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 March 31, 2002 -------------- 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 - 26,167,983 shares outstanding as of May 2, 2002
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Universal Corporation and Subsidiaries UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Three and Nine Months Ended March 31, 2002 and 2001 (In thousands of dollars, except per share data) <TABLE> <CAPTION> THREE MONTHS NINE MONTHS 2002 2001 2002 2001 ------------------------------------------------------------ <S> <C> <C> <C> <C> Sales and other operating revenues $ 547,073 $ 756,168 $ 1,907,725 $ 2,401,995 Costs and expenses Cost of goods sold 419,996 615,536 1,530,497 2,016,183 Selling, general and administrative expenses 68,861 66,542 203,867 196,631 ------------------------------------------------------------ Operating Income 58,216 74,090 173,361 189,181 Equity in pretax earnings of unconsolidated affiliates 8,168 3,720 9,711 5,592 Interest expense 11,577 14,982 37,495 47,090 ------------------------------------------------------------ Income before income taxes and other items 54,807 62,828 145,577 147,683 Income taxes 19,182 22,618 50,952 53,166 Minority interests 2,511 4,343 4,091 5,823 -------------------------------------------------------------- Net Income $ 33,114 $ 35,867 $ 90,534 $ 88,694 - -------------------------------------------------------------------------------------------------------------------- Earnings per common share $ 1.26 $ 1.32 $ 3.39 $ 3.22 - -------------------------------------------------------------------------------------------------------------------- Diluted earnings per share $ 1.26 $ 1.31 $ 3.38 $ 3.20 - -------------------------------------------------------------------------------------------------------------------- Retained earnings - beginning of period $ 540,546 $ 499,490 Net income 90,534 88,694 Cash dividends declared ($1.00 - 2002, $.95 - 2001) (26,501) (25,504) Purchase of common stock, net of shares issued (38,242) (32,527) ---------------------------- Retained earnings - end of period $ 566,337 $ 530,153 - -------------------------------------------------------------------------------------------------------------------- </TABLE> See accompanying notes.
2 Universal Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands of dollars) <TABLE> <CAPTION> March 31, June 30, 2002 2001 ------------- ------------ <S> <C> <C> ASSETS Current Cash and cash equivalents $ 61,836 $ 109,540 Accounts receivable 248,173 330,146 Advances to suppliers 92,788 66,683 Accounts receivable - unconsolidated affiliates 7,675 3,531 Inventories - at lower of cost or market: Tobacco 507,136 389,520 Lumber and building products 76,690 78,945 Agri-products 79,558 80,168 Other 22,207 26,176 Prepaid income taxes 12,393 17,683 Deferred income taxes 8,030 8,256 Other current assets 18,252 21,998 ----------------------------------- Total current assets 1,134,738 1,132,646 Property, plant and equipment - at cost Land 26,593 26,523 Buildings 247,281 236,875 Machinery and equipment 545,186 500,505 ----------------------------------- 819,060 763,903 Less accumulated depreciation 442,181 425,808 ----------------------------------- 376,879 338,095 Other Goodwill 117,330 111,341 Other intangibles 10,035 12,191 Investments in unconsolidated affiliates 81,761 78,860 Deferred income taxes 38,795 37,620 Other noncurrent assets 89,838 71,620 ----------------------------------- 337,759 311,632 ----------------------------------- $ 1,849,376 $ 1,782,373 - -------------------------------------------------------------------------------------------------- </TABLE> See accompanying notes.
3 Universal Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS (In thousands of dollars) <TABLE> <CAPTION> March 31, June 30, 2002 2001 ------------------ ------------------ <S> <C> <C> LIABILITIES AND SHAREHOLDERS' EQUITY Current Notes payable and overdrafts $ 175,840 $ 190,776 Accounts payable 249,239 241,607 Accounts payable - unconsolidated affiliates 2,720 4,967 Customer advances and deposits 92,218 96,166 Accrued compensation 18,463 22,020 Income taxes payable 37,522 23,789 Current portion of long-term obligations 120,335 2,440 ----------------------------------- Total current liabilities 696,337 581,765 Long-term obligations 434,270 515,349 Postretirement benefits other than pensions 39,213 39,088 Other long-term liabilities 75,017 59,351 Deferred income taxes 2,581 6,380 Minority interests 27,883 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 26,194,083 shares (27,184,663 at June 30, 2001) 84,016 85,582 Retained earnings 566,337 540,546 Accumulated other comprehensive income (76,278) (73,999) ----------------------------------- Total shareholders' equity 574,075 552,129 ----------------------------------- $ 1,849,376 $ 1,782,373 - -------------------------------------------------------------------------------------------- </TABLE> See accompanying notes.
4 Universal Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months ended March 31, 2002 and 2001 (In thousands of dollars) <TABLE> <CAPTION> 2002 2001 ------------ --------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 90,534 $ 88,694 Adjustments to reconcile net income to net cash provided by operating activities 49,000 39,000 Changes in operating assets and liabilities (51,238) (85,753) ------------------------------------- Net cash provided by operating activities 88,296 41,941 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (79,000) (47,300) Purchase of business, net of cash acquired (14,000) - Sales of property, plant and equipment - 9,500 ------------------------------------ Net cash used in investing activities (93,000) (37,800) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of short-term debt, net (15,000) (114,000) Repayment of long-term debt - (120,000) Issuance of long-term debt 38,500 295,000 Purchases of common stock (41,000) (35,100) Issuance of common stock 1,000 10,000 Dividends paid (26,500) (25,500) ------------------------------------- Net cash provided (used) in financing activities (43,000) 10,400 Net increase (decrease) in cash and cash equivalents (47,704) 14,541 Cash and cash equivalents at beginning of year 109,540 61,395 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 61,836 $ 75,936 - ------------------------------------------------------------------------------------------------------ </TABLE> See accompanying notes.
5 Universal Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 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 nine-months ended March 31, 2002, 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. The Company's exposure around the world varies seasonally and is affected by the method of funding working capital and the speed of shipment. In addition, certain subsidiaries provide guarantees that ensure that value-added taxes will be repaid if the crops are not exported. At March 31, 2002, total exposure under guarantees issued for banking facilities of Brazilian farmers was approximately $67 million. Other contingent liabilities approximate $22 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 $45 million at March 31, 2002. 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 the value of assets in that country. Company subsidiaries had approximately $30 million of such assets as of March 31, 2002 before considering a $4.7 million charge, which was recorded in the Company's second fiscal quarter. In addition, the Company has $5 million in peso-denominated liabilities.
6 The Directorate General Competition of the European Commission (DG Comp) 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 jointly negotiated with those associations. TAES is cooperating fully with the DG Comp 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 Comp 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. 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 Financial Accounting Standards Board 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 nine-month periods ended March 31, 2002, the Company made $400 thousand and $4.3 million in cash payments to 46 and 243 employees, respectively. No additional restructuring costs were recorded during the quarter. The remaining liability for severance payments as of March 31, 2002, was $2.1 million and will be paid during fiscal years 2002 and 2003.
7 5). The following table sets forth the computation of earnings per share and diluted earnings per share. <TABLE> <CAPTION> THREE MONTHS NINE MONTHS Periods ended March 31, 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Net income (in thousands of dollars) $ 33,114 $ 35,867 $ 90,534 $ 88,694 --------------------------------------------------------------------- Denominator for earnings per share: Weighted average shares 26,303,870 27,267,852 26,683,863 27,586,075 Effect of dilutive securities: Employee stock options 69,969 163,348 105,956 89,520 --------------------------------------------------------------------- Denominator for diluted earnings per share 26,373,839 27,431,200 26,789,819 27,675,595 --------------------------------------------------------------------- Earnings per share $ 1.26 $ 1.32 $ 3.39 $ 3.22 - ------------------------------------------------------------------------------------------------------------------- Diluted earnings per share $ 1.26 $ 1.31 $ 3.38 $ 3.20 - ------------------------------------------------------------------------------------------------------------------- </TABLE> 6). Comprehensive Income: <TABLE> <CAPTION> THREE MONTHS NINE MONTHS Periods ended March 31, 2002 2001 2002 2001 - -------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> (in thousands of dollars) Net income $ 33,114 $ 35,867 $ 90,534 $ 88,694 Foreign currency translation adjustment (4,464) 10,948 (2,279) 1,022 ------------------------------------------------------------------ Comprehensive income $ 28,650 $ 46,815 $ 88,255 $ 89,716 - -------------------------------------------------------------------------------------------------------------- </TABLE>
8 7). 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 NINE MONTHS Periods ended March 31, 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------- (in thousands of dollars) <S> <C> <C> <C> <C> SALES AND OTHER OPERATING REVENUES Tobacco $ 331,143 $ 522,828 $ 1,197,780 $ 1,683,149 Lumber and building products 120,727 118,882 387,544 371,582 Agri-products 95,203 114,458 322,401 347,264 ----------------------------------------------------------------- Consolidated total $ 547,073 $ 756,168 $ 1,907,725 $ 2,401,995 - ------------------------------------------------------------------------------------------------------- OPERATING INCOME Tobacco $ 63,792 $ 75,734 $ 169,797 $ 180,925 Lumber and building products 4,714 4,181 18,407 17,931 Agri-products 2,985 3,663 10,313 11,473 - ------------------------------------------------------------------------------------------------------- Total 71,491 83,578 198,517 210,329 Less: Corporate expenses 5,107 5,768 15,445 15,556 Equity in pretax earnings of unconsolidated affiliates 8,168 3,720 9,711 5,592 ----------------------------------------------------------------- Consolidated total $ 58,216 $ 74,090 $ 173,361 $ 189,181 - ------------------------------------------------------------------------------------------------------- </TABLE> 8). Depreciation and amortization for the three- and nine-month periods are as follows: <TABLE> <CAPTION> THREE MONTHS NINE MONTHS Periods ended March 31, 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------- (in thousands of dollars) <S> <C> <C> <C> <C> Depreciation $ 13,326 $ 11,416 $ 36,803 $ 32,534 ---------------------------------------------------------------- Amortization $ 1,192 $ 1,880 $ 3,745 $ 5,720 - ------------------------------------------------------------------------------------------------------- </TABLE>
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources - ------------------------------- Working capital at March 31, 2002, was $438 million compared to $551 million at June 30, 2001. The decrease in working capital was the result of an increase in current liabilities of $115 million, primarily due to the reclassification of maturing debt to current liabilities. In the United States, tobacco working capital needs are normally at their lowest point at June 30. Tobacco inventories increase during the nine-month period in Africa and the United States, as tobacco is 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 upon 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 March 31, 2002, the Company had purchased, pursuant to these programs, an aggregate of 10.5 million shares of Universal common stock for approximately $293 million. On April 11, 2002, the Company entered into $295 million in new revolving credit facilities. The facilities replaced those totaling $225 million, which the Company terminated on that date. These facilities are intended to support short-term borrowings, including the issuance of commercial paper. Under its terms, each facility may be extended to, or matures on April 11, 2004. On December 28, 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 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 assets of the projects. It matures on December 28, 2007, and under some conditions, the subsidiary can exercise an extension option for an additional four years. The Company had borrowed $30 million under the loan facility as of March 31, 2002. Long-term obligations decreased during the nine months due to the reclassification of $120 million in maturing debt to current liabilities.
10 Management believes that the liquidity and capital resources of the Company at March 31, 2002, remain adequate to support the Company's foreseeable operating needs. Results of Operations - --------------------- `Sales and Other Operating Revenues' decreased $209 million or 28% in the third quarter of fiscal year 2002 and $494 million for the nine-month period ending March 31, 2002. In the quarter, tobacco revenues were down by $192 million; and agri-products revenues decreased by $19 million. Last year's revenue included the value of tobacco purchased at auction in the United States; a number of U.S. manufacturers are now purchasing tobacco directly from farmers. Revenue for the third quarter of fiscal year 2002 also reflects smaller crops in Africa and Brazil this year as well as differences in shipment timing. Agri-products revenues have declined due to weaknesses in the tea and rubber markets. Fiscal year 2002 segment operating income in the third quarter and nine-month period decreased by $12 million, compared to the same period last year. Tobacco earnings for the quarter were $12 million lower than the prior year's third quarter and $11 million lower than the prior year's nine-month period. Tobacco results were lower in the quarter primarily due to a significant decline in shipments from Zimbabwe compared to last year's third quarter and the continuing impact of higher costs and the change in the marketing system in the United States. Zimbabwe's crop was smaller this year and shipments to customers last year were more concentrated in the third and fourth quarters. For the nine-month period, shipments from Africa were ahead of last year's pace with larger volumes from Malawi compensating for the lower shipments from Zimbabwe. Volumes from Brazil's smaller crop were also lower in the quarter but are up for the nine-month period due to strong shipments in the first half of the year. Oriental leaf volumes were higher in both periods while lower cigar filler sales reduced dark tobacco results for the quarter and the nine months. In the non-tobacco area, lumber and building products operations continue to perform well despite declines in the euro exchange rate compared to last year and despite signs of a significant drop in construction activity in the Netherlands. Agri-products results continued to suffer from unfavorable market conditions for rubber, sunflower seeds and tea. Interest expense decreased for the quarter and nine-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%. The economic, financial and political situation in Argentina remains chaotic, and it is unclear at this time how future developments there might affect the value of the Company's Argentine assets. However, at this time, management's best estimate is for net earnings of about $100 million for the full fiscal year.
11 Critical Accounting Estimates and Assumptions In preparing the financial statements in accordance with generally accepted accounting principles (GAAP), management is required to make estimates and assumptions that have an impact on the assets, liabilities, revenue, and expense amounts reported. These estimates can also affect supplemental information disclosures of the Company, including information about contingencies, risk, and financial condition. The Company believes, given current facts and circumstances, its estimates and assumptions are reasonable, adhere to generally accepted accounting principles, and are consistently applied. The Company's most critical accounting estimates and assumptions are in the following areas: Inventories The Company writes down inventory for changes in market value based upon assumptions related to future demand and market conditions. If actual demand or market conditions are less favorable that those projected by management, additional inventory write downs may be required. Intangible Assets The Company reviews the carrying value of goodwill annually utilizing a discounted cash flow model. Changes in estimates of future cash flows caused by items such as unforeseen events or changes in market conditions, could result in an impairment charge. Income Taxes The Company, through its subsidiaries, is subject to the tax laws of many jurisdiction. The Company is subject to a tax audit in each of these jurisdictions, which could result in changes to the estimated taxes. In addition, the Company makes assumptions regarding the future utilization of foreign tax credits, alternative minimum tax credits and tax loss carryforward. These assumptions could be affected by changes in future taxable income and its sources and changes in US or foreign tax laws or rates. The effective tax rate for the Company could be impacted by changes in these assumptions. Pension Plans and Post Retirement Benefits Pension and other post-retirement plans' costs require the use of assumptions for discount rates, investment returns, projected salary increases and benefits, mortality rates, and health care cost trend rates. The actuarial assumptions used in the Company's pension reporting are reviewed annually and compared with external benchmarks to ensure that they accurately account for the Company's future pension obligations. See note 6 of the Company's Annual Report on Form 10-K for the year ended June 30, 2001, for a discussion of these assumptions and how a change in certain of these assumptions could affect the Company's earnings.
12 Other Information regarding Trends and Management's Actions - ----------------------------------------------------------- The months ahead will continue to be challenging. While supply and demand conditions in world tobacco markets appear to have improved, the Company remains concerned about the impact of the continuing political and economic uncertainty in Zimbabwe on the future viability of the tobacco industry in that country. The position of the United States as a supplier of quality tobacco also continues to erode due to structural problems and non-competitive prices. On the other hand, the Brazilian market, where a record flue-cured crop is now being processed and sold, and developments in a number of African tobacco producing countries appear to provide good opportunities for the future. The Company's lumber and building products companies will face challenges in the months ahead due to a slackening of economic activity in Holland and the recent sharp decline in new construction. The impact of this decline has so far been buffered somewhat by maintenance of good sales volumes in the building renovation and the do-it-yourself sectors. Markets for agri-products remain difficult. 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.
13 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings On February 26, 2001, Universal Leaf Tobacco Company, Incorporated, J.P. Taylor Company, Incorporated and Southwestern Tobacco Company, Incorporated, which are subsidiaries of Universal Corporation (the "Company Subsidiaries"), were served with the Third Amended Complaint, naming them and other leaf tobacco merchants as defendants in DeLoach, et al. v. Philip Morris Inc., et al., a suit originally filed against U.S. cigarette manufacturers in the United States District Court for the District of Columbia and now pending in the United States District Court for the Middle District of North Carolina, Greensboro Division (Case No. 00-CV-1235) (the "DeLoach Suit"). The DeLoach Suit is a purported class action brought on behalf of U.S. tobacco growers and quota holders that alleges that defendants violated antitrust laws by bid-rigging at tobacco auctions and by conspiring to undermine the tobacco quota and price support program administered by the federal government. Plaintiffs seek injunctive relief, trebled damages in an unspecified amount, pre- and post-judgment interest, attorneys' fees and costs of litigation. On April 3, 2002, the District Court issued an opinion and order certifying the class. The Company Subsidiaries have petitioned the U.S. Court of Appeals for the Fourth Circuit for appeal of the class certification pursuant to Rule 23(f) of the Federal Rules of Civil Procedure, and are awaiting the court's response to that petition. Regardless of the outcome of such petition and any consequent appeal, the Company Subsidiaries intend to vigorously defend the DeLoach Suit. The suit is still in its initial stages, and at this time no estimate of the impact on the Company that could result from an unfavorable outcome at trial can be made. The Directorate General Competition of the European Commission ("DG Comp") 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 Spanish farmers and have jointly negotiated with those associations. TAES is cooperating fully with the DG Comp 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 Comp 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 Company is also aware that the DG Comp is investigating certain aspects of the tobacco leaf markets in Italy. The Company has a subsidiary, Deltafina, S.p.A., that buys and processes tobacco in Italy. The Company does not believe that the DG Comp investigation in Italy will result in penalties being assessed against it or its subsidiaries that would be material to the Company's earnings.
14 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 dated January 18, 2002, reporting investigation by European Union Competition Directorate of Spanish tobacco processors including the Company's subsidiary. Report on Form 8-K dated February 8, 2002, filing press release announcing second quarter earnings and press release announcing quarterly dividend. Report on Form 8-K dated February 20, 2002, filing Fixed Rate Note due on February 15, 2007. * - Filed herewith
15 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: May 6, 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)