of a record flue-cured harvest. This should provide increased sales opportunities in fiscal year 2003. The situation in Zimbabwe continues to be of great concern with reports of increased violence and land invasions in advance of the Presidential elections scheduled in March 2002. The flue-cured crop, which is now being harvested, is expected to be smaller than last year's. Current projections are for a flue-cured crop of 165 to 175 million kilos, compared to 202 million kilos last year and a normal base customer requirement of 180 to 190 million kilos. There is no certainty that such quantity will be successfully brought to market. However, assuming it is successfully marketed, the modest shortfall in Zimbabwe should be offset by larger crops in other African origins and in Brazil. Over the last several years, Zimbabwe has been an important source of tobacco for the Company representing between 14 and 18% of its continuing flue-cured and burley tobacco purchases. To the extent that the Company could not replace lost volumes of tobacco with
13 tobacco from other sources, the Company's results of operations would suffer. The operating environment in the United States remains difficult as a result of reduced crops, uncompetitive leaf prices, and a high cost marketing system. Unfortunately, the U. S. outlook will not improve without major changes in the price support program, which do not appear likely. Therefore, the Company is moving to reduce costs, and to improve efficiency through the significant investments in plants and advanced technology announced last spring. The Company exports tobacco from Argentina through one or more subsidiaries and the recent government actions there could affect its operations in the future. The currency devaluation should provide benefits to exporters; however it, along with evolving governmental policies, could further jeopardize collection of value added tax receivables from the Argentine government. A Company subsidiary has an 11.5 million peso value added tax receivable that has been adjusted to market value of $6.8 million as it is was re-denominated from U.S. dollars by the Argentine government. In addition, as of December 31, 2001, the Company's subsidiaries have provided long-term loans to a supplier. The loans are secured by liens on real property, processing machinery and equipment and other assets of the supplier. Short-term export financing, which is secured by tobacco, is provided annually to suppliers. This financing is repaid through the export of tobacco. If U.S. dollar loans, which approximated $25 million at December 31, 2001, were to be re-denominated into Argentine pesos, they would be revalued quarterly at market exchange rates. For current year advances, such a change could affect the timing of Company's results from quarter to quarter and between its fiscal years. In 1998, the Company announced the formation of a joint venture, Socotab, LLC ("Socotab"), to deal in oriental tobaccos. It owns processing plants in Turkey, Greece, and Macedonia, as well as minority interests in two plants in Bulgaria. The Company owns 49% of the venture and thus recognizes its equity in the earnings of the venture, but does not consolidate its financial statements. Socotab
14 generated $240 million in revenue during fiscal year 2001. Socotab is controlled by the venture partner, who has no other relationship to the Company, and the venture is intended to be a long-term partnership. The Company does not guarantee or provide other support for any obligations of Socotab. If the Company were to acquire the remaining interest in the venture as of December 31, 2001, the consolidated assets, net of cash, would increase by approximately $160 million and its total debt, net of cash, would increase by approximately $110 million. Readers are cautioned that the statements contained herein regarding expected earnings and expectations for the Company's performance are forward-looking statements based upon management's current knowledge and assumptions about future events, including anticipated levels of production and supply of the Company's products and services, costs incurred in providing these products and services, timing of shipments to customers, changes in market structure, and general economic, political, market and weather conditions. Lumber and building products earnings are also affected by changes in exchange rates between the U.S. dollar and the euro. Actual results, therefore, could vary from those expected. Reference is made to Items 1 and 7 and the Notes to the Consolidated Financial Statements in Item 8 of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2001, regarding important factors that could cause actual results to differ materially from those contained in any forward-looking statement made by or on behalf of the Company, including forward-looking statements contained in Item 2 of this Form 10-Q.
15 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Directorate General Competition of the European Commission ("DG IV") is investigating the buying practices of Spanish tobacco processors with the stated aim of determining to what extent the tobacco processing companies have jointly agreed on raw tobacco qualities and prices offered to Spanish tobacco growers. After conducting an investigation, the Company believes that Spanish tobacco processors, including the Company's Spanish subsidiary, Tabacos Espanoles, S.A. ("TAES"), have jointly agreed to the terms of sale of green tobacco and quantities to be purchased from associations of farmers and have held joint negotiations with those associations. TAES is cooperating fully with the DG IV in its investigation and believes that there are unusual, mitigating circumstances peculiar to the highly-structured market for green tobacco in Spain. Although the fine, if any, that the DG IV may assess on TAES could be material to the Company's earnings, the Company is not able to make an accurate assessment of the amount of any such fine at this time. The investigation is ongoing, and the Company believes that it is not appropriate to comment further on this matter at this time.
16 Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 12. Ratio of earnings to fixed charges.* b. Reports on Form 8-K. Report on Form 8-K filed on October 24, 2001, filing press release announcing first quarter earnings and expanding share repurchase program. Report on Form 8-K filed December 7, 2001, filing press release announcing increase in annual dividend. * - Filed herewith
17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 8, 2002 UNIVERSAL CORPORATION ----------------- ------------------------------------- (Registrant) /s/ Hartwell H. Roper ------------------------------------- Hartwell H. Roper, Vice President and Chief Financial Officer /s/ James A. Huffman ------------------------------------- James A. Huffman, Controller (Principal Accounting Officer)